Spectrum diversifies its revenue

Spectrum Pharmaceuticals acquires Allos Therapeutics for $206 million

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HENDERSON, Nev.—Rising from the ashes like a mythicalphoenix just as the prospects dimmed for one of its own cancer drugs, SpectrumPharmaceuticals Inc. is set to pick up another cancer drug with the acquisitionof Allos Therapeutics Inc.
Terms of a recently signed agreement call for Spectrum topay $206 million plus additional considerations if certain milestones are met.The boards of directors of both companies have unanimously approved thetransaction, which is expected to close in the second quarter. The acquisitionis expected to be accretive to Spectrum on a cash basis in the fourth quarter. 
In a conference call with the media, Spectrum CEO RajeshShrotriya said the acquisition "adds another diversified source of revenue,accelerates the development of our hematology franchise and affirms ourcommitment to becoming a leader in the treatment of lymphoma."
The acquisition marks the culmination of a yearlong effortby Allos to find a strategic partner for such a deal. Last year, the companyagreed to be acquired by AMAG Pharmaceuticals Inc. in an all-stock deal worthabout $686 million, but that deal collapsed when AMAG shareholders rejected it.
This time, it would appear that a willing dance partner hasbeen found. Shrotriya says the deal is a win-win for both Spectrum and Allos.
"It is my belief that Spectrum has never been a strongercompany, and our future has never been brighter," he says. "I am excited by theopportunities ahead for both companies and confident in our ability toexecute."
Paul L. Berns, president and CEO of Allos, says the deal"represents an excellent strategic and cultural fit that leverages two strongbrands in the hematology/oncology market today with potential for futuregrowth. Spectrum shares our commitment to patients and their healthcareproviders, and we believe Folotyn will be a welcome addition to its commercialproduct offering and diversified portfolio of development-stage drugs," headds.
According to Shrotriya, the deal creates synergies,including combined sales forces that presently promote drugs to the same groupsof physicians. Spectrum officials estimate the deal would generate savings ofabout $40 million in the year after the deal closes.
Allos markets Folotyn, which is a folate analogue metabolicinhibitor. In September 2009, the U.S. Food and Drug Administration (FDA)granted accelerated approval for Folotyn for use as a single agent for thetreatment 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 $100million annually.
Spectrum currently markets two oncology drugs: Zevalin andFusilev. The company explains that Zevalin is indicated for relapsed orrefractory, low-grade, or follicular B-cell non-Hodgkin's lymphoma (NHL), aswell as previously untreated follicular NHL. Fusilev is approved for advancedmetastatic colorectal cancer and high-dose methotrexate rescue therapy inosteosarcoma. The firm reported total revenues for 2011 of $193 million, up 160percent from 2010 and comprising product sales of $181 million: $153 millionfrom Fusilev and $28 million from Zevalin.
"Zevalin and Folotyn are targeted to the samehematologists/oncologists for the treatment of different forms of lymphoma,"says Shrotriya. "Thus, we are well positioned to immediately leverage thecombined strengths of the two companies, while expanding the number of cancerpatients that can benefit from our products."
Spectrum announced it was to be added to the S&P SmallCap 600 Index at the close of trading on April 24. Following the addition, thecompany will be a component of the NASDAQ Biotechnology Index, the Russell3000, Russell 2000, Russell Global and S&P Small Cap 600 indices.
"Our inclusion in the S&P SmallCap 600 Index will helpfurther increase our visibility within the investment community," saysShrotriya. "With two marketed drugs, a strong pipeline and potential growthfrom recently announced acquisitions, we believe we are well positioned todeliver outstanding value to our shareholders."

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