Investing.com -- Shares of Allakos Inc . (NASDAQ: ALLK ) plummeted 76% after the biopharmaceutical company announced the discontinuation of its AK006 development due to the drug's lack of therapeutic activity in its phase 1 clinical trial for chronic spontaneous urticaria (CSU).
The decision came after AK006 did not show the expected clinical benefits in patients, despite being well-tolerated with a favorable safety profile. The company's Chief Medical (TASE: PMCN ) Officer, Dr. Chin Lee, expressed disappointment that the preclinical inhibitory effects of AK006 did not translate into clinical benefits for CSU patients. As a result, Allakos will reduce its workforce by approximately 75% and shift its focus to exploring strategic alternatives.
In the phase 1 trial, AK006 was administered to patients with moderate-to-severe CSU who were refractory to antihistamines, with or without prior exposure to omalizumab. The exploratory efficacy results showed a mean change in the Urticaria Activity Score (UAS7) of -8.2 for AK006 compared to -12.4 for the placebo, indicating no significant improvement.
The company also outlined its restructuring plans, which include discontinuing all AK006-related activities and winding down the phase 1 clinical trial. Allakos ended the fourth quarter of 2024 with approximately $81 million in cash, cash equivalents, and investments. However, the company expects to incur $34 million to $38 million in restructuring costs, which will be paid primarily over the first and second quarters of 2025. Following these costs, Allakos estimates its cash reserves will be between $35 million and $40 million by June 30, 2025.
While the decision to halt AK006 development has had a significant impact on the company's stock, Allakos is now looking to manage its resources carefully as it considers its next strategic steps. The market's response to the news reflects the challenges faced by pharmaceutical companies in developing new therapies and the impact of clinical trial outcomes on their financial health.
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