SPPI a Step Closer to Allos


Spectrum Pharmaceuticals (SPPI) is a step closer to acquiring Allos Therapeutics (ALTH) with the companies announcing the termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976.

The US Federal Trade Commission (FTC) cleared the acquisition of Allos by Spectrum Pharma which is expected to close on September 4, 2012. Spectrum Pharma stated that it will accept for payment shares of Allos validly tendered prior to the expiration of the buyout offer on September 4 (5pm ET).

Spectrum Pharma had announced its intention to acquire biopharmaceutical company, Allos in April 2012. Per the terms of the deal, Spectrum Pharma will acquire Allos for $1.82 per share in cash along with 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).

Currently, Spectrum Pharma’s product portfolio comprises two marketed products -Fusilev used for treating 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 of Spectrum Pharma. At the time of announcing the deal, management at Spectrum Pharma had stated that both Zevalin and Folotyn will 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. The stock carries a Zacks #3 Rank (Hold rating) in the short run. However, we have an Underperform recommendation on Spectrum Pharma. The company carries a Zacks #5 Rank (Strong Sell) in the short run.

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