Alto Neuroscience Shares Plummet After Depression Trial Failure

The domain of neuropsychiatric drug development is notoriously challenging, with frequent clinical trial setbacks. Alto Neuroscience, however, is endeavoring to navigate these obstacles using a precision medicine model that tailors drug selection to individual patients based on specific biomarkers. Recently, a clinical trial failure involving one of its drugs, ALTO-100, has raised concerns about the viability of this approach and the underlying technology upon which it is built.

The disappointment stems from a Phase 2b trial of ALTO-100, which took place nearly nine months after Alto Neuroscience, based in Mountain View, California, raised over $128 million from an Initial Public Offering (IPO) at $16 per share. Following this announcement, Alto's share price sharply fell, opening at $5.15, a 64.5% drop from the previous day's closing price.

Alto’s core technology involves analyzing brain-based biomarkers to predict a patient’s response to a given drug. Last year, an open-label Phase 2a study of ALTO-100 indicated that the twice-daily medication significantly improved depressive symptoms in patients with impaired cognition compared to those without such impairment. However, the recent Phase 2b trial, a placebo-controlled study involving 301 patients with major depressive disorder (MDD), did not mirror these promising results.

The biomarker utilized in this study was low levels of brain-derived neurotrophic factor (BDNF), a protein essential for neuron health and survival. Participants included patients who were already on depression medications, and ALTO-100 was tested as an adjunct therapy. The primary objective was to measure changes in depression symptom scores after six weeks. Unfortunately, the results showed that ALTO-100 did not significantly outperform the placebo in improving depressive symptoms. This outcome was consistent for patients taking ALTO-100 both as an adjunct therapy and as a monotherapy, a secondary aim of the trial.

This negative result extends beyond just MDD. It casts doubt on future plans to evaluate ALTO-100 for other conditions like post-traumatic stress disorder and bipolar depression, which would have used the same biomarker strategy. Despite these setbacks, Alto executives, in conversations with William Blair analyst Myles Minter, maintained that the trial was conducted thoroughly, and the placebo response was within expected historical norms. This implies that the failure likely stems from the drug's inefficacy rather than an unusually high placebo response.

Alto Neuroscience plans to delve deeper into the complete dataset to decide on the next steps for ALTO-100 in MDD. Minter noted that while the results bring additional scrutiny to the biomarker stratification method, high-risk outcomes are not uncommon in placebo-controlled MDD trials. Alto's management remains optimistic about this approach, pending a detailed analysis of the data.

Additionally, Alto is pursuing another Phase 2b trial for another drug, ALTO-300, targeted at MDD. This small molecule, known as agomelatine, is already approved and marketed in Europe and Australia by Servier. Novartis, which previously held the U.S. rights, halted its Phase 3 trials due to liver toxicity concerns. Alto's current study involves a lower dosage of agomelatine and includes patients with a predictive biomarker. Preliminary data from this trial is anticipated in the first half of 2025.

Minter highlighted that ALTO-300 had demonstrated antidepressant efficacy in its existing markets, and its biomarker is less subjective compared to ALTO-100's, which could facilitate patient stratification. However, investors are likely to remain cautious due to the recent trial failure.

At present, Alto Neuroscience does not have any drugs developed internally. In addition to ALTO-100 and ALTO-300, the company’s pipeline features two other in-licensed assets for MDD and another for schizophrenia. As of the end of the second quarter, Alto reported a robust cash position of $193 million, enough to sustain operations until 2027.