SPPI Beats in 4Q on Higher Sales

Spectrum Pharmaceuticals ( SPPI - Snapshot Report ) reported fourth quarter of 2012 earnings (including stock-based compensation but excluding other special items) of 19 cents per share, ahead of the Zacks Consensus Estimate of 16 cents and the year-ago earnings of 15 cents per share. Earnings during the quarter benefited from higher revenues.

Spectrum Pharma reported adjusted earnings of $1.19 per share for full year 2012, above the year-ago earnings of 92 cents per share. However, earnings for the year fell short of the Zacks Consensus Estimate of $1.49 per share. The company’s 2012 total revenues jumped 38.7% to $267.7 million. Revenues just beat the Zacks Consensus Estimate of $266 million.

Quarter in Details

Spectrum Pharma’s revenues in the reported quarter came in at $70.1 million, up 32.3% year over year. Increase in total revenues was primarily due to higher product sales. Revenues in the fourth quarter edged past the Zacks Consensus Estimate of $69 million.

Spectrum Pharma recorded quarterly revenues from product sales and licensing fees. The company’s product revenues in the reported quarter increased 33.7% year over year to $66.7 million. Product revenues in the reported quarter consisted of revenues from Fusilev, Folotyn and Zevalin.

Fusilev is the highest contributor to Spectrum Pharma’s sales. The drug is approved for the treatment of metastatic colorectal cancer (mCRC). The company recorded Fusilev sales of $44.5 million in the reported quarter. The company is initiating clinical studies to expand Fusilev’s label.

Sales from Folotyn, which was added to Spectrum Pharma’s portfolio following its acquisition of Allos Therapeutics, Inc. in Sep 2012, came in at $14.4 million in the fourth quarter of 2012. Folotyn is available in the US for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL).

Zevalin sales during the reported quarter came in at $7.8 million. In Apr 2012, Spectrum Pharma acquired the licensing rights to market Zevalin outside the US.

Spectrum Pharma also received $3.4 million as licensing fees during the quarter.

The company’s adjusted research and development (R&D) expenses of $12.9 million during the quarter shot up 117.3% year over year. The increase in R&D expenses during the quarter was primarily due to higher clinical expenses.

Adjusted selling, general and administrative (SG&A) expenses in the fourth quarter of 2012 came in at $17.2 million, up 41.7% year over year due to higher promotional expenses related to the company’s marketed products.

Pipeline Update

Spectrum Pharma is currently conducting a phase III (ZEST) study on Zevalin in patients suffering from diffuse large B-cell lymphoma (DLBCL). The company is also running the SPINOZA (IIS) trial in patients suffering from relapsed DLBCL who have received autologous stem cell transplantation (ASCT). Zevalin is also being evaluated against Biogen Idec Inc.’s ( BIIB - Analyst Report ) Rituxan in previously untreated patients with follicular non-Hodgkin's lymphoma.

On the fourth quarter conference call, the company stated that it expects total revenue in 2013 to surpass 2012 levels. We are impressed with the company’s robust pipeline. We expect investor focus to remain on the company’s pipeline going forward.

Spectrum Pharma, a biotechnology company, currently carries a Zacks Rank #5 (Strong Sell). Not all biotech stocks are performing as poorly as Spectrum Pharma. Companies like Elan Corporation, plc ( ELN - Snapshot Report ) and United Therapeutics Corporation ( UTHR - Analyst Report ) presently look more attractive. Elan carries a Zacks Rank #2 (Buy), while United Therapeutics carries a Zacks Rank #1 (Strong Buy).