Avalo Therapeutics, Inc.

Current report

We plan to finance our operations through a combination of equity offerings, debt financings, collaborations, licensing arrangements and other similar arrangements. We do not have any committed sources of external financing. Our ability to raise additional funds may be adversely impacted by global economic conditions, disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, and diminished liquidity and credit availability, and biotechnology-specific market conditions, including reduced investor appetite for clinical-stage companies. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise capital when needed or on attractive terms, we would be forced to:

Current report

We may never achieve or sustain profitability.

Current report

To become and remain profitable, we must succeed in developing, obtaining regulatory approvals for, and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing clinical trials and preclinical studies and obtaining regulatory approval for one or more of our current and future product candidates, and manufacturing, marketing, and selling any products for which we may obtain regulatory approval. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable may have an adverse effect on the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product candidates, achieve our strategic objectives or even continue our operations.

Current report

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate an adequate effect or acceptable safety profile, gain marketing approval and become commercially viable. We are a clinical-stage biotechnology company with a limited operating history upon which you can evaluate our business and prospects. We commenced operations in 2011, have no products approved for commercial sale and have not generated any revenue from product sales. Since our inception, we have devoted substantially all our resources to building our organization, including an acquisition, raising capital, researching, discovering and developing potential drug candidates, establishing and maintaining our intellectual property portfolio, conducting preclinical studies and clinical trials, organizing and staffing our company, business planning and providing general and administrative support for these operations. We have not yet demonstrated the ability to successfully obtain regulatory approvals, manufacture products at commercial scale, establish reliable third-party manufacturing capabilities, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.

Current report

Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, including but not limited to including clinical trial delays or failures, changes in regulatory requirements, manufacturing challenges, strategic decisions, or competitive developments and we may need to seek additional funds sooner than planned. Our existing cash and cash equivalents and short-term investments may not be sufficient to complete development of any of our current or future product candidates. We will require substantial capital in order to advance any of our current and future product candidates through clinical trials, regulatory approval and commercialization.

Current report

•Competitive dynamics, including the timing of competitor data readouts, approvals, and commercial launches;

Current report

Risks associated with short-term liquid investments.

Current report

Interim, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. Such data are inherently preliminary and should not be relied upon as definitive or predictive of final results.

Current report

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on an initial analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. There can be no assurance that the final topline data from our trials will be consistent with such results or otherwise viewed as positive. We also may make assumptions, estimations, calculations and conclusions as part of our analyses of preliminary or topline data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Current report

Topline data also remain subject to audit and verification procedures including data cleaning, source verification, and protocol-specified analyses, that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete, including data from of our clinical trials, are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their diseases. Early trends observed in interim analyses may not persist through trial completion. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Current report

•Delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites, the terms of which may vary significantly among different CROs and clinical trial sites;

Current report

•Our reliance on third parties for research, preclinical studies, or clinical trials may limit our access to data, delay development, or restrict our ability to independently analyze or control development decisions.

Current report

Additionally, many of our competitors and their collaborators may have significantly greater experience than we do in the following:

Current report

•Identifying and validating targets;

Current report

•Screening compounds against targets;

Current report

•Manufacturing pharmaceutical and biological products at scale;

Current report

•Preclinical and clinical trials of potential pharmaceutical products; and

Current report

•Obtaining FDA and other regulatory clearances.

Current report

•The adequacy of our or our partners’ sales, medical affairs, and market-access capabilities;

Current report

and may not achieve or sustain profitability, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

Current report

•The FDA or other regulatory authorities may require an advisory committee review and the advisory committee may recommend against approval;

Current report

•Our product candidates may fail to qualify for, or maintain, accelerated approval, priority review, breakthrough therapy, fast track or similar regulatory designations;

Current report

If a prolonged government shutdown occurs, or if global health concerns or other emergencies prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, conduct manufacturing or clinical site inspections, or hold advisory committee meetings could be significantly impacted, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations or delay SEC effectiveness of registration statements or other filings.

Current report

There is substantial uncertainty as to how and to what extent the leadership of the FDA and the Trump Administration will continue to seek to modify or revise the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our product candidates and any products for which we obtain approval. Additionally, the administration could issue or promulgate executive orders, regulations, policies or guidance that adversely affect us or create a more challenging or costly environment to pursue the development of new therapeutic candidates or alter regulatory standards in ways that increase development timelines or costs.

Current report

We may fail to achieve our developmentand regulatory milestones on expected timelines, or at all, which could materially and adversely affect our business, financial condition, results of operations and prospects.

Current report

As a clinical-stage biopharmaceutical company, the value of our business depends substantially on our ability to advance our product candidate(s) through preclinical and clinical development and to obtain regulatory approval in a timely manner. Our development programs are subject to significant risks and uncertainties, and we may fail to meet publicly disclosed or internally anticipated milestones for a variety of reasons, many of which are outside of our control.

Current report

We establish development milestones based on a variety of assumptions, including patient enrollment rates, clinical site initiation timelines, manufacturing readiness, data availability, regulatory review periods, and the performance of third-party service providers. These assumptions may prove to be inaccurate. Clinical trials are inherently unpredictable and may be delayed or terminated due to, among other things: slower-than-expected patient enrollment or higher screen failure rates; delays in clinical site activation or staffing shortages at clinical sites; protocol amendments, safety concerns, or unfavorable interim data; variability in trial results or failure to achieve trial endpoints; manufacturing delays, supply chain disruptions, or product quality issues; delays in the release, analysis or validation of clinical data; feedback from regulatory authorities requiring additional data, modifications to trial design, or additional trials; challenges in scaling manufacturing processes or transferring manufacturing to third parties; and reliance on CROs, contract manufacturing organizations (“CMOs”), and other third parties over whom we have limited control. If we are unable to meet anticipated milestones for our clinical development programs, including timing of trial initiation, enrollment, data readouts, regulatory submissions, or regulatory approvals, our business may be materially harmed. Delays in achieving milestones may result in increased development costs, require us to raise additional capital sooner than expected, and divert management’s attention and resources. In addition, failure to meet publicly disclosed milestones or guidance could result in significant volatility in our stock price, loss of investor confidence, increased litigation risk, and diminished ability to access capital on favorable terms, or at all. We may revise, suspend, or terminate one or more of our development programs if interim or final data are negative or inconclusive, if regulatory authorities impose additional requirements, or if we determine that the program is no longer commercially viable. Even if we ultimately complete a clinical trial, delays in data analysis, regulatory review, or manufacturing scale-up may prevent us from achieving regulatory approval or commercialization within expected timeframes. Because our operating expenses are primarily driven by development activities, delays in our clinical programs may materially impact our cash runway and require us to seek additional financing, which may not be available on acceptable terms or at all. Any of these events could materially and adversely affect our business, financial condition, results of operations and prospects.

Current report

Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties that could materially adversely affect our business and profitability.

Current report

We are not permitted to market or promote any of our current or future product candidates before we receive regulatory approval from the applicable regulatory authority in that market, and we may never receive such regulatory approval for any of our current or future product candidates. To obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our current or future product candidates, and we cannot predict success in these jurisdictions. If we obtain approval of our current or future product candidates and ultimately commercialize our current or future product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

Current report

•Differing regulatory requirements in foreign countries, such that obtaining regulatory approvals outside of the U.S. may take longer and be more costly than obtaining approval in the U.S.;

Current report

•Our customers’ ability to obtain reimbursement for our current or future product candidates in foreign markets;

Current report

•Import or export licensing requirements;

Current report

•Longer accounts receivable collection times;

Current report

•Longer lead times for shipping;

Current report

•Language barriers for technical training;

Current report

•Foreign taxes, including withholding of payroll taxes;

Current report

•Potential liability under the Foreign Corrupt Practices Act of 1977 (the “FCPA”) or comparable foreign regulations;

Current report

Foreign sales of our current or future product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs (including tariffs that have been or may in the future be imposed by the United States or other countries or by sanctions regimes that limit cross-border transactions.

Current report

Among other matters, U.S. and foreign anti-corruption, including the FCPA, anti-money laundering, export control, sanctions, and other trade laws and regulations, which we collectively refer to as “Trade Laws,” prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector (including government officials and employees of government-owned or government-controlled entities). Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly. In addition, U.S. export control and sanctions laws (including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control and the U.S. Department of Commerce) can restrict, prohibit or impose licensing requirements on certain transactions and dealings with designated countries, entities and individuals. Violations of trade laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. As we increase our activities outside the U.S., which may include increased interactions with officials and employees of government agencies or state-owned or -affiliated entities, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. We may be held liable for the actions of our third-party intermediaries, including CROs, investigators, consultants, contractors and partners, even if we did not authorize or have actual knowledge of the improper conduct. Any investigations, actions or sanctions could harm our business, results of operations, and financial condition. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations in connection with our clinical development activities.

Current report

In some countries, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In addition, many countries outside the U.S. have limited government support programs that provide for reimbursement of products such as our product candidates, with an emphasis on private payors for access to commercial products. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.

Previous report

If we do not raise additional capital when required or on acceptable terms, we may need to:

Previous report

Our role as a guarantor of certain obligations assigned to Aytu exposes us to risk of loss or illiquidity.

Previous report

In connection with the Aytu Divestiture, as defined in the Notes to our Consolidated Financial Statements, we assigned payment obligations (“TRIS Obligations”) to Aytu under a supply and distribution agreement (the “Karbinal Agreement”) with TRIS Pharma Inc. (“TRIS”), which includes a per-unit royalty make whole payment for each unit sold under an annual minimum sales commitment through 2025. The total future make-whole payments to be made by Aytu are unknown as the amount owed to TRIS is dependent on the number of units sold.

Previous report

As a part of the assignment, we became a guarantor to the TRIS Obligations. If Aytu defaults under the terms of the Karbinal Agreement, we could be liable as a guarantor for unpaid amounts of the TRIS Obligation. Any amount we would be required to pay under the TRIS Obligation would limit the amount of cash available for development of our clinical pipeline and may expose us to significant losses, which would materially and adversely affect our results of operations.

Previous report

•Inability to agree with the FDA or other regulatory authorities on operationally viable endpoints or trial design;

Previous report

•Failure to enter into agreements with third parties to obtain the results of clinical trials;

Previous report

•Delays due to the world-wide shortage of animal testing subjects, including monkeys;

Previous report

•Our reliance on third party clinical trials may cause us to be denied access to clinical results that may be significant to further clinical development.

Previous report

We may make changes as we continue to evolve the manufacturing processes for our biologic product candidates for advanced clinical trials and commercialization, and we cannot be sure that even minor changes in these processes will not cause our product candidates to perform differently and affect the results of our ongoing clinical trials, future clinical trials, or the performance of the product once commercialized. In some circumstances, changes in manufacturing operations, including to our protocols, processes, materials or facilities used, may require us to perform additional preclinical or comparability studies, or to collect additional clinical data from patients prior to undertaking additional clinical studies or filing for regulatory approval for a product candidate. These requirements might lead to delays in our clinical development and commercialization plans for our biologic product candidates and might increase our development costs substantially.

Previous report

Our focus and reliance on AVTX-009 exposes us to risk if AVTX-009 does not perform in clinical trials or receive FDA approval and market acceptance.

Previous report

If we obtain approval to commercialize our product candidates, the markets in which we will be selling are highly competitive and we might be unable to compete successfully against new entrants or established companies.

Previous report

Competition in the pharmaceutical industry is intense and is characterized by costly sales and marketing infrastructures as well as extensive research efforts and rapid technological progress. We are aware of several pharmaceutical companies who commercially market products for the same condition or conditions we are targeting for AVTX-009. There may also be companies who are actively engaged in the development of therapies or products for at least some of these same conditions. Many of these companies have substantially greater research and development capabilities as well as substantially greater marketing, financial and human resources than we do. In addition, many of these companies have significantly greater experience than us in undertaking pre-clinical testing, clinical trials and other regulatory approval procedures. Our competitors may develop technologies and products that are more effective than those we are researching and developing. Such developments could render our product candidates, if approved, less competitive or possibly obsolete. We are also competing with respect to marketing capabilities and manufacturing efficiency, areas in which we have no current capabilities and in which we have no experience as a company, even though our executive officers do have pharmaceutical commercialization and launch experience. Mergers, acquisitions, joint ventures and similar events may also significantly increase the competition we face. In addition, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical and medical technology industries at a rapid pace. These developments may render AVTX-009 or any of our product candidates obsolete or noncompetitive. Compared to us, many of our potential competitors have substantially greater capital resources as well as greater access to strategic partners. As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we can or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors might also develop products that are more effective, more useful and less costly than our products and might also be more successful in manufacturing and marketing their products. In addition, our competitors might be more effective in commercializing their products and as a result, our business and prospects might be materially harmed.

Previous report

If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

Previous report

If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we would be subject to additional risks related to entering into international business relationships, including:

Previous report

•Different regulatory requirements for approval, advertising and promotion of drugs in foreign countries;

Previous report

•Foreign taxes;

Previous report

•Business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, or pandemics.

Previous report

These and other risks associated with any future international operations could materially adversely affect our ability to attain or maintain profitable operations.

Previous report

Even if we commercialize any of our product candidates, these products may become subject to unfavorable third‑party coverage and reimbursement policies, healthcare reform initiatives, or pricing regulations, any of which could negatively impact our business.

Previous report

Our ability to commercialize any product candidates successfully will depend in part on the extent to which coverage and adequate reimbursement for these product candidates will be available from government authorities, private health insurers, health maintenance organizations and other entities. These third‑party payors determine which medications they will cover and establish reimbursement levels, and increasingly attempt to control costs by limiting coverage and the amount of reimbursement for particular medications. Several third‑party payors require drug companies to provide them with predetermined discounts from list prices, and use preferred drug lists to leverage greater discounts in competitive classes. In addition, federal programs impose penalties on drug manufacturers in certain instances, in the form of mandatory additional rebates and/or discounts, which can be substantial, and could impact our ability to raise commercial prices. We cannot be sure that coverage and reimbursement will be available for any product candidate that we commercialize and, if coverage is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or available only to limited levels, we might not successfully commercialize any product candidate for which we obtain marketing approval.

Previous report

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or other regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates for a drug may vary according to the clinical setting in which it is used and may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Prices paid for a drug also vary depending on the class of trade. Prices charged to government customers are subject to price controls and private entities obtain discounts through group purchasing organizations. Net prices for drugs may be further reduced by mandatory discounts or rebates required by government healthcare programs and demanded by private payors, and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable reimbursement rates from both government‑funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize product candidates and our overall financial condition.

Previous report

Moreover, the regulations that govern pricing, coverage and reimbursement for new drug products abroad vary widely from country to country. Current and future U.S. or foreign legislation may significantly change the pricing, coverage and reimbursement in ways that could involve additional costs and cause delays in obtaining approvals. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates even if our product candidates obtain marketing approval.

Previous report

We are party to license and development agreements with various third parties. For example, for our programs we are party to the Lilly License Agreement and the Leap Agreement. We may be required to make significant payments in connection with our license and development agreements including (but not limited to):

Previous report

Risks Related to Legal Compliance

Previous report

The Healthcare sector is heavily regulated in the United States and abroad. New laws, regulations, judicial decisions and/or payment and coverage policies—or new interpretations of such laws, regulations, decisions or policies—could negatively impact our business, operations, and financial condition. The United States federal government, state governments, and foreign governments have shown significant and increasing interest in cost-containment initiatives intended to limit the growth of healthcare costs, including without limitation price controls, restrictions on reimbursement, requirements for substitution of generic products for branded prescription drugs, prior authorization requirements, and increased copays and cost shares for beneficiaries.

Previous report

The Patient Protection and Affordable Care Act increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud, waste, abuse and to provide access to increased health coverage.

Previous report

Since its enactment, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the Affordable Care Act that have resulted in profound changes to the law, and efforts to reform the ACA and healthcare sector are ongoing and are likely to gain momentum during the second Trump administration. Nevertheless, it is likely that any ongoing efforts to reform the financing and delivery of healthcare services in the United States will include the downward pressure on pharmaceutical pricing, especially under the Medicare program. Litigation and legislation related to these reforms are likely to continue, with unpredictable and uncertain results.

Previous report

Some of these changes could have a material adverse effect on our business and operations. Ongoing and future healthcare reform measures may result, for instance, in more rigorous clinical coverage criteria limiting when our product(s) may be covered and in additional downward pressure on the price that we receive for our product and product candidates, if approved, and could harm our future revenues.

Previous report

Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of products approved for marketing in the United States by the FDA will depend, in part, on the extent to which products are covered by third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results.

Previous report

In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, which are separate and apart from the costs required to obtain FDA or other comparable regulatory approvals based on the product’s safety and effectiveness. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.

Previous report

In Europe and other countries outside of the United States, pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed to. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. In some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.

Previous report

As stated above, the prices of prescription drugs have been the subject of considerable debate and regulation in the United States and abroad. Recent years have seen several U.S. congressional inquiries into prescription drug pricing, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare, and reform government program reimbursement methodologies for drugs and related products.

Previous report

Efforts at cost containment in healthcare programs and related reforms are ongoing, with the new Trump administration promising to rollback or rescind many of the reforms and executive orders implemented under the Biden Administration. For example, President Biden signed an Executive Order on July 9, 2021, affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription drug and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of a public health insurance option. Among other things, the Executive Order also directs HHS to provide a report on actions to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. It is unclear the extent to which any of these policies will continue under the new administration.

Previous report

On August 16, 2022 the Inflation Reduction Act of 2022 was passed, which among other things, allows CMS to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D, beginning in 2026 with ten high-cost drugs paid for by Medicare Part D, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. The legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation. The legislation also caps Medicare beneficiaries’ annual out-of-pocket drug expenses at $2,000. The effect of the Inflation Reduction Act of 2022 on our business and the healthcare industry in general is not yet known. Further, the Trump Administration has frozen funding under the IRA, calling into question the law’s continued viability in the new administration.

Previous report

Future legislation and regulation is likely to result in further changes in Medicare and other healthcare funding, perhaps significantly, and to otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Previous report

Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain and maintain profitability of our product and product candidates, if approved.

Previous report

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug formularies and other health care programs. These measures could reduce the ultimate demand for our product candidates, if approved, and/or may constrain the prices that we are able to charge for such products.

Previous report

State and federal healthcare program reform measures are ongoing, any of which could limit the amounts that we receive for our product candidates, result in reduced demand for our product candidates, if approved.

Previous report

Our relationships with commercial and government customers, healthcare providers, third-party payors, and others are subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare related laws, regulations and requirements, which could expose us to criminal and civil liability, exclusion from participation in federal healthcare programs, contractual damages and consequences, reputational harm, administrative burdens, and diminished profits and future earnings.

Previous report

Federal and state health care fraud and abuse laws and regulations apply to the healthcare providers and third-party payors who play a primary role in the recommendation and prescription of drug products. These laws constrain the business or financial arrangements and relationships through which we would market, sell, and distribute our product candidates and will impact, among other things, any of our future sales, marketing and educational programs. There are also laws, regulations, and requirements applicable to the award and performance of federal grants and contracts.

Current report — wording carried from elsewhere

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decrease. Interest rate fluctuations can negatively impact the returns on our fixed-income investments, particularly during periods of rising interest rates.

Current report — wording carried from elsewhere

We cannot be certain whether the clinical trials we or our partners may conduct will demonstrate adequate efficacy and safety data to support regulatory approval that would enable us to market any of our product candidates in any particular country. We also cannot be certain whether the efficacy and safety profile shown in clinical trials of any of our product candidates will be regarded by investors as competitive relative to marketed products and/or product candidates in development by third parties. If later stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates would be adversely impacted, which could cause a sharp decline in our stock price and materially impair our ability to continue our operations. If clinical trials do not produce sufficiently favorable results, our ability to raise capital to fund our operations and complete the development and commercialization of our product candidates could be adversely impacted.

Current report — wording carried from elsewhere

•Changes in government regulations or administrative actions; or

Current report — wording carried from elsewhere

Given our limited resources, we have prioritized certain product candidates over others at our management’s discretion. These prioritization decisions necessarily involve significant judgment based on incomplete information. We have also de-prioritized development of certain product candidates. We continually evaluate our capital allocation for each product candidate, and, in the future, may de-prioritize or cancel the development of certain product candidates. Our decisions concerning the allocation of research, collaboration, management, and financial resources toward particular proprietary molecules in our library, product candidates or therapeutic areas may not accurately reflect their ultimate commercial potential and may divert resources away from better opportunities.

Current report — wording carried from elsewhere

Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may limit our future strategic flexibility and could cause us to miss valuable opportunities. If the development of our product candidates is unsuccessful or, if successful but the products do not achieve an adequate level of market acceptance, we may lack the financial or operational capacity to pursue alternative programs. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Current report — wording carried from elsewhere

For product candidates for which we decide to perform sales, marketing and distribution functions ourselves, we could face a number of additional risks, including:

Current report — wording carried from elsewhere

We rely upon and expect to continue to rely upon third‑party CROs, CDMOs and other partners for execution of our clinical trials and, while we have agreements governing their activities, we have limited influence over their actual performance and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. For any violations of laws and regulations during the conduct of our preclinical studies or clinical trials, we could be subject to untitled and warning letters or enforcement action that may include civil penalties up to and including criminal prosecution and could delay or prevent regulatory approval of our product candidates.

Current report — wording carried from elsewhere

Third party pre‑issuance submission of prior art to the USPTO, or opposition, derivation, reexamination, inter partes review or interference proceedings, or other pre‑issuance or post‑grant proceedings in the United States or other jurisdictions provoked by third parties or brought by us or our licensors or collaborators may be necessary to determine the priority of inventions with respect to our or our licensors’ or collaborators’ patents or patent applications. These proceedings can also be used to determine other critical issues, such as the validity of patents based on prior art that was not previously raised or considered during prosecution. An unfavorable outcome in a USPTO proceeding or other similar proceeding in foreign countries could require us or our licensors or collaborators to cease using the related technology and could, therefore, negatively impact our ability to commercialize our product candidates, or to attempt to license rights to it from the prevailing party.

Current report — wording carried from elsewhere

Entities affiliated with Dr. Garry Neil, our Chief Executive Officer, are parties to a Royalty Agreement with us relating to AVTX-006, a program we are no longer developing. The Royalty Agreement was entered into in July 2019 and we assumed the agreement in the

Current report — wording carried from elsewhere

We collect and process sensitive information, including confidential business information and information associated with clinical trials including in some limited cases, personal information and sensitive health-related data.

Current report — wording carried from elsewhere

State legislatures continue to pass comprehensive and industry-specific privacy and data security laws that may present compliance challenges, including privacy laws regulating health-related information. The existence of a patchwork of privacy laws in different states make our compliance obligations add complexity, variation in requirements, restrictions and potential legal risk that requires additional investment of resources in compliance programs. Further, these privacy laws may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance. In addition to the risk associated with enforcement, compliance with and implementation of these evolving laws, rules, and regulations regarding the privacy, security and protection of personal information could result in higher compliance and technology costs for us, present challenges for our business model and could require significant changes to our policies, procedures, and data-processing practices.

Previous report — wording carried elsewhere

Drug development is unpredictable and we could encounter toxicity, safety, adverse reactions or other concerns with AVTX-009 as we continue its development. There can be no assurances that we will successfully develop AVTX-009.

Previous report — wording carried elsewhere

Third parties may infringe on our or our licensors’ or collaborators’ patents or misappropriate or otherwise violate our or our licensors’ or collaborators’ intellectual property rights. In the future, we or our licensors or collaborators may initiate legal proceedings to enforce or defend our or our licensors’ or collaborators’ intellectual property rights, to protect our or our licensors’ or collaborators’

Previous report — wording carried elsewhere

In addition, if the trading volumes of our common stock are low, persons buying or selling in relatively small quantities may easily influence the price of our common stock. This low volume of trades could also cause the price of our common stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may experience losses on their investment in our common stock. A decline in the market price of our common stock also could adversely affect our ability to issue additional common stock or other securities and our ability to obtain additional financing in the future.