Recently, Allos Therapeutics, Inc. (ALTH) announced preliminary financial highlights for the fourth quarter of 2010. The company, which expects to report fourth quarter as well as full year earnings in March 2011, also provided a summary of its business plans for 2011.
The preliminary results indicated that the company will earn approximately $11.8 million from gross product sales in the final quarter of 2010 as against $9.3 million earned in the third quarter of 2010.
Net product sales in the fourth quarter are expected to be $11.7 million as against $8.2 million reported in the third quarter of 2010. The higher preliminary revenues in the final quarter of 2010 were driven by increased sales of Folotyn (pralatrexate injection). The preliminary fourth quarter sales also topped the Zacks Consensus Estimate of $10 million.
Folotyn, the only marketed product at Allos, 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). While the drug has been available to patients since October 2009, it was launched commercially in January 2010. 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, for which a supplemental New Drug Application has been filed recently.
Allos is looking to expand the label of Folotyn into other indications. Consequently, the company intends to continue with the existing sales force. However, the total work-force has been trimmed by approximately 13%, for which a one-time expense of approximately $0.7 million is expected to be incurred in 2011.
Moreover, the job cut is expected to result in annual cash savings of $4 million going forward. The company, which is seeking a partner to develop and subsequently commercialize Folotyn outside the US, exited 2010 with total cash and investments of $98.6 million and zero debt.
Allos intends to continue with the intended label expansion for Folotyn in 2011. However, the company has decided to halt the development of the candidate for treating patients suffering from non-small cell lung cancer (NSCLC).
Allos, whose future is currently tied to Folotyn, is leaving no stone unturned to make Folotyn a success. While successful commercialization of the drug should boost the company’s top line, the excessive dependence on Folotyn for growth is concerning. We believe the company must develop additional products to sustain growth.
These concerns, highlighting the near-term pressure, are reflected by the Zacks #4 Rank (short-term ‘Sell’ rating) of the company. However, we prefer to remain on the sidelines in the long-run, with a ‘Neutral’ stance on the stock, till more visibility is obtained on the pipeline development at Allos.
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