Allos Therapeutics, Inc. Q1 2010 Earnings Call Transcript

May. 5.10 | About: Allos Therapeutics, (ALTH)

Allos Therapeutics, Inc. (NASDAQ:ALTH)

Q1 2010 Earnings Call Transcript

May 5, 2010 4:30 pm ET

Executives

Monique Greer – VP, Corporate Communications & IR

Paul Berns – President & CEO

Charles Morris – Chief Medical Officer

Jim Caruso – EVP and Chief Commercial Officer

Bruce Goldsmith – VP of Corporate Development

David Clark – VP of Finance and Treasurer

Analysts

Geoff Meacham – JP Morgan

Lucy Lu – Citigroup

Mark Monane – Needham & Company

Jason Kantor – RBC Capital Markets

Josh Schimmer – Leerink Swann & Company

Matt Roden – Banc of America-Merrill Lynch

Operator

Good afternoon, ladies and gentlemen. Welcome to the Allos Therapeutics first quarter 2010 financial results conference call. (Operator instructions) I would now like to turn the conference over to Monique Greer, Vice President of Investor Relations. Please go ahead.

Monique Greer

Thank you so much. Good afternoon, everyone and thank you for joining us on this conference call to discuss our first quarter 2010 financial results and other corporate update. Following formal remarks by management the conference will be open for questions.

With me today are Paul Berns, President and Chief Executive Officer; Jim Caruso, Chief Commercial Officer; David Clark, Vice President of Finance; Dr. Charles Morris, Chief Medical Officer and Dr. Bruce Goldsmith, Vice President of Corporate Development.

After market closed today, we issued a press release and filed the company’s quarterly report on Form 10-Q for the quarter ended March 31, 2010. A copy of which can be found in the Investor section at our Web site at allos.com.

Before we begin, please note that during the course of this call we may be making forward-looking statements concerning our company that are not historical facts. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated by the forward-looking statements. Additional information concerning these risks and uncertainties is contained in the risk factor section of our quarterly report on Form 10-Q for the quarter ended March 31, 2010 and in the Company's other periodic reports and filings with the Securities and Exchange Commission.

The Company cautions investors not to place undue reliance on these forward-looking statements. All forward-looking statements are based on information currently available to the Company on the date hereof and the Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date hereof except as required by law.

I will now turn the call over to Paul Berns, who will begin the discussion with an overview of our business. After Paul’s remarks, the management team will review commercial, clinical, financial highlights before we open the call for questions. Paul?

Paul Berns

Thank you, Monique, and welcome everyone. First quarter of this year was an exciting period for Allos, highlighted by our U.S. commercial launch of FOLOTYN. Aggressive peripheral T-cell lymphomas have been largely ignored group of diseases and FOLOTYN is the first and only drug approved by the FDA for the treatment of relapsed or refractory PTCL.

We’re committed to making FOLOTYN available to the patients with relapsed or refractory PTCL who may benefit from this important treatment option. Further, as part of our commitment to patients and U.S. lymphoma community, our patient-assistance program is proving to be an effective tool to provide reimbursement resources for uninsured, underinsured and insured patients and reimbursement support for healthcare providers.

Our initial commercial experience at the end of 2009 was clearly encouraging. We are pleased with the uptick in this first quarter of our commercial launch. Jim will provide an update on our U.S. commercial activities and Dave will provide additional details on FOLOTYN sales for the first quarter later on the call.

Moving forward, we plan to continue driving our strategic life cycle development plan for FOLOTYN with the goal of extending FOLOTYN’s commercial opportunity and building additional value for our company through potential expanded indications in both the U.S. and abroad.

We are evaluating FOLOTYN as a single agent and in combination therapy regimen in a range of hematologic malignancies and solid tumors. We currently have ongoing studies in patients with non-Hodgkin’s lymphoma, Hodgkin’s lymphoma, PTCL, cutaneous T-cell lymphoma, advanced non-small cell lung cancer, bladder and breast cancer.

Bruce will provide an update on our clinical activities later on the call.

Let me now briefly summarize our plans for FOLOTYN outside the United States. Allos retained exclusive worldwide rights for both development and commercialization of FOLOTYN in all indications. As in the U.S. they are the high unmet medical needs with no approved agents in either Europe or Japan for patients with relapsed or refractory PTCL.

Based on the results of a PROPEL trial we intend to seek regulatory approvals to market FOLOTYN in Europe for the treatment of patients with relapsed or refractory PTCL. Our intent is to submit a Marketing Authorization Application or MAA to the European regulatory authorities in the fourth quarter of this year. We also continued to engage in discussions with key opinion leaders and consulting organizations to define registration strategies in Japan and additional markets globally.

We are off to a productive start in 2010 and look forward to another great year. We believe we have the right people in the right place and the right brand for physicians to treat patients with relapsed or refractory PTCL. With our prioritized product development and commercialization plan for FOLOTYN a solid financial position and exclusive worldwide rights to FOLOTYN for all indications we believe we have established a strong foundation for continued progress.

Now at this time I would like to introduce Dr. Charles Morris, our new Executive Vice President, Chief Medical Officer we believe will provide an outstanding leadership of the clinical development organization including clinical operations, medical affairs, regulatory and biometrics. We believe Charlie’s extensive oncology drug development experience and demonstrated track record of performance will be extremely valuable we continue to advance our product development and commercialization plan for FOLOTYN.

Before we move into the commercial update I would like to turn the call over to Charlie to make some introductory remarks.

Charles Morris

Thank you, Paul. I’m very excited to be here at Allos. I’ve only been here a couple of weeks but I would like to share with (inaudible). The FOLOTYN we have a great drug that is the first agent ever approved for the treatment of relapsed or refractory PTCL, biological diverse group of the directed blood cancer to have a (inaudible)

On PTCL I believe there are multiple opportunities to benefit patients by extending FOLOTYN use to other indications when new treatment options are needed. Antifolate continues to play an important role in the treatment of cancer patients. I believe FOLOTYN is a novel agent in the class with the unique provisos that may have broad applicability.

I look forward to driving the FOLOTYN development program and exploring FOLOTYN’s potential utilities of single agent or in combination treatment regimens in a variety of hematological cancers in solid tumors. I also want to say that I was drawn to Allos by the caliber and energy of the leadership and the dedication of the team.

My thoughts I believe my years experience in developing drugs for solid tumors and hematologic cancers as well as my extensive international experience (inaudible) I can work with all in the team really drives to our product key programs for broad ranging success.

I’m really excited to have this opportunity to contribute to our ongoing future success as we seek to expand FOLOTYN’s reach outside the U.S. and investigate the clinical utility and other indications.

With that I will turn the call over to Jim.

Jim Caruso

Thank you, Charlie, and welcome. As Paul mentioned we commenced the U.S. commercial launch of FOLOTYN in January of this year. And we’re encouraged by the level of awareness and use of FOLOTYN this early in the commercial launch. In the first quarter FOLOTYN factory sales were sales to wholesale distributors were $8.7 million and sell-through sales were sales to healthcare providers for their patients were $8.2 million. Importantly, factory sales are closely tracking to sell-through reflecting the real time nature of FOLOTYN ordering.

FOLOTYN’s prescribing pattern reflects usage across the United States, including academic institutions and community practices. We believe there is substantial upside market opportunity for FOLOTYN. Our estimated incidents of newly diagnosed PTCL for 2010 is approximately 5,900 patients. In addition, we estimate that in 2010 there were approximately 10,300 patients that relapsed or refractory PTCL.

According to the clinical literature the incidents of PTCL is increasing. And this growth maybe driven by demographics such as an ageing population, improvements in diagnosis, and increased awareness of PTCL.

In addition, market research indicates that relapsed or refractory PTCL prescribing patterns are changing. We believe that our promotional and educational initiatives coupled with positions early clinical experience with FOLOTYN are contributing to a greater understanding of how FOLOTYN may fit into the PTCL treatment paradigm.

Our initial launch experience suggests that the market for relapsed or refractory PTCL is promotionally sensitive. And healthcare providers detailed by Allos sales specialists are more likely to prescribe FOLOTYN. Physicians are also gaining awareness of FOLOTYN for a promotional grant campaign including advertisements, direct mail and canvas activities.

Our commercial organization continues to engage the PTCL community by building and strengthening relationships, educating healthcare providers and communicate the features and benefits of FOLOTYN for relapsed or refractory PTCL.

We believe this represents important progress with our goals of creating brand awareness and establishing FOLOTYN as the second line standard of care for PTCL. We believe there is strong potential for the continued trial, use and adoption of FOLOTYN where the treatment of patients with previously treated PTCL.

We have gathered market intelligence to company commission qualitative and quantitative customer research, company-sponsored advisory boards and anecdotal feedback from community and academic-based healthcare providers.

This research confirms that healthcare providers have been frustrated with existing treatment options and understand that PTCL is a devastating disease to a poor prognosis. As you recall PTCL has an overall five year survival rate of approximately 25% to 40% depending on subtype.

Market research also indicates that healthcare providers buying FOLOTYN label 27% response rate and 9.4 month duration of response, clinically meaningful in a highly pretreated patient population.

Please note that in the PROPEL study an average patient had three prior systematic therapies within 15.6 months prior FOLOTYN treatment and high field combination chemotherapy or stem cell transplant.

Anecdotal feedback from healthcare providers who have experience with FOLOTYN suggest that the adverse events seen with FOLOTYN are consistent with the package insert are typically manageable and also consistent with your experience with other chemotherapy agents.

As is most drug launches, the majority of healthcare providers initially prescribe new agents for patients receiving later lines of therapy. Our FOLOTYN brand campaign is designed to transition FOLOTYN to second line standard of care. As patients transition to earlier lines of therapy, we expect average duration of therapy to increase.

Another important takeaway from our market intelligence is that healthcare providers and patients value the convenience of a three minute to five minute IV push administration given in an outpatient setting.

Reimbursement for FOLOTYN remains strong. FOLOTYN is the only FDA approved drug and is included in the NCCN guidelines for second line treatment. Reinforcing the importance of FOLOTYN for the treatment of relapsed or refractory PTCL and the high unmet medical needs.

In April, we received our permanent seat code which enables FOLOTYN to be reimbursed under the hospital outpatient perspective payment system. And we anticipate receiving a permanent J code in January 2011.

In addition, our ASAP program which stands for Allos Support for Assisting Patients has been effective and supporting patient access to FOLOTYN. Modeled after best-in-class programs in oncology, the ASAP program, facilitates reimbursement and provide support for uninsured, underinsured and insured patients.

To our knowledge, our ASAP web site features the only interactive math that provides specific local coverage information which has been helpful to facilitate patient access to FOLOTYN.

Based on the FOLOTYN product profile increased interest, understanding of the disease stage, and the initial launch experience we believe there is strong potential for the continued trial use and adoption of FOLOTYN for the treatment of patients with previously treated PTCL.

With FOLOTYN’s first to market mover position coupled with our launch plan execution our goal is to establish FOLOTYN as the market leader and standard of care. We’re encouraged by the initial uptick of FOLOTYN by the U.S. Lymphoma Community; remain committed to driving FOLOTYN’s potential to make a difference in the lives of patients.

And now I will turn the call to Bruce Goldsmith who will provide an update on our life cycle planning efforts, clinical development and medical affairs program.

Bruce Goldsmith

Thank you, Jim. Based on FOLOTYN efficacy and safety profile and the clear unmet medical needs in relapsed or refractory PTCL the FDA granted accelerated approval for FOLOTYN.

As we have previously described in a connection with the approval and in an agreement with the FDA, we plan to conduct a following trial to advance the treatment of T-Cell lymphoma. In 2010, we plan to initiate a Phase III multi-center international randomized clinical study of sequential FOLOTYN versus observation in patients with newly diagnosed aggressive PTCL, who have responded following initial treatment with CHOP or CHOP like therapy.

We continue to work with the FDA to finalize the design of the sequential trial including the number of patients’ clinical end points and other study detail. We will update you on our progress on future calls.

In addition, we plan to conduct a Phase III multi-center international randomized clinical study comparing FOLOTYN in combination with systemic Bexarotene versus systemic Bexarotene alone in patients with cutaneous T-Cell lymphoma or CTCL who are refractories at least one prior systemic therapy.

Prior to initiation of the Phase III study we will conduct a Phase I study to determine the maximum tolerated dose of the combination. We’re pleased to announce that the Phase I portion of the FOLOTYN Bexarotene combination study is open to enroll patients as of last week.

These Phase III studies which will be conducted globally are part of a strategic life cycle development plan for FOLOTYN. They are intended to support the conversion of our U.S. accelerated approval II, a full approval and to extend the FOLOTYN development program to a broader T-Cell population through the potential for expanding indications.

From a PTCL education standpoint we’re committed to fostering a better understanding of this disease by supporting medical education opportunities. In addition to CME’s sponsorships, we’re pleased to announce in December that initiation of complete a global observational study that will enroll patients with newly diagnosed PTCL and obtain data regarding longitudinal treatment patterns and outcomes.

COMPLETE is expected to provide for the first time, important and detailed information on PTCL disease management across various treatment regimens, including drug therapy, stem cell transplant, radiation and radiation therapy.

We’re committed to this important initiative and believe that the data obtained will eventually help practitioners optimize treatment for patients with aggressive PTCL.

I will now review our development programs evaluating FOLOTYN both as a monotherapy and in combination in a variety of hematological malignancies and solid tumor indications.

We have an ongoing Phase I open label multi-center study of FOLOTYN in patients with relapsed or refractory CTCL. In December 2009, interim data from this study was presented at the 51st Annual Meeting of the American Society of Hematology.

Data were presented on 31 patients with relapsed or refractory CTCL who would receive the median of four prior systemic therapies. The design regimen of 15 milligrams per meter squared weekly for three week out of a four week cycle, but determined to be the optimal starting dosing schedule based on activity with tolerability.

In this dose deescalating study 18 patients received FOLOTYN at the optimal dose are higher. Responses were observed in an 11 of these patients were 61%. In the overall study, which included doses lower than the optimal dose, responses were observed in 12 of 31 patients were 39%, including two complete responses and nine partial responses in patients to receive FOLOTYN. No grade for adverse events was observed. Most common grade III adverse events was stomatitis, which occurred in 13% of patients.

We recently completed enrolment in an expansion cohort of 23 patients at the optimal dose and we report data from the full study in an upcoming Congress. We have an ongoing Phase I, IIa, open label multi-center combination trial of FOLOTYN and Gemcitabine in patients with relapsed or refractory non-Hodgkin’s lymphoma or Hodgkin’s lymphoma.

We completed the Phase I portion of this trial last July. The Phase I evaluation determine the maximum tolerated dose of the combination of FOLOTYN and Gemcitabine on sequential days and same day schedules. Updated results from this study were presented at the ASH Meeting in December 2009.

These data demonstrated the treatment with FOLOTYN and Gemcitabine is feasible with acceptable toxicity when administered on an every two weeks schedule. In this dose ranging portion of the study preliminary results showed activity of the combination of FOLOTYN and Gemcitabine in lymphoma malignancies with a 24% overall response rate in a heavily treated pretreated population.

We have initiated enrolment in a Phase IIa portion of the trial to assess the preliminary efficacy and safety on this combination in patients with relapsed or refractory T-cell lymphoma, PTCL or Hodgkin’s lymphoma.

Building on the clinical and preclinical activity of FOLOTYN observed in T-Cell non-Hodgkin’s lymphoma, in September 2009, we initiated patient enrolment in an investigational Phase II study of FOLOTYN and patients with relapsed or refractory B-cell non-Hodgkin’s lymphoma. Patients will be dosed at 30 milligrams per meter squared once every two weeks. The primary endpoint of this study is objective response rate complete and partial response as assessed by international workshop criteria. We continue to initiate new sites and advanced patients accrual.

Now, let’s turning to solid tumors. At the joint ECCO 15-34th ESMO Congress last September, updated results from a Phase I study of FOLOTYN advanced non-small cell lung cancer were presented by Dr. Jolly [ph] at Memorial Sloan-Kettering Cancer Center and his colleagues. In this study, the optimal dose of FOLOTYN with vitamin supplementation was determined to be per meter squared every two weeks.

The safety profile was consistent with previous studies. (inaudible) an overall response rate of 10% was observed with four out of 39 patients in this heavily pretreated population responding to FOLOTYN, including two long duration complete responses of 26 plus and 21 plus months with these patients still on therapy at the time of presentation.

The results of this and other completed studies of FOLOTYN in non-small cell lung cancer led to the design of our ongoing Phase IIb randomized multi-center international trial comparing FOLOTYN to erlotinib in patients with previously treated Phase IIIb4 non-small cell lung cancer who are or have been cigarette smokers.

In July 2009, we completed enrolment with 201 patients in the Phase II2b study. The adjective of the study is to assess the treatment effect of FOLOTYN in patients’ cohorts where we believe FOLOTYN has the potential to provide clinical benefit relative to erlotinib

The trial undergo both current and have former smokers which will allow us to conduct a number of pre-specified analysis comparing the treatment effect of FOLOTYN versus erlotinib based on smoking history. Patients with light smoking history versus those with heavy smoking history. Smoking status, current smokers versus former smokers. Histology, squamous versus non-squamous. As well as prior treatment with permeated patients that have received prior permeated versus that have not.

The future development of FOLOTYN and the syndication will be based on observing clinically meaningful results compared to erlotinib in one or more of the pre-specified patient cohort or in the overall population.

While the study is not powered to achieve statistical significance and is not intended to be a registration study we reviewed the design of the study in advance with both the FDA and EMEA. We will evaluate the results according to the analysis planned to determine the largest treatment effect observed and we’ll use this to inform the design of a potential Phase III registration study. Reporting the top line data requires specific number of death to occur as defined by the statistical analysis plan, which will trigger a series of step for standard clinical practice prior to data analysis.

Based on the number of events to-date, we now expect to report top-line results from this trial in the third quarter of 2010. Another ongoing study in solid tumors is the Phase 2 open label single arm multi-center study investigating FOLOTYN and patients with advanced or metastatic relapse Transitional (inaudible) Carcinoma or TCC of the urinary bladder. We continue to advance patient accrual and we look forward to presenting the results of this study once the efficacy and safety data are mature.

Finally, as part of our strategic life cycle development plan, we recently initiated a Phase 2 open label multi-center international trial FOLOTYN in (inaudible) patients with advanced for metastatic breast cancer who have failed prior chemotherapy.

The primary endpoint is objective response. Secondary endpoints include duration of response, overall survival, safety and pharmacokinetic parameters. Patients will be dosed at 190 mgs per meter squared every two weeks of a four week cycle. The study will seek to enroll approximately 30 patients.

Before closing, I want to mention that we have a number of abstract excepted for presentation at upcoming medical meetings. Specific information on the day and time of these presentations will be forthcoming in advance of these meetings.

With that I will turn the call over to David who will review our financial results.

David Clark

Thanks, Bruce. For the quarter ended March 31, 2010, we reported a net loss of $20.5 million or $0.20 per share compared to a net loss of $15.2 million, or $0.19 per share for the first quarter of 2009.

Non-GAAP gross product sales or sales to pharmaceutical wholesale distributors were $8.7 million for the first quarter of 2010. GAAP gross product sales or sell-through sales from distributors to healthcare providers were $8.2 million for the first quarter 2010.

Given the limited sales history for FOLOTYN we currently cannot reliably estimate expected returns at the time of shipment to our distributors. Therefore, in accordance with GAAP, we defer revenue recognition of sales to distributors until the product has been sold through or distributors to healthcare providers. As such, our deferred revenue increased by $0.5 million during the first quarter of 2010, which represents the difference between non-GAAP gross product sales and sell-through sales for the quarter. As of March 31, 2010, we’ve recorded total deferred revenue of $1.2 million.

Net product sales were $7.4 million for the first quarter 2010 which represents the $8.2 million of sell-through sales net of $0.8 million of gross to net sales adjustments. Gross to net adjustments consist of estimated accruals for rebates and chargeback and distributor service fees.

Gross to net adjustments equaled 10% of our GAAP gross product sales for Q1 2010. Gross to net adjustments for Q1 2010 included the release of a fourth quarter 2009 accrual of approximately $200,000 as we’ve refined our estimate of Medicaid rebates. This amounted to 2% of Q1 2010 GAAP gross product sales.

Therefore, for Q2 2010 and looking forward, we expect gross to net sales adjustments should approximate 12% of GAAP gross product sales. Positive sales for Q1 2010 was $0.7 million or 9.3% of net product sales. Looking forward, after the inventory has been sold, that is already expensed in R&D, prior to FDA approval, and we expect cost of sales to approximate 10% of net product sales, which includes our current 8% royalties.

Total operating cost and expenses for the first quarter 2010 were $28 million, including non-cash stock-based compensation expense of $2.9 million. We’re reaffirming our prior financial guidance of total operating cost and expenses, are expected to approximately $120 million to $130 million for 2010, excluding non-cash stock-based compensation expense. Stock-based compensation expense is expected to approximately $13 million to $15 million.

As we stated last quarter the company is not providing revenue guidance for 2010 at this time given the recent commercial launch of FOLOTYN.

Now, turning to our balance sheet, we ended Q1 2010 with a solid financial position. We have no debt. $8.8 million of accounts receivable and total cash and investments of $137.5 million as of March 31, 2010.

With that I will now turn the call back to Paul.

Paul Berns

Thanks, David. This is an exciting time for Allos, as we execute on our 2010 operating plan. We have an important opportunity to serve patients and their caregivers and to ensure that patients with the relapsed or refractory PTCL have access to FOLOTYN. We take this responsibility very seriously and we are committed to working diligently to make this happen. With a solid financial position, worldwide rights to FOLOTYN for all indications and a team of dedicated employees, focused on delivery, new cancer therapies to patients, we believe we have established a strong foundation for continued progress and look forward to providing future update.

And now operator, we will be happy to take questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions) The first question comes from the line of Geoff Meacham with JP Morgan. Please go ahead.

Geoff Meacham – JP Morgan

Hey, guys, thanks for taking the question. One question for you unfolds in commercial and then one on the clinical side, but wondering if you can give the adoption by lines of therapy this early in the launch I think you gave that last quarter I just wanted to see what the sequential trends were and maybe speak the duration as well.

Jim Caruso

Sure, those are both good questions. I think even early in this launch we are seeing second and third line patients are prescribed FOLOTYN, as we all know, patients in earlier lines of therapy are typically happier patients, I may be able to receive a higher number of doses per cycle and as we saw provide greater duration and tolerability. I think it’s common with most oncology drug launches initially, majority of healthcare professionals typically prescribe new drugs in laser lines of therapy. Our brand campaign is essentially designed to transition FOLOTYN to the second line standard of care.

In terms of duration of therapy, as previously discussed I think this is a classic oncology trial use and adoption model. We don’t have access to specific patient data but even if we had a clear line of site, it will be difficult to assess the “average duration of FOLOTYN in real world clinical practice.”

I think with any oncology launch we would expect duration of therapy to increase healthcare providers become familiar, become comfortable with FOLOTYN, and as FOLOTYN using second and third line continues to increase. Per USPI and I think we should be furred back to the package insert. The median duration of therapy was 70 days or approximately nine treatments. And I think early in the launch that’s a reasonable marker for the stage. I think based on PROPEL also the average number of doses was approximately 13 to 14 and I believe overtime that’s a reasonable longer-term commercial target.

Geoff Meacham – JP Morgan

And then a question for you, just on the distributor fees and Medicaid rebate, I think you guys are running in gross, the net adjustment is around 10%. What do you think this will stabilize and what do you think the timing would be there?

David Clark

Hi, Geoff, it’s David. I think for Q2 and looking forward we expect gross to net sales will be approximately 12% GAAP gross product sales. Because Q1 included a kind of a one-time two percentage adjustment so I think moving forward it’s going to be the 12% number.

Geoff Meacham – JP Morgan

Okay. And then just finally on the lung trial. It sounds like the events rate has been a little bit slower than you guys thought and I’m wondering if there’s anything that’s really changed since your last call you gave guidance of kind of 2Q. And then the other part of this is do you use to be have any discretion to, to look the data mature a little bit, they think that you could learn more by waiting an extra quarter or so?

Bruce Goldsmith

Thanks, Jeff. This is Bruce. First of all, I’d like to say that we believe this is a very rigorously conducted Phase 2 clinical study which we believe is as you know we’ll inform the design of the potential Phase 3 coming out. Reporting a top line data as we describe before requires a pre-specified number of events across the overall population or from both arms. And as per the analysis plan which we have not modified or changed, we’ve not looked at the number of deaths or events in each of the arms, we’re just looking at the overall number of death and event.

And therefore, only after achieving the number of events that’s pre-specified and finalizing the clinical database will the analysis of the primary and secondary endpoints are going to be conducted. So, we’re essentially continuing to track the number of events and based on the information that we have to-date we’ve updated the guidance release top-line in the third quarter of this year.

Geoff Meacham – JP Morgan

Got you. Okay, thanks.

Operator

Our next question is from the line of Lucy Lu with Citigroup. Please go ahead.

Lucy Lu – Citigroup

Great, thank you. The first question is on the commercial side. Can you talk about the number of physician prescribers that FOLOTYN so far, maybe your estimate of the number of physician prescriber this quarter versus last year? Thank you.

Jim Caruso

Well, we haven’t provided any detailed information not only on individual physician prescribers but also unique accounts that are prescribing and treating with FOLOTYN. I can't’ share with you that we’re very pleased with the broad distribution of use for the drug including academic institutions, hospitals as well as community hospitals and clinics. FOLOTYN is a unique agent based on its product profile has great clinical utility in both of those settings.

Lucy Lu – Citigroup

Okay. And then just a follow-up on the lung cancer. I guess the majority of the patients for the study, they all into the trial, probably by this time last year, because I remember you finished overall enrolment of 201 patients in July last year. So the majority of the patients at this point is they probably pass the one year mark. Can you just talk about in terms of tracking event, do you even know the overall number of events happening or right now the CRO whoever assumed the study for you. It’s not even disclosing the overall number of event to you. How you know is that you don’t have enough as of yet? Can you just give us like a qualitative sense, how many more events you need for the study to conclude?

Bruce Goldsmith

Lucy, this is Bruce. We’ve been working diligently with the clinical trial site to evaluate the current number of events and the ongoing rate of events. And we certainly in the overall population are aware of where we are in the study and that’s allowed us to update our guidance to report top-line in the third quarter of this year. We’ve not provided any additional details on that and we anticipate moving forward with the plan as we’ve outlined in order to achieve the number of pre-specified events to trigger the analysis and the subsequent events to then report of the top-line in the third quarter. And we’re continuing to work through that process and tracking the number of events.

Lucy Lu – Citigroup

Just to that extent one quick follow-up. I thought the study initially 160 patients and you eventually noted 201 patients, but early additional patients I guess more patients than you initially planned. Does the number of events required changed or that stays constant?

Bruce Goldsmith

So the number of events for the statistical analysis plan takes into consideration the final trial design which is the target 201 patients that were enrolled finally.

Lucy Lu – Citigroup

Got it. Thank you.

Operator

Our next question comes from the line of Mark Monane with Needham & Company. Please go ahead.

Mark Monane – Needham & Company

Thank you and good afternoon from Munich City. Happy (inaudible) the story of beating the enemy and impressive enemy much like the FOLOTYN is going after the impressive enemy cancer. (inaudible). In this title that we’re talking about here, do some early tables come out in terms of physician behavior, is it the same physician using the drug over and over again the individual patient or the same physician using the drug in the new patients, or is it new physicians trying the medication or using the medication for their PCTL patients?

Jim Caruso

I think it’s all of the above, Mark, as we’re getting the really nice and impressive collection of unique accounts and prescribers. And when you really think about the FOLOTYN product profile it is very attractive to both academic institutional environments as well as for the community oncology setting it’s a single agent, cytotoxic agent, that works very, very quickly and very favorable adverse eventful file and clinicians and the community as well as academic centers are very comfortable prescribing the compound.

As we know from PROPEL it is highly active and it has that kind of familiar and manageable AE profile and I will also tell you resonates very well is the three minutes to five minutes push, ease of administration and in for patient convenience, especially in the community, especially when you take into consideration of those busy community practices, but more importantly, just the reimbursement for four hour infusion versus the cost of staff. There’s a big differential there. And it’s almost cost prohibitive if somebody’s community practices as well.

Paul Berns

Mark, it's Paul. The other additional comment I would make and just remind everyone on the heels of the first quarter results that we reported we’re very, very pleased I have to say. Remember, the first quarter, our commercial launch are scaled up, commercial launch, the official launch of the drug, and the initial deployment of our launch tactics and investments, contemplate its part of our financial plan. So to get to your comment I think it’s a good one.

Clearly, as Jim has mentioned, we’re certainly seeing refi business within the same clinics, the same physicians, but I think what’s important is that we’re also getting expansion of our reach so we anticipate over time as we continue to deploy the launch investment throughout the course of the launch year and I think it will build quarter-over-quarter as we continue to see the potential return on investment of the deployment of those resources.

Mark Monane – Needham & Company

And then can you comment on the fact that the drug is out in the real world now and pretty much physicians are inquisitive and intellectual curious people using the drug in some of the investigating machine study. What’s that have seen taking place is of use in combination with Velcade and multiple myeloma, what are your thoughts about this trial?

Bruce Goldsmith

Thanks, Mark, this is Bruce. Just to review that on clinical triasl.gov is there is a posting of the study investigating and the combination of Velcade and FOLOTYN in the setting of relapsed or refractory multiple myeloma. And this is a Phase 1 study that designed to determine an MTD of the combination in this disease setting. In November 2009, we entered into a research agreement with the NCCN to provide a grant to evaluate the role of pralatrexate in the treatment of both hematological malignancies and solid tumors.

And these are similar to investigators sponsored studies which are consistent with the Allos development plan, and intended to explore the activity of FOLOTYN and other tumors and in other combination. So we’re very excited about the study and look forward to the outcome because it’s your point it’s really driven by investigator initiated desire to look at the FOLOTYN treatment and the potential for expansion of the FOLOTYN treatment in both combinations and in new setting.

Mark Monane – Needham & Company

That was helpful. And then one more follow-up question then. How should do with the inventory levels? I know it’s pretty early in the process here. And David did great job outlining how much was actually sold to the wholesaler and how much was passed through to the providers. What kind of behavior do you expect going forward, have you gotten any guidance from the wholesalers, about what kind of inventory they want to carry in, can you comment what the current inventory levels might be?

Jim Caruso

I think it’s important to know with GAAP accounting, it’s a snapshot at one given point in time at the conclusion of the month. And you raise a very good point, Mark. And that is bit mercurial over the course of the week as well. I believe in this space and with all premium priced oncology agents it’s typically real time. you will not see significant wholesaler inventory they will carry a bit on the shelves to satisfy the run rate demand but you typically will not see oversupply there and also at the end user at the point of delivery you will see very little inventory of the product there as well.

Mark Monane – Needham & Company

Thanks very much for the added information and congratulations on the launching. Good news for the patients. I’ll be standing by watching the growth.

Operator

Thank you. (Operator instructions) Our next question is from the line of Jason Kantor with RBC Capital Markets. Please go ahead.

Jason Kantor – RBC Capital Markets

Hi, there and congratulations on a solid quarter. Of late we see with cancer drug that there may be a bolus of sale to sort of pent-up demand since patients are maybe there is a lot of later stage patients they need to get on, are you seeing a lot of this or is it more of a steady uptick? And the reason I ask is that and I’m just wondering if there’s any possibility that we’re going to see kind of quarter to quarter sequential growth slowdown at some point in 2010 or do you really see this as just kind of a steady build throughout the year?

Jim Caruso

I think when you look at, it’s a great question, Jason, when you look at this market and the aggressive nature of the disease, I mean quite frankly even when FOLOTYN was approved and introduced it wasn’t like there was a significant bolus of patients there, waiting to be placed on the compound. Because of the aggressive nature of the disease, clinicians have to move very quickly, so it's not like, hey, let me wait 30 days or let me wait even two weeks for FOLOTYN to come out say. When patients relapse it’s typically very aggressive and clinicians or healthcare providers move very quickly to another line of therapy. So it’s really not as if even when we launched it was just enormous queue, it’s more of a timing issue. I believe we have made significant progress, we have work to do around PTCL awareness and education as with any first to market mover, there is a responsibility for education, but we believe over time we really have the capacity to significantly build quarter-over-quarter with this compound.

Jim Caruso

Jason, I would just echo Jim’s comments to say that it’s pretty clear we obviously from an internal planning perspective as we look at trial use and adoption curves and think about the unique nature of FOLOTYN’s product profile, the utility of this drug, and the syndication and the setting and then the application of our launch plans and the investments and how we scale those over the year, we clearly anticipate appropriate growth quarter-over-quarter as we penetrate and drive the educational level and awareness of PTCL and of course, the optimal position of FOLOTYN as the drug of twice in the relapsed or refractory setting so we think we’re off to a very, very good start in the first quarter.

Jason Kantor – RBC Capital Markets

Could you review again what exactly happened with this re-recognition of revenue that was deferred from Q4 that’s on its way into Q1 or vice versa I’m not sure?

David Clark

Yes, Jason, this is David. We just refined our Medicaid rebate so that was a, if you take that into account and you refine your estimates and that adjustments gets recorded in the current quarter so that’s just reflected in Q1 and like I said in Q2 moving forward we think gross and net will be 12%.

Jason Kantor – RBC Capital Markets

So you had previously deferred some of the gross to net in Q4 and then you’re recognizing that now in Q1?

David Clark

No, we had very conservative estimates for Medicaid rebates, as you may recall from our last call, and we were able to refine those estimates during the first quarter with additional information, so we trued up our estimate, if you will, and our Q1 numbers reflect that true up.

Jason Kantor – RBC Capital Markets

Alright, thank you.

Operator

Our next question comes from the line of Josh Schimmer with Leerink Swann & Company. Please go ahead

Josh Schimmer – Leerink Swann & Company

Okay, thanks for taking the question. Can you discuss your strategy for European approval and reimbursement in light of some of the reimbursement headwinds that that we’re seeing across the European countries, is that something maybe ENVISION is going to affect FOLOTYN, or are the patient numbers low enough that underneath evolving healthcare reimbursement proposals are not going to kind of impact the price you can charge?

Bruce Goldsmith

Sure, this is Bruce. So we will certainly take into account a number of different factors as we move forward with the European submission in the fourth quarter this year. The first and primary one as you mentioned is the patient population which reflects not only the high unmet medical needs that exist in Europe in terms of the relapsed or refractory PTCL population where again, there are no agents approved either in first line or in subsequent lines of therapy.

The unmet medical need is certainly one factor. The nature of the population in Europe is also a second factor to take into consideration and finally, it’s the value that FOLOTYN brings in terms of the target product profile that would drive the patient decisions they will have to make obviously in a regional and geographic specific factor to take into account the local requirements to price appropriately. So we recognize that the pricing environment in Europe maybe different than in the United States and we will take into account all of those factors and in particular, the FOLOTYN value that will bring to these patients in making those decisions.

Josh Schimmer – Leerink Swann & Company

Do you anticipate the price in Europe will be on par with the US?

Bruce Goldsmith

Certainly, that’s a future looking statement; we’re going to after enter into negotiations with the pricing and reimbursement authorities in Europe in the context of the three factors that I laid out in order to make that decision in the future.

Josh Schimmer – Leerink Swann & Company

Okay, thanks.

Operator

Thank you. Our next question comes from the line of Matt Roden with Banc of America-Merrill Lynch. Please go ahead

Matt Roden – Banc of America-Merrill Lynch

Thanks for taking the question. First one on reimbursement. You mentioned that you got a C code for hospital reimbursement in April, but what’s going on in the clinic saying are these providers using miscellaneous codes and if so is there are any chance to get a temporary unique code ahead of the January J code?

Jim Caruso

Thank you for the question. Net-net for reimbursement because of the nature of the disease where the only agent with an FDA approval, we have NCCN guideline, compendia listing, reimbursement, quite frankly, has not been an issue; on the temporary C code at the hospital was not an issue. All that typically means is once you’re assigned a permanent C code just changes reimbursements, so now that we have a permanent C code, those institutions get reimburse that ASP plus 6% so we have a 24-month pass-through and then with all drugs, two years later, ASP plus 4%. At the end of the day maybe there is a little bit more comfort level in terms of ordering the product. It’s nice to have the permanent C code.

I don’t think it was material or material to prescribing behaviors or ordering behaviors at those institutions or the permanent J code quite frankly the only real hurdle for us with the generic J code is typically because it’s a manual process, it will typically take an extra week or two from a reimbursement perspective for providers which for a handful of very small group providers that have poor credit who cannot get dating of any type, any premium priced oncology agent, would be challenging for them. Other than that we anticipate formally moving through the Federal government process with the J code and would expect based on the package that we’ve delivered our permanent J code in January of 2011.

Matt Roden – Banc of America-Merrill Lynch

Thanks Jim, that’s helpful color. I guess a follow up question or a new question for Dr Charlie Morris. As you look at the broader clinical development program, label expansion program for FOLOTYN, what opportunities do you see to maybe execute your influence on the development plan and where do you see the biggest opportunities for FOLOTYN down the line?

Charles Morris

Thanks for the question. Obviously, I came here because I saw, what I believe was a great opportunity with an active agent some of the detailed plan already put into place, I think clearly the most important (inaudible). decision is going to be around the lung cancer study which as Bruce has already hinted is I think a very well designed rigorously implemented study, which is really going to give us a great opportunity to move forward, hopefully in a carefully selected group of patients.

I think my initial influence is really going to come around the interpretation of those data when they come through, helping design that study working with the authorities to go forward. I think beyond that there’s a number of great plans in place and the opportunities going forward. The NCCN program which we have alluded gives us opportunity to begin to explore in some other areas and as those data come through we can make the right decisions.

I think the other thing for us is all to bear in mind the class of agents broadly, the antifolate class broadly has been very, very successful in the recent past, whether it’s with drugs that’s penetrated, whether it’s with the (inaudible) such as the loader so I think we really got the opportunity to continue to try to understand the best implementation for this in the best way to help patients, remains a great opportunity here. And I think the plans which are here are good and we really need more data right now to make the real big next investment decision.

Matt Roden – Banc of America-Merrill Lynch

I appreciate the color. Thanks for taking my question.

Operator

Thank you. And at this time, I would like to turn the conference back over to management for closing remarks.

Jim Caruso

Okay, thank you, operator. In summary we are very excited about our prospects for helping patients in building value for our shareholders. We believe we are well positioned to drive trial use and adoption of FOLOTYN for patients with relapsed or refractory PTCL in the US and expect to grow the brand overtime. We plan to initiate two studies that may potentially extend the FOLOTYN development program to a broader T-cell population.

We look forward to be reporting top line results from our Phase 2 solid tumor clinical trial of FOLOTYN and advanced non smoke for lung cancer in the third quarter of this year. We also intend to submit in MIA in Europe for relapsed or refractory PTCL in the fourth quarter. Looking forward to update you on our progress and seeing you at upcoming investor conference and the medical meeting. Thank you for joining us this afternoon. Have a good evening.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. If you would like to listen to a replay of today’s conference please dial 1800-406-7325 or 303-590-3030 and enter the access code 428-5655. AT&T would like to thank you for your participation and you may now disconnect.

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