Allakos Stock Craters To Record Low On Lead Drug Setback: Retail Hopes Fade

Allakos, Inc. shares lost more than three-quarters of its market capitalization on Tuesday afternoon, marking a record low after the company announced a significant setback for its lead drug candidate, AK006.

The biotech company revealed it would cease further clinical development of AK006 after its preclinical inhibitory effects failed to translate into clinical benefits for patients with chronic spontaneous urticaria (CSU).

In the proof-of-concept trial, 34 adult patients with moderate-to-severe CSU refractory to antihistamines, with or without prior omalizumab exposure, were randomized 2:1 to receive AK006 or placebo. 

The disappointing results prompted Allakos to terminate AK006-related programs across all functions and implement a 75% workforce reduction. 

The company will retain a small team of about 15 employees to explore strategic alternatives, ensure compliance, and oversee the wind-down of its phase 1 trial.

Allakos ended the fourth quarter of 2024 with $81 million in cash and expects restructuring costs of $34–$38 million, primarily to be paid by mid-2025. 

The company estimates its cash reserves will decline to $35–$40 million by June 30, 2025.

Following the announcement, several analysts adjusted their outlook on Allakos, according to The Fly.

Piper Sandler downgraded the stock to ‘Neutral’ from ‘Overweight,’ slashing its price target to $0.30 from $7. The brokerage noted AK006 was Allakos’s sole asset, leaving the remaining valuation restricted to cash.

JMP Securities downgraded Allakos to ‘Market Perform’ from ‘Outperform’.

On Stocktwits, sentiment for Allakos shifted sharply to ‘bearish’ as disappointed retail investors voiced their concerns. 

Data showed declining interest in the stock, with a 4.6% drop in followers over the past year and a 44% reduction in message volume last week.

Allakos stock has now lost 77% over the past 12 months, reflecting mounting challenges for the small-cap biotech as it faces an uncertain future.

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