H.C. Wainwright Remains Positive on Spectrum Pharmaceuticals, Inc. (SPPI) Despite FDA AdCom Setback

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is dealing with the rejection from yesterday’s FDA Oncology Advisory Committee meeting for its pipeline drug Qapzola (apaziquone), designed to treat non-muscle invasive bladder cancer (NMIBC).

Considering Qapzola did not succeed in meeting the primary endpoint of a significant reduction in two-year cancer recurrence rate for either of its studies, H.C. Wainwright analyst Swayampakula Ramakanth expected this setback, considering a “positive FDA decision” as a “low probability event.”

Despite the setback and without expectation for the FDA to approve the drug before its PDUFA date of December 11, 2016, Ramakanth reiterates a Buy rating on SPPI with a price target of $10, which represents a nearly 107% increase from where the shares last closed.

Ramakanth asserts, “We believe that despite the disappointing result from the AdCom meeting, there would not be significant negative impact on Qapzola’s development program. As our current model assumes Qapzola reaching the market in 2019, we are not making any adjustments to our financial projections as a result of today’s event.”

From yesterday’s event, the analyst notes that multiple urologists on the panel highlighted the value of finding a treatment of NMIBC, as right now there stands a “significant unmet need” in the wake of lack of drug approval for the past 18 years.

Second, the urologists commented that the usual standard of care, mitomycin C has its drawbacks in regards to severe side effects. In contrast, Ramakanth explains SPPI’s drug’s profile has proven to be “exceptionally clean” in its profile.

Perhaps the most important takeaway of all for the analyst is that though the drug did not convince the agency of demonstrative clinical benefits for treating NMIBC, rather than dismissing the drug, the urologists assess the lack of approval likely stems more as a “result of flawed study designs.”

As such, Rakamanth concludes, “Based on these remarks, we believe that committee members regard Qapzola as a promising drug that could benefit patients if the correct setting could be found. We believe if Qapzola is able to demonstrate a significant reduction in NMIBC recurrence rate in the ongoing Phase 3 study, it would have a high likelihood of receiving FDA approval.”

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Swayampakula Ramakanth is ranked #3,986 out of 4,151 analysts. Ramakanth has a 31% success rate and faces a loss of 12.4% in his yearly returns. When recommending SPPI, Ramakanth loses 7.1% in average profits on the stock.

TipRanks analytics demonstrate SPPI as a Strong Buy. Based on 4 analysts polled in the last 3 months, 3 rate a Buy on SPPI, while 1 maintains a Hold. The consensus price target stands at $8.67, marking an 84% upside from where the stock is currently trading.screen-shot-09-15-16-at-06-17-pm

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