Good afternoon, everyone. I'm Alex Thompson, Biotech Analyst here at CTFO. Really happy to have Garry Neil with us this afternoon, CEO of Avalo Therapeutics. You know, maybe to kick things off, Garry, I'd love it if you could give a quick overview of Avalo, and then we'll get into a Q&A. Right. Great. Thanks, Alex. I really appreciate the invite today. Avalo is based outside of Philly. We're traded on the NASDAQ, AVTX. We recapped the company last year, 2024, around a new asset, AVTX-009, which is a fully human anti-IL-1β monoclonal antibody we have in phase 2b for HS. We're about 35 people at the moment. I'm really proud of the team. They really executed well against this program, and we're really making progress. Great. Maybe, maybe to kick things off, I want to talk about IL-1's role in inflammation more broadly. It's not a, not a new target, but I think you, we've seen obviously a renaissance of focus getting out of some of these rare, rheum-type disorders. Maybe if you could start there, that would be great. Yeah. It's not a new target, which actually has a lot of advantages because there's been a ton of data characterizing it and also a lot of accumulated safety data. Using it as a, or inhibiting IL-1β, I should say, in HS is a bit of a new idea. Yeah. But it's one that makes all kinds of sense. If you look at this mechanistically, IL-1β sits exactly at the bullseye of inflammation in the lesions of patients with HS. By that, I mean that it bridges the gap, if you like, between the innate immune system and the cognate immune system. On the innate side, it really quarterbacks a lot of the initial response to inflammation and also the chronic inflammatory response in the skin. As you know, in HS, the primary lesions start in the hair follicle, which become inflamed, then they become distorted, and then finally liquefied into an abscess. The process by which that happens largely depends on the matrix metalloproteinase system, which is in turn really quarterbacked, if you like, or controlled by IL-1β. It also brings in neutrophils. This is a very neutrophilic type of lesion with a lot of these cells forming the pus inside these abscesses. That is also driven largely by IL-1β. As you get more into the cognate immune system, you have the effect on macrophages, which are releasing TNF, and also on the TH17 cells, which are releasing IL-17 and all its subvariants. IL-1β is right in the middle of all of this, perpetuating the inflammation and driving a lot of the complications associated with it. It is exactly the target that you'd want to be able to neutralize if you want these lesions to heal. Yeah. So maybe, maybe then moving on, we have, you know, now, you know, a decent amount of, you know, empirical data from Lutikizumab in HS. It's IL-1 alpha beta bispecific. Yeah. You know, maybe we can start by talking about, you know, what, how that data look relative to kind of the broader clinical landscape in HS, and then I want to get into, you know, 009 and the differentiation there. Right. When AbbVie released their data at the AAD meeting a year ago, it really created a sensation. It was spectacular data because it was better than anyone had seen in HS for a phase 2 trial. What was more remarkable than that was that these data were generated in 100% of patients with TNF failure, and more than 70% of those patients also had the highest stage of disease, early stage 3. To show results like that, where their 300 milligram dose, both once a week and every two weeks, was showing crude treatment effects as high as 46%, placebo-subtracted, about 25%. That was really very remarkable. We took notice of that because the mechanism was clearly already well defined, as I just gone through, but now you had clinical data to really support this beyond anecdotal data that had existed for a long time with drugs like Canakinumab and Anakinra showing that it could be effective. We jumped right on that, knowing that we had an antibody which had higher affinity, better PK characteristics, and was not disadvantaged by the bispecific. Yeah. Construction that Lutikizumab has. We thought we could do even better. At EADV this year, we saw some more data from Lutikizumab in naive patients. I guess how did that data set kind of fit into the broader understanding of that drug? Right. That really extended the findings quite a bit because people said, "Well, this is really great, but maybe, maybe IL-1β is only going to be an active mechanism. Yeah. In patients who'd already failed TNF. That didn't make sense biologically, but it was a legitimate question to ask. AbbVie laid that to rest by doing a study. It was an uncontrolled study, but it was still reasonable in size, 47 patients in biologic-naive patients. They showed basically exactly the same results. Yep. At 300 milligram dose, in that patient population. It really tied everything together very nicely. Mm-hmm. They, of course, have already started phase 3 with that program. Yep. And then I want to get to, you know, 009 IL-1 beta specific antibody here. What gives you confidence that you can kind of leave IL-1 alpha behind, you know, as you focus on HS here? Right. There are several lines of evidence. In contemporary biology, we know a lot more now about the different roles of IL-1 alpha and IL-1 beta. IL-1 alpha is an alarm and it's expressed on the surface of virtually every epithelial cell in the body. That's the skin, the gut, as well as the lungs. It's an enormous sink of IL-1 alpha. As an alarm, it's there basically to alert the immune system that an epithelial cell has been damaged or a group of epithelial cells, bringing in the cleanup crew. Mm-hmm. To either affect apoptosis or to clean up the debris in the acute inflammation. It does not play a significant role in chronic inflammation, whereas IL-1β is, again, the main driver of chronic inflammatory states. Mm-hmm. You don't really need IL-1α, and IL-1α is not found at increased levels inside the HS lesions themselves. There's more evidence from the clinic, and Johnson & Johnson had in-licensed a drug, actually bought a drug from XBiotech called Bermekimab, which is a pure high-affinity anti-IL-1α. They took that drug into two diseases, one atopic dermatitis, the other HS. Mm-hmm. What they showed in really carefully done clinical trials was that there was no drug effect in either disease by blocking IL-1 alpha alone. I think taken together, all of these findings, the mechanistic biology associated with IL-1 alpha, the fact that it's not found at elevated amounts inside the lesion, and that blocking it didn't have any effect on the drug really lays the whole matter to rest. We don't believe that targeting IL-1 alpha would have any advantage. Now, there is a disadvantage to this because, as I started off by saying, IL-1 alpha is expressed very broadly on normal epithelial cells. If you have a drug which is targeting both IL-1 alpha and beta, you are likely to draw a significant amount of antibody away from the lesion. Yep. Where the IL-1β is to normal, normal cells. Whether or not that has any detrimental effect is a matter of conjecture, but it certainly would remove a lot of effective drug from getting into the lesion. Let's talk more specifically about 009. You talked a little about the properties here, potency for IL-1β, differentiation from other antibodies in this class, and kind of, you know, the breadth of data that's been generated historically for this asset as well. Yeah. This was initially discovered by Lilly. They initially were developing it for type 2 diabetes, where it did show moderate efficacy, with reductions in A1C, but not at a level that they considered to be viable as a commercial product. They let it go. They had done a total of over 200 patients, both with type 2 diabetes and with rheumatoid arthritis. Why rheumatoid arthritis? They were looking for populations that had high levels of inflammation so they could look at the effect on biomarkers. That showed how potent the drug was because they were not able to successfully show a no-effect dose. They went down to doses as low as 0.6 milligrams, which is a hundredth of a milliliter of their 60 milligram formulation. They could not go any lower than that. We're still showing very substantial inhibition of both CRP and IL-6. We knew it was a really potent, good antibody with a great safety profile. They've done a complete tox package on it and it was ready to go into phase 2. You know, thinking about HS as the lead here, you obviously have the Lutikizumab data, but HS is not a, you know, uncompetitive indication. You know, how are you thinking about, you know, IL-1β fitting into the, the future clinical landscape? Yeah. You're right. There is a lot of competition because there's a lot of patient need. Yep. It may be that we used to consider this a rare disease, no longer maybe, may afflict as many as 1% of the U.S. population, which is millions of sufferers. We know that there's a real need for drugs with different mechanisms. Yep. To control it. We've seen very successful launches and uptake of Humira, Cosentyx, and now Bimzelx in the market. I think the Bimzelx launch is the fastest in the history of dermatology and several fold faster than what they'd originally predicted for themselves. It shows the need in the market. Mm-hmm. Despite that, when you survey dermatologists, although they, they'll say that in psoriasis, only 0% say there's a need for any new drugs, atopic dermatitis, about 7%. 70% of them say that we need new mechanisms. Mm-hmm. to treat HS. Among those mechanisms that they cite, IL-1β is always number one on the list. Yeah. Even though it's a competitive market, we feel like based on the mechanism, based on the clinical data, that there's a very high need for IL-1β antibodies. Yep. Yeah. It seems like in the future, you know, we probably want to see orthogonal mechanism in HS, not a bunch of IL-17s. Multiple orthogonal mechanisms make sense, right? Right. Right. Exactly. IL-17 is very important. IL-1β is upstream of both 17 and. Yep. TNF, as I mentioned earlier, as well as all the other mechanisms that we talked about. Mm-hmm. Blocking, for example, blocking TNF, usually there is a compensatory increase in the TH17, IL-17 pathway. You are going to get continued inflammation with that, and probably part of the explanation for why the TNFs seem to have short duration and not long durability of effect. Yeah. The opposite may be true as well. Blocking more centrally in the pathway gives us a chance for better effect size and better durability. Yep. So you just announced full enrollment of your, your phase 2. Right. Lotus study. Can you talk about the trial design, and the timeline here? Right. We did complete enrollment October 28th. We've enrolled something over 250 patients. It's a 16-week study with a 6-week safety follow-up. You could do the math on that. We should easily be able to have our data ready by the mid of next year. The trial itself is three arms: placebo-controlled, two active doses of drug. We're testing both a four-week and every two-week regimen with a loading dose. Sixteen weeks, the primary endpoint is HiSCR75. Mm-hmm. With secondary endpoints of HiSCR50, 90, and 100. We will be announcing the results of those, as well as IHS4, quality of life, and skin pain measurements. The demographics of the trial, we've been asked a lot about that. Yep. Pretty typical of what others have been studying and presenting in their phase 2 and phase 3 programs. We expect with patients on average about eight years of disease. Mm-hmm. About two-thirds of them being early stage 2, about one-third early stage 3. We do expect something over a third of patients to have been biologic exposed. The reason that, and that's higher than some have shown, but the reason for that is that we've allowed in both TNF failures and 17 failures. Yeah. Of that one-third biologic experience, do you, what do you expect the split might be between 17 and TNF? It'll be about evenly split now. Okay. Reflecting what's going on in the market. Okay. You know, before we get to sort of what good looks like here, you know, dose selection is an interesting question, especially in the context of the Lutikizumab data where, you know, in their phase 2, they didn't really see a dose response between the every two-week or two-week dose and I think had multiple doses in phase 3. How confident are you in the doses that you've selected, in the phase 2 as it relates to target coverage of IL-1β? We're very confident. Now, I mean, just to sort of digress for a minute, when you're thinking about dose ranging with monoclonal antibodies, they all monoclonal antibodies follow a very simple three-phase dose response curve. Mm-hmm. In the initial part of the phase, there's really no clinical activity until it reaches a critical concentration. Mm-hmm. Where it's able to inhibit the cytokine. You see it go straight up. Yep. Till it reaches a dose efficacy plateau. After that, adding additional drug for any particular antibody doesn't increase the therapeutic effect, although there can be some noise around that. Yep. It's very difficult to find a dose which is right in the middle of this steep ascending curve. So you're either going to be on the no-effect plateau or the high dose effect plateau. We believe both of our doses are going to be to the right of that curve on the dose effect plateau. There may be some difference between them based on half-life differences, but we'll have to see the data. I am expecting both doses to be effective. Yep. If that is the case, we will probably be required to do an additional exploration of the lower end of the dose response curve. Mm-hmm. By FDA in phase 3. I wanted to make sure that we are going to have a positive trial. We pushed the dose to the right. The other reason for doing that, and I think it's just good drug development. Yep. Is that you're looking at the upper end so that you can get a pretty good gauge on safety and risk-benefit, which is what patients, doctors, and the FDA are gonna be looking for. So then when we get to the top line data around middle of next year, what is a good outcome for you when you think about HiSCR75 delta versus placebo? What are the relevant comparisons? Unlike our competitors, I'm not, I'm not gonna set a specific bar for us. I think any positive trial will be a win for us with the different mechanism that we have and the superior dosing regimen that we have. The fact that we do have a much higher affinity molecule, it's 15 times more potent than Lutikizumab. Mm-hmm. Along with a longer half-life and also with higher bioavailability, I think we have a very good chance of having a superior. Yeah. Efficacy, than they showed. Since Lutikizumab is, at least on the face of their drug effect size, substantially higher than what we've seen with the 17s. Yeah. If we're higher than they are, that would certainly be a new benchmark for HS. So your Lutikizumab is the, the proper bar, you think, somewhere in between the bio-naive and bio-experienced population? I think it's a good bar for. Okay. For us to look at. Because we have a differentiated mechanism, I think. Yeah. What we really need is a positive trial and a good risk-benefit profile. Will you have enough patients in the bio-experienced arm to say anything about efficacy there? We will, right? And we wanted to make sure that we had enough patients that we'd be able to do some comparative subgroup analysis there. Yeah, then obviously, you know, a lot of conversations recently about HS trial conduct, right? Mm-hmm. I guess maybe, maybe starting off, like, what were your takeaways from, you know, what happened in the Sonelokimab phase 3? What are some learnings that you can take away as you think about, you know, your phase 2 study? Yeah. It's hard for me to comment directly on their study, but. Yep. I think what I've learned in 30 years of drug development is that it's very important to have a solid trial design and to be a little bit conservative on estimating the placebo size and the drug effect size, which we certainly did. It's also really important to pick an endpoint where you're going to be able to maximize. Mm-hmm. The difference between drug effect and placebo. The sweet spot there is definitely in the HiSCR75. We've seen, I know, I think the Vela 2 study with a 26% placebo effect really is an outlier. Yes. Because we've gone back and we've looked at the placebo effect across all of the studies that have been done using HiSCR75. And it's still by and large in a fairly tight band between. Yep. 13% and 18%. We initially powered our study to a 20% placebo effect. However, at that point, the number of patients that we planned in the study was 180. We subsequently, when we were thinking about, the reason wasn't really that we were worried about a placebo anomaly, but we were thinking more about what you'd asked about before, which is having enough patients in the biologically. Mm-hmm. Experienced category and some other subgroups for us to be able to do some subgroup analysis. Mm-hmm. We increased the sample size up to 222, which gave us substantially more power to withstand a higher placebo rate. After that, there was a lot of patients trying to come into the study. We had a lot of patients in screening, and we ended up over-enrolling to something over 250 patients. That gives us even more power in the study to do that. Operationally, that's study design and powering. You then think about the conduct of the trial. We selected Parexel, who's been a great partner for us. Mm-hmm. In this trial. They also happened to be the CRO that ran the Bimzelx trials for UCB. They had a lot of very experienced investigators coming off that very successful trial, which actually had fairly low placebo rates. Mm-hmm. They were already fairly well trained. We did add some new sites, as well, of course. In addition to that, we worked with Tina Porter at Harvard to develop our own training program and video. We even trained them on the placebo effect. Yep. So that they would understand what they needed to do and be as objective as possible. We made sure that no site could be activated until they'd gone through that training program. We took a little bit more time setting the trial up. After that, it was very smooth sailing. Yep. We ran the trial through very evenly. I think the other thing that I've learned in operations over the years is that if you apply a lot of acceleration at the end or try to hurry up to try to make a timeline or bring a study. Yep. In a little bit sooner, you run the risk of having some of your investigators cut corners. Yep. Maybe you're going to enroll more patients at certain sites than you would have otherwise planned. We really limited it so that no more than 5% of patients could come from any individual site. Yep. We also did not change the pace at which we were enrolling the trial. We went steady, and the enrollment was good throughout the summer and throughout the entire. Mm-hmm. Enrollment period. We ended up finishing enrollment a little earlier anyway. I think all of that helps you. In the case of MoonLake, was it just bad luck or did they have some operational issues at the end? Were they trying to accelerate things? I do not know. I do not think. Yep. It's possible to discern that from the data. We just have to. Yep. Accept their own explanation when they say there's no smoking gun. I do think that that 26% looks like an anomaly to me. Yep. The sister trial was at 18% or less. Yep. Makes sense. I think that maybe the final question here on HS is really, you know, how are you dealing with antibiotic use in the study as it relates to both rescue therapy and then, you know, imputation of non-responders? Yeah. A couple of things. Some patients are on stable doses for long periods of time of antibiotic. Mm-hmm. Particularly minocycline or tetracycline. Yep. We let some of those patients in. We stratified that and we capped it at 20%. We don't think that's gonna have any impact, with the stratification, it'll distribute over the arms. As to intercurrent infection and the use of antibiotics, I don't think that treating somebody with amoxicillin for a sore throat or. Yeah. Giving them a drug for an infected toenail is gonna have any effect on their HS. Yep. These are likely to be randomly distributed anyway. We're not going to count those patients as failure. You have the opportunity within the ICH guidelines and the ESTAMAN protocol that they mandate the ability to make a choice as to whether or not you impute those as failures or not. It's our intention to not do that at this point. Yep. Great. You know, as we think beyond HS, obviously AbbVie has pushed Lutikizumab into several different indications here. How are you thinking about, you know, indication expansion moving forward? Yeah, as they are. I mean, I think we really wanna focus on diseases which are clearly IL-1β driven. Yep. You have the mechanism just like we did with HS and if possible where there's some clinical proof of concept too. Yep. To reduce the risk. Within those categories, you have GI, especially IBD, rheumatology, and also dermatology. AbbVie, of course, have studied and are studying atopic dermatitis, Crohn's disease, and they had a study recently complete in UC. Mm-hmm. In arthritis and rheumatoid arthritis and psoriatic arthritis, those are all good indications. We think that that is all plausible. In addition to that, we have our own ideas about some indications, including crystal arthropathy, which is clearly due to IL-1β. There is good anecdotal evidence, although not any really good trials showing that inhibiting IL-1β is very effective. Nothing is approved for that disease, and there are probably millions of sufferers in the U.S. Yep. Particularly older patients who do not have good therapeutic choices. When should we expect a kind of strategic decision there? Yeah. Right now we've really been focused like a laser beam on getting this trial. Yep. Done and executed. We've done some preliminary work. I think, as we get into 2026 and closer towards the completion of the trial, we'll have something more to say about that. Yep. And then where are you at currently with your cash runway? We've got $110 million left, which gets us through 2028. But we know we're going to have to raise for phase 3. Yep. We're planning to do that, on the back of the successful phase 3 trial. I don't think we'll have a problem doing it. Great. Garry, thank you so much. Thank you, Alex.