Allos Eyed by Spectrum Pharma - Analyst Blog
09 Abril 2012 - 9:15AM
Zacks
Recently, Allos Therapeutics, Inc. (ALTH) and
Spectrum Pharmaceuticals (SPPI) inked a deal
whereby the latter agreed to acquire the former for $1.82 per share
in cash, in addition to one contingent value right (CVR). The offer
price represents a premium of 27% to Allos’ closing price on April
4, 2012. Spectrum Pharma intends to finance the deal through its
available cash balance in addition to a revolving credit line from
Bank of America.
Per the terms of the deal, Spectrum Pharma will initiate a
tender offer to buy the entire outstanding shares of Allos for the
above mentioned purchase price. The CVR, which will not be traded
in the public domain, makes each Allos shareholder eligible to
receive a further 11cents per share in cash depending on the
conditional European approval and achievement of certain milestones
of its sole marketed drug, Folotyn.
The deal, expected to close in the second quarter of this year,
is valued (the upfront portion) at $108 million after deducting
Allos’ cash balance of $97.8 million at the end of 2011. The deal,
cleared by the Boards of both companies, is expected to boost
Spectrum Pharma’s earnings in the final quarter of the year.
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.
The deal, which is expected to result in savings in the range of
$40 -$50 million for Spectrum Pharma in the first year following
its closure, is a smart strategic move by Spectrum Pharma as it
will further strengthen its product portfolio.
Currently, Spectrum Pharma’s product portfolio comprises two FDA
approved 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. 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.
We note that, last year, the proposed merger between Allos and
AMAG Pharma (AMAG) was called off following
insufficient shareholder votes for the deal. However, we expect the
deal between Spectrum Pharma and Allos to go through since it makes
more strategic sense than the failed deal. AMAG’s sole marketed
product, Feraheme, for treating patients suffering from iron
deficiency anemia, is an underperformer with nothing to indicate
that sales would have improved had the merger materialized.
Our Recommendation
Currently, we have an Outperform Recommendation on Allos. The
company carries a Zacks #1 Rank (short-term “Strong Buy” rating).
We are Neutral on Spectrum Pharma in the long run. Spectrum Pharma
carries a Zacks #3 Rank (short-term “Hold” rating).
ALLOS THERAPEUT (ALTH): Free Stock Analysis Report
AMAG PHARMA INC (AMAG): Free Stock Analysis Report
SPECTRUM PHARMA (SPPI): Free Stock Analysis Report
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