Biotech Stock Mailbag: Spectrum Pharma

BOSTON ( TheStreet) -- Patrick A. gets the ball rolling on this week's Biotech Stock Mailbag:

"Why not talk recently of Spectrum Pharmaceuticals ( SPPI) and its sales of Zevalin? Spectrum is posting encouraging sales numbers with first quarter revenue coming in at $6.5 million, a 27% quarter-over-quarter increase from the fourth quarter. Considering that Zevalin sold a total of $12 million in all of 2008, these numbers have to be exciting for Spectrum shareholders since the company's sales force was completely implemented in the first quarter. What are your thoughts on the future of Zevalin sales? How high can they go?"

Analyst coverage of Spectrum is hit or miss, so I don't have a sense for the consensus sales expectation for second quarter, if one even exists. Is it reasonable to expect the first quarter sequential sales growth (27%) to continue? If so, Spectrum should post second-quarter Zevalin sales of $8.2 million.

Zevalin sales in 2009 totaled $15.7 million. Spectrum needs to at least double Zevalin sales this year, if not more. Based on first quarter growth trends, Zevalin sales of $35 million to $40 million in 2010 should be an achievable target, especially since Spectrum's sales force and the company's full-time marketing efforts are underway.

If Spectrum can grow Zevalin sales to these targets -- if -- the stock in the low-$4 range is undervalued.

Investors are still in show-me mode, witnessed by the flattish performance of the stock this year. I have questions about Spectrum's commercial capabilities, as well. On April 12, two high-level executives, Chief Medical Officer Andrew Sandler and Chief Commercial Officer Amar Singh, resigned from the company unexpectedly.

Spectrum CEO Raj Shrotriya couldn't tell me exactly why both Sandler and Singh left the company, although Shrotriya intimated that personal reasons, including an out-of-state commute, played a role. Neither Sandler nor Singh had new jobs lined up, according to Shrotriya, and I haven't been able to track either of them down for comment.

The unexpected exit of two top executives at any drug company is reason for concern. The situation at Spectrum might be more worrisome because Shrotriya, in the past, has made the point of talking about recent hires like Sandler and Singh as evidence of the company's ability to turn around the fortunes of a drug like Zevalin.

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