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 ¹. 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 ². 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 ³ for the prior year, which was related to a change in estimate of commercial liabilities for the Millipred® product ⁴. The license and supply agreement for Millipred® expired on September 30, 2023 ⁵, and no gross revenue was recognized from sales for the years ended December 31, 2025, and December 31, 2024 ⁶.

The company's lead product candidate is abdakibart (AVTX-009), an anti-IL-1β monoclonal antibody (mAb) ⁷. Abdakibart (AVTX-009) is a high affinity, highly potent humanized IgG mAb designed to specifically inhibit IL-1β and block downstream inflammatory pathways ⁸. It is currently in a Phase 2 clinical trial, known as the LOTUS trial, for hidradenitis suppurativa (HS) ⁹. HS is a chronic inflammatory skin disease estimated to affect 0.7–1.2% of the U.S. population ¹⁰, with an estimated 3.4 million people in the United States having HS in 2024, projected to rise to 3.5 million by 2035 ¹¹. The global HS market is expected to grow to over $10 billion by 2035 ¹². 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 ¹³.

For the fiscal year ended December 31, 2025, Avalo Therapeutics reported a net loss of $78.3 million ¹⁴, an increase of $43.1 million ¹⁵ compared to the prior year. Research and development expenses increased by $25.6 million ¹⁶ to $50.084 million ¹⁷ from $24.437 million ¹⁸ in 2024, primarily due to increased clinical and CMC expenses related to the Phase 2 LOTUS trial ¹⁹. General and administrative expenses increased by $5.7 million ²⁰ to $22.900 million ²¹ from $17.241 million ²² in 2024, mainly driven by a $4.2 million ²³ increase in stock-based compensation expense ²⁴. The company recognized $5.2 million ²⁵ in other expense, net, for the year ended December 31, 2025, compared to $33.5 million ²⁶ 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 ²⁷.

Net cash used in operating activities was $51.5 million ²⁸ for the year ended December 31, 2025, compared to $49.056 million ²⁹ in 2024. As of December 31, 2025, the company had $98.3 million ³⁰ in cash and cash equivalents and short-term investments ³¹, and $12.9 million ³² in current liabilities ³³. The increase in research and development expenses was driven by increases in clinical and CMC expenses of $14.9 million ³⁴ and $4.6 million ³⁵, respectively, due to progress in the Phase 2 LOTUS trial, including site activations, patient trial costs, and drug manufacturing activities ³⁶. Stock-based compensation also increased by $3.6 million ³⁷ in R&D and $4.2 million ³⁸ in G&A due to option and restricted stock unit grants and headcount additions ³⁹.

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 ⁴⁰. The company acquired the rights to abdakibart (AVTX-009) through the AlmataBio Transaction in the first quarter of 2024 ⁴¹, which included a $27.6 million ⁴² acquired in-process research and development charge in 2024 that did not repeat in 2025 ⁴³. In October 2024, the first development milestone of $5.0 million ⁴⁴ 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) ⁴⁵.

Business Outlook

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 ⁴⁶. However, expenses beyond this data readout are difficult to predict as they will be highly dependent on the trial's outcome ⁴⁷. The company's current cash, cash equivalents, and short-term investments of $98.3 million ⁴⁸ are expected to fund operations into 2028 ⁴⁹.

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) ⁵⁰. 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 ⁵¹ with moderate to severe hidradenitis suppurativa ⁵². The primary efficacy endpoint is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response 75 (HiSCR75) at Week 16 ⁵³. HS represents a substantial unmet medical need, with currently approved biologics achieving HiSCR50 only approximately 50% of the time ⁵⁴, and the global HS market is expected to grow to over $10 billion by 2035 ⁵⁵.

The company plans to primarily rely on biologics regulatory exclusivity for abdakibart (AVTX-009) ⁵⁶, which, if approved by the FDA, is expected to provide twelve years of regulatory exclusivity in the United States ⁵⁷ and a minimum of 9 years, potentially up to 11 years, in Europe ⁵⁸. This is particularly important as the U.S. composition-of-matter patent for abdakibart (AVTX-009) expired in February 2026 ⁵⁹. Avalo also has pending patent applications related to abdakibart (AVTX-009) for methods of treating HS and formulations, with expiration dates in 2045 ⁶⁰.

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 ⁶¹. Beyond this, cash usage will be highly dependent on the trial's outcome ⁶². 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 ⁶³. Currently, a single CDMO manufactures the clinical supply for abdakibart (AVTX-009) ⁶⁴.

For capital allocation, Avalo expects to finance its operations through a combination of equity offerings, debt financings, collaborations, licensing arrangements, and other similar arrangements ⁶⁵. The company will likely need to raise additional funds prior to any Phase 3 development and/or indication expansion ⁶⁶. Planned capital expenditures are not explicitly detailed beyond the general funding of operations and development of abdakibart (AVTX-009) ⁶⁷. The company provides discretionary matching contributions to its 401(k) plan for employees ⁶⁸.

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 ⁶⁹. The unpredictability of drug development means toxicity, safety, or adverse reactions could be encountered ⁷⁰. The company also faces intense competition from pharmaceutical and biotechnology companies, many of whom have greater resources and experience ⁷¹. The marketing approval processes are lengthy, costly, and unpredictable, and there is no guarantee of obtaining approval ⁷². 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 ⁷³.

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 ⁷⁴. 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 ⁷⁵. 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 ⁷⁶. Unstable global economic and geopolitical conditions, including military conflicts, sanctions, and trade restrictions, may also adversely affect the business ⁷⁷.

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 ⁷⁸. 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 ⁷⁹. The U.S. composition-of-matter patent for abdakibart (AVTX-009) expired in February 2026 ⁸⁰, increasing reliance on regulatory exclusivity, which may be challenged or shortened ⁸¹. Intense competition from companies with greater resources and experience, coupled with rapid technological change, poses a significant threat to market share and product success ⁸². 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 ⁸³. The company is subject to significant payment obligations under license and development agreements, including up to $70 million ⁸⁴ in development and regulatory milestones to Lilly, up to $650 million ⁸⁵ in sales-based milestones to Lilly, up to $70 million ⁸⁶ to Leap, and contingent development milestones to former AlmataBio stockholders, including $15.0 million ⁸⁷ upon the first patient dosed in a Phase 3 trial for abdakibart (AVTX-009) ⁸⁸. Non-compliance with environmental, health, and safety laws, or misconduct by employees or third parties, could result in fines, penalties, or reputational damage ⁸⁹. Cybersecurity threats, including those enhanced by artificial intelligence, pose risks to sensitive data and operations, potentially leading to litigation, penalties, and reputational harm ⁹⁰. 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 ⁹¹.

Management 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 ⁹². 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 ⁹³. Management believes its existing cash and cash equivalents and short-term investments of $98.3 million ⁹⁴ are sufficient to fund operations into 2028 ⁹⁵. However, they explicitly state that expenses beyond the Phase 2 data readout are difficult to predict and highly dependent on the trial's outcome ⁹⁶, and that additional funds will likely be needed prior to any Phase 3 development and/or indication expansion ⁹⁷. 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.

View Source Annual Report on SEC.gov ↗

References

[1] Item 1, Business — Overview
[2] Item 1, Business — Our Strategy
[3] Item 7, MD&A — Product Revenue, net
[4] Item 7, MD&A — Product Revenue, net
[5] Item 7, MD&A — Product Revenue, net
[6] Item 7, MD&A — Product Revenue, net
[7] Item 1, Business — Overview
[8] Item 1, Business — Pipeline - Overview, Competition, and Intellectual Property
[9] Item 1, Business — Overview
[10] Item 1, Business — Development Opportunity in HS
[11] Item 1, Business — Development Opportunity in HS
[12] Item 1, Business — Development Opportunity in HS
[13] Item 1, Business — Legacy Programs
[14] Item 7, MD&A — 2025 Financial Operations Overview
[15] Item 7, MD&A — 2025 Financial Operations Overview
[16] Item 7, MD&A — Research and Development Expenses
[17] Item 7, MD&A — Research and Development Expenses
[18] Item 7, MD&A — Research and Development Expenses
[19] Item 7, MD&A — Research and Development Expenses
[20] Item 7, MD&A — General and Administrative Expenses
[21] Item 7, MD&A — General and Administrative Expenses
[22] Item 7, MD&A — General and Administrative Expenses
[23] Item 7, MD&A — General and Administrative Expenses
[24] Item 7, MD&A — General and Administrative Expenses
[25] Item 7, MD&A — Other (Expense) Income, net
[26] Item 7, MD&A — Other (Expense) Income, net
[27] Item 7, MD&A — Other (Expense) Income, net
[28] Item 7, MD&A — Cash Flows
[29] Item 7, MD&A — Cash Flows
[30] Item 7, MD&A — 2025 Financial Operations Overview
[31] Item 7, MD&A — 2025 Financial Operations Overview
[32] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
[33] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
[34] Item 7, MD&A — Research and Development Expenses
[35] Item 7, MD&A — Research and Development Expenses
[36] Item 7, MD&A — Research and Development Expenses
[37] Item 7, MD&A — Research and Development Expenses
[38] Item 7, MD&A — General and Administrative Expenses
[39] Item 7, MD&A — Research and Development Expenses
[40] Item 1, Business — Abdakibart (AVTX-009): Anti-IL-1β mAb targeting inflammatory diseases
[41] Item 1, Business — Licensing and Partnerships
[42] Item 7, MD&A — Acquired In-Process Research and Development
[43] Item 7, MD&A — Acquired In-Process Research and Development
[44] Item 1, Business — AlmataBio Transaction
[45] Item 1, Business — AlmataBio Transaction
[46] Item 7, MD&A — 2025 Financial Operations Overview
[47] Item 7, MD&A — 2025 Financial Operations Overview
[48] Item 7, MD&A — 2025 Financial Operations Overview
[49] Item 7, MD&A — 2025 Financial Operations Overview
[50] Item 1, Business — Our Strategy
[51] Item 1, Business — Phase 2 LOTUS Trial
[52] Item 1, Business — Phase 2 LOTUS Trial
[53] Item 1, Business — Phase 2 LOTUS Trial
[54] Item 1, Business — Development Opportunity in HS
[55] Item 1, Business — Development Opportunity in HS
[56] Item 1, Business — Intellectual Property Overview
[57] Item 1, Business — Intellectual Property Overview
[58] Item 1, Business — Intellectual Property Overview
[59] Item 1, Business — Intellectual Property Overview
[60] Item 1, Business — Intellectual Property Overview
[61] Item 7, MD&A — Uses of Liquidity
[62] Item 7, MD&A — Uses of Liquidity
[63] Item 1, Business — Manufacturing
[64] Item 1, Business — Manufacturing
[65] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
[66] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
[67] Item 7, MD&A — Uses of Liquidity
[68] Item 11, Executive Compensation — 401(k) Plan
[69] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
[70] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
[71] Item 1A, Risk Factors — Risks Related to Development of Our Product Candidates
[72] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
[73] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs
[74] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
[75] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
[76] Item 1A, Risk Factors — Risks Related to Regulatory Approval of Our Product Candidates
[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] 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] 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] 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] 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] 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] 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] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
[85] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
[86] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
[87] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
[88] Item 1A, Risk Factors — We may be required to make significant payments in connection with our license and development agreements.
[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] 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] 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] Item 7, MD&A — Overview
[93] Item 1, Business — Our Strategy
[94] Item 7, MD&A — 2025 Financial Operations Overview
[95] Item 7, MD&A — 2025 Financial Operations Overview
[96] Item 7, MD&A — 2025 Financial Operations Overview
[97] Item 1A, Risk Factors — Risks Related to Our Financial Position and Capital Needs

Analysis on 5/22/2026

Recent Material Events

2026-06-23Material Event

Avalo Therapeutics, Inc. appointed Ron Philip to its Board of Directors, effective June 23, 2026. Mr. Philip will serve on the Compensation Committee and the Science, Development and Commercial Advisory Committee until the 2027 Annual Meeting of Stockholders. As part of his appointment, he will receive a non-qualified stock option to purchase 40,200 shares of common stock, vesting in three equal annual installments. Mr. Philip previously held leadership roles at Spark Therapeutics, Orbital Therapeutics, and Pfizer. Avalo Therapeutics, Inc. is a biotechnology company.

View filing ↗

2026-06-16Material Event

Avalo Therapeutics, Inc. announced the advancement of AVTX-010, a long-acting next-generation anti-IL-1β monoclonal antibody. The therapeutic candidate is being developed for the treatment of hidradenitis suppurativa and other inflammatory disorders. The company also released an updated investor presentation on its website. Avalo Therapeutics is a biotechnology company focused on developing therapies for inflammatory diseases.

View filing ↗

2026-06-12Material Event

Avalo Therapeutics, Inc. entered into an exchange agreement on June 11, 2026, to exchange 4,294.675 shares of Series C non-voting convertible preferred stock for an equivalent number of newly created Series C-1 non-voting convertible preferred stock. This exchange allows an investor to increase their beneficial ownership limit from 4.99% to 9.99% of the Company's common stock. Additionally, the Company amended employment agreements for CEO Garry A. Neil, CFO Christopher Sullivan, M.D., CMO Mittie Doyle, and CBO Taylor Boyd to modify severance and change in control benefits. Avalo Therapeutics, Inc. is a biotechnology company focused on developing therapeutic solutions.

View filing ↗

2026-06-08Material Event

Avalo Therapeutics, Inc. held its 2026 annual meeting of stockholders, where stockholders approved the Second Amended and Restated 2016 Employee Stock Purchase Plan (A&R 2016 ESPP) and elected seven board nominees. Additionally, stockholders also ratified the following: Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year 2026.

View filing ↗