As AVTX stock price soars, Avalo Therapeutics bankruptcy remains

Avalo Therapeutics (NASDAQ: AVTX) stock price has become unloved and unwanted in the past few months. It has become a penny stock as it is trading at $0.1630, down from its all-time high of $91.65. Its market cap has plunged to just $7 million from its all-time high of over $377 million.

Challenges and bankruptcy risks remain

Avalo Therapeutics is a biotech company that researches on several illnesses in the LIGHT-signaling network. Like other clinical-stage companies, it operates a high-risk and high-reward business. If all goes well, the company can have a multi-billion dollar exit and vice versa.

Avalo Therapeutics has been a high-risk investment over the years. For example, in June, the company suffered a major setback after its monoclonal antibody AVTX-002 failed its FDA trial. The drug had a favourable safety and tolerable profile but did not reach its endpoint.

This was a notable development since AVTX-002 was one of the two drugs the company was working on. Most recently, the AVTX stock price jumped after the company decided to sell three rare disease assets to AUG Therapeutics. UAG paid $150k upfront for the three compounds. It will also pay contingent payments of $15 million if they are approved by the FDA.

There are still elevated risks that Avalo Therapeutics will go bankrupt in the near term. For one, only AVTX-002 and AVTX-008 are in its pipeline. The former has failed to meet its endpoint while the company has sold the latter. Therefore, its future depends on the agreement with UAG. 

Avalo has limited cash. It ended last quarter with just $6.3 million in cash and cash equivalents. Its total operating expenses stood at over $17.8 million in the first six months, leading to a loss of over $18 million. 

AVTX stock price forecast

AVTX share price bottomed at $0.085, its lowest level on record. Recently, it has been behaving like a classic penny stock, with regular pumps and dumps. I suspect that the shares will resume the bearish trend in the longer term. 

If this happens, the next level to watch will be the YTD low of $0.085. I also believe that the company could file for bankruptcy in the new normal of high-interest rates.