Why Spectrum Pharmaceuticals Stock Is Sinking Today

By George Budwell Markets Fool.com

What happened

Continue Reading Below

As of 12:54 p.m. EDT, shares ofSpectrum Pharmaceuticals (NASDAQ: SPPI) were down by 11.3% following a disappointing first-quarter earnings report that hit the wires after the bell yesterday. The key issue that seems to be concerning investors is the26.7% drop in year-over-year net product sales -- partially reflecting the stagnating commercial launch of Spectrum's sixth anti-cancer drug, Evomela.

Image source: Getty Images.

So what

Despite having a basket of approved drugs on the market, Spectrum is still having significant trouble growing either its bottom or top line. Evomela's launch last year as a treatment fortwo multiple myelomaindications was supposed to change this scenario. But with the drug's sales seemingly stuck around $6 million per quarter and failing to show much momentum, the company may have trouble meeting the Street's fairly modest growth expectations (5.7% top-line growth is being forecast for 2018) going forward.

Now what

Continue Reading Below

On the bright side, Spectrum does have two late-stage drug candidates in the pipeline that might provide a welcome boost in the not-so-distant future. Rolontis, an experimental drug forthe management of chemotherapy-induced neutropenia, could be on the market in the U.S. by late next year. Qapzola is working its way toward a regulatory filing as a treatment for low- and intermediate-risk non-muscle-invasive bladder cancer by perhaps 2020.

At the end of the day, though, Spectrum clearly lacks a bona fide franchise-level drug in its product portfolio, as well as a game-changer in its late-stage pipeline. And that's a significant issue when it comes to attracting a stable investor base. Spectrum, after all, is currently trading at a rock-bottom price-to-sales ratio of 3.62 -- a rather unusual valuation for a company with multiple cancer drugs on the market. So until Spectrum finds a true flagship drug to build around, it might be best to look elsewhere in the biotech space for more compelling growth opportunities.

10 stocks we like better than Spectrum Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Spectrum Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 1, 2017

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.