Avalo Therapeutics' (AVTX) lead drug abdakibart is now a cleaner immunology story following positive phase 2 trial data to treat skin disease hidradenitis suppurativa, BofA Securities said in a Friday research report.

The results offer the pathway to relatively superior disease impact if consistency is retained in phase 3 studies starting H1 2027, BofA said.

The brokerage said its investment case is founded on the company's differentiated IL-1Beta antibody for the inflammatory skin disease, a massive undertreated market, and a balance sheet runway through next major data readout in 2029.

Avalo's reliance on a single asset as well as variability in placebo responses in hidradenitis suppurativa studies continue to pose key risks, according to the note.

The brokerage said it initiated coverage of the stock with a buy rating and a price target of $35 per share.

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