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Why Alzamend Neuro Stock Fell More Than 14% Today

What happened

Shares of biotechnology name Alzamend Neuro (NASDAQ: ALZN) were down on the order of 14.3% in Monday's trading, following through on Friday's intraday reversal of a big news-driven gain. With time to put that news into the proper context, investors still see the company's stock as being overvalued.

So what

Monday's sell-off is in sharp contrast to Friday's rally, which at one point carried shares up as much as 44% before peeling back to what was essentially breakeven. The initial surge was sparked by news that Alzamend Neuro's experimental Alzheimer's disease treatment AL002 didn't present any toxicological concerns in early-stage testing in mice.

Image source: Getty Images.

It's an encouraging report, to be sure. But the actual efficacy of AL002 (which is a process rather than a drug itself) remains unknown due to the pre-clinical nature of the company's efforts. So the press release is leaving investors wanting for something meatier.

Now what

The sudden pullback can't come as too much of a surprise to current and prospective shareholders. The company went public on June 15, and while its first trade was 480% above its IPO price of $5, shares have fallen pretty steadily back to their current price near $5 ever since. Any hint of a rebound rally since then was quickly met with a move to even lower lows.

There's much to be gleaned from the persistent pullback leading up to today's rout, but chief among these clues is that most investors aren't buying into the hype linked to the public offering itself. There's a reason. Perhaps it's concern that the biotech was only raising funds here and now to cash in on the market's current receptiveness to risky start-ups.

Still, being reeled back to its IPO price makes it an interesting speculation -- for investors who can stomach such risk.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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