Response to Spectrum (SPPI) Question
Here's a question posted on my blog from Tim:
Hi Michael,
This is a very interesting article, and what makes it so interesting is Spectrum Pharma which I believe has the pipeline and the potential (satraplatin/ozarelix) to hit one out of the park. In fact I believe they will.
The current valuation of the company is ~116mil and that factors in 10% royalties from Satraplatin (ODAC panel will most likely give green light here and FDA will approve) but the market gives no value whatsoever to the remaining Spectrum pipeline which is almost half a page long.
I may be wrong, but I believe Spectrum is a screaming buy...triple buy I'd say.
I'd like to hear your thoughts on SPPI given your expertise and always on target posts.
Thanks,
Tim
My answer, Tim, is that I've followed Spectrum for a long time and if you use a metric I love -- the number of mid-stage Phase II and Phase III drugs (including those where a new drug application has been submitted) divided into a comapny's market cap -- Spectrum is well ahead, if not completely on top of, all other biotech and pharma companies.
SPPI's business model mitigates risk for investors by acquiring or licensing drugs past pre-clinical development. It also doesn't plan to sell or market its products, which mitigates some of the potential upside for the company.
I can live with that given the relative efficiency of the comapny in using its capital and other resources to get drugs through the development and (hopefully) approval process. I also agree with your optimism on satraplatin -- the FDA should decide this summer.
Michael
Comments (2)
Option players have been positioning here in the August calls. I've been watching Spectrum since it peaked at 7 1/2 and doing research on them. I liked them back then, and I like them now even more.
Stock has been weak but it looks like the tide's beggining to turn and it's getting close to jumping in while the stock continues to go un-noticed by the broader market.
Every stock has it's day and this one will be coming up shortly...
Cheers
Tim
Posted by Tim Benning | May 24, 2007 10:36 AM
Posted on May 24, 2007 10:36
Is Cypress Bioscience for real? Because if it is there's good oppty there after the positive P3 Milnacipran results. I have yet to find a small biotech with plenty of cash (103mln at the end of Q12007), zero dept, half a million burn rate per quarter, and a sweet partnership with Forest Labs on what Jefferies calls a billion dollar drug FMS drug (milnacipran), where Forest pays:
a) All development costs for Milnacipran
b) All sales, marketing costs
c) Some of Cypress' employees salary
d) Provides Cypress with a min. 205mln milestone payment
e) Provides royalties to Cypress
Additionaly, Cypress can license Milancipran to Forest for Canada. Furthermore, Cypress has the option to co-promote up to 25% of the total physician details using Cypresse's sales force and would be reimbursed by Forest in an amount equal to Forest's cost of providing the equivalent detailing calls.
If I do the math and value the company at a reasonable 5-6x sales/royalties, 85% risk adjusted and without the $3 per share cash they have I get a value around $23-24. Tacking on the cash, that's ~$26-27.
This isn't Dendreon. It's actually better. with a sucessfull trial based on the company's recently announce PR and no approved drug in the US for FMS, this sounds like an arms dealer to me.
I was looking at institutional ownership @ almost 90% with Fidelity, Goldman, Wellington capital and Maverick. Especially, Maverick...These guys are damn good in finding opportunities.
Am i missing something?
Thanks
Tim
Posted by Tim Benning | May 29, 2007 1:03 AM
Posted on May 29, 2007 01:03