Allakos to cease AK006 development after trial setback

SAN CARLOS, Calif. - Allakos Inc . (NASDAQ:ALLK), a clinical-stage biotechnology company with a market capitalization of $108 million, announced today that it will halt the development of its drug candidate AK006 after it failed to show therapeutic activity in a phase 1 clinical trial for chronic spontaneous urticaria (CSU). Despite the setback, the stock has shown resilience with a 41% gain over the past week. According to InvestingPro analysis, the company's stock is currently trading near its Fair Value. The decision will lead to a workforce reduction of approximately 75%.

The halted drug, AK006, was tested in a cohort of 34 adult patients with moderate-to-severe CSU who were refractory to antihistamines and, in some cases, had prior exposure to omalizumab. Despite being well-tolerated, AK006 did not demonstrate the expected clinical benefit, prompting the company to discontinue further clinical development.

The primary endpoint of the trial was safety and tolerability, with therapeutic activity assessed using the Urticaria Activity Score (UAS)-7 at 14 weeks. The results showed a mean change in UAS7 of -8.2 for AK006 compared to -12.4 for the placebo. The complete response rate, defined as a UAS7 score of 0, was 9% for both AK006 and placebo groups.

In light of these findings, Allakos plans to significantly scale back operations across various departments and retain only around 15 employees to explore strategic alternatives and ensure regulatory and financial reporting compliance. InvestingPro data reveals that while the company maintains a strong current ratio of 6.08, indicating solid short-term liquidity, it faces challenges with weak profit margins and rapid cash burn.

The company reported having approximately $81 million in cash, cash equivalents, and investments at the end of the fourth quarter of 2024. The estimated cost of restructuring activities, including severance and vendor payments, is projected to be between $34 million and $38 million, with the majority expected to be paid in the first half of 2025. By June 30, 2025, Allakos anticipates its financial reserves to be between $35 million and $40 million.

Allakos expressed gratitude to the patients, investigators, and site coordinators involved in the AK006 trials. The company will host a conference call and webcast today to discuss these developments.

This announcement is based on a press release statement from Allakos Inc. and reflects the company's current position and plans following the phase 1 clinical trial results of AK006.

In other recent news, TD Cowen, through its analyst Joseph Thome, highlighted significant upcoming biotech catalysts for 2025. Among these are ANAB's Phase II rheumatoid arthritis data for Rosnilimab, UTHR's Phase III program for Tyvaso, and QURE's accelerated approval application for AMT-130 in Huntington's disease. Other companies like ALKS, JAZZ, PRME, XENE, PTCT, RAPP, and CMRX also have important milestones on the horizon.

In other developments, uniQure (NASDAQ:QURE) BV has made progress with its gene therapy product, AMT-130, for Huntington's Disease. The US FDA has agreed to an accelerated approval process for AMT-130, a development that has been positively received by financial services companies such as Mizuho (NYSE:MFG) Securities, RBC Capital Markets, and Stifel. Raymond (NSE:RYMD) James has upgraded the company's stock from Outperform to Strong Buy.

In another development, Allakos Inc. has finalized an early lease termination agreement, incurring a cost of approximately $2.5 million. This move is part of Allakos's efforts to manage its expenditures and optimize operational efficiency. The company has also reported promising results from its Phase 1 study of AK006, a treatment for mast cell-driven diseases. In terms of financials, Allakos reported a net loss of $71 million in the first quarter of 2024 but maintains $139 million in cash reserves.

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