Allogene Therapeutics Inc (NASDAQ:ALLO) shares tumbled at the open Friday after the company revealed plans to cut 22% of its workforce, part of a strategic shift in pipeline prioritization and clinical development strategy.
The company anticipates completing the workforce reduction by the end of January 2024, with estimated charges of approximately $5 million to $5.5 million for severance payments and employee benefits, primarily in the first quarter of 2024.
In addition to the layoffs, Allogene announced the discontinuation of two trials, ALPHA2 and EXPAND.
Allogene also disclosed plans for autoimmune studies in 2025, leveraging Dagger technology to potentially eliminate the need for lymphodepletion, a development that could be game-changing in the CAR-T space.
Commenting on the changes, analysts from Jefferies noted that Allogene became a more compelling story following the early termination of the pivotal 3L DLBCL trial. The company plans to transition to a 1L consolidation study in high-risk MRD+ patients, a move seen as scientifically sound and targeting a larger market with fewer competition issues.
Despite the shares plummeting, Jefferies analysts remain optimistic about Allogene's long-term prospects, highlighting the company's more prudent spending to maximize opportunities. The extended cash runway to 2026, resulting from the pipeline reprioritization, adds further appeal for potential partnerships or financing.
Allogene's revised strategy focuses on 1L LBCL and autoimmune markets, representing more extensive opportunities compared to the previous emphasis on 3L DLBCL.
Jefferies is maintaining its Buy rating on the stock with an $8 price target.
Shares of Allogene were down around 15% at the open Friday at $2.71.