Allos Therapeutics (NASDAQ:ALTH) capped off its fiscal first quarter with a strong balance sheet. With $75.5 million in cash and investments, it's got more than enough funds to fuel the $34 million to $38 million it plans to burn in 2007. And with key clinical trial data for two major projects coming later this year, the best may be yet to come.

Efaproxyn, the company's lead drug candidate, is in testing for the treatment of brain metastases in patients with breast cancer. Efaproxyn augments the effects of radiation therapy, increasing the release of oxygen to cancer cells, increasing their vulnerability to radiation. In Efaproxyn's initial phase 3 trial, dubbed REACH, the drug was well-tolerated. Median survival nearly doubled from 4.6 months to 8.7 months among patients who received the drug plus whole brain radiation therapy (WBRT), versus those who received WBRT alone.

However, because this subset of patients -- with brain metastases originating from breast cancer -- was not specified at the start of the trial, Allos received an approvable letter in June 2004 from the FDA for Efaproxyn, and had to design another phase 3 trial (ENRICH) that studies only this specific group. The ENRICH trial is expected to reach its endpoint around mid-2007, with final safety and efficacy data released shortly thereafter. Encouraging survival data from the previous trial suggests that Efaproxyn will be proven both safe and effective, leading to FDA approval.

The company's other cancer drug candidate is PDX, which works much like the widely used cancer drug methotrexate (also used to treat many other conditions), but may offer a better safety profile. In January, PDX was cleared to continue in a phase 2 trial (PROPEL) in patients with relapsed or refractory peripheral T-cell lymphoma, after no safety concerns were observed during a planned interim analysis. The next interim analysis is expected to occur sometime in the second half of this year, and I predict it will yield positive results.

In addition, Allos is developing an earlier-stage cancer compound, RH1, activated by an enzyme more prevalent in many types of tumors than in healthy tissue. RH1 has the potential to provide a targeted cancer therapy, since it would attack tumor cells while treating normal cells far more gently.

With two drugs that both sport reasonable chances of positive clinical data and FDA approval, biotech investors should take a look at Allos -- before any potential good news rolls in.

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Fool contributor Mike Havrilla, R.Ph., B.S., Pharm.D., is a Rite Aid pharmacist who lives, writes, works, and enjoys running on the streets and trails in the small Pennsylvania town of Portage. He invites your comments and feedback. See his picks and pans for free on Motley Fool CAPS. Mike does not have a position in any company mentioned in this article. The Fool has a disclosure policy.