Avalo Therapeutics will divest three compounds in its rare disease AVTX-800 series to AUG Therapeutics, marking a further development in the company’s tumultuous past months that included a negative trial readout and a default.

The divestment is expected to be completed in Q4 2023, according to a 12 September press release.

AUG will make an upfront payment of $150,000 for each of the three compounds bought from Avalo. This includes AVTX-801 (D-galactose), AVTX-802 (D-mannose) and AVTX-803 (L-fucose).

In addition to the upfront payment, AUG will make a contingent payment of $15m if the first US Food and Drug Administration (FDA) approval is for an indication that is not a rare paediatric disease. AUG will also assume up to $150,000 of certain liabilities incurred before the agreement, based on the 12 September press release.

Avalo’s AVTX-801 is a therapeutic dose of D-galactose that was developed for the treatment of the rare inherited disease phosphoglucomutase 1 (PGM1) deficiency. AVTX-803 is a therapeutic dose of L-fucose for use in leukocyte adhesion deficiency type II (LAD II), which is a different type of carbohydrate-deficient glycoprotein syndrome, based on the company’s website.

Avalo first shared its plans for a potential divestment in its Q2 financial results update, shared last month. The US-based company stated that it was considering out-licensing or selling its non-core and even possibly core assets to reduce future expenses. The company already entered a non-binding letter of intent for the sale of the AVTX-800 series in July 2023.

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In the same month, Avalo entered a forbearance agreement with its debt lenders that followed a default. The default happened due to a material adverse change in the company’s business, per the 3 August company update.

In June, Avalo announced that the Phase II PEAK study (NCT05288504) of its compound AVTX-002 (quisovalimab) in non-eosinophilic asthma patients missed its primary endpoint. While the trial did not meet the primary endpoint threshold for a reduction in asthma-related events, positive trends were observed in a patient sub-population with heightened baseline serum LIGHT levels, per a 26 June announcement.  The company announced plans to evaluate these results to shape the asset’s further development, based on the 3 August update.

Beyond AVTX-002, Avalo is focused on developing its preclinical BTLA agonist fusion protein AVTX-008 in autoimmune diseases.