Investing.com -- Shares of Alx Oncology (NASDAQ:ALXO) fell in pre-market trading Thursday after Jefferies downgraded the stock to "hold" rating from a "buy," citing concerns over the company's clinical trial results and the higher burden of proof for its flagship drug, evorpacept.
Jefferies analysts noted that while ALX Oncology initially generated investor excitement with its Phase II interim results in gastric cancer, the complete dataset revealed weaker outcomes.
The study's objective response rate and progression-free survival appeared less compelling upon further analysis.
Analysts attributed the diminished efficacy in the later phases of the trial to inconsistencies, which raised doubts about the drug's performance in broader applications.
The downgrade reflects broader uncertainties tied to the company's pipeline. Jefferies highlighted challenges in the ongoing trials for head and neck cancer, with early data showing only modest differentiation from existing treatments like Keytruda.
Additionally, the experimental combinations with antibody-drug conjugates such as Padcev and Enhertu face low expectations due to limited and non-randomized data.
The analysts underscored financial constraints as a critical factor, with ALX Oncology's cash reserves projected to last only until the first quarter of 2026.
These limitations may hinder the company’s ability to advance its clinical programs effectively, increasing risks for investors.
With ALX Oncology's stock price recently trading at $1.79 and Jefferies reducing its price target to $2, down from $12, the downgrade signals tempered expectations for the company's near-term prospects.
While there remains potential for improved data readouts in 2025, Jefferies said that the burden lies on the company to demonstrate clear and consistent value for its therapies.