STIFEL 2026 HEALTHCARE CONFERENCE - AVALO THERAPEUTICS INC

Explicit Guidance:

• Phase 3 Trial Enrollment: Commencement of patient enrollment for Phase 3 trials expected "early next year" (FY2025) following FDA feedback on the final protocol.
• Phase 3 Data Readout: Top-line data for the Phase 3 program targeting Hydradenitis Suppurativa (HS) projected for 2029.
• Financial Runway: Current cash resources ($430 million post-Lotus trial) sufficient to fund Phase 3 operations and reach 2029 top-line data without additional capital raises; also covers funding for the new indication (INI) and ABTX-010 Phase 1 program.
• Regulatory Feedback: Expectation to receive FDA and EMA feedback on the Phase 3 protocol package by "the end of this year."

Business-Segment Outlook:

• Lead Indication (HS): High confidence in replicating Phase 2 efficacy (43% HiS75 response) in Phase 3 due to rigorous trial design, patient selection, and high drug affinity; anticipates a Phase 3 study design comprising two placebo-controlled studies with 16-week induction and 52-week maintenance.
• Next Indication (INI): Plan to announce a new indication in an Infectious/Inflammatory (INI) therapeutic area with "very strong clinical validation" and "high unmet need" prior to the end of the current year, with clinical trial initiation planned for "early in next year."
• Pipeline Expansion (ABTX-010): Development of ABTX-010 (PK-extended version of Abdacobart) to reach clinical testing in the "first half of next year" via an IND filing supported by an abbreviated toxicology program; aims for dosing intervals of every 3 to 6 months or less.

Market and Competitive Outlook:

• Target Market Size: Projects the HS market in the U.S. to exceed $10 billion, potentially exceeding current estimates similar to the expansion trajectory of inflammatory bowel disease.
• Competitive Landscape: Views the market as non-dominant for any single class; expects continued growth for anti-TNF, anti-IL-17, and JAK inhibitors, but maintains a "bullish" stance on IL-1-beta due to its central role in inflammation.
• Efficacy Positioning: Believes their product offers superior clinical outcomes compared to competitors (e.g., Litikizumab/Abbvie, Bemselx) due to 7-fold higher affinity, longer half-life, and rigorous Phase 2 execution, anticipating less "degradation" from Phase 2 to Phase 3 than historically observed.
• Site Competition: Anticipates favorable site and patient availability in Phase 3 given the completion of AbbVie's Phase 3 program and expected launches of competitor products.

Macro / Industry Outlook:

• Placebo Response Trends: Acknowledges a structural shift in HS trials toward higher placebo response rates (mid-20% range vs. historical mid-teens), attributing this to variable disease course and self-medication; plans to mitigate via rigorous patient training and investigator diligence.
• Regulatory Environment: Anticipates FDA focus on statistical significance and difference from placebo rather than absolute efficacy rates for labeling; engaged in active dialogue regarding potential pivotal role of existing Phase 2 data.
• Industry Sentiment: Notes increased "explosion of recognition, growth, and development activity" in the HS space due to better disease recognition and biologic availability.

Strategic Initiatives:

• IND Filing (ABTX-010): Accelerating the IND process for the extended PK molecule using abbreviated toxicology to enable clinic entry in H1 next year.
• New Indication Launch: Preparing to file and initiate a trial for a new INI indication in early next year, leveraging established relationships with FDA, investigators, and CROs.
• Trial Infrastructure: Finalizing CRO contracting and clinical supply chain readiness immediately upon FDA protocol feedback to ensure seamless transition to Phase 3 enrollment.
• Manufacturing: Completed successful manufacturing run for the new extended PK compound, securing IP and production readiness.

Risks and Headwinds to Outlook:

• Placebo Effect Variability: Risk of high placebo response rates potentially obscuring treatment effect size if not adequately controlled through trial design and patient monitoring.
• Phase 2 to 3 Degradation: Historical precedent of efficacy loss in HS programs (e.g., Benzelex, Sonolocumab); management expects this but maintains mitigation strategies (rigorous sizing, consistent dosing regimens).
• Safety Signals: Acknowledges theoretical risk of neutropenia associated with IL-1 beta blockade (based on Class effects) but notes low historical incidence; however, requires large Phase 3 trials to definitively rule out clinically significant neutropenia.
• Trial Duration/Rigor: Risk that overly rigorous imputation or strict patient selection could limit generalizability, though management believes current protocols mitigate this.
• External Failures: References recent clinical failures (e.g., Xura) as context for the difficulty of the HS space, though management attributes those to insufficient drug effect rather than solely placebo rates.

Management Tone on the Future:

• Confidence: Expresses "very high confidence" and "very bullish" sentiment regarding the IL-1-beta hypothesis and the specific differentiation of Abdacobart; describes Phase 2 data as "compelling" and "remarkable."
• Strategic Hedging: Maintains a "cautious" approach regarding Phase 3 sizing to avoid underpowered studies despite high Phase 2 confidence; willing to adapt to FDA requirements for dose ranging.
• Financial Confidence: Highlights "great shape" regarding cash position, explicitly stating a lack of need to raise capital in the current market environment.
• Differentiation: Confident that superior antibody affinity and PK properties will translate to better clinical outcomes compared to bispecific or lower-affinity competitors.

Miscellaneous:

• Investor Education: Notes a divergence between investor focus on placebo-subtracted differences and physician/investor focus on absolute drug efficacy; plans to address this in communication.
• Competitor Analysis: Plans to scrutinize AbbVie's Litikizumab data (specifically patient population and unreported metrics) at upcoming AAD conference presentations to validate the IL-1-beta hypothesis while identifying room for improvement.
• Disease Recognition: Highlights a shift in medical practice where HS is increasingly recognized and less often misdiagnosed as boils or rashes, expanding the eligible patient pool.