Executive Summary / Key Takeaways

• Adverum Biotechnologies is pioneering a one-time intravitreal gene therapy, Ixo-vec, for wet age-related macular degeneration (wet AMD), aiming to provide durable aflibercept expression and significantly reduce the burden of frequent injections.
• Recent Phase 2 LUNA data demonstrated robust maintenance of visual and anatomic outcomes, coupled with high rates of injection reduction (88-92%) and injection freedom (54-69%), supporting the advancement to Phase 3 using the 6E10 dose and topical steroid prophylaxis.
• The company has initiated ARTEMIS, the first of two planned Phase 3 trials for Ixo-vec in wet AMD, with the second trial, AQUARIUS, expected to start in the second half of 2025, signaling significant progress towards potential regulatory approval.
• Despite clinical momentum, Adverum faces substantial financial challenges, including significant operating losses ($47.0 million net loss in Q1 2025) and a going concern doubt, necessitating substantial additional funding beyond the current cash runway into the second half of 2025.
• Key factors for investors to monitor are the progress and results of the Phase 3 trials, the company's ability to secure necessary funding on favorable terms, and the successful resolution of operational challenges like the material weakness in internal controls and the North Carolina sublease dispute.

Setting the Scene: A Gene Therapy Vision for Ocular Disease

Adverum Biotechnologies is driven by an ambitious mission: to establish gene therapy as a transformative, one-time standard of care for highly prevalent ocular diseases. At its core, the company seeks to liberate patients from the burden of frequent injections by delivering gene therapies designed to induce sustained expression of therapeutic proteins directly within the eye. This strategy is particularly aimed at conditions like wet age-related macular degeneration (wet AMD), a leading cause of blindness globally, currently managed with therapies requiring repeated, often monthly or bimonthly, intravitreal injections.

The company's journey began in 2006, evolving its gene therapy platform with a focus on developing novel adeno-associated virus (AAV) vectors. This historical focus on vector engineering is foundational to its current lead program, ixoberogene soroparvovec (Ixo-vec), formerly known as ADVM-022. Ixo-vec utilizes Adverum's proprietary AAV.7m8 capsid, engineered for efficient transduction of retinal cells following a single, in-office intravitreal injection. This technological differentiator is designed to enable the sustained expression of aflibercept, the same therapeutic protein found in a widely used anti-VEGF treatment.

The tangible benefit of this approach, if successful, lies in its potential to provide long-term, durable therapeutic levels of aflibercept. This sustained delivery aims to reduce the treatment burden associated with bolus anti-VEGF injections and potentially mitigate the fluctuations in macular fluid that can contribute to vision loss over time, even in well-treated patients. The company's manufacturing strategy, while currently relying on external vendors, is being developed with scalability in mind, recognizing the need for large-scale production to address the millions of patients affected by prevalent diseases like wet AMD. This approach sets it apart from many gene therapies developed for smaller patient populations.

In the competitive landscape, Adverum operates against formidable players. Established pharmaceutical giants like Regeneron (REGN), Novartis (NVS), and Roche (RHHBY) dominate the current wet AMD market with blockbuster anti-VEGF therapies like Eylea, Beovu, and Lucentis, respectively. These companies possess vast financial resources, established commercial infrastructures, and extensive clinical development experience. Adverum's gene therapy approach represents a disruptive challenge to this established paradigm, offering the potential for a one-time treatment versus their repeated injection models. However, these larger competitors also have pipelines exploring next-generation therapies, including longer-acting formulations and alternative delivery methods. Smaller, more direct gene therapy competitors like Regenxbio (RGNX) are also developing AAV-based treatments for ocular diseases, creating a competitive environment for technology, talent, and clinical trial enrollment. Adverum's strategic positioning hinges on demonstrating the superior long-term durability and patient convenience of Ixo-vec, leveraging its proprietary vector technology as a key moat against both traditional anti-VEGF therapies and competing gene therapy approaches, such as 4D Molecular Therapeutics' (4DMT) 4D-150.

Ixo-vec: From Clinical Data to Pivotal Trials

The investment narrative for Adverum is currently centered squarely on the clinical progress and potential of Ixo-vec in wet AMD. The journey began with the OPTIC Phase 1 trial, which evaluated different doses of Ixo-vec in patients previously requiring frequent anti-VEGF injections. Data from OPTIC demonstrated promising signals of therapeutic efficacy, including maintenance or improvement in visual acuity and central subfield thickness, and significant reductions in the need for supplemental anti-VEGF injections.

Building on these early results, Adverum initiated the Phase 2 LUNA trial, a double-masked, randomized study evaluating two lower doses (2E11 and a new 6E10 dose) and enhanced prophylactic corticosteroid regimens. Top-line 52-week results from LUNA, announced in November 2024, provided crucial data supporting the path forward. Both the 6E10 (n=28) and 2E11 (n=29) doses maintained visual and anatomic outcomes. Critically, they demonstrated favorable reductions in annualized anti-VEGF injection rates of 88% and 92%, respectively, and injection-free rates of 54% and 69%, respectively, in subjects who completed 52 weeks of follow-up. These figures underscore the potential of Ixo-vec to significantly reduce treatment burden compared to the frequent injections required by current standards of care.

LUNA also provided valuable insights into inflammation management. Data suggested that difluprednate eye drops alone are a promising prophylactic regimen for controlling the dose-related anterior inflammation observed with Ixo-vec. A pre-specified patient preference survey in LUNA also indicated a strong preference for Ixo-vec over prior anti-VEGF therapies and acceptability of the topical steroid regimen.

This body of clinical evidence, particularly the LUNA data, has paved the way for the next critical phase: registrational trials. In February 2025, Adverum initiated ARTEMIS, the first of two planned Phase 3 clinical trials for Ixo-vec in wet AMD. The company intends to initiate the second Phase 3 trial, AQUARIUS, in the second half of 2025. These trials will evaluate the 6E10 dose, selected based on the LUNA results, along with a topical difluprednate prophylactic regimen. The initiation of Phase 3 represents a significant de-risking step for the program, moving closer to a potential Biologics License Application (BLA) submission.

Beyond the core clinical data, Ixo-vec has received several positive regulatory designations, including FDA Fast Track (2018) and Regenerative Medicine Advanced Therapy (RMAT) designation (2024), EMA Priority Medicines (PRIME) designation (2022), and MHRA Innovation Passport (ILAP) (2023). These designations highlight the potential of Ixo-vec to address an unmet medical need and offer opportunities for expedited development and review, although they do not guarantee approval.

Financial Realities and Operational Headwinds

Despite the promising clinical and regulatory momentum for Ixo-vec, Adverum faces significant financial and operational challenges that are central to the investment thesis. As a clinical-stage biotechnology company, it has not generated product sales revenue and has incurred substantial operating losses since its inception, resulting in an accumulated deficit of $1.10 billion as of March 31, 2025.

Operating expenses saw a notable increase in the first quarter of 2025 compared to the same period in 2024. Total operating expenses rose from $29.2 million in Q1 2024 to $48.2 million in Q1 2025. This increase was primarily driven by a $13.3 million rise in research and development expenses, largely attributable to the ramp-up of Phase 3 clinical development activities for Ixo-vec. General and administrative expenses also increased by $5.7 million, influenced by higher facilities costs (including a $4.8 million payment to discharge a lien related to the North Carolina Premises sublease), professional services, and consultant expenses. Other income, net decreased due to lower average investment balances.

The company's liquidity position reflects these ongoing expenses. As of March 31, 2025, Adverum held cash, cash equivalents, and short-term investments totaling $83.1 million, down from $125.7 million at December 31, 2024. Cash used in operating activities during the three months ended March 31, 2025, was $42.8 million. Based on its current resources and operating plan, Adverum expects its existing cash to fund operations only into the second half of 2025.

This limited cash runway has led the company to conclude that there is substantial doubt regarding its ability to continue as a going concern for at least twelve months from the filing date of its Q1 2025 10-Q (May 14, 2025). Management explicitly states the need to raise substantial additional funding to finance operations through regulatory approval and beyond. While the company has an at-the-market offering program in place, no sales have been made to date, and there is no assurance that additional capital will be available on favorable terms, or at all, through potential equity or debt financings, collaborations, or other arrangements. Failure to secure this funding could severely impact the company's ability to continue its development programs, including the ongoing and planned Phase 3 trials.

Adding to the operational complexities, Adverum is grappling with issues related to a sublease for its North Carolina Premises. The subtenant defaulted on rent payments in March 2025, leading Adverum to assume responsibility for these payments and discharge a $4.8 million lien filed by a third-party contractor to avoid defaulting on the head lease. As of March 31, 2025, the future rent obligation for this premise stood at $120.4 million. Adverum has initiated a lawsuit against the subtenant and guarantor to recover losses, but the outcome is uncertain, potentially leaving Adverum responsible for significant lease obligations.

Furthermore, the company has identified a material weakness in its internal control over financial reporting related to lease accounting as of December 31, 2024. While remediation efforts are underway, this weakness impacts the effectiveness of disclosure controls and procedures, potentially affecting the accuracy of financial reporting and investor confidence until fully resolved.

Outlook and Critical Considerations

Adverum's outlook is dominated by the critical need to advance Ixo-vec through its pivotal Phase 3 program while simultaneously securing the necessary capital to sustain operations. The initiation of the ARTEMIS trial and the planned initiation of AQUARIUS in the second half of 2025 are key milestones that, if successful, could lead to a BLA submission. However, the path through Phase 3 is long, expensive, and uncertain, with no guarantee of positive results or regulatory approval.

Management expects research and development expenses to increase as the Phase 3 program progresses, further contributing to anticipated net losses and operating cash outflows for the foreseeable future. The ability to manage these costs efficiently while executing high-quality clinical trials will be paramount.

The most critical consideration for investors is the company's ability to address its going concern doubt by raising substantial additional funding. The timing, terms, and success of these fundraising efforts will directly impact the pace and scope of the Ixo-vec development program and the company's ability to pursue its broader strategic objectives, including advancing its early-stage pipeline. Dilution from equity financing is a significant risk for existing shareholders.

Competition in the wet AMD market remains intense. While Ixo-vec offers a potentially differentiated profile with its one-time administration and sustained delivery, it must demonstrate compelling efficacy and safety relative to established therapies and other emerging treatments. The duration of efficacy and the manageability of inflammation with the chosen prophylactic regimen will be key factors influencing market acceptance if approved. Pricing and reimbursement for a one-time gene therapy treatment also present unique challenges compared to traditional chronic therapies.

Operational execution, including successful patient enrollment in Phase 3 trials, reliable manufacturing supply from third parties, and resolution of the North Carolina sublease issue and the material weakness in internal controls, are all necessary components for the company to realize its strategic vision.

Conclusion

Adverum Biotechnologies stands at a pivotal juncture, armed with promising clinical data for its lead gene therapy candidate, Ixo-vec, and having advanced into the crucial Phase 3 stage for wet AMD. The potential to offer a one-time, in-office treatment that significantly reduces injection burden and provides durable therapeutic benefit represents a compelling value proposition for patients and physicians in a large, underserved market. The company's proprietary AAV.7m8 vector technology and focus on scalable manufacturing underpin its strategy to disrupt the existing treatment paradigm.

However, the path forward is fraught with significant financial and operational risks. The substantial operating losses and the explicit going concern doubt highlight the urgent need for significant additional capital. The success of the Phase 3 program, the ability to secure funding on acceptable terms, and the effective resolution of operational and control challenges will be the defining factors determining Adverum's future. For investors, Adverum represents a high-risk, high-reward opportunity, where the potential for transformative clinical success is balanced against the immediate and pressing need to secure financial stability and navigate complex operational hurdles. The coming quarters, particularly regarding fundraising and Phase 3 trial progress, will be critical in shaping the trajectory of this gene therapy pioneer.