Allos Therapeutics Evenly Poised, But Competition Lurks

| About: Allos Therapeutics, (ALTH)

We are maintaining our Neutral recommendation on Allos Therapeutics Inc. (NASDAQ:ALTH) with a target price of $3.25.

Allos, founded in 1992 and headquartered in Westminster, Colorado, is a biopharmaceutical company focused on the development and commercialization of small molecule drugs for the treatment of cancer. The company was formerly known as HemoTech Sciences, Inc. and changed its name to Allos Therapeutics in October 1994.

Allos suffered a narrower net loss in the fourth quarter of 2010 mainly because of higher revenues driven by increased sales of Allos’ only marketed product, Folotyn (pralatrexate). The higher revenues more than offset the rise in operating expenses.

Folotyn has been approved by the U.S. Food and Drug Administration (FDA) for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL). The FDA approval is a significant achievement for the company. Even though Folotyn is currently the only FDA approved drug for PTCL, it will have to compete with Celgene Corporation’s (NASDAQ:CELG) Istodax, which is under review in the U.S.

Folotyn was launched in January 2010. The drug is also being developed for other indications. Allos is leaving no stone unturned to make Folotyn a success.

Allos is seeking to enter into a partnership outside the U.S. to co-develop and commercialize Folotyn. We believe that the signing of lucrative deals with established pharma and/or biotech players would not only boost Allos’ cash position, but also provide the company with the necessary marketing muscle.

However, the dependence on one drug for growth concerns us. We believe that Allos, which is characterized by the absence of a decent pipeline, must develop additional products to sustain growth. Consequently, we see limited upside potential from current levels and retain our Neutral view on Allos.