J.P. Morgan Securities started coverage of Allos Therapeutics Inc with an overweight rating and a price target of $10, citing upside potential from the company's key drug Folotyn.

The brokerage said while there was lesser risk in getting Folotyn approved as a treatment for a kind of cancer, peripheral T-Cell lymphoma (PTCL), there were several free call options in the pipeline. Folotyn, which received an accelerated approval to treat PTCL in September 2009, is being tested in two other types of cancer -- cutaneous T cell lymphoma and non-small cell lung cancer (NSCLC).

The near-term driver for the stock would be data from the mid-stage study of the drug in lung cancer against OSI Pharmaceuticals' Tarceva, analyst Geoffrey Meacham said.

Data from the lung cancer trial and the cutaneous T cell lymphoma are expected to be available in the first half of 2010.

Shares of the company were up 7 percent at $7.20, Friday on Nasdaq. They had touched a high of $7.25 earlier in the session. (Reporting by Vidya L Nathan in Bangalore; Editing by Anil D'Silva)