Neurology-Focused Alector Downgraded On Failed Alzheimer's Study, BofA Securities Highlights Lack Of Catalysts

Bank of America Securities has downgraded Alector, Inc. ALEC, citing the failure of its AL002 program.

Alector recently released results from the INVOKE-2 Phase 2 trial evaluating the safety and efficacy of AL002 in slowing disease progression in individuals with early Alzheimer’s disease (AD).

But AL002 failed to meet the primary endpoint of slowing Alzheimer’s clinical progression as measured by the Clinical Dementia Rating Sum of Boxes (CDR-SB).

The analyst writes, “We see this as likely the end for the AL002 program, and combined with the 17% workforce reduction, we do not expect the $250M opt-in milestone from AbbVie Inc ABBV to be realized.”

The AL002 results are expected to impact sentiment as investors wait for Phase 3 data on latozinemab for frontotemporal dementia (FTD).

INFRONT-3 Phase 3 trial completed enrollment in October 2023 and a treatment duration of 96 weeks.

The lack of near-term clinical milestones adds further pressure.

The analyst has downgraded from Neutral to Underperform and reduced the price target to $1 (previously $9), reflecting the removal of AL002, lower valuation for AL001, and the significant investment required for future pipeline growth.

BofA anticipates that Alector’s next big milestone will be the Phase 3 INFRONT-3 trial results, which are expected in late 2025 or early 2026.

While the analyst remains optimistic about AL001 and its approach of targeting progranulin (compared to AL002, which focuses on TREM2), the novel pathway for treating FTD carries a similar level of biological risk.

AL101 offers another potential avenue for Alzheimer’s disease, but BofA is cautious about its prospects until it demonstrates functional benefits, which are key to its success.

Over the next year, the analyst views Alector as being in a “wait-and-see” phase, with limited opportunities for significant progress in the near term.

Price Action: Alector stock is down 10.7% at $2.25 at last check Wednesday.

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