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Spectrum Pharma Said to Make Bid for Allos

Stocks in this article: AMAGALTHSPPI

WESTMINSTER, Co. ( TheStreet) -- Allos Therapeutics (ALTH) is thinking about leaving Amag Pharmaceuticals (AMAG) at the merger altar to run away with another suitor.

The suitor is offering more money for Allos than Amag but remains officially unidentified. The new bidder, however, is believed to be Spectrum Pharmaceuticals (SPPI), sources tell TheStreet.

In a regulatory filing Wednesday, Allos said it will begin negotiations with "Company A" based on a proposal to acquire Allos for $2.20 a share in cash and stock.

Company A's rival offer is composed of $1.50 in cash and 70 cents in stock, valuing Allos at $233 million. Company A's proposal, therefore, surpasses the current all-stock merger agreement with Amag that values Allos at $193 million, based on Amag's Tuesday's closing stock price.

Allos, in its regulatory filing, was careful not to endorse Company A's offer or declare it superior to the Amag merger deal. However, the mere fact that Allos' board voted to begin negotiations with Company A sends a message that the Amag deal may be unraveling.

A shareholder vote on the Amag-Allos merger is scheduled for Oct. 21.

Spectrum Pharmaceuticals is a logical answer for the identity of the mystery suitor trying to woo away Allos from Amag. Spectrum currently sells two cancer drugs -- Fusilev for colon cancer and the non-Hodgkin's lymphoma drug Zevalin.

Adding Allos' lymphoma drug Folotyn would give Spectrum a third cancer drug to sell with its existing sales force, increasing revenue and profits without having to necessarily add much to the company's marketing budget. Folotyn has been a commercial disappointment which is why Allos is seeking a buyer, so Spectrum's ability to sell the drug any more effectively is far from guaranteed.

In a previous regulatory filing, Allos identified Company A as a publicly traded pharmaceutical company with a market capitalization of less than $500 million.

Spectrum's current market cap is around $400 million. The company is cash-flow positive and ended the second quarter with $165 million in cash on its books.

At the time, Company A offered $2 a share in cash and stock for Allos, which Allos' board considered and rejected. The sweetened $2.20 a share offer, which importantly includes more cash, seems to have swayed Allos to change its mind and at least enter into talks.

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