Spectrum Pharma: Post-Zevalin Approval Sales Should Ramp Up

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by: Justin M. Hall

As many, who have followed and/or invested in Spectrum Pharmaceuticals (NASDAQ:SPPI), know Zevalin® was finally (and thankfully) approved last Friday, September 4, by the FDA for first-line consolidation use in patients with non-Hodgkins lymphoma (NHL).

PRELIMINARY FACTS

  • Zevalin is the first of two FDA approved radio-immunotherapeutics (RITs) for the treatment of NHL to win regulatory approval for first-line consolidation use in the US.
  • Prior to the Friday approval, Zevalin was only approved for use in refractory NHL patients, a last resort setting.
  • Bayer Schering (OTC:BYERF) markets Zevalin in the European Union, Japan and other countries worldwide. Notably, Zevalin was approved for first-line consolidation use in Europe on April 28, 2008.
  • Bexxar®, the competitive RIT in the NHL setting, is made and sold by GlaxoSmithKline (NYSE:GSK) and is not approved in either the US or abroad for use in the first-line setting. Bexxar is, however, approved worldwide in the refractory setting.

Following the approval, shares of SPPI have fallen and are near their 50-day MA. As result, naysayers are running rampant arguing that Zevalin is priced in at SPPI’s current value at or below $300 million. Those, less optimistic, seem to believe that the market penetration for Zevalin will remain at or near 10.5%, the average previously maintained by Biogen Idec (NASDAQ:BIIB).

With all due respect to the naysayers, I say humbug.

Click to enlarge

Folks can argue this, that and the other as to why Zevalin sales can’t or won’t increase. The only issue that matters is whether doctors will finally begin to prescribe Zevalin to their NHL patients. I argue they will. Here’s why.

Let’s first take a look at the process. Upon determination via biopsies and other diagnostics that a patient has cancer, they visit with an oncologist or two. If they get a good one, the oncologist will sit down and spend some time educating the patient and giving them lots of stuff to take home and read. Those who have had cancer will likely tell you that this can be very overwhelming. There’s a lot to learn. Unfortunately, most do not educate themselves about cancer until they get it.

During the initial visit – as time is extremely important – the doctor will provide the patient with a game plan. This game plan is essentially a template of the treatment plan for the patient and based on their specific type of cancer.

With few variations, most oncologists follow the same template when treating the same types of cancers. For example, an oncologist might prescribe doxorubicin, a chemotherapeutic, before they consider administering docetaxel to treat a patient with inflammatory breast cancer. During the 4-6 month round of doxorubicin treatments, the oncologist will monitor the patient closely to determine if they are receiving a response to the treatment. Upon completion of the treatment, the doctor will review the patient’s scan and determine whether or not the patient’s tumor has shrunk enough for surgery. If not, then the doc may order a second round of chemo, but this time using docetaxel rather than doxorubicin.

It should become evident that treating cancer, like building a home, is a process and requires planning. With homebuilding, the plans or blueprints vary based on the kind of home the owner desires. Same goes for treating cancer.

In oncology, the plan or treatment template that is used by most physicians is considered the standard of care. On September 4, the template for treating NHL patients changed. Falling short, those, who are less optimistic about Zevalin’s potential in the market place, have failed to acknowledge this change.

FIRST-LINE APPROVAL V. STANDARD OF CARE

Cancer drugs that are approved by the FDA for first-line use - like Zevalin - eventually become the standard of care and are prescribed by most treating physicians.

First Line Approval

In this July 27 article, the importance of first-line approval was exemplified in the following hypothetical.

Doctor does not inform the patient about or dissuades the patient from the Zevalin (or Bexxar) option. Like most, who are diagnosed with either early or late-stage NHL, the patient does not gain access to Zevalin. Reasons: (1) the patient was never informed about the Zevalin option or (2) was dissuaded from the treatment due to inconvenience. Later, the patient dies from complications attributed to NHL. Under this scenario, how might the treating physician explain to a jury that he or she did not inform the patient about the Zevalin option? Despite the number of studies showing Zevalin to be a safe and very effective treatment in both early and late stage settings and that the treatment has been approved for use in both settings, how might the doctor explain that he or she dissuaded the patient from the Zevalin option due to inconvenience? Would a jury be likely to excuse the doctor for missing both opportunities?

Though it is just a simple man’s hypo, the circumstances are certainly foreseeable. Under this scenario, the doctor would have some challenging hurdles to surpass. More importantly, however, it underscores the importance of the first-line approval. Doctors need to provide patients with the opportunity to beat NHL early by treating them with Zevalin following induction therapy.

Standard of Care

Standard of care is a legal standard, which negligence is based, and is often cited in medical malpractice complaints. Here, standard of care requires the treating physician to do what a reasonable physician would do under the same circumstances. If, however, the physician’s conduct falls below the standard, then that physician may be liable for injuries resulting from their conduct.

Regarding the legal aspect of the standard, Lawrence P. Wilkins, William R. Neale Professor of Law Emeritus at Indiana University School of Law–Indianapolis and an expert in medical malpractice law explained:

Standard of care is a different animal from FDA-approved therapies. Safety and efficacy determinations indicate only that the risks of the therapy are outweighed by the benefits, not that that the therapy performs better than other therapies (the latter is often determined by so-called ‘stage three and stage four’ drug trials). A doc can take into account these studies, but rarely will it automatically result in the new therapy being adopted as the standard of care to the exclusion of other therapies. The ‘two schools of thought’ defense is often implicated in this type of claim; so long as a respectable minority of the profession remains committed to the alternative therapy, it would not be malpractice for the doc to fail to recommend the new therapy. Patient would have to obtain testimony from a physician willing to testify that standard of care at the time of treatment required the defendant physician to inform the patient of the Zevalin option, and that the Zevalin option wasn't covered by other general statements by the doc in the conversations with the patient.

So, first-line approval does NOT automatically guarantee that Zevalin will become the standard of care for NHL. With that said, however, all of the cancer drugs approved for first-line use do eventually become apart of the standard of care. Listed in the table below are all of the cancer drugs that have been specifically cited for receiving first-line approval by the FDA. From my research, these drugs still appear to be a component of the standard of care treatment for the type of cancer which first-line use was approved.

Cancer Drugs Approved for First-Line Use

Trade Name
Active Drug
Manufacturer / Distributor
Approval Date
Arimidex®
anastrozole
AstraZeneca (NYSE:AZN)
Sep 01, 2000
Avastin®
bevacizumab
Genentech (OTCQX:RHHBY)
Oct 11, 2006
Feb 26, 2004
Camptosar®
irinotecan
Pharmacia & Upjohn (NYSE:PFE)
Apr 20, 2000
DanuoXome®
daunorubicin liposomal
Nexstar
Apr 08, 1996
Etopophos®
etoposide phosphate
Bristol-Myers Squibb (NYSE:BMY)
May 17, 1996
Femara®
letrozole
Novartis (NYSE:NVS)
Jan 10, 2001
Gemzar®
gemcitabine
Eli Lilly (NYSE:LLY)
May 19 2004
Aug 25, 1998
May 15, 1996
Navelbine®
vinorelbine
GlaxoSmithKline (GSK)
Nov 05 2002
Dec 23, 1994
Platinol®
cisplatin
Bristol-Myers Squibb (BMY)
Apr 22, 1993
Dec 19, 1978
Rituxan®
rituximab
Genentech (OTCQX:RHHBY)
Sep 29, 2006
Tarceva®
erlotinib
OSI (OSIP)
Nov 02, 2005
Taxol®
paclitaxel
Bristol-Myers Squibb (BMY)
Jun 20, 2000
Jun 30, 1998
Apr 09, 1998
VePesid®
etoposide, VP-16
Bristol-Myers Squibb (BMY)
Dec 30, 1986
Zevalin®
Ibritumomab tiuxetan
Spectrum (SPPI)
IDEC (BIIB)
Sep 4, 2009
Feb 19, 2002
Click to enlarge

Source: FDA

CONCLUSION

Since the cancer drugs above are all part of the standard of care treatment for the approved indication, Zevalin is highly likely to follow suit. By default, Bexxar, the only competitive RIT approved for NHL, is likely to be viewed as an alternative to Zevalin as it has not yet been approved for first-line use anywhere in the world.

While there are a number of reasons that can be attributed to Zevalin’s prior disuse, even the naysayers won’t dispute the safety and efficacy of the treatment. For NHL patients, however, physicians were simply not availing them to Zevalin. By approving this treatment for first-line use, the FDA, in effect, has changed the template for how doctors will treat NHL patients going forward.

Will more doctors begin to prescribe Zevalin? Yes. In fact, there is evidence that suggests more doctors are already beginning to adopt the treatment. In Q2 2009, SPPI reported the first increase (25%) for sales of Zevalin in, at least, the past three years. This trend should continue. With SPPI’s sales force that is comprised of 40 executives, who will market the drug throughout the US, Zevalin sales are likely to ramp up with great efficiency.

On September 3, Reni Benjamin, managing director and senior biotech analyst at Rodman and Renshaw (NYSEARCA:RODM) indicated that he thinks Zevalin sales could reach $150 million. As indicated in this June 12 article, I agree with Mr. Benjamin’s sentiment and project Zevalin sales of $180 million.

With a market cap at or below $300 million, SPPI remains undervalued and shares remain very attractive right now.

For extensive coverage of SPPI and other companies, interested investors can review my other articles here.

Disclosure: Long SPPI and ARIA.

Other Optionable Cancer Drug Makers

Symbol
Market Cap
Price/Sales
Price/Cash
(NASDAQ:DNDN)
2.75 B
24,970.43
9.56
2.62 B
11.45
12.71
1.91 B
4.94
3.44
(NASDAQ:ONXX)
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(NASDAQ:REGN)
1.76 B
6.16
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(NASDAQ:SGEN)
1.14 B
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(NASDAQ:MDVN)
873.23 M
19.29
3.67
(NASDAQ:CTIC)
779.28 M
150.15
65.05
(NASDAQ:ALTH)
687.41 M
0
6.56
(NASDAQ:EXEL)
673.02 M
6.00
3.44
(NASDAQ:INCY)
670.84 M
193.88
4.78
(NASDAQ:GERN)
656.47 M
426.28
3.49
(NASDAQ:SLXP)
634.17 M
3.16
7.37
(NASDAQ:MITI)
498 M
19.68
10.12
(NASDAQ:IMMU)
453.97 M
15.12
16.57
432.94 M
4.54
3.66
(NASDAQ:IMGN)
424.53 M
15.17
5.97
(NASDAQ:BCRX)
402.01 M
7.69
9.51
(NASDAQ:GTXI)
362.38 M
26.84
5.26
301.4 M
9.93
3.54
(NASDAQ:LGND)
282.53 M
8.14
5.09
(NASDAQ:ARIA)
278.55 M
34.26
7.04
266.46 M
0
5.34
(NASDAQ:DYAX)
265.24 M
5.55
4.99
(NASDAQ:OSIR)
263.06 M
8.67
5.06
(NASDAQ:ARQL)
245.29 M
12.57
2.09
(NASDAQ:SCLN)
230.99 M
3.46
10.54
(NASDAQ:OGXI)
225.82 M
0
39.62
(NASDAQ:IDRA)
174.07 M
5.52
3.45
(SUPG)
169.76 M
4.13
1.95
(NASDAQ:PGNX)
166.79 M
3.29
1.47
(ONTY)
143.64 M
3.9
6.32
(NASDAQ:BDSI)
100.85 M
840.4
20.41
(SNTA)
93.36 M
8.43
1.54
(NASDAQ:KERX)
66.02 M
2.95
4.92
Averages
767.76
8.9
Averages
(Ex-DNDN)
55.92
8.88
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Data Source: FinViz.com as of close on Tuesday, September 8, 2009.