HENDERSON, Nev. ( TheStreet) -- Spectrum Pharmaceuticals ( SPPI - Get Report) has a (shrinking) Zevalin problem.

First-quarter sales of the non-Hodgkin's lymphoma drug totaled $5.9 million, which means sales fell 9% from the first quarter last year. More worrisome is that Zevalin sales fell 26% sequentially, making this quarter the first in two years where Zevalin sales did not grow, even just a little.

The last time Zevalin sales dipped below $6 million in a quarter was December 2009.

Spectrum shares were down $1.06, or 12%, to $8.05 in early Wednesday trading.

Spectrum offered no explanation in its earnings release or 10-Q for the decline in Zevalin sales, so hopefully management addresses the issue on its conference call later this afternoon.

In its earnings pre-announcement last week, Spectrum management said it expected Zevalin sales "to grow gradually over time." Regression, not gradual growth, was the measure in the first quarter.

Zevalin is a monoclonal antibody that seeks out and attaches itself to cancer cells. But unlike other such drugs, Zevalin carries a radioactive payload designed to kill the cancer cells while leaving neighboring healthy cells intact. Zevalin was the first in a new class of "radio-immunotherapies" approved by the FDA.

Unfortunately, the technology the makes Zevalin so effective also makes it complicated to administer to patients and difficult to sell. Idec Pharmaceuticals, the company that developed Zevalin, didn't have much luck and neither did Biogen Idec when it acquired Idec. After that, Zevalin was sold to Cell Therapeutics, which couldn't market the drug effectively. Now, it's Spectrum's turn.

Spectrum has applied to the U.S. Food and Drug Administration for approval to lift a requirement that patients undergo a pre-treatment "bioscan" before Zevalin is administered. The company hopes that this will make it more convenient to treat patients with Zevalin and boost sales. An FDA decision on lifting the bioscan requirement is set for Nov. 20.

Zevalin is the key growth driver for Spectrum, which is why first-quarter's lackluster sales of the cancer drug are overshadowing what was, in all other respects, a very good financial performance.

Spectrum earned 23 cents a share in the quarter on total revenue of $43.6 million, topping the consensus analyst estimate by a wide margin. However, Spectrum's pre-announcement of better-than-expected revenue last week meant investors already knew about the outperformance.

What investors didn't know until Wednesday was how badly Zevalin performed. And then there's the question about the sustainability of growth from Spectrum's other cancer drug, Fusilev.

Spectrum's first-quarter's revenue and profit was driven almost entirely by Fusilev sales of $34.6 million, up 50% sequentially. As is widely known, Fusilev is benefiting from an ongoing supply shortage of generic leucovorin that prompted FDA to sanction the off-label use of Fusilev as a replacement for leucovorin in commonly prescribed chemotherapy regimens for colon cancer.

Fusilev and leucovorin are chemical cousins so when leucovorin supply stocks recover, Fusilev sales are likely to fall, even with last week's FDA approval allowing Spectrum to market Fusilev for colon cancer. Fusilev is much more expensive than generic leucovorin and the drug's label contains no data demonstrating superiority over leucovorin in colon cancer.

Spectrum has not provided financial guidance for 2011, including sales forecasts for Zevalin or Fusilev. The current analyst consensus has Spectrum losing a penny a share on total revenue of $95.98 million.

--Written by Adam Feuerstein in Boston.

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