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Biotech Stock Mailbag: Generex, Part II

At $2 a share, Novartis would be paying more than $1.2 billion for Cell Therapeutics! And what would Novartis get for that mountain of cash? A me-too chemotherapy drug just body-checked into oblivion by the FDA and its advisory panel? How about a reformulation of a generic chemotherapy drug that has failed multiple phase III trials and was rejected by European regulators last year?

Oh, how enticing!

Big Pharma tends to get suckered into dumb deals, but no one, Novartis included, is that stupid.

Update: Cell Therapeutics held a conference call Thursday night. All I'll say about the call is that it robbed me of 30 minutes of my life that I'll never get back.

ARoy emails, "What do you feel about the prospects of Spectrum Pharmaceuticals (SPPI - Get Report)? It's been a while since you've have written about the company. Do you consider Spectrum shares are currently undervalued or at least fairly valued?"

Spectrum has traded relatively sideways since late last year because investors still aren't sure if the company is going to turn the lymphoma drug Zevalin into a profitable drug.

Monday, Spectrum said it was delaying the release of financial results for the fourth quarter and full year 2009 because it needs more time to complete its accounting work. Spectrum said it will post a higher net loss in 2009 than the previous year, but that's not a surprise at all.

More important for Spectrum and its stock price are sequential quarterly sales gains for Zevalin. Third quarter sales totaled $4.7 million, up 42% from the second quarter. Spectrum doesn't have enough analyst coverage to compile a good consensus, but Morgan Joseph's analyst is looking for fourth quarter Zevalin sales of $5.6 million.

Don't expect Spectrum's stock to surge even if Zevalin posts healthy sequential growth in the fourth quarter. That would be nice, but I think Spectrum is under the gun to produce consistent Zevalin sales growth over a longer time period before all the doubts about the drug and its commercial potential are lifted. Investors also want evidence that doctors are using Zevalin in more patients and that sales growth is not just coming from price increases.

The FDA label for first-line use in non-Hodgkin's lymphoma granted last September was a big help in that effort, but it's still up to Spectrum to generate meaningful sales.
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