Allos Therapeutics Inc.’s (ALTH) fourth quarter 2010 loss of $0.17 was narrower than the Zacks Consensus Estimate of a loss of $0.18 per share. The year-ago loss was $0.22 per share. The lower loss per share was attributable to the higher revenues recorded in the final quarter of 2010 driven by increased sales of Allos’ only marketed product Folotyn (pralatrexate injection). The higher revenues more than offset the rise in operating expenses.
Quarterly Results
The company recorded $11.7 million in net product sales (on a reported basis) during the reported quarter. Allos recorded sales of only $3.6 million in the year-ago quarter, since Folotyn was launched in January 2010. The Zacks Consensus Estimate was $11 million.
Folotyn was approved by the US Food and Drug Administration (FDA) in September 2009 for treating patients suffering from relapsed or refractory peripheral T-cell lymphoma (PTCL). The drug is under review in Europe. Even though Folotyn is currently the only FDA approved drug for PTCL, it will have to compete with Celgene Corporation’s (CELG) Istodax which is under review in the US.
Operating costs and expenses (on a reported basis, including stock based compensation expense of $3.5 million) in the reported quarter increased 18% to $31.4 million. Selling, general and administrative expenses went up 19.3% to $21.6 million in the final quarter of 2010 due to the higher costs incurred on selling Folotyn. Research and development expenses increased 5% to $8.3 million.
Annual Results
For the full year 2010, Allos suffered a loss of $0.74 per share, narrower than the year ago loss by $0.07 and the Zacks Consensus Estimate by $0.01. 2010 revenues came in at $35.2 million, surpassing the Zacks Consensus Estimate of $34 million. The entire revenues recorded in 2009 were the $3.6 million recorded in the final quarter of 2009.
Total operating costs and expenses for 2010 (excluding non-cash stock based compensation expense of $11.4 million) came in at $102.8 million which was below the $105 million-$110 million range forecasted by Allos while releasing third quarter 2010 results. The lower expenses reflect efficient management of operating costs at Allos. In January 2011, Allos announced that it has trimmed its total work-force by approximately 13%. The job cut is expected to result in annual cash savings of $4 million going forward.
2011 Guidance
Apart from disclosing financial results, Allos also provided guidance for 2011. The company expects total operating costs in the range of $95 million – $98 million (excluding cost of sales and non-cash stock-based compensation expense). Allos did not provide any earnings guidance for 2011.
Agreement with FDA reached
On the same day, Allos announced that it has agreed with the FDA, under the agency’s Special Protocol Assessment (SPA) program, regarding the design of Folotyn’s late-stage study in patients with previously undiagnosed PTCL. The SPA provides that the US regulatory body is in agreement with the design and the analysis planned by the study and they satisfactorily address the objectives needed to support a regulatory submission.
Our Take & Recommendation
We are encouraged by Allos’ initiatives to expand the label of Folotyn. Moreover, Allos is seeking a partner to develop and subsequently commercialize Folotyn for ex-US markets. The signing of lucrative deals with established pharma and/or biotech players would not only boost Allos’ cash position, it would also provide the company with the necessary marketing muscle.
Even though, Allos carries a Zacks #2 Rank (‘Buy’ recommendation) in the short-run, we prefer to remain on the sidelines in the long-run, with a ‘Neutral’ stance, till more visibility is obtained on the pipeline development at Allos.
