KEY POINTS

  • After Allkos announced poor late-stage trial results last year, the biotech stock lost most of its value.
  • The firm’s shares, on the other hand, were recovering Wednesday.
  • Investors are betting that the company’s late-stage clinical trials will be successful, driving the stock price.

What’s going on with Allakos stock

The beaten-down biotech Allakos stock was soaring yesterday. As of the market close on Wednesday, the stock price of the clinical-stage immunomodulatory receptor specialist was up by over 19%, on heavy volume.

What was powering the biotech firm’s stock higher yesterday? Allakos (NASDAQ:ALLK) hasn’t issued any important news since its 2022 second-quarter earnings release, nearly an entire month ago. In turn, investors appear to simply be positioning themselves for a key upcoming catalyst set to come out next month.

Why we care

This rising trend might be forcing short-sellers to reconsider their position right now. As a result, the short covering may have helped contribute to this almost 20% increase in asset value. After all, Allakos shares have been a popular short-selling target since the biotech’s late-stage monoclonal antibody lirentelimab missed the target as a treatment for eosinophilic gastrointestinal diseases (EGIDs) late last year.

What near-term catalyst is catching investors’ attention right now? By the end of next month, Allakos expects to reveal the top-line results for lirentelimab’s late-stage trial for eosinophilic duodenitis. Allakos’s shares could surge back after last year’s steep decline if this crucial data is accurate.

What now

Is Allakos’ stock worth the gamble? This small-cap biotech is a textbook example of a high-risk, high-reward investment. For instance, on positive phase 3 results for eosinophilic duodenitis, Allakos share price might increase fourfold. In contrast, if lirentelimab stumbles in another indication, the biotech’s stock might drop even further. As a result, investors may wish to adopt a cautious approach with this high-risk biopharmaceutical company for the time being, even though Allakos stock was soaring yesterday.

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