Spectrum diversifies its revenue
May 2012
by David Hutton  |  Email the author

SHARING OPTIONS:

HENDERSON, Nev.—Rising from the ashes like a mythical phoenix just as the prospects dimmed for one of its own cancer drugs, Spectrum Pharmaceuticals Inc. is set to pick up another cancer drug with the acquisition of Allos Therapeutics Inc.  
 
Terms of a recently signed agreement call for Spectrum to pay $206 million plus additional considerations if certain milestones are met. The boards of directors of both companies have unanimously approved the transaction, which is expected to close in the second quarter. The acquisition is expected to be accretive to Spectrum on a cash basis in the fourth quarter.
 
 
In a conference call with the media, Spectrum CEO Rajesh Shrotriya said the 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."  
 
The acquisition marks the culmination of a yearlong effort by Allos to find a strategic partner for such a deal. Last year, the company agreed to be acquired by AMAG Pharmaceuticals Inc. in an all-stock deal worth about $686 million, but that deal collapsed when AMAG shareholders rejected it.  
 
This time, it would appear that a willing dance partner has been found. Shrotriya says the deal is a win-win for both Spectrum and Allos.  
 
"It is my belief that Spectrum has never been a stronger company, and our future has never been brighter," he says. "I am excited by the opportunities ahead for both companies and confident in our ability to execute."  
 
Paul L. Berns, president and CEO of Allos, says the deal "represents an excellent strategic and cultural fit that leverages two strong brands in the hematology/oncology market today with potential for future growth. Spectrum shares our commitment to patients and their healthcare providers, and we believe Folotyn will be a welcome addition to its commercial product offering and diversified portfolio of development-stage drugs," he adds.  
 
According to Shrotriya, the deal creates synergies, including combined sales forces that presently promote drugs to the same groups of physicians. Spectrum officials estimate the deal would generate savings of about $40 million in the year after the deal closes.  
 
Allos markets Folotyn, which is a folate analogue metabolic inhibitor. In September 2009, the U.S. Food and Drug Administration (FDA) 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 U.S. net sales in 2010 and $50 million in 2011. Shrotriya also notes that sales of Folotyn could top $100 million annually.  
 
Spectrum currently markets two oncology drugs: Zevalin and Fusilev. The company explains that Zevalin is indicated for relapsed or refractory, low-grade, or follicular B-cell non-Hodgkin's 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 percent 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," says Shrotriya. "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."  
 
Spectrum announced it was to be added to the S&P Small Cap 600 Index at the close of trading on April 24. Following the addition, the company will be a component of the NASDAQ Biotechnology Index, the Russell 3000, Russell 2000, Russell Global and S&P Small Cap 600 indices.  
 
"Our inclusion in the S&P SmallCap 600 Index will help further increase our visibility within the investment community," says Shrotriya. "With two marketed drugs, a strong pipeline and potential growth from recently announced acquisitions, we believe we are well positioned to deliver outstanding value to our shareholders."
 
Code: E051221

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