UPDATE: Amid Setback, Spectrum Pharma To Buy Allos For $206 Million
April 05 2012 - 2:07PM
Dow Jones News
As prospects dimmed for one of its own cancer drugs, Spectrum
Pharmaceuticals (SPPI) is poised to land another cancer drug with
its planned acquisition of Allos Therapeutics Inc. (ALTH) for up to
$206 million cash, plus additional consideration if certain
milestones are met.
Spectrum announced both developments within minutes Thursday
morning. The company first disclosed that in two late-stage
clinical trials, the experimental drug apaziquone failed to achieve
a statistically significant reduction in the rate of tumor
recurrences in patients with a form of bladder cancer compared with
a placebo.
Though Spectrum said pooled data from both studies suggested the
drug provided a benefit, the setbacks for each individual study
could impede Spectrum's ability to secure U.S. regulatory approval
for the drug, which it is developing in collaboration with Allergan
Inc. (AGN). Spectrum had planned to file for Food and Drug
Administration approval this year; it is now considering its next
steps.
Spectrum shares tumbled $1.18, or 10%, to $11.03 in recent
trading.
Soon after disclosing the research setback, Spectrum said it
agreed to acquire Allos Therapeutics for $1.82 per share in cash,
plus a contingent value right that would be worth an additional 11
cents a share if certain targets are met for Allos's cancer drug
Folotyn.
Folotyn was approved by the U.S. Food and Drug Administration in
2009 to treat patients with a form of lymphoma. The drug had U.S.
sales of $50.5 million for 2011. The contingent value rights would
kick in for Allos shareholders if certain European regulatory
approval and commercialization milestones for Folotyn are met.
"The deal brings immediate diversification from a
revenue-generating cancer drug" and should add to Spectrum's
earnings-per-share later this year, Spectrum Chief Executive Rajesh
C. Shrotriya said on a conference call with analysts.
Shrotriya also said the deal would have synergies, including
combining sales forces that currently promote certain drugs to the
same groups of physicians. Spectrum estimated the deal would
generate cost savings of $40 million to $50 million in the first
year after the deal closes. The deal is expected to close by
midyear.
Overall, Spectrum said the upfront portion of the transaction is
valued at up to $206 million on a fully diluted basis, and $108
million net of Allos's cash balance at the end of 2011.
Allos shares jumped 38 cents, or 27%, to $1.81 in recent
trading. Still, the stock is down significantly from a peak above
$10 in 2008. Recently shares suffered because an advisory body to
the European Medicines Agency recommended against conditional
approval of Folotyn.
Last year, Allos had agreed to be acquired by Amag
Pharmaceuticals Inc. (AMAG) in an all-stock deal with total equity
value of about $686 million, but the deal fell through after Amag
shareholders rejected it.
Allos's largest shareholder, Warburg Pincus, which owns about
24% of Allos shares, agreed to tender its shares in the Spectrum
offer, the companies said.
As for the experimental drug apaziquone, the outlook is
uncertain. The drug is designed to be administered into the bladder
immediately after surgical removal of low-risk, nonmuscle invasive
bladder tumors. The late-stage studies tracked the rate of tumor
recurrences after two years.
Spectrum said each study failed to meet its primary endpoint.
However, analysis of the pooled data from both studies showed a
"statistically significant treatment effect in favor of apaziquone
in the primary endpoint of the rate of tumor recurrence at 2 years"
and in a key secondary endpoint, time to recurrence, the company
said.
Spectrum said it's considering requesting a meeting with the FDA
to discuss future steps, and it needs to convince the FDA that the
drug is safe and effective.
-By Peter Loftus, Dow Jones Newswires; +1-215-982-5581;
peter.loftus@dowjones.com
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