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Why Spectrum Pharmaceuticals Stock Is Bolting Higher Today

What happened

As of 1:28 p.m. EDT, shares of Spectrum Pharmaceuticals (NASDAQ: SPPI), a biotech developing treatments for various blood disorders and cancers, are up by over 21% on elevated volume. The drugmaker's shares are rising in response to its better-than-expected second-quarter earnings report that hit the wires in after-hours trading yesterday. 

Image source: Getty Images.

So what

Despite having multiple anti-cancer agents on the market, Spectrum has had serious trouble transforming any of its products into viable growth drivers in the past few quarters. In the second quarter of 2017, though, the company's broad product portfolio finally showed some signs of life, topping consensus on revenue by a healthy 12.4% for the three-month period.

Spectrum's unexpectedly strong quarter can largely be attributed to an uptick in the sales of its multiple myeloma drug Evomela. During the second quarter, for instance, the company reported that Evomela's sales came in at $10.1 million, which is a noteworthy 60% increase compared to the first quarter of 2017. 

Now what

Before investors get too excited, however, there is the problematic issue of the company's rather short cash runway. Because of Spectrum's heavy investment in clinical assets such as the late-stage chemotherapy-induced neutropenia medicine Rolontis, it has been losing over $20 million per quarter of late. Unfortunately, Spectrum exited Q2 with only $138.6 million remaining in cash and cash equivalents.

Put simply, Spectrum will probably have to tap the public markets for a sizable chunk of change within a year's time, which could put the brakes on the stock's upward momentum in a big way. Therefore, investors may want to stick to the sidelines with this speculative biotech stock for the time being.  

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George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.