@pjkorman tweets (with some snark, which I appreciate), "Waiting for your take on SPPI report tomorrow. I know you're a fan." Spectrum Pharmaceuticals ( SPPI) rates a "meh" for its second-quarter earnings report. The company was once again profitable, earning $7.2 million, or 12 cents a share, but gross margins, operating margins and net profit margins were all down sequentially due to higher expenses. Selling, general and administrative costs were up substantially, even accounting for non-cash charges in the quarter. The performance of the colon cancer drug Fusilev is what we all focus on these days, and sales were down 2% sequentially to $33.9 million. Given Spectrum's big marketing push and continued shortages of the generic competitor leucovorin, I expected sequentially higher sales of Fusilev. Spectrum said it was very happy with Fusilev sales in the quarter, noting that the company had supply issues of its own, which meant full demand for the drug could not be met. Spectrum signed on new Fusilev suppliers at the end of the June, so with continued leucovorin shortages, Spectrum better turn in a stronger performance in the third quarter. If Fusilev sales once again fall or remain flat sequentially in the September quarter, it could mean that leucovorin resupply is eating into Fusilev sales, which is what Spectrum bears expect to happen. For the record, Spectrum said on its call that it expects equal or higher Fusilev sales in the third quarter.
One drop-dead rule for biotech investing (any investing, actually) is to read closely a company's regulatory filings. What a company discloses to the Securities and Exchange Commission in an 8-K, 10-Q or 10-K is much more important than what's trumpeted in a press release. Don't ignore press releases. Instead, compare the language and details scripted in the press release to what's disclosed in the SEC filings. If the two documents differ, i.e., if the press release leaves out salient yet less-than-positive details, you can infer that management may be more interested in spin than transparency.
Back to Dendreon, Martine P. asks, "Is this a buying opportunity in Dendreon the way it was back when FDA rejected Provenge in 2007?" Provocative question! I don't have the guts to give you a direct answer, but I will point out that Dendreon opened Thursday at $12.71, and as I type this, the stock looks like it will close around $11.94. That's not a good sign, even on a terrible, horrible, miserable day for stocks like Thursday. I laid out most of the issues pertaining to Dendreon and Provenge in my Thursday column, but here are a few more thoughts: As much as Dendreon insists that it's dealing with a reimbursement issue, I'd hazard to say that a majority of investors believe slacking demand for Provenge is as big a problem, if not more so. It should really worry you when you hear Dendreon say that doctors aren't identifying enough Provenge-eligible patients. That either means Dendreon's sales team is incompetent (not good) or doctors don't believe in Provenge enough to bother screening patients (really not good.) Assuming the "cost density" of Provenge is a problem, how will getting doctors more comfortable with reimbursement make this issue go away? Even if a doctor knows that he can reimbursed quickly, he still has to lay out $93,000 for every patient he puts on Provenge. ISI Group biotech analyst Mark Schoenebaum thinks Dendreon needs to consider cutting Provenge's price (not likely) or coming up with a way to offer doctors more generous payment terms. Whether the latter solution helps solve this cash-flow problem is not clear, he adds. Dendreon failed its first major test in the "non-supply constrained" Provenge era, and Wall Street is not likely to be in a forgiving mood for a very long time. Management credibility -- zero.