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2011 was a fantastic year for the little biotech stock (which has grown to become an 800 mio. $ + company). It was a good year for investors when the share price was increasing but also because the company has its first year with positive profits, they have never been stronger financially, their products are great sellers and their pipeline has never been better.
The main events for Spectrum in 2011 was:
FDA agrees to use Fusilev against Colon Cancer:
This news has been the reason behind spectrums strong performance and growth in 2011. Fusilev has performed very strongly and sells now (Q3 2011) for 41 million. $ every quarter.
FDA agrees to remove the BioScan requirements for Zevalin (http://investor.spectrumpharm.com/releasedetail.cfm?ReleaseID=625466)
This is to me the year’s most important event. Zevalin has since SPPI acquired this drug not really lifted the sales as expected. This explains Spectrum themselves with the Bioscan requirement for Zevalin. Spectrum is now focusing on Zevalin in the so called RRZ treatment (2 times Rituxan 1 time Zevalin). Raj announced by CC for Q3 that: the removal of the Bioscan for Zevalin could increase sells to “easily 300-400 million dollars.” So there is great potentials here. I will tell more about Zevalin later.
The Company’s revenue and profit grows with accelerated speed:
Q3 is important because it’s the latest report, but also because this was the turning point for many investors and analyzers, including the critic blogger Adam Fauersthein. The company here showed explosive growth in Fusilev sales, record sales, record earnings, record cash etc. Here, it was shown to many that fusilev not only are selling to the lack of a generic drug. What was really impressing me here was their gross margins that impressed me tremendously (over 82%) and the way they have been able to keep their costs down and create profits to shareholders.
In addition, there have been some other (coming in on several of them below), but this was the 3 I would select as most important for Spectrum in 2011.
The economy in 2011?
Here I write about the financial situation during 2011. The last number I have is at. 30/9 from the Q3 financial statements. 2011, as I said, was the first year of SPPI making profits. I will call the evolution nothing less than amazing. Revenue from sales has increased to: mio. $ (Q1 – 40.5) (Q2 – 42.3) (Q3 – 47.9). This is expected to continue into 2012. The sales have increased dramatically compared to 2011, several hundred %. At the same time this year improved their Gross margins. This is 82%! in Q3. This is also a sign that it is expensive drugs they have.
When we’re talking economics, I’ll let you in on what I’m actually most impressed about with SPPI. It is the way they can keep their costs down. Normally in biotech companies we see Cash Burn in large scales, not taking care on shareholders money and make endless stock purchases. Spectrum seems to be a company that has fiscal discipline and provides value for their shareholders. Probably because Raj himself is a major shareholder so there is mutual interest.
Spectrum can actually throw money at the bottom line. They earned this year (Q1 – 12.8) (Q2 – 7.2) (Q3 – 20.3). So 40.3 million in total so far in 2011. With an estimate on 20 million in Q4 the total profit for 2011 will be 60 million $.
Earnings per. share has been in quarters (Q1 – 0.25) (Q2 – 0.14) (Q3 – 0.38).
So 0.77 per. share by the end of third quarter. If Q4 are equal to Q3 we will in 2011 have 1.15 in earning per. share. Try to see it in relation to the stock price. Try to take the 0.38 in EPS in Q3 and scale it up to a whole year then we get 1.52 per. share.
They are financially very strong. They had at the end of Q3 200 million. $ In cash and receivables. And their cash flow is possitive. As Raj says: “it is fun when the cash bells are ringing every day”.
P / E are decreasing all the time because Spectrum buys its own shares too. I think we will see an increase of the existing repurchase program.
If you look at their impressive margins over the next year and future years, it is really positive. Raj has stated that they hardly need to increase their sales force to increase sales of Zevalin and Fusilev. This means that 82% of their revenue goes straight on EBIT or at least a 75% of them.
Now I will be writing a lot about their products. Spectrum has several products with a pipeline of more than 13 drugs. I will tell about their 4 main products: Fusilev, Zevalin, Apaziquone and Belinostat.
Fusilev is Spectrums bestseller. It is the fast growing Drug and it is the drug that really helped to boost the share price. As previously written was Fusilev in 2011 approved for the treatment of Colon Cancer which has helped to increase the fusilev sales. In addition, a shortage of a generic drug helped the increase in sales.
Fusilev sales have increased so far in 2011, in millions. $ (Q1 – 34.6) (Q 2 – 33.9) (Q3 – 41.0). If you compare this with last year, it is a high growth.
Can Fusilev grow further? Well I certainly think it can. I think Fusilev already in Q4 rounds revenue of more than 50 million $. Maybe we can reach 300 million $ Next year.
Fusilev may be challenged by a cheaper generic product, but who knows what the future brings. I do not think we get down there where Fusilev sells for less than 20-25 million $ Per. quarter.
In 2012 Also Bedford has stopped producing generic Leucovorin. They are hit by a shortage. Teva has stopped the import from Hungary. The little player APP is also on backorder due to increased demands. The situation at this time is that Spectrum with Levoleucovorin (Fusilev) can make long term commitments with the patients. The market is a 1 bio. $ market and for now, Fusilev is the only player on the market witch are not on shortage or in backorder. I really expect sales in 2012 to increase dramatically. Maybe to 500 mio. $.
One of the main reasons for the low sales of Zevalin was that the U.S. required a BIOSCAN before the use of Zevalin. This has stopped sales to growth. This has now been removed and Spectrum in december 2011 relaunched Zevalin.
Zevalin sales in 2011 are in millions. $: (Q1 – 5.9) (Q2 – 8.4) (Q3 – 6.9)
Zevalin is for the treatment of NHL, which is a huge indication for more than 60 to 70,000 patients annually in the U.S. Zevalin has an CR of 83% against Rituxans (sells for 6 billion dollars annually) 45%. Raj has the publication said that they could sell “easily 300-400 million. $. This corresponds in fact only 5% of the total market. 12.5% of the market and Zevalin is blockbuster Drug. This I believe will not immediately happen in the short term, but maybe it will happen in the long term. There are great expectations for the so-called RRZ treatment with Rituxan and 2 times 1 time Zevalin. There are several “experts” who have said that they did not believe in Zevalin and do not believe the problems has been about the Bioscan. I choose until proven otherwise to believe in Raj. Predicts Zevalin sales in 2012 to 150-200 million. $ for the worldwide sales.
Zevalin is actually on its relaunch compiled some really great data. You should look more closely at
Zevalin has previously been second treatment in NHL. If Spectrum can get Zevalin made first line treatment in RRZ it has great opportunities for Zevalin. As Raj says about Zevalin: “Zevalin is not one of the best drugs against NHL, this is THE BEST drug.”
Apaziquone is for the treatment of NMIBC (Non Musccel Invasive Bladder Cancer). We are getting data from to phase III studies with Apaziquone in the near future. The data log was closed at december 2011, so they are now cleaning and analyzing data. The two studies is Multicenter, Randomized, Placebo controlled, double blinded studies. The 2 studies have got an SPA (Special protocol Assessment) from the FDA, and have also received scientific advice from EMEA. Apaziquone have Orphan Drug Status and have Fast Track Status. I have not been able to find new data, but in 2008 American Cancer Society estimated that in the U.S over 500,000 were living with NMIBC and that 68,810 would be hit by NMIBC, which would be increased in the future. In Europe there were anticipated 944,000 living with NMIBC and 149,000 a year would suffer by NMIBC. Apaziquone is the active molecule of Mitomycin C. Apaziquone is also called Eoquin. The Drug is bioradioactive. There are NO other drugs accepted by the FDA for the treatment of NMIBC. Some Urologists are using Mitomycin C and Epirubicin, but this is only because they have no other possibilities, with Apaziquone, they have. Apaziquone have low side effects.
What is really great about the Apaziquone studies is the amazing SPA Raj have gotten by FDA for this drug. Apaziquone do not have to beat anyone. They only have to show statistic improvement to be better than Placebo. I think this the nearest to a walkover. Apaziquone is a Blockbuster product. It is co partnered in US with Allergen 50/50 and licensed to Allergen in Europe, Nippon in Asia and Hankok in Korea. Spectrum licensed the Drug for only 100.000 $ and have already marked partnerships in value about 500 mio. $
Belinostat is probably the product danish investors know best. This is because the Spectrum partnership with TopoTarget.
Belinostat are investigated in PTCL and CUP and also other smaller studies. At this time a pivotal trial in PTCL is operated by SPPI. SPPI expect on the basis of this to file an NDA registration for Belinostat against PTCL in Q3 2012. In addition here to TopoTarget run a very controversial CUP study in Phase II. This study is now expected to report topline data in H1 the 2012. Belinostat is studied in multiple other trials, the large potential for Belinostat is against PTCL, CUP, NSCLC, Ovarian and Bladder Cancer.
Spectrum has some interesting studies in their other pipeline
The last link is to the partner agreement as Spectrum has signed for some exciting biosimilar Rituxan. There may eventually be good options.
This was a little summary of the products and the financial information. I will follow up with more after the investor conference this evening.
(this is an English translation from an original Danish post – therefore the quality is low – in the next posts I will write directly in English witch will help to the understanding of my posts).
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