Avoid Allos Therapeutics (NASDAQ:ALTH)

“Aaron A. writes, ‘I see Allos Therapeutics (ALTH) finally got word of their scheduled FDA panel meeting to review pralatrexate on Sept. 2, which lines up well for final FDA decision of this fast-tracked drug by the Sept. 24 PDUFA date. You still positive on Allos? Where does it trade if it gets approval? Citi has a $15 target. JMP Securities a $20 target, Needham sees $12. What do you say?’

I'm still positive on Allos. The Sept. 2 advisory panel meeting is well timed, since it should allow enough time for the FDA to meet its Sept. 24 approval decision deadline. With that said, don't be freaked out by a short delay. The FDA's on-time record is still not great.

The near-term focus, of course, will be the advisory panel. A positive recommendation for approval should be the outcome based on all publicly available pralatrexate data. But then, that's assuming the FDA finds the data copacetic, too. Advisory panels can and do go off script, so the risk is not entirely de minimis. My previous price target for Allos was $11 to $12 a share, so I'll stick with that.

Risks? Allos guided to a higher spending (and a higher net loss) for the remainder of the year. Is this a signal that a partnership deal for pralatrexate and/or a takeout are not in the cards? Allos is a small company, so can it sell pralatrexate successfully on its own?

Also, in order for pralatrexate to yield significant revenue (relative to Allos' current valuation) the drug has to work in some cancer outside the small indication of peripheral T cell lymphoma. A phase IIb study of pralatrexate in patients with non-small cell lung cancer is underway with data expected in the first half of next year.”

Source: TheStreet.com

RATIONALE

(1) ALTH's lead drug, pralatrexate, was cited to an FDA [ODAC] advisory panel on September 2.  As many investors know all too well, this is typically not a good sign.  Advisory panels are often called upon to review a drug when there are issues with it.

(2) ALTH has still NOT found a partner to help them market the drug.  This is yet another negative indicator.

CONCLUSION

The above factors indicate to me that investors ought to avoid buying shares until there is more clarity with pralatrexate.  While the data on the drug certainly appear favorable, the two indicators above leave me feeling very doubtful about its prospects.

While I respect his opinion, I think Mr. Feuerstein's call on ALTH may be wrong here. 

For these reasons, investors should avoid taking any long positions in the company until the results from the FDA advisory panel meeting are announced on September 2.

Adam Feuerstein is Senior Reporter at TheStreet.com (Nasdaq: TSCM)

Disclosure: No positions.