Spectrum Pharma: Post-Zevalin Approval Sales Should Ramp Up 23 comments
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As many, who have followed and/or invested in Spectrum Pharmaceuticals (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 (BYERF.PK) 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 (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 (BIIB).
With all due respect to the naysayers, I say humbug. 
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 (AZN) | Sep 01, 2000 |
Avastin® | bevacizumab | Genentech (RHHBY) | Oct 11, 2006 Feb 26, 2004 |
Camptosar® | irinotecan | Pharmacia & Upjohn (PFE) | Apr 20, 2000 |
DanuoXome® | daunorubicin liposomal | Nexstar | Apr 08, 1996 |
Etopophos® | etoposide phosphate | Bristol-Myers Squibb (BMY) | May 17, 1996 |
Femara® | letrozole | Novartis (NVS) | Jan 10, 2001 |
Gemzar® | gemcitabine | Eli Lilly (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 (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 |
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 (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 |
(DNDN) | 2.75 B | 24,970.43 | 9.56 |
(HGSI) | 2.62 B | 11.45 | 12.71 |
(OSIP) | 1.91 B | 4.94 | 3.44 |
(ONXX) | 1.85 B | 8.64 | 4.29 |
(REGN) | 1.76 B | 6.16 | 4.5 |
(SGEN) | 1.14 B | 31.02 | 8.09 |
(MDVN) | 873.23 M | 19.29 | 3.67 |
(CTIC) | 779.28 M | 150.15 | 65.05 |
(ALTH) | 687.41 M | 0 | 6.56 |
(EXEL) | 673.02 M | 6.00 | 3.44 |
(INCY) | 670.84 M | 193.88 | 4.78 |
(GERN) | 656.47 M | 426.28 | 3.49 |
(SLXP) | 634.17 M | 3.16 | 7.37 |
(MITI) | 498 M | 19.68 | 10.12 |
(IMMU) | 453.97 M | 15.12 | 16.57 |
(ZGEN) | 432.94 M | 4.54 | 3.66 |
(IMGN) | 424.53 M | 15.17 | 5.97 |
(BCRX) | 402.01 M | 7.69 | 9.51 |
(GTXI) | 362.38 M | 26.84 | 5.26 |
(SPPI) | 301.4 M | 9.93 | 3.54 |
(LGND) | 282.53 M | 8.14 | 5.09 |
(ARIA) | 278.55 M | 34.26 | 7.04 |
(PARD) | 266.46 M | 0 | 5.34 |
(DYAX) | 265.24 M | 5.55 | 4.99 |
(OSIR) | 263.06 M | 8.67 | 5.06 |
(ARQL) | 245.29 M | 12.57 | 2.09 |
(SCLN) | 230.99 M | 3.46 | 10.54 |
(OGXI) | 225.82 M | 0 | 39.62 |
(IDRA) | 174.07 M | 5.52 | 3.45 |
(SUPG) | 169.76 M | 4.13 | 1.95 |
(PGNX) | 166.79 M | 3.29 | 1.47 |
(ONTY) | 143.64 M | 3.9 | 6.32 |
(BDSI) | 100.85 M | 840.4 | 20.41 |
(SNTA) | 93.36 M | 8.43 | 1.54 |
(KERX) | 66.02 M | 2.95 | 4.92 |
Averages | 767.76 | 8.9 | |
Averages (Ex-DNDN) | 55.92 | 8.88 |
Data Source: FinViz.com as of close on Tuesday, September 8, 2009.
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This article has 23 comments:
Thanks
Hey User 482586,
If you don't like this blog, then don't post here.
I suggest you put your attention on something positive.
If you have constructive criticism we will surely listen,
but with all that name calling, you are making a joke yourself.
Rumi Frost
Excellent work and on point! Would you kindly comment on the following statement made by Michael Becker and the impact this investment by Bayer will have on SPPI? Thanks!
The bullish case is that Bayer is making a fresh $800 million investment in the field of STaRT, which could lend support to a consolidation of Zevalin marketing rights by Bayer. However, the bear case is that Algeta has already demonstrated in vivo the potential of linking alpha-emitting radionuclides to existing monoclonal antibodies, including rituximab, which could ultimately pose quite a competitive threat to earlier-generation STaRT products like Zevalin.
Excellent article, with very helpful and useful information.
Thanks!
It will have no effect on SPPI. After thinking about it, I view it as a red herring. I do not think it's relevant to SPPI, Zevalin or any future deal.
Justin
Thank you for your response!
Why did sales suddenly - out of nowhere - increase 25% Q over Q for the first time in 3 years. I suppose you will shrug that off too. Shrug off the expansion to include all 66K NHL patients from 28K.
You have clearly demonstrated that you have absolutely no idea why the drug was not used or why it will be used in the future. Off-label arguments are totally ignorant and irrelevant here.
As for the pullback, who cares? The pattern is established. See the chart above. When you take shares down and break the underlying trend, I will concede. Otherwise, a smack talker with no identity is just another coward.
Take a hike.
Since you'll continue to come back - obsessive nut - I would appreciate it if you would try to write in complete thoughts. Please use the new spell check feature! Thanks!
On Sep 11 03:51 PM User 482586 wrote:
And I'll keep laughing as this keeps falling.
Constructive point, which longs won't like because it will cost them
$, is that lable expansions in chemo don't lead to increased revenue due to off lable use already. check sales of other oncol drugs post sNDA approval. Simple......
Regarding the alleged data that you want me to look up, it is not readily available.
Next time, I will itemize and date everything for you. Kidding, I won't. I thought I was the slow one here, but you really take the cake. Obviously, the other 66K followed - hence the use of periods. The point was made, and yet again you cannot refute it - other than to play some silly game by quickly summing up that I disproved my own point.
Nothing I have said aims to prove anything. I build my case and you have consistently been way off - not even close to the ballpark.
Why waste your time and all of your negative energy? You continue to lose. Honestly, you really do not have a clue about what the heck you're talking about.
If there is data, present it. Make your case. Rather than play games with me - "disprove" me.
I do not believe you can.
Too funny! I was just reviewing your call on (MYL) and posted a comment under your article! Nice call, my friend! I agree with your sentiment on the generic industry.
Just a heads up on biogenerics / biosimilars: the patent exclusivity limitations that have been proposed by Waxman for biologic drugs inside the Obamacare package (junk), are not likely to pass.
With that said, I like your call on MYL! Great call!
Thank you for the nice comment. I respect your opinion and certainly appreciate the feedback!
Please stay in touch!
Justin
Price target ?
Thanks
JC
User No. 476774:
Did you read the article featured above or just rush to post your brilliant comment?
I addressed the downgrade.
I think shares remain undervalued at the current price and believe that a more appropriate market cap for this company is $500 M based on the Zevalin approval alone. At that value, shares would trade around $11.90. I believe shares will likely reach and exceed $11.90 within the next 90 days or less.
Obviously, price targets are adjusted when the company sells its stock. The projected market value of the company, which I have conservatively estimated at $1.12 billion within 12-18 months (or less), has not changed. My sentiment about SPPI remains the same.
A retest of the 50 MA hardly creates a cause for concern. Nice try. Investors here are smarter than you apparently believe - as you try to play the "gotcha" game with me. The problem for you is that you haven't got anything to get me with. Your methodology is not at all persuasive. Sadly, you've had it rough throughout your entire life.
As far as Fusilev, I am sticking with my call. I think the odds favor an approval and by 85% or greater. At what specific price will shares trade if the company successfully obtains approval for Fusilev on 10/8/09? I have not a clue.
What I can tell you is that I believe SPPI is way undervalued at the current price. I am confident that shares will move higher from here. Following the Zevalin approval, I believe a more appropriate value for SPPI is at or above $500 million or a share price of $11.90. As I said above, I remain confident it will get there before year-end.
When shares do begin to advance, you will magically disappear until the next pullback. It is funny how that works.
I'm not hiding on this end.
Justin
PS. Please try to improve your grammar and spelling.
I did not read your article but I will and to answer your last comments because I trust in yours articles that I read before I make investment in SPPI.
Even if you post that kind of comments. I will continue to read your
articles. And sorry for my grammar and spelling.
Thanks for you response !
JC
Thanks bro! I appreciate the feedback. I post results, whether bad or good, to remain accountable to myself and others. Honestly, it does helps me to stay on top of my game. I began doing this years ago. I frequently bugged the crap out of my friends and family and flooded them with emails and charts along with the results of my calls - good and bad. It wasn't long before some started paying close attention to what I was doing. I know it must have annoyed some, but they never told me. It helped me to improve my strategy - entries and exits. It forced me to be accountable for my decisions. Others don't like to talk about their results, which indicates they are ashamed. Shame stems from pride and pride is BS. After folks get over themselves, the fear or embarrassment goes away. The aim here is to find little things that you can do to help yourself, improve, and achieve your financial goals.
Know This: Anybody can buy and sell a stock, but very few can do it well, consistently.
Rule: Always remain accountable to yourself and someone else. Those, investing by themselves and for themselves, should share (or post) ALL investment / trading results, openly and honestly, with a supportive spouse (NOT a nagging wife or a wimp of a man), supportive friends, and family members ---> who can be trusted.
Sorry for the rant Hustle617, but you started it! Thanks for the constructive feedback. You know I appreciate it!
I agree with your rocket scientist analogy. Too bad some can't seem to catch on.
Let me just close with saying this - I do NOT normally jock a company like this. Specturm, like Indevus (acquired by ENDP on 1/6/09), is another rare find. I have never sold a share or option since I began building my position in February 2009 - before they obtained 100% rights to Zevalin from CTIC. I began buying CTIC in late January and added SPPI in early February. I had invested in SPPI periodically over since 2007 and was very familiar with the company and most of their late-stage pipeline. I took a beating in July 2007 when shares tumbled as result of a poor hedging strategy (dumb mistake), which I have since learned and recovered. I sold my positions in CTIC throughout the spring and continued to add to my SPPI positions. I have followed Zevalin since July 14, 2007 when I read that NY Times article. It angered me that the drug was not being made available to NHL patients - absolutely ridiculous.
To me, it has been and will likely remain all about Zevalin. Fusilev is an impressive drug and should generate big revenue for SPPI. But Zevalin is a cure for most NHL patients. Yes, it is a cure. Have doubts? Ask Betsy de Parry. Email her. She will tell you all about RITs. Read her story and listen to her. She is fortunate to be alive today, and she would not be without a RIT. Many other NHL survivors have explained the same. This drug works like nothing else does. It provides some patients with benefits that Rituxan cannot provide for whatever reason. It just works and we will want it around as our folks age and later down the road we will want to have access to it. So, this isn't some shell game as some purport.
With that said, protect your positions with put options. If you buy out of the money buy them farther out - Jan or Feb 2010.
CYA, CYA, CYA.
Manage the risks, do NOT ignore them.
Thanks Hustle!
Justin
With that said, protect your positions with put options. If you buy out of the money CALLS, buy them farther out - Jan or Feb 2010.
I dumped my shares because of this.
Thanks for the comment. What you suggest may be true. If you carefully looked at the chart and were familiar with TA, the pattern is easy to see. It makes new highs and retests the 50-day MA. This may or may not continue. Since some, believe it will sell off again upon Fusilev, then it might not. There are a number of positive catalysts in front of this one. I think you sold too early. Time will tell. But for now, we wait.
From a valuation standpoint, SPPI remains undervalued. Let's see what happens over the next 90 days. I bet shares hit and surpass $11.90.
Good luck!
Justin
Is it posibble that the large salles of the shares are of hedge funds because of the options expiration next Friday?
How Adam Fruerstein have wrote about the FDA approval at 1055 AM on Friday 9 minutes after the company PR?
Moreovere he wrote about telephone conversation with the CEO thursday night after the company recieved the FDA letter?
(1) Yes, that is possible. As I point out in my comments above, however, I'm not concerned about this recent pullback. As I have held consistently, SPPI is a longer-term investment. Try to remain patient and avoid focusing on the daily trading activity!
(2) I wrote Adam an email following the ALTH decision congratulating him on his call. I also thanked him for his fair coverage of SPPI following the Zevalin approval. He never responded. I am not sure what to make of him or why he thinks and does what he thinks and does. To be fair, he has made some good calls like ALTH, but I have seen him fumble some calls. That is the nature of investing in this environment, which he apparently does not do. What do I make of him doing XYZ? I just don't care. He is entitled to express his opinion, whether he is write or wrong, fair or not. We have a right to ignore or listen to him. In full disclosure, I selectively do both - ignore and listen. :-)
(3) Regarding that telephone call, I was not there. So, I do not know whether it occurred or not. The news, however, was not bad. The important thing here is that Zevalin was approved. So, I am not sure that I would worry too much about it. I certainly would not blame he for the recent pullback until there is evidence to suggest that he is responsible. Personally, I do not believe he is.
The bottom line, here, is know what you own and remain patient. Investing takes time and I think SPPI will prove to be a winner in the long run!
Justin
www.nccn.org/professio...
NCCN Categories of Evidence and Consensus
Category 1: The recommendation is based on high level evidence (e.g. randomized controlled trials) and there is uniform NCCN consensus.
Category 2A: The recommendation is based on lower level evidence and there is uniform NCCN consensus.
Category 2B: The recommendation is based on lower level evidence and there is nonuniform NCCN consensus (but no major disagreement).
Category 3: The recommendation is based on any level of evidence but reflects major disagreement.
What is your opinion in INO?
Thanks,
JC