Thanks for joining our 45th Annual Healthcare Conference. I'm Stacy Ku, part of the Biotech Team. I'm here with my colleague, Vish Shah, and we'd like to welcome Garry Neil, CEO of Avalo Therapeutics. We'd also like to thank Chris Sullivan, who's joining us from the audience. Thanks so much for being here today. As many of you know, our view is that the HS market is poised to meaningfully expand with novel targets to address the disfiguring and heterogeneous aspect of the disease. In our clinician checks, the KOL discussion post IL-17 leads to IL-1, and specifically IL-1β. We are looking forward to hearing Garry discuss AVTX-009 before we end with Q&A. Thank you so much.
Thank you very much, Stacy. Good afternoon. I'm Garry Neil. I'm the CEO of Avalo Therapeutics. I'm very happy to be here. For those of you who haven't read it, you really need the required reading to read Stacy's report on HS. It really is the definitive report on the subject. As you can read here for yourselves, I'll be making some forward-looking statements. Avalo Therapeutics. Who are we? We are a public biotech company, AVTX on NASDAQ, based outside of Philadelphia. We are in the I&I space. We are specifically developing targeted therapies for immune dysregulation. Our lead compound and where we are entirely focused at the moment is AVTX-009, which is an anti-IL-1β monoclonal antibody, human IgG4. We believe it has the potential for best-in-disease profile in HS.
We base that on both the mechanism of action, which I'll detail a little bit more in my talk, but also on the favorable proof of concept validation, both in anecdotal and small series of other IL-1β antibodies that we're aware of, but especially from this phase two study run by AbbVie with their IL-1αβ bispecific monoclonal antibody, lutikizumab, in HS, which was presented for the first time at AAD about a year ago. In that study, they demonstrated comparable efficacy to the existing market leaders, as well as late-stage pipeline therapeutics in a refractory population that had failed anti-TNF therapy. That was a very impressive result in a very sick population. We also, and I'll present evidence to support this, know that IL-1β is a dominant immunoregulator in HS. This is based both on preclinical and clinical evidence.
Now, AVTX-009, our lead compound, is comparable in a lot of ways to lutikizumab, but it's noteworthy that we have a drug that has a 15-fold higher affinity and very much longer half-life than lutikizumab and higher bioavailability as well. Those characteristics are potentially predictive of higher efficacy and more convenient dosing. We are doing a Phase II trial, the LOTUS study, which we initiated late last year with top-line data expected in 2026. The HS market, as everybody knows, and you can read this in Stacy's report, is large and growing, expected to be greater than $10 billion. Some have it even higher than $15 billion by 2035, which I think is very plausible based on recent launches and what we know about the demographics. In addition to HS, AVTX-009 has the potential to treat multiple other immune-mediated diseases.
I'm going to get a chance to touch on that later. We have expected cash runway to get us well past the data readout for our Phase II LOTUS trial, getting us at least into 2027. I am blessed with a very experienced and very accomplished senior management team, as you see here. Collectively, we have about 200 years of experience. Half of that's mine in biotech and pharma. Together, we've been responsible for or involved in putting a number of very important medications on the market. This is a team that really knows how to develop drugs and also make them. I mentioned some of the characteristics of AVTX-009, highly potent specific inhibitor of IL-1β. It was originally developed by Eli Lilly. It is a stable 150 milligram per ml dosage formulation.
That's a new formulation that we have that can be administered both subcu and IV. The initial presentation for this will be a pre-filled syringe with a post-approval plan for an auto-injector. There was extensive clinical experience when we brought this antibody in, 245 patients studied in phase one and phase two clinical trials, both in Type 2 diabetes and in rheumatoid arthritis, concomitant with methotrexate, I might add. It is very noteworthy that it had a significant and rapid lowering of inflammatory biomarkers at doses as low as 0.6 milligrams subcu. That's not per kilogram. That's 0.6 milligrams, which was a hundredth of a ml of the dosage formulation that Lilly had. This sort of underscores the high potency and biological activity of the molecule. Despite that, it was very well tolerated at doses in humans up to 180 milligrams subcu weekly.
With the animal tox and the additional human safety data, we have a 50x safety margin with this drug. We are very pleased about that. The potency and half-life of the drug are expected to support up to four-week dosing in HS, possibly longer in other indications. The target, IL-1β, is a, if not the master regulator of inflammation. It is named IL-1 for a reason. IL-1β, one of the two variants of IL-1, is a central driver of the inflammatory process. It activates immune cells that generate pro-inflammatory cytokines that include IL-6, TNF alpha, and IL-17. I wanted to sort of highlight TNF alpha and IL-17 are the two mechanisms that have been approved for treatment of HS. This regulator is upstream of both of those.
It has a clinically validated and de-risked mechanism of action, been shown to be effective and safe in a variety of autoimmune and inflammatory diseases, including HS, as I mentioned earlier. There is well-established class safety and tolerability with three approved products, with more than 12,000 patients studied in clinical trials and 13 years and counting real-world experience. Let's talk a little bit about our opportunity in HS. HS is a chronic inflammatory disease of the skin that progresses to tissue destruction. It is often very debilitating, certainly disfiguring, causing painful lumps, abscesses, tunnels that form under the skin. It has a lot of collateral damage and effect on the patient's quality of life, psyche, and causes very severe pain. You can see the progression from nodules to abscess to tunnels.
One of our senior advisors has described these patients as being walking biohazards with oozing lesions that are malodorous. It's really a terrible disease. There remains a large unmet need in these patients. They frequently present to GPs. They might be treated with topical agents or antibiotics, but most of them will progress and have worse symptoms and lesions. You can see that the quality of life issues are underscored here with a majority of them. This sort of progresses with the stage of disease. Pain, sort of general pain, discomfort, pain on sitting, painful movement, that sort of thing. Pain is a real problem for these patients. Many of them end up being addicted to narcotics. I mentioned the malodorous drainage, which is certainly a great impediment to the quality of their life.
Not surprisingly, in this situation, many of them suffer from low mood and depression. As I also mentioned earlier, IL-1β dominates the pathophysiology of HS. It is a key driver of the inflammatory process, as I have already shown you. This cascade leads to the destruction of the pilosebaceous unit in the hair follicle. It often occurs in areas of intertriginous skin, in skin folds or in areas like that, but there are always hair follicles around. In these lesions, IL-1β gene expression is actually over 100-fold increased directly in the lesions compared to normal skin or in patients' skin without HS lesions. As I also mentioned, and as you can see here, it is upstream of IL-17 and TNF alpha.
There's actually a complex interplay between these cytokines and IL-1β with mutual reinforcement and a cascade developing with more and more inflammatory cytokines being released and the formation of abscesses, which become pustular and drain and can form tunnels under the skin, and all of that results in pain. Certainly, clinical benefit has been demonstrated. We've talked to several dermatologists who've treated these patients off-label with IL-1 inhibitors with some degree of success, sometimes remarkable success. We have the single well-controlled trial, which was done by AbbVie. Here's the data from that study with the AbbVie data shown on the right and compared to JAK1 and BIMZELX as well as sonelokimab from MoonLake. You can see this is the drug effect in the colored tops of the bars versus the placebo in all of these patients.
You can see the AbbVie data with lutikizumab on the right. At 16 weeks, very impressive data showing at both their highest doses. This is remarkable given that the patient population studied by AbbVie, unlike the other studies that were done, was a very refractory population. 71% of them had the highest stage, early stage three, and all of these patients had failed anti-TNF therapy. Both of those characteristics really designate the population as being much harder to treat. They had very, very remarkably good results. As we compare ourselves to lutikizumab, which again, we think is an excellent drug, although we believe our drug has several advantages, theirs is a rather cleverly designed bispecific with both CDRs being demonstrated in tandem, IL-1β at the apex, and then IL-1α just proximal to that. They have an IL-1β binding affinity of about 44 picomolar.
It has a subcutaneous bioavailability of 46% and a half-life of 10-14 days. The dosing that's been evaluated is once weekly and once every two weeks subcutaneously. They are now in phase three, and induction is using a Q1 week dose. Our drug, in contrast, has a much lower affinity, less than three KD in the two picomolar range, a higher bioavailability at 73%, a longer half-life at 19 days. We are studying it at dosing intervals of Q2 weeks and Q4 weeks. This should give us the potential to have even higher efficacy and longer dosing intervals than the AbbVie compound. As you noticed, lutikizumab binds both IL-1α and IL-1β. It begs the question, what is the role of IL-1α in the pathogenesis of hidradenitis suppurativa?
You can see here that from a mechanistic point of view, you can see IL-1β levels on the left in control of patients, psoriasis patients, and also in HS. You can see IL-1α in the same populations. What you see is that there's a massive increase in IL-1β levels, over a hundredfold increase, especially in HS, also a little bit elevated in psoriasis, as you'd expect. It gives you sort of a hint as to how the inflammation is dramatically amplified in HS. Whereas IL-1α really shows no difference. In fact, if anything, IL-1α levels are lower in the lesions of these patients rather than in normal skin. What we know about this is that IL-1α functions as a sort of alarmin. It's present in every epithelial cell in the body and is released upon cell injury.
One of its most important functions is to activate the NLRP3 system, which in turn releases IL-1β. While it's important in the initial acute reaction to inflammation, IL-1β is the much more important driver in chronic inflammation. We also have clinical evidence that IL-1α neutralization really doesn't have any effect on HS lesions. This is a study of bermekimab, which was done by J&J a couple of years ago. In this study, they had bermekimab, which is a pure and potent anti-IL-1α binder. They also had a positive control with HUMIRA. What you see in this, although the HUMIRA positive control was indeed positive and showed approximately the level of effect that you'd expect, there was absolutely no clinical effect from bermekimab.
Taken together, the absence of an increased level of IL-1α, its mechanism in the chronic inflammation in the skin and the lack of an effective neutralization leads us to conclude that IL-1α is not an important target, and we want to focus on IL-1β. Now, having convinced you, I hope that IL-1β is a good target. Why does affinity matter? The major difference between our drug and the AbbVie drug, which again showed remarkable efficacy, is its affinity as well as the bioavailability. In this lesion, in this disease, affinity really does matter. Why is that? Only a relatively small fraction of antibody in these types of skin lesions is actually going to reach the target lesion where it needs to go to be effective. Most of these patients have suffered from obesity. Many of them smoke, and they may have Type 2 diabetes.
All of these intercurrent illnesses and problems really reduce the level of drug that's available to reach the lesion. A lot of it gets sequestered in the adipose tissue, for example, and there's a lot of inflammation in Type 2 diabetes. Only about 11% of drug will then get into the skin. Here you have abscesses, which are basically pus under pressure. This prevents the drug from entering the lesion in significant concentrations. You're only going to get a small amount of drug that you inject into the lesion where it needs to neutralize IL-1β and keep it low. Trough levels really matter. That all being said, it's very important that the drug that does get into the lesion will have high neutralizing capability. In other words, will have a very high affinity.
That's why the superior affinity of AVTX-009 is allowing the antibody to target the lesions where IL-1β levels are very high, prolong the dwell time in the lesion, and to have a much more effective neutralization. Both the higher potency and the prolonged half-life should, we believe, translate into superior efficacy. This is our ongoing study, the phase two LOTUS trial, which is in clinicaltrials.gov. It's a three-arm study, placebo-controlled, two doses of AVTX-009 versus placebo over 16 weeks. You can see the doses there. We're using a 600 milligram loading dose in one arm with a 300 milligram subcu dose every four weeks. In a second arm, we're using a 300 milligram loading dose and 150 milligram subcu every two weeks. The exposures are actually fairly similar in these two dose arms because of the differences in dosing frequency and placebo.
The primary endpoint is a percentage of patients achieving HiSCR 75 at 16 weeks. As you can see, they have to have HS for at least six months, a total active nodule count of at least five at baseline. They have to have HS lesions present in at least two distinct anatomic areas, at least one lesion that is early stage two or stage three, which would make the moderate disease. We're targeting 60% of these patients to be TNF experienced failures, with the other 40% being naive. You can see all the secondary and exploratory endpoints there, which are fairly standard. We've modeled these doses. The exposures will be similar to the AbbVie lutikizumab exposures. Again, we will have an effective concentration that's much higher given the 15-fold increased affinity of the drug. The study is underway, and we expect data in 2026.
Now, just looking a little bit at the market, again, we concur with the analyses that have been done showing that this market should grow into a $10+ billion market by 2035. The overall prevalence in the U.S., it's approximately 1% of the population. So you see 3.3 million in 2023. That's not going to grow that much, but it will grow. However, the HS diagnosed population is going to increase substantially more. So about a million people diagnosed today, up to 1.6 million. Why? Obesity is prevalent. We're not expecting that to drive this, but it's more diagnosis and recognition as well as earlier referral to dermatologists with recognition of what the disease is. The delay has traditionally been six years plus between presentation to a GP with complaint of symptoms until referral.
In some cases, we've seen it be as long as 10 or 15 years. If they get to the dermatologists earlier, they'll get more effective therapy. Those that are diagnosed with moderate to severe HS, again, for the same reasons I've mentioned, we expect that number to increase to over 500,000. Today, there are about 100,000 patients on biologics. That number varies in different estimates that we've seen, but we expect that's going to more than double by 2035 with increased recognition and also the recognition, there is more availability of different therapies and more education of patients to therapeutic options. There is also a recognition that earlier, more effective treatment is going to be better for these patients, limiting the progression of the lesions and improving their quality of life. This is our timeline looking forward.
Where we are, last year, the merger that brought the drug in, I think a pretty remarkable accomplishment of our very accomplished team. We had the IND open in the U.S. in July. In October, we enrolled our first patient in the U.S. We are well underway now. We have sites open in the U.S., Canada, Australia, Europe, and now Turkey. We expect the readout of data in 2026. I can't be more precise than that right now. We have cash to last us through 2027. We plan to initiate our phase three program in 2027. I'll just finish with a discussion of other potential targets, which we've not yet landed on. There is a clinical rationale for IL-1 targeting in a number of different disease states. IL-1 targeting therapies are approved in RA and also in acute gout flare.
The CANTO study, which was done by Novartis with Ilaris and 10,000 patients over three years, supports the effect of IL-1β in severe arthritis. IL-1β blockade was associated with a reduction of about 50% in the need for hip and total knee replacements in patients with osteoarthritis, an unselected population, by the way. There is a strong scientific rationale for IL-1β driving crystal arthropathies. We know that from gout. Within that space, there is a very large unmet need in calcium pyrophosphate deposition disease, which afflicts about 10 million Americans, particularly older ones who are at risk of joint replacement. Inflammatory bowel disease is another very promising area. We know that IL-1 activity, increased IL-1 activity is present in at least a subset of patients, and both with Crohn's disease and ulcerative colitis. There is an overlap between IBD and HS, which is another rationale for doing this.
We've seen smaller series and very early onset IBD, which is thought to be a genetically driven variant of IBD using Ilaris. It is very promising. We see that AbbVie is initiating studies in UC and Crohn's disease. There are a number of other indications that we've also been considering. Just to recap, we are an INI company now focused on HS and AVTX-009, an anti-IL-1β monoclonal antibody that has favorable proof of concept in HS through studies by AbbVie and others. We know that the mechanism is very propitious for neutralizing IL-1β based on both preclinical and clinical evidence. We have a very high affinity anti-IL-1β monoclonal antibody with a comparably longer half-life than lutikizumab and the potential for even higher efficacy than they've shown. We're in our phase two study right now. Date expected 2026.
Big market opportunity, big potential in other large immune-mediated diseases and an expected cash runway to last us into 2027. Thank you very much. I'll stop there. Stacy.
In the last few moments that we have, I do want to pause to see if anyone has any questions.
Yes.
[AbbVie's] body count numerically, what do you think every other week upper bound the error?
I don't really think we can say that it did. I think they're close. Numerically, the answer, it certainly did, but I don't think statistically there was any difference. I would just say that they probably reached saturation kinetics with the molecule at both of those doses. They weren't able to demonstrate any additional efficacy at least at 16 weeks. We don't know what would have happened if they would have continued the trial longer.
That arm, what was the influence of that arm? Is that arm not certainly effective?
Yeah, it wasn't better than placebo statistically. They did have a dose effect, but it peaked at the 300 milligram.
What do you think is the impact from inflammation? For example, NLRP3, would that have an impact in HS? NLRP3?
I think any drug which would reduce IL-1β levels is likely to have an effect. That's correct. I think the best way to target this, and I think the most effective, is likely to be direct targeting of IL-1β and reducing the levels.
Novartis drug, does it have canakinumab in HS?
The only data that we've seen with canakinumab are relatively small case series. We've spoken to quite a few dermatologists, many of whom have used it off-label.
It's difficult for them to get access for patients because the drug is very expensive. It's orphan drug priced, and it needs to be given more frequently given its half-life. It's difficult for them to use it long term. At least anecdotally, they've told us that they've had some good success with it.
Do you think the biosimilar, that one, [127}, would that have an impact?
It won't have the indication for it. I don't see anybody doing that study with it right now. Biosimilar should be similar to Ilaris. We're hoping we have a much higher affinity and potency than Ilaris. For the same reason and with the data that we're generating with this trial in phase three, we think we'll have a much superior product.
To follow up a little bit on that question, there are a number of different modalities that are in development for HS. As we think about JAK inhibition, other IL-17s, even let's say OX40, OX40 TNF combinations, maybe talk about the safety read-through that we have for IL-1 and how we should think about where it might slot in in HS.
Yeah, thanks, Stacy. That's a really great question. There is, I think, a very differentiated safety profile for IL-1 blockade. Very well tolerated, as we've seen in our Phase I and II studies. If you look at the long-term data from Ilaris and also from the AbbVie study, you can see that. For example, what's different about IL-1 as an immunoregulator and blocking is not really immunosuppressive as much as it suppresses or reduces inflammation.
In the CANTOS trial, the incidence of cancer over three years was not increased as it is with most other immunosuppressive-type drugs. In fact, it was reduced by about 50%. There was a reduction in lung cancer of 77% in that study. That is very reassuring, even though you may not end up in the label problem. It was very reassuring to physicians when we talked to them about that. Also, CANTOS showed a reduction in cardiovascular disease, which was the primary endpoint of the study, about 20%. That is in contrast to what you see with JAK inhibitors and cardiovascular disease.
Last question is on your phase two trial design. I know you highlighted it, but we just walked through the selection of HiSCR 75. I think you were pretty conscious about selecting that endpoint. That is one.
Two, maybe talk about details from lutikizumab and your selection of maybe enriching for the TNF inadequate responders, but also making sure you're grabbing those biologic naive patients.
Yeah. First off, I mean, we want to design phase two in a thoughtful way so we can demonstrate the efficacy potential of the drug and design a better phase three program. We selected the HiSCR 75 because we think it's more clinically relevant to patients and physicians. That's what our investigators and advisors have told us. I won't be surprised to see FDA moving to that standard just as has happened with psoriasis. We wanted to pick a more stringent endpoint. Also, if you use HiSCR 75, one of the issues you're trying to avoid is an increased placebo response relative to the signal. With HiSCR 75, you get a better signal-to-noise ratio.
This is also true of using patients which have more severe disease, so higher active nodule count, higher early stage, and including at least some of the patients who are TNF or other biologic failures. We have selected that population to focus on because we want to make sure we have an adequately stringent test population. We also wanted to include enough naive patients so we can demonstrate that the drug is effective in them as well. That will help us design a really good phase three program, which is likely to have a broader population in it.
Wonderful. I think we're over. With that, we're going to leave it there. Thank you so much.