Spectrum says bladder cancer drug fails, buys Allos
(Reuters) - Spectrum Pharmaceuticals Inc (SPPI.O) said its experimental drug to treat a common form of bladder cancer failed to significantly reduce the recurrence of tumors in late-stage trials, sending its shares down 14 percent.
Separately, the biotechnology company said it agreed to buy Allos Therapeutics ALTH.O for about $206 million to gain access to its anti-cancer drug Folotyn.
Spectrum was testing the drug apaziquone in two late-stage trials for non-muscle invasive bladder tumors (NMIBC), which are currently removed through surgery.
NMIBC is a form of bladder cancer localized in the surface layers of the bladder. About 70 percent of all patients diagnosed with bladder cancer have NMIBC.
Patients in the late-stage trials either received a single dose of apaziquone or a placebo into the bladder after the surgery.
Spectrum, which is developing the drug with medical device maker Allergan Inc (AGN.N), said the drug failed to show a statistically significant difference in the rate of tumor recurrence at two years against a placebo.
The company, however, said the pooled data from both studies showed a statistically significant treatment effect.
Spectrum said it plans to meet the U.S. Food and Drug Administration to discuss further steps.
"It is unusual for the FDA to review the NDA (new drug application) with the pooled data, but it is possible," said MLV & Co analyst George Zavoico.
Zavoico said in an email that MLV expects to receive or intends to seek compensation for investment banking services from Spectrum in the next three months.
Allos shareholders will get $1.82 in cash for each share, which represents a premium of 27 percent to Allos' Wednesday close, plus a contingent value right that gives shareholders 11 cents, if certain regulatory and sales milestones are met in Europe.
Allos' lead drug Folotyn, which is used to treat relapsed or refractory peripheral T-cell lymphoma, raked in sales of about $50 million last year. The drug had been rejected by an European advisory committee and the company had submitted a request to re-examine its application.
The committee is expected to issue its decision in the second quarter of this year.
On a conference call with analysts, Spectrum's Chief Executive Rajesh Shrotriya said Folotyn annual sales could cross $100 million.
MLV's Zavoico said the drug could reach $100 million sales, especially if they get European approval.
Spectrum, which also makes lymphoma drug Zevalin, expects the deal to save about $40 million to $50 million in 2013.
"Folotyn is prescribed by the same physicians who prescribe Zevalin," said Shrotriya. A salesman selling two products would bring down expenses.
Last year, AMAG Pharmaceuticals Inc (AMAG.O) had dropped its plan to buy Allos after AMAG shareholders opposed the deal.
Spectrum expects to close the deal in the second quarter and add to its fourth-quarter earnings. The company expects to finance the acquisition with a combination of cash on hand and a revolving credit line from Bank of America.
Spectrum is advised by RBC Capital Markets and Allos by J.P. Morgan Securities.
Spectrum shares were down 10 percent at $11.03 in morning trade on Nasdaq, while Allos rose to $1.82.
(Reporting by Anand Basu in Bangalore; Editing by Don Sebastian)