Avalo Therapeutics, Inc.
For the period ended Jun 30, 2026. Filed Aug 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 6, 2026
AVTX$6.93+4.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-13.
0001534120-26-000033
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001534120-26-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 57 previous paragraphs and 70 current paragraphs.
31 unchanged; 15 reworded; 21 added; 11 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 4 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
We are a clinical stage biotechnology company dedicated to developing therapeutics targeting the IL-1β pathway for immune-mediated inflammatory diseases. Avalo is advancing its lead anti-IL-1β monoclonal antibody (“mAb”) drug candidate, abdakibart, into a phase 3 registrational program in hidradenitis suppurativa (“HS”), a 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 developing AVTX-010, a long-acting next-generation anti-IL-1β mAb.
Current report
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.
Current report
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.
Current report
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.
Current report
Other Expense, Net
Current report
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.
Current report
Comparison of the Six Months Ended June 30, 2026 and 2025
Current report
Research and Development Expenses
Current report
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.
Current report
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.
Current report
General and Administrative Expenses
Current report
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.
Current report
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.
Current report
Other (Expense) Income, Net
Current report
The following table summarizes our other (expense) income, net for the six months ended June 30, 2026 and 2025 (in thousands):
Current report
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.
Current report
Income Tax Expense
Current report
Net cash used in operating activities was $37.7 million for the six months ended June 30, 2026 and consisted primarily of net loss of $56.0 million, partially offset by net non-cash charges of $15.5 million. The non-cash charges consisted primarily of stock-based compensation of $8.9 million, change in fair value of contingent consideration of $6.6 million, and a change in the fair value of the derivative liability of $0.5 million, partially offset by $0.5 million accretion of investments. Changes in net operating liabilities increased $7.6 million and consisted primarily of a $5.1 million increase in accrued expenses and other liabilities primarily due to the $10.0 million milestone accrued as of June 30, 2026 due upon dosing the first patient in a phase 3 trial for abdakibart and partially 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.
Current report
Net cash used in investing activities
Current report
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.
Current report
Net cash provided by (used in) financing activities
Removed paragraphs (11)
Previous report
We are a clinical stage biotechnology company fully dedicated to developing IL-1β-based treatments for immune-mediated inflammatory diseases. Our lead asset, abdakibart (AVTX-009), is an anti-IL-1β monoclonal antibody (“mAb”). Positive topline data was recently reported for abdakibart in a Phase 2 clinical trial in hidradenitis suppurativa (“HS”). We’re also exploring additional opportunities to make an impact in prevalent indications that have significant remaining unmet needs.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Other Income, Net
Previous report
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.
Previous report
Net cash used in operating activities was $9.5 million for the three months ended March 31, 2025 and consisted primarily of net loss of $13.1 million and adjustments to reconcile net loss to net cash used in operating activities including stock-based compensation of $3.2 million. Prepaid expense decreased $2.5 million primarily due to the timing of abdakibart related payments. Accrued expenses and other liabilities decreased $1.7 million primarily related the timing of non-equity incentive compensation.
Previous report
Net cash provided by investing activities
Reworded paragraphs (15)
Previous wording
Management’s primary evaluation of our success is the ability to progress its programs towards commercialization or opportunistically out-licensing rights to indications or geographies. The following chart represents the achievement of our most recent milestone of the positive topline data release of the Phase 2 clinical trial in HS.
Current wording
Management’s primary evaluation of our success is the ability to progress our programs towards commercialization or opportunistically out-licensing rights to indications or geographies. The following chart summarizes certain key information about our product candidates:
Previous wording
On May 5, 2026, the Company announced positive topline results from its Phase 2 LOTUS trial evaluating the efficacy and safety of 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, p=0.015 300mg and p=0.004 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 endpoints in HiSCR50, change in IHS4 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 information in the “Liquidity and Capital Resources, including Capital Expenditure and Cash Requirements”section below.
Current wording
In the second quarter of 2026, we reported positive topline Phase 2 LOTUS results for abdakibart in adults with moderate to severe HS. The trial successfully met its primary endpoint at both doses studied (p=0.018 150 mg, p=0.015 300mg and p=0.004, 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%). Abdakibart also demonstrated statistically significant benefit across the key secondary endpoints, including HiSCR50, change in IHS4, and change in draining tunnel count. Additionally, in the second quarter of 2026, we completed an equity offering for net proceeds of $405.0 million.
Previous wording
For the three months ended March 31, 2026, Avalo generated a net loss of $19.6 million and negative cash flows from operations of $17.7 million. As of March 31, 2026, Avalo had $82.0 million in cash and cash equivalents and short-term investments.
Current wording
For the six months ended June 30, 2026, we generated a net loss of $56.0 million and negative cash flows from operations of $37.7 million. As of June 30, 2026, we had $472.2 million in cash and cash equivalents and investments.
Previous wording
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, 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.
Current wording
Based on our current operating plans, we expect that our existing cash, cash equivalents and investments are sufficient to fund operations 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.
Previous wording
•Advancing our pipeline through development to regulatory approval—notably and in the near term by preparing to initiate our pivotal trial(s) and considering further indication expansion for abdakibart;
Current wording
•Advancing our pipeline through development to regulatory approval—notably and in the near term by preparing to initiate our pivotal trials and considering further indication expansion for abdakibart;
Previous wording
Given the positive results of the Phase 2 LOTUS trial 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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
The following table summarizes our other income, net for the three months ended March 31, 2026 and 2025 (in thousands):
Current wording
The following table summarizes our other expense, net for the three months ended June 30, 2026 and 2025 (in thousands):
Previous wording
We primarily uses cash to fund the ongoing development of abdakibart and costs associated with its organizational infrastructure. As of March 31, 2026, we had $82.0 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 to advance abdakibart into a registrational phase 3 program.
Current wording
We primarily use cash to fund the ongoing development of our pipeline, primarily abdakibart, and costs associated with our organizational infrastructure. As of June 30, 2026, we had $472.2 million in cash and cash equivalents and investments. We expect future cash used in operating activities to increase over time as we advance abdakibart into a registrational phase 3 program in HS, progress AVTX-010 toward submission of an investigational new drug application and support the infrastructure necessary for our operations.
Previous wording
The following table summarizes our cash flows for the three months ended March 31, 2026 and 2025 (in thousands):
Current wording
The following table summarizes our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):
Previous wording
Net cash used in operating activities was $17.7 million for the three months ended March 31, 2026 and consisted primarily of net loss of $19.6 million, partially offset by net non-cash charges of $3.0 million and changes in our operating assets and liabilities of $1.1 million. The non-cash charges consisted primarily of stock-based compensation of $3.6 million partially offset by a decrease in the fair value of the derivative liability of $0.5 million. Changes in our operating assets and liabilities consisted primarily of a $1.5 million decrease in accrued expenses and other liabilities primarily due to continued activity related to the LOTUS trial and the timing of vendor invoices.
Current wording
Net cash used in operating activities was $20.8 million for the six months ended June 30, 2025 and consisted primarily of net loss of $33.9 million, partially offset by net non-cash charges of $8.3 million and changes in operating assets and liabilities of $4.7 million. The non-cash charges consisted primarily of stock-based compensation expense of $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 continued activity related to the LOTUS trial and the timing of vendor invoices.
Previous wording
Net cash provided by investing activities for the three months ended March 31, 2026 consisted of $25.5 million of proceeds from maturities and sales of available-for-sale investments.
Current wording
Net cash used in investing activities for the six months ended June 30, 2026 consisted of $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.
Previous wording
Net cash provided by financing activities
Current wording
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.
Previous wording
Net cash provided by financing activities for the three months ended March 31, 2026 consisted of $2.2 million 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.
Current wording
Net cash used in financing activities for the six months ended June 30, 2025 consisted primarily of the cash paid to tax authorities related to withholding shares to satisfy RSU vesting withholding obligations on behalf of employees.
Previous wording
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 three months ended March 31, 2026.
Current wording
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 six months ended June 30, 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.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The following table summarizes our research and development expenses for the six months ended June 30, 2026 and 2025 (in thousands):
Current report — wording carried from elsewhere
The following table summarizes our general and administrative expenses for the six months ended June 30, 2026 and 2025 (in thousands):
Current report — wording carried from elsewhere
The Company recognized minimal income tax expense for both the six months ended June 30, 2026 and 2025.