Why Bears Are Devouring Spectrum Pharmaceuticals, Inc. (NSPPI)

Just 10 days ago, I examined the bear thesis on Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) as, amazingly, over half of its float was sold short. It looks like those short sellers were on to something after all.

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) tonight announced a crushing 40% guidance reduction for 2013, setting a revenue target between $160 million to $180 million, compared to Wall Street’s roughly $300 million estimate. The stock is currently down nearly 40% in after-hours trading. The culprit is steeply lower Fusilev sales, a branded drug that took full advantage of generic leucovorin’s unavailability to rack up $204 million in 2012 sales. Short sellers saw this as just a temporary bonanza while bullish investors believed that Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) could hold on to those market share gains.

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI).The announcement is a dramatic change of tune from Feb. 21, when during Spectrum’s fourth-quarter conference call CEO Rajesh Shrotriya confidently declared, “We expect 2013 revenues to grow” on the back of strong January trends. I’m guessing February and March were trending worse than Seth MacFarlane’s Oscar performance.

Perhaps putting too much faith in management’s comments from the conference call, I concluded my video from earlier this month that while the growth days of Fusilev were over, generics weren’t poised to immediately decimate its market share. Oops. However, I did at least argue that, over the longer haul, short sellers would be vindicated, potentially sooner if insurance reimbursement pressure hastened the switch to lower-cost generics from companies such as Sagent Pharmaceuticals Inc (NASDAQ:SGNT) .

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s valuation may be shattered, but it doesn’t mean the stock is finished. Fusilev is still expected to bring in $85 million in 2013. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)also has two other drugs on the market, albeit neither are great sellers, a handful of phase 2 and phase 3 cancer assets, and about $60 million in net cash to help develop them.

Even for investors who believe in those late-stage assets, the valuation of this company is still murky given that Fusilev sales could decline worse than estimated. I recommend staying away from falling knife stocks, unless you like getting cut.

The article Why Bears Are Devouring Spectrum originally appeared on Fool.com and is written by David Williamson

David Williamson has no position in any stocks mentioned, and neither does The Motley Fool. Follow David on Twitter @MotleyDavid.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!