The Burrill Report


Minutes after revealing that its experimental bladder cancer drug, apaziquone, had failed two late-stage clinical trials, Spectrum Pharmaceuticals announced that it would pursue another cancer drug candidate obtained by acquiring Allos Therapeutics.

Spectrum had been testing apaziquone in two late-stage trials for invasive bladder tumors, which currently are removed through surgery. Its announcement of the failed trials brought about a sell-off that saw Spectrum’s shares fall as much as 14 percent and close the day down 9 percent at $11.07.

In both trials, Spectrum found that trial patients taking the drug failed to show a statistically significant difference in the rate of tumor recurrence at two years compared to a placebo group. The company did however find that the pooled data from both studies showed a statistically significant treatment effect and it plans to meet with the U.S. Food and Drug Administration to discuss an approach going forward.

Spectrum quickly shifted gears. Within minutes of announcing the disappointing results it said it had agreed to acquire Allos Therapeutics for $1.82 per share in cash, or a 27 percent premium to Allos’ previous day’s close. The deal also includes contingent value rights of 11 cents a share based on the European approval for Folotyn, Allos’ lead drug candidate for the treatment of lymphoma. The upfront value of the transaction is could reach $206 million on a fully diluted basis.

The acquisition will add Folotyn to Spectrum’s pipeline. The drug was approved by the FDA in 2009 and managed U.S. sales of $50 million in 2011 compared to sales of $35 million in 2010.

“The acquisition adds another diversified source of revenue, accelerates the development of our hematology franchise, and affirms our commitment to becoming a leader in the treatment of lymphoma,” says Spectrum’s CEO Rajesh Shrotriya in a statement.

Though the outlook of apaziquone seems uncertain as it is unlikely that the FDA will review the NDA with the pooled data, Spectrum hopes that that the acquisition of Allos and its lymphoma drug can help it quickly rebound from the research setback. Analysts at MLV speculate that sales of Folotyn could reach $100 million in annual sales, especially if it receives European approval.

As for Allos, the deal provides an opportune exit especially considering last year’s failed deal when Amag Pharmaceuticals’ shareholders rebuked the companies attempt to acquire Allos in a total equity value deal of $686 million.


April 06, 2012
http://www.burrillreport.com/article-following_late_stage_failure_spectrum_to_buy_allos.html