Good day, everyone. Welcome to day two of Cantor's Global Healthcare Conference. I'm Prakhar Agrawal, a biotech analyst at Cantor, and for our next session, we are very excited to host the team of Avalo Therapeutics. From Avalo, pleasure to have Garry Neil, Chief Executive Officer. Garry, welcome, and thank you for coming.
Thank you. It's an honor to be here.
Well, big year for you.
Yeah.
With data earlier in the year. We'll talk about that as well. Maybe for folks who are not yet familiar with the story, just maybe give a broad overview of the company, the pipeline, and key priorities for the next one to two years.
Right. Avalo, AVTX, is a clinical-stage biotech company based outside of Philadelphia. We have been around in various iterations of the company before, but the important part of our history really begins with the recap of the company in 2024, and the initiation of our development of our lead asset abdakibart, which is a very high potency anti-IL-1 beta monoclonal antibody, which we have in the clinic right now, in phase II, heading into phase III for HS, moderate-to-severe HS. After we recapped the company in 2024, we got straight to work building the right team that we needed and initiating the phase II-B LOTUS trial, which was a definitive proof of concept study run at a very rigorous, and I would say, pivotal standard and analyzed the same way, which we enrolled in really very rapidly, and had our data readout this May.
That showed extremely. We were very pleased with the results, very positive results, very consistent results, which we can talk about in a little bit more detail, and giving us the impetus to move into phase III. We were then able to raise the capital we needed to be able to get us through the phase III program, which will conclude in 2029. We are able to expand our pipeline with AVTX-010, which is a longer PK version of AVTX-009, we have not disclosed all the details, and start to make preparations for expanding other indications. So that is where we are right now. We are in expansion mode, getting ready to meet with FDA for our end-of-phase II, phase III initiation program, get the CRO in place, and get our clinical trial supplies manufactured.
Great. Maybe going to the phase II data that you presented this year. You have had some time to discuss this data, probably with the KOLs as well. So what has been the physician feedback on the data, and what are some of the key highlights from that data set for you that surprised you to the upside?
Yeah, they are super excited by this. These are the best data that have been shown in a really rigorous, large phase II trial. Yes, you could see some results out there from smaller studies, but it is a little bit more difficult to interpret in a variable disease like HS. But they were very excited by the data.
In fact, what we heard over and over again is, "We weren't absolutely certain about the IL-1 beta hypothesis in HS before your data, but now that we see these data, we're absolutely convinced that this is a very robust and consistent treatment effect." That was shown by hitting in the low to mid-40s in terms of efficacy at HiSCR 75, but also in the consistency of the response across IHS4, HiSCR 50, HiSCR 90, all of the measures that we used, and all of the secondary parameters. The consistency was also temporal. The data were very clean, the curves were very smooth, and the effect looked very sustained. It was also a very robust effect equal to naive patients and biologically experienced patients, including patients who'd been on IL-17s. They were very excited about it, as were we.
I think we haven't shared our biomarker data yet. We're going to do that at a scientific meeting. But I can say, and many of them looked at that, too, that it was all the more convincing by how effectively we engaged the target, which was IL-1 beta, and all of the other secondary measures as well.
Got it. You highlighted the consistency of data across endpoints. That was kind of striking as well if you look at bio-naive versus refractory.
Yeah.
This is in a placebo-controlled setting as well. When you look at that, the HiSCR curves also looked a little bit different and better for abdakibart versus, let's say, even lutikizumab. I guess what's driving that differentiation mechanistically or between lutikizumab and your data set?
Yeah. It goes back to mechanism, because fundamentally we believe this is an IL-1 beta disease. The macrophage and the neutrophil in particular are very involved in the pathogenesis of the disease. You have IL-1 beta sitting upstream as a key regulator, if not the key regulator of the innate immune system, with these direct effects on neutrophils and macrophages, and the matrix metalloproteinase system. But it is also upstream of other effective cytokines which have been shown to be effective in the disease, namely TNF- alpha and IL-17, particularly, probably IL-17F.
Because of that central positioning, and the fact that you do see some immune accommodation in response to the selective pressure of using various therapies against these cytokines, being more central in the pathway also prevents some of the resistance from developing, and allows you to treat patients who have already not responded well or stopped responding to one of the other drugs.
Right. How does that mechanism differentiation versus AbbVie play on the safety profile as well? What did you see in the safety versus lutikizumab?
We really loved IL-1 beta because of the safety profile that it has, and a lot of the positive benefits that patients have from being on an IL-1 beta that was seen in the ILARIS CANTOS trial. Here we have a drug which is much more potent and much more effective than ILARIS, but we expect it to be able to demonstrate a similarly benign safety profile. But what really excited us was that we really did not see any difference with respect to SAEs or AEs of consequence between either of the two doses we studied and placebo. Again, this looks like a really great drug, very well tolerated by patients.
Got it. You will have the presentation at EADV as well. I guess what incremental data sets should investors expect to learn from there?
We are going to show a little bit more of our biomarker data.
Okay.
A little bit more details around it. I think that our top-line data set was pretty complete though. I do not think there is going to be any big revelations from it.
Again, I am really excited. Whenever you are developing a monoclonal antibody and you are using biomarkers, you want to see that you are effectively neutralizing those biomarkers in a very wide range of patient subpopulations. I think you are going to see that.
Got it. You will start a phase III. Remind us what are the gating steps in terms of the phase III start? When is your FDA meeting, and how should we think about the design versus other
Yeah. We are targeting before the end of the year, submitting our end-of-phase II package, which we very carefully developed. This is the standard that everybody follows for getting into phase III, and getting agreement and alignment with the FDA that the program we are going to run is going to be fit for purpose for an approval. Fortunately, HS is a well-worn path, so there have been other sponsors there that have got approvals before, and FDA has been pretty definitive about what they require as far as a 16-week induction phase, 52-week chronic treatment, and the safety and efficacy endpoints using HiSCR 75, HiSCR 50, which we will have both of those, as well as IHS4 and healing of tunnels and all of that.
There are some details to be worked out around the minimum age of inclusion in the trials, whether that is 18 or 16, and how the pediatric program will look. We want to go forward with our 600/300 dose. That is a 600 mg loading dose followed by 300 mg every four weeks, which would be very differentiated in the field. We want them to give us the green light to do that.
Okay. Not to beat the dead horse here, but on the placebo response in HS trials, we had a couple of good KOLs, top KOLs actually, yesterday, and they said that they do not look at a placebo adjusted response, they just look at absolute efficacy. Having said that, we still need to be statistic in phase III. For that, you need to make sure that placebo is in a reasonable range for the trial powering as well. I guess what are your thoughts on that, as well as what steps could you take to mitigate any variabilities on the placebo?
We've looked really carefully at that. I think the first thing you need is to have an effective drug with a big treatment effect, which we do, fortunately. We can easily design and power the study so that we will not be disadvantaged in some way by an anomalously high placebo effect in a very variable disease. We know that more severe patients tend to respond better. We know that some of the limitations in using the binary endpoint of HiSCR, and we'll also be comparing that to looking at the totality of evidence with IHS4. We'll take into account and do stratifications when it comes to variables like weight and numbers of lesions and all of that. There's only so much you can control in a variable disease like this, and you just have to make sure that you've got a really good drug.
I've developed drugs for over 30 years, have had many successful programs, and what you learn from that is that it's not that you stay away from disease areas or categories where you have a high placebo response.
You design the trial in a way that you're going to be successful and show the effect. I'm super confident about the phase III program, by the way, because of the consistency of the response—
Right.
—temporally and across all of these different endpoints. Yeah, we've seen placebo rates as high as this. They're more commonly, traditionally or if you like, over the last several years, they've run in the 13%-18% range with a couple being in the 20s. I guess we've explored that. Now the other thing I'll say is based on the MoonLake Immunotherapeutics precedent, is that when you run a phase II trial that's sufficiently large, sufficiently rigorous, and it's analyzed according to a pivotal standard, that FDA has agreed with MoonLake Immunotherapeutics that such a trial could be used—
Right.
—as a pivotal trial. In one sense, the way we think about it, and we're still planning to do two pivotal studies in phase III. We kind of have one pivotal study in the bank already showing a positive result. That gives us, and should give investors a little bit more confidence in the program overall.
Got it. As you think about the enrollment, and you've said the timeline of readout is going to be 2029. I was looking at the HS landscape, and a lot of the late-stage trials are actually finishing up right now, so that should be beneficial for you in terms of the enrollment timelines, right?
Agree. We're hitting a really propitious window for being able to enroll. I think yesterday, it was an excellent panel that you and Imogen did yesterday. But I think the message was very clear from your thought leaders that these trials are very easy to enroll because there's a lot of patients out there who are looking for opportunities to get into a clinical trial. Again, what I've learned in 30 years of drug development is that if you can't enroll the trials, the market may be difficult as well. When you can enroll the trials easily, that tells you something about the market. So yeah, we're hoping. We've set aggressive enrollment timelines. We're not going to compromise our quality in any way, but there may be some opportunity to do even a little bit better than what we're hoping.
Okay. There's a big catalyst for you from a competitor standpoint in the coming months, AbbVie's data for lutikizumab.
Yeah.
I guess, as you think about the different scenarios, what are the implications for Avalo from that data set?
Right. We can't control what they're doing. It looks to me that they've run a very rigorous phase III program. As I said, there were some questions because of the messiness of their data in phase II. They were obviously convinced, and they're an excellent drug developer and a very big player in the immunology space, so they know what they're doing. But when you combine what their phase III data showed and now our phase III data, I think it's very convincing for the IL-1 beta hypothesis. And they have a drug which hits that target. Ours hits it harder and more selectively, so I think that's going to be in our favor. But I would expect that they should have a positive result, and that would obviously be good for us, especially if we could show some of the advantages that we already have. Just dosing.
I mean—
Yeah.
—they are studying once a week dosing, which is what they will get in their label for the induction phase. We plan to study once a month.
Right.
That is reducing that needle burden to patients who already have a very difficult disease, I think is going to be a big deal, as you heard from your thought leaders yesterday.
Yep. No, the dosing frequency is definitely a big advantage. I think the KOLs also agree with that. What is the device presentation and like the dosing volume and injections that you are giving?
Yeah. We have already gone through the prototype stage for an auto-injector, and it is our plan to launch with an auto-injector that will be very simple for the patient to use. Just remove the cap and be able to inject thigh, arm, abdomen, wherever they are comfortable with.
Okay. Got it. On the landscape and commercial, we have IL-17 at the class that is getting a lot of share in HS. Where do you see IL-1 sort of fitting in the treatment paradigm? Is it a little more refractory patients, or is it just going to be more bio-naive, or patients who have more draining tunnels? Where do you see the low-hanging fruit?
All of the above.
Okay.
Right. We are going to develop this as a frontline therapy because we think we will have both the best efficacy profile, which is really critical to patients, and a really great safety profile, where you are not having to worry about things like psoriasiform rash or candidiasis or any of those other types of issues. I think that there is also a lot of potential benefit that both dermatologists who are traditionally quite conservative about the therapy.
This is not a fatal disease. It is a bad disease, but they do not want to give patients additional problems. When they see that long-term use with IL-1 beta inhibitors like ILARIS have actually been associated with a significant reduction in cardiovascular disease in a patient population that suffers from obesity, type 2 diabetes, and has a high smoking prevalence, so they are at risk of heart disease. That is one thing.
A drug that is actually not associated with an increased cancer risk, in fact, quite the opposite. It was very remarkable—
Yep.
—in the ILARIS trials that the cancer rate overall was about half in the patients who were on drug versus patients who weren't. This is just astonishing to people. When you think about the fact that cancer, most all of the big cancers arise in the context of active inflammation, it makes a lot of sense. You think about you have a drug which is not really an immunosuppressant, but it's an inflammatory reducing drug which is targeting this most abundant cytokine in the lesion and with a high affinity within getting into the tissue, getting into the lesions. That's going to be very attractive. We also did show really remarkable data on healing of draining tunnels, and that really caught the attention of the KOLs.
As you're thinking about which therapy you want to put the patient on, and you're looking at that overall profile, I think this comes to mind almost immediately. Secondly, if you've already got an established market that has been penetrated but not saturated with anti-IL-17s and TNFs, and you're also able to demonstrate that, hey, look, we can be just as effective in a patient who's already had that. If your patient's not tolerating it, if your patient's not getting optimal relief, why not move to this drug in that patient population as well? We'll see how the dynamics play out in the market, but I think we'll be extremely well positioned to be able to capture both frontline patients and patients who are looking for a better alternative.
Right. Yeah, as we see in any other I&I market, more drugs are expanding the lines of therapy, so there's already—
Yes.
—a lot of IL-17.
The launches are going really great. Again, the disease is kind of coming out of the shadows.
Yeah.
I think as a physician, I had no idea back in my practice days that this disease is as common and prevalent as it really is. Now that people are, again, as often happens when effective therapies become available, recognition goes up and patients come in seeking therapy much sooner. You know the delay in diagnosis—
Yeah.
—is a decade. Patients are sort of going around and around in circles trying to find an effective therapy with a GP before they get referred to a dermatologist or an internist who knows what the disease is and how to treat it properly. We can compress that timeline. That's also going to really accelerate growth.
Okay. You recently announced plans for a long-acting IL-1 beta as well.
Yeah.
What is the strategy there? Is it going to be a drug for HS, or do we explore that in other indications as well as you think about life science?
I think that patients are always looking for opportunities for reducing needle burden. I think this is a bad disease, as Michael Cameron said yesterday, patients are willing to take an injection and even more frequent injections. But if you can offer them an alternative that lessens that burden and improves compliance at the same time, I think that is really a big advantage. It also opens up some additional target space for us, where very intermittent therapy would be much more desirable on the behalf of the patient and the physician, and may give us some pricing advantages, too. We are really excited about that, and we know how to do this engineering, and we know how to do it very effectively. Why should we sit around and wait for somebody else to do that? We instead took the bull by the horns and did it ourselves.
We will be in the clinic with that the first part of next year.
Okay.
I think we have also been able to negotiate some abbreviated toxicology programs and so on from the FDA based on the work that we have already done with abdakibart. We are very excited about that, and stay tuned. I think if you are looking for an analogy, you can think about SOLIRIS and ULTOMIRIS.
Yep.
Maybe as one way of thinking about the evolving life cycle plan for our drug.
Got it. Based on some of the preclinical data for the long-acting, are you able to comment on what dosing frequency would you predict in clinical trials?
We haven't seen the human PK data yet—
Yeah.
—but we do have a highly potent drug, and if that is further enhanced by having a long half-life, I think it's very, depending on the indication—
Yep.
—very thinkable to think about a three month or longer, six months maybe.
Got it. As you think about your indication expansion strategy, I think you started to talk about derm and rheum as possible categories that you could explore. What indications rank up high in the priority, and when do we hear more about them?
We're trying to build the premier anti-inflammatory company centered around the inflammasome IL-1 beta, so we're staying within that theme. As we look at the science, we're looking at what diseases are unequivocally and with clinical validation, associated with IL-1 beta and neutrophil/macrophage biology. When you look at that, there's a lot of different adjacencies in the dermatology space. Especially, there's this whole large category that's sometimes referred to as neutrophilic dermatoses. HS is the preeminent one now. But you can think about diseases like pyoderma gangrenosum, severe acne, PASH syndrome, so on and so forth. There's opportunities there which we feel are very well validated as far as IL-1 beta pathology that we're looking at.
If you think about diseases like psoriasis and atopic dermatitis, those are perhaps less well suited to the indication, but even in the case of patients that are, they're also fairly well served. We also want to go into populations that really need something that isn't available. Rheumatology provides another really interesting space where we know IL-1 beta is playing a really big role, and what comes to mind there are the crystal arthropathies.
Yeah.
Most people do not even, again, define them in this larger category, but there is a whole series of rheumatologic diseases that lead to pain, acute flaring joints, chronic joint pain, even joint replacement, that are associated with crystal deposition in the joint. Gout is the classic one that is known with uric acid crystals. The approach to gout in the majority of patients has been control of the uric acid, which is possible with uric acid-lowering therapies, although compliance with that is very, very low. That is one of them. There is another crystal arthropathy, though, that is less well-known called CPPD or calcium pyrophosphate deposition disease. These crystals, which probably originate in bone, nobody really knows, and cannot be controlled either with diet or with drugs, deposit in the joint a little bit different anatomical pattern than gout.
Again, they can cause a severe acute inflammation which puts the patient in the hospital, but in between flares, they have chronic ongoing joint damage. It is when you know what you are looking for, it is fairly easy to recognize, and again, IL-1. What happens with the crystal deposition, by the way, as I neglected to mention that, is that basically the crystals are taken up by a macrophage. The macrophage cannot really process a crystal, so it turns on the inflammasome NLRP3 system and produces massive amounts of IL-1 beta, which drives the inflammatory cascade and in a lot of cases, joint destruction. Targeting IL-1 beta at that level is known to be very effective in these diseases. We are talking about millions of patients, many of them older patients who are intolerant of any of the less targeted therapy.
That is another one that is very exciting to us. I also think about, and this was part of the rationale for the AVTX-010 program about future targeted therapies that are using combinations or bispecifics to be able to enhance the inflammatory response or expand the response of population, using IL-1 beta as the base for all of the reasons that we said before. We are thinking about that as part of our future indication expansion strategy.
Right. The CPPD indication is super interesting. How big is the addressable market for patients who are severe enough to go on a biologic therapy? Do physicians use IL-1 beta therapy off-label, like anakinra or ILARIS?
They do. We have talked to rheumatologists about this. This is a disease which is treated by rheumatologists.
They put CPPD up among the diseases with the highest unmet need for which they do not have any approved therapies. They put it right up there ahead of rheumatoid arthritis and with lupus. It is a very high unmet need that they recognize. It is a disease that principally affects, but not exclusively, but the largest demographic is older patients over the age of 60, and that population is expanding very rapidly around the world. We think there are about 10 million patients that have the disease in total, and maybe of patients that are severe enough to warrant this treatment with a biologic, if only 10%.
Yeah.
That seems to be 10%-20% comes back from most of the rheumatologists we have talked about. That is a huge market. They do use drugs off label for this when they can get them like anakinra or occasionally ILARIS, and they are effective. Anakinra, of course, has to be injected every day. They are very expensive and off-label insurance coverage is more challenging for them. We think having an approved therapy in that space would be very welcome by the rheumatologists. Yes, that is definitely one of the things, the diseases we are considering.
Okay. When do we hear more definite plans around?
Our major focus right now has been to get the phase III program established.
Okay.
Have our meeting with FDA. We've been doing all the work in parallel on CMC, the auto-injector, but also making the clinical trial supplies. Of course, getting the AVTX-010 project launched. As we get later into the fall, maybe into the earlier part of next year, we're going to announce exactly what we're doing with our next indication. It's not that we're not working on it, but I think that announcement can come out. There should be a lot of news this fall, both with the lutikizumab data coming out, the end-of-phase II meeting, and then our ability to talk about our next indication.
Okay. We know HS is now a big market. You have established really good efficacy and safety for abdakibart. You have a long-acting drug. You can go in different directions with a different indication expansion. How do you maximize the value of this, I guess, of the company as well as the pipeline that you have in terms of the strategic options and maybe even partnerships? When might be the right time to do that?
Right. I'm focused and our team is focused on building a preeminent company in the IL-1 beta NLRP3 space, which is what we're going to do. We just need to execute our plan to be able to achieve that. Meanwhile, we're also not naive. We know that there can be strategic interest and partnerships and what have you, and we're always open to those types of discussions, if they come up. Right now, I'm focused like a laser beam on trying to get this company to the next stage. We have the capital we need. I've got a superb team, and we've got an excellent drug with a great profile right now. We have all of the ingredients that we need to be able to succeed on our own.
Okay, great. And maybe last question, the cash that you have on the balance sheet, what does it cover in terms of the phase III as well as some of the—
Gets us through our phase III top line data set.
Okay.
The AVTX-010 data, and also we made sure that we have enough in there to cover a proof of concept for another indication.
Okay, great. That's all the time we have, but thank you, Garry, for a great overview, and looking forward to the next updates as well.
Thank you very much.
Thank you so much.
Pleasure.