Investors holding Allena Pharmaceuticals, Inc. (NASDAQ: ALNA) awoke with a fright this weekend, seeing the downward freefall the stock experienced. This 51.94% decline, in the aftermarket, comes after barely on movement on Friday. The clinical biopharmaceutical company has been on a steady bullish trend since mid-January, climbing over 30% during this phase. However, the current shift in market perception towards ALNA comes as a result of a major story, raising serious red-flags, The story further compromises the company’s financial sustainability and growth potential, pushing investors to sell ALNA, thereby driving down prices.
Allena Abandoning Lead Drug Candidate
One of the core reasons the plummet in ALNA occurred relates to a recent decision regarding its lead candidate, Reloxaliase. The company announced its plans to drop research on the drug, thereby abandoning all commitments and potential associated with it. Given the degree to which Allena pushed the project, the move places heavy skepticism regarding the stock’s prospects. Furthermore, its sustainability comes under question, which further brings hesitance amongst market participants, in regards to the stock.
The oral enzyme therapeutic, which was aimed to treat severe metabolic renal conditions, promised a medical breakthrough in its domain. Instead, the company has chosen to focus on ALLN -346, a phase 2 candidate, targeting hyperuricemia. However, given its poor liquidity position, the risk in these ventures is apparent.
What’s Next for ALNA?
With the ditching of Reloxaliase, the prospects for ALNA seem murky, with little clarity regarding growth strategy. The management, focusing on ALLN-346 appears to be placing all its eggs in a single basket, showcasing a worsening risk profile. With the ongoing trial being on its second phase, investors remain skeptical, and the risk is substantial. These sentiments worsen by the sheer degree of strategic importance the company placed on Reloxaliase. Being the lead drug, a substantial portion of resources were therefore allocated towards its development. As a result, the sudden abandonment raises serious concerns about the company’s credibility. The overall skepticism was further increased by the dismal liquidity profile of the company and subsequent financial challenges.
ALNA took a hard plummet after news that management decided to ditch its lead drug candidate, Reloxaliase. Skepticism and hesitance towards the stock remain substantially heights, as the company places all bets on the candidate ALLN-346. The risky profile, financial challenges, strategic uncertainty, and dismal liquidity each contribute to these negative sentiments.