AVTX 10-K & 10-Q changes, risk factors and insider trading
Avalo Therapeutics, Inc. · Nasdaq · Pharmaceutical Preparations · CIK 1534120 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may never achieve or sustain profitability.”
New heading “Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.”
New heading “We have incurred significant net losses in most periods since our inception and we expect to continue to incur net losses for the foreseeable future.”
New heading “Interim, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. Such data are inherently preliminary and should not be relied upon as definitive or predictive of final results.”
New heading “Disruptions to the FDA, the SEC and other governmental agencies and regulatory authorities caused by funding shortages, changes in leadership and policy, or global health concerns could hinder the ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business and results of operations.”
New heading “We may fail to achieve our development and regulatory milestones on expected timelines, or at all, which could materially and adversely affect our business, financial condition, results of operations and prospects.”
New heading “Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties that could materially adversely affect our business and profitability.”
New heading “We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We can face serious consequences for violations.”
New heading “Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.”
New heading “Current and future healthcare legislative reform measures may have a material adverse effect on our business and results of operations.”
New heading “If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.”
New heading “Our employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading laws.”
New heading “Ongoing changes to healthcare laws and regulations may increase the difficulty of and costs associated with commercializing our products and may affect the prices we are paid for those products and the demand for such products.”
New heading “We may be subject to certain regulations, including federal and state healthcare fraud and abuse laws, physician payment transparency laws, anti-bribery and anti-corruption laws and health information privacy and security laws. Any actual or perceived failure to comply with these regulations could have a material adverse effect on our business and financial condition.”
New heading “Even if we receive marketing approval for abdakibart (AVTX-009) or future product candidates, our current or future product candidates may not achieve broad market acceptance, which would limit the revenue that we generate from their sales and could prevent us from achieving or sustaining profitability.”
New heading “Our manufacturing process needs to comply with FDA regulations relating to the quality and reliability of such processes. Any failure to comply with relevant regulations could result in delays in or termination of our preclinical and clinical programs and suspension or withdrawal of any regulatory approvals or could limit our ability to supply product for clinical trials or, if approved, for commercial sale.”
New heading “If our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.”
New heading “We or the third parties upon whom we depend may be adversely affected by unforeseen global events, natural disasters, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.”
New heading “Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.”
New heading “Unstable global economic and geopolitical conditions may have serious adverse consequences on our business, financial condition, stock price and results of operations.”
New heading “Our business is subject to risks arising from pandemics and epidemic diseases.”
New heading “Changes in tax law may adversely affect us or our investors.”
New heading “The rights associated with our outstanding Series D and Series E preferred stock may concentrate control of our Board of Directors and could adversely affect the interests of holders of our common stock.”
New heading “The U.S. Congress or the current administration may make substantial changes to fiscal, tax, and other federal policies that may adversely affect our business.”
New heading “Our use of new and evolving technologies, such as artificial intelligence, may present risks and challenges that can impact our business, including by posing cybersecurity and other risks to our confidential and/or proprietary information, including personal information, and as a result we may be exposed to reputational harm and liability.”
Removed heading “We have incurred significant net losses in most periods since our inception and we expect to continue to incur net losses in the future.”
Removed heading “Our role as a guarantor of certain obligations assigned to Aytu exposes us to risk of loss or illiquidity.”
Removed heading “Disruptions to the FDA, the SEC and other governmental agencies and regulatory authorities caused by funding shortages or global health concerns could hinder the ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.”
Removed heading “Our focus and reliance on AVTX-009 exposes us to risk if AVTX-009 does not perform in clinical trials or receive FDA approval and market acceptance.”
Removed heading “If we obtain approval to commercialize our product candidates, the markets in which we will be selling are highly competitive and we might be unable to compete successfully against new entrants or established companies.”
Removed heading “If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.”
Removed heading “Even if we commercialize any of our product candidates, these products may become subject to unfavorable third‑party coverage and reimbursement policies, healthcare reform initiatives, or pricing regulations, any of which could negatively impact our business.”
Removed heading “Risks Related to Legal Compliance”
Removed heading “Ongoing changes to healthcare laws and regulations may increase the difficulty of and costs associated with commercializing our products and may affect the prices we are paid for those products.”
Removed heading “Our relationships with commercial and government customers, healthcare providers, third-party payors, and others are subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare related laws, regulations and requirements, which could expose us to criminal and civil liability, exclusion from participation in federal healthcare programs, contractual damages and consequences, reputational harm, administrative burdens, and diminished profits and future earnings.”
Removed heading “Low trading volume of our common stock on the Nasdaq Capital Market may increase price volatility.”
Largest changes
“Among other matters, U.S. and foreign anti-corruption, including the FCPA, anti-money laundering, export control, sanctions, and other trade laws and regulations, which we collectively refer to as “Trade Laws,” prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector (including government …”see in full comparison
“We are exposed to the risk that our employees, principal investigators, CROs and consultants may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate the regulations of the FDA and other regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities; healthcare fraud and abuse laws and regulations in the U.S. …”see in full comparison
“We maintain a large quantity of sensitive information, including confidential business information and information associated with clinical trials. Because of the sensitivity of this information, our privacy and security measures related to such information are very important. Although we have privacy and security measures in place designed to protect sensitive data and our systems, techniques used to obtain unauthorized access or to sabotage systems and data change frequently and often are not recognized until launched against a target. …”see in full comparison
“Although we have data security measures in place designed to protect personal data, sensitive data and our systems, techniques used to obtain unauthorized access or to sabotage systems and data change frequently and often are not recognized until launched against a target. It is also possible that, due to the surreptitious nature of certain data breaches and other cybersecurity incidents, such incidents may remain undetected for an extended period, which may exacerbate harm to the company. …”see in full comparison
“All of these evolving compliance and operational requirements impose costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants and legal advisors, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, utilize management’s time and/or divert resources from other initiatives and projects. …”see in full comparison
“To commercially produce our products either at our own facility or at a third party’s facility, we will need to comply with the FDA’s cGMP regulations and guidelines. We may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We are subject to inspections by the FDA and comparable foreign regulatory authorities to confirm compliance with applicable regulatory requirements. …”see in full comparison
Full comparison: every changed paragraph (443)
You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report on Form 10-K and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price and value of our securities would likely decline. Additional risks or uncertainties not presently known to us or that we currently deem immaterial may also harm our business. Moreover, some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future.
We expect to require additional capital in the future to continue to fund our operations and to finance the further advancement of our product candidates, which might not be available to us on acceptable terms, or at all. Failure to obtain any necessary capital could force us to delay, limit or terminate our product development efforts or significantly curtail or cease our operations.operations altogether.
At December 31, 2024, we had $134.5 million in cash and cash equivalents and $7.0 million in current liabilities. As of the date of this Report, we believe we have sufficient funds to finance our continuing operations into at least 2027 to further advance our product candidates. However, we will likely need to raise additional funds prior to any phase 3 development and/or indication expansion. Additionally, if there are significant unexpected delays and/or cost overruns in our current Phase 2 LOTUS trial, or other negative deviations from cash forecast, we might require additional funds prior to the Phase 2 LOTUS trial read-out.
As a research and development company, our operations have consumed substantial amounts of cash since inception. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time‑consuming, expensive and uncertain process that takes years to complete, and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance our current product candidates through or into clinical trials.trials and prepare for later-stage development activities, including manufacturing scale-up, regulatory engagement, and commercialization planning. Circumstances may cause us to consume or require capital more rapidly than we currently anticipate. As an example,Historically, our cashcapital positionconstraints inhave the past has causedrequired us to prioritize productcertain candidatesdevelopment forprograms development,over out-licenseothers, including deferring, out-licensing or discontinuing certain product candidatescandidates, and we may be required to deferdo so again in the development of other candidates.future. We will need to raise additional funds or otherwise obtain funding through collaborations to complete the development of abdakibart (AVTX-009) and any of ourother product candidates and to continue our operations.
We plan to finance our operations through a combination of equity offerings, debt financings, collaborations, licensing arrangements and other similar arrangements. We do not have any committed sources of external financing. Our ability to raise additional funds may be adversely impacted by global economic conditions, disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, and diminished liquidity and credit availability, and biotechnology-specific market conditions, including reduced investor appetite for clinical-stage companies. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise capital when needed or on attractive terms, we would be forced to:
•Significantly delay, scale back or discontinue the development or commercialization of abdakibart (AVTX-009) or other product candidates or cease operations altogether;
•Relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves.
At December 31, 2025, we had $98.3 million in cash and cash equivalents and short-term investments and $12.9 million in current liabilities. As of the date of this Report, we believe we have sufficient funds to finance our continuing operations into 2028 to further advance abdakibart (AVTX-009) and other product candidates. This estimate is based on assumptions regarding our operating plan, clinical timelines, and expenditures that may prove to be inaccurate. We could use our capital resources sooner than we currently expect due to unanticipated delays, cost overruns, changes in regulatory strategy, or other factors. We will likely need to raise additional funds prior to any phase 3 development and/or indication expansion. Additionally, if there are significant unexpected delays and/or cost overruns in our current Phase 2 LOTUS trial, or other negative deviations from cash forecast, we might require additional funds prior to the Phase 2 LOTUS trial read-out.
We may never achieve or sustain profitability.
To become and remain profitable, we must succeed in developing, obtaining regulatory approvals for, and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing clinical trials and preclinical studies and obtaining regulatory approval for one or more of our current and future product candidates, and manufacturing, marketing, and selling any products for which we may obtain regulatory approval. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable may have an adverse effect on the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product candidates, achieve our strategic objectives or even continue our operations.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Additional fundraising efforts may divert our management from our day‑to‑day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we do not have any committed external sources of funding,funding and cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Furthermore, our ability to raise capital on a timely basis through the issuance and sale of equity securities might be limited by Nasdaq’s listing rules on transactions that do not qualify as “public offerings” (as defined in Nasdaq listing rules), which might require us to obtain stockholder approval prior to the issuance of common stock (or securities convertible into or exercisable for common stock) at a price per share that is less than the “Minimum Price” if the issuance would equal 20% or more of our common stock outstanding before the issuance.
We may need to seek additional funds sooner than anticipated through public or private equity offerings, debt financings, collaborations, licensing agreements, or other sources. Such financing could dilute our shareholders,stockholders, and failure to secure adequate funding may limit our operational activities.
If we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of such financing could include liquidation preference, anti-dilution provisions, or other rights that may negatively impact your position as a shareholder.stockholders. Debt financing could impose restrictive covenants, increase fixed payment obligations, or introduce other constraints that could affect our business operations.
If we secure additional funds through upfront or milestone payment as part of future collaborations with third parties, we may be required to relinquish valuable rights to abdakibart (AVTX-009) or grant licenses under terms that are not favorable to us. Our ability to raise additional capital may be negatively affected by macro events, such as worsening global economic conditions, disruptions to financial markets, and volatility in credit markets in the United States and worldwide, as well as biotechnology specific industry events and trends.
We have incurred significant net losses in most periods since our inception and we expect to continue to incur net losses for the foreseeable future.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate an adequate effect or acceptable safety profile, gain marketing approval and become commercially viable. We are a clinical-stage biotechnology company with a limited operating history upon which you can evaluate our business and prospects. We commenced operations in 2011, have no products approved for commercial sale and have not generated any revenue from product sales. Since our inception, we have devoted substantially all our resources to building our organization, including an acquisition, raising capital, researching, discovering and developing potential drug candidates, establishing and maintaining our intellectual property portfolio, conducting preclinical studies and clinical trials, organizing and staffing our company, business planning and providing general and administrative support for these operations. We have not yet demonstrated the ability to successfully obtain regulatory approvals, manufacture products at commercial scale, establish reliable third-party manufacturing capabilities, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.
Historically, we have financed our operations primarily through public and private equity offerings. We incurred a net loss of $78.3 million for the year ended December 31, 2025. As of December 31, 2025, we had an accumulated deficit of $448.5 million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development program and from general and administrative costs associated with supporting our operations. We expect that our existing cash and cash equivalents and short-term investments will allow us to advance the clinical development of abdakibart (AVTX-009) and other product candidates, and we expect that the remainder will be utilized to fund other research and development activities as well as working capital and other general corporate needs. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner or differently than we currently expect.
Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, including but not limited to including clinical trial delays or failures, changes in regulatory requirements, manufacturing challenges, strategic decisions, or competitive developments and we may need to seek additional funds sooner than planned. Our existing cash and cash equivalents and short-term investments may not be sufficient to complete development of any of our current or future product candidates. We will require substantial capital in order to advance any of our current and future product candidates through clinical trials, regulatory approval and commercialization.
If we do not raise additional capital when required or on acceptable terms, we may need to:
•Significantly delay, scale back or discontinue the development or commercialization of AVTX-009 or other product candidates or cease operations altogether;
•Relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourself.
•The initiation, progress, timing, costs and results of preclinical and clinical studies for abdakibart (AVTX-009) and any future product candidates we may develop;
•The level of research and development investment required to develop product candidates through clinical development and prepare for later stage trials;
•The rate and level of patient recruitment into clinical trials, including particularly the ongoing LOTUS Trialtrials;
•Changes in product development plans needed to address any difficulties that may arise in manufacturing, preclinical activities, clinical trialstrials, regulatory interactions, or commercialization;
•The initiation and completion of all required safety and efficacy studies necessary for obtaining regulatory approval in the U.S. including additional clinical trials or studies beyond those currently planned to support AVTX-009’sabdakibart (AVTX-009)’s approval and commercialization;
•Providing sufficient evidence to the FDA, and other global regulatory bodies demonstrating the safety, efficacy, and an acceptable risk-benefit profile of abdakibart (AVTX-009) or any future other product candidates;
•Our ability to promptly submit and secure approvalclearance of IND applications for our programs to initiate planned or future clinical trials;
•Competitive dynamics, including the timing of competitor data readouts, approvals, and commercial launches;
•The effect of competing technological and market developments;
We have incurred significant net losses in most periods since our inception and we expect to continue to incur net losses in the future.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate an adequate effect or acceptable safety profile, gain marketing approval and become commercially viable. Historically, we have financed our operations primarily through public and private equity offerings. We incurred a net loss of $35.1 million for the year ended December 31, 2024. As of December 31, 2024, we had an accumulated deficit of $370.3 million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development program and from general and administrative costs associated with our operations.
We expect to continue to incur losses in the future and we might never achieve profitability on an annual basis. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our future profitability will depend, in part, on the rate of future growth of our expenses as we develop our product candidates and the successful completion of clinical development and regulatory approval, and our ability to obtain approval of one or more of our product candidates to generate revenues.revenues from any approved products. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We face risksRisks associated with short-term liquid investments.
At December 31, 2024,2025, we had $134.5$98.3 million in cash and cash equivalents.equivalents and short-term investments. We historically have invested our cash in money market funds and intend to invest in a variety of investment-grade marketable securities such as corporate and government bonds, commercial paper, asset-backed securities, U.S. treasury securities, money market funds, and other cash equivalents, thatconsistent with our investment policy. These investments are intended to preserve principal value and maintain a high degree of liquidity while providing current income. However, these instruments are subject to general credit, liquidity, market and interest rate risks. We may realize losses in the fair value of these investments, which could include a complete loss of these investments, which would have a negative effect on our consolidated financial statements. In addition,extreme shouldmarket ourconditions, investmentssuch ceaselosses payingcould orbe reduce the amount of interest paid to us, our interest income would decrease. Interest rate fluctuations can negatively impact the returns on our fixed-income investments.material.
In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decrease. Interest rate fluctuations can negatively impact the returns on our fixed-income investments, particularly during periods of rising interest rates.
Further, these types of investments are not insured against loss of principal, and cash and cash equivalents and short-term investments held in deposit accounts bear the risk of bank failure.failure to the extent balances exceed applicable government insurance limits. There is no guarantee that investments in these assets will be redeemable at par value. Once invested, if we cannot liquidate our investments, or redeem them at par, we could incur losses and experience liquidity issues. A decline in the value of our investments or a delay or suspension of our right to redeem may have a material adverse effect on our results of operations or financial condition.
We have a significant amount of gross net operating losses (“NOLs”) for federal and state purposes. The Company has accumulated $3.4 million of NOLs through the end of 2017, which will begin to expire in 2031. Unused NOLs for the current tax year and prior tax years will carry forward to offset future taxable income, if any, until such unused losses expire. Unused NOLs generated after December 31, 2017 of $183.0$255.0 million, will not expire and may be carried forward indefinitely, but will be only deductible to the extent of 80% of current year taxable income in any given year. In addition, both the deductibility of current and future unused NOL carryovers may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code (“IRC”). Sections 382 and 383 of the IRC subject the future utilization of NOLs and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event of certain ownership changes. In general, an “ownership change” is defined as a greater than 50% change (by value) in equity ownership over a three-year period. As of December 31, 2024,2025, the Company had various research tax credits of $6.3$7.7 million that will begin to expire in 2038. If we experience an ownership change, or if we do not generate sufficient taxable income before the expiration of these attributes, some or all of our NOLs or tax credits could expire unused. To the extent there is a limitation, there could be a reduction in the $7.0$8.4 million deferred tax asset related to Federal loss carryforwards and tax credits that may have expired unutilized with an offsetting reduction in the valuation allowance.
Our quarterly and annual operating results historically have fluctuated and are likely to continue to fluctuate depending on several factors, many of which are beyond our control.control, including but not limited to the timing and outcome of clinical trials, regulatory interactions, financing activities, changes in operating plans, and macroeconomic or industry conditions. Accordingly, our quarterly and annual results are difficult to predict prior to the end of the quarter or year, and we may be unable to confirm or adjust expectations with respect to our operating results for a particular period until that period has closed. In addition, period-to-period comparisons of our operating results may not be meaningful due to the episodic nature of clinical development activities. In the event we provide cash projections or other guidance, any failure to meet such targets or failure to meet the expectations of analysts could adversely impact the market price of our securities. Therefore, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.
Our role as a guarantor of certain obligations assigned to Aytu exposes us to risk of loss or illiquidity.
In connection with the Aytu Divestiture, as defined in the Notes to our Consolidated Financial Statements, we assigned payment obligations (“TRIS Obligations”) to Aytu under a supply and distribution agreement (the “Karbinal Agreement”) with TRIS Pharma Inc. (“TRIS”), which includes a per-unit royalty make whole payment for each unit sold under an annual minimum sales commitment through 2025. The total future make-whole payments to be made by Aytu are unknown as the amount owed to TRIS is dependent on the number of units sold.
As a part of the assignment, we became a guarantor to the TRIS Obligations. If Aytu defaults under the terms of the Karbinal Agreement, we could be liable as a guarantor for unpaid amounts of the TRIS Obligation. Any amount we would be required to pay under the TRIS Obligation would limit the amount of cash available for development of our clinical pipeline and may expose us to significant losses, which would materially and adversely affect our results of operations.
Our supply and license agreement for our only commercial pharmaceutical product, Millipred®, which the Company considered a non-core asset, expired, as planned, on September 30, 2023. The product revenue from Millipred® was not sufficient to provide adequate capital for the continued development of our product candidates. With no commercial products, our operations are not expected to produce revenues for the foreseeable future, or at all, which might harm our ability to obtain additional financing and might require us to reduce or discontinue our operations.
Our ability to increasegenerate revenue in the future will depend on developing and commercializing our current and future product candidates. Identifying, developing, obtaining regulatory approval and commercializing product candidates are prone to the risks of failure inherent in clinical development. Developing product candidates is expensive, and we expect to spend substantial amounts as we fund our product development. We cannot provide any assurance that we will be able to successfully advance any product candidate through the development process or successfully commercialize any product candidate, or that any such product candidate will be widely accepted in the marketplace or be more effective than other commercially available alternatives. Any failure to develop or commercialize a product candidate in our current clinical pipeline could require us to raise additional financing.
We are substantially dependent on the success of AVTX-009,abdakibart (AVTX-009), and our ongoing and anticipated clinical trials of abdakibart (AVTX-009) may not be successful.
We acquired abdakibart (AVTX-009) in March 2024 and have focused our resources on abdakibart (AVTX-009) thereby increasing our exposure to risks associated with a single lead product candidate. Our future successsuccess, including financial condition and results of operations, relies heavily on our ability to successfully develop abdakibart (AVTX-009) for marketing approval and eventual commercialization. We are dedicating the majority of our efforts and financial resources to the research and development of AVTX-009.abdakibart (AVTX-009). In October 2024 we announced the first patient enrolled in our global Phase 2 LOTUS clinical trial.trial and in October 2025 we announced that we completed enrollment.
Abdakibart (AVTX-009) will require further clinical development, generation and assessment of clinical, preclinical,clinical and preclinical data, manufacturing activities, regulatory approval in multiple jurisdictions, substantial investment, additional scale, and significant marketing efforts before we can generate any revenue from product sales. We are not allowed to market or promote abdakibart (AVTX-009) until we receive marketing approval from the FDA,FDA and other comparable foreign regulatory authorities, and we may never obtain such approvals.
The success of abdakibart (AVTX-009) will depend on various factors, many of which are beyond our control. These include aspects of clinical development, the regulatory submission process, potential challenges to our intellectual property rights, and the manufacturing, marketing, distribution, and sales activities of any third parties with whom we may collaborate in the future. Therefore,It could take years until abdakibart (AVTX-009) may receive marketing approval, and we may never obtain such marketing approval. Moreover, we cannot guarantee that we will ever generate revenue from the sale of AVTX-009,abdakibart (AVTX-009), even if it receives regulatory approval. If we are unable to successfully commercialize AVTX-009,abdakibart (AVTX-009), or if there are significant delays in doing so, our business will be materially impacted.
Any setback for or failure of abdakibart (AVTX-009) during its clinical development could cause material delays in and costs to its further development and commercialization. Any such delays or costs could have a material adverse effect on our financial condition and results of operations and could require us to raise more capital, turn to third-party collaborators to continue the development of abdakibart (AVTX-009) or cease operations. In addition, our focus on abdakibart (AVTX-009) may negatively impact the planned development of our other product candidates. Drug development is unpredictable and we could encounter toxicity, safety, adverse reactions or other concerns with abdakibart (AVTX-009) as we continue its development. There can be no assurances that we will successfully develop abdakibart (AVTX-009).
Interim, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. Such data are inherently preliminary and should not be relied upon as definitive or predictive of final results.
From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on an initial analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. There can be no assurance that the final topline data from our trials will be consistent with such results or otherwise viewed as positive. We also may make assumptions, estimations, calculations and conclusions as part of our analyses of preliminary or topline data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.
Topline data also remain subject to audit and verification procedures including data cleaning, source verification, and protocol-specified analyses, that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete, including data from of our clinical trials, are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their diseases. Early trends observed in interim analyses may not persist through trial completion. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial, is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, results of operations, prospects or financial condition.
Before obtaining required approvals from regulatory authorities for the sale of product candidates, we alone, or with a partner, must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive and difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials mightmay not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. Our product candidates will require additional clinical and preclinical development, management of clinical, preclinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply on our own or from a third party, expansion of our commercial organization, and substantial investment and significant marketing efforts before we could generate any revenues from sales of any of those product candidates approved for marketing. We do not know whether the clinical trials we or our partners may conduct will demonstrate adequate efficacy and safety data resulting in regulatory approval enabling us to market any of our product candidates in any particular country. If later stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates would be adversely impacted, which could cause a sharp decline in our stock price and/or lead to insolvency of the Company.
We cannot be certain whether the clinical trials we or our partners may conduct will demonstrate adequate efficacy and safety data to support regulatory approval that would enable us to market any of our product candidates in any particular country. We also cannot be certain whether the efficacy and safety profile shown in clinical trials of any of our product candidates will be regarded by investors as competitive relative to marketed products and/or product candidates in development by third parties. If later stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates would be adversely impacted, which could cause a sharp decline in our stock price and materially impair our ability to continue our operations. If clinical trials do not produce sufficiently favorable results, our ability to raise capital to fund our operations and complete the development and commercialization of our product candidates could be adversely impacted.
Our product candidates that we intend to commercialize are in early to mid-stages of development. If we do not successfully complete nonclinical testing and clinical development of our product candidates or experience delays in doing so, our business may be materially harmed. Our focus and reliance on abdakibart (AVTX-009) increases the risk of such exposure.
We have invested a significant portion of our efforts and financial resources in the identification and preclinical and clinical development of product candidates, including AVTX-009.abdakibart (AVTX-009). Our ability to generate significant product revenues will depend on our ability to advance our clinical product candidates toward approval and our preclinical product candidates into clinical development. The outcome of preclinical studies and earlier clinical trials might not predict the success of future clinical trials. Preclinical data and clinical trial data may be susceptible to varying interpretations and analyses, and many product candidates that performed satisfactorily in preclinical studies and early clinical trials have nonetheless failed in later clinical development.
We may experience delays in obtaining or maintaining the FDA’s authorization to initiate clinical trials under future INDs and to complete ongoing clinical studies of our product candidates due to a variety of reasons. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our product candidates and may harm our business, results of operations and prospects.
Management's Discussion & Analysis (MD&A)
Removed heading “License and Other Revenue”
Removed heading “Goodwill Impairment”
Removed heading “Warrant Liability”
Removed heading “Asset Acquisition”
Largest changes
“Net cash used in operating activities in 2023 consisted primarily of a net loss of $31.5 million and non-cash adjustments to reconcile net loss to net cash used in operating activities, including goodwill impairment of $3.9 million, stock-based compensation of $3.5 million, accretion of debt discount of $1.8 million, and increase in fair value of the derivative liability of $0.7 million. Accrued expenses and accounts payable decreased an aggregate of $11.5 million from December 31, 2022.”see in full comparison
“There was no goodwill impairment loss recognized for the year ended December 31, 2024. The Company recognized $3.9 million of goodwill impairment loss for its sole reporting unit for the year ended December 31, 2023 as part of its annual goodwill impairment test performed on the last day of the fiscal year. The impairment loss recognized represented the difference between the reporting unit’s carrying value and its fair value as of December 31, 2023.”see in full comparison
“Our initial focus in 2024 was augmenting our immunology pipeline and securing financing to develop our pipeline. In March 2024, we acquired our lead asset, AVTX-009, through our acquisition of AlmataBio, Inc. (“AlmataBio”). Concurrently, we executed a private placement of $185 million, including initial upfront investment of $115.6 million received in March 2024. We received the remaining $69.4 million of gross proceeds in the fourth quarter of 2024 upon the full exercise of the warrants issued as part of the transaction. …”see in full comparison
“Other expense, net was $5.2 million for the year ended December 31, 2025 compared to other income, net of $33.5 million for the prior year period ended December 31, 2024. …”see in full comparison
“The increase in other income, net was partially offset by a $2.9 million loss recognized on the increase in fair value of the derivative liability driven by changes in assumptions utilized in the valuation of both the AVTX-501 Milestone and the AVTX-007 Milestones and Royalties (as defined in Note 6 - Fair Value Measurements of the consolidated financial statements) due to updated publicly available information of the development plans for the assets by J&J and Apollo, respectively (as defined in Note 6 to the consolidated financial statements). …”see in full comparison
Full comparison: every changed paragraph (77)
We are a clinical stage biotechnology company fully dedicated to developing IL-1β-based treatments for immune-mediated inflammatory diseases. Our lead product candidate, abdakibart (AVTX-009), an anti-IL-1β monoclonal antibody (“mAb”) is in a Phase 2 clinical trial for hidradenitis suppurativa (“HS”). We are also exploring additional opportunities to make an impact in prevalent indications that have significant remaining unmet needs.
In 2025, we were focused on executing operationally on the development of abdakibart (AVTX-009) in HS including progressing the Phase 2 clinical trial, which we refer to the Phase 2 LOTUS trial. The global study which includes approximately 250 adults with moderate to severe hidradenitis suppurativa is designed to evaluate the efficacy and safety of subcutaneous bi-weekly and monthly dosing regimens compared to placebo. Our current focus is completing the Phase 2 LOTUS trial, preparing for the anticipated topline data readout in the second quarter of 2026, and planning for our Phase 3 trial(s).
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 initial focus in 2024 was augmenting our immunology pipeline and securing financing to develop our pipeline. In March 2024, we acquired our lead asset, AVTX-009, through our acquisition of AlmataBio, Inc. (“AlmataBio”). Concurrently, we executed a private placement of $185 million, including initial upfront investment of $115.6 million received in March 2024. We received the remaining $69.4 million of gross proceeds in the fourth quarter of 2024 upon the full exercise of the warrants issued as part of the transaction. Immediately following the acquisition of AVTX-009, our focus shifted to executing operationally on the development of AVTX-009 for the treatment of hidradenitis suppurativa (“HS”). This included activation of the Investigational New Drug (“IND”) application in July 2024 and enrolling the first patient in our Phase 2 LOTUS trial in October 2024 (the “LOTUS Trial”). The LOTUS Trial is a global study designed to enroll 180 adults with HS to assess the efficacy and safety of convenient subcutaneous bi-weekly and monthly dosing regimens of AVTX-009, compared to placebo, with topline data expected in 2026.
Our focus in 2025 is continuing to execute operationally on the development of AVTX-009, most notably the progression of the LOTUS Trial. We are committed to executing the LOTUS Trial effectively and efficiently, as well as exploring AVTX-009’s potential broad applications for other immune-mediated diseases as we work toward the announcement of our second indication.
Management’s primary evaluation of Avalo’sour success is the ability to progress its programs towards commercialization or opportunistically out-licensing rights to indications or geographies. We believe the ability to achieve the next anticipated milestone as presented in the section entitled “Business” in Item 1 of this Annual Report on Form 10-K represents our most immediate evaluation point as to the progression of our pipeline.
As of December 31, 2024,2025, Avalowe had $134.5$98.3 million in cash and cash equivalents, representing a $127.1 million increase compared to December 31, 2023. During the year, we raised approximately $175.8 million of net proceeds from a private placementequivalents and theshort-term subsequent exercise of warrants issued in the private placement.investments. Net cash used in operating activities werewas $49.1$51.5 million for the year ended December 31, 2024,2025. which includes $12.5 million of milestone payments to AlmataBio pursuant to the terms of the acquisition in the first quarter. The Company’sOur current cash, cash onequivalents handand isshort-term investments are expected to fund operations into at least 2027.2028.
Net loss for the year ended December 31, 2025 was $78.3 million, representing a $43.1 million increase in net loss as compared to the prior year. Research and development expenses increased $25.6 million from the prior year driven by costs related to and supporting the Phase 2 LOTUS trial. General and administrative expenses increased $5.7 million from the prior year mainly due to increased stock-based compensation. These increases were offset by a $27.6 million acquired in-process research and development charge in 2024 that did not repeat. Further, we recognized $5.2 million of other expense for the year ended December 31, 2025 as compared to $33.5 million of other income in the prior year, which contributed to the increase in net loss. The other income recognized in the prior period primarily related to the accounting impact of the warrants that were issued and exercised in 2024.
We expect operating expenses to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026, however, expenses beyond the data readout are difficult to predict given they will be highly dependent on the outcome of the trial.
Net loss for the year ended December 31, 2024 was $35.1 million, representing a $3.6 million increase in net loss as compared to the prior year. Total operating expenses increased by $39.7 million, which was driven by the recognition of $27.6 million of acquired in-process research and development from the acquisition of AlmataBio in the first quarter of 2024, as well as a $10.7 million increase in research and development expenses and a $6.9 million increase in general and administrative expenses. Increased research and development expenses were driven by AVTX-009 development costs, including trial initiation and progression, as well as manufacturing, partially offset by limited development costs incurred in 2024 on other legacy programs. Increased general and administrative costs were driven by employee compensation costs, including stock-based compensation expense, as well as increased consulting, legal and other professional expenses following acquisition and financing that took place in the first quarter of 2024. Operating expense increases were partially offset by a $37.7 million increase to other income, primarily related to the warrants that were issued in 2024.
We expect future research and development expenses and cash used in operations, excluding the milestone payments made to the former AlmataBio stockholders, to increase in 2025 as a result of our development plans for AVTX-009, including the continued execution of the LOTUS Trial which commenced in October 2024.
We recognized minimal net product revenue for the year ended December 31, 2025 compared to $0.4 million for the year ended December 31, 2024, which related to a change in estimate of commercial liabilities, mainly sales returns, for the Millipred® product. Our license and supply agreement for Millipred® expired on September 30, 2023 as planned and as such there was no gross revenue recognized from sales for the years ended December 31, 2025 and December 31, 2024. We do not expect significant movement in estimates of commercial liabilities, however, if additional information becomes available, we could recognize expense (or a benefit) for differences between actuals or updated estimates to the reserves previously recognized, which could be recognized in net product revenue.
The Company’s license and supply agreement for Millipred® expired, as planned, on September 30, 2023. The Company continues to monitor estimates for commercial liabilities, such as sales returns. As additional information becomes available, the Company could recognize expense (or benefit) for differences between actuals or updated estimates to the reserves previously recognized. As such, the Company recognized $0.4 million in product revenue, net for the year ended December 31, 2024, compared to $1.4 million related to product sales for the year ended December 31, 2023. We do not expect future gross product revenue for Millipred®.
License and Other Revenue
Avalo recognized no license and other revenue for the year ended December 31, 2024. The Company recognized $0.5 million for the year ended December 31, 2023 as a result of the sale of its rights, title and interest in assets relating to the 800 Series (as defined in Note 4 to the consolidated financial statements) to AUG Therapeutics, LLC (“AUG”).
We recognized a benefit of $0.4 million to cost of product sales for the year ended December 31, 2024, compared to cost of product sales of $1.3 million for the same period in 2023. The benefit recognized in the current period was mainly driven by the reversal of a $1.0 million reserve against the receivable due from Aytu BioScience, Inc. (“Aytu”) in December 2024 given that Avalo expected the receivable to be collectible as of December 31, 2024, partially offset by additional royalty on the profit share as a result of a change in estimate for commercial liabilities. Avalo collected the receivable from Aytu in January 2025. The cost of product sales incurred in the prior period was driven by units sold.
We recognized no cost of product sales for the year ended December 31, 2025 compared to a benefit of $0.4 million for the same period in 2024, which related to the change in an estimate of commercial liabilities for the Millipred® product. The Company willceased continueselling toMillipred® monitorin September 2023. We do not expect significant movement in estimates forof commercial liabilities, suchhowever, as sales returns and profit share with the supplier pursuant to the reconciliation process. Asif additional information becomes available, the Companywe 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 increased $25.6 million for the year ended December 31, 2025 compared to the prior period. The increase was driven by increases in clinical and CMC expenses of $14.9 million and $4.6 million, respectively. Clinical expenses increased due to progress in the current year for the Phase 2 LOTUS trial in HS, including site activations, patient trial costs and clinical trial work performed by our contract research organization, as compared to trial enabling and activation activities incurred in the prior year period. CMC expenses increased due to raw material purchases and drug manufacturing activities to support the trial during the current year.
Additionally, stock-based compensation increased $3.6 million compared to the year ended December 31, 2024 due to option and restricted stock unit grants made during the second half of 2024 and in 2025, including the annual employee grants in August 2024 and January 2025, as well as headcount additions. Salaries, benefits and related costs increased $2.3 million compared to the year ended December 31, 2024 primarily due to headcount additions.
We expect research and development expenses to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026, however, expenses beyond the data readout are difficult to predict given they will be highly dependent on the outcome of the trial.
Research and development expenses increased $10.7 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. Notably, clinical expenses increased $4.2 million in the current period due to LOTUS Trial activities including expenses incurred to activate the IND and trial initiation and execution expenses. Additionally, chemistry, manufacturing, and control (“CMC”) expenses increased $3.3 million as a result of AVTX-009 raw material purchases and manufacturing. Clinical and CMC expense increases were partially offset by clinical development and manufacturing activity ongoing in the prior year for quisovalimab that did not repeat in the current year given the conclusion of the Phase 2 trial of quisovalimab in June 2023.
Salaries, benefits and related costs increased $2.6 million in the current period primarily due to increased non-equity incentive plan compensation expense incurred. Stock-based compensation expense increased $1.1 million due to option and restricted stock unit grants during the period, including the annual grant in August 2024.
We expect future research and development expenses to increase as a result of our development plans for AVTX-009, including the continued execution of the LOTUS Trial which commenced in October 2024.
In the first quarter of 2024, we acquired abdakibart (AVTX-009) pursuant tothrough the AlmataBio Transaction (as defined in Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K), resulting in us recordingacquiring $27.6 million of acquired in-process research and development (“IPR&D”). We recognized the fair value of the IPR&D, substantially all of which is related to AVTX-009, for the year ended December 31, 2024 as there is no alternative future use.2024. There was no acquired IPR&D for the year ended December 31, 2023.2025.
General and administrative expenses increased $6.9$5.7 million for the year ended December 31, 2024,2025 compared to the prior year ended December 31, 2023.period. The increase was driven primarily by a $2.3$4.2 million increase in salaries, benefits and related costs due to increased non-equity incentive plan compensation expense, as well as a $1.3 million increase to stock-based compensation expense due to option and restricted stock unit grants made during the period,second half of 2024 and in 2025, including the annual grantgrants in August 2024. In addition, legal, consulting2024 and otherJanuary professional expenses increased $2.1 million for accounting and reporting work incurred2025 as well as increasednew consultinghire servicesgrants. followingSalaries, benefits and largelyrelated relatedcosts increased $1.9 million compared to the AlmataBioyear acquisitionended andDecember March31, 2024 privatedue placement.to Commercialheadcount additions. This increase was partially offset by a $0.3 million decrease to commercial planning and marketing expensesas increasedwe $0.8transitioned millioncertain duethird-party toconsulting work performedengagements for HS and indication expansion, such as market opportunity assessments and competitive intelligence.intelligence to salaried headcount.
These increases were partially offset by a $0.3 million decrease in legal, consulting and other professional expenses compared to the prior year period related to increased expenses incurred in the prior period for accounting, reporting and consulting services incurred following the AlmataBio Transaction and concurrent private placement financing in March 2024.
We expect general and administrative expenses to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026, however, expenses beyond the data readout are difficult to predict given they will be highly dependent on the outcome of the trial.
Although we expect the majority of our future 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.
Goodwill Impairment
There was no goodwill impairment loss recognized for the year ended December 31, 2024. The Company recognized $3.9 million of goodwill impairment loss for its sole reporting unit for the year ended December 31, 2023 as part of its annual goodwill impairment test performed on the last day of the fiscal year. The impairment loss recognized represented the difference between the reporting unit’s carrying value and its fair value as of December 31, 2023.
Other Income (Expense), Income, net
The following table summarizes our other income (expense), income, net for the years ended December 31, 20242025 and 20232024:
Other expense, net was $5.2 million for the year ended December 31, 2025 compared to other income, net of $33.5 million for the prior year period ended December 31, 2024. The $38.7 million change was primarily driven by (i) the accounting impact in the prior period of the warrant liability associated with the warrants issued in the March 2024 financing that were subsequently exercised in the fourth quarter of 2024, and (ii) the change in the fair value of the derivative liability in the current period driven by changes in assumptions related to the AVTX-007 Milestones and Royalties (as defined in Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K). Further, we incurred $9.2 million of private placement transaction costs in the prior year period that did not repeat in the current period, largely consisting of the placement agent fee of $7.0 million and $1.7 million fee payable upon exercise of the warrants issued in the private placement investment.
Other income, net increased $37.7 million for the year ended December 31, 2024 as compared to the prior period in 2023, primarily driven by the accounting impact of the warrant liability associated with the warrants issued in the March 2024 financing that were subsequently exercised in the fourth quarter of 2024. For the year ended December 31, 2024, we recognized a $79.3 million loss at issuance on the excess of initial warrant liability fair value ($194.9 million) over the private placement proceeds ($115.6 million). The loss was more than offset by a $121.6 million gain recognized on the change in fair value of the warrant liability from its initial valuation ($194.9 million) to the settlement of the warrant liability in the fourth quarter of 2024 ($73.3 million) upon the full exercise of the warrants. This gain was mainly driven by a decrease in the stock price from the initial valuation ($21.75 per share) to the stock prices on each warrant exercise date (weighted average of approximately $12.00 per share). Given the full exercise of the warrants in the fourth quarter of 2024, there was no warrant liability as of December 31, 2024, and we therefore do not expect related future activity in other income (expense), net. Refer to Note 6 - Fair Value Measurements of the consolidated financial statements for more information.
Additionally, interest income increased by $6.7 million contributing to the overall increase to other income, net. The increase was a result of the Company’s increased cash position, paired with no interest expense in 2024 given the Company’s full payoff of its loan in 2023.
The increase in other income, net was partially offset by a $2.9 million loss recognized on the increase in fair value of the derivative liability driven by changes in assumptions utilized in the valuation of both the AVTX-501 Milestone and the AVTX-007 Milestones and Royalties (as defined in Note 6 - Fair Value Measurements of the consolidated financial statements) due to updated publicly available information of the development plans for the assets by J&J and Apollo, respectively (as defined in Note 6 to the consolidated financial statements). Refer to Note 6 - Fair Value Measurements of the consolidated financial statements for more information. The overall increase to other income, net was also partially offset by $9.2 million of private placement transaction costs, largely consisting of the private placement agent fee of $7.0 million due in March 2024 and $1.7 million due on the exercise of the warrants.
The CompanyWe recognized minimal income tax expense for the years ended December 31, 20242025 and 2023.2024.
Since inception, we have incurred significant operating losses and negative cash lossesflows from our operations. We have primarily funded our operations to date through sales of equity securities, out-licensing transactions and sales of assets.
For the year ended December 31, 2024,2025, Avalowe generated a net loss of $35.1$78.3 million and negative cash flows from operations of $49.1$51.5 million. As of December 31, 2024,2025, Avalowe had $134.5$98.3 million in cash and cash equivalents. For the year ended December 31, 2024, the Company raised approximately $175.8 million of net proceeds from a private placementequivalents and theshort-term subsequent exercise of warrants issued in the private placement.investments.
Based on our current operating plans, we expect that our existing cash andcash, cash equivalents and short-term investments are sufficient to fund operations into at2028. least 2027. The CompanyWe closely monitorsmonitor itsour cash and cash equivalents and seeksseek 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’sour 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,us, 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 thewe Company raisesraise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Companywe might have to relinquish valuable rights to itsour technologies, future revenue streams, research programs or product candidates.
We primarily use cash to fund the ongoing development of abdakibart (AVTX-009) and costs associated with its organizational infrastructure. As of December 31, 2025, we had $98.3 million in cash and cash equivalents and short-term investments. We expect cash used in operations to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026, however, cash used in operations beyond the data readout are difficult to predict given they will be highly dependent on the outcome of the trial.
The Company primarily uses cash to fund the ongoing development of our research and development pipeline assets and costs associated with its organizational infrastructure. As of December 31, 2024, Avalo had $134.5 million in cash and cash equivalents, representing a $127.1 million increase compared to December 31, 2023. We expect cash used in operating activities, excluding the milestone payments made to the former AlmataBio stockholders, to increase in future periods as a result of our development plans for AVTX-009, including the execution of the LOTUS Trial which commenced in October 2024.
Net cash used in operating activities was $51.5 million for the year ended December 31, 2025 and consisted primarily of net loss of $78.3 million, partially offset by net non-cash charges of $23.0 million and changes in our operating assets and liabilities of $3.8 million. The non-cash charges consisted primarily of $13.6 million in stock-based compensation and a change in the fair value of the derivative liability of $9.5 million. Changes in our operating assets and liabilities consisted primarily of a $2.6 million increase in prepaid expenses and other current assets due to our ongoing clinical work and a $6.7 million increase in accrued expenses and other liabilities primarily due to increased drug manufacturing activities as well as compensation and benefits accruals.
Net cash used in operating activities in 2024 consisted primarily of a net loss of $35.1 million and non-cash adjustments to reconcile net loss to net cash used in operating activities including the change in fair value of the warrant liability of $121.6 million, excess of initial warrant fair value over private placement proceeds of $79.3 million, acquired IPR&D of $27.6 million, $12.5 million milestone payments made to the former AlmataBio stockholders, the change in fair value of the derivative liability of $2.9 million, and stock-based compensation of $5.9 million. Prepaid expenses increased $2.9 million from December 31, 2023 due to the increased research and development activity for AVTX-009.abdakibart (AVTX-009).
We expect cash used in operations to be largely consistent with 2025 through the Phase 2 LOTUS trial topline data readout expected in the second quarter of 2026, however, cash used in operations beyond the data readout are difficult to predict given they will be highly dependent on the outcome of the trial.
Net cash used in operating activities in 2023 consisted primarily of a net loss of $31.5 million and non-cash adjustments to reconcile net loss to net cash used in operating activities, including goodwill impairment of $3.9 million, stock-based compensation of $3.5 million, accretion of debt discount of $1.8 million, and increase in fair value of the derivative liability of $0.7 million. Accrued expenses and accounts payable decreased an aggregate of $11.5 million from December 31, 2022.
We expect cash used in operating activities, excluding the milestone payments made to the former AlmataBio stockholders, to increase in future periods as a result of our development plans for AVTX-009, including the continued execution of the LOTUS Trial which commenced in October 2024.
Net cash provided by (used in) provided by investing activities
Net cash providedused byin investing activities for the year ended December 31, 20242025 consisted of the$113.7 cash acquired as partmillion of thepurchases AlmataBioof Transaction.available-for-sale Netinvestments, cashpartially usedoffset inby investing$32.0 activitiesmillion wasof minimalproceeds forfrom thematurities yearof endedavailable-for-sale December 31, 2023.investments.
Net cash provided by investing activities for the year ended December 31, 2024 consisted of the cash acquired as part of the AlmataBio Transaction.
Net cash provided by financing activities for the year ended December 31, 2025 consisted of proceeds of $14.8 million from the sales of shares made pursuant to our “at-the-market” sales agreement and proceeds of $0.8 million from stock option exercises, partially offset by $0.5 million in cash paid to tax authorities related to withholding shares to satisfy RSU vesting withholding obligations on behalf of employees.
Net cash provided by financing activities for the year ended December 31, 2023 consisted of net proceeds of $46.2 million from equity financings, partially offset by debt principal payments of $21.2 million, inclusive of the full payoff of the loan in September of 2023. Avalo fully retired its debt in 2023.
In preparing the financial statements, thewe Company makesmake 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. TheWe Company believes,believe, given current facts and circumstances, our estimates and assumptions are reasonable, adhere to U.S. generally accepted accounting principles (“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.
TheWe Company appliesapply the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all stock‑based awards made to employees, including employee stock options, in the statements of operations and comprehensive loss.
For stock options issued to employees and members of the board of directors for their services, thewe Company estimatesestimate the grant date fair value of each option using the Black‑Scholes option pricing model. The use of the Black‑Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected lifeterm of the option, risk‑free interest rates and expected dividend yields of the common stock. Additionally, the stock price on the date of grant is utilized in the Black-Scholes option pricing model. For awards subject to service‑based vesting conditions, including those with a graded vesting schedule, thewe Company recognizesrecognize stock‑based compensation expense equal to the grant date fair value of stock options on a straight‑line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.incurred.
Each Restricted Stock Unit (“RSU”) represents one equivalent share of our common stock to be issued after satisfying the applicable continued service-based vesting criteria over a specified period. The fair value of these RSUs is based on the closing price of our common stock on the date of the grant. The compensation for RSUs is recognized on a straight-line basis over the vesting period.
Each Performance Stock Unit (“PSU”) represents one equivalent share of our common stock to be issued after achievement of the performance goals specified in the grant. We estimate the fair value of our PSUs as of the grant date based upon the expected likelihood of achievement of the performance goals specified in the grant and the closing market price of our common stock on the date of grant. We recognize stock-based compensation expense over the requisite service period, if it is probable that the performance goal will be achieved.
The estimates involved in the valuations include inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates when valuing our stock options, our stock‑based compensation expense could be materially different. We recognize compensation expense for only the portion of awards that are expected to vest.
Warrant Liability
On March 28, 2024, the Company closed a private placement in which the investors received (i) 19,946 shares of Series C Preferred Stock and (ii) warrants to purchase up to an aggregate of 11,967,526 shares of Avalo’s common stock (or a number of shares of Series C Preferred Stock convertible into the number of shares of common stock the warrant is then exercisable into) with an exercise price of $5.796933. Refer to Note 11 - Capital Structure and sub-header “March 2024 Financing” of the consolidated financial statements for more information.
What changed in the latest 10-Q
Risk Factors
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, 2025, filed with the SEC on March 23, 2026 (the “2025 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 2025 10-K referenced above. The risks described in the 2025 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.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six Months Ended June 30, 2026 and 2025”
New heading “Research and Development Expenses”
New heading “General and Administrative Expenses”
New heading “Other (Expense) Income, Net”
New heading “Income Tax Expense”
Largest changes
see in full comparisonOnInMaythe5,second quarter of 2026,theweCompany announcedreported positive toplineresults from itsPhase 2 LOTUStrialresultsevaluating the efficacy and safety offor abdakibart in adults with moderate to severe HS. The trial successfully met its primary endpoint at both dosesstudied. Based on these data, we plan to advance abdakibart into a registrational phase 3 program. The Phase 2 LOTUS trial successfully met its primary endpoint at both dosesstudied (p=0.018150mg,150 mg, p=0.015 300mg and p=0.0040.004, combined), demonstrating a 42.2% and 42.9% absolute improvement in HiSCR75 response rates at Week 16, respectively (42.5% combined, placebo rate 25.6%).This was the highest absolute improvement in HiSCR75 and HiSCR50 in clinical trials of this size or larger at each individual dose and on a combined dose basis.Abdakibartregimensalso demonstrated statistically significant benefit across the key secondaryendpointsendpoints,inincluding HiSCR50, change inIHS4IHS4, and change in draining tunnel count.Numerically favorable responder rates were observed across all other key secondary endpoints. The HiSCR75 response was similar in patients with and without prior biologic exposure. On May 7, 2026, Avalo completed a follow-on offering of its common stock and pre-funded warrants to purchase shares of common stock. Refer to additional informationAdditionally, in the“LiquiditysecondandquarterCapitalofResources,2026,includingweCapitalcompletedExpenditureanandequityCashofferingRequirements”forsectionnetbelow.proceeds of $405.0 million.
Full comparison: every changed paragraph (51)
We are a clinical stage biotechnology company fully dedicated to developing therapeutics targeting the IL-1β-based treatmentspathway for immune-mediated inflammatory diseases. Our lead asset, abdakibart (AVTX-009),Avalo is anadvancing its lead anti-IL-1β monoclonal antibody (“mAb”). Positivedrug toplinecandidate, dataabdakibart, was recently reported for abdakibart ininto a Phasephase 23 clinicalregistrational trialprogram in hidradenitis suppurativa (“HS”)., We’rea chronic inflammatory skin condition that affects an estimated 1-4% of the population globally. Avalo is pursuing additional development opportunities in IL-1β driven indications. Avalo is also exploringdeveloping additionalAVTX-010, opportunitiesa tolong-acting makenext-generation ananti-IL-1β impact in prevalent indications that have significant remaining unmet needs.mAb.
Management’s primary evaluation of our success is the ability to progress itsour programs towards commercialization or opportunistically out-licensing rights to indications or geographies. The following chart representssummarizes thecertain achievementkey ofinformation about our mostproduct recent milestone of the positive topline data release of the Phase 2 clinical trial in HS.candidates:
The LOTUS trial (NCT06603077), which enrolled 253 adults, was a randomized, double-blind, placebo-controlled parallel-group Phase 2 trial to evaluate the efficacy, safety and tolerability of abdakibart across two dose regimens and placebo in a 1:1:1 ratio over a 16-week treatment period. Subjects received either a 600mg loading dose of abdakibart followed by 300mg every four weeks or a 300mg loading dose followed by 150mg every two weeks. The trial’s primary efficacy endpoint was the proportion of patients achieving Hidradenitis Suppurativa Clinical Response (HiSCR75) at Week 16.
OnIn Maythe 5,second quarter of 2026, thewe Company announcedreported positive topline results from its Phase 2 LOTUS trialresults evaluating the efficacy and safety offor abdakibart in adults with moderate to severe HS. The trial successfully met its primary endpoint at both doses studied. Based on these data, we plan to advance abdakibart into a registrational phase 3 program. The Phase 2 LOTUS trial successfully met its primary endpoint at both doses studied (p=0.018 150mg,150 mg, p=0.015 300mg and p=0.0040.004, combined), demonstrating a 42.2% and 42.9% absolute improvement in HiSCR75 response rates at Week 16, respectively (42.5% combined, placebo rate 25.6%). This was the highest absolute improvement in HiSCR75 and HiSCR50 in clinical trials of this size or larger at each individual dose and on a combined dose basis. Abdakibart regimens also demonstrated statistically significant benefit across the key secondary endpointsendpoints, inincluding HiSCR50, change in IHS4IHS4, and change in draining tunnel count. Numerically favorable responder rates were observed across all other key secondary endpoints. The HiSCR75 response was similar in patients with and without prior biologic exposure. On May 7, 2026, Avalo completed a follow-on offering of its common stock and pre-funded warrants to purchase shares of common stock. Refer to additional informationAdditionally, in the “Liquiditysecond andquarter Capitalof Resources,2026, includingwe Capitalcompleted Expenditurean andequity Cashoffering Requirements”for sectionnet below.proceeds of $405.0 million.
In June 2026, we announced the appointment of Ron Philip to our Board of Directors. Mr. Philip contributes deep strategic and commercial expertise, with a proven track record of bringing novel therapeutics to market.
On April 26, 2026, the Company entered into a Milestone Buyout Option and Amendment Agreement to the Agreement and Plan of Merger and Reorganization (the “Buyout Agreement”) pursuant to which the Company agreed to pay $2.25 million to the former AlmataBio, Inc. (“AlmataBio”) stockholders for an option, exercisable within 90 days of the effective date, to pay an additional $5.125 million in cash or shares of Avalo common stock, or a combination thereof at the election of Avalo, in lieu of a $15.0 million contingent milestone payment due upon the first patient being dosed in a Phase 3 trial pursuant to the original Agreement and Plan of Merger and Reorganization dated March 27, 2024. The upfront $2.25 million payment was made in April 2026.
For the threesix months ended MarchJune 31,30, 2026, Avalowe generated a net loss of $19.6$56.0 million and negative cash flows from operations of $17.7$37.7 million. As of MarchJune 31,30, 2026, Avalowe had $82.0$472.2 million in cash and cash equivalents and short-term investments.
On May 7, 2026, the Company completed a follow-on offering of its common stock and pre-funded warrants to purchase shares of common stock. The Company issued and sold 22,899,500 shares of common stock, including full exercise of the underwriters’ option to purchase an additional 3,169,500 shares, at a public offering price of $17.75 per share and pre-funded warrants to purchase 1,400,000 shares of common stock at a public offering price of $17.749 per pre-funded warrant, which represents the per share public price of each share of common stock, less the $0.001 per share exercise price for each pre-funded warrant. The aggregate gross proceeds before deducting underwriting discounts and commissions, and other estimated offering expenses payable by the Company were approximately $431.3 million. Net proceeds are expected to be approximately $405.0 million.
Based on our current operating plans, we expect that our existing cash, cash equivalents and short-term investments, together with the net proceeds from the offering,investments are sufficient to fund operations for at least twelve months from the filing date of this Quarterly Report on Form 10-Q and into 2029. We closely monitor our cash and cash equivalents and seek 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 our 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 us, 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 we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we might have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates.
•Advancing our pipeline through development to regulatory approval—notably and in the near term by preparing to initiate our pivotal trial(s)trials and considering further indication expansion for abdakibart;
Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025
The following table summarizes our research and development expenses for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands):
Research and development expenses increased by $9.3 million in the second quarter of 2026 as compared to the second quarter of 2025. The increase was driven by the recognition of a $10.0 million development milestone for abdakibart payable upon the dosing of the first patient in a phase 3 trial, as achievement of the milestone was determined to be probable as of June 30, 2026. Additionally, CMC expenses increased $1.8 million primarily due to manufacturing preparation activities for AVTX-010. In addition, stock-based compensation expense increased $0.6 million due to the annual employee equity grants and salary and related expenses increased $0.4 million primarily due to higher headcount. These increases were partially offset by a $3.5 million decrease in clinical expenses as LOTUS trial activities declined in the current period leading up to and following the release of topline data in May 2026, compared to significant ongoing trial activities in the prior year.
CMC expenses increased during the first quarter of 2026 compared to the prior year period due to drug manufacturing activities and related preparations for our pivotal trials(s) of abdakibart in HS paired with continued drug manufacturing activities to support the LOTUS trial. Clinical expenses increased in the first quarter of 2026 compared to the prior year period related to the maturing status of the LOTUS trial and ongoing patient trial costs and clinical trial work performed by our contract research organization.
Salaries, benefits and related costs increased $0.7 million compared to the three months ended March 31, 2025 due primarily to headcount additions during the year.
Given the positive results of the Phase 2 LOTUS trialtopline results in HS, we expect future research and development expenses to increase over time as we prepare and advance abdakibart into a registrational Phase 3 program.program in HS.
The following table summarizes our general and administrative expenses for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands):
General and administrative expenses increased by $2.9 million in the second quarter of 2026 compared to the second quarter of 2025. The increase was primarily driven by a $2.0 million increase in stock-based compensation expense related to additional equity awards granted since the prior year period as well as $0.8 million of modification expense associated with the accelerated vesting of equity awards held by former directors. Salaries and related expenses increased $0.6 million due to higher headcount. In addition, legal, consulting and other professional expenses increased $0.4 million primarily due to increased activity supporting Company’s operational and development activities.
Given the positive Phase 2 LOTUS topline results in HS, we expect general and administrative expense to increase over time as we support the advancement of abdakibart into a registrational Phase 3 program in HS and expand the infrastructure required to support our operations.
The increase in general and administrative expenses from the prior year period was driven by a $0.6 million increase in salaries, benefits and related costs compared to the prior year due primarily to headcount additions. Additionally, stock-based compensation expense increased $0.4 million from the prior year period due to option grants, including the annual employee grants in January 2025 and February 2026, as well as headcount additions throughout 2025 and 2026.
Given the positive results of the LOTUS trial in HS and the Company’s intention to advance abdakibart into a registrational phase 3 program, we expect future general and administrative expense to increase as compared to prior periods to support the abdakibart program.
Other Income,Expense, Net
The following table summarizes our other income,expense, net for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands):
Other expense, net increased $3.4 million for the three months ended June 30, 2026 as compared to the prior year period, primarily driven by a $6.6 million charge related to the contingent consideration recognized under the AlmataBio Buyout Agreement. The increase was partially offset by a $1.5 million favorable change in the fair value of the derivative liability associated with AVTX-007 milestone and royalty payments as compared to the three months ended June 30, 2025 (refer to Note 4 - Fair Value Measurements of the unaudited condensed and consolidated financial statements for more information). Interest income increased $1.7 million due to higher average cash and investment balances from the prior year.
The decrease in other income, net from the prior year period was primarily driven by decreased interest income in the current year period due to a decreased cash balance from the prior year.
The Company recognized minimal income tax expense for both the three months ended MarchJune 31,30, 2026 and 2025.
Comparison of the Six Months Ended June 30, 2026 and 2025
Research and Development Expenses
The following table summarizes our research and development expenses for the six months ended June 30, 2026 and 2025 (in thousands):
Research and development expense increased by $14.3 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The increase was driven by the recognition of a $10.0 million development milestone for abdakibart payable upon the dosing of the first patient in a phase 3 trial, as achievement of the milestone was determined to be probable as of June 30, 2026. CMC expenses increased $3.9 million primarily due to drug manufacturing activities and preparations for our planned pivotal HS trial of abdakibart as well as manufacturing preparation activities related to AVTX-010. These increases were partially offset by a $1.7 million decrease in clinical expenses as LOTUS trial activities declined in the current period leading up to and following the release of topline data in May 2026, compared to significant ongoing trial activities in the prior year. Additionally, salaries, benefits and related costs increased $1.2 million primarily due to higher headcount.
Given the positive Phase 2 LOTUS topline results in HS, we expect research and development expenses to increase over time as we advance abdakibart into a registrational Phase 3 program in HS.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the six months ended June 30, 2026 and 2025 (in thousands):
General and administrative expenses increased $4.2 million in six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The increase was primarily driven by a $2.4 million increase in stock-based compensation expense related to additional equity awards granted since the prior period as well as $0.8 million of modification expense related to the accelerated vesting of equity awards held by former directors. Salaries, benefits and related costs increased $1.2 million primarily due to higher headcount. Additionally, legal, consulting, and other professional expenses increased $0.7 million primarily due to increased activity supporting the Company’s operational and development activities.
Given the positive Phase 2 LOTUS topline results in HS, we expect general and administrative expense to increase over time as we support the advancement of abdakibart into a registrational Phase 3 program in HS and expand the infrastructure required to support our operations.
Other (Expense) Income, Net
The following table summarizes our other (expense) income, net for the six months ended June 30, 2026 and 2025 (in thousands):
The $3.6 million change in other (expense) income, net compared to the prior year period was primarily driven by a $6.6 million charge related to the contingent consideration recognized under the AlmataBio Buyout Agreement. This increase in other (expense) income, net was partially offset by a $1.6 million favorable change in the fair value of the derivative liability associated with the AVTX-007 milestone and royalty payments as compared to the six months ended June 30, 2026 (refer to Note 4 - Fair Value Measurements of the unaudited condensed and consolidated financial statements for more information). Interest income increased $1.3 million in the current period due to higher average cash and investment balances from the prior year.
Income Tax Expense
The Company recognized minimal income tax expense for both the six months ended June 30, 2026 and 2025.
We primarily usesuse cash to fund the ongoing development of abdakibartour pipeline, primarily abdakibart, and costs associated with itsour organizational infrastructure. As of MarchJune 31,30, 2026, we had $82.0$472.2 million in cash and cash equivalents and short-term investments. We expect future cash used in operating activities to increase over time as a result of our intention towe advance abdakibart into a registrational phase 3 program.program in HS, progress AVTX-010 toward submission of an investigational new drug application and support the infrastructure necessary for our operations.
The following table summarizes our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):
Net cash used in operating activities was $17.7$37.7 million for the threesix months ended MarchJune 31,30, 2026 and consisted primarily of net loss of $19.6$56.0 million, partially offset by net non-cash charges of $3.0 million and changes in our operating assets and liabilities of $1.1$15.5 million. The non-cash charges consisted primarily of stock-based compensation of $3.6$8.9 millionmillion, partiallychange offsetin byfair value of contingent consideration of $6.6 million, and a decreasechange in the fair value of the derivative liability of $0.5 million.million, partially offset by $0.5 million accretion of investments. Changes in ournet operating assetsliabilities increased $7.6 million and liabilities consisted primarily of a $1.5$5.1 million decreaseincrease in accrued expenses and other liabilities primarily due to continuedthe activity$10.0 relatedmillion tomilestone accrued as of June 30, 2026 due upon dosing the LOTUSfirst patient in a phase 3 trial for abdakibart and thepartially offset by decreased research and development accruals. Additionally, accounts payable increased $3.2 million due to timing of vendor invoices. Prepaid and other assets increased $0.7 million.
Net cash used in operating activities was $9.5$20.8 million for the threesix months ended MarchJune 31,30, 2025 and consisted primarily of net loss of $13.1$33.9 million, partially offset by net non-cash charges of $8.3 million and adjustments to reconcile net loss to net cash usedchanges in operating activitiesassets includingand liabilities of $4.7 million. The non-cash charges consisted primarily of stock-based compensation expense of $3.2 million. Prepaid expense decreased $2.5$6.0 million and a $2.2 million change in the change in the fair value of the derivative liability. Changes in our operating assets and liabilities consisted primarily of a $2.4 million decrease in prepaid expenses and other current assets due to our ongoing clinical work and a $2.1 million increase in accounts payable primarily due to thecontinued timing of abdakibartactivity related payments.to Accruedthe expensesLOTUS trial and other liabilities decreased $1.7 million primarily related the timing of non-equityvendor incentive compensation.invoices.
Net cash providedused byin investing activities
Net cash providedused byin investing activities for the threesix months ended MarchJune 31,30, 2026 consisted of $25.5$353.8 million purchases of available-for-sale investments partially offset by $49.4 million of proceeds from maturities and sales of available-for-sale investments.
Net cash used in investing activities for the six months ended June 30, 2025 consisted of $70.9 million of purchases of available-for-sale investments.
Net cash provided by (used in) financing activities
Net cash provided by financing activities for the six months ended June 30, 2026 consisted primarily of gross proceeds of $431.3 million from the underwritten public offering that closed in May 2026, partially offset by $26.4 million of transaction costs, and $7.4 million of proceeds from the exercises of stock options.
Net cash providedused byin financing activities for the threesix months ended MarchJune 31,30, 20262025 consisted of $2.2 millionprimarily of proceeds from the exercise of stock options, partially offset by $0.8 million in cash paid to tax authorities related to withholding shares to satisfy RSU vesting withholding obligations on behalf of employees.
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, clinical trial accruals and research and development costs, stock-based compensation, fair value measurements, the valuation of derivative liabilities, and cash flows used in management’s going concern assessment. 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, 2025 filed with the SEC on March 23, 2026. There have been no significant changes to our critical accounting policies during the threesix months ended MarchJune 31,30, 2026.2026, except for the investments policy as described in Note 2 - Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
AVTX insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 18 filings (5 insiders, 17 trade dates, 380,085 shares, about $7.6M; 17 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -380,085 (purchases minus sales); net value about -$7.6M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-16 | Sullivan Christopher Ryan |
Option exercise |
12,394 | $9.88 | $122.5K |
| 2026-09-16 | Sullivan Christopher Ryan |
Open-market sale |
12,394 | $16.33 | $202.4K |
| 2026-09-10 | Sullivan Christopher Ryan |
Option exercise |
10,185 | $8.04 | $81.9K |
| 2026-09-10 | Sullivan Christopher Ryan |
Open-market sale |
10,185 | $17.62 | $179.5K |
| 2026-08-28 | Doyle Mittie |
Option exercise |
679 | $8.04 | $5.5K |
| 2026-08-28 | Doyle Mittie |
Open-market sale |
679 | $20.00 | $13.6K |
| 2026-08-18 | Sullivan Christopher Ryan |
Open-market sale |
31,031 | $20.05 | $622.2K |
| 2026-08-18 | Sullivan Christopher Ryan |
Option exercise |
31,031 | $9.88 | $306.6K |
| 2026-08-17 | Sullivan Christopher Ryan |
Open-market sale |
3,749 | $19.94 | $74.8K |
| 2026-08-17 | Sullivan Christopher Ryan |
Open-market sale |
37,945 | $19.85 | $753.2K |
| 2026-08-17 | Sullivan Christopher Ryan |
Option exercise |
2,876 | $9.88 | $28.4K |
| 2026-08-17 | Sullivan Christopher Ryan |
Option exercise |
37,945 | $9.88 | $374.9K |
| 2026-08-17 | Doyle Mittie |
Open-market sale |
1,000 | $20.00 | $20.0K |
| 2026-08-17 | Doyle Mittie |
Option exercise |
1,000 | $12.65 | $12.7K |
| 2026-08-11 | Riley Jennifer |
Open-market sale | 2,655 | $19.59 | $52.0K |
| 2026-08-10 | Doyle Mittie |
Option exercise |
679 | $8.04 | $5.5K |
| 2026-08-10 | Doyle Mittie |
Open-market sale |
679 | $20.00 | $13.6K |
| 2026-07-27 | Doyle Mittie |
Open-market sale |
1,000 | $20.00 | $20.0K |
| 2026-07-27 | Doyle Mittie |
Option exercise |
1,000 | $12.65 | $12.7K |
| 2026-06-30 | Doyle Mittie |
Option exercise |
2,875 | $12.65 | $36.4K |
| 2026-06-30 | Doyle Mittie |
Option exercise |
1,779 | $8.04 | $14.3K |
| 2026-06-30 | Doyle Mittie |
Open-market sale |
4,654 | $20.00 | $93.1K |
| 2026-06-23 | Doyle Mittie |
Open-market sale |
1,450 | $18.00 | $26.1K |
| 2026-06-23 | Doyle Mittie |
Option exercise |
1,450 | $8.04 | $11.7K |
| 2026-06-10 | Riley Jennifer |
Shares withheld for tax | 588 | $13.10 | $7.7K |
| 2026-06-10 | Varki Paul |
Shares withheld for tax | 1,081 | $13.10 | $14.2K |
| 2026-06-10 | Sullivan Christopher Ryan |
Shares withheld for tax | 138 | $13.10 | $1.8K |
| 2026-06-10 | Doyle Mittie |
Shares withheld for tax | 1,084 | $13.10 | $14.2K |
| 2026-05-28 | Doyle Mittie |
Option exercise |
679 | $8.04 | $5.5K |
| 2026-05-28 | Doyle Mittie |
Open-market sale |
679 | $16.00 | $10.9K |
| 2026-05-21 | Riley Jennifer |
Grant/award | 34,200 | — | — |
| 2026-05-21 | Sullivan Christopher Ryan |
Grant/award | 39,900 | — | — |
| 2026-05-21 | Varki Paul |
Grant/award | 24,300 | — | — |
| 2026-05-21 | Doyle Mittie |
Grant/award | 43,500 | — | — |
| 2026-05-21 | Neil Garry Arthur |
Grant/award | 100,200 | — | — |
| 2026-05-15 | Doyle Mittie |
Open-market sale |
3,000 | $18.76 | $56.3K |
| 2026-05-15 | Doyle Mittie |
Option exercise |
3,000 | $12.65 | $38.0K |
| 2026-05-07 | Sullivan Christopher Ryan |
Open-market sale |
18,606 | $24.12 | $448.8K |
| 2026-05-07 | Sullivan Christopher Ryan |
Option exercise |
18,606 | $9.88 | $183.8K |
| 2026-05-06 | Varki Paul |
Option exercise |
12,563 | $8.04 | $101.0K |
| 2026-05-06 | Varki Paul |
Open-market sale |
37,375 | $18.91 | $706.8K |
| 2026-05-06 | Varki Paul |
Open-market sale |
5,196 | $19.78 | $102.8K |
| 2026-05-06 | Varki Paul |
Open-market sale |
9,253 | $22.70 | $210.0K |
| 2026-05-06 | Varki Paul |
Open-market sale |
400 | $23.71 | $9.5K |
| 2026-05-06 | Varki Paul |
Option exercise |
62,500 | $13.43 | $839.4K |
| 2026-05-06 | Varki Paul |
Open-market sale |
22,839 | $21.22 | $484.6K |
| 2026-05-06 | Sullivan Christopher Ryan |
Open-market sale |
9,219 | $21.37 | $197.0K |
| 2026-05-06 | Sullivan Christopher Ryan |
Open-market sale |
2,700 | $20.76 | $56.1K |
| 2026-05-06 | Sullivan Christopher Ryan |
Open-market sale |
12,347 | $19.28 | $238.1K |
| 2026-05-06 | Sullivan Christopher Ryan |
Open-market sale |
8,900 | $22.57 | $200.9K |
| 2026-05-06 | Sullivan Christopher Ryan |
Open-market sale |
13,834 | $18.55 | $256.6K |
| 2026-05-06 | Sullivan Christopher Ryan |
Option exercise |
47,000 | $8.04 | $377.9K |
| 2026-05-06 | Doyle Mittie |
Open-market sale |
19,015 | $22.41 | $426.1K |
| 2026-05-06 | Doyle Mittie |
Open-market sale |
44,944 | $21.20 | $952.8K |
| 2026-05-06 | Doyle Mittie |
Open-market sale |
5,000 | $19.65 | $98.2K |
| 2026-05-06 | Doyle Mittie |
Open-market sale |
27,538 | $18.03 | $496.5K |
| 2026-05-06 | Doyle Mittie |
Open-market sale |
10,058 | $22.88 | $230.1K |
| 2026-05-06 | Doyle Mittie |
Option exercise |
77,905 | $12.65 | $985.5K |
| 2026-05-06 | Doyle Mittie |
Option exercise |
28,650 | $8.04 | $230.3K |
| 2026-05-06 | Chan Mitchell |
Open-market sale |
3,167 | $22.88 | $72.5K |
Well-known investors holding AVTX (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 2,387,026 | $44.1M | 0.07% | Added 161% |
| Millennium Management (Israel Englander) | 2026-06-30 | 835,484 | $12.5M | — | Sold out |
| Renaissance Technologies | 2026-06-30 | 357,200 | $6.6M | 0.01% | Added 197% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 323,833 | $6.0M | 0.0% | Added 67% |
| Two Sigma Investments | 2026-06-30 | 67,094 | $1.2M | 0.0% | Added 4% |