Avalo Therapeutics(AVTX) - 2024 Q2 - Quarterly Report

Financial Performance - Avalo generated a net loss of $22.8 million and negative cash flows from operations of $22.5 million for the six months ended June 30, 2024[164]. - There was no net product revenue for the three months ended June 30, 2024, compared to $0.6 million for the same period in 2023, due to the expiration of the license and supply agreement for Millipred[169]. - The company had no net product revenue for the six months ended June 30, 2024, compared to $1.1 million for the same period in 2023, due to the planned expiration of the license and supply agreement for Millipred[184]. - The company reported a net cash used in operating activities of $22.5 million for the six months ended June 30, 2024, compared to $21.1 million for the same period in 2023[199]. - Net cash used in operating activities was $21.1 million for the six months ended June 30, 2023, primarily due to a net loss of $18.1 million and non-cash adjustments including stock-based compensation of $1.7 million[201]. Cash Position - As of June 30, 2024, Avalo had $93.4 million in cash and cash equivalents, with expectations to fund operations into 2027[165]. - Interest income increased by $3.1 million due to the company's increased cash position compared to the prior period, with no interest expense incurred in the current period[196]. - Net cash provided by financing activities for the six months ended June 30, 2024 was $115.6 million from a private placement investment, offset by transaction costs of $7.5 million[202]. - The company could receive up to an additional $69.4 million from the exercise of warrants issued in the private placement investment, exercisable at approximately $5.80 per share[203]. Research and Development - Research and development expenses decreased by $0.1 million to $4.6 million for the three months ended June 30, 2024, primarily due to a decrease in CMC expenses[173]. - Avalo expects future research and development expenses to increase in 2024 due to the development plans for AVTX-009[174]. - The company recognized a $79.3 million loss on the excess of initial warrant liability fair value over private placement proceeds, with a fair value of $194.9 million against proceeds of $115.6 million[192]. - Research and development expenses decreased by $4.0 million for the six months ended June 30, 2024, primarily due to a $2.8 million decrease in clinical expenses and a $2.0 million decrease in CMC expenses[188]. - Avalo's IND for AVTX-009 is now active, allowing the commencement of the Phase 2 LOTUS clinical trial, expected to enroll its first patient in the second half of 2024[162]. - The primary efficacy endpoint for the LOTUS Trial is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response (HiSCR75) at Week 16[162]. General and Administrative Expenses - General and administrative expenses increased by $2.1 million to $4.5 million for the three months ended June 30, 2024, driven by increased legal and consulting expenses related to the Almata Transaction[177]. - General and administrative expenses increased by $2.6 million for the six months ended June 30, 2024, driven by a $1.7 million increase in legal, consulting, and other professional expenses[191]. Other Income and Expenses - Other income increased by $109.1 million for the three months ended June 30, 2024, primarily due to a $112.0 million gain on the change of fair value of the warrant liability[178]. - Other income, net increased by $21.7 million for the six months ended June 30, 2024, primarily driven by the impact of the warrant liability associated with the March 2024 financing[192]. - The company incurred $9.2 million in private placement transaction costs, primarily related to placement agent fees[194]. Accounting and Controls - There were no significant changes to critical accounting policies during the three months ended June 30, 2024[205]. - The company has no off-balance sheet arrangements as defined by SEC rules[206]. - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of the end of the reporting period[208]. - There were no changes in internal control over financial reporting that materially affected the company's internal control during the reporting period[210].