On Thursday, Piper Sandler adjusted its financial outlook for shares of biotechnology company Allogene Therapeutics (NASDAQ:ALLO), revising the stock's price target down to $9 from the previous $11 while maintaining an Overweight rating.
The decision follows Allogene's announcement that it would halt new patient enrollment in the phase 1 cohort of its ALPHA2 study, which is researching cema-cel for relapsed or refractory Chronic Lymphocytic Leukemia (r/r CLL). The company cited a slower-than-anticipated rate of enrollment as the primary reason for this action.
The ALPHA2 program previously experienced delays, as indicated during Allogene's second-quarter earnings report in August, which mentioned a quarter shift in the timeline. This was attributed to the prioritization of the ALPHA3 trial.
Analysts had held a positive outlook on cema-cel, anticipating it could potentially outperform similar treatments like Breyanzi due to its allogeneic approach, which could mitigate issues faced by autologous CAR T therapies in CLL patients whose cells are often more exhausted.
In light of the recent development, Piper Sandler has chosen to exclude the potential revenue from cema-cel in CLL in both the U.S. and European markets from its valuation model. This adjustment directly contributes to the reduction in the price target for Allogene's shares.
The firm believes that this strategic shift will allow Allogene to focus on more promising areas of its pipeline, such as the ALPHA3 trial for post-first-line treatment of Large B-Cell Lymphoma (LBCL) and its autoimmune programs, with proof of concept data expected by the end of 2025.
In other recent news, Allogene Therapeutics has paused patient enrollment in a Phase 1 clinical trial for cemacabtagene ansegedleucel (cema-cel), citing slower recruitment rates and the availability of new treatment alternatives. This decision reflects Allogene's commitment to optimizing the use of its resources and its focus on developing innovative therapies.
In parallel, the company has made significant progress in its clinical trials and financial standing. H.C. Wainwright maintained a Buy rating on Allogene, following encouraging data from the TRAVERSE trial, which showed a 38% objective response rate for ALLO-316 in treating adult patients with CD70+ advanced renal cell carcinoma.
Despite a net loss of $66.3 million in the third quarter of 2024, Allogene maintains a robust cash balance of $403.4 million, expecting its cash runway to extend into the second half of 2026. The company's ALPHA3 trial for cema-cel, targeting large B cell lymphoma, is advancing with over half of the sites activated.
Allogene's ALLO-316 has shown a 50% best overall response rate in renal cell carcinoma patients, and an IND filing for ALLO-329, targeting autoimmune diseases, is expected in Q1 2025. These recent developments highlight Allogene's commitment to advancing its pipeline of CAR T therapies.
InvestingPro Insights
Recent InvestingPro data provides additional context to Allogene Therapeutics' current financial situation and market performance. Despite the setback in the ALPHA2 study, the company's stock has shown resilience, with a strong 20.89% return over the last three months. This suggests that investors may be focusing on other aspects of Allogene's pipeline, aligning with Piper Sandler's view on the potential of the ALPHA3 trial and autoimmune programs.
However, the company faces financial challenges. An InvestingPro Tip indicates that Allogene is "quickly burning through cash," which is a critical consideration for a biotechnology company in the development stage. This cash burn rate underscores the importance of the company's strategic decisions, such as halting enrollment in the ALPHA2 study, to allocate resources more efficiently.
Another relevant InvestingPro Tip reveals that Allogene "holds more cash than debt on its balance sheet," which provides some financial flexibility as the company navigates its pipeline priorities. This strong cash position could be crucial in supporting ongoing research and development efforts, particularly in the promising areas highlighted by Piper Sandler.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Allogene Therapeutics, providing a deeper understanding of the company's financial health and market position.
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