Spectrum plunges on negative trial results; makes bid for Allos

US biotech firm Spectrum Pharmaceuticals (Nasdaq: SPPI) saw its shares plunge as much as 14%, before closing down 7.9% at $11.25 last Thursday, after announcing disappointing results for its bladder-cancer drug candidate apaziquone, as well as revealing that it had made a takeover bid for fellow USA-based rival Allos Therapeutics (Nasdaq: ALTH). Shares of Allos rose 27% to $1.81 on the news.

Spectrum said it has signed a definitive agreement to acquire all of the outstanding shares of Allos for $1.82 per share in cash plus one contingent value right (CVR). This CVR entitles Allos stockholders to an additional payment of $0.11 per share in cash if certain European regulatory approval and commercialization milestones for Folotyn (pralatrexate injection) are achieved. The upfront portion of the deal 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.

In September 2009, the US Food and Drug Administration granted accelerated approval for Folotyn for use as a single agent for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL). Folotyn generated more than $35 million in US net sales in 2010 and $50 million in 2011. The CVR’s $0.11 payment is conditional on Folotyn obtaining conditional approval for the treatment of patients with relapsed/refractory PTCL in Europe in 2012 and achieves its first reimbursable commercial sale in at least three major European Union markets by December 31, 2013. The CVR will not be publicly traded.