Hey everybody, we're back. Very happy to have Garry Neil, CEO of Avalo Therapeutics, with us for the next fireside. I'll kick it over to Garry to give a brief overview of Avalo, and then we'll get into a Q&A. With that, Garry.
Thanks, Alex, and thanks for having us again. Avalo is focused on developing therapies targeting IL-1 beta for immune-mediated inflammatory diseases where there remains significant need. Our lead asset is abdakibart, formerly AVTX-009, a highly potent and selective anti-IL-1 beta monoclonal antibody. We acquired the molecule through the Almata Bio transaction of 2024 because we saw a compelling combination, strong biology supporting IL-1 beta as a central driver of HS, and an attractive safety profile for the IL-1 beta class. The molecule we believed would have a differentiated efficacy and dosing profile, and that's playing out.
The LOTUS Phase II results significantly strengthened that conviction. Both doses met the primary HiSCR 75 endpoint response rates of 42.2%, 42.9% respectively, and we saw very consistent activity across multiple clinically meaningful secondary endpoints. In fact, all of the secondary endpoints were positive. Importantly, the 300 mg every four-week regimen performed essentially identically to the every two-week regimen.
Our number one priority is straightforward, execute the registrational phase III program in HS, which we plan to initiate the first half of 2027. At the same time, we're building beyond abdakibart with AVTX-010, our next generation long-acting anti-IL-1 beta antibody, and we plan to submit an IND for that program in the first half of 2027 as well. I'd characterize the next 12 months as being about execution, moving abdakibart into phase III, looking at additional indications, and beginning to build a broader IL-1 beta franchise.
Yep. Yeah, great. I think maybe the way to kick things off is just sort of talk about where is the HS landscape today, right? We've had some new therapies recently. We've had some failures. We've had a lot of new things in development. Where are we at right now in your view?
It is very vibrant, very dynamic. There is increasing recognition of the huge need. Patients are getting earlier diagnosis and better diagnosis than they ever had before because of the availability of some new products. They are getting on biologics much earlier with the recognition that allowing the disease to progress is not really optimal medical care. We are seeing the market growing. It is probably already in excess of $3 billion, and we have it pegged to grow to over $10 billion by the mid-2030s, and that may be an underestimate for it.
It has been very easy to enroll these trials because of the availability of patients who are seeking better treatment options, and that is why we do need to explore and provide new mechanisms such as abdakibart to these physicians that look after them and the patients. Because even though there has been a lot of progress, there still remains a lot of need. Patients are not completely satisfied, and until we get a mature market like psoriasis where the majority-
Yeah.
...of patients are achieving clear skin, I think we are not done yet.
I guess you alluded to this in the intro, but the core thesis here is selectivity for IL-1 beta. That comes out of initial proof of concept data from lutikizumab from AbbVie, which is IL-1 alpha beta. I guess maybe could you at a high level, can you talk about that mechanistic rationale that underpins the story here, and then I want to get into the phase II in a little bit more detail.
IL-1 beta is really a central inflammatory driver. From an efficacy point of view, it really makes a lot of sense. There are very, very high levels of IL-1 beta in these HS lesions, more than any other cytokine. The second most commonly expressed would be IL-17, which we know is well-validated with approved drugs on the market.
It also has an effect, IL-1 beta has an effect on a variety of other mechanisms, such as the matrix metalloproteinase system, direct effects on the neutrophil and macrophage, which are really super important, also upstream of TNF. All of that taken together leads to a really great profile, potentially of being able to help more patients also get into healing in draining tunnels and fistulas. That is really critical for it. At the same time, it has a really great safety profile-
Yeah.
...IL-1 beta, it is not a pro immune stimulator. It is an inflammatory molecule. Blocking it gives you an anti-inflammatory effect, but you do not get into opportunistic infections or-
Yeah.
...increased cancer risk, which has been a little bit of a problem or an impediment to the safe use of some of the other products that are used in this disease. In fact, if you look at the historical data from the CANTOS trial with ILARIS, which is a much less potent drug than ours and not being developed in HS, but it did show that there was no increased cancer risk. In fact, quite the opposite.
There was a markedly reduced cancer risk and cancer mortality risk in that three-year study since most cancers, epithelial cancers especially, arise on a background of inflammation. You also saw a decrease in cardiovascular risk with long-term treatment with it. I think those are both very reassuring when you are looking at the long-term safety profile of a drug like abdakibart.
I guess, in the context of the phase II, the safety profile was pristine, right? I guess you want to talk about the phase II study in a little more detail and how it supports the thesis overall, and then we will get in some more follow-ups on that too.
Yeah. The LOTUS was on approximately 250-
Yeah.
...patient study. As you said, adverse event rates were similar across the treatment and placebo groups. Importantly, we observed no adverse events related to neutropenia, serious infections, opportunistic infections, or anything like that. The data, as I said, were basically class leading for what's been presented now in a large, well-controlled study. I'd like to point out that, we did a really rigorous trial-
Yeah.
...to a pivotal standard, both of execution and the way we analyzed the data using a very rigorous imputation, the most conservative imputation method that you can use. We're very, very confident about the data being-
Right.
...translatable to a phase III program, and the consistency of the response as well. In every single secondary endpoint, many were not really powered for statistical significance, but everything went in the right direction.
Yeah.
We saw very, very consistent responses and very clean response curves over time, which is a little different than some other smaller studies have shown. All of that taken together gives us very high confidence in this mechanism of action and in this drug.
From a baseline perspective, things were quite similar to other contemporary studies. I guess you did include IL-17 experience patients.
We did, yeah.
How might that have contributed to the data here? Can you say much about that subpopulation at this point?
Right. We had more than a third of the patients were biologically experienced either with a TNF-
Yeah.
...or the IL-17. Almost all the IL-17 experienced patients had also had a TNF, and the response rates were virtually identical in the biologically experienced patients compared to patients who were biologically naive. That tells us that we can expect a very good response in that population in secondary use. We are studying it and planning to get first-line use for the drug. We think that given its efficacy and safety profile, it would be ideal for that. It is also going to be very reassuring to patients and doctors and also to payers that the drug can be effective in patients who have already had a course of biologic therapy and did not respond as well as they wanted to.
Obviously, the internal consistency of the trial is quite impressive.
Yes.
The one question here is placebo response, right? It is on the higher end relative to some other contemporary studies except for VELA-2.
Yeah.
I guess the question for you is this the new normal in your opinion? Do you think placebo responses on HiSCR 75 moving forward may end up being in the low to mid-20s?
It is a little hard to be sure.
Sure.
This is a variable disease-
Yeah.
...for a lot of reasons, and we have known that from the beginning. There is a stochastic range of placebo responses that have been observed despite everyone's best effort to try to control it through training and management. There is a little bit higher placebo response in some patients who have milder disease. Again, part of that is due to the endpoint, the regulatory anchor endpoint of HiSCR, which is a binary outcome.
Yeah.
You could be one or two lesions either way, and either be a responder or a non-responder.
Yeah.
But that said, historically, again, we've seen this range from 13% all the way up to 25%.
Sure.
As we did, that means that one has to really power the study, and make sure you're studying a drug with a robust treatment effect to make sure that you're going to be able to demonstrate the drug treatment effect in a population where you happen to get a placebo rate that high.
Yeah.
We've looked very carefully at our data. We're going to take the lessons learned forward into phase III with additional stratification and enrollment criteria, and even more rigorous training than we did before in the hope that we're going to be able to manage that. But given the fact that we were able to show such a robust, consistent effect in a smaller study, running studies with a much larger sample size is only going to increase our power to demonstrate the effectiveness of the drug. We're not worried about it.
Yeah.
We're going to try to manage it, and it may be the new normal, and it may be difficult for new treatments coming in that are more marginal in their efficacy to withstand that.
You're going to present this trial at EADV as a late breaker.
Yes.
Anything we should expect new out of the data set that you didn't present at the top line?
No, I think the emphasis on that is going to be the IHS4 data. We like that as a better endpoint because it's a more continuous variable, and it's also weighted towards patients with more severe and deeper lesions, and we did very well with IHS4. But we have presented those data before, so there won't be a lot. We did present most of the data that really matters. We'll be talking a little bit more as we go forward about things like PK and anti-drug antibodies and so on and so forth, which all is very favorable for us.
There's going to be a wealth of other HS data sets before the end of this year. Also, at EADV, we'll have the TL1A tulisokibart data. Some point later this year, maybe we'll get the lutikizumab data from AbbVie. Some BAFF, IL-17, bispecific data, BTK, et c. I guess out of these contemporary readouts in general, and I want to circle back to LUDI, but what are you looking for in these data sets to understand where the development landscape is and sort of maybe learnings for your own phase III trial?
Yeah, we're always interested in that. It's very exciting to see new mechanisms coming forward. It's going to help to accelerate and expand the market, we think, and give patients more treatment options. But that all said, we still remain very, very convinced that IL-1 beta is the bullseye for therapy right now, and that we have the best drug against IL-1 beta with abdakibart. The LUDI data, I think the readout could be very important for us. We think there are several informative scenarios if they produce a successful phase III result, which is what we all expect.
I think that will be definitely good for us, and we'll still be very differentiated from them with the potential for our every four-week dosing regimen from treatment initiation and maybe some advantages on the safety profile as well. If the efficacy is broadly consistent with what's been observed, in other words, we believe LOTUS results position us very, very well.
If they substantially outperform their earlier experience, which is possible, I think that would be very important evidence that IL-1 inhibition can produce very deep response in HS, and we then have the next IL-1 program in development with potential differentiated molecular and dosing characteristics, as I've already pointed out. I think the least likely scenario is that their study significantly disappoints, and if that happens, we'd obviously want to understand why. We'd want to look at the data very carefully.
But our confidence in abdakibart really ultimately comes not from what lutikizumab does, but from our own randomized phase II data set, and those two independently studied doses, statistical significance in HiSCR 75 and IHS4, the depth and consistency of response across multiple endpoints. That just gives me very, very high confidence for going forward. We're looking forward to the readout because it should provide another important piece of information about the IL-1 opportunity in HS, but our development decisions are being driven by the strength of the abdakibart data.
I guess, how would you react to the devil's advocate perspective around the LUDI trial? If they were to show a delta that was greater than what you showed in phase II, how would you react to the perspective that that adds credence to the idea that alpha matters in HS, and that sparing alpha may be detrimental to abdakibart?
Well, I don't think I would reach that conclusion. We have to obviously look at the data-
Sure.
...because there's going to be a range of potential outcomes-
Yeah.
...from a clinical trial. I think mechanistically, looking back at the bermekimab data set, which showed really no evidence of efficacy with a high affinity anti-IL-1 alpha, you'd have expected that if IL-1 alpha was able to do anything positive, they would have seen some kind of an effect in that trial, and they didn't. I think the worry is that IL-1 alpha blockade may have a less desirable side effect profile because of the role of IL-1 alpha as an alarmin and in defense of the skin against infections. There has been a little hint of that, although, again, you have to be careful with small data sets.
Yeah.
But we'll be looking at that. I think the fact that IL-1 alpha levels aren't increased in the lesion also is another clue that it's probably not going to be doing much. So we'll have to look at the data and see what comes out.
Sure.
I would see a positive result from lutikizumab as further validation of the IL-1 beta hypothesis, primarily.
Makes sense. So sort of with that, and on all these other readouts, I guess, where do you see kind of the HS treatment landscape 10 years from now? Do we see one dominant mechanism of action? Do we see multiples cycling? What's the best disease area analog to HS in your view?
In my view, the best disease analog to look at is IBD. And remember, there are more patients with HS, as far as we know, than there are with IBD. And the IBD landscape as it's evolved, as there's been a desire to provide better therapies and to put more patients into remission with the disease has resulted in a larger number of mechanisms entering the market, and each of them having their place.
Sure.
We are now beginning to see combination therapy come in, which is kind of expected. I happen to be a gastroenterologist, and I can say that as a group, gastroenterologists tend to be a little bit more aggressive in trying novel therapy things and combination therapies maybe than either rheumatologists or especially dermatologists. But the need for more effective treatments has driven that, and I think we could probably expect to see something similar ultimately happening in the HS area as well. But the bottom line is that this is not going to be a disease that is dominated by any one mechanism or therapy.
There may be some application of biomarkers or other standards that helps to direct therapy. That hasn't really panned out that well so far in IBD, so it's just meant that doctors and patients need choices, either because they don't respond initially or because they initially do, and then they have an inadequate response or a diminution in that response, so they need to switch to a different mechanism. So the HS market, I think, will be like that. There will be a need for a number of different mechanisms, room for a lot of different mechanisms.
Yeah.
But among those, we think IL-1 beta suppression, especially with a high-potency drug like abdakibart, is going to play a very important role, and also an important role as a potential combination therapy.
Yeah, makes sense. Can you walk through, we've had the phase II. What are the steps left for you to then move into a pivotal program from here?
Right. We've requested an end-of-phase II meeting with FDA. We're requesting scientific advice from the EMA as well. We expect to get that, FDA's feedback on our proposed program before the end of the year. Once we have reached agreement with them, we intend to move forward into our phase III program.
We've already been working very hard on getting our clinical trial supplies ready for phase III. We have contracts with our CMO, and that's all gone extremely well. We've been doing our contract negotiations with a CRO, so we're ready to hit the ground running as soon as we have the very final protocol after getting agreement with FDA. We plan to be in the clinic in the first half of next year enrolling patients.
Do you expect to test one dose or both of the doses from LOTUS?
That's TBD. My preference would be to make it as simple a trial as possible. We believe the 300 mg four-week dose with a 600 mg loading dose, what I call the 600/400 or 600/300 dose sorry, is really the best for patients and did show both doses were very effective, but that dose looked a little bit more effective to us. I think would be the right dose to test. We'll talk about that with FDA, though, whether or not it would make sense or they want us to run a second dose.
Yeah.
So-
Would you expect LOTUS counts as a pivotal, and do you plan to run two phase IIIs or how do you think about that?
We do plan to run two phase IIIs, and I would say this, that LOTUS was run to a pivotal standard and could be used as a pivotal trial, similar to the experience that MoonLake had with FDA. I don't think we want to go in there proposing that we use it as a pivotal trial. It is only a 16-week trial-
Yeah.
...but it could serve that purpose if we needed it.
Yeah.
That de-risks the program very substantially for us.
Yeah.
We already have a very robust positive study in there, and there is basically an FDA precedent with MoonLake in using such a study if it were to be needed. We think we'll have the most de-risked program by doing two phase III trials. However, we haven't had our discussion with FDA yet, so something may come out of that which changes our view on that and helps us to simplify the program even a little bit more.
You alluded to this, the translate availability from phase II to phase III. You feel good about the LOTUS trial, the design, the execution there. I guess some folks will point to you saw an effect size regression for bimekizumab into phase III. You seem to have seen that for sonelokimab as well. I guess what gives you confidence that you can replicate the signal you saw in phase II and phase III?
Again, if you look at some of the other smaller phase IIs, they are clearly positive. They did, but they may have had a little bit optimistic effect size based on a single dose, for example, versus another dose. The consistency of our dose response across the exposure, the size of the trial, the depth of response across all of these different secondary endpoints, and the temporal relationship, there is no wobble, so you did not have to get lucky that it just happened to give you a good separation at week 16. We saw early separation that continued to diverge all the way through the clinical trial with both doses, and by multiple measures.
I think taken together, plus as we continue to look through the biomarker data, we know that we are addressing the target very well. I think that taken together, all of that says that we have a very high likelihood of being successful in phase III. I have been doing drug development for over 30 years, many successful programs, and I feel really as good about this one as I do about any program I have ever taken into phase III.
Makes sense. Maybe the last few minutes, do you want to touch on pipeline AVTX-010 through your half-life extended product and indication expansion as well?
Yeah. We are really excited about it because we do expect it to have. It has already demonstrated prolonged half-life in animal studies. We need to verify what the actual half-life is in humans. It is a little bit difficult to extrapolate, so I am not going to give you a number on it. But-
Yeah.
...we feel like that's going to be a real advantage. First, it's convenience because in chronic inflammatory diseases, less frequent dosing can matter to patients and physicians, and it's specifically engineered to enable longer dosing intervals. Second is life cycle and franchise expansion. It potentially gives us another molecule for HS.
Oh.
it also creates flexibility to pursue additional IL-1 beta-driven diseases with a differentiated dosing profile. Remember, in HS in particular, we believe that the potency of the molecule and its specificity and its affinity are really critical for maximizing the effect. We are able to preserve that with the AVTX-010 molecule. The third advantage is intellectual property.
A next-generation molecule gives us kind of a fresh set of downs and opportunity to establish new composition of matter protection and extend the value of our IL-1 beta franchise. Longer term, it could potentially provide a very attractive backbone for combinations or bispecifics because as you know, very often when you do a bispecific, you unintentionally, or the unintentional consequence of that engineering is a shorter half-life.
Yep.
Here you've already extended the half-life, so you can prevent a degradation there. We plan to submit the IND first half of 2027. Everything's gone very extremely well on the engineering and manufacturing. I think it also demonstrates that we, Avalo, are able to engineer these molecules as well. We have that capability.
Yep.
We bring them forward.
Great. Well then maybe last question, can you talk about your current cash runway and what's embedded in those assumptions?
Yeah. We reported over $400 million at the end of June after our fundraise of $430 million in May. We have adequate cash runway to get through 2029 and through our phase III top-line program with additional funds available for us to do the AVTX-010 program and another indication which we'll be announcing in due course.
Great.
We're in great shape. We've eliminated a lot of our financial overhang.
Great. Well, Garry, thanks again for joining us. Really appreciate it.
You're more than welcome. A pleasure to be here.