Allos Therapeutics Inc.’s (ALTH) third quarter 2010 loss of 18 cents per share was narrower than the Zacks Consensus Estimate of a loss of 20 cents per share. The year-ago loss was 21 cents per share. The lower loss per share was attributable to the increased number of shares outstanding in the reported quarter.
The net loss in the quarter was $18.8 million as against $18.7 million a year ago. This slight uptake in losses was attributable to higher costs incurred on selling Folotyn (pralatrexate injection), its only marketed product.
The company recorded $8.2 million in net product sales during the reported quarter, short of the Zacks Consensus Estimate of $10 million. No sales were recorded in the comparable quarter of 2009.
Operating costs and expenses in the reported quarter increased 42.8% to $27.0 million. Selling, general and administrative expenses went up 65.1% to $18.7 million in the third quarter of 2010 due to the higher costs incurred on selling Folotyn. Research and development expenses declined 3.8% to $7.2 million. Cost of sales came in at 11% of net product sales recorded in the quarter.
In October 2010, Allos announced encouraging survival data from a mid-stage study of Folotyn. The randomized study (n=201) evaluated the efficacy of Folotyn against Roche’s (RHHBY) Tarceva (erlotinib) in patients suffering from advanced non-small cell lung cancer (NSCLC) who are, or have been, cigarette smokers and did not respond to chemotherapy.
The company intends to file an application seeking European approval of the drug for the treatment of relapsed or refractory peripheral T-cell lymphoma (PTCL) by year-end.
2010 Guidance Revised
Allos adjusted its guidance for 2010 due to the efficient management of operating costs. The company expects total operating costs in the range of $105 million – $110 million (excluding non-cash stock-based compensation expense). The earlier projection was in the range of $115 – $120 million. Given the launch of Folotyn earlier in the year, Allos has not provided any revenue guidance.
Our Take & Recommendation
We note that Allos’ future is dependent on Folotyn. The drug is approved in the US for treating patients with relapsed or refractory PTCL. We believe that the drug will provide major relief to patients suffering from this disease as prior to Folotyn there was no approved drug for the indication. While Folotyn has been available to patients since October 2009, it was launched commercially in January 2010.
The company’s efforts to expand Folotyn’s label into other indications is encouraging. We believe that Folotyn, if approved for any of the additional indications, can prove to be a major revenue generator for the company.
Currently, we are neutral on Allos Therapeutics supported by a Zacks #3 Rank (short-term Hold recommendation).
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