Spectacular Growth Prospects
Sharmistha is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The biotechnology industry is fuelling mobility and economic growth and it is expected to show a strong upward momentum in the future. Many investors once considered biotech stocks untouchable, but all that is about to change.
Spectrum Pharmaceuticals (NASDAQ: SPPI) a small, fast growing company which has achieved almost quadruple its revenue is gradually getting its due recognition in the biotechnology industry. The strengths and opportunities outnumber the weaknesses and threats. The vast product portfolio and strategic alliances, in the ever growing cancer market that it has garnered, is slowly pushing it above the intense competition.
Spectrum’s MD, Chairman, Chief Executive Officer, and President said that the company expects $300 million in revenue for this year. Spectrum turned profitable in 2011 after posting losses in prior years, actually earning $48.5 million, or 84 cents a share, in 2011. For 2012, analysts are forecasting earnings of between $1.37 a share and $1.96.
In the first five years since its inception, Spectrum transitioned from a small start-up entity to a growing, development-stage company. In the second five years, Spectrum has transformed into a successful commercial company. Spectrum markets three oncology drugs ─ FUSILEV (levoleucovorin) an Injection marketed in the U.S.; FOLOTYN (pralatrexate injection), also marketed in the U.S.; and ZEVALIN (ibritumomab tiuxetan) another injection, for which the Company has worldwide marketing rights.
Fusilev, which is indicated for osteosarcoma and colorectal cancer, is the big revenue driver accounting for 78% of total sales. The company is not only cash rich but has reported revenue of $232.56 million, with $128.56 million in the first two quarters of 2012.
The completion of the Allos acquisition is a major milestone for Spectrum giving the combined company a third approved drug. Allos is currently focused on the development and commercialization of FOLOTYN (pralatrexate injection), a folate analog metabolic inhibitor. FOLOTYN is approved in the U.S. for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL). Allos will no longer trade publicly because the company is now a subsidiary of Spectrum
Spectrum has also signed an exclusive collaboration with Allergan (AGN), a technology-driven global health care company, for the development and commercialization of Apaziquone, an agent aimed at treating non-muscle bladder cancer. . Apaziquone is one of Spectrum’s two drugs undergoing phase 3 clinical trials, to determine its safety and efficacy as a potential treatment for bladder cancer.
The company is valued with a P/E ratio of just over 8, which is far less than the forward ratio of biotech companies with similar growth such as Regeneron Pharmaceuticals (NASDAQ: REGN) and Alexion Pharmaceuticals (NASDAQ: ALXN).
Regeneron Pharmaceuticals (Regeneron) is an integrated biopharmaceutical company, which discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions. Regeneron is far better known for Eylea, a treatment approved late last year for treating macular degeneration, the leading cause of blindness in the elderly is already achieving blockbuster sales and stealing market share from Roche's Lucentis treatment for the eye condition The company, based in Tarrytown, New York, has a promising array of other drugs in development with Sanofi to treat cancer, cholesterol and inflammatory diseases. Regeneron shares, which rose 0.4 percent to $136.96, have soared 250 percent since the FDA approved Eylea on November 18. The company’s stock value is continuing to increase in the market share as it raises revenue on existing platforms with existing customers. From an investors point of view it continues to be one of the more compelling biotech companies.
Alexion Pharmaceuticals is a biopharmaceutical company focused on serving patients with severe and ultra-rare disorders through the innovation, development and commercialization of life-transforming therapeutic products. The company has a P/E ratio of 109.4, below the average drugs industry P/E ratio of 110.5 and above the S&P 500 P/E ratio of 17.7.Recently Alexion Stock Hits New 52-Week High. The stock is currently trading 3.64% above its 20-day moving average, 6.3% above its 50-day moving average, and 24.35% above its 200-day moving average.
Recently Spectrum Pharmaceuticals appointed Industry Veteran and Former Senior Amgen Executive, Ken Keller, as Executive Vice President, Chief Operating Officer. With over 20 years of experience, the company’s association with Mr. Keller will accelerate the growth process. “We are pleased to welcome Ken to Spectrum and believe he will be a strong asset to our management team,” stated Rajesh C. Shrotriya. The Company has assembled an integrated in-house scientific team, including clinical development, medical research, regulatory affairs, biostatistics and data management, formulation development, and has established a commercial infrastructure for the marketing of its drug products. And plans to establish and expand offices in Japan and in Europe to support international operations.
“Trustworthiness, honesty and consistency” are considered playing an integral part in the company’s success. This coupled with the stability factor plays an important role in the investor’s decision making.
The company invests a great portion of its assets in short term securities thus allowing Spectrum to record interest revenues every year. With a very strong balance sheet, its cash and marketable securities are higher than its total liabilities. Spectrum has no long term financial debt and contrary to many biopharmaceutical firms, it has been able to maintain shareholders' equity .There was a 44.5% increase from $89.0 million in consolidated revenue recorded in the first six month s of 2011 and reports record revenues and profits for First Quarter of 2012. The Company’s Board of Directors has approved an increase in its stock repurchase program authorizing the repurchase of up to a total of $100 million of the Company's common stock. The Company was previously authorized to repurchase up to $25 million of its stock.
In a nutshell SPPI seems a promising long term player and the stock could rally to new highs. The company is buying back shares aggressively, projecting revenue worth of $300 million, and just completed a very important acquisition that should allow for all of its drugs to grow faster and longer. A definite stock to watch.
SharmisthaB has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
