# Avalo Therapeutics, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Avalo Therapeutics, Inc.](/companies/avtx.md) (CIK 1534120)
- Form: 10-Q
- Filed: 2025-05-12
- Accepted by EDGAR: May 12, 2025, 07:03 ET
- Period: 2025-03-31
- Accession: 0001628280-25-024436
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1534120/000162828025024436/avtx-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1534120/000162828025024436/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$14.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $8.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$13.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$1.25 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$1.25 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 10,514,901 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$9.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2025-03-31 | $125.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $126.9m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $138.5m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $5.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $15.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $122.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,742 characters.

*This Quarterly Report on Form 10-Q and the information incorporated herein by reference contain forward-looking statements that involve a number of risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements can be identified by the use of forward-looking words such as “projects,” “may,” “might,” “will,” “could,” “would,” “should,” “continue,” “seeks,” “aims,” “predicts,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential,” “pro forma” or other similar words (including their use in the negative), or by discussions of future matters such as: the future financial and operational outlook; the development of product candidates; and other statements that are not historical. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those set out in our Annual Report on Form 10-K filed with the SEC on March 20, 2025, and in our other filings with the SEC. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.*

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2024 appearing in our Annual Report on Form 10-K filed with the SEC on March 20, 2025.

### Overview

Avalo Therapeutics, Inc. (the “Company,” “Avalo” or “we”) is a clinical stage biotechnology company focused on the treatment of immune dysregulation. Avalo’s lead asset is AVTX-009, an anti-IL-1β monoclonal antibody (“mAb”), targeting inflammatory diseases.

Our focus in 2025 is continuing to execute operationally on the development of AVTX-009, most notably the progression of the LOTUS trial.

Management’s primary evaluation of the success of the Company is the ability to progress its pipeline forward toward commercialization or opportunistically out-licensing rights to indications or geographies. We believe the ability to achieve the anticipated milestone as presented in the following chart represents our most immediate evaluation point as to the progress of our goal to move the pipeline forward.

The Company’s Phase 2 (“LOTUS”) trial of AVTX-009, an anti-IL-1β (mAb), in hidradenitis suppurativa (“HS”), is a randomized, double-blind, placebo-controlled, parallel-group Phase 2 trial with two AVTX-009 dose regimens to evaluate the efficacy, safety and tolerability of AVTX-009 in approximately 180 adults with moderate to severe HS. Subjects will be randomized (1:1:1) to receive either one of two doses of AVTX-009 or placebo. The primary efficacy endpoint is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response (HiSCR75) at Week 16. Avalo is the study sponsor and the current proposed trial locations include the United States, Canada, France, Germany, Italy, Spain, Bulgaria, Czech Republic, Greece, Poland, Australia and Turkey.

### Recent Developments

In March 2025, the Company announced the appointment of Michael Heffernan as Chairman of the Board of Directors. Mr. Heffernan’s extensive experience in building and leading biopharmaceutical companies and driving shareholder value combined with his leadership skills and board experience makes him a valuable member of our Board of Directors.

### Liquidity

Since inception, we have incurred significant operating and cash losses from operations. We have primarily funded our operations to date through sales of equity securities, out-licensing transactions and sales of assets.

For the three months ended March 31, 2025, Avalo generated a net loss of $13.1 million and negative cash flows from operations of $9.5 million. As of March 31, 2025, Avalo had $125.0 million in cash and cash equivalents.

Based on our current operating plans, we expect that our existing cash and cash equivalents are sufficient to fund operations for at least twelve months from the filing date of this Quarterly Report on Form 10-Q and we expect current cash on hand to fund operations into at least 2027. The Company closely monitors its cash and cash equivalents and seeks to balance the level of cash and cash equivalents with our projected needs to allow us to withstand periods of uncertainty relative to the availability of funding on favorable terms. We may satisfy any future cash needs through sales of equity securities under the Company’s at-the-market program or other equity financings, out-licensing transactions, strategic alliances/collaborations, sale of programs, and/or mergers and acquisitions. There can be no assurance that any financing or business development initiatives can be realized by the Company, or if realized, what the terms may be. To the extent that we raise capital through the sale of equity, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Further, if the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company might have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates.

### Our Strategy

Our strategy for increasing stockholder value includes:

- Advancing our pipeline through development to regulatory approval. Most notably and in the near term, completing our Phase 2 LOTUS trial in hidradenitis suppurativa, preparing for the next stage of development for that indication and considering further indication expansion for AVTX-009;
- Acquiring or in-licensing rights to and/or developing targeted, complementary differentiated preclinical and clinical stage compounds that treat immune mediated disease; and
- Opportunistically out-licensing rights to compounds, indications or geographies.

There is no guarantee that our products will obtain regulatory approval by the United States Food and Drug Administration (the “FDA”) or comparable foreign regulatory authorities. The FDA approval process is complex, time-consuming, and expensive. It typically involves the following prior to submitting a new drug application (“NDA”) or biologics license application (“BLA”): preclinical laboratory and animal testing, submission of an Investigational New Drug (“IND”) application, and human clinical trials to establish safety and efficacy. Human clinical trials typically include: Phase 1 studies to evaluate the safety and tolerability of the drug, generally in normal, healthy volunteers; Phase 2 studies to evaluate safety and efficacy, as well as appropriate doses; these studies are typically conducted in patient volunteers who suffer from the particular disease condition that the drug is designed to treat; and Phase 3 studies to evaluate safety and efficacy of the product at specific doses in one or more larger pivotal trials. Upon submission of an NDA or BLA, the FDA reviews the application including potentially an FDA advisory committee review and typically inspects manufacturing facilities and clinical study sites prior to FDA approval or rejection of the application. Even if a product receives FDA approval, the agency may impose post-approval requirements or withdraw approval if safety or efficacy issues arise. The processes for obtaining marketing approvals in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

### Results of Operations

### Comparison of the Three Months Ended March 31, 2025 and 2024

#### Cost of Product Sales

We recognized no cost of product sales for the three months ended March 31, 2025, compared to minimal activity for the same period in 2024.

The Company will continue to monitor estimates for commercial liabilities, such as sales returns, profit share with the supplier pursuant to the reconciliation process, and commercial activity with Aytu, who previously managed Millipred® commercial operations on our behalf. As additional information becomes available, the Company could recognize expense (or a benefit) for differences between actuals or updated estimates to the reserves previously recognized, which could be recognized in cost of product sales.

#### Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024 (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Nonclinical expenses | $83 | $152 |
| Clinical expenses | 3,850 | 62 |
| CMC expenses | 1,979 | 254 |
| Internal expenses: |  |  |
| Salaries, benefits and related costs | 1,850 | 1,324 |
| Stock-based compensation expense | 1,301 | 269 |
| Other | 60 | 55 |
|  | $9,123 | $2,116 |

Research and development expenses increased $7.0 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. This increase was mainly driven by a $3.8 million increase in clinical expenses, $1.7 million increase in chemistry, manufacturing, and controls (“CMC”) expenses, and $1.0 million increase in stock-based compensation expense.

AVTX-009 was acquired in late March 2024 as part of the AlmataBio Transaction (as defined in Note 3 to the unaudited condensed consolidated financial statements). As such, both clinical expenses and CMC expenses increased due to the ongoing LOTUS trial activities in the first quarter of 2025, compared to no expenses related to the trial for the same period in the prior year.

Stock-based compensation increased $1.0 million compared to the three months ended March 31, 2024 due to option and restricted stock unit grants made during the period, including the annual employee grants in August 2024 and January 2025, as well as headcount additions.

We expect future research and development expenses to increase as a result of our development plans for AVTX-009, including the execution of the Phase 2 LOTUS trial which commenced in October 2024.

#### General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2025 and 2024 (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Salaries, benefits and related costs | $1,553 | $902 |
| Legal, consulting and other professional expenses | 1,611 | 1,590 |
| Stock-based compensation expense | 1,940 | 360 |
| Commercial planning and marketing expenses | 12 | 7 |
| Other | 430 | 334 |
|  | $5,546 | $3,193 |

General and administrative expenses increased $2.4 million for the three months ended March 31, 2025 compared to the prior period. The increase was driven by a $1.6 million increase in stock-based compensation expense due to option and restricted stock unit grants made during the period, including the annual grants in August 2024 and January 2025, as well as headcount additions.

While we expect the majority of operating expense increases will be focused on research and development activities to progress AVTX-009, we also expect moderate increases to general and administrative expenses to support the AVTX-009 program.

#### Other Income (Expense), Net

The following table summarizes our other income (expense), net for the three months ended March 31, 2025 and 2024 (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Change in fair value of derivative liability | 380 | (120) |
| Interest income, net | 1,148 | 100 |
| Excess of initial warrant fair value over private placement proceeds | — | (79,276) |
| Private placement transaction costs | — | (9,220) |
|  | $1,528 | $(88,516) |

Other income, net increased $90.0 million for the three months ended March 31, 2025 compared to the prior period. The increase was primarily due to the excess of the warrant fair value over proceeds received from the March 2024 private placement financing that occurred during the three months ended March 31, 2024. The warrants did not meet the equity contract scope exception and therefore were classified as a liability upon issuance. The initial measurement of the warrant liability of $194.9 million exceeded the proceeds received of the private placement investment of $115.6 million, which resulted in a $79.3 million loss recognized in other expense, net. The warrants were fully exercised in the fourth quarter of 2024. Refer to Note 6 - Fair Value Measurements of the unaudited condensed consolidated financial statements for more information. Similarly, in the first quarter of 2024, we recognized $9.2 million of private placement transaction cost associated with the March 2024 financing that did not repeat in the current period. Finally, interest income increased from the prior period driven by the increased cash balance in the current year compared to the prior year.

#### Income Tax Expense

The Company recognized minimal income tax expense for both the three months ended March 31, 2025 and 2024.

### Liquidity and Capital Resources

### Uses of Liquidity

The Company primarily uses cash to fund the ongoing development of our research and development pipeline assets, mainly AVTX-009, and costs associated with its organizational infrastructure. As of March 31, 2025, Avalo had $125.0 million in cash and cash equivalents.

### Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

| Net cash (used in) provided by: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $(9,457) | $(6,202) |
| Investing activities | — | 356 |
| Financing activities | — | 108,612 |
| Net (decrease) increase in cash and cash equivalents | $(9,457) | $102,766 |

#### Net cash used in operating activities

Net cash used in operating activities was $9.5 million for the three months ended March 31, 2025 and consisted primarily of net loss of $13.1 million and adjustments to reconcile net loss to net cash used in operating activities including stock-based compensation of $3.2 million. Prepaid expense decreased $2.5 million primarily due to the timing of AVTX-009 related payments. Accrued expenses and other liabilities decreased $1.7 million primarily related to the timing of non-equity incentive compensation.

Net cash used in operating activities was $6.2 million for the three months ended March 31, 2024 and consisted primarily of a net loss of $121.3 million and adjustments to reconcile net loss to net cash used in operating activities including the excess of warrant fair value over private placement investment proceeds of $79.3 million, acquired IPR&D of $27.5 million, transaction costs payable upon exercise of the warrants issued pursuant to the private placement investment of $1.7 million, and stock-based compensation of $0.6 million. Accrued expenses and other liabilities increased primarily due to the $1.7 million transaction costs payable upon exercise of the warrants issued pursuant to the private placement.

We expect future cash used in operating activities to increase in future periods as a result of our development plans for AVTX-009, including the execution of the Phase 2 LOTUS trial, which commenced in October 2024.

#### Net cash provided by investing activities

There was no net cash provided by investing activities for the three months ended March 31, 2025.

Net cash used in investing activities was for the three months ended March 31, 2024 consisted of the cash acquired as part of the AlmataBio Transaction.

#### Net cash provided by financing activities

There was no net cash provided by financing activities for the three months ended March 31, 2025.

Net cash provided by financing activities for the three months ended March 31, 2024 consisted of gross proceeds of $115.6 million from the private placement investment that closed on March 28, 2024, partially offset by transaction costs related to the private placement investment of $7.0 million.

### Critical Accounting Policies, Estimates, and Assumptions

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with GAAP. In preparing the financial statements in conformity with GAAP, the Company makes estimates and assumptions that have an impact on assets, liabilities, revenue and expenses reported. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk, and financial condition. In our unaudited condensed consolidated financial statements, estimates are used for, but not limited to, revenue recognition, cost of product sales, stock-based compensation, fair value measurements, the valuation of derivative liabilities, cash flows used in management’s going concern assessment, income taxes, goodwill, and clinical trial accruals. The Company believes, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to GAAP and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates, and estimates may vary as new facts and circumstances arise. Our most critical accounting estimates and assumptions are included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 20, 2025. There have been no significant changes to our critical accounting policies during the three months ended March 31, 2025.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by applicable SEC rules and regulations.

## Controls and procedures

As filed, 1,800 characters.

### Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 896 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20, 2025 (the “2024 10-K”), which could materially affect our business, financial condition, or future results. Our risk factors as of the date of this Quarterly Report on Form 10-Q have not changed materially from those described in the 2024 10-K referenced above. The risks described in the 2024 10-K referenced above, however, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or future results of operations and the trading price of our common stock.

Filed May 12, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-024436. Last ingested by Listed: Oct 29, 2026, 16:18 ET. No prices; not investment advice.