Spectrum Pharmaceuticals: The Labor Day Catalyst

by: Justin M. Hall

This Labor Day, September 7, Spectrum Pharmaceuticals (NASDAQ:SPPI) expects an FDA decision for their non-Hodgkin’s lymphoma (NHL) radio-immunotherapeutic (RIT), Zevalin®.

The consensus held by most investors, analysts and commentators is that Zevalin will be approved as a first-line consolidation therapy for patients with NHL. It is important to note that Zevalin is already approved for use in the US for refractory NHL. Unfortunately, Zevalin is usually only administered as a last resort treatment.


Upon filing a Supplemental Biologics License Application (sBLA) in late 2008, SPPI’s aim is to obtain regulatory approval for Zevalin in a first-line consolidation setting. Under this setting, Zevalin would be approved for first-line use and administered in consolidation with induction therapy.

Induction therapy generally includes a combination of (1) a chemotherapeutic, such as doxorubicin and (2) rituximab. Consolidation therapy follows induction therapy and is designed to induce remission. Under the consolidation setting, Zevalin would be administered after induction therapy to those patients who obtain either a partial response (PR) or complete response (CR).

In April 2008, Zevalin was approved in the EU as a first-line consolidation therapy for patients with NHL. Here, it should be noted that outside the US, Zevalin is marketed by Bayer Schering (OTC:BYERF).


In the Phase 3 FIT trial, patients, who received Zevalin following induction therapy, (1) received a progression free survival (PFS) benefit of three years (an improvement from two years as previously reported here) and (2) regardless if the patient had received either PR or CR to induction therapy.

During the company’s August 13 conference call Dr. Andrew Sandler, SPPI’s Chief Medical Officer, pointed out, “[A] three year progression free survival advantage is very significant in this patient population.”

Importantly, 77% of the patients, who received a PR following induction therapy, converted to a CR. Here, FIT researchers noted, “[T]his is one of the highest PR-to-CR conversion rates reported in [all] Phase 3 randomized studies in first-line follicular lymphoma.”

Based on these significant findings, the Phase 3 FIT trial was characterized as a “landmark study” by Dr. Oliver W. Press, chair for lymphoma research at Fred Hutchinson Cancer Research Center. (Source: NCI Cancer Bulletin, vol.5/no. 21, Oct. 21, 2008.)


During last week’s conference call, Dr. Sandler touched on Zevalin’s prior disuse.

Although Zevalin is currently FDA approved in the relapse or refractory setting, for a number of reasons it is unfortunately currently only used in a salvage setting. Many patients, who should be receiving Zevalin, are not. We hope to change that. If Zevalin is approved in the first-line setting, we believe it will be an important first step bringing the treatment of non-Hodgkin’s lymphoma in line with the standard of care in other hematological malignancies.

Consolidation Therapy in Other Cancers

Consolidation therapy is used often to treat other forms of cancers. In the conference call, Dr. Sandler explained how consolidation therapy is used to treat a related cancer, acute leukemia.

For decades, doctors have been treating acute leukemias with (1) induction therapy to wipe out as much bulky disease as possible; (2) followed by consolidation therapy to further reduce any minimal residual disease and to provide the patient with the best quality of response possible; and (3) maintenance therapy to sustain the consolidation response, thus improving the duration of the response.

Issues Surrounding Zevalin Disuse

Dr. Sandler further highlighted the three main issues that led to Zevalin’s disuse. In the table below, a brief summary of each issue has been provided along with SPPI’s solution for each.

Brief Description
It was previously and incorrectly believed that Zevalin might cause damage to patient bone marrow if used in a consolidation setting.

As evidenced by the FIT study, this is obviously false. The FIT study clearly shows that Zevalin offers significant benefits for NHL patients in the first-line consolidation setting. Results fro the FIT study indicate that Zevalin is both a very safe and effective treatment for patients in each of the age groups evaluated in the study.

SPPI is working to educate treating physicians. In time, the company expects such education will lead to increased use of Zevalin in BOTH the [pending] first-line and [existing] refractory settings.
“Cumbersome” bio-scan requirement in the US.

In most EU countries, the bio-scan is NO longer required. Without the bio-scan, Zevalin could be administered in a couple of hours as opposed to 7+ days with the bio-scan. Now, this is would be a great way to cut healthcare costs!

SPPI is also conducting an analysis of the bio-scan upon the FDA's request. The company hopes the results from this analysis will enable the regulators to drop or discontinue the bio-scan requirement.
Complicated reimbursement for Zevalin policies that differ by state.
SPPI is working with CMS (Medicare) to alleviate reimbursement complications resulting from differing reimbursement policies in various states.


On July 14, 2009, I indicated that, “. . . investors should not be shocked to see an up-tick in Zevalin sales during Q2 2009.” In Q2, SPPI did, in fact, report an increase of 25% in quarter over quarter sales for Zevalin.

During the recent conference call, Amar Singh, SPPI’s Chief Commercial Officer, provided some insight on the upside surprise achieved with Zevalin sales.

We are encouraged by the strong signal that we have received from the market after just one full quarter of marketing and sales under Spectrum’s leadership.

(1) Average growth in unit sales over the prior three years when we compare only the first and second quarters, the rates were a -12%. Despite the fact that two out of these three years, the drug was previously sold by a company (Biogen Idec (NASDAQ:BIIB)) much larger than Spectrum.

(2) This improvement from a decrease of -12% to an increase of over 20% was achieved in the first full quarter since Spectrum acquired 100% of the rights to Zevalin.

(3) Importantly, we accomplished this at a time of heightened competition from the launch of Treanda® (marketed in the US by Cephalon (NASDAQ:CEPH)) in the refractory NHL setting last fall.

(4) We accomplished this in the absence of receiving regulatory approval of Zevalin in the front-line setting.

Singh concluded, “It appears that we are well on our way to achieving our . . . goal of stabilizing [Zevalin] sales.”

Since SPPI acquired the rights to Zevalin from Cell Therapeutics (NASDAQ:CTIC) in mid March 2009, I agree with Mr. Singh’s sentiment. That Zevalin sales actually rose for the first time in the past three years is very compelling. From my view, the 25% increase is a meaningful improvement and strongly suggests that Zevalin may finally have a promising future.


In response to my June 29, 2009 article, Michael Becker commented, “[I]t is naive to believe that Zevalin has simply been marketed incorrectly.”

In the conference call, Dr. Rajesh Shrotriya, SPPI’s chairman and CEO, revealed that the company’s sales force, responsible for marketing Zevalin, consisted of 40 executives. Dr. Shrotriya also pointed out that the past sales teams from both Biogen Idec (BIIB) and Cell Therapeutics (CTIC), who had previously held the rights to and were responsible for marketing Zevalin, consisted of no more than seven (7), executives.

One could reasonably argue that the size of SPPI’s sales force may be having an impact on current Zevalin sales and responsible for the respective 25% increase.


The recent up-tick in Zevalin sales appears to be much more than a stroke of good luck. It appears SPPI is executing a well-designed plan with a right-sized sales force.

Based on the Q2 results, it is evident that SPPI has correctly identified the core issues that led to Zevalin’s disuse. Thus far, the company’s plan seems to be working efficiently and effectively, and SPPI is NOT repeating the same mistakes made in the past.

The sharp increase in quarter over quarter in Zevalin sales implies either: (1) SPPI has assembled the kind of sales force necessary to market Zevalin appropriately; (2) more physicians are beginning to adopt Zevalin; or (3) all of the above. Nevertheless, there appears to be a notable shift from the previous sentiment of disuse to one favoring Zevalin’s use.

For these reasons, I anticipate sales of Zevalin will likely continue to grow in the coming quarters, and especially if this safe and effective treatment is finally approved by the FDA for first-line use on Labor Day, September 7, 2009.

Institutional investors and hedge funds have been slow to catch on. With two weeks before FDA review, SPPI remains a hidden gem. With a current price of $6.32 and a market cap of a mere $263 million, SPPI is well positioned to make hit new multi-year highs in the coming weeks with Zevalin’s approval.

Over the next 6 to 12 months, my target price range for SPPI is $23.80 to $26.67, giving the company a market value of $1.0 to $1.12 billion. If Zevalin sales continue to increase in future quarters, then I believe SPPI could be a buyout target within the next 12 to 18 months.

Disclosure: Long SPPI

To learn more about RITs, Zevalin® and Bexxar®, take a minute and check out the resources listed below. It should be noted that Bexxar is marketed worldwide by GlaxoSmithKline (NYSE:GSK).

Interested investors should take a minute to review my thorough coverage of SPPI.

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