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Spectrum Blames Fusilev Sales Warning on Overstuffed Inventory

Spectrum says 75% of its Fusilev sales are derived from private oncology clinics, with the remaining 25% of sales coming from hospitals. Looking ahead, Keller explained demand for Fusilev from private oncology clinics was "stable" and could be reasonably projected to total approximately $25 million per quarter. The company is less confident about future hospital sales and Keller warned that sales there will continue to decline.

If Spectrum recorded $204 million in Fusilev sales last year, 75% coming from oncology clinics where demand is stable, why isn't the company able to forecast 2013 Fusilev sales of $150 million?

Because wholesalers current inventory is stuffed with Fusilev, making it impossible for Spectrum to know when new orders will start up again. Spectrum hopes to see wholesalers re-order Fusilev in the second quarter and into the second half of the year, but the company has no visibility into current wholesaler inventory level so it can't be sure, Keller said.

With the significant cuts in top-line revenue expected for 2013, Spectrum admitted on the Credit Suisse call that it will not be profitable unless expenses are cut. [Spectrum net income for 2012 totaled $95 million, or $1.46 per share.] In order to maintain non-GAAP profitability, Spectrum is cutting R&D expenses, although the company refused to elaborate on the conference call.

Shrotriya also tried to make the case that investors shouldn't abandon Spectrum. The company was undervalued when everyone thought Fusilev sales were great. Now that Fusilev sales have been whacked, the company is an even better buy, he insisted.

On Wednesday, few investors are buying what Shrotriya is selling.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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