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Justin M. Hall is an entrepreneur, investor and author. Hall serves as owner and founder of HiRx, LLC located in Indianapolis, Indiana. He is the author of "The Option Investors Desk Reference©" (2008). Hall invests in areas of innovative growth, such as (1) late-stage drug, device... More
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  • Spectrum Pharmaceuticals: Post Zevalin Approval Sales Should Ramp Up  10 comments
    Sep 11, 2009 04:26 AM | about stocks: BMY, PFE, OSIP, LLY, AZN, NVS, RODM, BYERF.PK, BIIB, GSK, DNDN, HGSI, ONXX, REGN, SGEN, MDVN, CTIC, ALTH, EXEL, INCY, GERN, SLXP, MITI, IMMU, ZGEN, IMGN, BCRX, GTXI, SPPI, LGND, ARIA, PARD, DYAX, OSIR, ARQL, SCLN, OGXI, IDRA, SUPG, PGNX, ONTY, BDSI, SNTA, KERX
    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
    2.75 B
    24,970.43
    9.56
    2.62 B
    11.45
    12.71
    1.91 B
    4.94
    3.44
    1.85 B
    8.64
    4.29
    1.76 B
    6.16
    4.5
    1.14 B
    31.02
    8.09
    873.23 M
    19.29
    3.67
    779.28 M
    150.15
    65.05
    687.41 M
    0
    6.56
    673.02 M
    6.00
    3.44
    670.84 M
    193.88
    4.78
    656.47 M
    426.28
    3.49
    634.17 M
    3.16
    7.37
    498 M
    19.68
    10.12
    453.97 M
    15.12
    16.57
    432.94 M
    4.54
    3.66
    424.53 M
    15.17
    5.97
    402.01 M
    7.69
    9.51
    362.38 M
    26.84
    5.26
    301.4 M
    9.93
    3.54
    282.53 M
    8.14
    5.09
    278.55 M
    34.26
    7.04
    266.46 M
    0
    5.34
    265.24 M
    5.55
    4.99
    263.06 M
    8.67
    5.06
    245.29 M
    12.57
    2.09
    230.99 M
    3.46
    10.54
    225.82 M
    0
    39.62
    174.07 M
    5.52
    3.45
    169.76 M
    4.13
    1.95
    166.79 M
    3.29
    1.47
    143.64 M
    3.9
    6.32
    100.85 M
    840.4
    20.41
    93.36 M
    8.43
    1.54
    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.
    Themes: Healthcare, Drug Manufacturers, Biotech, Biotech Diagnosis, Biotech Research, Long Ideas, Options, Small Caps Stocks: BMY, PFE, OSIP, LLY, AZN, NVS, RODM, BYERF.PK, BIIB, GSK, DNDN, HGSI, ONXX, REGN, SGEN, MDVN, CTIC, ALTH, EXEL, INCY, GERN, SLXP, MITI, IMMU, ZGEN, IMGN, BCRX, GTXI, SPPI, LGND, ARIA, PARD, DYAX, OSIR, ARQL, SCLN, OGXI, IDRA, SUPG, PGNX, ONTY, BDSI, SNTA, KERX
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This post has 10 comments:

  •  
    Thanks for the clarification justin! Always a pleasure reading your blog. Some of these guys are impatient. im shocked they are calling you for the sell off of the SPPI stocks. anyways keep up the good work.
    Sep 11 05:12 AM | Link | Reply
  •  
    Monacoautavia:

    Thank you!

    Justin
    Sep 11 05:14 AM | Link | Reply
  •  


    Oh Yeah! GR8 Article. I am so glad you back, Justin.
    I absolutely love reading your articles
    and apppreciate your due DD.
    I have made some good money in ARIA & SPPI
    since reading your articles and doing a little of my own DD.
    For your sincerity and kindness in sharing your DD with us,
    you going str8 to heaven my friend.

    Rumi Frost
    May the force be with you.
    Sep 11 05:39 AM | Link | Reply
  •  
    Thanks Rumi!
    Sep 11 06:05 AM | Link | Reply
  •  
    Excellent article with sound reasoning. Good to see you back. Without a catalyst I would expect SPPI to bounce around its 50 ma for a while changing slightly with the general market. When will the next catalyst be available to help SPPI bounce off its support and begin to move forward? Thanks again for your blog and excellent DD!
    Sep 11 06:19 AM | Link | Reply
  •  
    Thanks Castle!

    10.8.09 is the PDUFA date for Fusilev. Since the drug has already been reviewed by the FDA's ODAC panel and approved for osteosarcoma, I anticipate Fusilev will be approved on 10.8.09 without delay.

    No worries. I am confident that SPPI will move [much] higher before too much longer. After reading the article at BioMedReports, it appears that the SPPI presentation at yesterday's (RODM) conference was outstanding! I remain very optimistic about SPPI!

    Thank you again for ALL of your comments! I do appreciate it!

    Justin
    Sep 11 06:31 AM | Link | Reply
  •  



    Castle & Justin

    Follow the link below to the FDA page and scroll down to Levoleucovorin.
    www.fda.gov/Drugs/Drug...

    Recently there was a shortage of Levoleucovorin and The FDA
    recommended Fusilev for use in colorectal cancer during the
    shortage.

    May the force be with you!
    Sep 11 06:51 AM | Link | Reply
  •  
    Jusin I am so glad you are back.I like very much your DD.
    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?
    Thanks
    Sep 11 06:54 AM | Link | Reply
  •  



    Castle & Justin ( Slight corretction to my reply above)

    Follow the link below to the FDA page and scroll down to Levoleucovorin.
    fda.gov/Drugs/Drug...

    Recently there was a shortage of Leucovorin and The FDA
    recommended Fusilev for use in colorectal cancer during the
    shortage.

    Read the link below
    www.bcm.edu/cancercent...

    May the force be with you!
    Sep 11 07:00 AM | Link | Reply
  •  
    Sometimes I do not think you understand the value of the free service you offer. I can see how it becomes cloudy in your mind after the events of the last few days. Even though you are unaware, you and I, Mr. Justin have done very well in my intermediate trading account. With your DD's on the fundamentals and my trading skills, my family will reap the rewards of our efforts as I am fast approaching retirement age. "Fast approaching" actually my wife tells me I have already arrived.


    On Sep 11 06:31 AM Justin M. Hall wrote:

    > Thanks Castle!
    >
    > 10.8.09 is the PDUFA date for Fusilev. Since the drug has already
    > been reviewed by the FDA's ODAC panel and approved for osteosarcoma,
    > I anticipate Fusilev will be approved on 10.8.09 without delay.<br/>
    >
    > No worries. I am confident that SPPI will move [much] higher before
    > too much longer. After reading the article at BioMedReports, it appears
    > that the SPPI presentation at yesterday's (seekingalpha.com/symbo...)
    > conference was outstanding! I remain very optimistic about SPPI!
    >
    >
    > Thank you again for ALL of your comments! I do appreciate it!
    >
    > Justin
    Sep 11 07:46 AM | Link | Reply
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