Allos Therapeutics Cut to Neutral - Analyst Blog
13 January 2012 - 4:15AM
Zacks
We have recently downgraded Allos Therapeutics
Inc. (ALTH) to Neutral from Outperform with a target price
of $1.50.
The failure of Allos’ deal with AMAG Pharma
(AMAG) in October 2011 has reverted Allos to a one-drug company,
solely dependent on Folotyn for growth. Folotyn is currently
marketed for the treatment of patients suffering from relapsed or
refractory peripheral T-cell lymphoma (PTCL). The drug received
accelerated approval from the US Food and Drug Administration (FDA)
in September 2009 and was launched commercially in January
2010.
The merger with AMAG was announced in July 2011. The deal failed
to materialize due to insufficient shareholder votes. Following the
termination, Allos received approximately $1.8 million (net) from
AMAG to make up for merger related costs.
The failure of the merger has also denied Allos the chance to
strengthen its balance sheet further. Furthermore, the development
has denied Allos the chance to drive bottom-line growth as the
merger was expected to result in significant cost savings.
We believe that Allos must not be solely dependent on Folotyn.
The company must develop new products to sustain growth.
Even though Allos is evaluating Folotyn for additional
indications, any setback in the developmental process will impact
the stock. We note that Allos is no stranger to pipeline setbacks.
For example, in 2007, Allos discontinued its developmental programs
for efaproxyn, its most advanced candidate at that point. The drug
was being studied in women with brain metastases originating from
breast cancer.
In view of these concerns we have downgraded Allos to Neutral.
We see limited upside potential for the stock until Allos is
successful in expanding its product portfolio.
ALLOS THERAPEUT (ALTH): Free Stock Analysis Report
AMAG PHARMA INC (AMAG): Free Stock Analysis Report
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