WESTMINSTER, Colo. ( TheStreet) -- Allos Therapeutics' ( ALTH) cancer drug Folotyn reduced the risk of death compared to OSI Pharmaceuticals' ( OSIP) Tarceva in a mid-stage study involving patients with non-small cell lung cancer, the company announced Wednesday.

The improved survival favoring Folotyn over Tarceva was only a trend because the small study was underpowered and was not expected to produce statistically significant results.

Also Wednesday, Allos said sales of Folotyn as a treatment for peripheral T-cell lymohoma (PTCL) were $9 million in the quarter, a 10% improvement sequentially but below Street consensus estimates.

Allos shares were down 30 cents to $5.40 in pre-market trading.

Folotyn was approved late last year as a treatment for PTCL. Allos is also developing the drug in the much larger non-small cell lung cancer market, where it would potentially compete against OSI's Tarceva and Eli Lilly's Alimta.

In the phase II lung cancer study, Folotyn reduced the risk of death by 13% compared to Tarceva. The study was also designed to compare the efficacy of Folotyn to Tarceva in various subgroups of lung cancer patients.

In patients with non-squamous cell lung cancer, which comprises the largest subgroup of lung cancer patients, Folotyn demonstrated a 35% reduction in the risk of death compared to Tarceva. This subgroup is important because it's where OSI generated the bulk of Tarceva's $1.2 billion in 2009 worldwide sales.

In patients characterized as light smokers, Folotyn reduced the risk of death by 37% compared to Tarceva. Positive trends in overall survival were observed favoring Foltyn in all other patient subgroups except patients with squamous cell carcinoma and patients previously treated with Lilly's Alimta.

The $9 million in gross sales for Folotyn in the second quarter fell well below the consensus estimates of $11-12 million, which will likely exacerbate investor concerns that the market potential in PTCL is smaller than originally envisioned.

Net product sales and total revenue in the quarter totaled $7.9 million, which reflects fees paid to distributors and adjustments made for possible government rebates and chargebacks.

Overall, Allos reported a net loss of $20 million, or 19 cents a share, a penny better than the Street's consensus estimate.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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