Allos Therapeutics, Inc. Q2 2010 Earnings Call Transcript

| About: Allos Therapeutics, (ALTH)
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Allos Therapeutics, Inc. (NASDAQ:ALTH) Q2 2010 Earnings Call July 28, 2010 8:30 AM ET


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


Lucy Lu – Citigroup

Charles Duncan – JMP Securities

Mark Monane – Needham & Company

Brian Skorney – Thinkequity

Jason Kantor – RBC Capital Markets

Chris Naragordi with JP Morgan

Josh Schimmer – Leerink Swann & Company


Good morning, Ladies and Gentlemen. Thank you for standing by. Welcome to the Allos Therapeutics Second Quarter 2010 Financial Results Conference call. (Operators Instructions)

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

Monique Greer

Good morning, everyone. We thank you for joining us on this conference call to review our second quarter 2010 financial results and other corporate updates, including the top-line results from our randomized Phase2b clinical study of FOLOTYN in advanced non-small cell lung cancer.

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

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

This morning we issued two press releases and filed the company’s quarter report on Form 10Q for the quarter ended June 30, 2010.

In addition to reporting our second quarter financial results, we issued a press release announcing top-line results on our randomized Phase2b clinical study of FOLOTYN in advanced small-cell lung cancer.

Copies of both releases can be found in the Investor’s section of our website at

Before we begin, please note that during the course of the call, we will make forward-looking statements concerning our company that are not historically facts.

Those forward-looking statements will not guarantee the future performance and are subject to risk and uncertainties that may cause actual results to different 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 quarter report on Form 10Q for the quarter ended June 30, 2010. And in the company’s other periodic reports and filings with the Securities and Exchange Commission.

The company cautions investors necessarily [inaudible] on these forward looking statements. All forward-looking statements are based on information currently available to the company on the [inaudible] and the company undertakes no obligation to advise 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 his discussion with the overview of our business. After Paul’s remarks, the management team will review clinical, commercial and financial highlights before we open the call for questions. Paul?

Paul Berns

Thank you, Monique. And good morning everyone. First half of this year was a busy period for Allos, highlighted by the U.S. commercial launch of FOLOTYN for patients with relapsed or refractory peripheral T-cell lymphoma.

Aggressive peripheral T-cell lymphomas have been a largely ignored group of hematologic diseases. And FOLOTYN is the first and only drug approved by the FDA for the treatment of relapsed or refractory PTCL.

We are in the early stage of our commercial experience as a company, and continue to make important progress.

We enter the second half of the year with the drive and determination we believe are required to continue building the marketplace awareness for both PTCL and FOLOTYN to capitalize on what we believe to be a significant commercial opportunity.

Jim will provide an update of our U.S. Commercial activities, and David will provide an update on our financial results for the second quarter, later in the call.

One of our key objectives for this year is to advance our strategic lifecycle plan for FOLOTYN in both hematological malignancies and solid tumors.

As Monique mentioned, this morning we announced top-line results from our randomized-Phase 2b study of FOLOTYN in patients with advanced non-small cell lung cancer.

We are pleased that the results of this trial demonstrated the clinical activity of FOLOTYN in these patients.

Charley will review the top-line results in greater detail and provide additional insights in a few moments.

I want to take a moment to recognize and thank all of the patients who enrolled in the trial, our valued clinical investigators who helped up generate these data in a very short timeframe, and patient families and caregivers who play a vital roll in the clinical trial process.

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

With that, I will turn the call over to Charley to review the top-line results from our Phase2b non-small cell lung cancer study, and to provide an update on our other ongoing clinical development programs.

And following Charley’s comments, Jim will provide an update on our commercial activities.

Charles Morris

Thank you, Paul. I would like to express my appreciation to the patients and their families which made this study possible. So now I’ve took two months to summarize a design followed by the results.

Two-hundred and one current or former smokers were randomized one to one and with multi-center international Phase 2b study comparing FOLOTYN to erlotinib in patients we’ve previously treated to Stage III/B4 non-small cell lung cancer. Participating patients have been receiving one of two prior systemic treatments including at least one prior platinum regimen.

The outcome of the study we randomized between the starting dose of FOLOTYN at 230 milligrams per meters squared every two weeks, then erlotinib at 150 milligrams daily. Up to 35 patients are being recruited to study/ The starting FOLOTYN dose which is used in 190 milligram per meters squared in the further 166 patients enrolled in the trial.

When we refer to the overall population, we mean all 201 patients. And when we reference primary efficacy population we’re referring to the group of 166 patients recruited after that dosage change.

Patients were enrolled at 43 locations; 15 in the U.S. and 28 ex-U.S. sites between January 2008 and July 2009.

Primary efficacy endpoint was overall survival. Progression-free survival and overall response rate was secondary endpoints. The endpoints for overall survival and progression-free survival this statistical analysis plan caused the efficacy to be measured using [inaudible] ratios.

As previously stated the study was not powered to achieve statistical significance, and in fact no definition for statistical significance was included in analysis plan.

In addition to the analyses that we have already described, we also plan to conduct a number of pre-specified analyses comparing the treatment phase of FOLOTYN versus erlotinib based on the following subsets: smoking history, looking at patients with light-smoking history versus those with heavy-smoking history; smoking status, looking at current smokers versus former smokers; histology, looking at squamous versus non-squamous; and patients who have received prior treatment with pralatrexate versus those who have not.

As we described in the press release this morning, we are pleased that the results of this trial demonstrated clinical activity of FOLOTYN in a randomized study compared to erlotinib, an approve activated agent in non-small cell lung cancer.

Primary endpoints, as we have stated, was overall survival. Patients receiving FOLOTYN had a 16% reduction in the risk of death compared to erlotinib in the overall population of 201 patients with a hazard ratio of 0.84 and 13% reduction in the risk of death in the primary efficacy population of 166 patients with a hazard ratio of 0.87.

All study results, including data on the predefined subgroups are currently being analyzed and will be submitted for presentation at an upcoming medical meetings.

In the analyses of patient cohort, the largest reduction in the risk of death for FOLOTYN were observed in patients with non-squamous cell carcinoma in 107 patients with a hazard ratio of 0.65. And in light smokers where we have 37 patients and hazard ratio of 0.63.

These results demonstrating a 35% and 37% reduction risk in death, respectively. Positive trends in overall survival were observed in favor of FOLOTYN in all the other patient cohorts except for those patients with squamous cell carcinoma and patients who received pralatrexate.

The safety profile of FOLOTYN was consistent with what we have observed and reported in previous FOLOTYN solid-tumor studies. Most common grade three or four adverse events observed in patients treated with FOLOTYN was mucositis. Other grade three to four adverse events occurring in more than 5% but less than 10% of patients; fatigue, dyspnea, neutropenia, thrombocytopenia and anemia for the patients treated with FOLOTYN. And those treated with erlotinib is was rash, dyspnea, anemia and fatigue. As you can imagine with an overall population of 201 patients and the various prospectively defined cohorts, this trial generated a lot of very interesting data.

The analyses of these data will better allow us to understand the activity observed across predefined cohorts involved in the trial. We will review these data with our expert advisors to further evaluate the clinical potential of FOLOTYN in this patient population.

As previously mentioned, a full set of results will be submitted for presentation at an upcoming medical meetings.

Now I will provide a brief review of other the planned and ongoing studies in our portfolio.

As we previously described in connection with the approval of FOLOTYN for relapsed or refractory PTCL, we planned to conduct two clinical studies to advance the treatment of T-cell lymphoma.

In the forth quarter of this year, we plan to initiate randomized multi-center international Phase 3 clinical studies to [inaudible] patients with newly diagnosed aggressive PTCL who have responded following initial treatment with CHOP or CHOP-like therapy.

In addition we’ve come to conduct a randomized multi-center international Phase 3 study clinical study comparing FOLOTYN in combination with systemic Bexarotene verses 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 in the Phase 1 portion of the FOLOTYN- Bexarotene combination study. And once we have determined the maximum tolerated dose of the combination we tend to initiate the Phase 3 portion of this program.

These important Phase 3 studies, which will be conducted globally are part of our strategic lifecycle development plan FOLOTYN. They’re intended to support the conversion of our U.S. accelerated approval to full approval and to extend forward to utility to a broader T-cell population through the potential for expanded indications.

Based on results of the PROPEL trial, we intend to seek records regulatory approval to market in Europe for the treatment of patients with relapsed or refractory PTCL. We are on the track to meet the marketing authorization application, or MAA to the European Regulatory Authorities in the forth quarter of this year.

From a PT-cell education standpoint, we’re committed to fostering a better understanding of this disease by supporting medical educational opportunities. In addition to CME, we’re making good progress with our global observation study known as COMPLETE, by enrolling patients diagnosed PTCL. We believe that the data obtained will eventually help find optimized treatment for patients with Aggressive PTCL.

We will now review our other development programs evaluating FOLOTYN both as a mono-therapy and in combination in a variety of hematologic malignancies and solid-tumor indications.

In a recent European Hematology Association Meeting in early June, we presented up data from our ongoing [inaudible] Phase 1 study of FOLOTYN in patients with relapsed or refractory PTCL.

PTCL is a group of often slow-growing non-Hodgkin’s lymphoma that primarily manifest in the skin.

With 54 patients enrolled this [inaudible] study, data were available for 48 patients with relapsed or refractory PTCL who received a medium of four prior systemic therapies.

Administered as 15 milligram per meter squared by arriving push weekly, for three weeks of a four week cycle, which determined to be the optimal stopping dose and schedule that provided activity.

Response rate for 22 patients who were treated with FOLOTYN at this optimal dose was 45%.. And of the patients who received FOLOTYN at the optimal dose or higher, 53% achieved a response, including one complete response and 17 partial responses.

Research is also presented data from a subgroup analysis that showed response to FOLOTYN in patients who’s disease had progressed by key prior systemic therapies, including 42% of patients who have received prior oral Bexarotene, 40% who received prior methotrexate, 35% of patients who received HDAC inhibitors, and 24% after failure of prior Interferon.

FOLOTYN was well tolerated at the optimal dose. The only Grade 3 adverse event observed was mucositis in 17% of patients and no Grade 4 adverse events were observed at the optimal dose.

In June, the European Commission granted additional product designation for pralatrexate for the treatment of PTCL. Both strengthening our global development of FOLOTYN in patients with T-cell lymphomas.

We have a number of additional ongoing studies with FOLOTYN, including a combination of FOLOTYN with gemcitabine in patients with relapsed or refractory non-Hodgkin’s lymphomas, or Hodgkin’s lymphoma. A Phase 2 study in patients with relapsed or refractory B-cell non-Hodgkin’s lymphoma.

In solid tumors, we have an ongoing Phase 2 study investigating FOLOTYN in patients with that advanced metastatic relapsed transition cell carcinoma, or TCC, of the urine and bladder.

In May, the FDA granted drug designation to pralatrexate for the treatment of bladder cancer.

We are pleased that the FDA recognized the unmet medical needs for new therapies for the treatment of patients with this, the most common form of bladder cancer.

Finally, as part of our strategic lifecycle development plan, we recently initiated the Phase 2 open-label multi-center international trial of FOLOTYN in female patients with advanced metastatic breast cancer who have progressed after prior chemotherapy. Primary endpoint is objective response. We will seek to enroll approximately 30 patients.

We continue to work for the investigators and the NCCN to explore the potential clinical use of FOLOTYN in the treatment for the genotypes.

Investigators with the NCCN network are currently planning to investigate FOLOTYN as a combination agent.

These studies, in combination with select brand investigations within the NCCN based on FOLOTYN’s current development program, and it’s clinical and preclinical profile.

[Inaudible] to determine maximum tolerated dose and activity and may have broad applicability including FOLOTYN in ovarian, gastrointestinal, and head and neck cancers as well was in multiple myeloma.

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

With that, I’d like to turn the call over Jim, who will review our commercial results.

Jim Caruso

Thank you, Charley. As Paul mentioned, we commence the U.S. Commercial launch of FOLOTYN for the treatment of relapsed or refractory peripheral T-cell lymphoma in January of this year.

We are making important progress to date, and our Q2 commercial efforts advanced according to plan.

A commercial overview will include the top-line Q2 sales, launch progress of our first-to-market opportunity, a review of PTCL market potential, and the summary of our FOLOTYN grand plan for the second half of 2010.

[Inaudible] gross demand sales surpassed $9 million for Q2, achieving double digit-growth of 10% versus Q1.

Sales to healthcare providers continue to track closely to wholesale distributor sales reflecting the real-time nature of the ordering.

You may recall from past quarterly updates that we estimate the annual incidence of newly diagnosed PTCL for 2010 to be approximately 5,900 patients. The estimated relaxed refractory PTCL population seeking treatment to be approximately 10,000 patients.

And according to the literature, the incidence of PTCL is increasing due to demographics such as an aging population, improvements in diagnostic technology, and then overall increase the awareness of PTCL.

As we have previously shared, we are engaged in a significant effort to educate the oncology market on the accurate diagnosis of PTCL. PTCL, as a disease state, the clinical value of FOLOTYN and establishing Allos Therapeutics as a partner to the oncology community.

Market research indicates that we have made progress in generating greater awareness of PTCL for FOLOTYN and towards our goal of establishing Allos as the leader in peripheral T-cell lymphoma.

Specifically, market research firms specializing in healthcare claims data indicate an increase in the number of patients identified with PTCL, ICD-9 [inaudible].

In addition, based on research for another third-party vendor, the number of PTCL patients being treated has shown steady growth since the commercial launch of FOLOTYN.

This market research cites an increase in the number of PTCL patients being treated first line and third line plus.

Ultimately, this will lead to an increase in PTCL patients treated across all lines of therapy.

In addition, over the course of our launch, the sales team has further identified healthcare providers in large group practices as well as academic and community settings that treat PTCL patients.

As you may be aware, in the normal product adoption cycle, there are traditionally three customer segments; early adopters, representing about 10% to 15% of prescribers; pragmatists, representing about 70% to 75%; and lagers, for late adopters, representing about 10% to 15% of prescribers.

The case of FOLOTYN, we believe we have executed well versus the early adopters who are primarily clinicians in the academic setting, who possess greater baseline knowledge of PTCL and increased understanding of the clinical benefit FOLOTYN provides for this difficult-to-treat patient population.

While we believe upside opportunity remains with this early adoptive segment, we are now in the process of increasing penetration of the pragmatist segment which represents the majority of any market and a more likely to be community based practitioners.

We believe this segment clearly represents a significant upside opportunity. Driving FOLOTYN trial use and adoption with this customer segment is an ongoing process.

However, early indicators suggest that we are making progress. For example, from Q1 to Q2, we have observed a 30% increase in community account ordering. We believe this was driven by an increase in field force effectiveness and phasing in of commercial resources over the first and second quarters of 2010.

In fact, the total number of healthcare providers sales calls increased by approximately 300, and 85% from December 2009 versus June 2010.

While the initial sales specialist focused on high potential, primarily academic accounts, our expanded field force now possesses the workload capacity to provide accurate and appropriate reach and frequency to more effectively penetrate the community setting.

In addition, marketing investment supports the sales team’s promotional efforts and further expands our reach with non-personal promotion.

A key brand objective is to establish FOLOTYN as the standard of care in second-line PTCL. The second line PTCL patient is typically healthier and possesses a superior [inaudible] status, which may lead to longer treatment durations, better clinical outcomes, and enhanced tolerability.

We have made progress penetrating second line. However, we believe there remains a significant second line share growth opportunity for FOLOTYN. In fact, the majority of our patients starts to date have been in third-line-plus patients, or in the salvage setting.

This is typical with the introduction of most oncology agents. As a result, our current average duration of therapy is estimated to be below the median of seven doses observed in the PROPEL trial. And substantially below the average of 14 doses reported at ASCO.

We anticipate that as FOLOTYN achieves greater share of the second line PTCL market, the average number of doses per patient to increase and move closer to the average of 14 seen in PROPEL.

We believe an increase in the number of second-line patients treated with FOLOTYN will likely have a positive impact on not only clinical outcomes for the patient, but also on FOLOTYN sales.

For example, and for grounding, for illustrative purposes only, the current average treatment was 10 doses. Gross demand sales for Q2 of approximately $9 million would have been approximately $13.5 million without one more additional relapsed refractory PTCL patient treated with FOLOTYN.

We believe we are seeing promising movement in the use of FOLOTYN in earlier lines of therapy. As with any launch, new drugs are first tried in later lines of therapy, or in salvage patients, and then transitioned to earlier lines of therapy as clinical experience grows.

As an IV drug, data on the actual number of patients and their specific duration of therapy is not available for FOLOTYN. However, we believe a good proxy for duration of therapy, as well as brand loyalty, is the overall account reorder rate and the average number of orders for account.

Q2 versus Q1, the average number of orders for end user accounts grew 34%. The overall reorder rate through launch, through Q2 is 83%. Essentially four out of five accounts have purchased FOLOTYN and reordered the drug.

We believe this supports anecdotal feedback that healthcare professionals are having positive clinical experiences with FOLOTYN.

We are also pleased to report that reimbursement for FOLOTYN continues to be strong. To our knowledge, there have been no coverage denials for our labeled indication.

Based on the FOLOTYN value proposition, it is widely understood that PTCL is an orphan disease with tremendous unmet needs.

In April, we received our permanent J code, which enables FOLOTYN to be reimbursed under the Hospital Outpatient Perspective Payment System. And we anticipate receiving our permanent J-code in Q4, 2010, which will be effective January 2011.

Our ASAP program, which stands for Allos Support for Assisting Patients, has been effective in supporting patient access to FOLOTYN. The ASAP program is modeled after best-in-class programs in oncology. It facilitates reimbursement, provides support for un-insured, as well as underinsured patients.

Customer feedback regarding Allos reimbursement support has been excellent.

We believe the addition of FOLOTYN to the NCCN Guidelines in October 2009 has been important from the reimbursement prospective as well as the clinical perspective.

The updated NCCN Guidelines added FOLOTYN as a second-line therapy option for patients with relapsed or refractory PTCL who are not candidates for high-dose therapy. Importantly, the NCCN also added FOLOTYN as the first and only single agent recommended for second-line treatment of patients who are candidates for high-dose therapy.

To date, all other listed high-dose therapies are a combination chemotherapeutic regimens. Thus, NCCN Guidelines support FOLOTYN’s positioning as the second-line standard of care.

Moving forward, we believe we have a strong plan to drive FOLOTYN’s utilization and benefit more patients with relapsed refractory PTCL.

In the second half of the year, we plan to build on the important progress we have made year to date. Specifically, we are observing the development of what we believe to be brand loyalty with many accounts due to FOLOTYN’s rapid onset of action, antidotal reports of visible tumor shrinkage in difficult-to-treat patients, the convenience of a three-to-five minute IV push.

The components of our plan include expanding the patient population through continued education, establishing FOLOTYN as second line standard of care based on clinical evidence, expanding utilization into the TMF, or transform mycosis fungoides population, enhancing penetration into the community setting, investing in national and regional key opinion leadership development, and continuing to establish Allos as a partner and resource for the oncology community.

In summary, more physicians are gaining awareness of PTCL and FOLOTYN’s role in the treatment of relapsed refractory PTCL through direct and indirect promotion, including sales force activity, our brand campaign, advertisements, direct mail, and Congress activities.

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

Importantly, we now have the sales and promotional infrastructure to expand our reach into the community setting where the majority of PTCL patients are treated.

We believe this represents important progress through our goals of creating grand awareness, support of FOLOTYN trials, use and adoption establishing FOLOTYN as the second line standard of care for PTCL.

We are encouraged with the uptake of FOLOTYN by the U.S. Lymphoma community. We remain committed to drive FOLOTYN’s use for relapsed refractory PTCL patients, and make a difference in their lives.

And now, I will turn the call over to David Clark who will provide an update on our financial results.

David Clark

Thanks, Jim. For the quarter ended June 30, 2010, we reported a net loss of $20 million or $0.19 per share, compared to a net loss of $20.5 million, or $0.20 per share for the first quarter of 2010.

As Jim mentioned, gross product sales were $9 million for the second quarter of 2010, a 10% increase from our gross product sales, up $8.2 million in Q1 2010.

Net product sales were $7.9 million for Q2 2010, which represents our $9 million of gross product sales net of $1.1 million of gross-to-net sales adjustments.

Gross-to-net sales adjustments consist of estimated accruals for government rebates and charge backs, and distributor service fees.

Gross-to-net sales adjustment equal 12.6% or our gross product sales for Q2 2010. But the second half of 2010 and looking forward, gross-to-net sales adjustments are expected to approximate 12% of gross product sales.

As we have reviewed in prior quarters, we sell FOLOTYN to pharmaceutical wholesales distributers who then resell FOLOTYN to patient’s healthcare providers.

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

For Q2 2010, sales to our distributors were approximately the same as the $9 million of gross product sales to healthcare providers. Therefore, our deferred revenue balance of $1.2 million as of June 30th, 2010, remained unchanged from March 31, 2010.

Cost of sales for Q2 was $752,000 or 9.5% of net product sales. For the second half of 2010 and looking forward, we expect cost of sales to approximate 10% of net product sales, which includes our current 8% royalty on FOLOTYN sales.

Total operating costs and expenses, or OpEx, for the second quarter were $27.9 million including non-cash stock-based compensation expense of $2.8 million.

Total OpEx for Q2 was essentially flat with Q1 OpEx of $28 million. We expect OpEx to increase in the second half of 2010, relative to the first half, primarily due to the following; 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 continue to manage out OpEx and we have realized certain savings for 2010 in our R&D programs, primarily related to the timing of certain studies and efficiencies in manufacturing development.

As a result, we are lowering our prior financial guidance for 2010 OpEx, which is now expected to approximate $115 to $120 million excluding non-cash stock-based compensation expense, a decrease from prior guidance of $120 to $130 million.

Stock-based compensation expense for 2010 is expected to approximate $12 to $13 million, a decrease from prior guidance of $13 to $15 million.

Turning to our cash flow and balance sheet, our net cash [inaudible] and operating activities for the second quarter 2010 was $16.3 million.

We ended Q2 at the solid financial position. We have no debt, and total cash and investments of $122.3 million as of June 30th, 2010.

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

Paul Berns

Thanks, David. As we look forward, we continue to execute on our 2010 operating plan. We have an important opportunity to serve patients and/or caregivers, and to ensure that patients with relapsed or refractory PTCL have access to FOLOTYN.

We take this responsibility seriously and we are committed working diligently to make this happen. We are pleased at the results of our randomized non-small cell lung cancer trials demonstrated clinical activity of FOLOTYN.

Additionally, the trial generated important data regarding the safety and efficacy profiles for FOLOTYN in advanced non-small cell lung cancer, an area of high unmet medical needs.

We believe these data will warrant further analysis to determine the future developments strategy based on our assessment of the potential clinical, regulatory, and commercial opportunities for FOLOTYN in this indication.

Allos is unique among it’s biotech peers in that we have a commercialized and oncology product and retain exclusive worldwide rights to FOLOTYN for all indications. We have a solid financial position and a team of dedicated employees focused on delivering new cancer therapies to patients. We believe we have established a strong foundation for continued progress and look forward to providing future updates.

And now, Operator, we’d be happy to take questions.

Question-and-Answer Session


Thank you. We’ll now begin the question-and-answer session. (Operator Instructions)

And our first question comes from the line of Lucy Lu with Citigroup. Please go ahead.

Lucy Lu – Citigroup

Great. Thank you. Good morning.

Paul Berns

Good morning, Lucy.

Lucy Lu – Citigroup

I find it a little intriguing that FOLOTYN did so well in non-squamous and [inaudible] patient population. They should have benefited the most from Tarceva in this trial. Do you have an explanation? And then I have one follow up.

Charles Morris

Hi, Lucy. It’s Charley. I mean, we’re also very encouraged, obviously, by the data in the overall population and the populations that you’ve highlighted. I think looking back at some of the data of Tarceva, these are populations where we also assume that there’s activity, but if we look at some of the following papers, like Gary Clott’s paper, the non-squamous cell population, I think maybe not served quite as well by Tarceva traditionally, as we tend to believe.

So I think that activity is interesting. I think it’s something that we need to follow up with and do more exploration of. But obviously, we’re encouraged by it because of the strength of the signals that you’ve seen.

Lucy Lu – Citigroup

Okay. So, Charley, if that’s the case, I understand that you want to preserve the data for presentation. But can you please just tell us if the survival data of the patient on Tarceva in this trial is better or worse, or about the same as with – or consistent with prior Tarceva studies?

Charles Morris

I think it’s very safe to say that the Tarceva has performed as we would have hoped during the study. So I think it’s the benchmark that we would have hoped.

Lucy Lu – Citigroup

Thank you very much.


Thank you. And our next question comes from the line of Charles Duncan with JMP Securities. Please go ahead.

Charles Duncan – JMP Securities

Hi, guys. Let me add my congratulations on completion of a nice trial as well as good financial results for the quarter.

Paul Berns

Thank you, Charles

Charles Duncan – JMP Securities

My question is regarding say the hazard ratio that you might be seeing here. I guess if I were to assume Tarceva, you know, did the approximate eight months or so, with the hazard ratio of 0.65, does that kind of imply that FOLOTYN could be around 12 months?

I guess people could be doing better than that, but is that kind of the right logic to be thinking through this?

Charles Morris

Hi, Charles. It’s Charley again. I think rather than speculating on the mediums and other details of that occur at the moment, I think the right way to look at it, to think about how the ratios indicate, which you know, is a reflection on the overall rate and the risk of that.

And I think as you’ve seen, 0.65, in this study, is a 35% reduction, and I think that’s a very encouraging number. And obviously, the details will be presented at a later date.

Charles Duncan – JMP Securities

Okay. And then I’m sure that it’s probably too early to tell, but regarding next steps, do you anticipate being able to take this data, you know, compare it with what you would have expected with your thought leaders and be able to design and conduct the next stage of clinical trial work in over the course of the next six months, or initiate next steps soon?

Charles Morris

I mean, I think you’ve described what the process needs to be very well. We need to explore the data. We need to consolidate our view on the positive trends that we’ve seen. We need to work very closely with our advisors and opinion leaders. And as Paul said in closing remarks, we need to understand, do we have a regulatory path, a clinical path and open-ended business opportunity.

I do think what we have is a great opportunity to really understand how we best serve patients and particularly those patients who seem to be benefiting from the drug. And so obviously, we’ll follow up and let people know the plans as we resolve it.

Charles Duncan – JMP Securities

Thank you for taking my question. I’ll hope back in the queue.

Paul Berns

Thanks, Charles.


Thank you. And our next question comes from the line of Mark Monane with Needham & Company. Please go ahead.

Mark Monane – Needham & Company

Thank you. Good morning from Mid-Town New York City. It’s foggy here. I’m hopping you can help dispell some of the fog with some more information on that Phase 2 trial you nicely outlined.

Have you had a chance, Charles, and the team, in thinking about what the market has said about such a reduction? The 20% reduction in the entire population seems pretty good, it’s before any sub-group analysis.

And I was wondering if you could help us understand that number in the sub-group analyses in light of other trials, especially the Tarceva/Alimta trial, I think, which was presented by the Greek Cooperative study at a recent cancer meeting.

Charles Morris

Hi, Mark. Thanks for the question. You know, I think it really come down, I think a lot – this is obviously a trial design which would replace my recently [inaudible]. I think it’s a very small study.

We compared against an active comparator, a comparator which is know to be superior to placebo in these disease settings. And that you’ve seen, we’ve then encouraged against that.

I don’t think we should necessarily speculate on how that would compare to one drug against another in another study at this early point. But I do think given that we’ve got evidence of activity against a widely used active proved agent, really validates our position here and gives us an opportunity to really understand the way forward.

Mark Monane – Needham & Company

That was helpful. And then in follow up, Jim and the team outlined a strategy for deeper penetration of FOLOTYN both awareness in the community as well as followup in terms of reordering the drug.

Could you talk about what you think the timeline is for the benefits of this intervention? You know, basically, how long does it take given your past experience, Paul, and Jim, in launching drugs. How long does it take for these efforts to translate into sales increases? I’m sure there some sort of a lack.

Jim Caruso

Hi, Mark. This is Jim. Thanks for your question. I appreciate it. As you know, with any agent in any launch, there are unique elements and circumstances to each. We’re, quite frankly, although we’re certainly not satisfied, we’re never satisfied, we believe we’re making real progress in terms of our end road into this marketplace.

I think that the biggest, or the largest issues that we had seen prior to launch, and had anticipated are around education. This is a first-to-market mover, and there’s significant education around even diagnosis.

Historically, these PTCL patients have been treated with B-cell regimens. And quite frankly, some PTCL agents off label. We’re finding that we need, and will continue to significant levels of education. Not only the diagnosis of PTCL, but also PTCL as a disease state in general.

On top of that – and we’ve made significant progress there, we need to communicate effectively the clinical benefits that FOLOTYN provides relative to the existing agents or combination chemotherapeutic regimens that clinicians have been comfortable with from this B-cell, or off-label PTCL world.

Additionally, we’ve made significant progress around really establishing Allos as a very credible partner. Our sales specialist and commercial team, as well as our medical liaison team have done a really nice job in terms of providing value to the end users, understanding how we can further support clinicians and healthcare providers in terms of their understanding of PTCL and appropriate treatment as we move forward. So we believe we’ve made progress on a number of different fronts.

Interestingly, in this space, you have both a very scalable population, and then you have out in the general community, you also have regional institutions that act as casement centers. You have some organized systems where in, I guess, in total, have significant number of PTCL of patient population that they treat.

And then you have a significant amount of mom-and-pop, if you will, oncologists that may see a patient a year, or two patients a year. Now, interestingly, we’re very encouraged with our field level intelligence. And quite frankly, with other sources of information as to the population of treatment seekers in this space. It’s held up pretty well for us.

And you know, above and beyond what we’ve discovered, above and beyond asking clinicians about the type of patient flow they see for PTCL, and sometimes with some of these clinicians out in the community. Well, maybe I see one patient a year. Maybe I see two patients a year. I think it’s important to do a couple of things.

One, historically, they’re thinking PTCL NOS. They’re not thinking of the broad number of PTCL subtypes. And once the clinicians are, you know, see the data, including TMF, quite frankly, which is a significant, and we believe great opportunity for this organization and for patients moving forward, when you shared the subtypes of PTCL, there’s almost an ah-ha moment where it moves beyond the one or two, to three or four, five, often times. Where they say, okay, I have one of those. I have a couple of those patients.

Additionally, we’ve done market research in which clinicians, again may say, well, we’re treating, we have one or two PTCL patients in our practice, and then through a third party they review all of the patient files in the practice. And oftentimes that number increases significantly.

So we believe the hurdle for us is education. The product itself is holding up very well. I believe we’ve established brand loyalty, as you mentioned. And the product profile and performance in the marketplace is very consistent with market research. Our product resonates. It’s an active drug, it’s perceived to have rapid onset. It has established CRs in tough-to-treat patients.

And as we may have talked about in the past, what really resonates with both patients as well as healthcare providers is visible tumor shrinkage. And a significant number of PTCL patients have tumors that are visible. And within a few doses, we’ve had some really nice success in that area. And that really drives trial use and adoption.

And so, I think the other element that we’ve discovered that also is consistent with the market research is that there’s a clear comfort level with these clinicians out in the community in particular, with single-agent cytotoxic agents. And quite frankly, a 3-to-5 minute IV push.

Also the convenience of that also resonates very, very well.

So I guess the net is, we’ve made significant progress. We have significant education opportunities left, especially out in the community where we believe the bolus of the patients exist.

Remember, the academic centers that act as treatment or catchment centers for PTCL, essentially generate the majority, by far, of their patient population through referrals from the community.

So we feel very good about what we’ve done to date. We believe we’re making great progress. And I would anticipate consistent growth quarter over quarter. And certainly, a hockey stick over time in terms of growth.

Mark Monane – Needham & Company

Thanks for the added information.


Thank you. And our next question comes from Brian Skorney with Thinkequity. Please go ahead.

Brian Skorney – Thinkequity

Hey. Good morning, guys. Thanks for taking my question and congratulations on the non-small cell lung cancer data. As we look at that trial, I’m just wondering, can you give us any color on how Tarceva performed? I don’t know if you could break out any individual overall survival data, but could you just maybe qualitatively speak, you know, did Tarceva do what was in line with your expectations, what we’ve seen in other studies? I just want to make sure that there’s not some sort of effect that we’re seeing in the Tarceva-treated group that’s throwing off the outperformance of FOLOTYN.

Charles Morris

The short answer is yes. You know, without getting into the details, I’d like to hold onto those for a medical meeting. Tarceva ‘s performed in line with historic data, and obviously, we are very encouraged that therefore, our data has achieved us against a meaningful benchmark in line with historic findings.

Brian Skorney – Thinkequity

Okay. And then maybe Jim, just kind of going back to just the PTCL launch, and you know, when we might see a different inflection point as far as penetration goes. You know, over the next two quarters, you know, I’m sure you’re not comfortable giving guidance at this point, but you know, should we continue to think about this as a mid-single digit sequential growth array, or do you see, you know, a real catalyst driving into more second-line patients coming up in the near term, or should we think about that more as 2011/2012 timeframe? Thanks

Jim Caruso

Well, I wouldn’t go that far out. I believe we’re going to continue to see incremental growth as the community becomes more fluent with the understanding of PTCL and the benefits that bulletin provides.

I believe we will do a much better job with the additional phased-in sales force that we have in terms of applying the right level of reach, and frequency out in the community. But we believe is significant or the majority of the business does exist. We also have a great opportunity to transform mycosis fungoides, which just as some background, represents approximately 8% to 12% of mycosis fungoides, which we estimate to be about 1,000 to 2,000 patients.

We believe that’s an opportunity for us that’s pretty clear. And one of the reasons is, these are PTCL patients that have been in the community being treated with 4CTCL for a number of years. And then these patients, unfortunately, transition from mycosis fungoides, which we believe represents about 80% of the PTCL population, to a much more aggressive transformed version of MF.

Those patients, we are estimating conservatively to be in the 1,000 to 2,000 range, based on an estimated prevalence of about 20,000 for C2CL. And that’s a clear opportunity for us as we move forward.

We believe that’s low-hanging fruit. As you know, TMF was not consistently studies by those agents that are approved for PTCL. We believe we have the greatest and most robust data set out of PROPEL for [inaudible] mycosis fungoides. We are covered for TMF based on our label. So we’re excited about that opportunity as we move forward there.

I think you’re going to see continued growth. We’re excited about what we’re observing and physician feedback in terms of the drug itself.

There is a lot of appreciation, even for clinicians that have prescribed the drug, and the patient unfortunately blew through therapy. This drug has held up very well in a very hard-to-treat patient population.

And even in some very salvaged-type scenarios, the drug has really performed quite well. So from a brand-loyalty perspective in a trial used in adoption perspective, we’re very pleased with that. I think we’re going to see continued growth and we’ll be at a point, and I don’t think it’s ’12. I think, to your point, over the next four quarters or so, we’re going to see significant ramp.

Brian Skorney – Thinkequity

Great. And just as a reminder, can you just – I think in the past you guys have bladder cancer data might be in sometime next year. Any better clarity when that might be? Do you think you’ll have data ready for ASCO?

Charles Morris

I think it’s unlikely to be ready for ASCO, but you know, all of the solid tumor programs are ongoing and obviously we’re hoping that we can push those on with the interest that will be generated from having these data from the lung cancer study.

Brian Skorney – Thinkequity

Great. Thanks, guys.

Paul Berns

Thanks, Brian.


Thank you. And our next question comes from the line of Jason Canton with RBC Capital Markets. Please go ahead.

Jason Kantor – RBC Capital Markets.

Great. Thanks for taking my call. Could you tell us what you think the unmet medical need is that this would – that FOLOTYN will fill in lung cancer? It seems like this is exactly were Alimta already is, and you’ve got a much higher [inaudible] rate. So is there really a commercial opportunity, or a clinical in lung cancer? Is so, could you clarify that a little bit better?

Bruce Goldsmith

Sure. This is Bruce Goldsmith. Thank you for the question. And I’ll talk a little bit about the marketplace and maybe ask Charley to also comment from a clinical perspective.

First of all, I think the data showing demonstrated clinical activity against an active comparator is going to be a very interesting discussion with the physicians to create both the clinical and regulatory case. But of course, as you know from our history, we’re going to take into consideration the business case very carefully before, and into consideration as we move forward in further investments around our strategy for lung.

So it’s important to understand that the positioning of Pentatrex or Alimta had really actually starting to move earlier in lines of therapy, and Tarceva is also considerable conservatively used in both first, second and third lines.

There’s a diverse adoption of the agents, both in first, second and third line. And as that evolves, that creates a continuum on medical need in the second and third-line population, exactly where we accrued the study.

So I think your point is well taken that Alimta and Pentarex has really had really established a profile of anti-folia class in activity and generating significant sales globally. And I think we’re able to follow those sales, specifically with a differentiated profile in the second and third line where we started to look at this. And we’ll continue to look at the clinical profile to establish the regulatory pathways forward. But of course, taking into consideration exactly where you’re speaking about.

Charles Morris

I think, after all, there are, you know, there always remains unmet needs in the treatment of this disease. I think we have – we disclosed to you today in the press release that the strongest signals are [inaudible] on the non-squamous. I think you also have to remember as we look at groups like the squamous group in particular, looking back at the BR21 data for Tarceva, in the every-smoking squamous population, there’s a marked effect on survival there.

So having the outcomes in the same region in a comparative study with an active control, encourages us that we may well have activity in squamous cell carcinoma. But I think we’ve got to explore the data even right down to the individual patient level to really understand how strong the signal is in the squamous. It’s undoubtedly clearer in non-squamous, but that does not mean that there isn’t a positive signal on the squamous side.

So we will continue to explore this and make the decisions appropriately the best way forward.

Jason Kantor – RBC Capital Markets

But in terms of the comments about second and third, then later lines of therapy, if the drug doesn’t work in Alimta failures, doesn’t that limit your ability to be a third-line agent in non-small cell lung cancer?

Charles Morris

Well, again, coming back to the same point. First of all, the Alimta groups, a subgroup in the study was one of the small arms that we had. So I think the uncertainty around any estimates of the efficacy in the Alimta trail group is one of the great uncertainties.

Additionally, again, it’s a comparison against an active agent. So not having a strongly positive trend is not the same as not active. Again, I think what we have to do is go down into a level of detail where they haven’t yet been and explore this at individual patient level and look for where the evidence of activity is rather than concluding from a limited data set that – in particular, that data is very limited, that we don’t have activity.

Jim Caruso

And I’d like to follow that up by emphasizing what Charley just mentioned. There continues to be a significance on that medical need in the second and third line. And you’re absolutely right, that one of our goals is to translate the differentiated mechanism of action that we’ve talked about before into evidence of activity across all patient subsets, which is why the trial design was the way it was.

If you recall, the idea was to generate significant amounts of data to design teacher development strategies and that’s exactly what we’ll pursue looking for both a regulatory and clinical case, but of course, a commercial case as well.

So you’ve highlighted some of the things that we’re thinking about. You’re right on target about how we’re going to proceed in terms of looking for development strategies going forward that are smart investments to capitalize on the unmet medical needs.

I would just say, just in closing, Jason, that – I mean, we’re very pleased with the data, bottom line. We show what we think is very important, excellent activity, again, you know, a known-approved active agent in Tarceva, we’re very pleased with that, and in a difficult treatment setting for that matter.

And frankly, you know, we’re also convinced to the fact that as you could look at other benchmark models, that the agent that you’re speaking to predominately will not have 100% market shares of those frontline markets to begin with. And I’m highly confident given history of marketing pharmaceuticals that in fact there will be open-market opportunities for us to explore as we consider the commercial case. And all this should be taken into consideration, but first and foremost, it starts with what I think is very interesting and exciting activity demonstrated in this Phase 2b program.

Jason Kantor – RBC Capital Markets

Agreed. Thank you.


Thank you. And our next question comes from the line of Chris Naragordi with JP Morgan.

Chris Naragodi – JP Morgan

Hi. Thanks for taking my question. Congratulations on the data. I was wondering if you can help us understand in terms of the subsets they amounts of overall survival curves. Were there early or late separations in these curves?

Charles Morris

I don’t really want to get into too much detail on the curves. I think obviously because we want to hold on to the details for the medical meeting. I think it is pretty safe to say though that the hazard ratios that we are reporting, you know, describe the shapes of the curves and particularly those subgroups where there is a strong separation. And we’re highly encouraged by the positive data.

We received that consistently across overall population where we’ve got the signal across the subgroups and we also have the signal. I think this adds something, you know, a strong indication here that we are providing good benefit to patients and we – when we’ve done the appropriate analyses, should be able to find a way forward.

Chris Naragodi – JP Morgan

Okay. Thanks. In terms of FOLOTYN in PTCL, could you give us a number of discontinuations in the second quarter, in comparison to the first quarter?

Jim Caruso

That’s a tough call. I mean, with an IV drug it is difficult certainly to track that type of information. That would be anecdotal feedback from the field. There really isn’t a data set that would accurately measure that. I think logically, the healthier the patient, the stronger the ECOG status. Typically you have less adverse events, because they haven’t gone through multiple combination chemotherapeutic soups where they’ve been beaten up over time.

So typically the healthier the patient, the less better tolerated any drug is with reduced adverse events. Typically your adverse events to your point are primary driver of discontinuation as would be the effectiveness of the compound with those given patients as well. I do not have that answer for you.

Chris Naragodi – JP Morgan

Okay. One last question. In terms of practice of reordering, what percentage of patients do not reorder – I’m sorry, physicians do not reorder FOLOTYN?

Jim Caruso

The number that I was referring to, and thank you for picking up on that, we are very pleased with it. The overall reorder rate was 83%. And that is launch to date.

So typically reasons for non-reorder, it could be mortality as an issue, it could be the patient progressed very rapidly. What typically occurs, not often times, but in the salvage patients that have been through multiple lines of therapy, when they progress they progress very rapidly and sometimes it’s on to Hospice, or if they have been through multiple lines of therapy the family and the individual decide not to continue treatment or therapy, or in fact they could – the agent, FOLOTYN was not effective in terms of preventing progression of disease. Those would typically be our reasons.

Chris Naragodi – JP Morgan

They are typically clinical reasons. Were there any reimbursement reasons for not reordering?

Jim Caruso

We feel really good about reimbursement. We believe we’ve had quite frankly that’s floated up through our team, zero orders that have not been reimbursed within label, net at the end of the day.

So the team has done a very nice job. It makes sense, right? Because the price, quite frankly, is inline with other hematologic agents. It’s an ultra-orphan population. We have an indication – historically and typically if the provider believes a drug is the best opportunity for a patient, they’ll get reimbursement. We have support systems, quite frankly, I want to give our team credits, support systems that have been very effective in terms of helping offices dot the Is and cross the Ts to ensure reimbursement.

Chris Naragodi – JP Morgan

Okay thanks very much.


(Operator Instructions)

And our next question comes from Josh Schimmer with Leerink Swann & Company. Please go ahead.

Josh Schimmer – Leerink Swann & Company

Thanks for taking my questions. Just a couple of follow-ups on the lung cancer data. What percent of patients had received the pralatrexate prior to the study? And what percent received it after completion of the randomized portion, do you have that available?

Charles Morris

The number of patients who had had prior pralatrexate before entering the study were 30. And the number who received it after the study was a small number, if I remember correctly around about 10.

Josh Schimmer – Leerink Swann & Company

I guess I’m surprised we didn’t see the break out results not previously exposed to pralatrexate because that would suggest that you actually did see a nice benefit there.

Charles Morris

I think generally speaking we’ve seen in the majority of the groups here we’ve seen good benefit relative – just to re-emphasize – relative to an active comparative. We are encouraged by the overall data, and we are not discouraged by these datas of pralatrexate in the squamous groups either given the activity – the known activity of Tarceva of these grouping. We’ve got to understand the data and look at them all, but generally I am encouraged by the outcomes.

Josh Schimmer – Leerink Swann & Company

I guess maybe I was a little surprised you didn’t see a bit better activity when you went down in the starting dose. Maybe you can talk a little about the comparison between the overall patient population and the subset that was started at the higher dose, and then relative to the 166 patients who enrolled after the dose modification? What did you learn from that.

Charles Morris

I think everything, it’s difficult to compare the small subgroup against the larger subgroup. But I think the encouraging and important piece of information is that having made those adjustment, we were still able to demonstrate the transferred positive outcomes reported in the study. The differences in the numbers are up there and they’re relatively small, and their all positive, whether it is in the overall group or the smaller group.

A number of patients, remember, also were able to escalate and some patients did escalate back from 190 to 230, So I think we’ve seen evidence that this has been tolerable and in fact some patients are able to tolerate a high dose as well. I think from a tolerability perspective and efficacy perspective, we’ve landed on doses which are showing benefit.

Josh Schimmer – Leerink Swann & Company

One more question, if I may. The rate of Grade 3/4 mucositis, was that for the entire population or is that the lower dose, 166 patient subset?

Charles Morris

The numbers are similar in both groups.

Josh Schimmer – Leerink Swann & Company

So what was the rationale then for reducing the starting dose?

Charles Morris

Early on in the study we saw a number of early dropouts for a variety of reasons, and looked at the data from the other earlier Phase 2 study that was ongoing at the time. I felt there was enough study [inaudible] seven, felt enough evidence of tolerability and efficacy from there that we could manage with the 190 dose. I think that was indicated by the outcomes showing that we’ve gotten that tolerability and efficacy out of the 190 dose.

Josh Schimmer – Leerink Swann & Company

Okay thanks very much.


Our next question comes from a line of Charles Duncan with JMP Securities. Please go ahead.

Charles Duncan – JMP Securities

Hi guys. Thanks for taking my follow-up. I wanted to ask about the experience in PTCL. Jim, I believe you said the average number of doses were below seven so far, but what I would like to know is what is the experience in call it the upper quartile? Are you seeing some patients get more doses?

Jim Caruso

Absolutely. We had anecdotal reports from the field of patients that have been on therapy for extended periods of time. A number – a lot a complete responses. I think the community is very pleased with the activity with this drug. I think one of the reasons in all fairness, is remember, we’re comparing this to PROPEL and PROPEL was a function of multiple years.

And an average is an input of patients hypothetically in PROPEL that had one or two doses and then patients that also had 30 or 40 doses. So we don’t have the benefit, in fairness with FOLOTYN as well. FOLOTYN has not had the benefit of this duration of time.

Where you are bringing up a very good point Charles, and that is patients that are on the drug that have been on the drug for extended period of time and anticipated you continued receive FOLOTYN in the near future. The benefit of those additional doses being kind of thrown into the average bucket has not been seen yet. We do have a number of great success stories and extended therapy. Thank you for asking.

Charles Duncan – JMP Securities

Thanks. Thanks for taking the question.

Jim Caruso

Thank you Charles


Thank you. We’ve reached the end of the conference, I’d like to turn the call back over to -

Paul Berns

In Europe, the relapsed refractory PTCL in the fourth quarter. Looking forward to reporting the full results from our Phase 2 clinical trial with FOLOTYN in advanced non-small cell lung cancer at an upcoming medical meeting.

We certainly look forward to updating you on our progress and seeing you at upcoming investor events and medical congresses. Here again thank you for joining us this morning and have a good day.


Thank you, Ladies and Gentlemen. This concludes the Allos Therapeutic Second Quarter 2010 Financial Results Conference Call. If you would like to listen to a replay of today’s conference please dial 303 590-3030 or 1-800-406-7325. Passcodes of 4329512.

AT&T would like to thank you for your participation. You may now disconnect

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