Allogene Therapeutics, Inc. (ALLO) is a clinical-stage immuno-oncology company developing and commercializing genetically engineered allogeneic T cell therapies for cancer treatment. It develops, manufactures, and commercializes UCART19, an allogeneic chimeric antigen receptor (CAR) T cell product for treating pediatric and adult patients with R/R CD19 positive B-cell ALL.
The stock has declined 49.2% over the past year and 52.1% over the past nine months. While ALLO’s pioneer position in allogeneic CAR-T benefitted early investors, CAR-T space has been the worst performer in an already dismal healthcare market.
ALLO faced several drawbacks in the CAR-T space. Though CAR-T can be therapeutic as it is now approved for B-cell lymphoma, leukemia, and mantle cell lymphoma, autologous CAR-T can be largely expensive. Kymriah costs $475,000 per treatment regimen; Yescarta costs $375,000.
Allogeneic therapies could be made cheaper and quicker, and that's the drawback of allogeneic CAR-T. However, the human body is framed in a way that rejects what it considers foreign bodies. This is among the primary problems faced by allogeneic therapies today. Various companies are putting effort, but the market has perceived that they are not succeeding too well, which is reflected in their stock prices.
Here is what could shape ALLO’s performance in the near term:
Poor Financials
During the first quarter ended March 31, 2022, ALLO’s collaborative revenue-related party declined 99.8% year-over-year to $0.61 million. Its loss from operations increased 141% from its year-ago value to $79.99 million, while the company’s net loss grew 141.9% from its year-ago value to $79.85 million. Its loss per share increased 124% from its prior-year quarter to $0.56.
Premium Valuation
In terms of forward EV/Sales, the stock is currently trading at 11.41Kx, which is significantly higher than the 3.69x industry average. Furthermore, ALLO’s 14.50Kx forward Price/Sales is considerably higher than the 4.51x industry average.
Bleak Growth Prospects
Analysts expect ALLO’s revenue to decrease 77.3% in the current quarter and 99.7% in the current year. Also, the company's EPS is expected to decline 15.1% in the current quarter, 36.5% in the current year, and 11.2% next year.
POWR Ratings Reflect Bleak Outlook
ALLO has an overall D rating, equating to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ALLO has a D grade for Growth, which is justified given its poor financial performance. It also has a D grade for Sentiment, which is consistent with its bleak earnings estimates.
Among the 170 stocks in the F-rated Medical - Pharmaceuticals industry, ALLO is ranked #157.
Beyond what I’ve stated above, you can view ALLO ratings for Stability, Momentum, Value, and Quality here.
Bottom Line
ALLO’s efforts to be the leader in CAR-T space could be alarming because of the various pitfalls faced by CAR-T-making companies. In addition, the company's poor first-quarter results could add to investors’ concerns. Therefore, we think the stock is best avoided now.
How Does Allogene Therapeutics, Inc. (ALLO) Stack Up Against its Peers?
While ALLO has an overall D rating, one might want to consider its industry peer, Merck & Co. Inc. (MRK), Novartis AG. (NVS), and Pfizer Inc. (PFE), which have an overall A (Strong Buy) rating.
ALLO shares were trading at $11.73 per share on Tuesday morning, up $0.03 (+0.26%). Year-to-date, ALLO has declined -21.38%, versus a -16.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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