Who Will Buy Spectrum Pharmacueticals?

There seems to be a lot of speculation on the chances of Spectrum Pharma (SPPI) being acquired over the coming months. I personally don't think it will happen, but there are a few companies that could be interested. Bayer (BYERF.PK) will always be mentioned because of the fact they sell Zevalin in Europe, but Bayer did just divest two oncology drugs to Genzyme (GENZ), Fludara and Leukine, which makes me think that oncology is not where they want to focus their company. Allergan (AGN) should also be mentioned because of their partnership of bladder cancer drug EOquin with Spectrum, the drug is in phase three trials. If AGN really believes the drug is a winner, then why not try to own 100 percent.

Then there are companies like Onyx (ONXX), Abraxis Bioscience (ABII) and OSI Pharma (OSIP) who have an solid oncology drug on the market, but have struggled to get a second oncology drug through their pipeline and on to FDA approval. Then there are companies like Cephalon (CEPH) and Genzyme who have been very aggressive in in-licensing drugs or acquiring oncology drugs and companies. Or how about companies like Seattle Genetics (SGEN) or Regeneron Pharma (REGN) who have late stage oncology drugs in their pipeline who could use SPPI salesforce to jumpstart the transition into a commercial stage biotech.

When I do my due diligence on Spectrum, I have to admit it does remind me of MGI Pharma and Pharmion, two specialty pharmas with a focus on oncology. Both ended up being acquired by large companies, MGI by Japanese powerhouse Eisai (ESALY.PK) and Pharmion by US biotech giant Celgene (CELG). I can also remember when investors didn't think much of those companies. I personally would rather see Spectrum stay independent and try to really build a nice oncology based specialty pharma. I think there is more money to be made this way than by getting lucky with an acquisition.

Disclosure: Long SPPI

Comments

[Justin M. Hall]

Mark Cifra:

Thank you for the article! I respect your opinion and agree with most of what you said. MOGN and PHRM are good examples! Nice work. SPPI also reminds me of IDEV, even though IDEV was not a cancer drug maker exclusively.

I was encouraged by the recent comments made by Rodman and Renshaw's analyst, who also covers SPPI.

Where we see things just a bit differently involves the possibility of acquisition. While I certainly do not believe SPPI will be acquired next week, I am confident a larger company will eventually make a bid to buy SPPI within the next 12-24 months.

Thank you again! I wish you the best of luck with your position in SPPI!

Justin M. Hall

2009 Aug 07 08:20 AM

[Justin M. Hall]

On Friday, August 7, 2009, another reputable news source reported that SPPI is rumored to be buyout talks.

I posted this information on my instablog, and it should be published on SeekingAlpha on either Sunday August 9 or Monday August 10.

seekingalpha.com/insta...

Justin

2009 Aug 09 04:04 AM