Despite Regulatory Setback, Spectrum Still "Unique Investment Opportunity," Says Analyst

Despite Regulatory Setback, Spectrum Still "Unique Investment Opportunity," Says Analyst
  • Yesterday, the FDA's Oncologic Drugs Advisory Committee (ODAC) panel voted against Spectrum Pharmaceuticals Inc's SPPI poziotinib's (pozi) risk/benefit ratio and concluded that pozi's benefits do not outweigh the risks for the treatment of HER2 exon 20 insertion mutations.
  • Meanwhile, with a newly approved commercial product Rolvedon launching into the $2.3 billion G-CSF space, JMP Securities believes that Spectrum shares still represent a unique investment opportunity with a 34% potential downside (bear case is $0.42) and 1,003% potential upside (bull case is $7). 
  • JMP reiterates its Market Outperform rating and a price target of $4.
  • The analyst writes that the four "yes" votes reiterated the need for new therapies in HER2 exon 20 mutations wherein the treatment options are limited. 
  • Additionally, given the well-understood safety profile of TKIs, the four "yes" voters indicated that the side effect profile could be managed well. 
  • Furthermore, JMP acknowledges that given the current cash position, the company would need to make efforts to conserve cash, including cutting R&D, along with a potential capital raise. In a change to the model, JMP has reduced the R&D costs beginning 1Q23 by 30%.
  • Price Action: SPPI shares are down 33.80% at $0.42 on the last check Friday.
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