Avalo Therapeutics' Newly Acquired Ex-Eli Lilly Drug Could Stand Out In Competitive Hidradenitis Suppurativa Market, Analyst Upgrades

Zinger Key Points
  • AVTX-009 is a promising drug candidate and with highly anticipated upcoming Phase 2 topline data in 2026 in hidradenitis suppurativa.
  • The analyst anticipates a peak market penetration of 15% and a launch price of $75,000 in 2029, aligning with other approved biologics.

Tuesday, Oppenheimer upgraded Avalo Therapeutics Inc AVTX, noting that its AVTX-009 is a promising drug candidate and looks forward to a Phase 2 topline data in 2026 in hidradenitis suppurativa (HS) and additional updates.

In March, Avalo Therapeutics announced the acquisition of a Phase 2-ready anti-IL-1β mAb, which it refers to as AVTX-009, originally developed by Eli Lilly And Co LLY.

Avalo announced a private placement of $185 million in gross proceeds, including an initial gross upfront investment of $115.6 million.

Oppenheimer says that the company is preparing to advance ‘009 for Phase 2 development in hidradenitis suppurativa (HS), showing confidence in its potential. While topline data won’t be available until 2026, there’s consideration to also evaluate ‘009 for ulcerative colitis (UC), which could provide interim updates. 

The analyst has upgraded to Outperform from Perform, setting a $35 price target based on the belief that AVTX-009 could stand out in the competitive HS market.

AVTX-009 attaches to IL-1β, a significant target for HS. Despite IL-1α and IL-18 not being recognized as key factors in the disease, lutikizumab from AbbVie Inc ABBV, which targets both IL-1α and IL-1β, showed substantial benefits in Phase 2 trials for a severe HS group. 

Additionally, MAS825 from Novartis AG NVS, which targets both IL-1β and IL-18, succeeded in a placebo-controlled trial for HS. 

These findings, along with physiological research on HS inflammatory lesions, strongly suggest the involvement of IL-1β in HS.

The analyst writes that Phase 2 will likely lead to advancing the development process for registration and integrating a pen autoinjector for commercial use. 

Anticipating a peak market penetration of 15% and a launch price of $75,000 in 2029, aligning with other approved biologics. Oppenheimer anticipates an increase in patient identification rates for HS, a condition often overlooked.

Price Action: AVTX shares are up 13.9% at $17.36 on the last check Tuesday.

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