Allos third quarter net loss decreases to $11.2 million

Nov 3 2011

Allos Therapeutics, Inc. (Nasdaq: ALTH) today reported financial results for the three months ended September 30, 2011.

“We believe our achievement of significant year-over-year revenue growth reflects increased disease-state awareness and brand awareness of FOLOTYN for patients with relapsed or refractory peripheral T-cell lymphoma, for whom there remains an unmet need”

• FOLOTYN^® (pralatrexate injection) net product sales increased 61% year-over-year to $13.2 million in the third quarter of 2011, compared to $8.2 million for the same period in 2010.
• As of September 30, 2011, the Company had no debt and $100.4 million in total cash, cash equivalents and investments.

"We believe our achievement of significant year-over-year revenue growth reflects increased disease-state awareness and brand awareness of FOLOTYN for patients with relapsed or refractory peripheral T-cell lymphoma, for whom there remains an unmet need," commented Paul L. Berns, president and chief executive officer of Allos Therapeutics. "We ended the third quarter with a strong balance sheet and remain focused on growing U.S. sales of FOLOTYN for relapsed or refractory PTCL while prudently managing our operating expenses. Also, in collaboration with Mundipharma, we are pursuing regulatory approval in the EU, which may occur in early 2012, as well as future label expansion opportunities in T-cell lymphoma."

Financial Results

Net product sales for the three months ended September 30, 2011, were $13.2 million, compared to $8.2 million for the same period in 2010, a 61% increase year-over-year. Net product sales for the nine months ended September 30, 2011, were $35.1 million, compared to $23.5 million for the same period in 2010, a 49% increase year-over-year. Net product sales for the three and nine months ended September 30, 2011 include $3.0 million related to the sale of FOLOTYN for use in a clinical trial to be conducted by an unrelated party. Allos expects to generate future sales of FOLOTYN related to this clinical trial, however, Allos cannot predict the timing or amount of such future sales.

In May 2011, Allos entered into a strategic collaboration agreement with Mundipharma International Corporation Limited (Mundipharma) and received an upfront payment of $50 million. License and other revenue related to the Mundipharma agreement for the three and nine months ended September 30, 2011 were $1.0 million and $29.1 million, respectively. As of September 30, 2011, $21.3 million was recorded as deferred revenue related to the Mundipharma agreement.

Cost of sales for the three and nine months ended September 30, 2011, were $1.2 million and $3.2 million, respectively, or approximately 9% of net product sales. These amounts compared to $0.9 million and $2.3 million for the same periods in 2010.

Cost of license and other revenue for the three and nine months ended September 30, 2011 were $0.4 million and $11.0 million, respectively. The amount recorded for the nine months ended September 30, 2011 was primarily related to the Company's payment of $10 million (or 20% of the $50 million upfront payment the Company received from Mundipharma) to the licensors of FOLOTYN under the terms of the Company's license agreement with Sloan Kettering Institute for Cancer Research, SRI International, and Southern Research Institute.

Total operating costs and expenses, excluding cost of sales, cost of license and other revenue and non-cash stock based compensation expense, for the three and nine months ended September 30, 2011 were $20.9 million and $64.9 million, respectively, compared to $23.9 million and $72.7 million for the same periods in 2010. Stock based compensation expense was $2.9 million and $9.4 million for the three and nine months ended September 30, 2011, respectively, compared to $2.2 million and $7.9 million for the same periods in 2010.

• Research and development expenses for the three and nine months ended September 30, 2011 were $5.0 million and $17.6 million, respectively, compared to $7.2 million and $23.1 million for the same periods in 2010.
• Selling, general and administrative expenses for the three and nine months ended September 30, 2011 were $18.7 million and $56.4 million, respectively, compared to $18.7 million and $57.2 million for the same periods in 2010.

Net loss for the three months ended September 30, 2011 was $11.2 million, or $0.11 per share, compared to a net loss of $18.8 million, or $0.18 per share, for the same period in 2010. Net loss for the nine months ended September 30, 2011 was $24.3 million, or $0.23 per share, compared to $59.3 million, or $0.56 per share for the same period in 2010.

As of September 30, 2011, the Company had no debt, and $100.4 million in total cash, cash equivalents and investments.

Financial Guidance

Allos is lowering prior operating expense guidance for full year 2011. Prior operating expense guidance for the full year 2011 was $95 to $98 million. Allos now expects total operating costs and expenses, excluding cost of sales, cost of license and other revenue and non-cash stock-based compensation expense, to approximate $82 to $84 million. Stock-based compensation expense for 2011 is now expected to approximate $12 million, as compared to prior guidance of $13 to $14 million.

Allos expects that license and other revenue and cost of license and other revenue, related to the Mundipharma agreement for the fourth quarter 2011, should approximate $1.0 million and $0.5 million, respectively. This guidance relates to expected research and development and regulatory services to be performed, which includes Mundipharma's current 40% share of jointly agreed-upon clinical development expenses for FOLOTYN.

As of September 30, 2011, the Company had $100.4 million in total cash, cash equivalents and investments. The Company expects this cash position will be sufficient to fund operations through the end of 2014. This projection is based on historical sales levels for the first nine months of 2011 and the Company's projected operating expenses through 2014. Achievement of growth in U.S. sales and/or potential milestone payments and royalties associated with regulatory approval of FOLOTYN in the EU would further extend the Company's cash resources.

Actual financial results will vary based upon many factors, including the amount of FOLOTYN sales and rate of patient enrollment in ongoing clinical trials of FOLOTYN.

Recent Corporate Events

• On October 21, 2011, the Agreement and Plan of Merger and Reorganization ("the Merger Agreement") entered into by and among Allos, AMAG Pharmaceuticals, Inc. and Alamo Acquisition Sub, Inc. on July 19, 2011, as amended on August 8, 2011, was terminated following a special meeting of stockholders. Allos' stockholders voted in favor of the adoption of the Merger Agreement; AMAG stockholders voted against the proposed merger. Pursuant to the terms of the Merger Agreement, AMAG paid Allos on October 25, 2011 a net expense reimbursement amount equal to $1.8 million in connection with such termination.
• In August 2011, Allos enrolled the first patient in a Phase 3 randomized clinical trial (PDX-017) evaluating FOLOTYN in patients with first-line peripheral T-cell lymphoma (PTCL). This study is open to enroll newly diagnosed patients with PTCL who have achieved an objective response following initial treatment with CHOP (cyclophosphamide, doxorubicin, vincristine, and prednisone) or a CHOP-like regimen. Earlier this year, Allos reached agreement with the U.S. Food and Drug Administration under its Special Protocol Assessment (SPA) process on the design of this Phase 3 trial.