Spectrum shares plunge as hospitals switch to cheaper colon cancer treatment

Wed Mar 13, 2013 1:44pm EDT

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(Reuters) - Shares of Spectrum Pharmaceuticals Inc (SPPI.O) fell as much as 38 percent on Wednesday after the company forecast a steep drop in full-year revenue as hospitals increasingly opt for a generic colon cancer treatment over its biggest-selling drug, Fusilev.

Fusilev has had strong sales over the past few years due to a shortage of leucovorin, a generic drug that treats advanced colon cancer in combination with another drug.

Fusilev, known chemically as levoleucovorin, is a purer and higher-priced version of leucovorin that is also used in combination chemotherapy.

The supply of generic leucovorin has increased since Sagent Pharmaceutical Inc (SGNT.O) began selling the drug in October, RBC Capital analyst Adnan Butt told Reuters.

"I think the company was surprised by the speed of the switch to generics," Butt said.

Spectrum, which had said in February that it expected sales to rise this year, forecast on Tuesday that total sales would fall to $160 million-$180 million in 2013.

Fusilev generated revenue of $204.3 million in 2012, about 80 percent of the company's product sales. Spectrum said on Tuesday it expects Fusilev sales of $80 million to $90 million in 2013.

Analysts expect that Fusilev could still generate revenue from clinics, which are less price-sensitive than hospitals.

"We still think it can be a $100 to $150 million drug per year," Butt said.

Spectrum management learned late last week that wholesalers, worried about growing demand for leucovorin, would delay Fusilev orders by at least a quarter, Roth Capital analyst Joseph Pantginis wrote in a note.

Leucovorin has been in short supply since 2008 as manufacturers in the U.S. suspended production or could not match demand for the drug.

Leucovorin is manufactured by Sagent, Teva (TEVA.TA), Bedford Laboratories and APP Pharmaceuticals LLC.

The number of cancer, anesthetic and other drugs in short supply in the United States hit a high in 2011 with 250 medicines, largely due to manufacturing problems.

Spectrum shares, which have risen more than eight-fold since Fusilev was launched in August 2008, were down 35 percent at $8.04 on the Nasdaq on Wednesday.

(Reporting By Vrinda Manocha in Bangalore; Editing by Supriya Kurane)

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