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Spectrum Blames Fusilev Sales Warning on Overstuffed Inventory

Stocks in this article: SPPI

HENDERSON, Nev. ( TheStreet) -- Spectrum Pharmaceuticals (SPPI) retreated to the cosy confines of a private conference call with Wall Street investors Wednesday morning to attempt damage control for last night's massive Fusilev sales warning.

Investor confidence in Spectrum and its CEO Raj Shrotriya -- already tenuous -- is now in tatters. Shrotriya has always been quick to promote the company through press releases and public conference calls when it suits him. But when a detailed explanation of bad news is warranted, Shrotriya shows disdain for his broader shareholder base by speaking only to a select group of investors on a call organized by the investment bank Credit Suisse.

Spectrum shares are down 36% to $7.90 in early Wednesday trading.

For those that may have missed the details of last night's Fusilev warning, Spectrum said it expects sales in the first quarter to be between $10 million and $15 million. That's down sharply from $44.6 million in sales recorded in the December quarter. For all of 2013, Spectrum expects Fusilev sales of just $80 million to $90 million, well off 2012 sales of $204 million.

Spectrum's walk back of Fusilev sales on Tuesday night came just three weeks after the company's year-end earnings call, on which Shrotriya promised sales growth for 2013. Shrotriya boasted about Fusilev growth despite flat revenue for the past three quarters.

"We expect with the trends we are seeing in January, and we are seeing the new accounts and the reorders from the old accounts, that we expect that 2013 revenues to continue to grow. And we expect our sales to be higher than we had in 2012," Shrotriya said on the Feb. 21 call.

What happened in the past three weeks to radically change the outlook for Fusilev?

On the Credit Suisse call, Spectrum COO Ken Keller offered two causes: 1) Three of the four largest wholesalers only recently informed Spectrum they would not be purchasing any Fusilev in the first quarter. These wholesalers had enough Fusilev on their shelves already to meet user demand, and they were "watching market dynamics" before buying additional supply. 2) Hospital use of Fusilev, already in decline due to switching back to generic leucovorin, was decelerating faster than Spectrum had originally projected.

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