On Monday, Stifel initiated coverage on Avalo Therapeutics, Inc. AVTX. Avalo’s lead asset is AVTX-009, an anti-IL-1β mAb targeting inflammatory diseases.

The company initiated a Phase 2 LOTUS trial, which will include approximately 180 adults with hidradenitis suppurativa (HS), to evaluate the efficacy and safety of subcutaneous bi-weekly and monthly dosing regimens compared to placebo. Topline data is expected in 2026.

Avalo continues to evaluate AVTX-009 for additional immune-mediated diseases with plans to announce a second indication.

Analyst Alex Thompson writes that the following proof-of-concept data in HS from AbbVie Inc’s ABBV lebrikizumab, an IL-1α/β bispecific success for AVTX-009, is highly de-risked given the strong evidence suggesting that IL-1β blockade represents the key driver of efficacy for Lutikizumab.

In January 2024, AbbVie’s Phase 2 results showed that adults with moderate to severe hidradenitis suppurativa (HS) who had previously failed anti-TNF therapy who received lutikizumab (ABT-981) 300 mg every other week or 300 mg weekly achieved higher response rates (59.5% nominal p=0.027 and 48.7%, nominal p=0.197, respectively) than placebo (35%).

Stifel writes that AVTX-009 can achieve comparable efficacy to lutikizumab albeit with the potential for superior dosing (Q4W vs. Q2W), equating to a meaningful minority share within the growing HS market yielding over $2 billion drug in the US alone amid significant strategic interest in the space.

Stifel has initiated with a Buy rating and a price target of $36.

“Bottomline we think AVTX represents an attractive HS pure-play with a favorable risk-reward heading into topline Ph2 data in the 2026 timeframe. Strong external HS newsflow over the next 12 months offers an additional tailwind,” Stifel analyst writes.

Cash and cash equivalents were $134.5 million as of December 31, 2024. The company’s current cash on hand is expected to fund operations into at least 2027.

Price Action: AVTX stock is up 15.5% at $8.81 at the last check Tuesday.

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