Alto Depression Therapy Fails Mid-Stage Trial, 9 Months Post-IPO

Alto Neuroscience’s efforts to treat depression have hit a major setback, with their Phase IIb therapy failing to show any significant improvement over a placebo. This news comes just nine months after the biotech company went public, raising $128.6 million. This situation echoes the troubles faced by Acelyrin last year, where they too faced clinical trial failures shortly after a significant IPO.

The disappointing results were revealed in an after-market statement on Tuesday evening, causing Alto’s shares to plummet by 60%. According to the report, their treatment, ALTO-100, did not outperform the placebo in alleviating symptoms of major depressive disorder (MDD), although it was found to be safe and tolerable. Alto now plans to thoroughly analyze the data to decide future steps.

Alto’s CEO, Amit Etkin, expressed deep disappointment, highlighting the significant unmet needs of patients with depression. Analysts from William Blair and Stifel also labeled the results as a clear failure, noting that the trial was well-conducted but ultimately unsuccessful.

The treatment was part of Alto's precision psychiatry platform, designed to create highly personalized psychiatric therapies. However, the failure of ALTO-100 raises concerns about the effectiveness of this approach. Analysts questioned the potential impact on Alto's broader portfolio of neuropsychiatry treatments, given the trial's outcome.

The Phase IIb study utilized a memory-based biomarker to classify patients before randomly assigning them to either the treatment or placebo group. The primary endpoint was a score on the Montgomery-Åsberg Depression Rating Scale (MADRS), measured at the end of a six-week treatment period. Conducted in the U.S. with 301 adult participants, the study found no statistically significant improvement in the treatment group compared to the placebo. Moreover, the treatment failed to show any benefits on other pre-specified secondary endpoints.

Despite the setback, Etkin praised the team's effort in conducting a pioneering biomarker-based study in psychiatry. He assured that Alto would quickly evaluate the complete data set to understand the findings and apply the lessons learned across their platform. ALTO-100 is also being tested in another Phase IIb trial for patients with bipolar disorder.

William Blair's analysts noted that Alto had taken on one of the most challenging targets: depression. They highlighted the historical difficulty of placebo-controlled MDD studies, suggesting that this particular trial was no exception. Other companies, such as Sage Therapeutics, have also struggled with gaining approval for depression treatments, despite achieving success in other areas.

Looking ahead, attention will shift to Alto's next pipeline asset, ALTO-300, which is also in development for MDD. A readout is expected in the first half of 2025. The drug, known as agomelatine, is already approved for depression in Europe and Australia. Alto has completed a Phase IIa study confirming the EEG-based biomarker to be used. Analysts believe that ALTO-300 may be less risky compared to ALTO-100 due to its existing approvals.

Stifel analysts remain somewhat optimistic about Alto's approach, suggesting that better patient selection and more homogenous trial populations could still be effective strategies in CNS therapies. They believe that Alto's other assets should not be dismissed outright.

Despite the failure, Alto remains financially stable, with $193.6 million reported as of June 30. This funding is expected to sustain the company through multiple upcoming readouts, including those for ALTO-300 and ALTO-203 in MDD.

The recent events recall last year's challenges faced by Acelyrin, which raised $540 million in an IPO but soon reported failures in its clinical trials. Acelyrin’s shares dropped significantly, contributing to a cautious market for biotech IPOs. However, Acelyrin later found success with another trial, demonstrating that initial setbacks do not necessarily spell the end for biotech endeavors. Similarly, Alto hopes to recover and continue its pursuit of innovative treatments for psychiatric disorders.