Biotech Stock Mailbag: Spectrum

The Biotech Stock Mailbag is open a day ahead of schedule so everyone can enjoy the long holiday weekend.

Tory K. kicks things off with this email:

"Spectrum Pharmaceuticals(SPPI Quote) raised $21 million right before the FDA is supposed to decide on the approval of Zevalin. That's a bad sign, right?"

Normally, I'd agree, but in this case, I'd say that Spectrum's management was taking rightful advantage of what has been a lucky, albeit fundamentally unjustified, run-up in the company's stock price since May.

In that time, the stock has jumped from $2.50 to almost $8. Management would be criminally negligent if it didn't pounce on the opportunity to sell stock and raise cash. So, I say bravo, Spectrum.

The FDA is expected to issue an approval decision tonight on a label expansion for Zevalin that should allow the drug to be used by a much larger number of patients with non-Hodgkin's lymphoma. A full FDA approval seems like a no-brainer based on my read of the Zevalin data supporting the label expansion filing.

But let's not forget that Zevalin is a very effective cancer drug today that almost no one uses. (I wrote about some of the reasons why back in March.) Sales last year were only $12 million, down from sales of $17 million and $18 million in 2007 and 2006, respectively. Three different companies have tried to make Zevalin a commercial success but failed.

The expanded label should help Spectrum put Zevalin on a firmer commercial footing and perhaps even start to grow sales again. I've talked to management previously about their marketing plans for the drug, and I walked away impressed.