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Executives

Monique Greer - VP of IR

Paul Berns - President and CEO

Mike Schick - VP, Sales and Marketing

Dr. Charles Morris - CMO

Bruce Goldsmith - VP, Corporate Development

Analysts

Geoff Meacham - J.P. Morgan

Charles Duncan - JMP Securities

Lucy Lu - Citigroup

Brian Skorney - ThinkEquity

Brian Wong - Needham & Company

Josh Schimmer - Leerink Swann

Charles Duncan - JMP Securities

Jason Kantor - RBC Capital Markets

Ling Wang - Brean Murray

Allos Therapeutics, Inc. (ALTH) Q3 2010 Earnings Call November 4, 2010 4:30 PM ET

Operator

Welcome to the Allos Therapeutics third quarter 2010 financial results conference call. (Operators Instructions)

I would know like to turn the conference over to Ms. Monique Greer, Vice President of Investor Relations.

Monique Greer

Good afternoon, everyone. We thank you for joining us on this conference call to review our third quarter 2010 financial results and other corporate updates.

Following formal remarks by members of management, the conference will be open for questions.

With me today are Paul Berns, President and Chief Executive Officer; Mike Schick, Vice President of Sales and Marketing; Dr. Charles Morris, Chief Medical Officer; and Bruce Goldsmith, Vice President of Corporate Development.

After market close today we issued a press release, a copy of which can be found in Investors Section of our website at allos.com.

Before we begin, please note that during the course of this call, we may make 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 Factors section of our quarterly report on Form 10Q for the quarter ended September 30, 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 would now like to turn the call over to Paul Berns. Paul.

Paul Berns

Thank you, Monique. Good afternoon everyone, and thank you for joining us today.

During the quarter, we continued to make progress as an emerging commercial organization growing our oncology presence. We had a first to market commercial opportunities for FOLOTYN and relapsed or refractory peripheral T-cell lymphoma, and remain committed to evaluating the potential of FOLOTYN in a number of other indications.

We believe we have established a prioritized product development and commercialization plan that is designed to maximize the potential value of FOLOTYN in the both the near and long term time horizon. With the U.S. commercial launch of FOLOTYN commencing in January, we believe this novel therapeutic has already made an important contribution to patients with relapsed or refractory peripheral T-cell lymphoma and their families.

For healthcare professionals, we were able to provide a new FDA-approved therapeutic option for their patients, where previously there was none. And over the past nine months, our focus has been on driving the trail, use and adoption of FOLOTYN, both in the academic and community setting through disease-state education and brand awareness generating activities.

We are in the early phase of our commercial launch experience, and our leading indicators are trending positive. Our commercial plan of action is focused on incorporating our key learnings to date to optimize sales force effectiveness and drive brand performance.

Our head of sales and marketing, Mike Schick will provide specifics in his commercial overview of the quarter. One of our key objectives for the year is to advance our strategic lifecycle plan for FOLOTYN in both hematologic malignancies and solid tumors. To this end, on October 11, we reported the presentation of favorable survival data from our randomized, Phase 2b study of FOLOTYN in patients with Advanced Non-Small Cell Lung Cancer at the ESMO Congress.

This was the first time these data were presented to the medical oncology community. Charlie will provide an overview of these encouraging results during his clinical update later on in the call.

There remains a high unmet medical need for new therapies, particularly in the second and third lines, and we believe a Phase 3 program is warranted based on the results of this trial.

Given our exclusive worldwide promotional rights to FOLOTYN, we continue to drive our strategic lifecycle development plan with the goal of extending the commercial opportunities and building additional value for our company through potential expanded indications in both the U.S. and abroad.

Now I'd like to turn the call over to David for a review of our financial results for the quarter.

David Clark

Thank you, Paul. For the quarter ended September 30, 2010, we reported a net loss of $18.8 million or $0.18 per share.

Gross product sales were $9.3 million for the third quarter of 2010, an increase from Q2 2010 gross product sales of $9 million. Net product sales were $8.2 million for Q3 2010, which represents a $9.3 million of gross product sales, net of $1 million of gross to net sales adjustments.

Gross to net sales adjustments approximated 11.3% of gross product sales for Q3 and consisted estimated accruals for government rebates and chargebacks and distributor service fees. As we have reviewed in quarters, we sell FOLOTYN to pharmaceutical wholesales distributors who then retail FOLOTYN to patients' healthcare providers.

We currently recognize revenue on the sell-through method, meaning that we defer revenue recognition sales to our distributors and then recognize revenue when the product is sold from our distributors to healthcare providers.

For Q3 2010, sales to our distributors were $9.7 million as compared to the $9.3 million of gross product sales to healthcare providers. Therefore, we saw a $0.4 million increase in deferred revenue for Q3 2010, and deferred revenue as of September 30, 2010 was $1.6 million.

Turning to operating costs and expenses, we continue to prudently manage our OpEx. For the third quarter, OpEx totaled $27 million, slightly lower than OpEx for Q2 of $27.9 million. OpEx for Q3 includes non-cash stock based compensation expense of $2.2 million.

We expect OpEx to increase in Q4 relative to Q3, primarily due to increases in sales and marketing expenses to continue our efforts in growing product sales and increases in R&D expenses primarily related to clinical trial costs, including start-up costs for our post-approval studies.

With that said, we remained focused on prudently managing our OpEx while prioritizing investments to drive our lifecycle development plan for FOLOTYN.

We expect 2010 operating expenses to be lower than previously guided, primarily related to the timing of certain clinical studies, efficiencies in manufacturing development, and prioritization of sales and marketing initiatives. Therefore, we are lowering our prior financial guidance for 2010 OpEx, which is now expected to approximate $105 million to $110 million, excluding non-cash stock based compensation expense, a decrease from prior guidance of $115 million to $120 million.

Stock based compensation expense for 2010 is expected to approximate $12 million.

Turning to our cash flow and balance sheet, our net cash used in operating activities for the third quarter 2010 was $13.3 million. We ended Q3 with a solid financial position; we have no debt. And total cash and investments of $108.9 million as of September 30, 2010.

Finally, I'm pleased to report that in October 2010, we received notice that we were approved to receive approximately $1.5 million under the Therapeutic Discovery Tax Credit. This cash payment to Allos will be recorded in Other Income in the fourth quarter.

With that, I will now turn the call over to Mike for an update on our commercial operations.

Mike Schick

Thank you, David. Good afternoon everyone. I'm pleased to provide and update on our recent progress in building the FOLOTYN brand for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma.

As Paul mentioned, we are in the early phase of our commercial launch experience, and continue to make important strides. During the third quarter, we continue to execute on the FOLOTYN launch plan and drive brand awareness and new account growth.

We believe two factors impacted our quarter-to-quarter sales growth. Early in the third quarter, we expanded our community reach and improved our account targeting. While this contributed to a 19% increase in the total number of ordering accounts versus Q2, most of this growth occurred in the back half of the quarter which limited the value of this account growth recognized during Q3.

However, more importantly, it helped drive record monthly gross product sales of FOLOTYN in both September and October. Secondly, we started to see increased adoption of the dose modification guidelines contained in our USPI which incorporates both the starting dose at 30 mg/m2 and a reduced dose of 20 mg/m2 in the short-term including the third quarter.

We think this resulted in a lower average cost of weekly administration. However, in the long-term, we believe this may translate into better treatment compliance and longer duration of treatment which is likely to result in higher average treatment value per patient.

Our commercial organization is committed to enhancing sales force effectiveness for continued FOLOTYN growth in the short-term as well as in the long-term. Based on our launch observations to date, we are currently focused on the following six key drivers; number one, enriching the PTCL patient population, improved account targeting and penetration; establishing FOLOTYN as a second line standard of care for relapse or refractory PTCL, optimizing the duration of FOLOTYN treatment, driving strategic partnerships in KOL development, and ensuring patient access.

With respect to the first key driver, I mentioned regarding enriching the PTCL patient population, we believe that relapsed or refractory PTCL represents a substantial market opportunity. We estimate that the annual incidence of newly diagnosed PTCL for 2010 to be approximately 5,900 patients and an estimated relapsed/refractory PTCL population to be approximately 10,000 patients.

Further, according to the clinical literature the incidents of PTCLs increasing due to demographic such as the ageing patient population. We are actively seeking to enrich the PTCL patient population by providing physician education to differentiate PTCL from non-Hodgkin lymphoma; partnering with pathology and hematopathology societies to optimize PTCL diagnosis; engaging PTCL experts to educate the oncology community on PTCL subtypes and building awareness of PTCL and FOLOTYN through patient advocacy groups.

In addition, we believe that better identification of PTCL patients is occurring through improvements in diagnostic technology and increasing disease state awareness. With respect to account targeting and penetration, our leading indicators suggest that we are making important progress driving forward in trial use and adoption.

We have identified approximately 2,000 accounts and approximately 3,000 physicians at priority target for our sales force. Through September, approximately 20% of these accounts have ordered FOLOTYN, leaving almost 1,600 new accounts as potential growth opportunities.

As we continue to drive our launch plan, we expect penetration of these accounts to grow. For example, the total number of ordering accounts in Q3 19% and new accounts grew by 29% versus Q2. Importantly, new account ordering in the community grew by 25% over Q2. We were also utilizing PTCL ICD-9 codes to improve account targeting and penetration.

These PTCL ICD-9 cases allow us to identify specific physicians and accounts who are diagnosing and treating patients with relapsed or refractory PTCL. As you know, PTCL subgroups ICD-9 codes only became available at the end of 2007, widespread adoption of new ICD-9 codes takes time especially in an orphan disease and is often linked to education about the state and availability of new treatment options.

As a result, utilization of ICD-9 codes for PTCL subgroups are increasing as physicians recognize that there is a separate NHL subgroup with the need for specific therapeutic approaches. For example, claims data indicate that the utilization of ICD-9 codes for PTCL subgroups is expected to nearly triple between 2008 and 2010.

We believe the community segment represents a significant upside opportunity for FOLOTYN, and we plan to utilize this coding information to improve targeting and growth of community accounts. We are also expanding our physician targeting to include bone marrow transplant physicians as well as dermatologists and oncologists who treat transformed mycosis fungoides.

By improving account targeting and penetration, we believe we can enhance force effectiveness and drive growth and sales of FOLOTYN. Separately, we continue to make progress establishing FOLOTYN as a second line standard of care for PTCL by communicating the features and benefits of FOLOTYN including the strength of clinical data that is served at the basis for a regulatory approval.

Our market research indicates that we continue to build grand awareness of FOLOTYN. For example, our Q3 market research reported that FOLOTYN had a high unaided awareness rate of 71% among hematologists and oncologists, compared with 46% in February of this year. In addition, our market research indicated that we are enhancing our sales force effectiveness at the point of sale by improving the amount of time with decision makers and effectively communicating our key messages.

Another important component of our plan of action is optimizing the duration of FOLOTYN treatment. Our ultimate goal is to ensure the best possible treatment outcome for both patients and physicians. Our sales force and promotional efforts are aimed at communicating that the clinical benefit that was observed in PROPEL is that the 30 mg/m2 starting dose per our U.S. package insert with appropriate dose submission and reductions.

We believe that duration of treatment will improve and patient outcomes maybe enhanced as we educate physicians on the dosing guidelines included in USPI and have these guidelines adopted into practice.

In addition to our sales force, focus on optimizing duration of therapy, we are also implementing targeted initiatives that educate oncology nurses on the proper assessment and management of oral mucositis, which is the most common adverse event associated with FOLOTYN.

We recently enhanced our strategic partner initiatives with key academic and oncology community networks and group purchasing organizations. These partnerships continue to yield results both to an increase in the number of new account utilizations, utilizing FOLOTYN for the first time as well as to an increase in the number of existing accounts treating multiple patients.

Finally, we remain committed to ensuring patient access to FOLOTYN treatment. We are pleased to report that reimbursement for FOLOTYN remains strong. To our knowledge there have been no coverage denials for our labeled indication. In addition, we recently received notice that a permanent J code was issued which will be effective January 1, 2011.

We plan to proactively communicate this important information to healthcare professionals prior to the effective date. We are also excited about the upcoming presentation of additional data from PROPEL at the American Society of Hematology annual meeting in December. These data will further support our brand profile and are expected to help drive the use and adoption of FOLOTYN.

We believe the marketing and opportunity for FOLOTYN is substantial and we remain committed to driving brand awareness and establishing FOLOTYN as a second line standard of care for PTCL.

Now, I'll turn the call over to Charlie.

Charles Morris

This is an exciting time for Allos as we have generated encouraging data from the first randomized clinical trial of FOLOTYN in a solid tumor, which demonstrated the clinical activity of FOLOTYN in patients with advanced non-small cell lung cancer.

Non-small cell lung cancer is a complicated and difficult disease and new treatments are needed to support physicians' goal of improving and extending the lives of the patients. Despite the progress which has been made, most patients will progress after first and second lines of therapy and overall survival remains very poor.

Current treatment options for non-small cell lung cancer include both pemetrexed, marketed as Alimta, and Erlotinib and marketed as Tarceva. Pemetrexed is indicated only for patients with non-squamous histology and is now being more frequently utilized in first lines of therapy. Erlotinib may be used across all histologies, substantially in the second line.

Unlike premetrexed, Alimta is used frequently in squamous cell carcinoma based on the benefit observed in the pivotal BR.21 study. Based on early studies of single agent FOLOTYN in advanced non-small cell lung cancer, the demonstrated responses, including durable, complete responses, we designed PDX-012, a randomized study of FOLOTYN versus Erlotinib to explore FOLOTYN's clinical activity versus an active comparative that is indicated and used across all histologies.

Patients who had received prior therapy with premetraxed were eligible for the study. The primary endpoint of this Phase 2B trial was overall survival, which remains the most important endpoint in assessing the benefit of an investigational therapy to treat lung cancer.

As we have previously reported in this study, of 201 patients in the overall population, patients receiving FOLOTYN have a 16% lower risk of death than those treated with Erlotinib. As an example of what this meant to patients, at the one year mark, 28% of patients treated with FOLOTYN were alive and 18% of patients treated with Erlotinib were alive.

In addition, Progression Free Survival or PFS showed a trend in favor for FOLOTYN with a hazard ratio of 0.91 with a 9% reduction in the risk of disease progression. While response rate was lower than past studies with 2% for FOLOTYN, the overall decrease in tumor burden showed activity of FOLOTYN with a single agent across histologies and in those patients who had prior treatment with pemetrexed. Based on the known activity of available agents, we also chose to look more specifically for activity, not just in the overall population but within specific predefined histological subtypes, dividing the population into squamous and non-squamous cell patients.

The most striking effects were observed in the 107 patients with non-squamous cell carcinoma, with the results demonstrating a hazard ratio of 0.65, representing a 35% reduction in the risk of death for patients treated with FOLOTYN. In addition, we saw a hazard ratio of 0.58 for progression free survival. Of note, approximately 25% of the patients with non-squamous cell carcinoma in the FOLOTYN arm had received pemetrexed during previous lines of treatment. We believe these data demonstrates activity of FOLOTYN as the single agent in non-squamous cell carcinoma.

In patients with squamous cell carcinoma, a hazard ratio for overall survival of 1.06 was observed. As we have discussed, erlotinib is an active comparator in this group, with a known survival benefit as described in the paper by Clark et al in 2006. This included patients with squamous histologies who were average smokers showing a hazard ratio of 0.66 in favor of Erlotinib. As a result, we believe that the similar outcomes for FOLOTYN and Erlotinib observed in our Phase 2b study indicate activity of FOLOTYN in this underserved population.

The safety profile of FOLOTYN was consistent with that observed and reported in previous FOLOTYN solid tumor studies. The most common Grade 3-4 adverse event observed in patients treated with FOLOTYN was mucositis. Other Grade 3-4 adverse events occurring in more than 5% but less than 10% of patients were fatigue, dyspnea, neutropenia, thrombocytopenia and anemia in patients treated with FOLOTYN, and rash, dyspnea, anemia and fatigue in patients treated with erlotinib.

One point we'd noted and discussed with our advisors is that the rate of continuations due to adverse events should be a key area of focus for our future studies. Therefore, in future studies we plan to include changes to our dose modification schema as well as other approaches intended to maintain patients on treatment and maximize the percentage of benefit and safety of FOLOTYN.

For additional details regarding this study, I refer you to our press release issued on October 11, and we have no presentation posted on the Presentations and Events portion of the Investor Relations section on our website.

We believe these are important results for the cancer community, generating data on the potential efficacy and safety profile for FOLOTYN in this treatment setting, where there remains a high unmet need.

So where are we now? We've shared these results with scientific advisors who have a broadened standing and expertise in lung cancer. Based on these discussions, we believe the Phase 2b results support a global Phase 3 program that will be designed and intended to meet the needs of U.S. and EU regulatory authorities. We believe there are viable clinical and regulatory pathways for developing FOLOTYN to treat patients with advanced non-small cell lung cancer, including both squamous and non-squamous cell carcinomas.

We continue to work through the substantial clinical dataset and are in active discussion with lung cancer experts about specific trial designs in order to fully define the potential role of FOLOTYN in lung cancer and we will share these later in the quarter.

Now I will provide a very brief review of our technical development activities currently underway in areas outside of lung cancer and solid tumors. These are part of our strategic lifecycle development plans for FOLOTYN.

As we have previously described, we plan to conduct two Phase 3 clinical studies for advanced treatment of T-cell lymphoma. We remain on track with our plans to initiate in the fourth quarter of this year, a randomized multi-center international Phase 3 clinical study of sequential FOLOTYN versus observation in patients with newly diagnosed, aggressive PTCL following initial treatment with CHOP or a CHOP-like therapy.

In addition, we plan to conduct a randomized multi-center international Phase 3 clinical study, comparing FOLOTYN in combination with systemic bexarotene versus systemic bexarotene alone in patients with Cutaneous T-cell Lymphoma or CTCL, who are refractory to at least one prior systemic therapy. We are actively enrolling patients from the Phase 1 portion of the FOLOTYN/bexarotene combination study, and once we have determined the maximum tolerated dose of the combination, we intend to initiate the Phase 3 portion into this program.

These important Phase 3 studies which will be conducted internationally, are intended to support the conversion of our U.S. accelerated approval to a full approval, and may extend FOLOTYN's utility to a broader T-cell population through the potential for expanded indications globally.

We also plan to submit by the end of this year a Marketing Authorization Application, or MAA, to the European regulatory authorities to seek approval to market FOLOTYN in Europe for the treatment of patients with relapsed or refractory PTCL. The MAA submission will be based on the results of the PROPEL trial.

In addition to our Company-sponsored development program, we have now seen the initiation of a number of investigator-sponsored studies, including six studies through our collaboration with the NCCN's Oncology Research Program in a range of solid tumor and hematologic malignancies.

Before closing, as Mike mentioned earlier, there are a number of interesting aspects related to our PTCL indication that have been accepted for presentation at the American Society of Hematology Annual meeting in Orlando. In addition, you can expect additional data from our Phase 2b non-small cell lung cancer study at the Chicago Multidisciplinary Symposium in Thoracic Oncology. Those meetings take place in the early part of December, and specific information on the day and time of these presentations will be forthcoming in advance of these meetings.

In addition, the PROPEL manuscript was recently accepted for publication in a peer review journal, and we anticipate that will appear sometime in the next few months.

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

Paul Berns

Thanks, Charlie. Before we go to Q&A, let me briefly summarize what we are focused on here.

So first, we will continue to drive trial, use and adoption of FOLOTYN for patients with relapsed or refractory PTCL. Second, we plan to submit a marketing authorization application for FOLOTYN for the treatment of relapsed or refractory PTCL to the European regulatory authorities by the end of the year.

Third, we plan to initiate a randomized multi-center international Phase 3 clinical study of sequential FOLOTYN versus observation in patients with newly diagnosed aggressive PTCL following initial treatment with CHOP or CHOP-like therapy.

Fourth, we look forward to reporting our numerous data presentations at upcoming medical meetings in December. And finally, we are pleased that the results of our randomized Phase 2b non-small cell lung cancer trial demonstrated clinical activity of FOLOTYN in this area of high unmet medical needs.

Now as Charlie described, we are completing our discussions with lung cancer experts to determine the optimal Phase 3 trial designs, which we will share later this quarter. We believe we can create additional value by utilizing our internal capabilities and resources to meet with health authorities to agree on the potential regulatory pathways for the non-small cell lung cancer. We recognize that creating shareholder value with the potential indication of a Phase 3 program will require consideration of the additional investment required and the route of obtaining the necessary funds.

So in summary, we believe we have established a global strategic lifecycle plan that is focused on maximizing FOLOTYN's clinical, regulatory and commercial potential in a number of indications. We are committed to our strategy and believe we can improve the standard of care in cancer therapy while maximizing shareholder value.

So with that we will now open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question is from the line of Geoff Meacham with JPMorgan.

Geoff Meacham - J.P. Morgan

First one on PTCL, maybe if you can help us just with some metrics of the launch and its progress so far, but if you guys can talk about perhaps number of hem/oncs writing a script or reordering versus the prior couple of quarters that would be helpful. And then I have a follow-up on lung.

Paul Berns

I'll let Mike go ahead and just speak to that and the team to add some additional commentary.

Mike Schick

We continue again, to make good progress, enjoying FOLOTYN utilization both in the academic and the community setting. And we are really encouraged by the traction we've seen in Q3. And from an account ordering perspective, especially in Q3 as we had explained on the call, total number of ordering accounts grew by 19%, new accounts by 29% versus Q2, and most importantly new accounts in the community grew by 25% over Q2.

Again, very positive sign that we've continued to move forwards in utilization across second and third-line (plus) setting. Also, most importantly the FOLOTYN product profile continues to be attractive in both the academic and the community setting. For instance, physicians are very happy with the quick onset of action, where they are seeing 66% of the responses, again, within PROPEL occurred within cycle one, the durable responses and the favorable administration profile.

So we feel that the results of this, as we move forward have resulted in multi-gross product sales records for both September and October.

Geoff Meacham - J.P. Morgan

And then, what impact does time to response really have on utilization? Where do you think vis-à-vis the competitive data that could come out at the ASH meeting, where do you think you could have an advantage there?

Paul Berns

We think, frankly as part of the efficacy messaging for the drug, a quick onset of effect and time to response is actually very pivotal, and all of this market research tested very, very positively. So maybe, Mike you want to add some additional commentary there. But that's a strong brand feature for FOLOTYN.

Mike Schick

I mean, what we are seeing in the community setting is physicians, especially because this is an aggressive PTCL disease, they want to make sure that patients are going to be respond quickly. And again, that's one of the key product attributes that's positioned like around FOLOTYN. But most importantly also, its durable response; physicians want to see a durable response. When you look at the PROPEL data, the median durational response is 9.4 months. And then, as we go into the favorable administration profile, again especially in the community setting, you're talking of three-to-five minute IV push for patients.

But when we think about competition, I think it's also important. Again, PTCL is a high unmet medical need. Physicians need new therapies as well as patients. Again, so we feel that we are a trailblazer right now within this disease state. And unfortunately, these patients are eventually going to fail treatment due to the aggressive nature of this disease.

So again, introduction of new therapies are good for both the patient and the physicians. And again, as we move forward, as new therapies get introduced into this disease state, there is opportunity again for combination trials, and also looking at different sequencing of therapies.

Paul Berns

The only comment I would add just to that, Mike, is that frankly additional participants are just going to help us grow the marketplace, and further differentiate T-cell lymphomas and PTCLs from B-cell non-Hodgkin lymphoma. And I think frankly we have an unsurpassed product profile in FOLOTYN as a brand with the unique features and benefits that we have. I think that we will do very well in that setting.

Geoff Meacham - J.P. Morgan

And then one more follow-up, just on the lung design, I know you guys had talked about having more commentary on the design later on this year, but are there any broad brush strokes that you can help us with, with respect to histologies or comparators or things at this point, or should we wait?

Charles Morris

I mean, I think we've give in some full detail by end of the year. I think what we discussed previously, I think what I'm trying to highlight on the call is that we believe it's up, a clear activity here in the non-squamous cell patients, we've got good activity here in the squamous cell patients. There's no need to be thinking about taking any of those options off the table. We've got the activities that we believe is important in the patients who have seen pemetrexed previously.

So really trying to pull all of those things together and think about how we push forward on all fronts. So we'll add some more color to that later in the year. But this clearly activity broadly here and we plant to continue to explore that.

Operator

And our next question is from the line of Charles Duncan with JMP Securities.

Charles Duncan - JMP Securities

Thanks for taking the question, and also thanks for the added color on the dynamics of the marketing. But I had a question further to that. What do you see as the biggest change following the change in the sales management?

Paul Berns

I appreciate the question and thank you for joining us today. So I think the ongoing iterative tracking, management and improvements we're making in sales force effectiveness in the leadership of our promotional organization and implementing that, was that we're significant positive contributors to the growth we saw in the second half of the third quarter. As Mike alluded to you in his comments today, and frankly the continued good growth we're seeing early here in the fourth quarter in October, as Mike mentioned.

All of that, he'll speak to that in a little more detail. But the course strategy of launching the brand is still intact and relevant to the promotional dynamics and the opportunity to build the brand and build the marketplace. But I think we've just done significantly better job, quite frankly speaking in the targeting and improving the sales force effectiveness, and I would anticipate that we would see improve growth going forward. Mike?

Mike Schick

First, again, our core launch elements have stayed consistent throughout our launch year-to-date. My current focus has been on driving sales force effectiveness. For example, continue to improve account hardening and penetration. Again, we currently are still students of the game here. And as we reported today, our leading indicators are turning positive. Our total number of ordering accounts and new accounts have grown versus Q2, and this has driven to a record monthly gross product sales in both September and October.

Charles Duncan - JMP Securities

(technical difficulty)

Operator

And our next question comes from the line of Lucy Lu with Citigroup.

Lucy Lu - Citigroup

I also have a couple of questions on the launch. I guess since you already have the numbers for October, can you give us some guidance for the fourth quarter sales?

Paul Berns

I'll turn it over to Mike. But we're not in a position to guide for the fourth quarter. We will look to entertain obviously looking to guide, as we think about 2011 and moving forward, and looking at the longitudinal data that we have at that point. We're certainly very pleased with the performance, nonetheless, in the second half of the third quarter. And the continued growth and ramp up we have seen in early fourth quarter, again as we've commented on. But I can understand your interest in that and certainly appreciate the question with that. Mike, I don't know, if you want to add anything additional of kind of what we've already said. But the leading indicators would be improved and enhanced targeting both in the community and academic setting, and just the improvement in our share voice, I would say, Lucy, is bearing very fruitful return.

Mike Schick

Yes. And let's go to the question again. As we stated on the earlier on the call, I mean we are committed to begin a focus on driving our six key drivers, again, enriching the PTCL patient population, et cetera and moving it forward. And again, we're very happy with the results as we exit Q3 and move into Q4. And we feel very confident that trend is going to continue.

Lucy Lu - Citigroup

And then just a follow-up question. Are you seeing any competition from Romidepsin? Obviously they haven't been officially approved for PTCL, but just wanted to see anecdotally, if some physicians may be using that for PTCL, as well. And also, anecdotally, is FOLOTYN used in CTCL at all?

Mike Schick

At this point we do not comment on all off-label utilization. Again, and we do not promote off-labely. In reference to the Romidepsin and PTCL, market research is showing that they're getting very limited use.

Paul Berns

Let me just add to Mike's comment. I mean, clearly we aren't promoting off-label. We're aware of the fact that obviously with supplier data that we had at ASH in prior meeting with our CTCL data that we have a very compelling, what we did, potentially a very compelling level of activity there. And it out looked out to be better in the future. So transformed mycosis fungoides as a subtype that was within our actual PTCL label is a very attractive area for physicians to use the drug today where it's reimbursed.

And Mike can maybe even speak to that a little bit, because that's one of the approved customer segment focal points for us going forward. And so we are seeing improved, frankly, use, broadly speaking in T-cell lymphomas on the on-label business, and we've heard certainly anecdotally physicians applying that in other T-cell studies and continues to be felt.

And we're in the fact that Romi is being used abroad across T-cell studying as well. Frankly we hope they continue to invest in the category to build the differentiation of T to B just as we are. But we're very confident that our first-to-market movement position and the strength of our efficacy message and brand position and profile that we spoke to you earlier in Jeff comments, we think uniquely positions us for future growth.

Operator

And our next question is from the line of Brian Skorney with ThinkEquity.

Brian Skorney - ThinkEquity

Just to kind of try to hone in a little more on how the sales launch is going, you said that September and October were both record gross product sales months. I'm just wondering, could you give us kind of a scope of how much better September was versus July and August. And were July and August not record months? And when we look out towards fourth quarter, I understand you don't want to give guidance, but we're seeing kind of low single-digit gross product sales growth 2Q to 3Q. Do you think we'd see a return to a more close to low double-digit growth?

Paul Berns

So I would say to the latter part of your question. And then I'll turn it to Mike. We certainly anticipate improved growth quarter-over-quarter going forward. It's certainly our objective as an organization. And we think in fact our leading indicators point to that, and we look at the data that we look at internally and will be giving indicators certainly point to that. And what I anticipate is that we would return to that type of performance. And I think as the emerging commercial business, it's an important transition here for us as we've increased our share voice, enhanced our deployment and our targeting. And so you anticipate seeing improved growth going forward. I'll turn it to Mike, based on my comments.

Mike Schick

Again, as we stated on the call, early in the third quarter when we expanded that to community, again, we kind of diluted our share voice. But as we started to move into the second half of the quarter, again, we've put a lot of emphasis on improving our targeting, our physicians, as well as accounts. And especially as I told you and we utilized our acclaims data to do that.

So again, we believe that the positive trends that we've seen from the middle half of the quarter on has been due to better, again, identifying patients and accounts that are treating PTCL patients.

Mike Schick

And we expect again, as we move into in the fourth quarter that we'll continue to improve on accounts auditing and penetrations.

Brian Skorney - ThinkEquity

And then, just as far as the PROPEL study you said is going to be published in a peer review journal. Any guidance on what we should look? Is this going to be kind of the tier one or tier two journal? I mean, am I looking at New England Journal, or is it like a Blood article?

Charles Morris

I mean, it's an oncology journal and it's one of the top ones.

Operator

And our next question is from the line of Mark Monane with Needham & Company.

Brian Wong - Needham & Company

Hi, it's Brian Wong for Mark Monane. A quick question, again on the (inaudible). You mentioned that your company always has done a good job to generate brand awareness. I was wondering what's the trend of the duration on treatment and what do you think was the element in raising or limiting steps? Is that efficacy or is it satisfaction?

Charles Morris

When we look at duration of therapy, again, unfortunately we don't have access to individual patient data, but we continued the best we can to triangulate multiple data steps to get a better understanding of our duration.

But we still believe that we're definitely below the median duration of therapy per our USPI which is approximately around nine treatments.

Paul Berns

We continue to see that and our belief is that it's improving as we continue to improve the pull-through of our messaging and obviously the support of the physicians' trial and use with FOLOTYN, but we still think there are important opportunities to continue to grow that, is our message here.

And so we think that there are multiple factors there. When you look at future sales growth, the contributing factors of enhanced targeting, position the expanded targeting of our comp, and greater penetration of our top targeted accounts with of course the growth in administered unit and duration.

Mike, any other thoughts?

Mike Schick

Again, I think our ultimate goal again is to ensure the best possible treatment outcome for both patients and the physicians. So therefore, we believe that we promote the package insert dose submissions and dose reductions for FOLOTYN. And they have been incorporated into the practice. The clinical benefit will expand FOLOTYN's utility, and again potentially extending duration in more patients.

And as we all know, when a new drug enters into the marketplace, it's used in later lines of therapy. So as physicians get more comfortable with the drug, and that moves up into lines of therapy, duration levels decrease.

Mark Monane - Needham & Company

It's Mark Monane with a follow-up question.

It's raining hard in New York City, and it's been pretty much raining the whole day, which brings me to the question about thinking about the use of FOLOTYN in the individual patient. You presented some nice data from PROPEL trial, especially, about what the average dose consideration is, or how many doses people are taking, how many cycles. But we didn't see the distribution.

And I guess the question for you is, are there certain physicians that feel more comfortable with giving more doses, or are there certain patients with certain characteristics that are more comfortable getting more doses and can work through the side effects?

I want to know a little bit more about the distribution of the doses, who's getting what, because it brings up, I think different targeted strategies, as you nicely talked about, in targeting the physicians and in targeting the right patients.

Paul Berns

It's a PROPEL question, Mark. I'll turn it over to Bruce and then Charles. Bruce.

Bruce Goldsmith

One comment about the PROPEL dataset is that we actually saw very good durations of both therapy and response across a wide range of histologies. And if you look at the four major histologies that were in the PROPEL dataset, they were PTCL-NOS, ALCL, Angioimmunoblastic and Transformed MF.

And we saw responses in all of those different subtypes. And we actually saw very long durations of therapy in the majority of subtypes that were shown as well, and we saw responses in the various subtypes as well. So essentially, when you go back to the PROPEL dataset and you look at the average duration of therapy and the median duration of therapy, that's a sum of all of the outcomes.

So just to give you some examples, there were patients that had both PTCL, ALCL up negative, T/NK lymphoblastic NK that had over 200 days of duration of response, and similarly had fairly long duration of therapy as well. And as you know, some of those patients also went on to transplant and had very good outcomes as well.

So I think there is a whole range of subtypes that are included in our label that we are promoting that can have the benefit of long durations of therapy over time. And the other piece of this is that we also know that PROPEL was conducted in the major academic institutions. And this is obviously something that we are well aware of too is that these physicians are aware of experimental agents in running studies etcetera. And we can bring them up on the education curve quite well in terms of interacting, in terms of interacting, in terms of a clinical study program.

So to Mike's point, and I'll just allude back to the commercial piece that we talked about. The need for us is to not only to educate around the subtypes and the expansive label, but also about how this drug must be administered. And including the dose modification guidelines which include omissions as well as dose reductions that are appropriate, in a clinical study protocol we can have better control over that and better communication.

And that's what we are trying to do through our sales force to ensure best patient outcomes.

Paul Berns

Charlie, any other thoughts?

Charles Morris

The only other thing I'd draw your attention to Mark, we've touched upon some of the potential for what may be presented in forthcoming meetings. Obviously, we've though a lot about one of the important patient groups, important prior treatments that they may have had in some of the histologies in there.

I think there's an opportunity to really help define some of the responses and duration of responses, duration of treatment in some of those key groups through what we'll be doing there. And hopefully that provides information to physicians to help them with some of that decision making as well.

Mark Monane - Needham & Company

Thanks for the added information.

Operator

And our next question is from the line of Josh Schimmer with Leerink Swann.

Josh Schimmer - Leerink Swann

First, was there any contribution from Europe in the quarter?

Paul Berns

No contributions from Europe. You mean, like the name patient basis?

Josh Schimmer - Leerink Swann

Yes.

Paul Berns

No.

Josh Schimmer - Leerink Swann

When do you expect to see any of that, or do you not expect revenue until the product's approved?

Paul Berns

No. I'll let Bruce to add some commentary to it, but we anticipate seeing that sporadically, I would guess over time. We had seen some of that in the past outside of U.S. But it's nothing that key component at least from a revenue planning perspective.

Bruce Goldsmith

Correct. We are planning on projecting revenue based on the MAA submission and therefore approval. And obviously that's going to occur towards the end of this year. And then the review period will subsequently follow and we're expecting revenue to ramp up after the approval.

Josh Schimmer - Leerink Swann

And do you plan on starting the lung cancer Phase 3 trial on your own, or is that something that you're seeking to partner? How are you planning for that?

Bruce Goldsmith

We're essentially moving forward using our own internal resources and our own knowledge of the lung cancer space to continue to create value around the program in two aspects; one is to work with external experts to define the best clinical and regulatory pathway and linking that as we mentioned earlier to a commercial value proposition and making sure that all of those three components line up effectively to create the investment strategies that's going to create shareholder value. And that's really what we are focused on.

We have not determined the optimal path going forward at this point and remain focused on the initial stages of those which is defining the pathway and even going forward in terms of regulatory interactions to get buy-in and alignment around potential (inaudible) regulatory pathways, as well.

Finally, I think in terms of the actual funding and execution when we ramp up the Phase 3 programs. We recognize that that will take additional resources and investment. And I think we can put on a table that we recognize that there are essentially three avenues forward; one is central partnership, which would be non-diluted financing as well as co-development structure.

The other is to also reinvest in the business using the continued growth that we expect in PTCL sales in the U.S., and subsequently to your point, in Europe. And the third is obviously to pursue potential financial routes. And I don't think we have committed to those, but I think the order that we're discussing those I think are important, and we're very cognizant of the fact that we need to execute our program and invest in that program that will create shareholder value.

Josh Schimmer - Leerink Swann

Is there an option to partner with a cooperative group and get them to fund it on your behalf, or does that not provide the rigorous study required for filing?

Bruce Goldsmith

I think it was precedent in the past to work with cooperative groups, but also note that cooperative groups are not necessarily free of charge either. And there are fees associated with bringing a cooperative group to study up to a regulatory compliant level. So that is certainly part of the potential strategy, is to work with cooperative group, both formally and informally. And there is both, the European groups as well as United States groups that could potentially participate in such studies.

However, I think that's more of an execution fees that we'll get to later into the program in terms of actually when we ramp up this Phase 3 programs. Charlie?

Charles Morris

I mean obviously it's an appealing concept from a financing perspective. But managing that from an execution an operational perspective (technical difficulty) be in control of our timelines and (technical difficulty).

Josh Schimmer - Leerink Swann

With the investments that you're making in the sales and then some of the trials that are starting up, how do you think about managing your own cash position to avoid the need for an additional financing?

David Clark

We're not commenting beyond 2010 as far as our OpEx, but we have built in our commercial infrastructure into 2010. We don't expect that to require significant future investment. But we just cannot comment on our future R&D spend.

Paul Berns

All in all, and generally speaking, we feel like we have a good plan in control of our investment in the OpEx frankly going forward. We're just not in a position to really give guidance on 2011 at this point, to David's comments, Josh. But we are well aware of, as you are pursuing your line of questioning which is absolutely correct, we're well aware of the resource management aspect of it and we are aware of that even the way we managed 2010 to put ourselves and still up where we consider to be in a strong position.

And I think as you alluded to, and as previously mentioned, we think that there are multiple opportunities to think about resourcing this program in particular, and that's including the evaluation of the partnering dynamic that you brought up and alluded to yourself. We think we have multiple options, and are considering that as well as the growth of our sales going forward in 2011, which we think gives us just a broader array of things to consider, but we are still managing OpEx very tightly and feel very good about that going into '011.

Operator

And we do have a follow-up question from the line of Charles Duncan.

Charles Duncan - JMP Securities

I had a question about Asia. Have you dusted off the idea of getting to Asia? And if you have any further thoughts on how you might do that that might involve business development?

Bruce Goldsmith

As we've described before, I think we brought forward the potential regulatory strategy in Japan by working with external key opinion leaders as well as external groups such as CROs etcetera to validate a potential pathway forward. I think we're focused right now on getting the European submission in place and creating the additional value around our ongoing clinical studies.

I think the Asia potential pathways forward would likely remain focused opportunistically on potential business development strategies moving forward, but we obviously retain the global rights to the brand and we're obviously focused on, as I mentioned earlier, maximizing shareholder values. So I think we'll do what's in the best interest of both the brand, patients and as well the shareholders.

Paul Berns

I think to Charles point, and we've talked about this before, the Pan Pacific/Asian opportunity we think the Pacific opportunity is one that clearly makes a lot of sense and we continue to spend quality time evaluating our options.

Charles Duncan - JMP Securities

With regard to the lung cancer trials, this is kind of a follow-up to the last question, do you believe that you can define a path forward which is capital-efficient and that you might be able to start to execute in 2011?

Bruce Goldsmith

We believe that we can define a pathway forward that builds both a clinical regulatory and commercial space. I don't think that we commented on the capital utilization that we would require to run those studies. And that's obviously part of the consideration. And then the subsequent part of that consideration is, once we build out the actual plans, how we actually finance this.

So we're trying to focus on the first parts of the step to create additional value. And I think that's where we'll leave it at this time. Suffice it to say that the internal team which is the focus team has the capabilities and resources and expertise to move this program along forward, continue to refine it and we feel like we have the connections with our external experts to do that. And that's what we're driving for in the near term.

I don't think we've commented either on the specific timeline. But we obviously have focused on like all of our programs, moving them forward as rapidly as possible to create the value that comes along with doing that.

Mike Schick

Frankly, we're not trying to get over our proverbial (inaudible). We're just trying to finish refining our thoughts on what we call the lung cancer drug development commercialization strategy for the organization, and potential options that we're evaluating there. And we take the capital requirement as a component of that. But since it's also been in consideration as we've thought on those lines about executing in the Phase 2 program, and what (we know will) develop the needs of the company, and making sure that we were positioned effectively to move forward across the arrays of resourcing, as we've told to you. So we feel like we're in a good position given the input that we have, that it's a very good program.

Charles Duncan - JMP Securities

And then my last question is, I know it's been a long call, but you've mentioned 2,000 accounts that have been targeted, approximately 20% have ordered. What percentage of them have actually been visited by someone from your organization, and do you think that you could see a ramp in the number of accounts that you've visited and then ordering in the next six months, and what's your target there?

Mike Schick

When we look at the number of accounts that we've penetrated, roughly around half of those accounts have been called on by a sales representative. And again, as we kind of go back to some of our earlier calls, we took a gated approach to the launch. We ramped up our resources, but most importantly also ramped up how we introduced our sales force into the launch over the first half of the year. And again, so we're continuing again. Again, when you look at our six key drivers, we're continuing to do better job at, again, identifying the accounts and physicians who are treating PTCL, and that will continue as we move into the fourth quarter.

Paul Berns

I think it's interesting. The majority of those touches have obviously come later in our launch experience today, because it ties directly back to the deployment and the scale-up of our commercial organization. So that's another way. The representatives, getting them through training, the deployment of those representatives in the advertising and promotional marketing ops, the medical and education that supports that has all been in the later stage of roughly the 10 months, so that we've been in the first year of our commercial launch.

We've enjoyed the majority of those touch points frankly, later in this experience today and not early. And so we really do believe that you're in the front end of the account penetration and growth in those targeted accounts as Mike alluded to you. And what I'll dissipate was, you point, getting more and expanding out reach to the broader 2,000 account target list. As well as just improving our frequency with now the fixed deployment of our sales force and the enhancement of our sales force effectiveness efforts. And so while we would anticipate, we should continue to drive that.

Mike Schick

And I will like to point out, I mean recent market research, again, as indicated that we're enhancing our sales force effectiveness as the point of sale, by improving again, the amount of time with the decision maker. And again, that due to the gain and approach we're going to continue as we move into Q4.

Operator

And our next question is from the line of Jason Kantor of RBC Capital Markets.

Jason Kantor - RBC Capital Markets

Just some detailed questions left on PTCL. Most of the rest have been answered. But could you go back to what you were saying about lower dose being used and maybe how that impacted the quarter and what kind of reductions that we're talking about? Also, when you talk about the number of accounts, I know you talked about growth rate for the community accounts.

Maybe you could give us some sense of either where we are this quarter or where we were last quarter in terms of what percentage of your ordering accounts are community accounts. And then just in terms of an inflection point here, are you saying that you're expecting an inflection point above the current trajectory in the fourth quarter? Is that what you're trying to guide us to expect in this saying that October was very strong?

Paul Berns

Let me ask you Jason, to repeat some of those questions. We were trying to write them all down, but you're spot on, those are good questions and I'll toss it to Mike and Bruce to perhaps talk a little about the dosing element first. Go ahead, Mike.

Mike Schick

I think again as we stated earlier in the call. We expanded into to the community reach. Again, we improved our targeting. But as we reviewed, we've started to really implement and really to generate greater education on our dose modification guidelines contained in our USPI. So again, as we stated earlier, it's important that our ultimate goal was to ensure the best possible treatment outcome for both patients and physicians. And that goes again back to the dosing guidelines.

So again, important to keep the patients on therapy. Again ties back to, again, our package insert. Our package insert indication talks about treating the progression. So again, that's why that those modifications are there. So you started 30, which is a starting does which is PROPEL and then you dose appropriately based on the dosing modification guidelines.

We are very, very encouraged by the activity again that we're seeing in the end of third quarter. And again, we hope that that penetration and continued growth continues to drive.

Bruce Goldsmith

With that some commentary to that in terms of, again, what we have observed back in the data that we have the best insight into, which is the PROPEL data. So, to Mike's point, our starting dose is at 30 mg/m2. And that's what we're really focused on promoting and that's where we saw the efficacy obviously, as well as the dose emissions and dose reductions.

So you're question was about dose reduction. And to Mike's point, the USPI allows for one dose reduction to 20 mg/m2. And in PROPEL in fact, 80% of the doses that were delivered were delivered actually at the 30 mg/m2, and 20% of the doses were delivered at the lower dose of 20 mg/m2. so substantially all of the vast majority of doses were administered at the higher dose.

So what Mike's alluding to is that by correctly in response to specific adverse events, by correctly either dose omitting or in some cases dose reducing to the 20 mg/m2 there's a potential for increasing duration; because this could allow and facilitate the resolution of adverse events, and in some percentage of patients the lack of reappearing of those adverse events. So it's interesting and just as a side note, since the dosing of FOLOTYN is based on body surface area or m2, this translates into basically obviously 100% of the dosing at 30 mg/m2, which is essentially three vials of essentially 20 mg.

And the 20 mg/m2 that calculates to actually two-thirds of the pricing if you will, which is basically two 20 mg vials. So it's not like it's really cut in half and it's always a proportion of how many patients get the 30 mg/m2 and to really change that and in PROPEL the majority were. And obviously, then how many patients get to 20 mg/m2. So it's essentially the ratio of those two doses. But the key point here is that by correctly educating physicians around these dose modification guidelines, we can potentially get more patients into a longer duration of therapy.

Jason Kantor - RBC Capital Markets

Then my other two questions were about the percentage of your accounts that were considered community accounts by your definition. And then also whether you're trying to lead us down a path of assuming a sales inflection point in the fourth quarter.

Paul Berns

So Mike, so the second question was just to break up between community and academic in those target accounts, what Percent?

Mike Schick

So again when we look at our Q3 mix our account mix, 51% of our accounts was community based, hospitals again around the 20% base and then the remaining is academic centers.

Bruce Goldsmith

And in terms of your second question about the inflection point, I think what we're saying is that we are very pleased with the uptake in terms of the new accounts that we're seeing. We're trying to give you some color commentary that we think that our sales force effectiveness is improving, but we think that we're going to see, and we hope to see continued and steady growth.

I don't think we're talking about a specific inflection point and guiding to that. What we're saying is that we're seeing growth in accounts; we're seeing good traction around the key elements of the launch plan, and we're applying the learning's that we're having from launch to reiterate those and to continue to refine those, but we're seeing continual growth. And we hope to see that steady growth in the future.

Paul Berns

Yes, I would just come back to one last little piece of color commentary on this piece, and this gets back to Brian Skorney's comment. I mean clearly we would look to return to a little higher growth rate clearly, from what we had from Q2 to Q3. Clearly, it's our objective to move that growth rate up going forward, and we think the months of September, October, gives us good cause to believe that we're on that appropriate trajectory moving forward.

So, again, without handicapping the exact percent growth, I think it's too early to call that, but clearly we think that we will outpace what we did through even Q2 to Q3, and we'd look to consider providing appropriate level of input and color as we think about 2011.

Operator

(Operator Instructions) Our next question is from the line of Ling Wang with Brean Murray.

Ling Wang - Brean Murray

Thank you for taking my questions. I guess it's a sort of follow-up to many people have been asking. I guess you've talked about the penetration, talked about also the leading indicators improving. I guess, can you maybe explain a little bit more why have those improvements not been translated to the growth in sales on a quarter-to-quarter basis?

Paul Berns

Just to again, summarize, I think the comments we made in our opening comments, because I think those few factors explain the impact on our sales growth quarter-to-quarter. Also, it informs us, Ling, with regards to just our belief that we are going to see improved growth going forward as well. Mike.

Mike Schick

Earlier in the third quarter, we expanded our community reach, improved our account targeting, which contributed to a 19% increase in total number of ordering accounts versus Q2. But when we look at our second point that we pointed out, physicians started to increase the adoption of our dose modification guidelines contained in our USPI.

So in the short term, including the third quarter, we think this resulted in a lower average cost of weekly administration. But we believe in the long term, that this will translate in a better treatment compliance and longer duration of treatment, which is likely to result in higher average treatment value per patient.

Paul Berns

So just to summarize real quickly, the sales growth we saw in the quarter came in the back half of the quarter. And so we believe the full value of those starts, in fact, we'll be the beneficiary of the value on those starts moving forward throughout the fourth quarter, complementing what we would look to also grow as far as there's new starts, generally speaking, in our expanded region improved sales force effectiveness throughout the quarter itself.

Operator

And our next question is a follow up from the line of Brian Skorney.

Brian Skorney - ThinkEquity

Just kind of pushing a little more on Mark's questions earlier as far as a description of the patients that we're seeing getting treated. Can you comment on the quarter-to-quarter change in the severity of the disease, what line of therapy, is this really just kind of patients that this is the very last line of therapy? Are we seeing any move into earlier lines of therapy? And can you give us any color on what the duration of therapy that you're seeing is right now?

Paul Berns

I think, Brian, it's interesting, right? Because if you take a look at the fact that we are 20% penetrated on that target account list, that clearly indicates that many of the new starts that we're seeing, just as we saw earlier in the launch, given we're really still in the front end of our launch penetration, if you will from an account perspective given our deployment of our resources as we gated them up throughout the year, we're still seeing disproportionately a large share of our new patient starts are still in that late, later lines of therapy, salvage therapy classification, if you will. We're clearly migrated and seeing some modest improvement in the earlier lines with some of the earlier physicians that have had more trial use and experience with the drug.

But even though it's growing, it just represents by sheer mathematical numbers the minority, given the expansion of our share voice in targeting more of the new accounts, and those accounts really representing the later lines of therapy, to your point, salvage population base patients. So I think it creates an interesting dynamic in that, we're very pleased with the growth in our new account penetration, but we also are aware of the fact that if you think of the type of same store sales comp, that we think that over time as physicians gain more experience with the drug that we will also see improvements in duration of therapy, as either the drug moves up in the earlier lines for those treating physicians or, frankly, just as they become more comfortable with the overall dosing schema and management of patients with the drug itself. So there's multiple disparate inputs that I think are going to improve performance of the drug in quarters to come. Mike.

Mike Schick

We continue to believe that the median duration of therapy is below the median duration therapy we've seen in the USPI. Again, we would expect duration of therapy to increase as physicians become more familiar and comfortable with FOLOTYN, and especially as they continue to move it up the lines in therapy.

Paul Berns

I just think we're still early with our account penetration and growth. If you look at our business, the majority of it is still, think of it as a new Rx business, just because of the ability to penetrate and get these new accounts started while we grow the prior targeted physician business, if you will. We're seeing growth there, but again it's clear that we're going to see a lot of new actions going forward.

Mike Schick

And we're still early in the launch. We're seeing very good signals that we're moving from quarter-to-quarter.

Operator

And that does conclude the question and answer session. I would now like to turn the call back over to Mr. Paul Berns for closing remarks.

Paul Berns

Thank you, Operator. I'll keep it very brief and just thank everyone for joining us this afternoon and wishing you all a wonderful evening.

Operator

Ladies and gentlemen, this concludes the Allos Therapeutics third quarter 2010 financial results conference call. If you'd like to listen to a replay of today's conference, please dial 1800-406-7325 or 303-590-3030 with the access code 4375395. (ACT) would like to thank you for your participation. You may now disconnect.

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