Allos Therapeutics Inc. (Nasdaq:ALTH) shares were downgraded to "Hold" from "Buy" by Brean Murray, Carret & Co analyst Brian Skorney.
Last week, Spectrum Pharmaceuticals (Nasdaq: SPPI) announced acquisition of Allos, the maker of Folotyn cancer drug.
Skorney believes Spectrum is getting Allos for a ‘song' as a result of desperation following the disappointing launch of Folotyn and the failed merger with AMAG last year.
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"Spectrum has an established oncology program with Zevalin, and we believe leveraging the existing sales relationships will greatly increase the market potential for Folotyn," the analyst wrote in a note. "We see Allos as a good strategic fit for Spectrum and foresee no reason for this merger not to proceed."
However, Skorney believes the stock is currently reflecting a high probability that this acquisition goes through and do not see additional upside from investment.
Folotyn sales have been growing with $50 million in sales during 2011 over $35 million in sales during 2010. Spectrum sees synergy potential in consolidating the Zevalin and Folotyn sales forces, to bring both oncology drugs to a wider audience, the analyst noted.
Spectrum also plans to test its folate analog, Fusilev, in combination with Folotyn to mitigate Folotyn's toxicities and to explore combination therapy of their its pipeline drug, belinostat, with Folotyn to create additional synergy. Based on the entirety of Spectrum's oncology program, Folotyn can easily be leveraged to reach its estimate of $100 million in annual sales, Skorney said.
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On Tuesday, Allos shares added 0.55 percent to trade at $1.82.