UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 001-37590 AVALO THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Delaware (State of incorporation) 1500 Liberty Ridge Drive, Suite 321 Wayne, Pennsylvania ...

Exhibit 99.1 Avalo Reports Second Quarter 2025 Financial Results and Recent Business Updates WAYNE, PA, August 7, 2025 — Avalo Therapeutics, Inc. (Nasdaq: AVTX), a clinical stage biotechnology company fully dedicated to developing IL-1β-based treatments for immune-mediated inflammatory diseases, today announced business updates and financial results for the second quarter of 2025. "The team has made tremendous progress on the execution of the Phase 2 LOTUS trial in hidradenitis suppurativa (HS). We have enr ...

AVTX-009 and HS Market - AVTX-009, an anti-IL-1β mAb, is a lead compound with potential for best-in-class and best-in-disease profile in hidradenitis suppurativa (HS)[7] - The HS market is expected to grow to over $10 billion by 2035[8] - Avalo is enrolling patients in a Phase 2 LOTUS trial for HS, with topline data expected in mid-2026[8] - AVTX-009 has 15x higher affinity than lutikizumab, potentially predictive of higher efficacy and less frequent dosing[10] Financials and Strategy - Avalo expects its cash runway to extend into 2028[8] - As of March 31, 2025, Avalo had approximately $125 million in cash[70] - As of March 31, 2025, Avalo's adjusted market capitalization was $284.5 million, based on an adjusted common share count of 35.5 million and a stock price of $8.01[70] IL-1β and AVTX-009 Advantages - IL-1β gene expression is up to 100x increased in HS lesions compared to healthy skin[26] - AVTX-009 is designed to target the inflammatory driver of Hidradenitis Suppurativa (HS) to address significant unmet need[15] - AVTX-009 has a subcutaneous bioavailability of 73% and a half-life of 19 days[35]

Financial Data and Key Metrics Changes - The company has sufficient cash to complete its trials, with an expected cash runway extending into 2028, indicating no immediate financial overhang [8] Business Line Data and Key Metrics Changes - The lead compound, ABTX009, is currently in Phase 2b of the LOTUS trial, with results expected in mid-2026 [7] - The company is targeting hidradenitis suppurativa (HS), a severe skin disease, with a significant unmet medical need [5][12] Market Data and Key Metrics Changes - The HS market is evolving, with new therapies emerging, but there remains a substantial unmet need for more effective treatments [11][12] - The market for HS is projected to grow significantly, with conservative estimates suggesting it could reach $10 billion by 2035 [42] Company Strategy and Development Direction - The company aims to transition rapidly into Phase 3 trials following the Phase 2 results, with a potential BLA filing anticipated around 2029 [34] - The strategy includes differentiating ABTX009 from competitors by focusing on its higher potency and longer half-life compared to existing therapies [6][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the mechanism of action of ABTX009, highlighting its potential to treat additional immune-mediated inflammatory diseases [8] - The management noted that dermatologists are increasingly looking for new therapies due to the limitations of current treatments, indicating a favorable environment for new entrants [35][38] Other Important Information - The trial design for ABTX009 is similar to that of other recent studies, with a focus on clinically relevant endpoints [27] - The company is studying a diverse patient demographic across the US, Canada, Australia, and Europe, which may help in achieving robust treatment effects [31] Q&A Session Summary Question: Can you discuss the current state of HS and the effectiveness of emerging therapies? - Management highlighted that HS is a severe disease with significant pain and disability, and there is a growing recognition of the need for better therapies [11] Question: What differentiates ABTX009 from other IL-1 strategies? - Management emphasized that targeting IL-1 beta specifically is advantageous, as it plays a pivotal role in chronic inflammation associated with HS [20][21] Question: What are the expectations for the Phase 2 trial data readout in 2026? - The study is powered to show a placebo-subtracted efficacy rate of 25-30%, with a robust treatment effect expected [28][30] Question: How does the company plan to carve out a commercial niche in the HS market? - Management believes that with a differentiated side effect profile and superior efficacy, ABTX009 can capture a significant share of the market [39][42] Question: What are the potential additional indications for IL-1 beta? - Management mentioned several potential indications, including Crohn's disease and rheumatoid arthritis, highlighting the broad applicability of IL-1 beta targeting [43][44]

Company Overview - Avalo Therapeutics, Inc. is a clinical stage biotechnology company focused on the treatment of immune dysregulation [3] - The company's lead asset is AVTX-009, an anti-IL-1β monoclonal antibody targeting inflammatory diseases [3] Leadership Appointment - Dr. Rita Jain has been appointed to Avalo's Board of Directors, bringing over two decades of leadership experience in biopharmaceutical development [2] - Dr. Jain's previous roles include Executive Vice President and Chief Medical Officer at ChemoCentryx, where she advanced the development of Tavneos® [2] - Her expertise spans clinical development, regulatory strategy, and executive leadership across multiple therapeutic areas, including immunology and inflammation [2] Product Development - AVTX-009 is currently in a Phase 2 trial for hidradenitis suppurativa (HS), with results expected in the middle of next year [2] - The drug is a humanized monoclonal antibody that binds to interleukin-1β (IL-1β), a key driver in the inflammatory process, and is implicated in various autoimmune and inflammatory diseases [4] - Inhibition of IL-1β is considered a validated target for therapeutic intervention in multiple inflammatory diseases [4]

Summary of Avalo Therapeutics (AVTX) Conference Call Company Overview - **Company**: Avalo Therapeutics (AVTX) - **Lead Asset**: AVTX009NHS, targeting hidradenitis suppurativa (HS) Key Points and Arguments Industry and Market Dynamics - **Hidradenitis Suppurativa (HS)**: A chronic inflammatory skin condition with significant unmet medical needs, particularly among patients who do not respond to existing treatments like TNF inhibitors and IL-17 therapies [37][39] - **Current Treatment Landscape**: Approximately 50% of HS patients do not achieve remission with current biologics, indicating a large unsatisfied patient population seeking new treatment options [38] AVTX009NHS Mechanism and Efficacy - **Mechanism of Action**: AVTX009 targets IL-1 beta, which is identified as a key inflammatory driver in HS, with levels in lesions being 133 times higher than normal [11][12] - **Comparison with Other Treatments**: - Lutekizumab, another IL-1 beta targeting drug, has shown efficacy but has potential flaws that AVTX009 aims to address, such as a bispecific mechanism that may not effectively target the disease [5][20] - AVTX009 has a significantly higher affinity (15-30 times) compared to lutekizumab and can achieve better neutralization of IL-1 beta in lesions [18][24] Clinical Development and Study Design - **Phase II LOTUS Study**: - Designed to evaluate the efficacy of AVTX009 with a focus on rapid response using a loading dose of 600 mg followed by 300 mg every four weeks [30][31] - The study aims to enroll a diverse patient population, including those with moderate to severe HS, while ensuring robust data collection through rigorous investigator training [35][36] Safety and Long-term Use - **Safety Profile**: AVTX009 is characterized as a true anti-inflammatory drug rather than an immunosuppressant, reducing concerns about opportunistic infections and cancer risks associated with other treatments [10][13] - **Long-term Efficacy**: The drug's mechanism is expected to maintain lower IL-1 beta levels, promoting healing of lesions and reducing inflammation over time [24] Future Opportunities - **Expansion Potential**: There are plans to explore AVTX009 in other indications driven by IL-1 beta, such as inflammatory bowel disease (IBD) and various forms of arthritis, indicating a broad pipeline potential [44][45] - **Market Positioning**: The company aims to position AVTX009 as a first-line therapy in HS, capitalizing on the dissatisfaction with current treatment options and the need for new mechanisms [41] Conclusion - **Outlook**: The company is optimistic about the upcoming data release in mid-2026 and believes that AVTX009 has the potential to significantly improve treatment outcomes for HS patients, addressing a critical gap in the current market [47]

Financial Performance - Avalo generated a net loss of $13.1 million for the three months ended March 31, 2025, with negative cash flows from operations of $9.5 million[152]. - Net cash used in operating activities was $9.5 million for the three months ended March 31, 2025, compared to $6.2 million for the same period in 2024[169]. - Other income, net increased by $90.0 million for the three months ended March 31, 2025, primarily due to the absence of prior period private placement transaction costs[164]. - For the three months ended March 31, 2024, net cash provided by financing activities was $115.6 million from a private placement investment, offset by transaction costs of $7.0 million[173]. - There was no net cash provided by financing activities for the three months ended March 31, 2025[173]. Expenses - Research and development expenses increased by $7.0 million to $9.1 million for the three months ended March 31, 2025, primarily due to a $3.8 million increase in clinical expenses related to the LOTUS trial[158]. - General and administrative expenses rose by $2.4 million to $5.5 million for the three months ended March 31, 2025, driven by a $1.6 million increase in stock-based compensation[162]. - Stock-based compensation expense increased by $1.0 million to $1.3 million for the three months ended March 31, 2025, due to option and restricted stock unit grants[160]. Cash Position - The Company had $125.0 million in cash and cash equivalents as of March 31, 2025, sufficient to fund operations into at least 2027[153]. - The Company plans to balance cash levels with projected needs to withstand funding uncertainties, potentially through equity sales or strategic collaborations[153]. - The Company expects future cash used in operating activities to increase due to ongoing development plans for AVTX-009[171]. Clinical Trials - The Phase 2 LOTUS trial of AVTX-009 is evaluating efficacy in approximately 180 adults with moderate to severe hidradenitis suppurativa[149]. Accounting Policies - The company adheres to GAAP in preparing its financial statements, utilizing estimates and assumptions that impact reported assets, liabilities, revenue, and expenses[175]. - There have been no significant changes to the company's critical accounting policies during the three months ended March 31, 2025[175]. - The company does not have any off-balance sheet arrangements as defined by SEC rules[176]. - As a smaller reporting company, the company is not required to provide certain market risk disclosures[177].

Financial Performance - Avalo Therapeutics reported a net loss of $13.1 million for Q1 2025, a significant decrease of $108.2 million from a net loss of $121.3 million in Q1 2024[6]. - Basic and diluted net loss per share was $1.25 for Q1 2025, compared to $141.14 for Q1 2024[6]. - Total operating expenses for Q1 2025 were $14.7 million, a decrease from $32.8 million in Q1 2024[8]. Cash and Assets - Cash and cash equivalents were approximately $125 million as of March 31, 2025, expected to fund operations into at least 2027, with potential extension into 2028[4]. - Current liabilities decreased to $5.6 million as of March 31, 2025, from $7.0 million at the end of 2024[7]. - Total assets decreased to $138.5 million as of March 31, 2025, down from $150.7 million at the end of 2024[7]. Research and Development - Research and development expenses increased to $9.1 million in Q1 2025, up from $2.1 million in Q1 2024, primarily due to costs associated with the Phase 2 LOTUS trial[5]. - The Phase 2 LOTUS trial for AVTX-009 is expected to deliver topline data in 2026, involving approximately 180 adults with hidradenitis suppurativa[4]. - The company is evaluating a second indication for AVTX-009 for additional immune-mediated diseases, with plans to announce this in the future[5]. General and Administrative Expenses - General and administrative expenses rose to $5.5 million in Q1 2025, an increase of $2.4 million from Q1 2024, mainly driven by stock-based compensation[5].

Core Insights - Avalo Therapeutics, Inc. is making significant progress in its Phase 2 LOTUS trial for AVTX-009, targeting hidradenitis suppurativa (HS), with topline data expected in 2026 [2][5] - The company has sufficient capital, approximately $125 million as of March 31, 2025, to fund operations into at least 2027, with potential to extend into 2028 [5][6] - The company is evaluating additional development activities beyond the LOTUS trial, considering current market conditions [2][5] Financial Performance - Cash and cash equivalents were reported at $125.0 million as of March 31, 2025, down from $134.5 million at the end of 2024 [7] - Net cash used in operating activities for Q1 2025 was $9.5 million, with research and development expenses increasing to $9.1 million, up from $2.1 million in Q1 2024 [6][9] - The net loss for Q1 2025 was $13.1 million, a significant decrease from $121.3 million in Q1 2024, primarily due to a reduction in other expenses related to prior period warrants [6][9] Trial and Development Updates - The LOTUS trial involves approximately 180 adults with HS, evaluating the efficacy and safety of AVTX-009 with expected topline data in 2026 [6][12] - The primary efficacy endpoint is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response (HiSCR75) at Week 16 [12] - Avalo is also exploring AVTX-009 for additional immune-mediated diseases and plans to announce a second indication [6][12] Corporate Highlights - Mike Heffernan has been appointed as Chairman of the Board [5] - The company continues to focus on its lead asset, AVTX-009, which targets inflammatory diseases by neutralizing interleukin-1β [10][11]

Summary of Avalo Therapeutics (AVTX) Conference Call Company Overview - **Company**: Avalo Therapeutics - **Focus**: Targeting immune-mediated diseases, with a lead program in Hidradenitis Suppurativa (HS) currently in Phase II trials, with data expected next year [1][3][41] Core Points and Arguments - **Product Development**: The lead compound is a highly specific human monoclonal antibody targeting IL-1 beta, which is expected to be a premier treatment for HS and has potential applications in other diseases [4][5][41] - **Market Potential**: HS may affect up to 2% of the US population, translating to a market size potentially exceeding $10 billion, with increasing recognition and diagnosis of the disease [6][35] - **Clinical Trials**: The ongoing LOTUS trial is expected to yield top-line data next year, with a focus on a higher efficacy endpoint (high score 75) compared to traditional standards [5][30][41] - **Competitive Advantage**: The antibody has a significantly higher affinity (less than 3 picomolar) compared to AbbVie's drug (44 picomolar), leading to better efficacy and a longer half-life, allowing for more convenient dosing [19][20][29] Important but Overlooked Content - **Patient Demographics**: The disease primarily affects women and is often misdiagnosed, leading to delays in effective treatment [11][12][35] - **Treatment Landscape**: Current treatments often fail to address the underlying inflammatory processes, with many patients experiencing severe symptoms before receiving appropriate care [12][13][35] - **Regulatory Considerations**: There is potential for the Phase II study to be considered registrational, depending on the data quality, which could streamline the path to market [44] Future Directions - **Expansion Opportunities**: Avalo is exploring additional indications in dermatology, gastrointestinal, and rheumatology areas, similar to AbbVie's strategy with their drug [38][39] - **Cash Runway**: The company has sufficient cash to support operations through at least 2027, allowing for continued development and potential market entry [6][41] Conclusion - Avalo Therapeutics is positioned to capitalize on a significant market opportunity in HS with a differentiated product offering, a strong clinical development plan, and a focus on addressing unmet medical needs in immune-mediated diseases [41]