Terrific. Welcome back to another session here at Oppenheimer's 35th Annual Life Sciences Healthcare Conference. I'm Leland Gershell, one of the biotech analysts here on the research team. We're delighted to have with us Avalo Therapeutics. We've been covering Avalo for some time and very interested in their program in hidradenitis suppurativa, which is enrolling nicely. On behalf of the company, we have President and CEO Dr. Garry Neil, with whom we will have a fireside chat, but also please feel free to lob in any questions, and we will do the best to ask those on your behalf. With that, welcome, Garry.
Thank you, Leland. It's a pleasure to be here, and I apologize to the audience for my croaky voice, but I'm dealing with this cold that's been going around, so I'll do my best.
Absolutely. I think just to bring people up to speed, who may be less familiar with the story, last year, Avalo acquired Almata Bio, so that brought your lead candidate, AVTX-009, into the pipeline. Maybe just start by sharing some history of the compound, its data package that came from Lilly, and what makes it unique as you advance that for HS.
Yeah, thank you. We acquired AVTX-009 through a merger with Almata Bio in the first quarter of 2024. I can't believe it's not even a year since we closed that deal and all the progress that we've been able to make. The compound was originally developed by Eli Lilly, and they had a lot of prior clinical trial experience, over 245 patients treated, some for quite a length of time at relatively high doses in patients with rheumatoid arthritis and type 2 diabetes. The compound was very well tolerated, demonstrated an excellent safety profile, and it also showed them very, very high potency, being able to basically block CRP and IL-6 at doses as low as 0.6 milligrams, which is the lowest that they were able to test. They outlicensed the drug.
It spent a brief time with another company that were looking at it in cancer, but that really didn't go anywhere. It never really got into the clinic. We were excited. We saw the opportunity emerging in HS and knew what the potential of IL-1β was going to be in HS and saw this as a potential best-in-class, best-in-disease therapy based on the really high affinity and longer half-life. The data that had just emerged at the time we were acquiring it would lead to lutikizumab, which was AbbVie's bispecific IL-1α/β drug, which is now in phase three. We were very excited about this and the profile. We also recognized another thing, which is pain is really important in HS, as it is in other inflammatory diseases. IL-1β is a very potent central mediator and peripheral mediator of pain.
We were thinking about the potential opportunity for the drug there as well. We're excited to acquire it, get it going as quickly as we were able to do, get our IND filed, and get into the clinic last year. We're now progressing well in our phase two trial with data due in 2026.
Great. Investors have become quite familiar with HS as an indication given the activity in the industry. Maybe they're less familiar with t he different levels of severity and maybe the fact that it's often underdiagnosed or undiagnosed until down the road. Maybe just share a brief perspective on those elements.
Yeah. I was a practicing gastroenterologist before I went into the industry of biotech. We knew about this disease, but we considered it to be a very rare disease at the time. Now we realize it's not rare. It affects up to 1% of the population and maybe even more in some surveys. It's been tracking the obesity epidemic, but it's not just the disease of obesity. These patients, the reason we thought it was rare was because they usually would present to their GP, who would not know what it was. It could take 10, 15 years before they would ultimately get referred to a specialist who would be able to diagnose it and treat it. By that time, the disease would get really potentially very, very severe with a lot of scarring, tunneling, and really severe consequences on the patient's quality of life.
We now recognize this much more readily. New drugs are on the market, so patients are being referred earlier. Although there's currently only 320,000 patients known to have moderate to severe disease under treatment in the U.S., we think the number is much higher than that. Earlier referrals and better recognition are going to really expand that market opportunity and allow patients to get treated more aggressively earlier in the disease, which is going to help them as well as expand the market.
Great. Your candidate, 009, that excellent IL-1β, which plays a critical role in the inflammatory cascade, as you'd mentioned. How does that differ in terms of its inhibition versus other mechanisms like IL-17 or TNF in the HS pathogenesis?
It's really interesting because IL-1 beta is, we've known this for a long time, is a central regulator of the immune system. It was the first cytokine discovered, after all, and there's a reason for that. It's upstream of both IL-17 and TNF alpha. It's important. There's an important and complex interplay between those in driving the inflammatory process. We also know that the IL-1 beta levels are over a hundredfold increase in the lesions of patients with HS. It's the single most prevalent cytokine in these lesions, giving us a very strong clue for the role that it's playing as an inflammatory driver. We know that IL-1 alpha is not elevated in these lesions, and IL-1 alpha is probably the only role that it really plays is initiating the cascade through the NLRP3 system and starting the elaboration of IL-1 beta.
In itself, it doesn't play a very significant role. We know that from other studies that have been done where a blockade of IL-1 alpha has been tried unsuccessfully. For example, the Johnson & Johnson bermekimab study with an IL-1 alpha inhibitor showed no difference in placebo. Having a pure IL-1 beta inhibitor here, I think, gives us a real advantage where we're targeting the most central, the most important cytokine in the inflammatory cascade in this disease.
Right. Along that line, you have a pure IL-1β. You have companies like AbbVie and Novartis. They've got bispecifics in development that also include IL-1β targeting. Maybe just share what may differentiate 009 just in terms of its potency, how it's administered, other attributes.
Yeah, the potency is really high, higher than any other antibody I've ever worked on. It's 15-20 times more potent than lutikizumab, for example, on the IL-1β response. It also has a much longer half-life. I have a colleague who constantly tells me when we're talking about bispecifics that if you chase after two foxes, you won't catch either of them. I think we really want to focus in on what's important here, which is IL-1β, and that's what we're doing. IL-1α, I think, does not play a significant role, as we mentioned, and you're going to be diluting some of the potential efficacy by either diverting antibody into compartments that you don't want it to go into or having it bind to something which is not going to ultimately affect the course of the disease.
Very helpful. Let's talk a bit about the LOTUS trials. That's evaluating 009 to reduce inflammatory lesions in HS patients who failed anti-TNFs. I guess, how common is anti-TNF failure in HS? Where do the current approved therapies fall short here?
Right. If you look at the registrational studies in HS, the endpoint is this composite endpoint, HiSCR, the hidradenitis suppurativa clinical response score. HiSCR 50, which is a 50% reduction in the number of inflammatory nodules and abscesses. If you look at what's been basically done already with IL-17, TNF, but especially IL-17, you have Cosentyx and Bimzelx out there. The percentage of patients achieving a greater than 50% reduction in the number of these nodules ranges from 41-52%. That compares to a placebo response of 26-32%. This means that there's a very substantial number of patients who have suboptimal, incomplete, or no response at all to treatment that are still looking for a better therapy. More recently, the clinical bar is being raised. This completely recapitulates what we've seen in psoriasis.
Now we're up to HiSCR 75, a 75% reduction in the number of inflammatory nodules and abscesses, which is a much more clinically relevant endpoint for patients. This is what we're using as our endpoint in the LOTUS trial, is HiSCR 75. We think taken together that if you look at, for example, the lutikizumab data in phase two, they had responses similar or better to these that I've just mentioned for IL-17, but they had those responses in patients who'd already failed therapy with the TNF inhibitor. A sicker population of patients were difficult to treat. We look at that. We look at the fact that we are pure IL-1β play. We have higher potency. We have a longer half-life. We're using very substantial doses.
We have a better chance of neutralizing the IL-1β in the lesions in this population. We think we have a good chance to do better than lutikizumab did.
Yeah.
In the dosing regimen too.
Absolutely. On the HiSCR 75 primary, can you share your powering assumptions there and maybe any strategies that could help minimize placebo responses that you often see in those HS studies?
Right. Yeah. G oing to HiSCR 75 minimizes placebo responses right off out of the gate because it's a more stringent endpoint. That was one of the reasons we chose it as well as it being more clinically relevant. Training of the dermatologists to be able to assess these lesions properly is a big part of it. Alexa Kimball, we've been fortunate to have her as our PI, and working with one of her colleagues, Tina Porter, developed a really excellent training module that we're using to make sure that we're looking at really bona fide responses in the disease. I think beyond that, we're also making sure that we are enrolling patients who meet a higher inflammatory standard. These are patients that 60% of our patients are targeted to be TNFα failures. We're looking for high abscess and nodule counts.
Again, all of that basically milites against the risk of a higher placebo response and a better clinical response overall.
You have two doses. You are looking at 150 and 300 in the study. Any view on kind of the relative benefits of those at this point and what you might see?
We're hoping one of these is being given, the higher dose is given at four-week intervals, the lower dose at every two-week interval. We think both of these doses are likely to be effective, but I'm hoping that we're going to be able to see the best response with an every four-week regimen, which would give us some advantage in the marketplace. We'd be happy with either one of those doses. I think they're going to do well.
Great. Beyond the HiSCR 75, are there other endpoints, maybe some secondaries, maybe pain reduction that could maybe differentiate you?
Yeah, we're looking at all the standard endpoints, but pain reduction is a big one. Again, I think there is a possibility that IL-1β inhibitors will do better on pain than some of the other cytokines for the reasons we mentioned in the beginning. We are going to be taking a close look at that. That is something that's really important for patients, even the ones who are after treatment. About 80% of them are still complaining about pain, and some of them end up needing narcotics for pain relief. These are deep skin lesions. We also think that IL-1 may be more involved in tunnel formation, maybe could do better on tunnel healing as well, something we're going to be looking at as well in the study.
Great. Good. Yeah, and beyond HS, clearly there are other opportunities here. I think you've alluded to other inflammatory indications, maybe IBD or UC. Is there evidence that supports IL-1β or 009 in those? I know you've made a recent prior that may be playing a role in indication expansion. Maybe just share with us how you're prioritizing those opportunities.
Yeah, no, absolutely. IBD is a very exciting indication for IL-1β. IL-1β clearly playing a big role there. We've already seen AbbVie pursuing both ulcerative colitis and Crohn's disease with lutikizumab, which makes sense that it's an area we're very interested in. Although it's a crowded area, it still remains relatively unsatisfied. We also see opportunities in arthritis and the arthritides. There's substantial evidence for the role of IL-1 and IL-1β in particular in agents that are already approved for rheumatoid arthritis and acute gout flare. You have the canakinumab data that Novartis generated in the CANTOS trial, which, although it was aimed at patients with myocardial infarction with elevated CRP, they demonstrated as a incidental finding, a 50% reduction in knee and hip replacements in patients who had arthritis. We're very excited about that.
There are a lot of potential exists, some huge indications in arthritis, including psoriatic arthritis and the crystal arthropathies, a disease called calcium pyrophosphate deposition disease, which is not widely known, but it is starting to get a lot more attention and press, a lot more publications coming out. Clearly, IL-1β is at the epicenter of the inflammation in that disease. These are really interesting potential indications for us, and we hope to have the work done and announce our second indication sometime later this year.
The work being done by others like AbbVie and IBD, are there learnings from what that company has been doing that could maybe help you in your strategy and fluency or design?
We are always looking at what our competitors are doing pretty closely. They haven't released any data yet, but I would be very optimistic that because, as I said, IL-1β looks like it's a very important inflammatory driver in IBD. There have been some data in very early onset IBD, for example, using canakinumab way back when, which showed pretty impressive results. I am expecting that they're going to do well with that. What we will additionally learn from what they're doing, though, is potentially what subset of patients would be best. I think they've also been talking about doing combination therapy, which is now becoming a very prevalent strategy in the treatment of IBD. I think all of that will be interesting to us.
You'd mentioned CRP, and from my understanding, it seems like there's a fair prevalence of obesity in the HS population, and that's often linked to elevated CRP. I'm wondering, is there any thought to how CRP reduction could maybe be some potential additional benefit to 009 here?
No doubt, right? T hat was the original hypothesis in the CANTOS trial, looking at patients with elevated CRP and the risk of secondary myocardial events and stroke. They did show a substantial and significant reduction in those by using canakinumab, but they didn't feel that it was sufficiently high to allow them to pursue the indication. It gives you a flavor of what's going on with CRP in patients who have metabolic syndrome, obesity, and the like, and the secondary inflammatory consequences of that, both in terms of atherosclerosis, arthritis, and other diseases. There's no doubt that there's a plethora of opportunity in the IL-1β blockade space.
Yeah. Also, another element to the story is IL-6. Novo is running their IL-6 outcome studies. I think they're going to have data in the coming months or maybe next year, but wondering what you've seen with IL-6, maybe neutralization with 009 as an effect.
Yeah. Our drug, 009, is a potent, basically neutralizer of IL-6. IL-6 is, again, upstream of IL-1β. IL-6 also turns on the CRP gene, but wherever you have elevated IL-1β, you're going to have an increase in IL-6. An IL-1β blockade strategy would probably cover both IL-1β and the other diseases we've talked about, as well as IL-6 related diseases.
You have cash that you had raised, obviously, when you did the deal with Almata Bio last year. Maybe just talk a little bit about how that's looking as you expand 009. Also, are you looking to bring any other candidates into the portfolio nearer term, or would you want to wait for the LOTUS data before maybe expanding the portfolio?
We're very focused on the LOTUS trial at the moment, getting that enrolled, as well as the second indication that I hope we're going to be able to announce later this year sometime. We're always open to opportunities, but our main focus is on 009. The cash situation, we are expecting to be able to release data from LOTUS in 2026, and we have cash that's going to last us beyond that endpoint and into 2027. Again, we feel like we're well capitalized at the moment and well focused on our lead asset and our programs.
Great. Lastly, as we get through the year, there'll be a number of medical conferences that might relate to your areas of interest. Will you have a presence at any of those that maybe investors could interact with you or maybe see potential posters of any type?
Yeah. We're not planning to release scientific data. We'll be attending the investor conferences, though, and we'll be at those meetings and try to help out with the recruitment and trials and build our presence within the community. We're not really planning to release data until we have the LOTUS trial done.
Absolutely. Terrific. I think let me just check the audience to see if there are any further questions. Let's see. I think we are otherwise good on that. I think we covered a lot of ground here, Garry. Thank you so much, and thanks everybody for zooming into our session here with Avalo.
Yep. My pleasure.
Great. Have a terrific day.
Okay.