After working through a default with its creditors in July, troubled Avalo Therapeutics is looking to sell or license its core assets, with at least three therapies already involved in buyout discussions.
Avalo has had a tough few years. In June, the biotech’s lead asset AVTX-002 failed to stem asthma-related events in a phase 2 clinical trial, sending shares down 88% from $4.42 per share to 50 cents. And, in spring 2022, the company was forced to cut down its pipeline and lost a chunk of its C-suite.
Now, the situation has gotten even more dire. In a second-quarter earnings report Thursday, Avalo detailed a forbearance agreement signed July 20 with its debt lenders after a default event. The event occurred “due to a material adverse change in the company’s business.” The lenders have now agreed to refrain from executing the full remedies available to them until Aug. 15 or an earlier triggering event. Those remedies could include an acceleration of the amounts due.
Avalo now has some work to do, including an asset sale or licensing agreements. The company said discussions for a potential sale are already underway for its rare disease meds AVTX-801 (D-galactose), AVTX-802 (D-mannose) and AVTX-803 (L-fucose).
The series of therapies could be sold for $150,000 upfront with up to $45 million in milestones linked to certain FDA approvals, according to a Securities and Exchange Commission (SEC) filing dated July 20. Avalo did not name the potential buyer.
Meanwhile, Avalo is trying to find a path forward for what remains in the pipeline, including AVTX-008 and the failed asthma med AVTX-002. CEO Garry Neil, M.D., said AVTX-002 could still have an opportunity in asthma with a focus on patients with higher baseline LIGHT levels—a biomarker that Avalo previously pointed to as a possible area of study in severe non-eosinophilic asthma. Neil also said the therapy could be tested in other inflammation-driven diseases such as inflammatory bowel disease and other conditions affecting the lungs, gut and skin.
Neil also has “high confidence” in AVTX-008, which is in preclinical development for immune dysregulation disorders. The fully human BTLA agonist fusion protein could be used for patients who have not responded to anti-TNF therapy, a common treatment for inflammatory disorders. Members of the anti-TNF class include AbbVie’s megablockbuster Humira.
“The team is working tirelessly to determine the best path forward for these assets, including indication selection and funding to support development,” Neil said.
Avalo reported $6.3 million in cash and cash equivalents as of June 30, 2023, in today’s earnings report. But the SEC filing from July 20 said cash had fallen to $4.5 million as of that date.
The company's shares slid to 19 cents apiece Thursday morning.