Alto depression drug failure sends shares plunging 66%

Shares of Alto Neuroscience Inc. (NYSE: ANRO) collapsed Wednesday after the company’s experimental depression treatment failed in a six-week clinical trial.

The Mountain View, California-based company saw its market value plummet to $132 million from about $385 million. Trading volume surged past 12 million shares, about 33 times the daily average of 366,000.

The Phase 2b trial of ALTO-100, an oral small molecule in the benzylpiperazine (BZP)-aminopyridine class designed to enhance neural plasticity, failed to show statistically significant improvement over placebo. The study enrolled 301 patients across 34 U.S. sites who were selected using a memory-based cognitive biomarker assessment.

The setback comes after Alto highlighted the trial in August as “the first randomized double-blind study to be completed using our neurocognitive battery as a patient selection tool,” according to CEO Amit Etkin.

“We are disheartened by the results,” Etkin said in a statement Tuesday. The company will “move quickly to evaluate the full data set to better understand these findings.”

The failure raises questions about Alto’s broader pipeline strategy. The company has five Phase 2 studies ongoing across four drug candidates, with data expected through 2026. ALTO-100 is also being tested for bipolar depression, where it targets reduced neuroplasticity in the hippocampus.

The company reported $193.6 million in cash as of June 30, having posted a $16 million net loss in the second quarter. Research and development expenses nearly doubled year-over-year to $13.2 million, driven partly by costs associated with the now-failed trial.

Despite maintaining its cash runway extends into 2027, Alto shares touched an all-time low of $4.26 as of press time Wednesday, well below the 52-week high of $24. Wall Street’s average price target of $27.50 now implies a 460% upside.

The biotech still expects key readouts in early 2025 for two other depression treatments, ALTO-203 and ALTO-300, though investor confidence appears shaken after this first major trial failure.

The dramatic share decline has already attracted attention from securities lawyers. The Schall Law Firm announced late Tuesday it’s investigating potential violations of securities laws, focusing on whether Alto made false or misleading statements to investors.