Shorts Using Any Bad News They Can to Drive Spectrum Pharma Down

A comment from Arie regarding Spectrum Pharmaceuticals (SPPI):

I heard from seeking alpha guy justin that Spectrum may have cash around 156 million at the time.

So looking at fundamental side, it is very unlikely that stock will drop 10% at this point, otherwise the cash in hand will be the same with market cap.

My other question is - Am I wrong considering SPPI undervalued by looking at the institutional buy at 7.55/share since I believe they make better research than me? So then, I conclude SPPI price at the time is a very good buy for long term play.

You consider buying at below 4, is it based on a technical stand point?

Thanks, I appreciate your response


VFC's Take: Regarding fundamentals, technicals, common sense and logic - I think that a lot of that has been thrown out the window in this highly speculative and volatile market, especially in the biotech/small pharma sector.

I agree that another 10% drop wouldn't make too much sense - and I'm not using technicals when I say that I think the stock has a good chance to hit the below four dollar mark - but with the general market sliding and speculative money leaving the market, the shorts and naysayers are using any bad news that they can to drive stocks down as far as they can go. And it just so happens that the most recent big news out there regarding Spectrum is the Fusilev news.

I believe that Insmed (INSM) was actually trading at below the cash on hand value earlier this year, so I think investors and shorts also look at the fact that the cash pile is going to deteriorate if the company is losing money.

As for the institutional buy, I see your point, but there's quite a few institutions that have been underwater for some time during the market crash. If an institutional buy is what is used to place a true value on a stock, then investing would be easy. I rely more on my own Due Diligence to make my investing decisions more than anyone else - including institutions; if your DD tells you that SPPI is undervalued, then I say jump in.

I also think that it is a good rebound play and if BioDelivery Sciences (BDSI) were not also trading for right around four bucks (even more of an illogical event, in my opinion) then I may have picked up some SPPI. Right now I'm throwing my 'rebound' money at BDSI.

Long term, I think SPPI is a decent enough play. As I said before, based on the fact that Zevalin has posted year after year of declining sales, I'm not convinced that it will be a blockbuster; but the first line treatment should significantly boost the bottom line.

Thanks for the comment.

Disclosure: No position.