There were a handful of companies making waves yesterday. However, Wednesday’s single worst-performing stock also happened to be a relatively popular biotech company. Allakos (NASDAQ: ALLK) used to be one of the more closely watched companies in the biopharma sector, primarily because of its promising gastrointestinal drug candidate, with much of Wall Street expecting Allakos could be a biotech buyout candidate. However, that all changed on Wednesday.
The company reported that its current late-stage trial was a complete failure. The drug in question, lirentelimab, was used in patients over a 24-week period to see whether they had reduced symptoms for patients with a rare type of gastritis. Unfortunately for the company, the results ended up failing to meet their primary statistical endpoints.
Although the drug was slightly more effective than the placebo in reducing symptoms, it wasn’t enough to be statistically meaningful. While that might be tolerable in an early-stage trial, where sample sizes are quite small, this kind of failure in a late-stage trial spells with large sample sizes spells disaster for any drug candidate.
“We are deeply disappointed that the studies did not achieve their symptomatic endpoints,” said Robert Alexander, CEO of Allakos. “The company is grateful to the patients with eosinophilic gastrointestinal diseases (EGIDs) and to the investigators who participated in the ENIGMA and KRYPTOS trials.”
It wasn’t just investors that were quick to sell the stock on the news. Pretty much all of Wall Street ended up severely downgrading Allakos due to this announcement. Barclays ended up cutting its price target down from $36 per share to just $8, with other investment banks making similar cuts as well.
Management said that it would continue to analyze the data in an effort to find a silver-lining of some sort, perhaps even a way to reframe this current set of results. However, it’s very unlikely that anything meaningful will come from any extra analysis. It has happened before, where further details ended up salvaging a drug candidate, especially if it’s a certain subgroup of patients that were underperforming and dragged down the average result.
For that reason, there is still is a chance that lirentelimab might be effective after all. Especially since the results were still better than the placebo, just not by enough to be statistically meaningful. Unfortunately for the company, investors and analysts alike will be taking a “guilty until proven innocent” stance on the effectiveness of Allakos’ drug.
Shares of Allako plummeted a staggering 89%, whipping tens of billions of dollars of the company’s market cap. It was the single-worst performing stock not just on Wednesday but even when looking at the entire week.
Allakos Company Profile
Allakos Inc is a clinical-stage company developing therapeutic antibodies that selectively target immunomodulatory receptors present on the surface of immune effector cells involved in allergic, inflammatory, and proliferative diseases. The company’s lead program, AK002, an antibody that targets Siglec-8, an inhibitory receptor found on eosinophils and mast cells. In preclinical and clinical studies, AK002 has been shown to deplete eosinophils and inhibit mast cells. – Warrior Trading News
