Guggenheim backs Avalyn Pharma with buy rating on inhaled fibrosis pipeline

Bank sets $80 price target on biotech trading at $28.84, citing potential in underserved pulmonary market

Guggenheim has initiated coverage of Avalyn Pharma (AVLN) with a buy rating and a price target of $80, implying roughly 177 per cent upside from its current level of $28.84 and valuing the company at $1.21bn on a market capitalisation basis.

The Wall Street bank said it held high conviction in the commercial prospects of Avalyn's inhaled antifibrotic treatments targeting idiopathic pulmonary fibrosis and progressive pulmonary fibrosis — conditions that together affect an estimated 300,000 patients in the United States. Guggenheim said its view was informed by a survey of 50 pulmonologists and a series of expert interviews, both of which it said underscored significant unmet need in the disease areas.

The bank's investment case rests principally on AP01, an inhaled formulation of pirfenidone currently being evaluated in a Phase 2 study known as MIST for progressive pulmonary fibrosis, with data anticipated in the second half of 2027. The candidate builds on encouraging Phase 1b results and open-label extension data in pulmonary fibrosis patients.

Guggenheim also flagged AP02, an inhaled nintedanib with Phase 2 readouts likewise expected in the latter part of 2027, and AP03, a combination therapy for which Phase 1 data are due around the same time. The firm argued that all three candidates have the potential to become preferred treatments in a US pulmonary fibrosis market it estimates could support peak annual sales in excess of $30bn.

On a risk-adjusted basis, Guggenheim projects global sales of $3.5bn by 2040 in its base case, with AP01 contributing roughly $2bn and AP02 the remaining $1.5bn. Around 72 per cent of those revenues are expected to derive from the US market.

Avalyn remains loss-making, having recorded a loss per share of $4.56 over the past twelve months. The company raised $345mn in gross proceeds from its Nasdaq initial public offering earlier this year, selling shares at $18 apiece — an upsized deal that included an overallotment tranche. Despite its pre-revenue status, the company's liquid assets are said to exceed short-term obligations by a factor of more than ten, providing a substantial cash runway as its clinical programmes advance.