Avalo Therapeutics Receives $69.4 Million in Proceeds from the Full Exercise of Private Placement Warrants

Rhea-AI Summary

Avalo Therapeutics has received $69.4 million in gross proceeds from the full exercise of warrants issued in a March 2024 private placement. The warrants were exercised at $5.796933 per underlying share, resulting in the issuance of 781,259 common stock shares and 11,186.267 series C non-voting convertible preferred stock shares. This exercise brings the total gross proceeds from the transaction to $185 million, extending the company's cash runway into at least 2027. The private placement was led by Commodore Capital and TCGX, with participation from several other investors. As of November 8, 2024, Avalo has 10,463,633 common stock shares and 24,895.92 series C preferred stock shares outstanding.

Positive

• Received $69.4 million in gross proceeds from warrant exercise
• Total transaction proceeds reached $185 million
• Extended cash runway into at least 2027

Negative

• Significant shareholder dilution due to new share issuance

Insights

Financial Analyst

This substantial $69.4 million warrant exercise, combined with previous funding, gives Avalo a significant $185 million total capital raise. The extended cash runway into 2027 provides exceptional operational flexibility for their clinical programs. The high-profile investor participation from firms like Commodore Capital, OrbiMed and RA Capital Management signals strong institutional confidence in AVTX-009's potential.

The transaction structure using Series C preferred stock helps manage dilution while providing conversion flexibility. With approximately 10.5 million common shares outstanding and 24,896 preferred shares (each convertible to 1,000 commons), the fully diluted share count could expand significantly upon conversion, though beneficial ownership limitations provide some protection against immediate dilution.

Medical Research Analyst

The robust capital position strengthens Avalo's ability to advance their Phase 2 LOTUS trial in hidradenitis suppurativa (HS), a chronic inflammatory skin condition with significant unmet needs. The company's plans to expand AVTX-009 into additional inflammatory indications represents a strategic portfolio expansion opportunity. The extended cash runway provides ample time to generate meaningful clinical data across multiple indications, potentially increasing the program's overall value proposition.

• Proceeds from the full exercise of warrants issued in the first quarter of 2024 private placement bring the total gross proceeds from the transaction to $185 million
• Cash runway expected into at least 2027

WAYNE, Pa. and ROCKVILLE, Md., Nov. 12, 2024 (GLOBE NEWSWIRE) -- Avalo Therapeutics, Inc. (Nasdaq: AVTX), a clinical stage biotechnology company focused on the treatment of immune dysregulation, today announced that it has received $69.4 million in gross proceeds from the full exercise of the warrants issued in a March 2024 private placement.

“We appreciate the outstanding support of our investors by fully exercising their warrants from the private placement earlier this year. While our primary focus remains on the execution of our Phase 2 LOTUS trial in hidradenitis suppurativa, we are excited to expand the AVTX-009 program into additional inflammatory indications,” said Dr. Garry Neil, Chief Executive Officer and Chairman of the Board. “We are hard at work identifying our next indication, the launch and execution of which will benefit from our improved cash position and extended cash runway.”

The warrants were issued as part of the private placement in March 2024 that was led by Commodore Capital and TCGX, with participation from BVF Partners, Deep Track Capital, OrbiMed, Petrichor, and RA Capital Management. 11,967,526 warrants were issued and all have been exercised at an exercise price of $5.796933 per underlying share of common stock, resulting in gross proceeds to Avalo of $69.4 million and the issuance of 781,259 shares of common stock and 11,186.267 shares of series C non-voting convertible preferred stock. As of November 8, 2024, Avalo has 10,463,633 shares of common stock outstanding and 24,895.92 shares of series C preferred stock outstanding. Each share of series C preferred stock is convertible into 1,000 shares of common stock, subject to certain beneficial ownership limitations.

About Avalo Therapeutics

Avalo Therapeutics is a clinical stage biotechnology company focused on the treatment of immune dysregulation. Avalo’s lead asset is AVTX-009, an anti-IL-1β mAb, targeting inflammatory diseases. Avalo also has two additional drug candidates, which include quisovalimab (anti-LIGHT mAb) and AVTX-008 (BTLA agonist fusion protein). For more information about Avalo, please visit www.avalotx.com.

About AVTX-009 

AVTX-009 is a humanized monoclonal antibody (IgG4) that binds to interleukin-1β (IL-1β) with high affinity and neutralizes its activity. IL-1β is a central driver in the inflammatory process. Overproduction or dysregulation of IL-1β is implicated in many autoimmune and inflammatory diseases. IL-1β is a major, validated target for therapeutic intervention. There is evidence that inhibition of IL-1β could be effective in hidradenitis suppurativa and a variety of inflammatory diseases in dermatology, gastroenterology, and rheumatology.

About the LOTUS Trial

The LOTUS Trial is a randomized, double-blind, placebo-controlled, parallel-group Phase 2 trial with two AVTX-009 dose regimens to evaluate the efficacy and safety of AVTX-009 in approximately 180 adults with moderate to severe hidradenitis suppurativa. Subjects will be randomized (1:1:1) to receive either one of two dosing regimens of AVTX-009 or placebo during a 16-week treatment phase. The primary efficacy endpoint is the proportion of subjects achieving Hidradenitis Suppurativa Clinical Response (HiSCR75) at Week 16. Secondary objectives include but are not limited to: proportion of patients achieving HiSCR50 and HiSCR90 as well as change from baseline in: International HS Severity Score System (IHS4), draining fistula count, abscess and inflammatory nodule (AN) count and patients achieving at least a 30% reduction on a numerical rating scale in Patient's Global Assessment of Skin Pain (PGA Skin Pain). The number of patients with anti-drug antibodies, safety, and tolerability will be assessed. For additional information this trial (NCT06603077), please visit www.clinicaltrials.gov.

About Hidradenitis Suppurativa

Hidradenitis suppurativa (HS) is a chronic inflammatory skin condition characterized by painful nodules, abscesses, and tunnels that form in areas of the body such as the armpits, groin, and buttocks, severely impacting the quality of life of affected individuals.¹ HS is often underdiagnosed or misdiagnosed and therefore estimates of HS vary between 0.2-1.7% of the population worldwide.^2-5 The exact cause of HS is not fully understood but is believed to involve a combination of genetic, hormonal, and environmental factors. While advances in treatment have been made, limited treatment options are available. IL-1β plays a crucial role in the inflammatory cascade underlying HS, contributing to tissue damage, inflammation, and disease progression. Given the involvement of IL-1β in the inflammatory process of HS, we believe therapies that target IL-1β offer a potential treatment option for HS.

Forward-Looking Statements

This press release may include forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond Avalo’s control), which could cause actual results to differ from the forward-looking statements. Such statements may include, without limitation, statements with respect to Avalo’s plans, objectives, projections, expectations and intentions and other statements identified by words such as “projects,” “may,” “might,” “will,” “could,” “would,” “should,” “continue,” “seeks,” “aims,” “predicts,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “potential,” or similar expressions (including their use in the negative), or by discussions of future matters such as: the intended use of proceeds from the warrant exercise; drug development costs, timing of trials and trial results and other risks, including reliance on investigators and enrollment of patients in clinical trials; reliance on key personnel; regulatory risks; integration of AVTX-009 into our operations; general economic and market risks and uncertainties, including those caused by the war in Ukraine and the Middle East; and those other risks detailed in Avalo’s filings with the Securities and Exchange Commission, available at www.sec.gov. Actual results may differ from those set forth in the forward-looking statements. Except as required by applicable law, Avalo expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Avalo’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

References
¹Patel ZS et al. Curr Pain Headache Rep. 2017;21(12):49.
²Egeberg A, et al. JAMA Dermatol 2016;152:429–34
³Phan K, et al Biomed Dermatol 2020; 4: 2-6
⁴Jfri, A, et al. JAMA Dermatol. 2021;157(8):924-31
⁵Nguyen TV, et al. J Eur Acad Dermatol Venereol. 2021;35(1):50-61

For media and investor inquiries

Christopher Sullivan, CFO
Avalo Therapeutics, Inc.
ir@avalotx.com
410-803-6793

or

Meru Advisors
Lauren Glaser
lglaser@meruadvisors.com

FAQ

How much did Avalo Therapeutics (AVTX) raise from warrant exercise in November 2024?

Avalo Therapeutics raised $69.4 million in gross proceeds from the full exercise of warrants issued in March 2024 private placement.

What is the exercise price of AVTX warrants in November 2024?

The warrants were exercised at a price of $5.796933 per underlying share of common stock.

How long will AVTX's cash runway extend after the warrant exercise?

The company's cash runway is expected to extend into at least 2027.

How many shares did AVTX issue from the warrant exercise in November 2024?

Avalo issued 781,259 shares of common stock and 11,186.267 shares of series C non-voting convertible preferred stock.