Not even the dilution of an upsized follow-on offering could slow Allakos' momentum as its share price marched north steadily through midweek on the strength of Phase II data in eosinophilic gastrointestinal disorders, suggesting investors are betting the company is ripe for a takeout.
Shares of Allakos Inc. (NASDAQ:ALLK) added $53.88 (174%) to $84.88 across five trading sessions after the company announced early Monday that AK002, a first-in-class inhibitor of sialic acid binding Ig like lectin 8 (SIGLEC8), met the primary endpoint in the Phase II ENIGMA study. Two combined dose cohorts of AK002 led to a 95% reduction in gastric or duodenal eosinophil counts vs. a 10% increase for placebo (p<0.0001) in patients with eosinophilic gastritis (EG) or eosinophilic gastroenteritis (EGE), including some with eosinophilic esophagitis (EoE).
The new data could position Allakos as a bolt-on acquisition target.
“There is a huge appetite in the equity market for clinically de-risked, later-stage assets in unmet medical need areas, since they are traditionally what large pharma are very interested in purchasing,” Omega Funds’ Otello Stampacchia told BioCentury.
Allakos’ management includes several members of the team, including CEO Robert Alexander, that sold hyperkalemia company ZS Pharma Inc. to AstraZeneca plc (LSE:AZN; NYSE:AZN) in 2015 for $2.7 billion.
Even though Allakos proposed a $200 million follow-on after the bell Monday, its stock continued to rise. Its shares climbed another 22% before Allakos upsized the offering to $350 million, pricing late Tuesday at $77, a discount of just 3% from its closing price of $79.47.
Allakos touched an all-time high of $92.84 intraday on Wednesday, then hovered in the $80s for the rest of the week. Its market cap rose to just above $4 billion, from $1.4 billion at the previous Friday's close at $31. The company had shed considerable value since trading in the low $60s in December, and its shares were near their 52-week low before Monday's readout. Allakos went public in July 2018, pricing its IPO at $18.
The company is now well-capitalized to begin a planned Phase III study of AK002 in EG or EGE, as well as a Phase II/III trial in eosinophilic esophagitis, in 1Q20. All but one of ENIGMA’s 14 patients with co-morbid EoE who received the mAb had eosinophils reduced to <5 per high power field vs. one of nine who received placebo.
AK002 is the only molecule targeting SIGLEC8 that is listed in BioCentury’s BCIQ database. The mAb targets eosinophils and mast cells selectively to affect inflammatory responses, and has shown activity in patients with indolent systemic mastocytosis, chronic urticaria and severe allergic conjunctivitis as well as eosinophilic GI disorders.
Omega Funds does not hold a stake in Allakos.