Spectrum tucked the disclosure of an SEC subpoena in its most recent 10-Q filed last Thursday. The company made no mention of the investigation in the press release announcing first-quarter financial results or on a subsequent conference call.
On April 1, 2013, the Company received a subpoena from the SEC for documents pursuant to a formal order of investigation. The subpoena followed the Company's March 12, 2013 announcement that it anticipated a change in ordering patterns of FUSILEV. The Company is cooperating with the SEC investigation. The Company cannot predict when the SEC will conclude its investigation or the outcome of the investigation.
The "change in ordering patterns of Fusilev" forced Spectrum to drastically cut its 2013 sales forecast for the colon cancer drug to $80-90 million. Fusilev sales in 2012 totaled $204 million, or about 80% of Spectrum's total revenue.Spectrum blamed the fall in Fusilev sales on wholesalers' decision to stop purchasing the colon cancer drug due to excess inventory that exceeded user demand. Hospitals, in particular, were cutting their use of Fusilev and switching to a cheaper, generic alternative known as leucovorin to treat colon cancer patients. The nature of the SEC investigation has not been disclosed, but regulators likely want to know when Spectrum discovered the problem with Fusilev sales. The company issued its warning to investors on March 12, which was just three weeks after a 2012 earnings conference call on which CEO Raj Shrotriya predicted Fusilev sales would grow in 2013 despite recent flat sales. Spectrum's first quarter revenue fell 35% to $38.7 million compared to last year. The company reported a net loss for the first quarter of $2.8 million, or 5 cents per share, compared to net income of $46.5 million, or 71 cents per share, in the year-ago quarter. Fusilev sales totaled 11.8 million in the first quarter, down sharply from $51 million in the prior year. Spectrum shares closed Friday at $7.60 and are down 40% since the March 12 Fusilev sales-guidance cut. -- Reported by Adam Feuerstein in Boston. Follow Adam Feuerstein on Twitter.