On Wall Street, as in life, innocent bystanders sometimes get hurt.

Last week, another company's screw-up cost Spectrum Pharmaceuticals ( SPPI) dearly.

Spectrum shares are off 45% since July 20, when a negative Food and Drug Administration review of the prostate cancer drug satraplatin was made public. Four days later, an FDA advisory panel voted to recommend that regulators wait for more clinical data before approving satraplatin.

Spectrum shares closed Wednesday at $3.65, down 12 cents, or 3.2%.

The satraplatin debacle is a frustrating setback for Spectrum, because while the company has an economic interest in the drug, it doesn't control its development.

Spectrum licensed the drug to German drugmaker GPC Biotech ( GPCB) years ago, and GPC was responsible for clinical testing and submitting the approval package with the FDA.

As many investors learned painfully last week, GPC's efforts in this regard were woefully inadequate and, dare I say, misleading to many of us who have followed satraplatin.

Unfortunately, Spectrum is caught in the crosshairs. Its deal with GPC calls for the company to receive royalties on worldwide satraplatin sales. But now, U.S. approval of the drug looks dicey, and European approval isn't a sure thing either.

So what to do with Spectrum? The stock was -- and continues to be -- in my biotech model portfolio. The sharp drop in market cap is painful, but I continue to like the company's prospects, especially its experimental drug ozarelix.

Ozarelix treats the signs and symptoms of benign prostatic hyperplasia, or BPH, a noncancerous enlargement of the prostate that can result in increased frequency of or difficulty with urination. It's a common disease for men over the age of 50, and it's treated now with once-a-day pills such as Boehringer Ingelheim's Flomax or GlaxoSmithKline's ( GSK) Avodart.

Ozarelix, however, is an injection that can be given twice a year, which means freedom from having to remember to take your BPH pill every day. Early ozarelix data has been impressive from an efficacy and safety standpoint. Spectrum is wrapping up a placebo-controlled, double-blinded phase IIb study in the U.S. right now and hopes to start a phase III trial program by the end of the year.

There is a big market opportunity here: Upward of $4 billion a year is spent on BPH treatments worldwide.

Spectrum CEO Rajesh Shrotriya says the company is still ironing out plans for the data release from the phase IIb ozarelix study. Three-month efficacy data (the study's primary endpoint) will be ready in the third quarter, but the FDA has expressed an interest in seeing longer-term (six-month) efficacy and safety data, which could push data release into the first or second quarter of next year.

With all the uncertainty at the FDA these days, collecting the best and most-stringent clinical data possible from the ozarelix phase IIb study is a smart move for Spectrum, even if it means delaying the release of the results to the public.

Shrotriya says Spectrum has no intention of starting its phase III ozarelix studies without good phase IIb data, so an announcement regarding the start of phase III studies will be a positive signal to investors that ozarelix is on track.

Look for that announcement, hopefully, before the end of the year.

And don't expect Spectrum to take ozarelix to market by itself. This is a drug and indication that requires significant consumer marketing. Shrotriya says Spectrum has already received some initial partnership inquiries; while no serious negotiations are taking place yet, the company will ultimately partner this drug.

In the meantime, the focus is on satraplatin: Is the prostate cancer drug dead? No, but it's on life support. As we learned last week, FDA approval is now contingent on data showing that satraplatin can significantly boost survival. We won't get that data until early next year, but based on interim survival data already disclosed, hitting this efficacy benchmark isn't going to be easy.

The situation is somewhat different in Europe, where Pharmion ( PHRM) controls satraplatin. European regulators are often viewed by investors as more picky or less likely to approve new drugs compared than their U.S. counterparts.

I'm not sure that's true, especially with the FDA seemingly in no rush to approve anything related to prostate cancer. The FDA had no interest at all in approving satraplatin based on an endpoint of progression-free survival, but European regulators may be more open-minded.

There are examples of drugs rejected by the FDA but approved in Europe: Encysive Pharmaceuticals' ( ENCY) Thelin and NPS Pharmaceuticals' ( NPSP) Preos are two that come to mind.

This doesn't mean that satraplatin has a smooth road to European approval, but the drug's not dead and buried over there, either.

By the way, I asked Shrotriya about last week's disappointing FDA advisory panel meeting on satraplatin. He was diplomatic and wouldn't slam GPC, but the anger and frustration in his voice were there.

"I was dumbfounded while sitting at the panel," he said. "We were led to believe by GPC Biotech that everything possible was being done to get satraplatin approved. So I was surprised, shocked, when I learned that the FDA has raised questions."

Shrotriya is sick over Spectrum's current stock price because he believes investors are focused too much on satraplatin and not on the rest of the company's pipeline, which, along with ozarelix, includes a phase III ovarian cancer drug, Eoquin, and many other drugs in earlier stages of testing.

That doesn't mean investors are going to wake up tomorrow and start a bidding war for Spectrum shares. The satraplatin setback has dropped the company in a hole, and it will take some time -- and (hopefully) new, positive clinical data from ozarelix -- to dig out.
Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.