Common Labeling Issue Creates Minor Setback for Spectrum Pharmaceuticals (Nasdaq: SPPI) Print E-mail
By Justin M. Hall   
Monday, 06 July 2009 07:25
Yesterday, Spectrum Pharmaceuticals (Nasdaq: SPPI) announced receipt of a Complete Response Letter (CRL) for Zevalin from the FDA.  SPPI submitted a supplemental Biologics License Application (sBLA) earlier this year for the use of Zevalin as a first-line consolidation therapy for the treatment of non-Hodgkin’s lymphoma (NHL).  Zevalin is currently approved by the FDA for refractory NHL.
THE ISSUE

SPPI indicated in their press release that regulators have requested data from the Phase 3 FIT study to support the proposed labeling for Zevalin.

Although this request will postpone Zevalin’s approval, this is a relatively minor setback.  Labeling issues periodically trigger CRLs.  Typically, this is an easy fix.  In most circumstances, labeling issues are often last-call before final approval.

WHAT’S NEXT FOR SPPI?

The key is a timely response.  In their release, SPPI indicated that they intend to submit a response or provide the data requested to regulators this Wednesday, July 8.

SPPI’s response to the CRL will be filed as a resubmission of the Zevalin sBLA.  There are two types of resubmissions, Class 1 and Class 2.  Length of review for the resubmitted application depends on how the FDA classifies the resubmission, which is based on applicant’s response to the CRL.  Class 1 resubmissions are generally reviewed and decided within 60 to 90 days.  A Class 2 submission will usually take regulators six months or longer to review. 

The underlying issue that triggered the CRL involves labeling.  Responses to labeling issues are almost always accepted as Class 1 resubmissions.  Therefore, regulators are likely to accept the Zevalin resubmission as a Class 1 resubmission.

DOES ZEVALIN STILL HAVE A SHOT AT APPROVAL?


Yes.  Some say a better question might be: "When will Zevalin be approved?"  Assuming, SPPI submits a response for the CRL on Wednesday, July 8, and it is accepted as a Class 1 resubmission, then the FDA could render a decision on Zevalin within the next 90 days. 

This means, Zevalin could be approved on or before October 8, which just so happens to be the same day the FDA will review SPPI’s supplemental New Drug Application (sNDA) for Fusilev.  SPPI is seeking approval for Fusilev to be used in combination with 5FU for the treatment of colorectal cancer.

-- Zevalin (Class 1 resubmission): decision on or before October 8, 2009
-- Fusilev standard review: October 8, 2009

CONCLUSION

While Zevalin’s approval has been setback, the sky is certainly not falling.  Pullbacks as result of the setback may provide investors with a good buying opportunity.

At the end of the day, I remain very optimistic about SPPI going forward.

Right now, there is no other small cap drug maker, except for SPPI, scheduled to have two cancer drugs reviewed by the FDA in 2009 or 2010. 

Excluding these two potential approvals, analysts already estimate that SPPI will generate about $50 million in revenue (sales) for fiscal year 2009. 

As most small to mid cap drug makers trade above 4x sales, SPPI is currently trading near fair value at $6.50 (prior to news) with a market cap of $252 million.  The company is also sitting on more than $100 million in cash following three recent stock offerings.  If one compares SPPI to other small cap cancer drug makers, One can see that SPPI is well-positioned for future growth. As one example, one can see Cell Therapeutics, Inc. (NASDAQ:CTIC), which has no approved products on the market and very little cash on hand trading with a market cap of $765 million. 

I am reaffirming my price target of $31 for shares of SPPI over the next 12 to 17 months.


Disclosure: Long SPPI



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