Spectrum nabs Allos buyout as bladder cancer drug fails PhIII

Spectrum Pharmaceuticals ($SPPI) put on the best face possible on the news that its bladder cancer drug apaziquone failed two late stage studies, offering a shot at taking a revised look at the data to regulators while springing the news that it struck a deal to buy Allos Therapeutics ($ALTH).

Such second takes on late-stage data are rarely successful with regulators. But CEO Rajesh Shrotriya's PR strategy may be working, with Spectrum's shares down only 10% in early-morning trading. Shares of Allos jumped 27%.

First, the bad news: The pair of Phase III studies for apaziquone did not meet their primary endpoint of a statistically significant difference in the rate of tumor recurrence at two years between the two arms in the trials, Spectrum acknowledged. But as it ponders what to do next, the biotech offered that the "pooled data" showed a statistically significant treatment effect in favor of apaziquone in the primary endpoint as well as secondary endpoint: Time to recurrence. Back in 2008, Allergan agreed to pay Spectrum $41.5 million upfront with promises of up to $304 million more in exchange for U.S. licensing rights to the treatment.

Then minutes later came word of the buyout. Spectrum agreed to buy up all shares of Allos for $1.82 plus a CVR of 11 cents a share based on European approval for Folotyn. Spectrum said the upfront portion of the transaction is valued at up to $206 million on a fully-diluted basis, and $108 million net of Allos' cash balance at the end of 2011. AMAG ($AMAG) had a deal to buy Allos last year in a deal valued at $184.8 million, but shareholders shot that down.

Allos brings Folotyn to the Spectrum table, a lymphoma drug that managed to eke out $50 million in sales last year after posting $35 million in sales in 2010.

"For Spectrum, this 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," said Shrotriya.

- get the press release on Phase III results
- read the press release on the Allos buyout