Avalo Reports Second Quarter 2022 Financial Results and Provides Business Updates

WAYNE, Pa. and ROCKVILLE, Md., Aug. 04, 2022 (GLOBE NEWSWIRE) — Avalo Therapeutics, Inc. (Nasdaq: AVTX), today announced business updates and financial results for the second quarter of 2022.

“We have made significant progress advancing our clinical trials while also securing critical nondilutive capital since our first quarter business update,” said Dr. Garry Neil, President and Chief Executive Officer of Avalo Therapeutics. “We are pleased to have enrolled the first patient in both our Phase 2 PEAK trial of AVTX-002 in NEA as well as our pivotal LADDER trial of ATX-803 in LAD II. Additionally, it’s critically important that we secured approximately $15 million of initial consideration from our license and transfer of our AVTX-007 program. The transaction allows us to operationally and financially focus on our most promising programs, most notably AVTX-002.”

Business Updates:

  • In July 2022, Avalo granted an exclusive license to Apollo Therapeutics Group Limited (Apollo) granting rights to Apollo to research, develop, manufacture and commercialize AVTX-007. The AVTX-007 program was originally licensed to Avalo by MedImmune Limited, a subsidiary of AstraZeneca plc, and such license was transferred to Apollo as part of the transaction.
    • Avalo received approximately $15 million of upfront consideration.
    • Avalo is also entitled to up to $74 million of milestone payments, as well as a royalty payment of a low single digit percentage of annual net sales.
  • On July 7, 2022, Avalo effected a 1-for-12 reverse stock split to increase the per share price of its common stock to regain compliance with the listing requirements of the Nasdaq Capital Market. On July 22, 2022, the Company received written notification from Nasdaq that Avalo had regained compliance and that the matter is now closed.
  • In June 2022, Avalo, prepaid $15 million under its loan venture loan and security agreement (the Loan Agreement), of which $14.8 million was applied to principal and the remainder applied to accrued interest. As of June 30, 2022, the remaining principal payments were $21.2 million.

Program Updates and Milestones:

  • AVTX-002: Anti-LIGHT monoclonal antibody (mAb) targeting immune-inflammatory diseases.
    • NEA: Avalo has initiated its Phase 2 PEAK trial (A Phase 2, Randomized, Double-Blind, Placebo-Controlled, Parallel Group Study to Evaluate the Safety and Efficacy of AVTX-002 for the Treatment of Poorly Controlled Non-Eosinophilic Asthma K) evaluating the safety and efficacy of AVTX-002 in 80 patients with poorly controlled NEA. The first patient was dosed in May 2022. Top-line data from the trial are expected in the first half of 2023.
  • AVTX-800 programs (AVTX-803 and AVTX-801): Monosaccharide therapies for two congenital disorders of glycosylation (CDGs): leukocyte adhesion deficiency type II (LAD II, also known as SLC35C1-CDG) and PGM1-CDG.
    • LAD II: Avalo has initiated its pivotal LADDER trial (A Phase 3, Randomized, Double-blind, Two-period, Crossover, Withdrawal Study to Assess the Efficacy and Safety of AVTX-803 in Subjects with Leukocyte Adhesion Deficiency Type II (LAD II) ER) evaluating the safety and efficacy of AVTX-803 in patients with LAD II (n=2). The first patient was dosed in July 2022. Data from this pivotal trial are expected in the first half of 2023.
    • PGM1-CDG: Milestone timing and the development plan is under review as a result of recent feedback from the U.S. Food and Drug Administration (FDA).

Second Quarter 2022 Financial Update:

Avalo had $11.2 million in cash and cash equivalents as of June 30, 2022, representing a $43.4 million decrease as compared to December 31, 2021. The decrease was primarily driven by operating expenditures to fund and support pipeline development and a $15.0 million partial prepayment under the Loan Agreement. Subsequent to June 30, 2022, Avalo received the approximate $15 million of upfront payment from its transfer of AVTX-007.

Total operating expenses decreased $16.7 million for the six months ended June 30, 2022 as compared to the same period in 2021. Research and development expenses decreased $19.7 million due to a $10.0 million upfront license fee incurred in the first quarter of 2021, which did not repeat, and a $9.2 million reduction due to specific timing of manufacturing, non-clinical activities and clinical trial activities. Selling, general and administrative expenses increased $1.7 million mainly due to severance and stock-based compensation expense driven by headcount reductions from the pipeline prioritization plan announced in the first quarter of 2022 and other separations, partially offset by decreases to legal, consulting and marketing expenses from cost savings initiatives. Cost of product sales increased $2.1 million due to the net profit share of our non-core commercialized product, Millipred®, that began in the third quarter of 2021. Additionally, in the second quarter of 2022, we fully reserved the $1.0 million receivable due in December 2024 pursuant to the transition service agreement with the third party that previously managed Millipred®’s commercial operations. The net loss and change in net loss was largely driven by operating expenses.

Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share and per share data)

June 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 11,249 $ 54,585
Accounts receivable, net 544 1,060
Other receivables 1,306 3,739
Inventory, net 23 38
Prepaid expenses and other current assets 1,885 2,372
Restricted cash, current portion 14 51
Total current assets 15,021 61,845
Property and equipment, net 2,567 2,695
Other long-term asset 1,000
Intangible assets, net 38
Goodwill 14,409 14,409
Restricted cash, net of current portion 227 227
Total assets $ 32,224 $ 80,214
Liabilities and stockholders’ (deficit) equity
Current liabilities:
Accounts payable $ 2,164 $ 3,369
Accrued expenses and other current liabilities 13,231 16,519
Total current liabilities 15,395 19,888
Notes payable, non-current 18,713 32,833
Royalty obligation 2,000 2,000
Deferred tax liability, net 128 113
Other long-term liabilities 1,939 2,298
Total liabilities 38,175 57,132
Stockholders’ (deficit) equity:
Common stock—$0.001 par value; 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 9,405,724 and 9,399,517 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively1 9 9
Additional paid-in capital1 291,244 285,239
Accumulated deficit (297,204 ) (262,166 )
Total stockholders’ (deficit) equity (5,951 ) 23,082
Total liabilities and stockholders’ (deficit) equity $ 32,224 $ 80,214

1 Results have been retroactively adjusted to reflect the 1-for-12 reverse stock split effected on July 7, 2022.

The unaudited condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 have been derived from the reviewed financial statements, but do not include all of the information and footnotes required by accounting principles accepted in the United States for complete financial statements.

Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Revenues:
Product revenue, net $ 1,033 $ 2,730 $ 2,206 $ 3,204
License revenue 625 625
Total revenues, net 1,033 3,355 2,206 3,829
Operating expenses:
Cost of product sales 1,567 83 2,286 159
Research and development 8,510 12,569 18,094 37,774
Selling, general and administrative 2,784 7,404 14,468 12,751
Amortization expense 428 38 853
Total operating expenses 12,861 20,484 34,886 51,537
(11,828 ) (17,129 ) (32,680 ) (47,708 )
Other expense:
Other expense, net (5 ) (20 ) (5 )
Interest expense, net (1,154 ) (239 ) (2,323 ) (222 )
Total other expense, net from continuing operations (1,154 ) (244 ) (2,343 ) (227 )
Loss from continuing operations before taxes (12,982 ) (17,373 ) (35,023 ) (47,935 )
Income tax expense (benefit) 5 (199 ) 15 (188 )
Loss from continuing operations $ (12,987 ) $ (17,174 ) $ (35,038 ) $ (47,747 )
Income (loss) from discontinued operations 69 (38 )
Net loss $ (12,987 ) $ (17,105 ) $ (35,038 ) $ (47,785 )
Net loss per share of common stock, basic and diluted1:
Continuing operations $ (1.38 ) $ (2.12 ) $ (3.73 ) $ (5.97 )
Discontinued operations 0.00 0.01 0.00 0.00
Net loss per share of common stock, basic and diluted $ (1.38 ) $ (2.11 ) $ (3.73 ) $ (5.97 )
Net loss per share of preferred stock, basic and diluted1:
Continuing operations $ (0.88 ) $ (2.49 )
Discontinued operations 0.00 0.00
Net loss per share of preferred stock, basic and diluted $ (0.88 ) $ (2.49 )

1 Results have been retroactively adjusted to reflect the 1-for-12 reverse stock split effected on July 7, 2022.

The unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 have been derived from the reviewed financial statements but do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

About Avalo Therapeutics

Avalo Therapeutics is a leading clinical-stage precision medicine company that discovers, develops, and commercializes targeted therapeutics for patients with significant unmet clinical need in immunology and rare genetic diseases. The Company has built a diverse portfolio of innovative therapies to deliver meaningful medical impact for patients in urgent need. The Company’s clinical candidates commonly have a proven mechanistic rationale, biomarkers and/or an established proof-of-concept to expedite and increase the probability of success.

For more information about Avalo, please visit www.avalotx.com.