Spectrum Pharma Is Down But Not Out (NASDAQ:SPPI)

Spectrum Pharma (SPPI) has had a strange kind of COVID-19 related conundrum. Its BLA for rolontis was filed in December 2019, with a PDUFA goal date of 10/24/2020. On 10/26/2020, the company announced that the FDA informed the company that they are deferring action on the application. The agency cited “inability to conduct inspection of the drug substance manufacturing facility due to COVID-19 related travel restrictions” to the Hanmi Bioplant in South Korea.

Rolontis is targeting chemotherapy-induced neutropenia. If approved, Rolontis could have been the first novel granulocyte colony-stimulating factor (G-CSF) available to healthcare providers in more than 15 years. But COVID-19 intervened. And that presents another COVID-19 related opportunity for investors assuming all else is good with SPPI, which we will see.

Spectrum conducted two successful pivotal Phase 3 clinical trials, ADVANCE (conducted under an SPA) and RECOVER. The two trials evaluated the safety and efficacy of ROLONTIS in 643 early-stage breast cancer patients for the treatment of neutropenia due to myelosuppressive chemotherapy. In both trials, ROLONTIS demonstrated the pre-specified hypothesis of non-inferiority in duration of severe neutropenia (DSN) and a similar safety profile to pegfilgrastim. ROLONTIS also demonstrated non-inferiority (NI) to pegfilgrastim in the DSN across all four cycles of chemotherapy (all NI p<0.0001) in both trials.

Pipeline

Spectrum has 3 products in the pipeline.

Lead candidate ROLONTIS (eflapegrastim) is “an investigational long-acting granulocyte colony-stimulating factor (G-CSF) for the treatment of chemotherapy-induced neutropenia.”

Image: rolontis pipeline (source: company website)

Poziotinib is “an investigational orally administered, irreversible tyrosine kinase inhibitor (TKI) for the treatment of solid tumors.”

Image: poziotinib pipeline (source: company website)

IGN002 is “an investigational Interferon/CD20 Monoclonal Antibody Fusion Protein.”

Image: IGN002 stage (source: company website)

Poziotinib failed a critical phase 2 trial in 2nd line NSCLC patients with EGFR exon 20 mutations in January 2020, taking the stock down 60%. The trial failed to meet the primary endpoint in ORR in cohort 1. It did meet the primary endpoint in a second cohort, but the damage had been done. A pre-NDA meeting is scheduled.

In its latest earnings call, the company said

“We’ll be meeting with the FDA to review a filing strategy based on the positive results we announced earlier in the quarter for poziotinib. These data demonstrated that poziotinib met the pre-specified primary endpoint in patients with non-small cell lung cancer HER2 exon-20 insertion mutations.”

Financials

The stock was 8.75 on 12/24/2019, then dropped 60% to 3.5 on 12/26/2019, because the second candidate poziotinib missed the endpoint. 7/27/2020 and 9/18/2020 saw new positive data releases, but the stock is still down to 3.50. The 52-week range is $1.74 to $10.57. Market capitalization is $504.92M.

Ownership of total shares outstanding: 141.08M:

  • Institutions – 54.16%

  • Individuals / Insiders – 1.73%

  • Hedge Fund Managers – 5.57%

  • Public and Other – 38.54%

Six Wall Street analysts are bullish on average with an average rating of 4 out of 5 and price target of $10.80.

Spectrum had filed a $150M mixed shelf in March 2020. Priced an offering of 25M shares at $3 on 7/20/2020, when previous day close was $3.88.

Cash at 9/30/2020: $198.3M, includes $82M from July equity offering.

Cash burn: $28M per quarter. $145.1M in the TTM.

Market and competition

According to Delve Insight, Spectrum is in the lead of the emerging candidates. Incidence population in the U.S. in 2017 for chemo-induced neutropaenia was more than 1.03 million. Consensus Interferon-Alpha or CIFN therapy is a costly affair mired with safety issues. The total market in 2019 was estimated to be >$3 billion of which 73% was the share of Amgen’s Neulasta, and 27% of biosimilars. Neulasta was approved in 2002, and it is also a drug in the LA-GSCF class like Rolontis and Neupogen before that, which came in 1991. The company has a picture that describes the progress:

Source

IP, Licence/Royalty etc

Rolontis has a composition of matter patent that will expire in 2025. However, it has a formulation patent until 2031. There may be possible patent extensions following approval. Poziotinib has a composition of matter patent available until 2028 and other coverage that will last until 2034.

Bottom line

This is an overlooked stock waiting to be picked up at the current low price level. Just because the FDA can’t visit their facility due to the pandemic the PDUFA is deferred. Once the status clears, the stock may shoot up.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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