September is certainly shaping up to be a pivotal month for Allos Therapeutics. The US cancer specialist’s lead product, a novel chemotherapy agent called pralatrexate, is facing an FDA advisory committee on the 2nd and around three weeks later the regulator’s decision on approval should be announced.

With little else in the pipeline Allos is all about pralatrexate, or PDX as it is also known, and these two events will help determine whether the company is worth its weighty $688m market value. PDX certainly appears to have a good chance of winning approval straight off, with notable efficacy in an incredibly hard-to-treat blood cancer, peripheral t-cell lymphoma (PTCL). If the regulatory review of PDX goes as well as expected Allos, which is frequently named as a takeover target, is likely to receive a lot more attention, from both investors and potential partners. 

Approvable product

The pivotal trial of PDX was run under a special protocol agreement with the FDA, which has allowed the drug to be filed on the back of a single arm phase II study, called Propel. The indication is refractory PCTL, a rare form of non-Hodgkins lymphoma, and patients in the trial had failed to respond to numerous types of chemotherapy; some patients had already been exposed to 13 different drugs.

The study, in 109 patients, generated a 28% response rate and a 9.4 month median duration of response. Side effects were reversible and manageable, with the most severe problems seen in less than 10% of patients. The overall survival rate at one year was 57%, very impressive considering this figure is normally around 10% for this very sick population. 

The FDA will be looking at the response rate, which it has agreed is a suitable surrogate for overall survival in this case. However, the regulator never specifically defined an approvable response rate, and this uncertainty has caused jitters in the past (Allos data disappoints but not the end of the road, December 9, 2008). 

Despite this, analysts across the board believe PDX is approvable based on the results of Propel, given that there are no approved treatments for this patient population. Given the weight of expectation anything other than a positive review from the advisory panel and at worst a short delay to the FDA’s decision would be taken badly by the market, and Allos’ shares, which are currently trading at $7.88, are likely to tumble.

Newsflow

Since touching a record high of $10 this time last year, Allos’ shares have generally traded between $6 and $8, with the market pricing in success in the drug’s first indication. Analysts believe PCTL represents a $200m-$300m opportunity in the US, and the company has already started hiring a sales force, with a launch in January 2010 pencilled in. 

As well as regulatory news, plans for the drug in markets outside of the US could materialise at any time. The company is looking for partners here, and PDX should represent an interesting proposition for a number of players. Asia could prove particularly interesting due to the higher rates of PTCL among this population. 

Still, with management likely to be squarely focused on bringing this drug to the market in the US, those expecting a deal soon could well be disappointed. Plus, as FDA approval is likely to boost Allos’ share price, the company may well decide to raise some cash on the back of this and seek to extract better terms at a later date. With phase IIb data due on PDX versus Tarceva in non-small cell lung cancer in the first half of next year, an even riskier stance would be to wait for this before signing away rights, in the hope that positive results would increase the  value of the proposition.  

The characteristics of PDX – a novel therapy addressing an orphan indication - have elicited much attention for Allos over the last year or so, as the product represents exactly the sort of niche opportunity that many larger players have been seeking (Event - Allos looks promising ahead of crucial six months, July 1, 2008). Potential newsflow over the next few months is certainly going to maintain that interest, and if all goes well it seems highly likely that a takeover bid will materialise at some point.