Key Highlights

● Avalo plunged to around $7.77 while MoonLake soared to around $12.47 on Thursday.

● AbbVie's lutikizumab showed a smaller benefit over placebo than analysts had expected.

● Both biotechs are valued under $1 billion and target hidradenitis suppurativa.

● Health care climbed to a record high as the S&P 500 fell 93.74 points.

One set of clinical trial results from AbbVie (NYSE:ABBV) produced two very different outcomes for smaller rivals on Thursday.

Shares of Avalo Therapeutics (NASDAQ:AVTX) plunged, trading around $7.77 in the early afternoon on Thursday, October 22, according to market data. Shares of MoonLake Immunotherapeutics (NASDAQ:MLTX) soared, trading around $12.47 at the same point.

Both companies, each valued at under $1 billion according to market data, are developing treatments for hidradenitis suppurativa, a chronic inflammatory skin disease that causes painful lumps and abscesses. AbbVie's data on its own candidate in the same condition reshaped expectations for both.

What AbbVie showed

AbbVie's drug lutikizumab showed a benefit over placebo in hidradenitis suppurativa that was smaller than analysts had expected. One research note described the data as underwhelming.

Analysts said the result raised questions about lutikizumab's approach, which targets a signaling protein called IL-1 beta. That mattered greatly for one smaller rival and much less for the other.

Why Avalo fell

Avalo's lead candidate, abdakibart, is also an antibody that targets IL-1 beta for hidradenitis suppurativa. One analyst said investors feared Avalo's drug could show a similar drop in efficacy.

Not every analyst agreed with that read. Another said AbbVie's modest efficacy raises questions about the IL-1 beta approach, but described Avalo's high-affinity antibody as more robust, according to reports.

Despite that defense, the stock lost a large share of its value in a single session, a reminder of how sensitive small biotech companies are to news about rival drugs.

Why MoonLake rallied

MoonLake read the data the other way. Its candidate is sonelokimab. A weaker showing from a large rival could ease competitive pressure on MoonLake's drug in the same market, according to one research note.

Heavy buying of call options on MoonLake shares was reported during the session. The stock's gains were even larger earlier in the morning, according to market snapshots.

A day of biotech swings

The two moves were part of a volatile day for health care. Biohaven soared after the FDA accepted its resubmitted application for troriluzole in spinocerebellar ataxia. Korro Bio surged on preclinical data in alpha-1 antitrypsin deficiency, with KRRO-111 planned to enter the clinic in the first half of 2027.

Moderna was the worst performer in the S&P 500 after Phase 3 melanoma data appeared before its scheduled presentation, and was reportedly leaked.

Even so, the health care sector climbed to a record high as investors rotated out of technology. The S&P 500 fell 93.74 points to 7,663.43, while about two of every three S&P 500 stocks rose, according to market data. The Russell 2000, home to many small biotechs, crept higher.

Thursday's moves show how much small biotechs depend on what larger competitors reveal. When a big company tests a drug with a similar mechanism, its results often serve as an early signal for rivals that have not yet reported their own late-stage data. That can cut both ways, as Avalo and MoonLake demonstrated within the same session.

Next Signals on IL-1 Beta

Investors will look for any response from Avalo on how its antibody differs from lutikizumab, and for any update from MoonLake on sonelokimab's development timeline. Further detail on AbbVie's data, including any full presentation at a medical meeting, could shift sentiment again for both stocks.