European Setback for Allos - Analyst Blog

Allos Therapeutics Inc. (ALTH) suffered a setback when the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) did not recommend the conditional approval of Allos’ sole marketed product Folotyn (pralatrexate injection). Allos is looking to get Folotyn approved in the EU for treating patients suffering from peripheral T-cell lymphoma (PTCL) whose disease progressed after at least one prior systemic therapy.

The European marketing authorisation application, under review since 2010, included data from a phase II study (PROPEL). The negative opinion of the CHMP had an adverse impact on Allos’ stock price. We note that Folotyn is already available in the US for the PTCL indication.

Allos intends to submit a request for the re-examination of the CHMP’s opinion shortly. The company further stated that it along with partner Mundipharma will work closely with the CHMP during the re-examination.

We remind investors that Allos inked a co-development and commercialization deal with Mundipharma in May 2011 for Folotyn. Per the terms of the deal, the sole responsibility of commercializing the drug in the US and Canada lies with Allos. Mundipharma is responsible for commercializing Folotyn in the rest of the world. Mundipharma has already filed marketing applications in countries such as Australia, South Korea and Switzerland.

Sequential improvement in preliminary Folotyn sales

Earlier in the month Allos announced preliminary (unaudited) sales data for the fourth quarter and full year 2011. The company made the announcement at the 30th annual healthcare conference of JPMorgan (JPM). The actual, audited, results for the fourth quarter and full year 2011 are expected in March 2012.

Per the preliminary figures, Folotyn net sales are expected to improve 17% sequentially to $15.4 million. Moreover, Folotyn net sales are expected to improve 43.4% year over year to $50.5 million in 2011. Allos continues to expect operating costs and expenses (excluding cost of sales, cost of license and other revenue and non-cash stock-based compensation expense) in the range of $82 million to $84 million in 2011. Allos ended 2011 with $97.8 million in total cash, cash equivalents and investments and zero debt.

Our Recommendation

Currently, we have a long-term recommendation of Neutral on Allos. We believe that Allos must reduce its dependence on Folotyn and develop additional products to sustain growth. We see limited upside potential until Allos is successful in expanding its product portfolio. The stock carries a Zacks #2 Rank (Buy rating) in the short run.

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