Avalo Therapeutics Inc. (NASDAQ: AVTX) saw its stock price climb sharply on Tuesday, rising approximately 34% to $21.73 by midday, after the company announced a $375 million public offering on the heels of encouraging Phase 2 clinical trial results for its lead drug candidate, abdakibart, in hidradenitis suppurativa (HS).
The offering, priced late Tuesday, consists of 19.73 million shares at $17.75 each, along with pre-funded warrants for an additional 1.4 million shares at $17.749 per share. The transaction is expected to close on May 7, subject to customary conditions. The company intends to use the net proceeds, combined with its existing cash reserves—which stood at roughly $82.0 million as of March 31—to advance abdakibart into Phase 3 clinical trials and support other pipeline activities.
Phase 2 LOTUS Study Results
The positive data came from the LOTUS study, a 16-week, placebo-controlled Phase 2 trial involving 253 adults with moderate-to-severe hidradenitis suppurativa. The trial evaluated two dosing regimens of abdakibart: 150 mg every two weeks and 300 mg every four weeks. Both regimens demonstrated statistically significant improvements over placebo on the primary endpoint, HiSCR75, which measures a 75% reduction in abscesses and inflammatory nodules without an increase in draining tunnels.
Specifically, 42.2% of patients receiving the 150 mg every-two-week dose achieved HiSCR75, while 42.9% of those on the 300 mg every-four-week regimen met the endpoint. In comparison, only 25.6% of placebo-treated patients achieved HiSCR75. The company also reported statistically significant gains on key secondary endpoints, including HiSCR50, the IHS4 disease-severity score, and draining tunnel count.
Safety data from the trial were generally reassuring. Adverse event rates were comparable between the abdakibart and placebo groups, with headache and nausea being the most commonly reported side effects. Notably, there were no cases of neutropenia, serious infections, or opportunistic infections during the 16-week treatment period.
Market Context and Competitive Landscape
The positive results position Avalo to compete in the rapidly evolving HS treatment market. Hidradenitis suppurativa is a chronic inflammatory skin condition characterized by painful nodules, abscesses, draining lesions, and scarring, often in areas where skin rubs together. Current standard of care includes adalimumab products, and recent FDA approvals include Novartis's Cosentyx (secukinumab) for moderate-to-severe HS in 2023 and UCB's Bimzelx (bimekizumab) in November 2024.
Abdakibart is a monoclonal antibody that targets interleukin-1 beta (IL-1β), a key inflammatory protein implicated in HS. While the company's cross-study comparisons to approved drugs are not based on head-to-head trials—a point noted in the company's investor slides—the data suggest abdakibart could offer a meaningful new therapeutic option.
Management Commentary and Next Steps
Avalo CEO Garry Neil expressed confidence in the drug's potential, stating that the results provide "tremendous confidence" to advance abdakibart into Phase 3. Dr. John Frew, a dermatology professor at the University of New South Wales, described the data as "highly promising" and suggested that IL-1β inhibition could become a "meaningful new therapeutic option" for patients.
The company's next steps include securing the financing, presenting the full LOTUS data at a medical congress, and finalizing the Phase 3 trial design. However, the company acknowledges that even with the new capital, it may not be sufficient to fully develop all pipeline candidates.
Investors should be aware that the stock offering will result in dilution for existing shareholders. Additionally, the Phase 2 data may face scrutiny as the company moves to a larger, longer Phase 3 trial, particularly given the rapidly changing treatment landscape.
Intraday trading volume for Avalo shares was approximately 15.9 million, well above average, reflecting significant investor interest. The stock reached a high of $25.75 earlier in the session before settling back.
