Why Spectrum Pharmaceuticals Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Spectrum Pharmaceuticals (NAS: SPPI) dipped as much as 15% after the company reported its second-quarter earnings.

So what: For the quarter, Spectrum reported a whopping 51.5% increase in revenue to $68.7 million, led mostly by strength from its combination therapy, Fusilev, which is used for palliative care in patients with advanced colorectal cancer. Profits didn't lag either, up 48% from the previous year to $0.37. Both figures come in well ahead of estimates found on Yahoo! Finance.

Now what: If the results are so strong, why is Spectrum Pharmaceuticals down? It probably has a lot to do with the extended stagnant growth of Zevalin, a treatment for follicular lymphoma, and a recent string of poor clinical data from bladder cancer drug hopeful, apaziquone, that it is developing in partnership with Allergan (NYS: AGN) .

In spite of this, and Wall Street's recently reduced earnings estimates, I see a lot of opportunity to be had with Spectrum. Its purchase of Allos Therapeutics (NAS: ALTH) will add the already FDA-approved Folotyn for the treatment of relapsed or refractory peripheral T-cell lymphoma to its growing product portfolio, and it seems likely that the drug will be approved in Europe as well. At just nine times forward earnings, I would consider today's sell-off a fantastic opportunity to buy into the Spectrum story.

Craving more input? Start by adding Spectrum Pharmaceuticals to your free and personalized Watchlist so you can keep up on the latest news with the company.

The article Why Spectrum Pharmaceuticals Shares Slumped originally appeared on Fool.com.

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