Avalo Therapeutics (AVTX), a clinical-stage biotechnology company, is taking steps to treat immune dysregulation. The company’s lead asset, AVTX-009, is a monoclonal antibody that targets inflammation and offers the potential as a leading treatment for Hidradenitis Suppurativa (HS), a chronic skin condition. Avalo has recently dosed its first HS patient in the Phase 2 LOTUS trial, with top-line data expected in 2026. Further, the company plans to examine AVTX-009’s broader applications for other immune-mediated diseases. With the diagnosed and treated HS population projected to grow into a $10B+ market by 2035, AVTX-009 is a clinical-stage treatment with blockbuster potential.
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Avalo has seen an influx of cash that could support operations into 2027. The firm has recently earned $69.4 million from the full exercise of private placement warrants and received $58.1 million from the exercise of warrants issued in early 2024. These funds will support its ongoing clinical trials, including the LOTUS Trial. It is still early, and there is significant risk, but for investors looking for hidden gems with considerable upside potential in biotech, AVTX may be an intriguing option.
Avalo Hits Significant Milestone
Avalo Therapeutics is a clinical-stage biotech company working towards treatments for immune dysregulation, with a prime focus on inflammatory diseases. The company’s most promising asset is AVTX-009, an anti-IL-1β monoclonal antibody.
AVTX-009 was recently administered to the first HS patient in a Phase 2 LOTUS trial, marking a significant milestone. The objective of the LOTUS trial is to prove the efficacy of AVTX-009 as a leading treatment for HS based on its potency, specificity, and convenient dosing. The LOTUS Trial for AVTX-009 is anticipated to produce top-line data by 2026, which could open up its use for a broader range of immune-mediated diseases in the future. The company aims to extend the use of AVTX-009 for other immune-mediated diseases, such as arthritis and inflammatory bowel disease.
In addition, Avalo Therapeutics has recently expanded its financial position by exercising private placement warrants, bringing in $69.4 million in gross proceeds. This added revenue is expected to extend the company’s cash runway up until 2027 and will be used to bolster the ongoing clinical trials.
Avalo’s Financial Results Mark a Slight Improvement
The company recently reported results for the third quarter. Revenue of $249,000 marked a 4.2% year-over-year increase. R&D and general and administrative costs rose to $9.5 million and $4.3 million, respectively. The increase in R&D expenses is attributed to the initiation and development costs of the AVTX-009 LOTUS trial. The rise in general and administrative expenses was driven by increased employee compensation costs, augmented consulting, legal, and other professional expenses post the Q1 acquisition of AlmataBio, Inc., and financing activities.
The net income for the third quarter of 2024 reached $23 million, in contrast to a net loss of $5.2 million during the same period of 2023. This improvement in net income was primarily due to a $37.4 million increase in other income, which was mainly related to changes in the fair value of the warrant liability for the period despite the increased operational expenses. GAAP earnings per share (EPS) of -$2.83 substantially improved from the -$26.40 loss per share in Q3 2023.
As of the quarter’s end, the company held cash and cash equivalents of $81.9 million. In November, Avalo added to that by gathering gross proceeds of $58.1 million from exercising over 10 million warrants, leading to the issuance of more than 700k common shares and over 9000 preferred shares. Avalo’s cash reserves are predicted to fund operations until at least 2027.
Is AVTX a Buy?
The stock has bounced around in the past year from a high of $34.46 a share to a low of $3.95, posting a meager 4.42% return. It trades at the lower end of the 52-week price range and shows ongoing negative price momentum as it trades below the 20-day (10.69) and 50-day (10.95) moving averages.
Wall Street follows the stock thinly. H.C. Wainwright analyst Edward White recently initiated coverage with a Neutral rating and no price target, noting that AVTX-009 has promise to treat inflammatory diseases.
Avalo Therapeutics is rated a Moderate Buy based on two analysts’ recent recommendations. The average price target for AVTX stock is $35.00, representing a potential 244.83% upside from current levels.
Final Analysis of Avalo
Avalo is breaking new ground in treating immune dysregulation, particularly inflammatory diseases. Its flagship asset, AVTX-009, has commenced a Phase 2 clinical trial, with top-line results expected in 2026. The company’s recent financial exercises have bolstered its position significantly, extending a cash runway that could support operations into 2027. Despite potential risks and the early stage of trials, AVTX offers an innovative take on disease treatment that might intrigue those hunting for substantial growth potential in the biotech sector.
