Good afternoon, everyone, and thank you for joining Day 2 of the HC Wainwright 27th Annual Global Investment Conference 2025. My name is Daniel Smith, and I'm an HC Wainwright Equity Research Associate in Biotechnology. With that said, let me introduce our presenter for the session. I'd like to welcome Dr. Garry Neil, CEO of Avalo Therapeutics. We're developing AVTX-009, an anti-IL-1 beta monoclonal antibody for the treatment of immunological disorders. Avalo is traded on the NASDAQ under the ticker AVTX. The floor is yours.
Thank you, Daniel, and thank you, everybody, for coming out to hear the Avalo story this afternoon. There's our forward-looking save it. By the way, I have to point out I have a cute dog on my cover slide, which will counterbalance the gruesome skin pictures I'm about to inflict on you. Avalo Therapeutics is a small company outside of Philadelphia. We're about 30 people strong, and we are developing what we think will be the best in disease, best-in-class drug for hidradenitis suppurativa. It is an IL-1 beta inhibitor, very specific, called AVTX-009, as Daniel said.
There is a very significant unmet need in this disease, and recent surveys of dermatologists have sort of confirmed that, where they say that they're pretty satisfied with treatments that they have available now for psoriasis, a little bit less satisfied for atopic dermatitis, but highly unsatisfied for the available treatments for this disease, which is increasingly recognized, growing, and is very minimally penetrated by biologic therapy. I'll more on that later. We rely a little bit on AbbVie's luticizumab, which is an IL-1 beta, but also an alpha bispecific antibody. It demonstrated comparable efficacy to the existing market leaders and products that are currently in late-stage development, many of which I'm sure most of you know, but they did so in a refractory population. It's not an apples-to-apples comparison. They studied patients who were very sick.
71% of them had early stage 3, the highest disease stage within this disease category, and 100% of them had failed any TNF therapy. In that population, they still demonstrated really a high level of effectiveness. We took heart in that, and we believe that based on the fact that we are a pure anti-IL-1 beta play, and with a higher affinity, longer half-life, and better bioavailability, we have a very good chance of demonstrating superior efficacy to what they did. Now, luticizumab is currently in phase 3. We're in phase 2B. I'll show you more data later, but IL-1 beta, but not IL-1 alpha, is a dominant immunoregulator in HS. That's based on very extensive preclinical, non-clinical biomarker data, but also clinical evidence, which I'll show you momentarily.
Our basically unfair competitive advantage in this field is the high affinity of this antibody, which is 15 times higher than luticizumab and much higher than other comparable antibodies against IL-1 beta. We're in phase 2B right now with the LOTUS trial. It's enrolling. We announced earlier this year in August that we were 75% enrolled. We've had a very good August, very good September. We continue to roll a pace, and we should easily complete our enrollment this year with top-line data to be released by the middle of 2026. The HS market is growing very substantially. It's expected conservatively to be greater than $10 billion by 2035. I personally feel that a good analog for this market is IBD. The growth potential is very substantial indeed, very high need. It's minimally penetrated by biologics.
We have the potential to treat other immune diseases besides HS, since IL-1 beta is very extensively involved in a number of those diseases. We've been very capital efficient, and we have cash that will last us into 2028, certainly well beyond our data read for the phase 2B data. We will need to raise for phase 3. We have a very experienced management team, many drugs on the market. We know how to do phase 2, and we certainly know how to do phase 3 as well. HS, here are those skin pictures I promised you. It's a chronic, often debilitating inflammatory disease with painful lumps, abscesses, tunnels, and even fistula form under the skin, resulting in pain and the discharge of malodorous pus. It often occurs in folds of the skin, neck, armpits, under the breasts, abdomen, and especially in the groin and perineal region.
It has a severe impact on the quality of life. Most of these patients experience quite severe pain. Anybody who's ever experienced skin pain knows that it can be a very big detriment to the patient's quality of life. Restricted and painful movements, pain on sitting, the malodorous drainage. Many of these patients become social pariahs, and not unexpectedly, they have low mood and depression. There is a big impact on quality of life. Pain is really at the top of the list for most patients, though. As I said, IL-1 beta, it turns out, dominates the pathophysiology of HS. It's a key driver of the inflammatory cascade that leads to destruction of the hair follicle, the polysebaceous unit, also known as the hair follicle. IL-1 beta gene expression and protein expression in the lesions is elevated by at least two logs over healthy tissue.
It is an upstream modulator of both IL-17 and TNF-alpha. Why do I mention those? Those are both validated targets with approved drugs for HS on the market. IL-1 beta is more proximal to them in the inflammatory cascade. Inhibiting IL-1 beta should have a positive impact on both of those, as well as its own contribution to the inflammatory cascade. There are a number of other things that IL-1 beta does in this disease, and I don't have time to go through all of them, but notably, one of them is inhibition, or IL-1 beta stimulates IL-1 beta blockade, inhibits the matrix metalloproteinase system. This is a part of the innate immune system that is responsible for the destruction of the hair follicle and the formation of abscesses and formation of tunnels. Therefore, blocking that cascade should be beneficial in healing in these patients.
There are a number of exogenous factors, including obesity, smoking, and genetic factors that contribute to the disease. Obviously, everybody who's overweight and smokes doesn't get the disease. It does afflict about 1% of the population in the U.S., and it's really a global condition. If we look at some of the selected data in IL-1, or rather in HS, and look at the specific contributions of some of these drugs, you can see that it validates the role for IL-1 in HS. If you look on the left, you see the JAK inhibitors, in particular povasitinib, which was recently released. The gray bars at the bottom are the placebo effect, with the colored bars on top being the additional contribution of efficacy to HiSCR75, or a 75% reduction in the number of nodules that patients have, which is the current standard that FDA uses for evaluation and approval.
You can see that in one of their studies, they were not significant; the other one was, but there's still a large majority of patients who do not benefit substantially from the treatment. In the center, you have the BEHEARD studies from Bimzelx, UCB's drug, which is having an amazing launch since its approval last fall. You can see that here you have somewhere between 15% to 20% additional benefit on top of placebo. We have the phase 2 data from sonelokimab from MoonLake. We're just awaiting their phase 3 results now. It should be released sometime this month, I understand. You can see there that in their 12-week studies, they had a better effect, but still less than 50% of patients responding. On the right, we see the luticizumab data I mentioned earlier from their phase 2 trial, two different dose regimens, both of them showing efficacy.
What we see in this 16-week study was that these patients, even though it was a much sicker population, again, 71% early stage 3 and 100% anti-TNF therapy, had levels of efficacy that are as high or higher than what we've seen with other drugs. If you look at the populations that were studied by UCB and by Moonlake, you have less than half that number of patients early stage 3 and a much smaller number of patients who had had previous biologic exposure. When we saw these data, we were very, very excited and very encouraged about the possible contribution of an anti-IL-1 beta. This is our drug. It's highly potent and it's very specific. It's been studied in over 200 patients in phase 1-2 trials at doses up to 720 milligrams per month. It's in a stable 150 milligram per milliliter subcu dosage formulation.
It has the potency and half-life to support four-week dosing and possibly longer in this disease and others. When you compare it to luticizumab, which we're showing here, the first thing I'd like to point out is luticizumab is a bispecific antibody with two CDRs on the variable region of the molecule in tandem, a little bit unusual. You see IL-1 beta and then IL-1 alpha. The IL-1 beta affinity of that molecule is 44 kilodaltons, still pretty good, but much, much lower affinity than ours. It has a bioavailability of 46%, a half-life of somewhere between 10 and 14 days, and its dosing frequency has been evaluated every week, which is what they're using in phase 3, and every two weeks.
By contrast, you can see that our antibody has an affinity that's much higher, less than 3 picomolar, higher bioavailability, longer half-life, and being evaluated at every two weeks and every four weeks. As I said, IL-1 beta is the predominant IL-1 isoform that drives chronic inflammation in HS. Here's additional evidence of that. On the left, you have IL-1 beta expression in normal skin, psoriasis, and HS. You can see on the right, there's a massively increased amount of IL-1 beta within the lesions of HS. IL-1 alpha levels, in contrast, don't show any change at all from normal through psoriasis to HS. The way that we should think about that is the fact that IL-1 alpha, although it does bind to the IL-1 receptor, has a very different role. It is an alarmant. It's expressed in normal epithelial cells, skin, lung, and gut.
It functions mostly in the case of cell injury to turn on the NLRP3 system in this cascade, which in turn elaborates IL-1 beta. That is the kindling for the chronic inflammation, but the chronic inflammation is actually being driven by IL-1 beta. Again, that's upstream of TNF-alpha and also 17. Further evidence comes from a clinical trial that J&J did with a drug they licensed from XBiotech called bermekimab. The study was done in 2023. They used a very large dose, over a gram of bermekimab every week in patients with HS. They had a comparative positive control of Humira, which is known to be effective. You can see the results here. There was absolutely no drug effect from using bermekimab at high dose once a week in this patient population, whereas the Humira did perform as expected.
I'm just comparing that to the luticizumab data that we talked about before. As you would predict from the biomarker data I've shown you on the left, targeting IL-1 alpha does not have any effect on the disease. Therefore, we feel that a pure IL-1 beta play definitely gives us a stronger therapeutic opportunity. Affinity does matter, and it matters a great deal. There is evidence to show that these lesions are really pus under pressure. You can measure the pressure in the skin. It'd be something around 20 millimeters of mercury. In one of these lesions, it's about 80, which is a severe pressure gradient that prevents any kind of molecule, small or large, irrespective of its molecular weight, from getting into the lesion. Obviously, monoclonal antibodies can get there, or they wouldn't be effective. How do they get in against the pressure gradient?
It's simply a matter of affinity. The affinity for the target, in this case, IL-1 beta, draws the antibody in and holds it there. While the antibody is in the lesion, it is able to neutralize IL-1 beta effectively over a longer period of time, reducing the effective concentrations and giving us a lower trough level, which allows the inflammatory process to subside and for the lesions to heal. This is all about affinity. I know there's a lot of discussion out there around, well, my antibody is smaller than your antibody, and maybe that'll diffuse it. Actually, not even a small molecule like an antibiotic. They have a very difficult time diffusing into these lesions. It's been known for centuries that you need to basically decompress these lesions to allow them to heal.
In this case, that's not practical, but we can achieve the desired therapeutic effect with a higher affinity antibody. The higher the affinity, the longer the dwell time and the better the therapeutic effect. Our trial is listed here, the LOTUS trial. It follows a fairly well-developed pathway for study in this disease. It's a three-arm study with two doses of AVTX-009 versus placebo. A total of 222 patients planned. The primary endpoint is HiSCR75. I showed you before at 16 weeks. There will also be a six-week safety follow-up. In addition to HiSCR75, we'll be measuring the IHS-4. We'll be measuring skin pain and quality of life in these patients. We'll get a pretty comprehensive view of what this antibody is able to achieve.
We're using one four-week dose, which is our preferred dose for clinical trials in phase 3, and also as a backup, a two-week dose, 150 milligrams. Note that we're using a large loading dose or starter dose for these patients, which should allow us to get them to therapeutic levels very rapidly. That distinguishes us from other approaches that are being taken as well. That trial is progressing extremely well. The teams executed beautifully. We're over three quarters enrolled, and we've had a really good August and continue to have good enrollment in September. There's a lot of interest in the IL-1 beta mechanism, and I think we're very pleased with how the trial is advancing. The market itself, I mentioned, it's projected to be a $10 billion market. Obviously, room for a lot of different entrants. It is about 1% of the U.S. population.
Prevalence increases with increased obesity and smoking, but it's seen around the world, and many patients are not obese who have it. We think there's about 3.5 million current patients in the United States. Fewer than 100,000 right now are being treated properly. There's been traditionally a lag time of 12 years between initial presentation to the general practitioner and referral to the dermatologist. That's now decreasing with better therapies being available and better education of the public. Obviously, the earlier patients are referred and the earlier they can start effective therapy, the better they're going to do. We're seeing more of that happen, which is something that a factor that will really help to grow the market very substantially. These are our timelines. We enrolled our first patient last fall. Outstanding performance there by the team.
We expect to have enrollment completed this fall and our phase 2 readout in the mid of 2026. We will immediately go to FDA for an end of phase 2 meeting and get our phase 3 started in 2027. There are a lot of other potential indications for this drug. We note that AbbVie are studying. They studied a total of six indications, five still running. They had a recent readout from their ulcerative colitis trial where they showed that their drug was numerically superior to Humira as a monotherapy in ulcerative colitis. They're also studying it in combination with Skyrizi in Crohn’s disease, something we're very interested in looking at over the longer term.
There are studies going on in psoriatic arthritis and rheumatoid arthritis, as well as in atopic dermatitis, although as I mentioned earlier, the unmet need in atopic dermatitis maybe isn't as high as it is here. We've also thought about additional arthritis indications in the INI space, including crystal arthropathy, which is a very large opportunity, very unsatisfied at the moment. In summary, we have an excellent drug with a differentiated profile. Our competitive advantage is the very high affinity and longer half-life of this molecule against the central target for HS. A very, very benign and excellent safety profile. Our lead indication is HS, which is driving a lot of growth in the dermatology and INI space in general, and a very large market opportunity, which will peak sometime around 2035.
Our phase 2 definitive LOTUS trial is enrolling very well, with enrollment expected to be completed this fall and top-line data available mid of 2026. There's a strong scientific and clinical rationale for expansion into additional IL-1 beta-driven diseases. We're doing a lot of biomarker work on that, and we'll have more to say about that next year. We're in a very strong financial position with cash runway extending into 2028. We're not looking to raise money right now. We will raise for phase 3. I'll stop there and take questions. Thank you very much.