Allakos to drop skin disease drug after mid-stage studies failure, shares slide

[January 17, 2024]  (Reuters) -Allakos said on Tuesday it would drop development of its experimental drug after it failed to reduce symptoms of two inflammatory skin conditions across mid-stage trials, sending the drug developer's shares tumbling to a record low.

The treatment, called lirentelimab, was one of the most advanced drugs in California-based Allakos' pipeline of experimental treatments.

The trial failure prompted the company to also slash its workforce by 50%, or about 62 employees, and instead focus on another early-stage drug, AK006.

Lirentelimab was being developed to treat two skin conditions - atopic dermatitis and chronic spontaneous urticaria (CSU).

Analysts said the other treatment could be more effective than lirentelimab.

Allakos' "more potent" drug AK006 still has potential, William Blair analyst Tim Lugo said.

Both lirentelimab and AK006 work by reducing or hindering the action of mast cells or white blood cells known as eosinophils, which are elevated in patients with the two diseases.

"AK006 offers deeper and broader reduction of mast cells, potentially twice as much as what has been observed with lirentelimab," said Lugo.

Allakos plans to report data from an early-stage study testing AK006 as a treatment for chronic spontaneous urticaria by end-2024.

The company said it believes that AK006 could be successful if the drug shows similar efficacy to Novartis' Xolair in clinical studies.

Allakos had 123 full-time employees as of Dec. 31, 2022, based on its latest annual regulatory filing.

The layoffs and restructuring actions are expected to extend the company's cash runway into mid-2026, the drug developer said.

(Reporting by Sneha S K; Editing by Sonia Cheema and Shailesh Kuber)

[© 2024 Thomson Reuters. All rights reserved.]This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.