Spectrum Pharma's (SPPI) Drop Seen as 'Overreaction' at RBC

RBC Capital maintained an Outperform rating on Spectrum Pharmaceuticals (NASDAQ: SPPI) price target of $13. Shares dropped after the company announced receiving a CRL from the FDA for Evomela. Analyst Adnan Butt called the decline an overreaction and he thinks now is a good time to buy.

"While the complete response letter for Evomela is unexpected, the downtick in SPPI seems like an overreaction to us. Our sales forecast 2015-2017 was $2.5M, $5M and $10M previously so this would be a small product from a top-line growth or defrayed expense standpoint. Since we care more on SPI-2012, apaziquone and poziotinib, we think this is a good opportunity to add," said Butt.

The analyst continued, "Though approval would have provided revenues that could defray expenses, our prior projections for Evomela are modest, $2.5M in 2015, $5M in 2016, and $10M in 2017, all of which we move out by 1-year. The stock reaction appears perplexing because these figures are neither significant enough to be key top-line drivers nor to meaningfully offset pipeline development expenses. In fact, Evomela approval could require SPPI to pay Ligand up to $66M in regulatory and commercial milestones and would have paid Ligand $6M upon approval."

For an analyst ratings summary and ratings history on Spectrum Pharmaceuticals click here. For more ratings news on Spectrum Pharmaceuticals click here.

Shares of Spectrum Pharmaceuticals closed at $6.64 yesterday.

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