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.