Earnings Preview: ALTH

Allos Therapeutics (ALTH - Analyst Report) is scheduled to release its second quarter results on August 4. We expect the company to post a net loss of $16.5 million or $0.19 per share. The company does not have any marketed product; hence it does not have any revenue stream.

The current year seems to be quite crucial for Allos Therapeutics especially related to its most advanced pipeline candidate, pralatrexate. The company has submitted a new drug application (NDA) for pralatrexate to the FDA for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL) in March, 2009. We expect its approval by the end of 2009 or early 2010.

Pralatrexate has an orphan drug (presently no FDA approved drug for PTCL is available) status from the FDA and European Medicines Agency (EMEA) for the treatment of patients with PTCL. This status brings with it seven years of marketing exclusivity in the US and ten years of marketing exclusivity in the EU countries. Meanwhile, Allos Therapeutics seems to be confident of NDA approval as is evident from the recent launch of a website dedicated to PTCL.
 
In addition to PTCL, Allos Therapeutics is studying pralatrexate (phase IIb) for the treatment of NSCLC as well. Many pharmaceutical players have products under various stages of development for the treatment of NSCLC. However, estimates put the potential of the NSCLC market to reach about $13 billion by 2015.

Viewing the huge potential, the company initiated a trial in January this year comparing pralatrexate with erlotinib. Erlotinib (marketed in the US by Roche [RHHBY] and OSI Pharmaceuticals [OSIP - Analyst Report] and elsewhere by Roche under the tradename Tarceva) is a drug used to treat several types of cancer like NSCLC, pancreatic cancer.
 
Though the progress made by pralatrexate is quite satisfactory, we are concerned about the company’s weak pipeline and cash position. Since its inception in 1992, Allos Therapeutics has not generated any revenue from product sales and has experienced significant net losses and negative cash flows from operations.

The company’s policy of raising funds through the issuance of shares has led to considerable dilution in the shareholder base. Should pralatrexate fail to receive FDA approval for PTCL, Allos Therapeutics has little to fall back on. We maintain our Hold rating as we do not see any major upside potential at this point.