Spectrum Extends Allos Buyout Offer

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Recently, Allos Therapeutics Inc. (ALTH) and Spectrum Pharmaceuticals (SPPI) announced the extension of the offer period for the purchase of the entire outstanding common stock of the former. The offer period, which was set to expire on August 20, 2012, has been extended until September 4, 2012 (5 PM ET).

We note that the buyout offer was extended to enable both companies to comply with the request of the Federal Trade Commission for additional information regarding the deal under the antitrust laws. The companies stated that as of August 17, 2012, 59.9% of Allos’ outstanding shares had been tendered. We note that the tender offer period has been extended quite a few times previously too.

We remind investors that the deal was announced in April 2012. Per the terms of the deal, Spectrum Pharma will acquire Allos for $1.82 per share in cash, in addition to one contingent value right (CVR). The CVR, which will not be traded in the public domain, makes each Allos shareholder eligible to receive a further $0.11 per share in cash depending on the conditional European approval and achievement of certain milestones of Allos’ sole marketed drug, Folotyn.

We remind investors that Folotyn is available in the US for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (:PTCL). The drug is under review in the EU for the indication.

Currently, Spectrum Pharma’s product portfolio comprises two marketed products -Fusilev (advanced metastatic colorectal cancer and for rescue in osteosarcoma (a form of bone cancer) patients following treatment with a high-dose of chemotherapy drug, methotrexate) and Zevalin (for treating patients suffering from non-Hodgkin’s lymphoma).

The addition of Folotyn will further strengthen the oncology portfolio at Spectrum Pharma. At the time of announcing the deal, management at Spectrum Pharma stated that both Zevalin and Folotyn target the same set of doctors for treating different cancer forms. This makes the deal all the more sound strategically.

Our Recommendation

Currently, we have a Neutral recommendation on Allos in the long run.  However, we have an Outperform recommendation on Spectrum Pharma. Both companies carry Zacks #3 Ranks (“Hold”) in the short run.

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