Please ensure Javascript is enabled for purposes of website accessibility

Why Alector Is Tumbling 28.7% Today

By Todd Campbell – Jul 29, 2020 at 1:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors appear nervous that COVID-19 precautions could create obstacles to trials evaluating its lead drug candidate.

What happened

Shares in Alector (ALEC -3.56%) are tumbling 28.7% at 12:30 p.m. EDT on Wednesday over concerns COVID-19 could negatively impact patient enrollment and monitoring in clinical-stage trials of AL001.

So what

The biotech company's AL001 is being evaluated for use in frontotemporal dementia patients with a progranulin gene (PGRN) mutation.

A toy rocket crashed into a desk.


On Tuesday, management unveiled preliminary, early-stage data suggesting AL001 is generally safe and well tolerated but that "due to the COVID-19 pandemic, several clinical sites for the phase 2 study were temporarily closed or conducted reduced or remote patient assessments during the evaluation period. As a result, some participants missed a dose of AL001 or missed clinical assessments during the treatment period."

Worry that enrollment in AL001's trials could be slower than expected and missed doses and follow-up visits could create obstacles to analyzing trial results appear to be outweighing otherwise encouraging data.

Specifically, no treatment-related serious adverse events were observed in participants in its phase 1b trial or within the 10 patients initially dosed in its phase 2 study. Additionally, all the participants in its phase 2 study so far have seen a return of plasma progranulin levels to normal range, hinting at AL001's efficacy.

Alector plans on enrolling 40 people in its phase 2 study, and a phase 3 study was initiated in July.

Now what

Frontotemporal dementia is a devastating disease without any treatments approved by the Food and Drug Administration. Of the 170,000 people in the U.S. and European Union with this disease, roughly 15,000 have a mutation that could conceivably be addressed by AL001.

Alector is moving forward with its development timeline for AL001, but investors are right to be a bit cautious. There's a high failure rate in neurodegenerative disease trials, and the impact of COVID-19 on AL001's trials creates uncertainty.

Nevertheless, Alector had $548 million in cash on its balance sheet as of March 31, and it has multiple intriguing drugs in development, including AL002, an Alzheimer's disease drug licensed to AbbVie that's expected to enter phase 2 trials this year. Therefore, this could be an interesting company to keep tabs on.

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alector  Stock Quote
$9.21 (-3.56%) $0.34
AbbVie Stock Quote
$144.12 (1.50%) $2.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.