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Spectrum a Takeover Target for Bayer? Color Me Skeptical

IRVINE, Calif. ( TheStreet) -- A dose of reality needs to be injected into the conversation about Spectrum Pharmaceuticals (SPPI - Get Report) being a possible takeout target of German drug giant Bayer.

Bayer owns European rights to Zevalin, a drug that treats non-Hodgkin's lymphoma (NHL) that has been a commercial failure for a variety of reasons. Spectrum owns U.S. rights to the drug and is currently seeking an expanded approval here that is supposed to widen the potential pool of NHL patients who can be treated with the drug -- and hopefully breathe new life into moribund sales.

The rumor mill is churning with this: If Spectrum wins the new Zevalin approval (the decision is expected Sept. 7), Bayer will want to buy the company so it can control worldwide rights to the drug.

Really? The problem with this rose-colored scenario is that Bayer shows very little interest in Zevalin today. The company barely markets the drug in Europe despite already having the expanded NHL approval there. (Bayer doesn't even break out Zevalin sales every quarter because the drug is barely a rounding error on its income statement.)

Perhaps the Bayer-is-buying-Spectrum scenario would make more sense if Bayer gobbled up its other drug partners. But that isn't happening, either. Case in point: Onyx Pharmaceuticals (ONXX), which co-markets the very successful cancer drug Nexavar with Bayer. Nexavar sales will probably top $850 million this year.

Reasons abound for why Bayer should have bought Onyx years ago, but still, no deal. Yet somehow, investors should be expecting Bayer to buy Spectrum?

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