Allogene Therapeutics (NASDAQ:ALLO) shares plunged on Friday after it announced it would cut 22% of its workforce in connection with its pipeline prioritization and clinical development strategy.
The company said the reduction in its workforce is expected to be substantially completed by the end of January 2024, and it estimates that it will incur charges of approximately $5 million to $5.5 million for severance payments and employee benefits, primarily in the first quarter of 2024. The company also announced a strategic pivot, with the discontinuation of two trials, ALPHA2 and EXPAND.
At the time of writing, ALLO shares are down over 20% at $2.70 per share.
On Friday, JMP Securities analysts cut the firm's rating for the stock to Market Perform from Outperform, removing the price target.
The re-rating and price target removal were primarily based on ALLO's discontinuation of its late-stage trials that powered the firm's valuation methodology.
"Yesterday, Allogene held a conference call highlighting a new platform vision which includes a focus on front-line large B-cell lymphoma (LBCL), discontinuation of the ALPHA2 and EXPAND trials, and the entry into CLL and autoimmune diseases," the analysts explained.
"The net result is conservation of cash well into 2026. While the company was positioned at YE2023 with a strong cash position of $456MM (proforma), without clarity on development timelines, we value Allogene by estimating ending 4Q24 cash per share of $1.95 and a platform value of $1.41, resulting in a value of $3.36, near where shares are currently trading; thus, we view the company as fairly valued."