Hey, everyone. Welcome to the Jefferies Global healthcare conference 2025. With me today, I have the pleasure of having Avalo Therapeutics and CEO Garry Neil. Garry, how are you doing this morning?
Doing great. It's a pleasure to be here, Candace.
Yeah. Avalo is a really exciting company. Your lead asset, AVTX-009 in HS, looks really exciting. Very topical.
I agree.
Maybe just getting into it immediately, there was a very interesting phase II data set for a different asset for a different company named lutikizumab. How do you think those data are de-risking for AVTX-009 in HS?
Yeah, in a lot of ways. I mean, we're very, very excited about the IL-1β mechanism in HS for a number of reasons that we can get into, but it does directly affect the hair follicle and the abscess formation and all the rest of it. We know that there's huge amounts of IL-1β in the lesions with HS. Mechanistically, this makes a lot of sense. Prior to lutikizumab, there weren't a lot of—well, there was one study using IL-1, but most of it was just anecdotal evidence. However, that also looked very positive. When the lutikizumab data came out at AAD a year ago, it was really a game changer for the field because what AbbVie did in their control trial was demonstrate really unequivocally that this mechanism is very active in the disease. They studied a particularly sick population.
Unlike anybody else before or since, they went after patients who were all Humira failures, basically. They ended up with a very, very high concentration of the most severe patients, early stage three. 71% of the patients had early stage three. They really set themselves a high bar. Yet they were able to demonstrate really good results in that trial. It was a little small and maybe not as well-powered as it could have been, but they really set the bar. We looked at those data and were very encouraged. Now, as good as that drug is, and we think lutikizumab is a good drug, and obviously AbbVie agrees because they've taken it into phase III in HS and five other indications. They're investing in it.
As good as the drug is, it has a lot of potential flaws that are addressed by our drug, AVTX-009, and specifically.
Maybe what is the case for IL-1β as a superior mechanism in HS and across maybe all these indications as well?
Right. So again, IL-1β is the master regulator, and it really plays a very important role in a number of different diseases, especially this one because of the direct effect on the hair follicle and also recruiting macrophages and MMPs that cause further destruction and then getting into abscess and tunnel formation. It is really distinct from IL-1α. People often conflate these two, yet they have extremely different roles in the cell. IL-1α is constitutively expressed. It is an alarm in. What it is meant to do is basically signal damage to the epithelial cell and then turn on the NLRP3 system, which releases IL-1β. In an acute inflammatory or injury state, IL-1α has an important role. In a chronic inflammatory state like we are talking about in HS and these other diseases, it really does not have any effect at all.
Everything falls on IL-1β. As I said, we can demonstrate this. There are very, very high levels of IL-1β in the lesions themselves. This correlates with disease severity. When you block IL-1α, though, and this has been tested, another sponsor, Johnson & Johnson, had a drug called bermekimab, which was a specific and potent anti-IL-1α blocker. They tried this in HS in a well-controlled phase II trial and had Humira as a positive control. They showed absolutely no effect. It reinforces the message that this is being driven by IL-1β, but not by IL-1α. You can contrast the data from bermekimab and lutikizumab. I think the other thing to say about IL-1β, which is really important for long-term use, is that this is a true anti-inflammatory drug rather than an immunosuppressant.
You're mostly having effects on the innate immune system. There are secondary effects certainly on the other validated targets, TNF and IL-17. No disputing that fact. Its primary mechanism of action is going into the anti-inflammatory cascade. Therefore, it's not having the same immunosuppressive effects that you can worry about with secondary and opportunistic infections, cancer risk, that sort of thing.
Yeah. In terms of maybe just building upon kind of the evidence base for IL-1β, at least I've observed that the levels in HS lesions based on cytokine expression is much more for IL-1β versus IL-1α. Is that a good importance of relative importance in HS? Is there any other kind of evidence base there that's interesting?
Yeah. It's super important, as I've already said, because you want to find evidence that the target inflammatory driver is present in high amounts. And it is present in levels about 133 times higher than normal. IL-1α is not increased in these lesions at all. And then you think about the cascade and the importance that IL-1β has directly on the hair follicle, directly on MMPs, directly on enhancing IL-17, which is a known validated target. Obviously, there are approved drugs for that, Cosentyx and Bimzelx and also TNFα. And again, there's an approved drug for that, which is Humira. It's very, very important. I think it's more than that. It's because it's such a potent cytokine and it's secreted in such large amounts, it's very important to keep the trough levels down low.
That gets back to how we differentiate from lutikizumab, which we can talk about as well.
Maybe before we get into that differentiation, there is AVTX-009 isn't the only IL-1β on. And so maybe there's another one, canakinumab.
Canakinumab, yeah, Ilaris.
There's some case reports, both supportive and conclusive of the canakinumab's utility in HS. No, I don't think any formal studies. How should we interpret that variability? Maybe we could segue then into why AVTX-009 can be really differentiated amongst IL-1 betas.
Yeah. Ilaris canakinumab is not being studied in HS. It hasn't been studied in HS. We don't really view it as a competitor. That said, there's been an accumulated clinical data set from the drug being on the market and a lot of other big studies that have been done over the course of 13 years, thousands of patients treated, long-term studies like the CANTOS trial, which really helped to cement the safety of the class and the drug. I think I'd want to emphasize there, I mean, when the CANTOS trial was done by Novartis to try to show a reduction in major cardiovascular events in people at risk for this, which HS patients very frequently are at risk for cardiovascular events, which is why it's so relevant here. They did demonstrate about a 20% reduction in a large 10,000-patient trial over three years.
They did not move forward with it for whatever strategic reasons they had, but the safety in cardiovascular was there. They also demonstrated that there was a 50% reduction in cancer overall and a 75% reduction in lung cancer in patients who either were active smokers or had a history of smoking. Again, looking at the anti-inflammatory effect of IL-1 and the lack of immunosuppression, you get a great sense of comfort. Physicians who know about these data also feel that you are not going to be prescribing a drug that is likely to increase the things that they are most worried about: opportunistic infections, cancer, and cardiovascular disease. That is what we get out of the CANTOS trial data. We have talked to a lot of thought leaders who have used it sporadically. There are these small case reports. I think it has probably been underdosed.
It's a very expensive drug because it's orphan drug priced. Dosing is really important, which we can get back to in HS. I'm not sure that it's ever been optimally dosed or used long enough. Even then, we've seen about 50% or higher response rates of patients with the disease. I also think that such an expensive drug is likely only to be used or have been used in patients who have basically failed everything else. We don't have a lot of documentation there. I think it reassures us about the mechanism, and it reassures us a lot about the safety. Again, it's not a competitor.
Of course. Maybe that segues in nicely, how did AVTX-009 make it into your lap? And kind of what were the characteristics of it that you thought it could be really differentiated?
Right. So again, very interested in the mechanism. It made a lot of sense. When we had the opportunity to acquire this drug, we really jumped on it. It was originally discovered and developed by Lilly. We do not have to go into that detail. What really excited me was that in 30 years of doing drug development and having worked on a number of different monoclonal antibodies, this is as good as it gets. This drug had the highest affinity of any that I have ever worked on. It is at least 15 times higher affinity than lutikizumab and probably 20-30 times higher affinity than Ilaris. That is very important for HS. Also very well behaved in a number of other ways. Super potent, not just in the in vitro assays, but also in vivo.
Lilly tried to define a no effect dose, and we were unable to do it. They went down to doses less than 1 milligram injection. They could not go any lower than that because the volume was already a hundredth of a mill. Even at that dose, they were showing potent effects on secondary markers of IL-1β. We knew that this was going to be a really excellent drug. We have been able to—there has been some additional formulation work done on it to make it even more robust and to make it even better behaved in the clinic. All of that really added up to a great opportunity to address a disease like HS, as well as a lot of other diseases too.
Maybe making the bull case for AVTX-009, do you think it can achieve better efficacy than lutikizumab in HS? Maybe as importantly, on the other facets, how can it be advantaged?
Yeah. So we absolutely do. And the reasons for thinking this are several-fold. One, it is a pure anti-IL-1β play. And lutikizumab has the disadvantage of being a bispecific in this case because it addresses both IL-1α, which we've already talked about is not playing a role in the disease, as well as IL-1β. And when you go after IL-1α, you run the risk of targeting antibody into a lot of normal cellular compartments in the body because, again, every epithelial cell, lung, gut, skin is expressing IL-1α. You do not want to target that. Secondly, IL-1α binding, when it does occur, can also decrease binding of IL-1β. But because lutikizumab is a bispecific and we are not, they also have the disadvantage of a much shorter half-life and lower bioavailability. And I have already mentioned the affinity being lower with lutikizumab.
009 is much higher affinity, so much better neutralizing power, pure IL-1β play. It is addressing exactly the target we wanted to address. The higher affinity means not only that you get more neutralizing power on a molar basis, but what people do not often think about is the fact that in the lesions of a disease like HS, which comes from basically an exploding hair follicle, a plugged hair follicle in an abscess, this is pus under pressure. IL-1β is driving the formation of pus and this purulent exudate. It is difficult for macromolecules to get into these lesions. The size of all these macromolecules, I do not think that makes much of a difference, but affinity does. Basically, the affinity draws these antibodies in where they bind IL-1β, and it also increases the dwell time.
You get much more neutralization on a molar basis of the drug you get in. We realize it's difficult to get drug in, but the drug we do get in is going to work a lot better. It's going to stay there a lot longer. We also have a longer half-life by almost twice versus lutikizumab and a higher bioavailability. You add all of that up, and you're getting much more drug at the site of activity where you want it to be inside the lesion. Again, it's really important, in my view, to keep the IL-1β levels below a certain threshold so you allow that inflammation to basically dampen down and the lesions to heal. Also, because of the effect on MMPs and so on, we have a better chance of getting into these deep lesions, the deeper abscesses, the tunnels.
I think this is another real advantage that IL-1 has. Overall, we are impressed with the data that AbbVie has demonstrated with their drug. We feel like we have a much better drug and we're likely to get a better efficacy output. Not only that, I think when you look at patient burden, I mean, the AbbVie drug is being studied on a weekly dosing basis during the induction phase. We are able to do what we believe every four-week dosing with a loading dose. We can greatly reduce patient burden and make it easier for patients to use.
Now, there's a few investors that I've spoken with that kind of comment on, it's a small data set, but on a U-shaped dosing response for lutikizumab. Has that at all informed dosing of AVTX-009? And do you think that could be any evidence of kind of receptor saturation there? Or is there still opportunity to drive efficacy through higher dosing?
There definitely is. I mean, I think the whole idea of a U-shaped dose response curve in HS is a little bit controversial. Most of the time, what we're looking at is just a variable disease with a little bit more noise in it and some studies which maybe were not optimally powered to demonstrate the difference. If you look at the AbbVie data, in fact, if you look at the sonelokimab data in the MIRA study from MoonLake and others, you do not see a significant difference in the response rate between the doses. It may be a little bit more plausible in the 17 class than in IL-1. What you see much more often in the literature related to HS is underdosing. I think there is a much bigger risk of giving too little drug and not seeing an optimal effect.
You might conclude from the AbbVie data that they hit their saturation kinetics with the drug. That's as much as they're going to get into the lesion. They themselves, though, even though there was a numerical but not statistical difference, and both arms were statistically significantly positive in the lutikizumab study at HiSCR 75. You might conclude that they maxed out the dose. They're using the once-weekly regimen themselves, though, in phase III, which I think is the right thing to do. I'm a little bit skeptical about the validity of the U-shaped dosing curve. I think it's really critical to make sure, having done a lot of monoclonal antibody development over the years, that you're giving enough drug to be able to neutralize and optimize the effect size. That's informed our decisions.
Excellent. Maybe that segues nicely into the phase II LOTUS study. Can you just talk us through the general study design? How did that kind of previous body of data inform your dosing selection for that study?
Yeah, exactly. We obviously did a lot of PK modeling based on our drug and looking specifically at the predicted characteristics of HS patients that skew more towards being female and patients that are a little overweight, type 2 diabetes, and so on. We used all of that modeling. We looked very carefully at what the exposure levels would be with the AbbVie drug when we planned this out. We made some modifications, though, because, again, our idea was to try to get a rapid response as rapid as possible. We used a relatively large loading dose, 600 milligrams initially, and then 300 milligrams every four weeks, also comparing that to 300 and then 150 every two weeks in case half-life is actually a little bit more decisive here. In inflammatory states, sometimes the half-life of a drug can be a little bit lower.
We looked at that so that we can get a better effect. Of course, the exposures that we're generating will be similar to those that lutikizumab has at end state. The potency of our drug being 15 times higher gives you a much higher effective concentration. We feel like we're making sure that we're not underdosing the drug. We still have great safety margins as well. That's how we looked at that. The rest of the trial, we're using a 16-week duration, placebo-controlled, obviously. We went to HiSCR 75. Our friends at MoonLake had really set the standard with the MIRA study using HiSCR 75 as their primary endpoint. I think that's very smart. Just as has happened in psoriasis, the bar is getting higher for clinical effect.
You also get a lot less noise in the trial at HiSCR 75. You look at placebo effects in the lutikizumab study, they were half at 75 as they were at 50. We are going to get a better signal-to-noise ratio using that. We have made a few adjustments to our trial. As you know, as we have gone along, we initially were planning to enroll a lot more TNF alpha failures. We have now sort of walked away from that a little bit because we have seen the market shift even since we started the trial going more towards 17As. We have tried to bring our trial as far as the enrollment criteria much more in line with everybody else out there, including MoonLake, and allow us to have a more robust design for phase III. The trial is going really well, by the way.
We're really pleased with the enrollment and everything else we're seeing so far.
Maybe touch base on the baseline characteristics you were talking about in LOTUS compared to maybe the phase II lutikizumab study and now historical IL-17 studies. Is there still kind of a cutoff of the amount of TNF refractory that's going to be required in the trial, or is that shifted a bit?
Yeah, we're shifting that a little bit so we don't need—so we're looking at including biologically experienced patients, but we're no longer requiring the number to be 60%. It is going to more reflect what we're seeing in the general population of patients with moderate to severe disease. We haven't changed anything else in it. As enrollment's going so well, we've also been able to make the trial a little bit more robust by making sure we enroll a few more patients than we'd originally planned.
How would you expect the—would you expect any difference in response in kind of more milder patients than the more refractory patients?
I mean, based on the analysis literature so far, and not surprisingly, patients with early stage three disease and patients who are biologically refractory are probably a little bit harder to treat than patients who aren't. I think, if anything, we believe we'll be effective in all those patients. There's no a priori reason to believe that IL-1β would be different with respect to that. We expect we're going to get a good, robust response.
Great.
We've also done a lot to try to control the placebo response in the trial. We've seen that. You have seen MoonLake did something very similar by rigorously training their investigators on assessment of the lesions. Because there is variability in the disease, we have invested our time and effort into that kind of a training module, working with our PI, Dr. Alexa Kimble, and her staff, and creating this training module. It takes you a little bit longer to get going when you are doing that, but it is an investment in a high-quality result at the end. We are very pleased with that.
Maybe we could get now a little bit into just HS market dynamics. Overall, in the patient population, we're seeing a lot of biologic use now, or just much more than previously. What % of these HS patients are not responsive to TNFs? And maybe what % of patients also don't have a satisfactory response to IL-17s that have become quite positive?
If you go back and look at the data from the phase III trials for Humira, they had 42% and 59%. If you take the average of those two studies, about 50% response rates with about, at that point, 24%-25% blended placebo response. If you look at the 17s, again, you're looking at 40%-50% response rate, even at HiSCR 50. The MoonLake data look similar at HiSCR 75, 43% of patients responding, lower placebo response. They had a very good differential. This is telling us that—and then if you get into the JAK inhibitors, the response rates are even lower than that.
At least 50% of the patients who are being treated with biologics with early stage two and three disease are not going into remission and not even responding in a lot of cases. That leaves a very large unsatisfied population looking for a new mechanism. Some of the patients who do respond, again, are not satisfied with the response. They're looking to move into a different drug. Right now, physicians do not have a lot of choices when they're going into targeted therapy. You have 17A, or you can go to 17AF, but you're still in the 17 category. You can go to a JAK inhibitor, but there's still a lot of concern, especially among dermatologists, that the patient population you're treating has obesity, a high prevalence of smoking, type 2 diabetes. They're all at risk for cardiovascular disease.
There is concern in that patient population about going to a JAK inhibitor as well. When we have talked to thought leaders and surveys of just practitioners, they are very excited by the IL-1β class because it is something new, a new mechanism for them to go to. They like the safety, and they like a lot of the elements of the efficacy that they have seen so far from lutikizumab. We think we can walk right in there with a drug which we think will have a superior profile to lutikizumab.
A lot of these companies, including the IL-17 companies, are laying the groundwork in terms of really expanding the HS market. Maybe curious how you see them dealing with Humira step through. Is there any kind of burdens with payer access and kind of how you think you'd deal with that?
So far, not. It has been a market that has been very accommodating. We've talked to a lot of payers about this. They realize that this is a serious disease, and these patients' life is very severely impacted by this. The treatment guidelines are changing away from TNF to using 17s first line. We're seeing more and more of that happening as patients seem to be more satisfied with that category and have some concerns about the TNF. We think that's not going to be as much of a problem. As we design our phase III, of course, we still have to generate the phase II data, which will be coming out now in mid 2026. We can be more definitive about that right now. Enrollment in the trial is going really well, and we're very pleased with that.
As we talked to FDA about that, I mean, we would not try to position ourselves for second-line therapy. We'd want to be positioned for first-line therapy. I think even in the case where guidelines are starting off with a 17, there's going to be a large unsatisfied population that's looking for a new mechanism. I think this is going to become a very dominant play.
Yeah. Sorry, for the lutikizumab phase IIIs, are they allowing kind of biologics refractory unsatisfied patients in their studies?
They have some, but they've dropped the requirement that they had for a very high number or all Humira failures because recognizing that that's probably going to be a relatively small population.
Maybe with some kind of the final questions, any opportunities for even further pipeline extension for AVTX-009 and/or any other interest in pursuing 009 and other indications as well?
Absolutely. I mean, we're super excited about this. It is definitely a pipeline and a product. You can look at what AbbVie is doing. As I said, they're investing in IBD and arthritis, psoriatic arthritis and rheumatoid arthritis, as well as dermatology looking at atopic dermatitis. Those are all opportunities for 009. Again, we believe all of those are driven mostly by IL-1β, at least in certain subpopulations. Also, a good opportunity as they're thinking about and doing for combination therapy with our drug as well. We also have other indications that we're examining. For example, in the arthritis space, which really needs a new growth catalyst, there's diseases like crystal arthropathy, which are clearly IL-1β driven and a huge unmet need, a large population. We're thinking about all of that.
Great.
Right now, though, we are 100% focused on HS, getting this trial done, delivering data 2026 with the best profile.
Mid 2026?
Yep.
Awesome. We are really looking forward to it. Garry, thank you so much for your time, and we wish you the best of luck.
Thank you very much.