bischen optimistisch geschrieben, aber für 15 Dollar müsste es gut sein, wenn im September und Oktober die erweiterten Zulassungen, für Zevalin und Fusilev, kommen sollten?
SPECTRUM PHAMACEUTICALS (SPPI)
On July 14, 2009, I indicated that SPPI was oversold and undervalued at $4.98. Since that time, shares of SPPI have advanced 30.52%. On Friday, July 24, SPPI closed at $6.50.
Going forward, I am still comfortable with my price target of $31 for SPPI over the long-term. So, it should be obvious, to most anyway, that I also believe SPPI will continue to advance from here and despite less optimistic views held by some analysts and commentators.
Price: $31.00
Duration: 12 to 18 months
IN DETAIL
For those, who have not read or followed my past articles, here's how I derived at the $31 price target for shares of SPPI.
Zevalin®
Approval for first-line consolidation treatment in non-Hodgkin’s lymphoma (NHL) is important for Zevalin. On or before September 7, 2009, Zevalin is likely to be approved for first-line use. For purposes of the analysis below, I assume Zevalin will be approved for first-line use.
Under the first-line setting, approximately 20,000 additional early-stage NHL patients could qualify for the Zevalin treatment. Currently, there are about 8,000 patients that already qualify under the existing, approved refractory or salvage setting (last resort).
Over the past six to seven years, Zevalin has only been able to penetrate about 10.5% of the existing, approved market or 8,000 late-stage patients. Approximately 800 late-stage NHL patients actually receive Zevalin in a given year.
So, if Zevalin only penetrates 10.5% of the new first-line market, an additional 2,100 patients will receive the treatment. Do the math. Under both indications – first-line and late-stage - approximately 2,900 patients would receive the treatment with a penetration of 10.5%.
In the US, Zevalin costs between $24,000 and $30,000 per patient. While such an expense may seem expensive to some folks, Betsy de Parry, the subject of a new documentary, would strongly and rightfully argue otherwise.
With a penetration of 10.5% or 2,900 patients, sales of Zevalin would total $69.6 million.
However, I argue that more patients will be made aware of Zevalin after it is approved for first-line use. In an era of defensive medicine, the FDA’s seal of approval is very important to treating physicians. It is also very important to patients. In past years, doctors have NOT told patients about the Zevalin option. While there are a number of very poor and disappointing reasons, SPPI appears to have a sound plan to address the problems that led to Zevalin’s past disuse. Rather than reexamining the problems of the past, I am more interested in Zevalin’s future after it is approved for first-line use.
Doctors should finally find a place for Zevalin after the treatment is approved for first-line use. In effect, the first-line approval is likely to limit the liability for doctors, who administer Zevalin or refer patients to doctor who can administer the treatment. Under this same reasoning, first-line approval is also likely to increase the liability for those doctors, who do NOT administer Zevalin or refer patients to a doctor who can.
Regarding the latter, let’s examine a hypothetical scenario. Doctor does not inform the patient about or dissuades the patient from the Zevalin option. Like most Americans with early and late-stage NHL, this patient does not receive Zevalin because he or she was never informed about the option or was dissuaded from it. After some time passes, this patient dies from complications attributed to NHL. How might that doctor explain to a jury of his peers that he elected to NOT offer his patient Zevalin? How might that doctor explain why he dissuaded the patient from the Zevalin treatment, even though Zevalin has been proven in several trials to be a very safe and effective treatment for NHL and that the treatment has also been approved by the FDA for first-line and late-stage patients? How might that doctor explain to the jury why he missed both opportunities? These might be tough hurdles to get over. While the scenario is hypothetical, it is certainly foreseeable.
Under this reasoning, it seems far more likely than not doctors will begin informing NHL patients about the Zevalin option after it is approved for first-line use. If more patients are aware of Zevalin (including the benefits of (1) 87% complete response or remission rates after induction therapy and (2) a two-years of progression free survival), then it is likely that most early-stage NHL patients might opt for the treatment. If so, then one could reasonably argue that Zevalin will likely penetrate more than 10.5% of the total market.
I estimate that 7,500 patients, less than 30% of the total patient pool, would elect to have the Zevalin treatment, presuming they are, in fact, made aware of the option. From my view, 30% penetration, for a safe and extraordinarily effective first-line NHL treatment, which some doctors have called a cure, is a conservative estimate.
With a penetration of 7,500 patients, sales of Zevalin would total $180 million.
Fusilev®
Fusilev is scheduled for standard review by the FDA on October 8, 2009 to be used in combination with 5-FU for the treatment of colorectal cancer. Like Zevalin, Fusilev is also likely to be approved.
In early 2008, Fusilev was approved by the FDA as a combination treatment for osteosarcoma, a form of bone cancer. In August 2008, SPPI launched Fusilev in the US.
Under the colorectal cancer indication, Fusilev sales are approximately $200 million annually in Europe and Japan where the drug is marketed by Wyeth (WYE) and Takeda.
Q1 2009, Fusilev sales totaled $9.4 million. If sales flat line or remain the same, then Fusilev sales will total nearly $40 million in 2009.
Since the drug was just launched in August 2008, sales are likely to continue growing in 2009. With the additional colorectal cancer indication, which features a much larger patient pool, sales of Fusilev could grow substantially over the next 12 to 18 months.
In that time, I conservatively estimate Fusilev sales will reach $100 million, or half that which is already generated abroad.
SPPI at $31
Over the next 12 to 18 months, I estimate sales of Zevalin and Fusilev could likely total around $280 million. SPPI’s price target of $31 was factored by using a relatively conservative multiple of four times revenue or sales ($280 million X 4 = $1.12 billion). Most drug makers trade above this multiple.
At $31, SPPI would retain a market cap of approximately $1.12 billion.
Disclosure: Long SPPI
