Seeking Alpha
, stockmatusow (860 clicks)
Long/short equity, deep value, value, research analyst
Profile| Send Message|
( followers)  

Spectrum Pharmaceuticals (NASDAQ:SPPI) is a commercial-stage biotechnology company, primarily focuses on oncology and hematology. The company engages in acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. It markets Zevalin, a prescribed form of cancer therapy, radioimmunotherapy; and Fusilev, a novel folate analog formulation and the pharmacologically active isomer of the racemic compound, calcium leucovorin. The company's drugs in late stage development include Apaziquone, an anti-cancer agent; and Belinostat, a histone deacytelase inhibitor. Its drugs in development also include Ozarelix a luteinizing hormone releasing hormone antagonist, which is in Phase II clinical stage; SPI-1620, a peptide agonist of endothelin B receptors, which is in Phase I clinical stage; and RenaZorb, a lanthanum-based nanoparticle phosphate binding agent, which is in preclinical stage. The company was formerly known as NeoTherapeutics, Inc. and changed its name to Spectrum Pharmaceuticals, Inc. in December 2002. Spectrum Pharmaceuticals was founded in 1987 and is based in Henderson, Nevada.

FDA approved drugs and phase clinical pipeline:

Fusilev (Levoleucovorin), FDA Approved on April 29, 2011 for Use in Patients with Advanced Metastatic Colorectal Cancer and FDA Approved on March 7, 2008 for High-Dose Methotrexate Rescue Therapy in Osteosarcoma.

Zevalin (ibritumomab tiuxetan), an FDA-Approved, Proprietary, Biological Drug for Indolent Non-Hodgkin's Lymphoma.

Belinostat, a novel HDAC inhibitor in late stage clinical development for Peripheral T-cell Lymphoma, and other Solid Tumors (including Carcinoma of Unknown Primary, etc.)

Apaziquone, a lead candidate, is a synthetic bio-reductive pro-drug that is being investigated in the treatment of non-invasive bladder cancer, and began two Phase 3 studies in 2007.

Spectrum also has two drugs in Phase 2 clinical development: Ozarelix, for the treatment of prostate cancer and Ortataxel, for the treatment of taxane-refractory tumors.

As well, the Company has three drugs in the Phase 1 clinical development: SPI-1620, an adjunct to chemotherapy, Elsamitrucin, which will target advanced solid tumors and Lucanthone, a chemotherapy sensitizer in the treatment of recurrent malignant brain tumors.

Other drugs in development include SPI-014, used in the treatment of hyperphosphotemia in end stage renal disease, and SPI-205 for chemotherapy induced neuropathy.

Spectrum has impressive FDA approved drugs and phase clinical pipeline. Let's take a look at their fundamentals;

Fiscal Year
Fiscal Year Ends:Dec 31
Most Recent Quarter (mrq):Sep 30, 2011
Profitability
Profit Margin (ttm):25.69%
Operating Margin :30.83%
Management Effectiveness
Return on Assets :16.49%
Return on Equity :37.51%
Income Statement
Revenue :173.93M
Revenue Per Share :3.35
Qtrly Revenue Growth (yoy):204.90%
Gross Profit :56.67M
EBITDA 6:58.80M
Net Income Avl to Common :44.68M
Diluted EPS :0.80
Qtrly Earnings Growth (yoy):N/A
Balance Sheet
Total Cash (mrq):148.90M
Total Cash Per Share (mrq):2.61
Total Debt (mrq):17.00K
Total Debt/Equity (mrq):0.01
Current Ratio (mrq):2.75
Book Value Per Share (mrq):3.05
Cash Flow Statement
Operating Cash Flow :42.60M
Levered Free Cash Flow :39.60M

Obviously, Spectrum is well managed, just take a look at the ROE/ROA numbers. Very impressive for a smallish bio-pharma with a 800 million dollar market cap. Also take note of their explosive growth, also very impressive!

There is no doubt in my mind at the current closing price as of 1/26/11 of $14.05, Spectrum is very undervalued. Because of their pipeline and reasonable market cap, Spectrum is a very attractive acquisition target for big pharma. Perhaps Bristol-Myers Squibb (NYSE:BMY), Pfizer (NYSE:PFE), Merk (NYSE:MRK), Teva (NYSE:TEVA), Eli Lilly (NYSE:LLY), and Abbott Laboratories (NYSE:ABT), should take a closer look at Spectrum for Acquisition.

Spectrum has had a really nice run the last year. The recent small pullback was to be expected. In my opinion, the uptrend channel will continue to stay very healthy for all the fundamental reasons I have listed in this article.

The MACD (which is my favorite indicator) has been trending down lately, even when The Spectrum PPS was making a higher move. We can see that as an indicator, The MACD was able to successfully show the PPS was in for a pull back. It looks to me that The MACD has run its down trend course because it spent a much longer time above the zero line this time around as compared to past channel trend.

Whether or not Spectrum will be acquired by a mega pharma or not is somewhat moot. Spectrum stands on its own as an explosive growth and well managed biopharma company, poised for a much higher PPS for 2012 and years to come.

I am considering taking a position in Spectrum in the next 72 hours, as this company looks like a real winner to me.

Source: Spectrum Pharma: Solid Tech, Solid Fundamentals, Explosive Growth