1 Biotech Trying to Put the Cat Back in the Bag

Spectrum Pharmaceuticals (NAS: SPPI) is doing its best to put the cat back in the bag. The company's efforts to do so followed a news release on Sept. 21 from development Denmark-based development partner Topotarget A/S. In the public release, Topotarget stated that the primary endpoint was met in the phase 2 clinical trial for belinostat, a drug targeted for treatment of peripheral T-cell lymphoma.

Three days later, though, Spectrum released its own announcement distancing itself from Topotarget's news release. Spectrum emphasized that the final analysis from the belinostat trial is not yet complete. The company further stated that database lock is anticipated in the November to December timeframe, after which "a definitive determination of the primary endpoint of overall response rate (ORR) will be calculated."

This drama played out in public raises a couple of questions in my view. Let's take a look.


Why?
Why did Topotarget jump the gun with its announcement? I'm not sure how Ricky Ricardo's familiar line with his wife Lucy translates into Danish, but somebody's got some 'splainin' to do. Since that 'splainin' hasn't begun, we can only guess why the company made the announcement.

One real possibility is that Topotarget was trying to jump-start its stock. Shares on the Copenhagen stock market have hovered near $1.25 since July. The news about belinostat caused the stock to immediately double.

Another potential explanation is that what we have here is a failure to communicate. Perhaps parties within Topotarget truly thought that the objective for the trial had been satisfactorily met. It seems to be a stretch to think that the company's top management wouldn't be fully aware that the process was incomplete. However, we just don't know the full story at this point.

What if?
The other big question that comes to mind is: "What if Topotarget was correct?" In particular, how will Spectrum be affected if belinostat did achieve the objective for the drug?

There are other drugs used currently in treating PTCL. Two are generics: Cytoxan is sold by Baxter (NYS: BAX) and Vincristine is marketed by Teva Pharmaceutical (NYS: TEVA) . Celgene (NAS: CELG) makes Istodax.

The first FDA-approved chemotherapy for treating relapsed or refractory PTCL, though, is Fotolyn. Spectrum gained ownership of the drug with its recent acquisition of Allos Therapeutics. Fotolyn has struggled recently, with declining sales volumes and a rejection by the European Commission.

Should Spectrum succeed in bringing belinostat to market, it could potentially make up for Fotolyn's shortcomings. The financial potential for orphan drugs can be huge. Alexion (NAS: ALXN) stands out as an example of how companies can profit from orphan drugs that treat rare diseases. Sales for Soliris, its drug used in treating paroxysmal nocturnal hemoglobinuria, totaled $783 million last year.

Holding the bag
The smartest approach for investors is to wait for Spectrum to officially let the cat out of the bag when the clinical trial results are finalized. Even then, remember that Spectrum's fortunes still ride largely on other drugs. Making too hasty of a decision based on premature news about a drug still in the pipeline could leave buyers holding the bag.

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The article 1 Biotech Trying to Put the Cat Back in the Bag originally appeared on Fool.com.

Fool contributor Keith Speights owns no shares in the stocks mentioned above. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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