Wall Street Absolutely Loved This Biotech Stock. But It Just Crashed More Than 50%.

Between mid-November 2022 and mid-January 2023, shares of Altimmune (ALT -54.67%) skyrocketed over 90%. The excitement began to wane somewhat afterward. However, that was probably to be expected as the overall market retreated. 

Investors eagerly anticipated Altimmune’s announcement of clinical results for its experimental drug pemvidutide in treating obesity. Wall Street absolutely loved the biotech stock. But notice the use of the past tense in both of those statements. Why? Because Altimmune’s shares crashed more than 50% on Tuesday.

Great expectations

It’s an understatement to say that Wall Street had great expectations for Altimmune. All eight analysts who covered the stock and were surveyed by Refinitiv in February rated it as either a buy or a strong buy. The consensus 12-month price target for Altimmune reflected an upside potential of 169% compared to the stock’s closing price on March 20, 2023.

Those bullish views hinged in large part on the potential for pemvidutide. Altimmune announced promising results in December 2022 from a phase 2 study of the drug in treating nonalcoholic fatty liver disease (NAFLD). Patients receiving pemvidutide had a 75% reduction in liver fat content as well as significant improvement in liver inflammation. 

These results gave Altimmune reason to be optimistic about the potential for pemvidutide in two other indications. The company plans to initiate a phase 2b study of the drug in treating another liver disease called nonalcoholic steatohepatitis (NASH) in mid-2023. It also already had a phase 2 study underway evaluating pemvidutide in treating obesity.

Altimmune reported the data from an interim analysis of this obesity study on March 21, 2023. The company stated that the results were positive: Patients receiving pemvidutide experienced mean weight loss of 10.7% at week 24. Around half of the patients in the study taking the 1.8 mg dose of the drug achieved weight loss of 10% or more. Close to 20% of patients taking the 2.4 mg dose of pemvidutide achieved weight loss of 15% or more.

Tough competition

However, Altimmune stock crashed following the announcement of the results on Tuesday. The problem wasn’t the efficacy results. Instead, investors were concerned about pemvidutide’s side effects.

Altimmune reported that 26.8% of the patients in the study who received the 2.4 mg dose discontinued due to adverse events. Only one adverse event was deemed to be serious, with a patient requiring rehydration after nausea and vomiting. However, many patients experienced mild or moderate gastrointestinal side effects.

The primary issue for Altimmune is that pemvidutide would face tough competition if it’s approved for treating obesity. Novo Nordisk won U.S. Food and Drug Administration (FDA) approval for Wegovy in June 2021. Eli Lilly has initiated a rolling FDA submission for tirzepatide (Mounjaro) in treating obesity.

Investors were hoping that pemvidutide would demonstrate a clear advantage over these rival drugs from Novo Nordisk and Lilly. Altimmune’s phase 2 results appeared to dash those hopes. 

Two applicable adages

I think there are two old adages that apply in the developments for Altimmune. The first one is: “Don’t count your chickens before they hatch.” Wall Street analysts assumed that pemvidutide would be successful. However, clinical trials often don’t go as planned. Investors who bet too heavily on Altimmune based on analysts’ optimism learned this lesson the hard way this week.

The other adage, though, is: “It’s not over ’til it’s over.” Altimmune still thinks that it’s possible that pemvidutide’s side effects could be less problematic if dosing can be reduced along the way for patients. The protocol for its phase 2 study didn’t allow for dose reduction. 

More importantly, pemvidutide is still moving forward in a phase 2 study targeting NASH. Sure, Altimmune will likely trail Madrigal Pharmaceuticals, which expects to file for FDA approval of NASH drug resmetirom this year. However, the NASH market should be so huge that multiple therapies have an opportunity to be big winners.

Wall Street analysts (and biotech investors, in general) have a good reason to not love Altimmune nearly as much now as they did in the past. But — as is often the case with clinical-stage biotech stocks after major setbacks — it’s too soon to completely throw in the towel.