Avalo Therapeutics, Inc. (AVTX) stock intrinsic value fair value estimate & owner earnings analysis

Avalo Therapeutics is a clinical-stage biotechnology company with no product on the market. Its lead and essentially only significant asset is abdakibart (AVTX-009), an antibody that blocks interleukin-1, being tested in a Phase 2 trial called LOTUS in about 250 adults with moderate to severe hidradenitis suppurativa. Enrolment finished in October 2025 and the company said it expected topline results in the second quarter of 2026. The most recent annual report we could read (filed March 2026) predates that readout, and we could not verify the result from the filings available to us. What the business earns. Avalo has never produced positive owner earnings in the ten years of filings. Its only revenue in recent years came from Millipred, a steroid product whose supply agreement ended on September 30, 2023; the $59 thousand of revenue in 2025 was an adjustment to expected product returns, not real sales. On our basis (operating cash flow, less working-capital swings, less stock compensation, less capital spending) owner earnings per share were about minus $720 in 2022 (a very small share count after later reverse splits), minus $80 in 2023, minus $7.54 in 2024 and minus $5.53 in 2025. In 2025 the company used $51.5 million of operating cash and paid staff and others $13.6 million in stock-based compensation, which we treat as a real cost. The company said it expected cash use to stay roughly level with 2025 until the LOTUS readout. It ended 2025 with $98.3 million of cash and short-term investments, and management said this funds operations for at least twelve months from the filing date. How we valued it. We only credit earnings that are contracted, already happening, or the repeat output of a long proven process. Avalo has none of these: there is no product revenue, no partnership income, and no track record of bringing a drug to market. A drug candidate that has not yet shown it works, been approved and been sold is not growth we can count, so all three cases are worth $0 per share. The bear case is a failed or unusable LOTUS result; the base case is that no earnings can be built from named, evidenced sources; the bull case is that the trial succeeds but, since approval, a Phase 3 trial, a partner and sales have not yet happened, nothing in it can be counted today either. Our method does not add the cash balance to the value, and it does not subtract debt either. It values only the earnings stream, and the stream today is negative. The cash is what funds the losses, and the investment of that cash into the trial is the bet. Risks we weighed. The US composition-of-matter patent on abdakibart expired in February 2026, so any protection would have to come from other patents, regulatory exclusivity and the licence terms. The drug is licensed from Eli Lilly and Leap Therapeutics through the acquisition of AlmataBio, and the filing discloses a $15.0 million payment due, in cash or shares at the former holders' election, when the first patient is dosed in a Phase 3 trial. The company expects to fund itself through selling shares, partnerships, or asset sales, which would dilute current holders. What would make this wrong. If LOTUS results were strong and a partner paid meaningful upfront cash, or the drug reached approval and sales, the shares could be worth well more than zero; that upside is speculative rather than evidenced. We do not have a contracted or demonstrated basis to put a number on it, so this analysis assigns no value to it.