Spectrum Pharmaceuticals: Optimistic About Zevalin's Prospects

In just a few days, Spectrum Pharmaceuticals (Nasdaq: SPPI) will receive word from the FDA whether the company’s non-Hodgkin’s lymphoma (NHL) drug will finally be approved for use as a first-line consolidation therapy.

Some less optimistic about Zevalin’s prospects have implied that because four companies have tried to market Zevalin with little success that SPPI is facing an uphill battle. I respectfully disagree.

I first learned about Zevalin in July of 2007 after reading this article from the New York Times. Zevalin is a very safe and effective treatment when used in the first-line consolidation setting to treat NHL. The drug works.

LACKING INCENTIVE

Biogen Idec (Nasdaq: BIIB) did not properly market Zevalin. Why? BIIB also markets Rituxan, which is the current standard of care for NHL in addition to chemotherapy. When BIIB sold Zevalin’s rights to Cell Therapeutics (Nasdaq: CTIC) in December of 2007, Rituxan sales totaled $2.515 billion. What incentive did BIIB have to market Zevalin?

Today, BIIB may be concerned with the number of trials that Bayer Schering and other sponsors are conducting on Zevalin. Some have suggested that Zevalin could be shown to be both safer and more effective than either chemotherapy or Rituxan. Before jumping to any conclusions, I will wait to see if the data can support that claim.

ZEVALIN IS SAFE

As you should have picked up from the New York Times article, hematologists / oncologists, were not treating patients with Zevalin. Why? Some have argued the treatment is inconvenient while others have argued safety concerns.

The data clearly show that Zevalin is safe for NHL patients.

As I indicated in my June 12 article here and here, if safety concerns were an issue, then the FDA’s Oncology Drug Advisory Committee (ODAC) would have been asked to review the Zevalin application. By not involving the ODAC panel, it is evident that regulators do NOT have any concerns with Zevalin’s safety profile.

Worth noting, Zevalin was approved in Europe for NHL, first-line consolidation therapy on April 28, 2008.

A SOUND PLAN

Unlike some, I am optimistic about Zevalin’s prospects. SPPI has a sound plan to get over the hurdles that have kept Zevalin from patients. An SPPI spokesperson indicated to me that the company was receiving a great deal of interest from treating physicians across the country. Following two recent offerings in late May and June 18 for a total of $30 million, SPPI should be able to launch Zevalin without too much delay. For these reasons, I share the belief that Zevalin is in good hands with SPPI.

DELAY UNLIKELY

Because other companies have experienced some setbacks in the approval process, some have questioned whether Zevalin’s review will be delayed by regulators. Historically, the third quarter is the best time of the year for drug reviews with a 68% first-cycle approval rate. However, Zevalin is already approved for refractory NHL. Zevalin was originally approved by the FDA on September 11, 2001. No kidding.

In 2009, SPPI filed a supplemental biologics application (sBLA) and is now seeking approval for Zevalin for use as a first-line consolidation therapy under the same indication which it was originally approved, NHL. Supplemental applications (sNDAs & sBLAs) have a much higher approval rate than new applications (NDAs and BLAs), exceeding 85%. Data source: FDA

FARRAH’S IMPACT ON ZEVALIN

In a Newsweek article on the late Farrah Fawcett yesterday, her treating physician, a hematologist, is also hopeful that regulators will approve Zevalin on July 2. Hey FDA, are you listening?

PRICE TARGETS

I am reaffirming the price targets I highlighted in my articles on both June 12 and June 19 here and here.

1. Retest $7.88 prior to July 2 – SPPI should retest at or near the July 2007 high of $7.88.
2. $31 within 12-18 months – SPPI could hit as high as $31 with both approvals on July 2 and October 8, 2009. At $31, SPPI would retain a market cap of $1.12 billion.

CONCLUSION

Zevalin works. The data clearly show that Zevalin is both safe and a very effective treatment for patients with NHL in both a first-line consolidation and the existing refractory setting.

On July 2, I expect Zevalin will finally be approved by the FDA for use as a first-line consolidation therapy.

Disclosure: Long SPPI.

Comments

[CHowe:]

Zevalin's meager sales have NOTHING to do with Zevalin's efficacy, safety, doctor's desire to use a terrific product or lack of promotion by former companies. It has everything to do with where the treatment is given, i.e, who does/does not provide the therapy (hospitals vs. doctors), and the hospitals' lack of adequate reimbursement to justify providing Zevalin as an option. Due to government reimbursement policies, the hospital can actually lose money on a $25,000+ therapy. So very few hospitals want to or do offer it outside academic or teaching hospitals. Just filling in some info missing in the interest of full disclosure.
From a former VP of Sales responsible for Zevalin

Jun 28 08:30 AM

[Justin M. Hall:]

Mr. Howe:

Thank you for your response.

As I understand you correctly, you believe based on your experience working with Zevalin, this is purely a government reimbursement issue.

From all my research and conversations with various folks at Spectrum, I firmly believe Spectrum has a sound plan to address the problems that have prevented Zevalin's disuse.

Of the three issues identified by Spectrum, the primary issue is Safety.
-- Treating physicians believed that administering Rituxan post Zevalin may cause damage to bone marrow. Trial data indicates that this, however, is NOT true. As I stated above, Zevalin is safe.

The second issue identified by Spectrum is "Logistical."
-- A significant problem exists with all of the scans required to administer Zevalin. Discontinuation of the scan requirement, SPPI believes and I happen to agree, would go along way to help reduce the costs of administering Zevalin. In addition, SPPI is also working to provide "logistical support" to physican practices. This support is designed to make it easier for treating physicians to adminster Zevalin to their patients at their offices / clinics.

The third issue identified by Spectrum is Financial.
-- Reimbursement agencies (RAs) did not know how to reimburse Zevalin. Here, SPPI contends the radio-isotopes that RAs were most familar were diagnostics and not therapeutics like Zevalin. So, Zevalin has been reimbursed incorrectly as part diagnostic and part therapeutic. To make things worse, reimbursement varies by state, which is obviously a nightmare. For this reason, SPPI has met and will continue to work with CMS (Medicare) to ensure there is a standard reimbursement proceedure for Zevalin and potentially radio-immunotherapeutics (RITs) in general. SPPI indicated that this will ensure Zevalin is more aligned with other RITs that are being used outside of indications outside of oncology.

Whether Biogen Idec did or did not try to address these issues in the past is not clear from all of my research. I cannot tell.

What I do know is that even if SPPI had to cut the cost of Zevalin in HALF, SPPI still has a winner with Zevalin. Such a drastic reduction in cost seems a bit excessive and highly unlikely.

At the end of the day, whether BIIB or CTIC were or were not successful is moot. Under the currnet Spectrum plan as I understand it, I believe Specturm will have more success marketing Zevalin - IF it's approved as a first-line consolidation therapy. I think Zevalin has an excellent shot.

More importantly, patients should have the ability to access Zevalin regardless of who or what let to its disuse. Zevalin is an extraordinarily effective treatment for NHL and it just blows my mind why it has been such a struggle for patient's to access to it.

Please excuse any typos.

Thank you again CHowe.


Justin M. Hall

Jun 28 09:43 AM

[Michael Becker:]

CHowe - I also have extensive experience with radiopharmaceutical products and agree with your commentary. This issue is not specific to Zevalin, as several other companies have experienced challenges making this class of product successful. In fact, three radiopharmaceuticals have been FDA approved to treat cancer or support cancer therapy - including Bexxar which is similar to Zevalin and marketed by GlaxoSmithKline (GSK). It is naive to believe that Zevalin has simply been marketed incorrectly, as that would imply that GSK also didn't market Bexxar correctly. Radiopharmaceutical products have not been adopted by oncologists. If you want additional background on this topic, go to the following link and read the 9/1/07 article I authored for Oncology Business Review titled "Radiopharmaceuticals Need a Jump-STaRT" at www.mdbpartners.com/ar...

On Jun 28 08:30 AM CHowe wrote:

> Zevalin's meager sales have NOTHING to do with Zevalin's efficacy,
> safety, doctor's desire to use a terrific product or lack of promotion
> by former companies. It has everything to do with where the treatment
> is given, i.e, who does/does not provide the therapy (hospitals vs.
> doctors), and the hospitals' lack of adequate reimbursement to justify
> providing Zevalin as an option. Due to government reimbursement policies,
> the hospital can actually lose money on a $25,000+ therapy. So very
> few hospitals want to or do offer it outside academic or teaching
> hospitals. Just filling in some info missing in the interest of full
> disclosure.
> From a former VP of Sales responsible for Zevalin

Jun 29 07:46 AM

[Justin M. Hall:]

Michael:

I read your article years ago and found it very helpful. Sorry I did not mention it in my article. I also follow news at OBR.

EVERYONE SHOULD READ YOUR ARTICLE.
www.oncbiz.com/documen...

I want to apologize to both you and CHowe if I mischaracterized the marketing issue. This was certainly not the intent of writing the article. The intent was to show that Zevalin worked.

This class of drugs is being ignored.

I respect both of your opinions and appreciate that you responded to my article. I am honored.

Again, I apologize if I mischaracterized the marketing issue as it relates to BIIB and Zevalin.

Justin

Jun 30 05:34 AM

[Justin M. Hall:]

Correction: I read your article about a year ago.

Jun 30 05:38 AM

[nucs:]

Michael,

Yes, you know all to well. I know early in my Nuclear Medicine career, we used Strontium for bone palliation. Was that one not approved? I have given all of those drugs from the then company you headed at Cytogen, except Prostascint. Too bad, some of these diagnostics, and therapies haven't caught on. I think some of these products are wonderful. I believe RIT in general has awesome potential for improvement over existing naked antibodies for cancer therapy.


On Jun 29 07:46 AM Michael Becker wrote:

> CHowe - I also have extensive experience with radiopharmaceutical
> products and agree with your commentary. This issue is not specific
> to Zevalin, as several other companies have experienced challenges
> making this class of product successful. In fact, three radiopharmaceuticals
> have been FDA approved to treat cancer or support cancer therapy
> - including Bexxar which is similar to Zevalin and marketed by GlaxoSmithKline
> (seekingalpha.com/symbo...). It is naive to believe that
> Zevalin has simply been marketed incorrectly, as that would imply
> that GSK also didn't market Bexxar correctly. Radiopharmaceutical
> products have not been adopted by oncologists. If you want additional
> background on this topic, go to the following link and read the 9/1/07
> article I authored for Oncology Business Review titled "Radiopharmaceuticals
> Need a Jump-STaRT" at www.mdbpartners.com/ar...;br/>
>
> On Jun 28 08:30 AM CHowe wrote:

Jul 02 02:04 PM