In a deal reminiscent of last year's acquisition of struggling Allos Therapeutics Inc., Spectrum Pharmaceuticals Inc. nabbed cash-strapped Talon Therapeutics Inc. for a mere $11.3 million in cash up front, gaining rights to Marqibo, a nanoparticle encapsulation version of microtubule inhibitor vincristine, which gained approval last year in a subset of acute lymphoblastic leukemia (ALL) patients.

Henderson, Nev.-based Spectrum offered Talon's shareholders contingent value rights (CVRs) for up to an additional $195 million, most of those associated with Marqibo sales – $5 million after net sales of $30 million; $10 million on sales of $60 million; $25 million on sales of $100 million; $50 million on sales of $200 million; and $100 million on sales of $400 million – and a $5 million milestone due on approval of Menadione Topical Lotion, in Phase II testing for cancer treatment-limiting skin toxicity.

Spectrum acknowledged that there is a time limit associated with those milestone payments, "but it's pretty far out there," Ken Keller, senior vice president and chief operating officer, told investors on a Wednesday conference call.

The per-share purchase price equaled about $0.056 in cash plus one CVR. Because Spectrum took the deal straight to Talon's principal stockholders, the transaction was to close in a single day. Shares of Talon (OTCBB:TLON), which initially jumped on the news before falling 57.8 percent, or 21 cents, to close at 16 cents Wednesday, were expected to cease trading Thursday.

The CVRs won't be publicly traded.

Marqibo won accelerated FDA approval last August based on a single-arm study for the treatment of adults with Philadelphia chromosome-negative ALL (Ph- ALL) whose disease has progressed following two or more anti-leukemic therapies. But Talon had not yet launched the drug; the South San Francisco-based firm ended the first quarter with $4.1 million in cash and significant debt.

That debt also will be covered by Spectrum, which will issue 3 million shares in exchange and will pay certain related accrued interest. And Spectrum intends to launch Marqibo sometime this year; a more specific launch date wasn't offered, though company officials said the goal is to have the product available to patients ahead of the annual American Society of Hematology meeting in December.

No additional sales reps will be needed. "These are the same physicians we work with every day with Zevalin and Folotyn," Keller said.

Zevalin (ibritumomab tiuxetan) is approved for non-Hodgkin's lymphoma, while Folotyn (pralatrexate) is approved for peripheral T-cell lymphoma (PTCL). Spectrum gained rights to Folotyn in last year's buyout of Westminster, Colo.-based Allos, which had been plagued by initially slow sales of Folotyn, followed by the launch of PTCL competitor Istodax (romidepsin) backed by the marketing muscle of large-cap biotech Celgene Corp. (See BioWorld Today, April 6, 2012.)

The Allos transaction came right on the heels of Spectrum's Phase III failure of cancer drug apaziquone in two studies. Coincidentally, the Talon buyout also follows bad news, coming a few months after Spectrum said it was substantially dropping its guidance for Fusilev (levoleucovorin) sales for the year due to changes in ordering patterns and only a day after clinicaltrials.gov showed that the firm had terminated a Phase III study testing Zevalin in follicular lymphoma.

When asked about the Zevalin trial, dubbed Rozetta, Keller called it a "strictly business decision," as the firm opted to put more resources into a separate ongoing Phase III trial testing Zevalin in diffuse large B-cell lymphoma. "So we really doubled our bets there, and to do that we decided to discontinue the Rozetta trial," he said.

Spectrum reported cash of about $163.4 million as of March 31. Its shares (NASDAQ:SPPI) fell 12 cents Wednesday to close at $8.79.

'Beginning of the Marqibo Story'

Originally developed by now-defunct Inex Pharmaceuticals Inc., Marqibo was designed as an improved version of vincristine, a well-known drug that is used for ALL and non-Hodgkin's lymphoma (NHL). Developed with the Optisome nanoparticle encapsulation technology, Marqibo offers prolonged circulation of vincristine in the blood.

Data from the single-arm study in Ph- ALL were sufficient to convince the FDA. Spectrum said roughly 1,600 patients would be eligible for treatment. Although the drug's pricing won't be disclosed until closer to launch, RBC Capital Markets analyst Adnan Butt said orphan drug-like pricing of $50,000 to $100,000 per patient per year would result in annual sales of $80 million to $100 million if every patient received the drug. "Even successfully targeting 50 percent of this market would be positive, in our view," he wrote in a research note.

Spectrum is optimistic about market penetration. Ph- ALL represents a "very targeted group" of patients, Spectrum's Keller noted, and Spectrum expects to be able to reach them "very, very quickly."

In the European Union, there have been "discussions" with regard to approval. Keller described the market size in Europe as similar to the U.S., so "this is an opportunity we'll be chasing down fairly quickly."

But Talon – and now Spectrum – has bigger plans for Marqibo. In addition to an ongoing Phase III confirmatory study (HALLMARQ) enrolling patients 60 and older with newly diagnosed Ph- ALL, which could make the drug eligible for use in about 6,000 patients per year, Spectrum said accrual is going well in a Phase III trial (OPTIMAL) evaluating Marqibo in elderly patients with newly diagnosed NHL.

Long-term follow-up from a Phase II study in NHL, reported in June, showed an overall response rate of 96 percent and a complete response rate of 90 percent. If those results are duplicated in the OPTIMAL study, Marqibo would be positioned for a market "many-fold larger than ALL," Keller said. "It's our belief this is just the beginning of the Marqibo story," he added.

In addition to Marqibo and Menadione Topical Lotion, the acquisition of Talon adds two Phase I-stage liposomal versions of chemotherapy drugs – topotecan and vinorelbine.

Spectrum also anticipates a new drug application in the near future for belinostat, an HDAC inhibitor, in PTCL, a drug it hopes to potentially pair with Folotyn, an antifolate drug. Spectrum gained North American rights to belinostat from Topotarget A/S in a 2010 deal valued at up to $350 million.