Business |
6 Months Ended |
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Jun. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business | Business Avalo Therapeutics, Inc. (the “Company” or “Avalo” or “we”) is a clinical stage biotechnology company focused on the treatment of immune dysregulation by developing therapies that target the LIGHT network.
LIGHT (Lymphotoxin-like, exhibits Inducible expression, and competes with HSV Glycoprotein D for Herpesvirus Entry Mediator (“HVEM”), a receptor expressed by T lymphocytes; also referred to as TNFSF14) is an immunoregulatory cytokine. LIGHT and its signaling receptors, HVEM (TNFRSF14), and lymphotoxin β receptor (TNFRSF3), form an immune regulatory network with two co-receptors of herpesvirus entry mediator, checkpoint inhibitor B and T Lymphocyte Attenuator (“BTLA”), and CD160 (collectively, the “LIGHT-signaling network” or the “LIGHT network”). Accumulating evidence points to the dysregulation of the LIGHT network as a disease-driving mechanism in autoimmune and inflammatory reactions in barrier organs. Therefore, we believe reducing LIGHT levels can moderate immune dysregulation in many acute and chronic inflammatory disorders.
Avalo was incorporated in Delaware and commenced operation in 2011 and completed its initial public offering in October 2015.
Liquidity
For the six months ended June 30, 2023, Avalo generated a net loss of $18.1 million and negative cash flows from operations of $21.1 million. As of June 30, 2023, Avalo had $6.3 million in cash and cash equivalents. The future principal payments inclusive of the final payment fee under the Company’s Loan Agreement (as defined in Note 9) were $15.2 million as of June 30, 2023, which gives effect of the $6.0 million partial prepayment in June of 2023, as collectively agreed upon with the Lenders (as defined in Note 9). On July 20, 2023, the Company entered into a forbearance agreement (the “Forbearance Agreement”) with the Lenders, pursuant to which the Company and the Lenders agreed that an event of default had occurred due to a material adverse change in the Company’s business (the “Existing Default”) and the Lenders agreed to forbear from enforcing its full remedies related to the Existing Default, including acceleration of the outstanding principal payments and final payment fees of $15.2 million, plus interest, fees, and other amounts accrued, until the earliest of (i) August 15, 2023, (ii) the occurrence of any default or event of default (other than the Existing Default) under the Loan Agreement, or (iii) the occurrence of a breach by the Company of any provision in the Forbearance Agreement. In exchange for the Lenders agreeing to enter the Forbearance Agreement, the Company agreed to maintain cash on deposit in deposit accounts subject to an Account Control Agreement (as defined in the Loan Agreement) in an amount not less than the sum of (a) $3.0 million plus (b) one-hundred percent (100%) of the aggregate cash proceeds received by the Company as a result of any future sale of the Company’s equity securities while the Forbearance Agreement is in effect. The Company closely monitors its cash and cash equivalents and intends to raise money through all means available to raise capital to meet its projected operating requirements, including but not limited to sale of equity securities under its “at-the-market” (or “ATM”) program or otherwise, out-licensing transactions, strategic alliances/collaborations, sale of its core and non-core programs, and/or mergers and acquisitions. If the Company is able to negotiate extensions to the Forbearance Agreement and absent future cash raises or modifications to the originally planned principal and interest payments, the Company has approximately 60 days of cash on hand as of the filing date of this Quarterly Report on Form 10-Q.
The Company’s future success and ability to fund its operations within one year following the date on which this Quarterly Report on Form 10-Q is issued depend on its ability to obtain additional capital. There can be no assurance that any financing or business development initiatives can be realized by the Company, or if realized, what the terms may be, or that any amount that the Company is able to raise will be adequate. Further, if the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company might have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates. Subject to limited exceptions, the Loan Agreement prohibits the Company from incurring certain additional indebtedness, making certain asset dispositions, and entering into certain mergers, acquisitions or other business combination transactions without the prior consent of the Lenders. If the Company requires but is unable to obtain additional funding, the Company may be forced to make further reductions in spending, delay, suspend, reduce or eliminate some or all of its planned research and development programs, or liquidate assets where possible. Due to the uncertainty regarding future financing and other potential options to raise funds, management has concluded that substantial doubt exists with respect to the Company’s ability to continue as a going concern within one year after the date that the financial statements in this Quarterly Report on Form 10-Q were issued. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional capital as described above. The unaudited financial statements as of June 30, 2023 do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on the financial statements and less than the amount of its outstanding debt, leaving no proceeds for stockholders.
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