Allos reports net loss of $20.0 million for second-quarter 2010

Jul 28 2010

Allos Therapeutics, Inc. (Nasdaq: ALTH) today reported its financial results and business highlights for the quarter and six months ended June 30, 2010.

“During the quarter, we continued to build marketplace awareness for FOLOTYN for the treatment of relapsed or refractory PTCL”

Financial Highlights:

• In January 2010, Allos commenced the commercial launch of FOLOTYN^® (pralatrexate injection), the first and only drug approved in the U.S. for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL).
• Gross product sales were $9.0 million and $17.2 million for the quarter and six months ended June 30, 2010, respectively. Gross product sales in the second quarter of 2010 increased by 10 percent compared to the first quarter of 2010.
• Net product sales were $7.9 million and $15.3 million for the quarter and six months ended June 30, 2010, respectively, which represents gross product sales less gross to net sales adjustments.

"During the quarter, we continued to build marketplace awareness for FOLOTYN for the treatment of relapsed or refractory PTCL," said Paul L. Berns, president and chief executive officer of Allos Therapeutics. "We believe this represents an important market opportunity for Allos, and we are encouraged by the level of awareness and use of FOLOTYN at this stage of our commercial launch. In addition, we continued to drive our strategic lifecycle development plan for FOLOTYN with the goal of extending its commercial opportunity and building additional shareholder value through potential expanded indications in the U.S. and abroad."

Allos sells FOLOTYN to pharmaceutical wholesale distributors who then resell FOLOTYN to patients' health care providers. Given the limited sales history for FOLOTYN, Allos currently cannot reasonably estimate expected returns at the time of shipment to its distributors. Therefore, in accordance with GAAP, Allos defers revenue recognition of sales to distributors until the product is sold through its distributors to health care providers. For the second quarter of 2010, sales to distributors were $9.0 million, which was approximately the same as gross product sales to health care providers. As such, Allos' deferred revenue as of June 30, 2010 of $1.2 million remained unchanged from March 31, 2010.

Net product sales were $7.9 million for the second quarter of 2010, which represents the $9.0 million of gross product sales net of $1.1 million of gross to net sales adjustments. Gross to net sales adjustments consist of distributor service fees and estimated accruals for government rebates and chargebacks.

Allos reported a net loss of $20.0 million and $40.5 million, or $0.19 and $0.39 per share for the quarter and six months ended June 30, 2010, respectively. Total operating costs and expenses for the second quarter of 2010 were $27.9 million, including stock-based compensation expense of $2.8 million. Total operating costs and expenses for the six months ended June 30, 2010 were $55.9 million, including stock-based compensation expense of $5.7 million.

• Cost of sales for the quarter and six months ended June 30, 2010 were $0.8 million and $1.4 million, respectively. Cost of sales consists of an 8 percent royalty under our license agreement for FOLOTYN and costs for warehousing, shipping and inventory.
• Research and development expenses for the quarter and six months ended June 30, 2010 were $6.5 million and $15.8 million, respectively.
• Selling, general and administrative expenses for the quarter and six months ended June 30, 2010 were $20.5 million and $38.4 million, respectively.

Net cash used in operating activities for the quarter and six months ended June 30, 2010 was $16.3 million and $39.6 million, respectively. As of June 30, 2010, Allos' cash, cash equivalents and investments totaled $122.3 million.

Financial Guidance Update

The Company is revising its financial guidance as follows:

• Total operating costs and expenses for 2010 are expected to approximate $115 to $120 million, excluding non-cash stock-based compensation expense, a decrease from prior guidance of $120 to $130 million. Stock-based compensation expense for 2010 is expected to approximate $12 to $13 million, a decrease from prior guidance of $13 to $15 million.

The Company reaffirms its prior financial guidance as follows:

• Gross to net sales adjustments are expected to approximate 12 percent of gross product sales for the second half of 2010.
• Cost of sales are expected to approximate 10 percent of net product sales for the second half of 2010, which includes our current 8 percent royalty on FOLOTYN sales.

Actual financial results for 2010 will vary based upon many factors, including the amount of FOLOTYN sales and rate of patient enrollment in FOLOTYN clinical trials that are ongoing and planned for initiation in the second half of 2010.

Recent Business Highlights

• Earlier today, the Company issued a press release announcing topline results from its randomized Phase 2b investigational trial of FOLOTYN versus erlotinib in patients with advanced non-small cell lung cancer.
• In June 2010, new analyses from the Company's pivotal PROPEL trial of FOLOTYN in patients with relapsed or refractory PTCL were presented at the Annual Meeting of the American Society of Clinical Oncology and European Hematology Association (EHA).
• In June 2010, updated data from the Company's ongoing Phase 1 dose finding study of FOLOTYN in patients with relapsed or refractory cutaneous T-cell lymphoma (CTCL) was presented at the EHA meeting.
• In May 2010, the FDA granted orphan drug designation to FOLOTYN for the treatment of bladder cancer and in June 2010, the European Commission granted Orphan Medicinal Product Designation to FOLOTYN for the treatment of CTCL.