IntrinsicIntrinsic
OverviewFinancialsChartBusiness SummaryFilingsOwnershipValuation

Avalo Therapeutics, Inc. (AVTX)

Business Summary

Avalo Therapeutics, Inc. is a clinical-stage biotechnology company focused on developing IL-1β-based treatments for immune-mediated inflammatory diseases . The company's core business model revolves around advancing its pipeline through development to regulatory approval, acquiring or in-licensing targeted preclinical and clinical stage compounds for immune-mediated inflammatory diseases, and opportunistically out-licensing rights to compounds, indications, or geographies . Avalo generates revenue primarily through product sales, though it recognized minimal net product revenue for the year ended December 31, 2025, compared to $0.4 million for the prior year, which was related to a change in estimate of commercial liabilities for the Millipred® product . The license and supply agreement for Millipred® expired on September 30, 2023 , and no gross revenue was recognized from sales for the years ended December 31, 2025, and December 31, 2024 .

The company's lead product candidate is abdakibart (AVTX-009), an anti-IL-1β monoclonal antibody (mAb) . Abdakibart (AVTX-009) is a high affinity, highly potent humanized IgG mAb designed to specifically inhibit IL-1β and block downstream inflammatory pathways . It is currently in a Phase 2 clinical trial, known as the LOTUS trial, for hidradenitis suppurativa (HS) . HS is a chronic inflammatory skin disease estimated to affect 0.7–1.2% of the U.S. population , with an estimated 3.4 million people in the United States having HS in 2024, projected to rise to 3.5 million by 2035 . The global HS market is expected to grow to over $10 billion by 2035 . The company also has legacy programs, Quisovalimab (AVTX-002), AVTX-006, AVTX-008, and AVTX-913, for which it is exploring strategic alternatives and is not currently pursuing clinical development .

For the fiscal year ended December 31, 2025, Avalo Therapeutics reported a net loss of $78.3 million , an increase of $43.1 million compared to the prior year. Research and development expenses increased by $25.6 million to $50.084 million from $24.437 million in 2024, primarily due to increased clinical and CMC expenses related to the Phase 2 LOTUS trial . General and administrative expenses increased by $5.7 million to $22.900 million from $17.241 million in 2024, mainly driven by a $4.2 million increase in stock-based compensation expense . The company recognized $5.2 million in other expense, net, for the year ended December 31, 2025, compared to $33.5 million in other income, net, in the prior year, primarily due to the accounting impact of warrant liability in 2024 and changes in the fair value of derivative liability in 2025 .

Net cash used in operating activities was $51.5 million for the year ended December 31, 2025, compared to $49.056 million in 2024. As of December 31, 2025, the company had $98.3 million in cash and cash equivalents and short-term investments , and $12.9 million in current liabilities . The increase in research and development expenses was driven by increases in clinical and CMC expenses of $14.9 million and $4.6 million , respectively, due to progress in the Phase 2 LOTUS trial, including site activations, patient trial costs, and drug manufacturing activities . Stock-based compensation also increased by $3.6 million in R&D and $4.2 million in G&A due to option and restricted stock unit grants and headcount additions .

A significant operational development during the period was the completion of enrollment in the Phase 2 LOTUS trial for abdakibart (AVTX-009) in October 2025 . The company acquired the rights to abdakibart (AVTX-009) through the AlmataBio Transaction in the first quarter of 2024 , which included a $27.6 million acquired in-process research and development charge in 2024 that did not repeat in 2025 . In October 2024, the first development milestone of $5.0 million was met and paid in cash to the former AlmataBio stockholders upon the first patient dosed in a Phase 2 trial for abdakibart (AVTX-009) .

Business Outlook & Financial Sufficiency

Avalo Therapeutics expects its operating expenses to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout, which is anticipated in the second quarter of 2026 . However, expenses beyond this data readout are difficult to predict as they will be highly dependent on the trial's outcome . The company's current cash, cash equivalents, and short-term investments of $98.3 million are expected to fund operations into 2028 .

The primary growth area for Avalo is advancing abdakibart (AVTX-009) through development to regulatory approval, specifically by completing the Phase 2 LOTUS trial in HS, preparing to initiate pivotal trial(s) pending the Phase 2 results, and considering further indication expansion for abdakibart (AVTX-009) . The LOTUS trial is a randomized, double-blind, placebo-controlled, parallel-group Phase 2 trial evaluating the efficacy, safety, and tolerability of abdakibart (AVTX-009) in approximately 250 adults with moderate to severe hidradenitis suppurativa . The primary efficacy endpoint is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response 75 (HiSCR75) at Week 16 . HS represents a substantial unmet medical need, with currently approved biologics achieving HiSCR50 only approximately 50% of the time , and the global HS market is expected to grow to over $10 billion by 2035 .

The company plans to primarily rely on biologics regulatory exclusivity for abdakibart (AVTX-009) , which, if approved by the FDA, is expected to provide twelve years of regulatory exclusivity in the United States and a minimum of 9 years, potentially up to 11 years, in Europe . This is particularly important as the U.S. composition-of-matter patent for abdakibart (AVTX-009) expired in February 2026 . Avalo also has pending patent applications related to abdakibart (AVTX-009) for methods of treating HS and formulations, with expiration dates in 2045 .

Operationally, Avalo expects cash used in operations to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026 . Beyond this, cash usage will be highly dependent on the trial's outcome . The company does not have its own manufacturing facilities and will continue to rely on third-party contract development and manufacturing organizations (CDMOs) for raw materials, manufacturing, and quality testing for its product candidates . Currently, a single CDMO manufactures the clinical supply for abdakibart (AVTX-009) .

For capital allocation, Avalo expects to finance its operations through a combination of equity offerings, debt financings, collaborations, licensing arrangements, and other similar arrangements . The company will likely need to raise additional funds prior to any Phase 3 development and/or indication expansion . Planned capital expenditures are not explicitly detailed beyond the general funding of operations and development of abdakibart (AVTX-009) . The company provides discretionary matching contributions to its 401(k) plan for employees .

Management has explicitly flagged several structural headwinds and execution risks. The company is substantially dependent on the success of abdakibart (AVTX-009), and any setbacks or failures in its clinical development could cause material delays and costs . The unpredictability of drug development means toxicity, safety, or adverse reactions could be encountered . The company also faces intense competition from pharmaceutical and biotechnology companies, many of whom have greater resources and experience . The marketing approval processes are lengthy, costly, and unpredictable, and there is no guarantee of obtaining approval . Furthermore, the company's ability to use its net operating loss carryforwards and certain other tax attributes may be limited due to potential ownership changes under IRC Sections 382 and 383 .

Geographic, regulatory, and macro factors identified as constraints include the fact that clinical trials are being conducted at sites in foreign jurisdictions, and the FDA might not accept data from these trials . Changes in government regulations or administrative actions, including those from the U.S. Supreme Court's decision in July 2024 to overturn established case law giving deference to regulatory agencies' interpretations of ambiguous statutory language, could introduce uncertainty and delays . The Inflation Reduction Act of 2022 (IRA) and the One Big Beautiful Bill Act of 2025, along with recent CMS proposals (GLOBE, GUARD, GENEROUS), could impact drug pricing and reimbursement, potentially reducing pricing flexibility and increasing rebates . Unstable global economic and geopolitical conditions, including military conflicts, sanctions, and trade restrictions, may also adversely affect the business .

Management Sentiments & Priorities

Management's overall tone emphasizes a focused strategy on advancing abdakibart (AVTX-009) through its Phase 2 LOTUS trial for hidradenitis suppurativa (HS) and preparing for subsequent Phase 3 trials, with an anticipated topline data readout in the second quarter of 2026 . The company's strategic priorities include completing the Phase 2 LOTUS trial, planning for Phase 3 trial(s), considering further indication expansion for abdakibart (AVTX-009), acquiring or in-licensing targeted, complementary preclinical and clinical stage compounds for immune-mediated inflammatory diseases, and opportunistically out-licensing rights to compounds, indications, or geographies . Management believes its existing cash and cash equivalents and short-term investments of $98.3 million are sufficient to fund operations into 2028 . However, they explicitly state that expenses beyond the Phase 2 data readout are difficult to predict and highly dependent on the trial's outcome , and that additional funds will likely be needed prior to any Phase 3 development and/or indication expansion . Management also acknowledges the significant risks associated with relying on a single lead product candidate, the unpredictability of drug development, intense competition, and the lengthy and uncertain regulatory approval processes.

Risk Factors

Avalo Therapeutics faces material risks including the substantial dependence on the success of abdakibart (AVTX-009), where clinical trial failures or delays could significantly increase costs and harm the business . The company expects to require additional capital to fund operations and advance product candidates, and failure to obtain this funding could force delays, limitations, or termination of development efforts . The U.S. composition-of-matter patent for abdakibart (AVTX-009) expired in February 2026 , increasing reliance on regulatory exclusivity, which may be challenged or shortened . Intense competition from companies with greater resources and experience, coupled with rapid technological change, poses a significant threat to market share and product success . Regulatory approval processes are lengthy, costly, and unpredictable, with no guarantee of success, and even if approved, products may not achieve broad market acceptance due to efficacy, safety, cost-effectiveness, or reimbursement issues . The company is subject to significant payment obligations under license and development agreements, including up to $70 million in development and regulatory milestones to Lilly, up to $650 million in sales-based milestones to Lilly, up to $70 million to Leap, and contingent development milestones to former AlmataBio stockholders, including $15.0 million upon the first patient dosed in a Phase 3 trial for abdakibart (AVTX-009) . Non-compliance with environmental, health, and safety laws, or misconduct by employees or third parties, could result in fines, penalties, or reputational damage . Cybersecurity threats, including those enhanced by artificial intelligence, pose risks to sensitive data and operations, potentially leading to litigation, penalties, and reputational harm . Unstable global economic and geopolitical conditions, such as military conflicts, sanctions, and trade restrictions, could adversely impact financial markets, supply chains, and the company's ability to raise capital .

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 1, Business — Our Strategy
  3. [3] Item 7, MD&A — Product Revenue, net
  4. [4] Item 7, MD&A — Product Revenue, net
  5. [5] Item 7, MD&A — Product Revenue, net
  6. [6] Item 7, MD&A — Product Revenue, net
  7. [7] Item 1, Business — Overview
  8. [8] Item 1, Business — Pipeline - Overview, Competition, and Intellectual Property
  9. [9] Item 1, Business — Overview
  10. [10] Item 1, Business — Development Opportunity in HS
  11. [11] Item 1, Business — Development Opportunity in HS
  12. [12] Item 1, Business — Development Opportunity in HS
  13. [13] Item 1, Business — Legacy Programs
  14. [14] Item 7, MD&A — 2025 Financial Operations Overview
  15. [15] Item 7, MD&A — 2025 Financial Operations Overview
  16. [16] Item 7, MD&A — Research and Development Expenses
  17. [17] Item 7, MD&A — Research and Development Expenses
  18. [18] Item 7, MD&A — Research and Development Expenses
  19. [19] Item 7, MD&A — Research and Development Expenses
  20. [20] Item 7, MD&A — General and Administrative Expenses
  21. [21] Item 7, MD&A — General and Administrative Expenses
  22. [22] Item 7, MD&A — General and Administrative Expenses
  23. [23] Item 7, MD&A — General and Administrative Expenses
  24. [24] Item 7, MD&A — General and Administrative Expenses
  25. [25] Item 7, MD&A — Other (Expense) Income, net
  26. [26] Item 7, MD&A — Other (Expense) Income, net
  27. [27] Item 7, MD&A — Other (Expense) Income, net
  28. [28] Item 7, MD&A — Cash Flows
  29. [29] Item 7, MD&A — Cash Flows
  30. [30] Item 7, MD&A — 2025 Financial Operations Overview
  31. [31] Item 7, MD&A — 2025 Financial Operations Overview
  32. [32] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
  33. [33] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
  34. [34] Item 7, MD&A — Research and Development Expenses
  35. [35] Item 7, MD&A — Research and Development Expenses
  36. [36] Item 7, MD&A — Research and Development Expenses
  37. [37] Item 7, MD&A — Research and Development Expenses
  38. [38] Item 7, MD&A — General and Administrative Expenses
  39. [39] Item 7, MD&A — Research and Development Expenses
  40. [40] Item 1, Business — Abdakibart (AVTX-009): Anti-IL-1β mAb targeting inflammatory diseases
  41. [41] Item 1, Business — Licensing and Partnerships
  42. [42] Item 7, MD&A — Acquired In-Process Research and Development
  43. [43] Item 7, MD&A — Acquired In-Process Research and Development
  44. [44] Item 1, Business — AlmataBio Transaction
  45. [45] Item 1, Business — AlmataBio Transaction
  46. [46] Item 7, MD&A — 2025 Financial Operations Overview
  47. [47] Item 7, MD&A — 2025 Financial Operations Overview
  48. [48] Item 7, MD&A — 2025 Financial Operations Overview
  49. [49] Item 7, MD&A — 2025 Financial Operations Overview
  50. [50] Item 1, Business — Our Strategy
  51. [51] Item 1, Business — Phase 2 LOTUS Trial
  52. [52] Item 1, Business — Phase 2 LOTUS Trial
  53. [53] Item 1, Business — Phase 2 LOTUS Trial
  54. [54] Item 1, Business — Development Opportunity in HS
  55. [55] Item 1, Business — Development Opportunity in HS
  56. [56] Item 1, Business — Intellectual Property Overview
  57. [57] Item 1, Business — Intellectual Property Overview
  58. [58] Item 1, Business — Intellectual Property Overview
  59. [59] Item 1, Business — Intellectual Property Overview
  60. [60] Item 1, Business — Intellectual Property Overview
  61. [61] Item 7, MD&A — Uses of Liquidity
  62. [62] Item 7, MD&A — Uses of Liquidity
  63. [63] Item 1, Business — Manufacturing
  64. [64] Item 1, Business — Manufacturing
  65. [65] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
  66. [66] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
  67. [67] Item 7, MD&A — Uses of Liquidity
  68. [68] Item 11, Executive Compensation — 401(k) Plan
  69. [69] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
  70. [70] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
  71. [71] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
  72. [72] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
  73. [73] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
  74. [74] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
  75. [75] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
  76. [76] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
  77. [77] Item 1A, Risk Factors — Unstable global economic and geopolitical conditions may have serious adverse consequences on our business, financial condition, stock price and results of operations.
  78. [78] Item 1A, Risk Factors — We are substantially dependent on the success of abdakibart (AVTX-009), and our ongoing and anticipated clinical trials of abdakibart (AVTX-009) may not be successful.
  79. [79] Item 1A, Risk Factors — We expect to require additional capital in the future to continue to fund our operations and to finance the further advancement of our product candidates, which might not be available to us on acceptable terms, or at all. Failure to obtain any necessary capital could force us to delay, limit or terminate our product development efforts or significantly curtail or cease our operations altogether.
  80. [80] Item 1A, Risk Factors — If we are unable to obtain or maintain intellectual property rights, or if the scope of our issued patents are not sufficiently broad, competitors could develop and commercialize products similar or identical to ours, and we might not be able to compete effectively in our market. Furthermore, our US composition-of-matter patent for abdakibart (AVTX-009) expired in February 2026.
  81. [81] Item 1A, Risk Factors — As appropriate, we intend to seek all available periods of regulatory exclusivity for our product candidates. However, there is no guarantee that we will be granted these periods of regulatory exclusivity or that we will be able to maintain these periods of exclusivity.
  82. [82] Item 1A, Risk Factors — We face substantial competition and rapid technological change and the possibility that others may discover, develop or commercialize products before or more successfully than us.
  83. [83] Item 1A, Risk Factors — The marketing approval processes of the FDA and other regulatory authorities are lengthy, time‑consuming, costly and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates would substantially harm our business and prospects.
  84. [84] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
  85. [85] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
  86. [86] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
  87. [87] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
  88. [88] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
  89. [89] Item 1A, Risk Factors — If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
  90. [90] Item 1A, Risk Factors — Our business and operations could suffer in the event of information technology systems and infrastructure failures, cyber-attacks or deficiencies in our cyber-security.
  91. [91] Item 1A, Risk Factors — Unstable global economic and geopolitical conditions may have serious adverse consequences on our business, financial condition, stock price and results of operations.
  92. [92] Item 7, MD&A — Overview
  93. [93] Item 1, Business — Our Strategy
  94. [94] Item 7, MD&A — 2025 Financial Operations Overview
  95. [95] Item 7, MD&A — 2025 Financial Operations Overview
  96. [96] Item 7, MD&A — 2025 Financial Operations Overview
  97. [97] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs

Analysis on 5/22/2026