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This Biotech Would Rather Buy Experimental Cancer Drugs Than Develop Them


CEO Rajesh Shrotryia says he learned a lesson from his years at Bristol-Myers Squibb: You can have more success buying medicines from rivals.

Rajesh Shrotriya is a biotech CEO who has a much different view on developing promising new drugs than many of his rivals.

"The whole world is our laboratory," the chief executive of Spectrum Pharmaceuticals (SPPI) says.

What he means is that he has no interest in spending money to experiment on laboratory mice in hopes of finding new treatments. Shrotriya would rather send his business development team out to find other companies' experimental drugs -- specifically cancer treatments -- that Spectrum can buy for bargain prices.

"We look for diamonds in the rough," he says.

Shrotriya's business model still carries plenty of risk. Skeptics will argue that these drugs are being shed by other companies for a good reason. This year, Spectrum will apply to sell two new drugs in the US, a treatment for bladder cancer and a lymphoma drug.

But Shrotriya, 67, says he and his team have a good eye for snapping up drugs other companies don't want. It's a philosophy that goes back to his years at Bristol-Myers Squibb (BMY), he says. Shrotriya spent 18 years at the big drug maker, leaving in the early '90s. When he was at the company, it was known for its top cancer drugs -- medicines that were acquired, he says.

"Bristol-Myers was the No. 1 cancer drug company in the world back then," Shrotriya says. "Not one of those drugs was discovered by Bristol-Myers. They were all licensed in."

Spectrum has momentum. After almost a decade as CEO, Shrotryia is poised to report his company swung to a full-year profit when he announces 2011 results in the coming weeks. (Spectrum lost almost $49 million from 2008 to 2010 and reported more than $300 million in losses during its history as a public company.) Through nine months last year, the company more than tripled its sales to about $140 million on the growth of two approved drugs, Fusilev and Zevalin. Fusilev is used to offset the effects of chemotherapy and its sales benefited from a shortage of generic versions of the drug. Zevalin treats patients with non-Hodgkin's lymphoma. Spectrum's stock doubled in the past year, trading at just under $14 a share Thursday.

The continued growth of Spectrum's two approved drugs plus a low cost base should help the company continue to increase earnings, says RBC Capital Markets analyst Jason Kantor, who rates the stock a buy and sets a $17 price target on the shares.

Spectrum doesn't have the high research and development costs that hamper other biotechs, Shrotryia argues. That frees up money to make acquisitions. At the end of the third quarter, the company had almost $150 million in cash.

In January, Spectrum announced that it would pay German drug maker Bayer about $25 million for the rights to sell Zevalin outside the US. It seemed like a counterintuitive move given the cost of managing an overseas sales team. But Shrotryia says he'll rely on partner companies to help his own staff sell the drug, which he calls "an underappreciated asset."

Zevalin sales were about $21 million through nine months last year but Shrotryia says he believes the drug can someday be a $300 million a year product. He hopes to reach that level through expanded use of the drug and a concerted sales effort in Europe.

Zevalin was sold by Biogen Idec (BIIB) in 2007 to Cell Therapeutics (CTIC), which later partnered with Spectrum. (Bayer retained rights outside the US under a prior agreement with Biogen.) In 2009, Cell Therapeutics sold the US rights to Spectrum.

In the short term, look for Spectrum to file new drug applications in the US sometime this year for apaziquone, the bladder cancer drug, and belinostat for lymphoma. Spectrum is partnered with Allergan (AGN) and Japan's Nippon Kayaku for development of apaziquone. Denmark-based biotech Topotarget licensed North American rights to belinostat to Spectrum. The drugs also are being studied for other types of cancer.

Both drugs have good sales potential, Shrotryia says without giving an estimate. Overall, his strategy is to focus on the sale of multiple drugs rather than create one blockbuster.

"I would be quite happy if I had 10 drugs that run $100 million (in yearly sales) each," he says.

Twitter: @brettchase

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