Spectrum Still Won't Answer Relevant Questions About Fusilev Discounts

HENDERSON, Nev. (TheStreet) -- Spectrum Pharmaceuticals (SPPI) said Thursday that it hasn't cut the price of its colon cancer drug Fusilev but the company still refuses to explain why reported Fusilev sales are not keeping pace with increases in unit volume.

A logical answer is that Spectrum has increased the size of discounts, rebates and other financial incentives to doctors so that they'll prescribe more Fusilev. In fact, Spectrum's 10-Q for the second quarter filed with the Securities and Exchange Commission shows a marked increase in discounts and rebates, all of which lower the effective, net selling price of Spectrum's drugs, including Fusilev.

Spectrum is selling more Fusilev -- no one disputes that -- but net sales appear lower than expected because of discounting.

"Misleading reports suggesting marked decrease in pricing are erroneous and grossly misrepresent the company's Fusilev growth statregy. Spectrum has not reduced prices and Fusilev continues to show growth through new accounts and reorders," Spectrum said today in a statement, apparently in response to my story published Tuesday detailing the company's Fusilev discounting.

That's a strongly worded statement but it doesn't address the relevant questions. If Spectrum wants to be transparent about its Fusilev growth strategy, the company could disclose gross and net sales of the drug every quarter. Alternatively, how about continuing to report net sales but also disclosing the gross-to-net discount every quarter? This is relevant information that other drug companies report to investors on a regular basis, so Spectrum could easily do the same.

[For those wondering, Spectrum's gross-to-net discount did increase in the second quarter compared to the first quarter, according to the company's 10-Q.]

Spectrum is giving an investor presentation on Aug. 30, so hopefully, the company will provide some more transparency and answer relevant questions about its Fusilev commercial operations.

Perhaps Spectrum will also answer some additional questions:

Why have commercial efforts to sell its other cancer drug Zevalin failed to meet even limited expectations? Spectrum promised a rebound in Zevalin sales after FDA removed the "bioscan" requirement earlier this year. Yet Zevalin sales worldwide totaled just $9 million in the second quarter, a figure so low that Spectrum didn't even disclose in its earnings announcement.

Why did Spectrum CEO Raj Shrotriya sell $2.5 million of company stock earlier this month right after the company announced a share repurchase plan?

What is the specific issue raised by the Federal Trade Commission that is preventing Spectrum from closing its planned acquisition of Allos Therapeutics. Spectrum's tender offer for Allos was initiated on April 16. Since then, the tender offer period had been extended eight times due to an undisclosed FTC issue.

--Written by Adam Feuerstein in Boston.



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