Cowen downgrades Alector stock to Hold after Phase 3 trial failure

Investing.com - TD Cowen downgraded Alector Inc. (NASDAQ:ALEC) from Buy to Hold following the failure of the company’s Phase 3 INFRONT-3 trial for latozinemab. The stock, currently trading at $3.21, has shown resilience with a 174% surge over the past six months, though InvestingPro analysis indicates the company remains undervalued.

The clinical trial missed its primary endpoint measuring cognitive decline (CDR-SB) as well as imaging and biomarker endpoints, effectively ending the development program for latozinemab.

Alector’s focus will now shift to its Phase 2 PROGRESS-AD trial for nivisnebart, with interim results expected in the first half of 2026, along with its early-stage ABC pipeline that includes AL-037, AL-137, and AL050.

The company has implemented a 49% reduction in headcount to manage expenses, though TD Cowen noted that cash burn remains high despite a runway extending to 2027.

TD Cowen cited uncertainty around the clinical value of progranulin (PGRN) given the trial failure and limited near-term catalysts as key reasons for moving "to the sidelines" on the stock.

In other recent news, Alector Inc . announced its second-quarter 2025 earnings, beating expectations with an earnings per share (EPS) of -$0.30, which was better than the forecasted -$0.47. The company also reported revenue of $7.9 million, significantly surpassing the anticipated $4.7 million. Despite these positive financial results, the company faced challenges with its INFRONT-3 trial for latozinemab, which failed to meet its primary endpoint in treating frontotemporal dementia. The trial did not demonstrate efficacy in slowing disease progression, although it showed a statistically significant effect on plasma progranulin concentrations. Following this, Cantor Fitzgerald downgraded Alector from Overweight to Neutral. Meanwhile, H.C. Wainwright had previously maintained a Buy rating and set a price target of $10.00, based on upcoming results from the INFRONT-3 trial. Cantor Fitzgerald had also reiterated an Overweight rating prior to the trial results, focusing on the drug’s potential effects on biomarkers and disease progression. These developments highlight a mix of financial success and clinical challenges for Alector.

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