Last Update 04 Dec 25

ALEC: Cost Cuts And Early Pipeline Will Drive Long-Term Upside

Alector's analyst price target has been cut sharply, with analysts now valuing the shares around $1.50 versus prior expectations near $3.50, as they factor in failed Phase 3 data for latozinemab, limited near term catalysts, and the early stage nature of the remaining pipeline.

Analyst Commentary

Analysts broadly view the failed Phase 3 INFRONT-3 trial and termination of the latozinemab program as a major negative inflection point for Alector, prompting multiple rating downgrades and a reset in valuation expectations. With the lead asset removed, the equity story now hinges on earlier stage programs, which increases execution risk and lengthens the timeline to potential value creation.

Bullish Takeaways

Bullish analysts note that Alector still retains a pipeline of neurodegenerative disease candidates, which could provide longer term upside if early signals translate into later stage success.
The recently announced 49 percent headcount reduction is seen as a positive step toward aligning the cost structure with the smaller pipeline. This could potentially extend cash runway to 2027 and limit near term dilution.
Some see optionality in partnering or strategic transactions around select assets, which could unlock non dilutive capital and partially support the current valuation.

Bearish Takeaways

Bearish analysts emphasize that the failed Phase 3 trial effectively removes the primary value driver from the story, and they view this as justification for a lower price target and a more cautious stance on the shares.
With no clear late stage catalysts and remaining programs described as too early to value, investors face a prolonged period of limited visibility on clinical and commercial progress.
High cash burn, even after workforce reductions, raises concern that Alector may need additional capital before its pipeline can generate meaningful data, pressuring valuation and increasing financing risk.
Given the structural challenges and high historical failure rates in Alzheimer’s and related neurodegenerative indications, some view the risk reward profile as skewed to the downside despite the lower share price.

What's in the News

Alector and partner GSK reported that latozinemab failed to slow disease progression in the pivotal Phase 3 INFRONT-3 trial in FTD-GRN, leading to discontinuation of the open label extension and continuation study (Key Developments).
Following the Phase 3 failure, Alector is reducing its workforce by approximately 49%, impacting about 75 employees, and expects around $7.7 million in restructuring charges as it realigns resources to other programs (Key Developments).
The company reaffirmed its 2025 collaboration revenue guidance, still expecting between $13 million and $18 million. This signals no immediate change to the near term revenue outlook (Key Developments).
Despite the latozinemab setback, Alector and GSK continue to advance nivisnebart (AL101) in the PROGRESS AD Phase 2 trial for early Alzheimer’s disease, with completion targeted for 2026. They are also advancing preclinical ABC enabled programs AL137 for AD and AL050 for Parkinson’s disease (Key Developments).
Management plans a virtual event focused on the progranulin franchise and ABC enabled pipeline. This will include updates on latozinemab, AL101, and preclinical antibody, enzyme replacement, and siRNA programs in neurodegeneration (Key Developments).

Valuation Changes

Fair Value: Unchanged at $2.05 per share, indicating no revision to the intrinsic value estimate despite recent developments.
Discount Rate: Risen slightly from 7.44% to about 7.54%, reflecting a modest increase in perceived risk or required return.
Revenue Growth: Essentially unchanged at approximately negative 50.1%, signaling no material shift in long term top line expectations.
Net Profit Margin: Fallen slightly from about 16.98% to 16.03%, implying a modestly less favorable long term profitability outlook.
Future P/E: Increased moderately from roughly 231.8x to 246.3x, suggesting a somewhat higher multiple applied to projected earnings or lower earnings expectations relative to price.

Success in upcoming clinical trials could position Alector as a commercial leader in treating neurodegenerative diseases, expanding its patient reach and supporting sustained growth.
Proprietary technology enables innovation and efficiency in CNS drug development, with regulatory tailwinds and strong partnerships enhancing long-term earnings prospects and de-risking the pipeline.
Heavy reliance on successful clinical trials, a small addressable market, high R&D costs, and strong competition threaten future revenue growth and financial sustainability.

Catalysts

About Alector

A late-stage clinical biotechnology company, develops therapies that is focused on counteracting the devastating progression of neurodegenerative diseases.What are the underlying business or industry changes driving this perspective?

Imminent pivotal data from the late-stage INFRONT-3 trial of latozinemab for FTD-GRN serves as a near-term catalyst; if results are positive, it should unlock the first disease-modifying therapy for a fatal neurodegenerative condition with high unmet medical need, positioning Alector for potential first-mover commercial revenues and expanding its patient base.
Alector's proprietary expertise and platform for blood-brain barrier delivery of large therapeutic molecules addresses a critical bottleneck in CNS drug development and enables pipeline programs targeting Alzheimer's, Parkinson's, and additional neurodegenerative diseases, laying the groundwork for sustained long-term revenue growth and enhanced gross margins if these programs advance.
There is increasing scientific and political focus-and thus funding-on brain health and neurodegeneration, which supports higher R&D investments, collaborative partnerships (as seen with GSK), and potentially accelerated regulatory pathways, favorably impacting both net margins and risk-adjusted earnings expectations.
The company's biomarker
and genetics-driven drug development approach takes advantage of advancements in personalized medicine and genomics, driving higher success rates for approval and allowing for potential premium pricing, directly supporting future revenue and margin expansion.
Enhanced regulatory support for expedited CNS drug approvals (e.g., breakthrough/fast track/orphan designations already achieved by latozinemab) may reduce development costs, mitigate time-to-market, and de-risk Alector's pipeline, which could positively impact future earnings and investor sentiment if the company secures market entry ahead of emerging competition.

Alector Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Alector's revenue will grow by 64.8% annually over the next 3 years.
Analysts assume that profit margins will increase from -142.1% today to 18.8% in 3 years time.
Analysts expect earnings to reach $68.1 million (and earnings per share of $1.02) by about September 2028, up from $-115.3 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, up from -2.4x today. This future PE is lower than the current PE for the US Biotechs industry at 15.5x.
Analysts expect the number of shares outstanding to grow by 3.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.87%, as per the Simply Wall St company report.

Alector Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Successful commercialization of latozinemab is highly dependent on positive Phase III clinical trial data; if the clinical benefit does not reach statistical significance on both co-primary endpoints (especially given recent FDA requirements), this could result in no approval, sharply reducing Alector's future revenues from its lead program.
The patient population for FTD-GRN is very limited (8,000–17,000 in the US and EU combined), restricting the maximum market size and revenue potential for latozinemab, and increasing Alector's reliance on successful expansion into more prevalent but highly competitive neurodegenerative indications like Alzheimer's disease.
The company's late-stage and preclinical pipeline is focused on high-risk neurodegenerative diseases with a history of late-stage clinical trial failures and uncertain translation from biomarker improvements to meaningful clinical outcomes, presenting a persistent risk to future product approvals and long-term earnings growth.
Alector faces ongoing high R&D expenses ($130–$140 million guidance for 2025 against low near-term collaboration revenue of $13–$18 million), which may erode existing cash reserves and lead to shareholder dilution or reduced net margins if commercial or milestone payments are delayed or fail to materialize.
Regulatory changes, ongoing cost containment pressures in healthcare, and intensifying competition from major pharmaceutical companies or biosimilars in the CNS space may further limit reimbursement, lower pricing power, and depress long-term revenue and earnings outlook even if certain Alector products reach the market.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $3.833 for Alector based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $1.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $363.0 million, earnings will come to $68.1 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 6.9%.
Given the current share price of $2.79, the analyst price target of $3.83 is 27.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Cut Alector Price Target as Latozinemab Failure Drives Valuation Shift