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Summary of Avalo Therapeutics FY Conference Call (December 02, 2025) Company Overview - **Company**: Avalo Therapeutics (NasdaqCM:AVTX) - **Focus**: Development of AVTX-009 for hidradenitis suppurativa (HS) Key Points Industry Context - **2025 Performance**: The year was described as exciting, with expectations for 2026 to be even more promising [4][5] - **Competitor Landscape**: Mention of Lutikismab, a competitor in the HS market, currently in phase 3 studies [49] Clinical Trial Updates - **LOTUS Trial**: - Phase 2 trial for HS with AVTX-009 has completed enrollment as of October 29, 2025, exceeding the target of 222 patients, reaching 250 [6][16] - The trial is designed to show a 20% delta difference in HiSCR75 on a placebo-adjusted basis with 80% power, and 90% power for a 25-30% difference [16][18] - Top-line data expected in Q2 2026, following a 16-week treatment duration and a six-week follow-up [10][11][12] Trial Design and Execution - **Demographics**: The trial includes a higher proportion of biologically experienced patients, with over a third expected to be biologically experienced [21][22] - **Site Management**: - Approximately 90 sites involved, primarily in the U.S. and Canada, with rigorous site qualification and training processes implemented [29][30] - Emphasis on managing the placebo effect through strict protocols and training for both investigators and patients [30][35] Future Development Plans - **Phase 3 Trials**: - The anchor dose for the phase 3 program will likely be one of the two doses tested in phase 2, with a preference for a more patient-friendly dosing schedule [43][44] - Discussions with the FDA will determine the need for additional dose-ranging studies [44][45] Competitive Positioning - **Differentiation from Lutikismab**: - AVTX-009 is expected to offer a longer dosing interval and potentially higher efficacy due to its higher potency [49][51] - The company aims to demonstrate a benign side effect profile similar to Lutikismab while exploring efficacy in various patient populations [52][56] Financial Considerations - **Capital Needs**: Significant capital will be required for two large phase 3 trials, with expectations of strong investor interest due to the drug's potential [58] - **Expansion Opportunities**: Potential to explore other indications related to IL-1 beta, including dermatology and rheumatology [59] Conclusion - **Outlook**: The company is optimistic about the upcoming data and its potential impact on the market, with a strong focus on execution and differentiation in a competitive landscape [62]

Core Insights - Avalo Therapeutics, Inc. announced the grant of inducement equity awards to three new employees, totaling 114,000 nonstatutory stock options [1][2] Group 1: Inducement Equity Awards - The options were granted on November 4, November 10, and November 17, 2025, with recipients entitled to purchase 24,000, 72,000, and 18,000 shares of common stock respectively [2] - The exercise price for the options is set at the closing price on the respective grant dates, and the options will vest over four years [2] - Vesting schedule includes 25% of shares vesting on the one-year anniversary of each employee's start date, with the remaining shares vesting monthly over the following 36 months [2] Group 2: Company Overview - Avalo Therapeutics is focused on developing IL-1β-based treatments for immune-mediated inflammatory diseases, with its lead asset AVTX-009 currently in a Phase 2 clinical trial for hidradenitis suppurativa [3] - The company is exploring additional opportunities in prevalent indications with significant unmet needs [3] Group 3: Product Information - AVTX-009 is a humanized monoclonal antibody that binds to interleukin-1β (IL-1β) and neutralizes its activity, playing a central role in the pathogenesis of various human diseases [4] - Dysregulated IL-1β signaling is a major driver of inflammation, and its inhibition has shown effectiveness in multiple immune-mediated inflammatory diseases [4]

Summary of Avalo Therapeutics Conference Call Company Overview - **Company**: Avalo Therapeutics (NasdaqCM:AVTX) - **Focus**: Development of AVTX-009, a potent anti-IL-1 inhibitor for hidradenitis suppurativa (HS) [3][5] Key Points and Arguments Product Development - **AVTX-009 Background**: Originally developed by Eli Lilly for type 2 diabetes, showing a reduction in A1C by 0.25 to 0.3 grams but not pursued further due to insufficient effect size [4] - **Acquisition**: Acquired from AlmataBio in 2024, with rapid progression to phase 2B trials [5] Mechanistic Insights - **IL-1 Role**: IL-1 beta is a central regulator of the immune system, driving chronic inflammation in HS lesions [7][8] - **Clinical Evidence**: AbbVie's data supports the efficacy of targeting IL-1, while Johnson & Johnson's anti-IL-1 trial showed no treatment effect in HS, reinforcing the focus on IL-1 as a target [10] Clinical Trial Design - **Phase 2 Trial**: Designed to mirror successful elements from other trials, allowing for both bio-naive and bio-experienced patients [15][16] - **Enrollment Success**: Exceeded initial enrollment timelines, with over 250 patients enrolled, indicating strong interest from both patients and investigators [19][26] Efficacy and Safety Expectations - **Efficacy Goals**: Aiming for a treatment effect size comparable to or better than AbbVie’s results, with a favorable dosing regimen of every four weeks [28][29] - **Safety Profile**: IL-1 inhibitors are well-tolerated, with a lower risk of opportunistic infections compared to IL-17 inhibitors [33] Market Opportunity - **HS Market Growth**: Increasing awareness and earlier diagnosis are expected to expand the patient population significantly [36] - **Market Size Estimates**: Projected to exceed $10 billion by 2035, with a conservative estimate of a $1 billion opportunity from a 5% patient penetration of a target market of 200,000 patients [37][38] Additional Important Insights - **Competitive Landscape**: The HS treatment market is competitive, with multiple companies developing various drugs, but there is optimism about the unique mechanism of AVTX-009 [26][36] - **KOL Enthusiasm**: Key opinion leaders express high enthusiasm for IL-1 targeting in HS, suggesting a robust market for multiple agents [38]

Summary of Avalo Therapeutics Conference Call Company Overview - **Company**: Avalo Therapeutics (NasdaqCM: AVTX) - **Location**: Based outside of Philadelphia - **Employee Count**: Approximately 35 employees - **Key Asset**: AVTX-009, a fully human anti-IL-1 monoclonal antibody in phase 2b for hidradenitis suppurativa (HS) [2][12] Industry Insights - **Target Mechanism**: IL-1 plays a central role in inflammation, particularly in HS, bridging the innate and adaptive immune responses [4][6] - **Clinical Landscape**: The market for HS treatments is competitive, with a significant need for new mechanisms of action. IL-1 is identified as a top target by dermatologists [35][41] Key Clinical Data - **Lutikizumab Data**: AbbVie’s Lutikizumab showed a 46% crude treatment effect in HS patients, with a placebo-subtracted effect of about 25% [12][13] - **Comparative Advantage**: Avalo believes AVTX-009 has higher affinity and better pharmacokinetics than Lutikizumab, potentially leading to superior efficacy [13][84] Trial Design and Expectations - **Phase 2 Trial**: Completed enrollment with over 250 patients; designed as a 16-week study with a 6-week safety follow-up [56][60] - **Endpoints**: Primary endpoint is HiSCR75, with secondary endpoints including HiSCR50, 90, and 100, as well as quality of life measures [56][58] - **Patient Demographics**: Average of eight years of disease duration, with a mix of early stage 2 and early stage 3 patients [60][62] Future Directions - **Indication Expansion**: Plans to focus on diseases driven by IL-1, including inflammatory bowel disease (IBD), rheumatology, and dermatology [144][150] - **Cash Position**: Avalo has $110 million remaining, expected to last through 2028, with plans to raise additional funds for phase 3 trials [156][158] Additional Considerations - **Antibiotic Use in Trials**: Patients on stable doses of antibiotics are allowed in the study, capped at 20%, with no expected impact on results [135][141] - **Operational Strategy**: Emphasis on solid trial design and conservative estimates for placebo and drug effect sizes to maximize the difference in outcomes [100][111] This summary encapsulates the key points discussed during the conference call, highlighting Avalo Therapeutics' strategic focus, clinical data, and future plans in the context of the competitive landscape for HS treatments.

Summary of Avalo Therapeutics FY Conference Call Company Overview - **Company**: Avalo Therapeutics (NasdaqCM:AVTX) - **Location**: Near Philadelphia - **New Asset**: AVTX-009, a high affinity human anti-IL-1 beta monoclonal antibody targeting hidradenitis suppurativa (HS) [2][3] Key Points Product Development - **Background**: AVTX-009 was originally developed by Lilly for type 2 diabetes, showing a moderate effect size of 0.25-0.3 grams reduction in hemoglobin A1C, but was not pursued further [2][3] - **Acquisition**: Avalo acquired the asset after it was not advanced by previous owners [3] - **Funding**: The company raised $185 million in 2024 to support its operations and trials [3] - **Lotus Trial**: A phase 2b proof of concept study for AVTX-009 is fully enrolled, with data expected in mid-2026 [4] Mechanism of Action - **IL-1 Beta Role**: IL-1 beta is a master regulator of the immune system, crucial in the inflammatory response in HS lesions [5][6] - **Cytokine Levels**: IL-1 beta is the most abundant cytokine in HS lesions, making it a prime target for treatment [7] Comparison with Competitors - **AbbVie’s Lutikizumab**: A bispecific anti-IL-1 beta and anti-IL-1 alpha drug with a shorter half-life and lower affinity for IL-1 beta compared to AVTX-009 [11][12] - **Efficacy Data**: AbbVie reported a drug effect size of approximately 46% in a severe HS population, which Avalo aims to exceed with its higher affinity drug [13][15] Trial Design and Expectations - **Placebo Response**: The Lotus trial is designed to mitigate placebo responses, with a conservative estimate of a 20% placebo rate based on historical data [19][20] - **Patient Demographics**: The trial includes a mix of biologically experienced patients, with a higher proportion of TNF and IL-17 failures compared to competitors [25][26] Future Indications - **Exploration Beyond HS**: Avalo is interested in expanding indications to include crystal arthropathies, such as gout, in addition to other inflammatory conditions [30][31] Financial Health - **Balance Sheet**: Avalo has $115 million available, sufficient to fund operations through data release and into 2028, with plans to raise funds for phase three trials [33] Additional Insights - **Trial Management**: The company emphasizes rigorous training for investigators to ensure objective assessments and accurate data collection [27][28] - **Statistical Approach**: Avalo plans to handle non-responder imputation scientifically, contrasting with other companies' methods that may artificially lower efficacy results [29]

Financial Performance - Avalo Therapeutics reported a net loss of $64.5 million for the nine months ended September 30, 2025, with negative cash flows from operations of $37.2 million[160]. - The company recognized no product revenue for the three months ended September 30, 2025, following the expiration of its license agreement for Millipred on September 30, 2023[164][176]. - Other expense, net was $11.4 million for the three months ended September 30, 2025, a significant decrease from other income of $35.9 million in the prior year period[174]. - The company recognized a net other expense of $11.3 million for the nine months ended September 30, 2025, compared to other income of $55.4 million in the prior year, primarily due to changes in fair value of derivative liabilities[187]. Cash Flow and Liquidity - As of September 30, 2025, Avalo had $111.6 million in cash and cash equivalents, sufficient to fund operations for at least twelve months[161]. - The company had $111.6 million in cash and cash equivalents and short-term investments as of September 30, 2025[189]. - Net cash used in operating activities was $37.2 million for the nine months ended September 30, 2025, compared to $34.0 million in 2024, primarily due to a net loss of $64.5 million[191]. - Net cash used in investing activities was $84.1 million for the nine months ended September 30, 2025, primarily from purchases of available-for-sale investments[193]. - Net cash provided by financing activities was $13.9 million for the nine months ended September 30, 2025, from sales of shares under the "at-the-market" sales agreement[194]. Research and Development - Research and development expenses increased by $4.1 million to $13.6 million for the three months ended September 30, 2025, driven by a $2.2 million rise in clinical expenses[167]. - Research and development expenses increased by $20.6 million for the nine months ended September 30, 2025, totaling $36.8 million compared to $16.3 million in 2024, driven by clinical and CMC expenses[178]. - Clinical expenses rose by $11.6 million due to advancements in the Phase 2 LOTUS trial, while CMC expenses increased by $4.8 million due to raw material purchases and drug manufacturing activities[178]. - The company expects future research and development expenses in 2025 to increase due to ongoing execution of the Phase 2 LOTUS trial[180]. Clinical Trials and Pipeline - The Phase 2 LOTUS trial for AVTX-009 in hidradenitis suppurativa has enrolled approximately 250 adults and is expected to release topline results in mid-2026[155][158]. - Clinical expenses for the Phase 2 LOTUS trial increased due to ongoing patient trial costs and activities performed by contract research organizations[168]. - Avalo's strategy includes advancing its pipeline towards regulatory approval and considering further indication expansion for AVTX-009[162]. General and Administrative Expenses - General and administrative expenses rose by $1.3 million to $5.6 million for the three months ended September 30, 2025, primarily due to increased stock-based compensation[172]. - General and administrative expenses increased by $4.4 million for the nine months ended September 30, 2025, totaling $16.4 million compared to $12.0 million in 2024, primarily due to a $3.8 million rise in stock-based compensation[183]. Future Funding and Strategy - The company plans to fund future operations through equity sales, out-licensing transactions, and strategic collaborations[161].

Clinical Trials - Completed enrollment in the Phase 2 LOTUS trial of AVTX-009 for hidradenitis suppurativa, with topline data expected in mid-2026[5] - The LOTUS trial includes approximately 250 adults to evaluate the efficacy and safety of AVTX-009 with two dosing regimens compared to placebo[6] Financial Performance - Net loss for Q3 2025 was $30.6 million, compared to net income of $23.0 million for Q3 2024, with a significant change in other expenses[7] - Basic and diluted net loss per share for Q3 2025 was $2.19, compared to basic net income per share of $0.98 for Q3 2024[7] - Research and development expenses for Q3 2025 were $13.6 million, an increase of $4.1 million from Q3 2024, driven by costs related to the LOTUS trial[6] - General and administrative expenses for Q3 2025 were $5.6 million, an increase of $1.3 million from Q3 2024, primarily due to stock-based compensation[6] Assets and Liabilities - Cash and short-term investments totaled approximately $112 million as of September 30, 2025, expected to fund operations into 2028[5] - Total current assets as of September 30, 2025, were $113.8 million, down from $138.9 million as of December 31, 2024[8] - Total liabilities increased to $33.6 million as of September 30, 2025, compared to $17.7 million as of December 31, 2024[8] Leadership and Personnel - The leadership team was expanded with key appointments, including Taylor Boyd as Chief Business Officer and Ashley Ivanowicz as Senior Vice President of Human Resources[5] Risks and Uncertainties - Avalo Therapeutics may face significant risks and uncertainties that could cause actual results to differ from forward-looking statements[15] - The company relies on key personnel and is subject to regulatory risks that may impact its operations[16] - Economic and market risks, including geopolitical tensions such as the war in Ukraine and the Middle East, could affect Avalo's performance[16]

Core Insights - Avalo Therapeutics is focused on developing IL-1β-based treatments for immune-mediated inflammatory diseases, with a key emphasis on the Phase 2 LOTUS trial for AVTX-009 targeting hidradenitis suppurativa [1][11][12] Recent Corporate Highlights and Upcoming Anticipated Milestones - Enrollment in the Phase 2 LOTUS trial of AVTX-009 has been completed, with topline data expected in mid-2026 [6][7] - Kevin Lind has been appointed to the Board of Directors, bringing extensive experience in financial and corporate strategy [6][7] - The leadership team has been expanded with key appointments in business development and human resources [6][7] Third Quarter 2025 Financial Update - Cash and short-term investments totaled approximately $112 million as of September 30, 2025, expected to fund operations into 2028 [6][7] - Research and development expenses for Q3 2025 were $13.6 million, an increase of $4.1 million from Q3 2024, primarily due to costs associated with the LOTUS trial [7][10] - General and administrative expenses were $5.6 million for Q3 2025, up $1.3 million from Q3 2024, mainly driven by stock-based compensation [7][10] - The net loss for Q3 2025 was $30.6 million, compared to a net income of $23.0 million in Q3 2024, largely due to a $47.3 million change in other expenses [7][10] - Basic and diluted net loss per share for Q3 2025 was $2.19, compared to a basic net income per share of $0.98 for Q3 2024 [7][10] About AVTX-009 - AVTX-009 is a humanized monoclonal antibody that targets interleukin-1β (IL-1β), a key pro-inflammatory cytokine involved in various autoimmune disorders [12] - The LOTUS trial is designed to evaluate the efficacy and safety of AVTX-009 in approximately 250 adults with moderate to severe hidradenitis suppurativa [13]

Core Insights - Avalo Therapeutics, Inc. is identified as a top long-term biotechnology stock with a significant upside potential of 167.86% based on a price target of $48 set by Piper Sandler analyst Yasmeen Rahimi [1][2]. Company Overview - Avalo Therapeutics focuses on developing treatments for immune-mediated inflammatory diseases, with its lead product candidate, AVTX-009, currently in a Phase 2 clinical trial for hidradenitis suppurativa [3]. - The company's pipeline includes additional assets such as quisovalimab and AVTX-008, which are aimed at modulating the immune system [3]. Analyst Perspective - Piper Sandler maintains a bullish outlook on Avalo, emphasizing confidence in the company's strategic direction and progress in its clinical pipeline, particularly in immune dysregulation therapies [2]. - Recent leadership changes, strategic collaborations, and the ability to meet development milestones have contributed to the positive sentiment surrounding Avalo [2].