Allakos plans to reduce 50% of its workforce and abandon the development of its most advanced drug prospect after failing two late-stage trials.
The California biotech company will stop all activities related to clinical, manufacturing, research, and administrative functions.
Lirentelimab Failing Phase II Key Trials
Lirentelimab is a monoclonal antibody that targets and activates the Siglec-8 receptor, typically in mature eosinophils and mast cells. According to the biotech's website, Lirentelimab inhibits several signaling pathways inside these cells when bound to Siglec-8, potentially addressing the root causes of certain inflammatory diseases.
Following the strategic restructuring, Allakos reported that Lirentelimab did not succeed in its Phase II studies for atopic dermatitis and chronic spontaneous urticaria, where treatments did not show a significant reduction in disease severity compared to a placebo in eczema and failed to control symptoms in chronic hives, or urticaria effectively.
Turning to a More Powerful AK006
Allakos is stopping further research on Lirentelimab due to these results and will now concentrate on a more powerful earlier medicine, AK006, which is currently in Phase 1 testing, resulting in healthy volunteers, and later from urticaria patients anticipated later this year.
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Workforce Reduction for Project Funding
Allakos is cutting its workforce by approximately 50% to fund the project. As reported in a regulatory filing, Allakos also laid off staff in 2022, where the company had 123 employees, with 91 of them working in research and development in the last quarter.
After the restructuring, Allakos will have sufficient funds to operate until 2026. The company had approximately $171 million in cash at the end of 2023 and anticipates using about half this year. Allakos does not plan to seek additional funds until after reporting results on AK006.
Declining Shares Due to Failed Trials
The setback is the most recent for Allakos' primary drug, designed to target immune cells called mast cells and eosinophils. Allakos had been working on medicine for various immunological conditions, and high expectations raised its shares to over $151 each in 2020.
However, a year later, Lirentelimab failed two late-stage trials, leading Allakos' share price to drop. Despite this, analysts at Leerink Partners mentioned a recent increase in investor interest in the drug, partly due to its potential in treating urticarias, an area of drug research that has recently become more competitive.
Allakos now relies on AK006 to maintain investor interest but faces challenges. Shares dropped by 60% to just over $1 each on Tuesday, losing nearly all their value since going public at $18 a share in 2018.
Allakos' layoffs marked the latest in a large wave of biotechnology and pharmaceutical job cuts due to industry challenges. Based on BioPharma Dive data, over 120 biotech companies laid off staff in 2023, and Allakos is the seventh company to join the trend this year, at least the third to reduce its workforce by at least 50%, alongside Affimed and AlloVir.
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