Steven Boyd‘s Armistice Capital has further increased its activist stake in Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) to 4.24 million shares from 3.60 million shares that it reported in a filing on May 12, which itself was an increase from the 2.70 million shares it reported ownership of in its latest 13F filing. The fund’s current holding the $435.80 million healthcare company represents 6.6% of its outstanding common stock. Along with the latest transactions, Armistice also sent a letter to the company’s board on June 2, its second such letter in the past month.
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Boyd launched his New York-based fund in July 2012 and was named one of the best new hedge funds in 2013 at Americas Awards owing to its 48% returns in its first year. The long/short equity fund targets small companies that usually escape the attention of most analysts and investors. The market value of Armistice’s public equity portfolio stood at $225.63 million at the end of the first quarter, up from $208.09 million at the end of 2014. The healthcare and technology sectors are the largest components of the fund’s holdings.
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As part of his first activist campaign, Boyd sent a letter to Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s CEO Rajesh Shrotriya on May 11, one day before its 5.4% activist position was revealed in a filing. The fund’s first letter drew attention to the blatant mismanagement and failed promises that Shrotriya has been making to shareholders for three years. The icing on the cake was when, after losing a battle in court which opened Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s most prominent drug, Fusilev, to generic competition, the company handed out $2 million in bonuses and salary increments to its top four executives. This came from a company whose stock has slumped by 50% over the last three years, while Shrotriya’s own compensation for the period stands at more than $20 million. Moreover, the top executive had assured the shareholders time and again that Fusilev was protected by patents until 2022.
Armistice also drew attention to Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s ‘dysfunctional culture’, which included an unnecessary sprawl of offices around the globe, including in Tokyo, Japan and Mumbai, India. The fund is pushing for Shrotriya to step down or significantly slash his compensation, a restructuring involving the consolidation of its offices, cutting down on research that is not showing promising signs, and ultimately, a sale of the company following the above changes. Armistice believes that Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s current portfolio of drugs justifies a 40% premium to the current trading levels of its stock.
Following the first letter, the biotechnology company’s board issued a statement that it would carefully consider Armistice’s suggestions in line with its fiduciary duties to increase value for its shareholders and uphold strong corporate governance principles. Armistice sent another letter to Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) on June 2 reiterating many of the issues highlighted in its previous letter, while also urging the company to disclose any offers that the company has received with regards to its sale and what criteria the board has in relation to accepting any such offer.
As far as Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s financial results for the first quarter are concerned, the company beat both the top and bottom line estimates by delivering a net loss per share of $0.05 against an expected loss of $0.16 and revenues of $51.86 million, which were ahead of estimates by $3.33 million.
Among over 700 hedge funds that we track, the interest in Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) increased over the quarter as 16 firms had invested an aggregate amount of $54.43 million in the company at the end of March, as compared with 12 funds with $54.84 million at the end of the previous quarter. Besides Armistice, Israel Englander‘s Millennium Management and Jim Simons‘ Renaissance Technologies are prominent stockholders of Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) with stakes of 1.88 million shares valued at $11.42 million and 1.39 million shares valued at $8.45 million respectively, as of the end of the first quarter.
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