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Apr 5, 2012

Spectrum to Spend $206M to Purchase Allos Even as Late-Stage Cancer Drug Fails

  • Spectrum Pharmaceuticals may not have found success with its bladder cancer candidate in Phase III but it is going after a $206 million acquisition of Allos Therapeutics. The company is reporting today failure to achieve primary endpoints with apaziquone but on a more positive note is also providing details for its bid for cancer drug developer Allos.

    Spectrum and Allos inked a definitive agreement under which Spectrum will acquire all the outstanding shares of Allos for $1.82 per share in cash plus one contingent value right. This CVR entitles Allos stockholders to an additional payment of $0.11 per share in cash if Folotyn obtains conditional approval in Europe for the treatment of patients with relapsed/refractory peripheral T-cell lymphoma (PTCL) this year and achieves its first reimbursable commercial sale in at least three major EU markets by December 31, 2013.

    The up-front portion of the transaction is valued at up to $206 million on a fully-diluted basis and $108 million net of Allos’ cash balance at the end of 2011. The acquisition is expected to be accretive to Spectrum on a cash basis in the fourth quarter of 2012.

    Folotyn is a folate analogue metabolic inhibitor. It received accelerated approval from the FDA in September 2009 for use as a single agent for the treatment of patients with relapsed or refractory PTCL. The companies report that the drug generated more than $35 million in U.S. net sales in 2010 and $50 million in 2011. Allos is also developing Folotyn in other hematologic malignancies and solid tumors.

    "For Spectrum, this 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 Rajesh C. Shrotriya, M.D., chairman, CEO, and president of Spectrum.

    The company currently markets two oncology drugs, Zevalin® and Fusilev®. Zevalin is indicated for relapsed or refractory, low-grade, or follicular B-cell non-Hodgkin lymphoma (NHL) as well as previously untreated follicular NHL. Fusilev is approved for advanced metastatic colorectal cancer and high-dose methotrexate rescue therapy in osteosarcoma. The firm reported total revenues for 2011 of $193 million, up 160% from 2010 and comprising product sales of $181 million: $153 million from Fusilev and $28 million from Zevalin.

    "Zevalin and Folotyn are targeted to the same hematologists/oncologists for the treatment of different forms of lymphoma. Thus, we are well positioned to immediately leverage the combined strengths of the two companies, while expanding the number of cancer patients that can benefit from our products. Because of our strong operating performance, cash reserves, fiscal discipline, and a revolving credit line, we do not need to issue any equity to close this transaction."

    The transaction has been unanimously approved by the boards of both companies. Additionally, Warburg Pincus, Allos’ largest shareholder and owner of approximately 24% of Allos’ outstanding shares, along with the directors and certain officers of Allos, have agreed to tender all of their shares into the tender offer and vote in favor of the transaction. The transaction is expected to close in the second quarter of 2012.

    While the acquisition of Allos will certainly add an immediate revenue stream to Spectrum Pharmaceuticals, the company has lost out on pushing its own late-stage drug candidate into the market. Spectrum says that apaziquone did not achieve the primary endpoint in a pair of Phase III trials in bladder cancer. Apaziquone is an anticancer drug that is activated to become a cytotoxic alkylating agent by bio-reductive enzymes such as DT-diaphorase that are over-expressed in bladder cancer cells.

    In two double-blind, randomized, placebo-controlled Phase III trials, apaziquone failed to generate a statistically significant difference in the rate of tumor recurrence at two years. Analysis of the pooled data from both studies, however, showed a statistically significant treatment effect in favor of apaziquone in the primary endpoint and one secondary endpoint, time to recurrence. The company is considering to request a meeting with the FDA to discuss future steps.


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