Yesterday, Allos Therapeutics (ALTH) announced the closure of an underwritten public offering of 14 million shares of newly issued common stock at $7.1 per share. The company received net proceeds of $93 million after deducting issue related expenses.
We had forecasted that Allos would need to raise funds based on its cash position and requirements. The proceeds of the issue will be primarily used to support the commercialization of Folotyn (pralatrexate injection), other research and developmental activities and general corporate purposes.
Earlier, in September, Allos received accelerated approval from the US Food and Drug Administration (FDA) for Folotyn for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma. Folotyn is Allos’ first drug to receive FDA approval. While the drug will be available to patients in October, the commercial launch is scheduled for January 2010.
Allos is doubling its sales force from the current strength of 25 persons to 50, and making the necessary preparations for its launch. Moreover, the company has agreed to conduct additional clinical trials to further verify the benefit of Folotyn.
The necessity of additional trials comes with accelerated FDA approval as the agency requires further studies after the launch to confirm the drug’s benefits to patients. We believe Allos, being in a tight liquidity position is raising funds to meet these expenses. The FDA approval could not have come at a more appropriate time as Allos had been depending heavily on Folotyn.
Since its inception in 1992, the company has not generated any revenue from product sales and has experienced significant net losses and negative cash flows from operations. The successful launch and marketing of the drug in due course should boost the company’s top line in due course. We have a Neutral recommendation on the stock.
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