Allakos: Potential For Comeback With Lirentelimab With 2 Indications (NASDAQ:ALLK)

Allakos (NASDAQ:ALLK) is a great speculative biotech play to look into. The reason why I think it has potential value is because it has two major data readouts in the 2nd half of 2023. It suffered a setback with the use of its drug lirentelimab back in September of 2022, when it had announced that a phase 3 study treating patients with eosinophilic duodenitis failed to achieve statistical significance in the patient reported symptomatic co-primary endpoint. While this was a huge setback for the drug for this specific indication, it is also being explored in two other indications, which are chronic spontaneous urticaria (CSU) and atopic dermatitis. The advancement of the use of lirentelimab for CSU was due to prior positive results that were released. Based on proof of concept observed, Allakos decided to initiate a phase 2b study using this drug for this patient population. Results from this phase 2b study are expected in the 2nd half of 2023. Not only that, but lirentelimab is also being advanced in another phase 2 study, which is treating patients with atopic dermatitis. Results from this mid-stage study are also expected in the 2nd half of 2023 as well. Allakos isn’t only relying on lirentelimab, it is advancing another drug candidate by the name of AK006 for possible use in treating allergic and inflammatory disorders. IND-enabling study are expected to be completed in Q4 of 2022 and a phase 1 study in humans is expected to start in the 1st half of 2023.

Possible Comeback With Lirentelimab In Other Indications

As I noted above, there is potential to use lirentelimab against other indications. The first indication to go over involves chronic spontaneous urticaria. Chronic Spontaneous Urticaria occurs when a patient has hives that are on the skin of at least or greater than 6 weeks. Not only that but is present on the skin for most days of the week. It can be caused by an allergic reaction to food or a drug, but the issue is that the reaction doesn’t go away. These patients experience a host of symptoms such as:

• Red or swollen hives on skin that last for 6 weeks
• Itching of the skin
• Swelling of lips or throat

For Allakos this presents as a good opportunity. With respect to CSU, there are roughly 3.2 million people in the United States who are suffering from it. If left untreated, these patients have to go through years with it. A phase 2b study, known as MAVERICK, was initiated last month. This is going to be a 12-week randomized, double-blind, placebo-controlled study which is expected to enroll up to 110 adult patients with CSU. Patients are being randomized 1:1 to receive doses of either 300 mg of subcutaneous lirentelimab or placebo once every 2 weeks. The primary endpoint is going to be a change from baseline in UAS7 at 12 weeks. UAS7 stands for Urticaria Activity Score over 7 days and it pretty much determines itch severity and hive count with diary-based documentation. Thus, the goal is to see if lirentelimab achieves statistical significance with respect to this primary endpoint compared to placebo.

It’s hard to say whether or not this primary endpoint will be achieved. On the other hand, the prior data points to a potential great outcome. For instance, there were two sets of cohorts that were being explored for the prior phase 2 open-label study. These cohorts are as follows:

• Xolair failure CSU patients
• Xolair naive CSU patients

In both instances, the UAS7 score was much better after 22 weeks from baseline when these patients received lirentelimab. This is in the proof of the data, which is as follows:

• Xolair failure CSU cohort of 11 patients started with an average UAS7 score of 28.7 points at baseline and at week 22 dropped down to 14.7 points. (This was a huge 49% drop in UAS7 score as a percentage.)
• Xolair naive CSU cohort of 13 patients started with an average UAS7 score of 18.5 points at baseline and at week 22 dropped down to 4.6 points. (This was a massive 75% drop in UAS7 score as a percentage.)

The key being here that as long as patients on placebo don’t achieve a massive drop in percentage of UAS7 score, like those who took lirentelimab, then there is a good chance that statistical significance should be achieved on the primary endpoint of UAS7 change from baseline at 12 weeks. Results from this phase 2b study are expected in the 2nd half of 2023. If the primary endpoint is met, then it’s possible that the FDA would allow Allakos to initiate a phase 3 study to confirm such a finding in a much larger patient population.

Financials

According to the 10-Q SEC filing, Allakos Inc. had cash, cash equivalents and investments of $212.4 million as of June 30, 2022. The reason for the large cash on hand is because in November 2, 2020 it closed an underwritten public offering from a Form S-3 SEC filing, in which it sold a total of 3,506,098 shares of its common stock at a public offering price of $82 per share. In total it received aggregate net proceeds of $271.7 million after deducting underwriting discounts and commissions. It stated that it would have enough cash to fund its operations for at least the next 12 months from the date of the 10-Q SEC Filing, which was filed on August 4, 2022. However, it chose not to wait to raise cash and enacted a public offering. It sold a total of 29,882,000 shares of its common stock at an offering price of $5.02 per share. In total, it raised approximately $150 million in total gross proceeds. With this most recent cash raise, it should have plenty of cash for now. Prior guidance was 12 months of cash to operate with, however with the recent cash raise, I don’t think it will need to raise funds until at least near the end of 2023 at the earliest.

Risks To Business

There are several risks that investors should be aware before investing in this biotech. The first risk to consider would be based on the use of lirentelimab for the treatment of patients with CSU in an ongoing phase 2b study. There is no guarantee that the primary endpoint will be met. A second risk would be with respect to the use of lirentelimab for the treatment of patients with atopic dermatitis. Again, there is no guarantee that the primary endpoint will be met for this particular study either. I think this offers a riskier proposition, because lirentelimab failed to achieve statistical significance in a phase 3 study treating patients with eosinophilic duodenitis. I believe that these other indications are different, therefore, it’s possible that lirentelimab could perform better with these two targets instead.

Conclusion

The final conclusion is that Allakos is a great speculative biotech play to look into. The reason why I state that is because it has the potential for a comeback with lirentelimab. It is expected that there will be two data readouts for this drug in the 2nd half of 2023. The first data readout in the latter part of 2023 is going to come from the phase 2b study using lirentelimab for the treatment of patients with CSU. Another data readout, from the phase 2b study using lirentelimab for the treatment of patients with atopic dermatitis, is also expected during this same period. A good thing to note is that Allakos has other drug candidates being advanced in the pipeline. It is advancing AK006 (Anti-Siglec-6) for the treatment of patients with inflammatory diseases. It expects to start a phase 1 human study using this drug in healthy volunteers in the 1st half of 2023. In addition, it is in preclinical development for AK007 as an immuno-oncology drug. With potential for a comeback with lirentelimab in two other indications, plus additional programs being advanced in the pipeline, these are the reasons why I believe that Allakos is a great speculative biotech play to look into.