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The Deal: Spectrum Expands Cancer Line With Talon Buy

Tickers in this article: SPPI

NEW YORK (The Deal) -- Las Vegas-based Spectrum Pharmaceuticals Inc. is amping up its cancer therapy offerings with the acquisition of private equity-backed Talon Therapeutics Inc., paying $11.3 million up-front plus contingent value rights, or CVRs, of $195 million.

The CVRs are based on goals set for Talon's two lead drug candidates, lymphoma drug Marqibo and Menadione Topical Lotion. Marqibo is a nanoparticle-based formulation of the cancer chemotherapy vincristine. It allows targeted delivery to cancerous tissue and extends the time the drug is in the body.

South San Francisco-based Talon, a portfolio company of Warburg Pincus LLC since 2010, received accelerated approval from the Food and Drug Administration to market Marqibo in August 2012 for adults with relapsed/refractory Philadelphia chromosome negative acute lymphoblastic leukemia, or ALL.

However, Talon didn't have the funds needed to launch the drug. Spectrum expects to launch Marqibo by the early fourth quarter, and it dovetails nicely with its existing commercial organization. "The physicians that will prescribe Marqibo are the same ones we work with every day with Zevalin and Folotin," CFO Ken Keller said on a call with investors Wednesday.

With the addition of Marqibo, Spectrum will be marketing four approved cancer drugs. Three of them have label expansion programs in clinical trials. The approval of ALL was based on a study showing improvements in overall response rate. To gain regular FDA approval for the drug, Talon is testing it in a Phase 3 study with an outcome of overall survival. Marqibo is also in a Phase 3 trial to treat non-Hodgkin's lymphoma. Two other drug candidates that have completed Phase 1 testing are included in the deal.

CEO Rajesh Shrotriya said the company expects to file three new drug applications with the FDA within the next 18 months. Talon's Menadione ointment is in Phase 2 development to treat severe rashes caused by some cancer treatments.

Because Spectrum is purchasing more than 90% of the Talon stock, it can complete the acquisition in one day, so Talon will no longer be traded over the counter as of Thursday.

Willkie Farr & Gallagher LLP represented Warburg Pincus as controlling stockholder of Talon, led by partners Steven Gartner and Robert Langdon. Houlihan Lokey Inc. provided financial advice to Talon.

Written by Pamela Taulbee