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Spectrum Extends Allos Tender Offer

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Recently, Allos Therapeutics, Inc. and Spectrum Pharmaceuticals (SPPI - Free Report) announced the extension of the offer period for the purchase of the entire outstanding common stock of the former. The offer period, which was set to expire on June 22, 2012, has been extended until July 9 (5 PM ET).

We note that the buyout offer was extended to enable both companies to comply with the request of the Federal Trade Commission for additional information regarding the deal under the antitrust laws. The companies stated that as of June 21, 57.6% of Allos’ outstanding shares had been tendered. This is the fourth extension of the tender offer period.

Per the terms of the deal, announced in April 2012, Spectrum Pharma is scheduled to acquire Allos for $1.82 per share in cash, in addition to 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). The drug is under review in the EU for the indication.

At the time of announcing the deal, Spectrum Pharma and Allos had stated that the deal was expected to close in the second quarter of the year. However, the extension of the tender offer period makes it unlikely.

It was further announced that the deal is expected to result in savings in the range of $40 -$50 million for Spectrum Pharma in 2013. The move is a smart strategic one by Spectrum Pharma as it will further strengthen its product portfolio.

Currently, Spectrum Pharma’s product portfolio comprises two marketed 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. At the time of announcing the deal, 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.

Our Recommendation

Currently, we have an Outperform recommendation on Spectrum Pharma in the long-run. The company carries a Zacks #2 Rank (“Buy” rating) in the short run.

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