Spectrum Pharma Analyst Says Sell-Off May Have Been Overdone

Spectrum Pharmaceuticals, Inc. SPPI, which plummeted 60% to $3.50 Thursday in reaction to a negative clinical readout, were rebounding Friday.

The Spectrum Pharma Analyst

B Riley FBR analyst Mayank Mamtani maintained a Buy rating on Spectrum and lowered the price target from $18 to $11.

The Spectrum Pharma Thesis

The topline overall response rate of 14.8% Spectrum reported for Cohort 1 in the Phase 2 study that evaluated poziotinib in previously treated exon 20 deletion EGFR mutant non-small cell lung cancer patients came in below the 20-30% consensus and the 43% reported in the single-center MD Anderson study, Mamtani said in a Friday note. (See his track record here.) 

This would mean the 115-patient study failed to meet the pre-specified threshold agreed upon with the FDA for accelerated approval, the analyst said. 

Yet the data offered evidence of monotherapy activity, and the 68.7% disease control rate and 7.4 months of response are clinically meaningful in a hard-to-treat patient population, he said. 

"While acknowledging cohort 1 results has readthrough to cohorts 2-7, we aren't convinced to take out pozi from our model as is reflected in today's sell-off, i.e., -60%, and believe incremental updates in 2020 to reaffirm confidence in pozi's place in NSCLC treatment paradigm." 

B Riley FBR said it sees a valuation floor in the form of more advanced ROLONTIS for treatment of neutropenia that is likely to be commercially launched in the fourth quarter of 2020 — and the $250 million in cash the company has for supporting advancement of earlier stage oncology candidates.

Spectrum Pharma Price Action

The stock was trading 2.29% higher at $3.58 at the time of publication Friday. 

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