Avalo signals change in fortunes by snapping up AlmataBio for ex-Lilly inflammatory drug

Avalo Therapeutics is handing over more than $22 million in stock and cash to acquire AlmataBio for a phase 2-ready monoclonal antibody for hidradenitis suppurativa (HS).

The anti-IL-1β mAb, dubbed AVTX-009, has its origins at Eli Lilly. Avalo CEO Garry Neil, M.D., said the antibody has a “high probability of success for the treatment of HS as evidenced by recent data readouts validating inhibition of IL-1β in this disease.”

“We believe that HS is a multi-billion-dollar commercial opportunity and that AVTX-009 has the potential to be best-in-class and best-in-indication because of its target, half-life, and potency, which may allow for strong efficacy and convenient dosing,” Neil added in a post-market release yesterday.

Avalo will make AVTX-009 its lead asset, ahead of quisovalimab, an anti-LIGHT mAb in phase 2 development for ulcerative colitis, and AVTX-008, a BTLA agonist fusion protein in preclinical development.

The biotech expects to read out topline results from a phase 2 study of AVTX-009 in HS in 2026, and also alluded to plans to evaluate the antibody in another chronic inflammatory indication.

To get its hands on the drug, Avalo is paying out $15 million in stock and a further $7.5 million in cash to acquire Almata outright. Almata’s former stockholders are also in line for a $5 million payout when the first patient is dosed in the phase 2 trial and $15 million if a patient is dosed in a phase 3 trial.

The acquisition of privately-held Almata marks the end of a short life for the biotech, which was set up in April 2023 with the aim of identifying and licensing AVTX-009. While Almata will become a subsidiary of Avalo, the new owner only has eyes for the drug itself and won’t be taking on any of Almata’s staff.

"We are pleased that Avalo recognizes the promise of AVTX-009, an important potential treatment option for patients with inflammatory diseases,” Almata’s now-former CEO Patrick Crutcher said in the release.

“AlmataBio was founded to identify, acquire, and accelerate the development of clinically meaningful therapies, and we are proud of the contribution of the talented AlmataBio team to this mission,” Crutcher added. “We look forward to the advancement of AVTX-009 into a phase 2 trial in HS under Dr. Neil’s stewardship.”

Avalo hasn’t had an easy time in recent years. Back in 2022, the company was forced to cut down its pipeline and lost a chunk of its C-suite. Only last summer, the biotech had to work through a default with creditors before selling off its rare disease meds AVTX-801 (D-galactose), AVTX-802 (D-mannose) and AVTX-803 (L-fucose) to AUG Therapeutics.

But with $35 million in debt eliminated and potentially up to $45 million in milestone payments to come from the offloaded AVTX-800 series, Avalo ended 2023 in a better place, even if it only had $10 million in the bank.

Luckily, Avalo’s money worries have now been eased, with the company also announcing yesterday a $185 million raise via a private placement of various types of stock. The funding is expected to fuel the phase 2 trial of AVTX-009 and beyond into 2027.

Investors appeared relieved at Avalo’s change in fortunes, sending the biotech’s stock rocketing over 330% in pre-marketing trading this morning to $20.50 from a Wednesday closing price of $4.75.