ALTH Allos Therapeutics, Inc. (MM)

Allos Therapeutics Inc.’s (ALTH) third quarter 2011 loss of 11 cents per share was narrower than the year-ago loss of 18 cents and the Zacks Consensus loss estimate of 15 cents per share. The narrower loss was primarily attributable to higher revenues recorded in the third quarter of 2011.

Quarterly Results

Total revenues in the reported quarter jumped 73.2% to $14.2 million driven by increased sales of Allos’ sole marketed product, Folotyn. Marketed for treating patients with relapsed or refractory peripheral T-cell lymphoma (PTCL), Folotyn recorded sales of $13.2 million, up 61%. Management stated that increased awareness of the drug among patients led to the higher sales. Licensing and other revenues accounted for the balance. Total revenue beat the Zacks Consensus Estimate of $13 million.

Operating costs and expenses (excluding cost of sales and stock based compensation expense) declined 12.6% to $20.9 million in the reported quarter. Selling, general and administrative expenses were flat year over year at $18.7 million. Research and development (R&D) expenses fell 30.6% to $5.0 million.

Another interesting development at Allos took place in October 2011 when the proposed merger between Allos and AMAG Pharma (AMAG) was called off following insufficient shareholder votes for the deal. Following the termination, Allos received $1.8 million (net) from AMAG to make up for merger related costs.

Forecast for 2011

For 2011, Allos lowered its guidance range for operating costs and expenses (excluding cost of sales, cost of license and other revenue and non-cash stock-based compensation expense). The expenses are now expected in the range of $82 million to $84 million as opposed to the earlier guidance range of $95 million to $98 million. Reduced expectations for R&D and sales and marketing spend led to the lower projection.

Our Recommendation

Currently, we have a long-term recommendation of Outperform on Allos. We believe that the termination of the deal with AMAG is a positive for Allos as it will be able to focus its entire attention on making Folotyn a success. Moreover, the merger did not have enough strategic rationale behind it in the first place.

In our view, the current price represents an attractive entry point for long-term investors.

Our long-term recommendation is justified by the Zacks #1 Rank (Strong Buy rating) carried by the stock in the short run.

Allos Therapeutics, Inc. (MM) (NASDAQ:ALTH)
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