Alector, Inc. (ALEC) is an American clinical-stage biotechnology company focused on developing treatments for neurodegenerative diseases using a novel therapeutic approach. The company has several product candidates at various stages of development. It recently announced major changes to its senior executives.
Let’s take a look at Alector’s latest financial performance, corporate developments, and newly added risk factors. (See Alector stock charts on TipRanks).
Alector’s Q2 Financial Results
Alector generated $6.6 million in collaboration revenue in Q2 2021, compared to $3.2 million in the same quarter last year. The consensus estimate called for revenue of $8.73 million.
A sharp increase in research expenses to $47.8 million from $34.1 million a year ago led the company to a bigger reported loss. It posted a Q2 loss per share of $0.69, compared to a loss per share of $0.58 in the same quarter last year. Alector ended Q2 with $319.6 million in cash.
Alector’s Corporate Developments
During Q2, Alector and GlaxoSmithKline (GSK) agreed to jointly develop and commercialize Alector’s product candidates AL001 and AL101. The candidates are being developed as potential treatments for several neurodegenerative diseases, including Alzheimer’s disease, Parkinson’s disease, and amyotrophic lateral sclerosis. AL001 has reached Phase 3 testing, while AL101 is in a Phase 1a study.
As part of the arrangement, Alector will get $700 million from GSK in upfront payments. It will also be eligible for up to $1.5 billion in milestone payments. Additionally, it will receive a share of profits generated in the U.S. and earn royalties on international sales of AL001 and AL101.
Alector said that by combining its cash at the end of Q2 with the expected payments from GSK, it should have sufficient money to fund its operations through mid-2024.
On September 7, Alector announced that its Chief Operating Officer Shehnaaz Suliman and Chief Medical Officer Robert Paul will step down from their roles. The company said that Sam Jackson, head of clinical sciences who has been working on the AL001 program, will serve as chief medical officer in the interim. The departing executives are expected to stay on as advisors until the end of 2021.
Alector’s Risk Factors
The new TipRanks Risk Factors tool shows 76 risk factors for Alector. Since Q4 2020, the company has updated its risk profile with two new risk factors.
The company cautions investors that it does not currently have a product approved for sale and cannot guarantee that its product candidates will receive marketing approval. Therefore, it says, predicting its future success may be difficult. The company also expects to continue making losses for the foreseeable future. The company tells investors that drug development programs require significant resources, and it may be forced to delay or terminate some programs if it cannot obtain additional financing when needed.
Alector also cautions investors that it may be subject to lawsuits in the future. It says litigation could divert management’s attention, adversely impact finances, and harm its reputation.
The majority of Alector’s risk factors fall under the Tech and Innovation category, with 41% of the total risks. That is above the sector average of 27%. Alector’s shares have gained about 73% since the beginning of 2021.
Analysts’ Take on Alector
Following Alector’s announcement of the executive shakeup, Goldman Sachs analyst Graig Suvannavejh reiterated a Buy rating on Alector stock with a price target of $33. Suvannavejh’s price target suggests 26.10% upside potential.
Despite Alector’s executive changes coming as a surprise, the analyst noted that the company is quickly expanding its pipeline and may hire a chief medical officer with more experience.
Consensus among analysts is a Strong Buy based on 6 Buys. The average Alector price target of $45.40 implies 73.48% upside potential to current levels.
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