Shares of the beaten-down biotech Allakos (ALLK 6.79%) are showing signs of life today. Specifically, the clinical-stage immunomodulatory receptor specialist's stock price was up by a healthy 24.7%, on heavy volume, as of 1:15 p.m. ET Wednesday afternoon.
What's powering the biotech's stock higher today? Interestingly enough, Allakos hasn't released any material news since its 2022 second-quarter earnings report nearly a full month ago. Investors, in turn, seem to simply be getting into position ahead of a key upcoming catalyst due out next month.
This bullish trend is also probably causing some short-sellers to rethink their position today. As a result, short covering may be a contributing factor to this double-digit move northward. After all, Allakos stock has been a prime short-seller target ever since the biotech's late-stage monoclonal antibody lirentelimab missed the goalpost as a treatment for eosinophilic gastrointestinal diseases late last year.
Which near-term catalyst might be piquing investors' interest today? Allakos is slated to announce top-line results for lirentelimab's late-stage trial for eosinophilic duodenitis by the end of next month. If these pivotal data hit the mark, Allakos' shares could come storming back after last year's dramatic fall.
Is Allakos' stock worth the risk? This small-cap biotech is the epitome of a high-risk, high-reward play. Allakos share price could quadruple in value on positive phase 3 results for eosinophilic duodenitis. By contrast, the biotech's stock might tumble yet again if lirentelimab stumbles in another indication. Therefore, investors might want to take a cautious approach with this risky biopharma stock for now.