Spectrum Pharmaceuticals, Inc. (SPPI): Is This Biotech for Sale?

An acquisition of Spectrum Phamaceuticals could add 10 candidates to this pipeline. While Spectrum’s $170 million in revenue this year does not add value to Eli Lilly & Co. (NYSE:LLY)’s stock, its pipeline might.

Spectrum has a pipeline estimated to be worth $3 billion if all drugs are developed with success. With a $466 million market cap and $163 million in cash, Spectrum might be worth the risk to a struggling big pharma company such as Eli Lilly.

The second, and the most logical acquirer is Allergan, Inc. (NYSE:AGN). Aside from Spectrum being cheap, having a large pipeline, and having a significant pile of cash, Allergan, Inc. (NYSE:AGN) and Spectrum are already partners. The two are developing Apaziquone together, a product that was unsuccessful in its late stage study, but a product that longs believe still has a shot at approval due to the collective data and the design of the study.

Moreover, Allergan, Inc. (NYSE:AGN) needs to make a splash. The company’s stock has come under fire as of late, losing 27% of its value in the last three months. The company now faces new generic products, has a weak pipeline, and just recently posted a poor quarterly report.

The company is expected to produce total sales in the neighborhood of $6 billion for this full-year, meaning an acquisition of Spectrum would not add value to the stock. However, its pipeline might, and Allergan is a company that desperately needs 10 additional products in its pipeline.

Conclusion

In the midst of this conversation, you begin to realize that in the long term, Spectrum Pharmaceuticals might present value.

The problem with Spectrum is that people simply don’t trust its management. The CEO has a history of overhyping and underdelivering, which was evident with its guidance of $300 million in sales heading into 2013 — and then the sudden cut soon after.

Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) continues to be one of the most heavily shorted stocks in the market, and for this fact, management may finally be seeing that investors are no longer buying its promise. Those investors want to see a move, and the sale of Spectrum Pharmaceuticals could be that move.

The article Is This Biotech for Sale? originally appeared on Fool.com and is written by Sherrie Stone.

Sherrie Stone has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sherrie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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