Why Is Allakos Stock Plunging On Monday?

Core Insights - Allakos Inc has decided to discontinue the clinical development of AK006 for chronic spontaneous urticaria (CSU) after the phase 1 trial did not show clinical benefits despite preclinical inhibitory effects [1][2] Group 1: Clinical Trial Results - The phase 1 clinical trial involved 34 adult patients with CSU, randomized to receive either 720 mg of intravenous AK006 or placebo [2] - AK006 was well-tolerated with no serious adverse events reported among subjects receiving the treatment [2] - Previous results from a phase 1 study of subcutaneous AK006 in healthy volunteers indicated approximately 77% bioavailability and prolonged receptor occupancy on mast cells [4] Group 2: Company Actions - The company plans to discontinue all AK006-related activities across clinical, manufacturing, research, and administrative functions, leading to a workforce reduction of approximately 75% [3] - Allakos will retain around 15 employees to explore strategic alternatives and maintain compliance with regulatory and financial reporting requirements [3] Group 3: Financial Implications - As of the end of Q4 2024, Allakos reported approximately $81 million in cash, cash equivalents, and investments [5] - The company estimates restructuring costs related to closing out AK006 development will be between $34 million and $38 million, primarily incurred in the first and second quarters of 2025 [5] - By June 30, 2025, Allakos expects to have approximately $35 million to $40 million in cash, cash equivalents, and investments [6] Group 4: Market Reaction - Following the announcement, ALLK stock experienced a significant decline of 78.5%, trading at $0.26 [6]