Spectrum Pharmaceuticals: The Bear and Bull Case
At the request of some subscribers to my website, I have been asked to take a look at the bull and bear case on Spectrum Pharmaceuticals and try to fairly represent the positives and negatives of each point of view. There is strong bearish sentiment as short interest accounts for 52% of the float. For the detailed report, check the Company Reports section of my website.
The bear case calling for a sharp decline in Fusilev sales when generic leucovorin becomes widely available seems to be in serious question, but can’t be dismissed without several more months of data. Within the last few months, it appears that generic leucovorin supplies are now readily available. It is not crystal clear as to how much of an effect generic leucovorin is having or will have on Fusilev sales. It can be argued that Fusilev is flattening, but it might also be the case that the generics are just regaining that part of the market that was not supplied by Fusilev over the last two years and that Fusilev is maintaining its current sales level and perhaps expanding it.
I think that Spectrum could report Fusilev sales in 2Q, 2012 of $65+ million and field checks suggest a good start to the third quarter, which compares to the Street consensus of $60 million. . The upside surprise on Fusilev sales, if I am correct, could cause the stock to move up and make the bears uncomfortable, possibly resulting in a short squeeze. Based solely on my subjective feel, I can see the potential for an upside surprise and short squeeze driving the stock above $20. I think that the third quarter could also surprise on the upside relative to current thinking. My crystal ball flickers a little as I look into the fourth quarter and I don’t have as much confidence one way or another. I do think that it will be much more uncomfortable for bears than bulls over the next few months.
Tagged as Fusilev, Spectrum Pharmaceuticals Inc. + Categorized as Smith On Stocks Blog