Stifel has upgraded Alector Inc (NASDAQ:ALEC), noting that while Alzheimer's is a very high risk, the probability of success for AL002 (TREM2 agonist) is above average, and the stock risk/reward is highly attractive ahead of phase 2 data in expected in Q4 2024.

However, with AL002 data in Alzheimer's coming 4Q24, Stifel writes the stock sets up well, currently trading at around $125 million fully diluted enterprise value.

The analyst has upgraded the stock from Hold to Buy with a price target of $15 from $8.

Stifel notes that the preclinical findings indicate TREM2 agonism's potential in clearing amyloid plaques. The ongoing AL002 phase 2 trial, despite the observed ~20% rate of amyloid-related imaging abnormalities (ARIA), likely signifies a positive indication of target engagement.

However, it's essential to consider that this could also represent a non-specific inflammatory safety signal—meaning it's not guaranteed that AL002 is effectively functioning. Yet, consolidating the evidence supporting AL002, including genetic backing, a broader biological rationale, confirmed target engagement from phase 1, and a potential Parkinson's disease (PD) signal in ARIA makes the stock notably appealing.

Price Action: ALEC shares are up 16.49% at $8.04 on the last check Thursday.