Alector Corporate Overview Forward-Looking Statement This presentation contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this presentation are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative o ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Alector reported a net loss for the quarter, with total assets decreasing, while its financial position is supported by significant deferred revenue from collaborations [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, the company's cash and equivalents decreased to $669.3 million, with total assets at $748.3 million, and significant long-term deferred revenue of $431.1 million Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $195,555 | $154,323 | | Marketable securities | $473,774 | $558,528 | | Total current assets | $686,002 | $726,435 | | **Total assets** | **$748,342** | **$787,648** | | **Liabilities & Stockholders' Equity** | | | | Deferred revenue, current portion | $61,773 | $48,231 | | Deferred revenue, long-term portion | $431,079 | $443,370 | | Total liabilities | $565,327 | $573,206 | | Total stockholders' equity | $183,015 | $214,442 | | **Total liabilities and stockholders' equity** | **$748,342** | **$787,648** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Collaboration revenue decreased to $16.5 million for Q1 2023, resulting in a slight increase in net loss to $45.9 million, despite a modest decrease in operating expenses Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $16,549 | $24,474 | | Research and development | $51,887 | $53,043 | | General and administrative | $14,777 | $15,554 | | Total operating expenses | $66,664 | $68,597 | | Loss from operations | ($50,115) | ($44,123) | | Net loss | ($45,857) | ($44,617) | | Net loss per share, basic and diluted | ($0.55) | ($0.54) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 saw net cash used in operating activities of $48.5 million, a shift from the prior year, while investing activities provided $88.7 million and financing activities provided $1.1 million Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($48,548) | $135,091 | | Net cash provided by (used in) investing activities | $88,701 | ($12,106) | | Net cash provided by financing activities | $1,079 | $2,483 | | **Net increase in cash, cash equivalents, and restricted cash** | **$41,232** | **$125,468** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail collaboration agreements with GSK and AbbVie, generating $11.4 million and $5.2 million respectively, alongside a recent 11% workforce reduction with a $2.1 million charge - The company's collaboration with GSK for latozinemab and AL101 resulted in **$11.4 million** in revenue for Q1 2023. The related deferred revenue was **$433.6 million** as of March 31, 2023[41](index=41&type=chunk) - The collaboration with AbbVie for AL002 generated **$5.2 million** in revenue for Q1 2023. In February 2023, an amendment to the agreement resulted in a **$17.8 million** milestone payment to Alector[43](index=43&type=chunk) - On March 28, 2023, the company initiated a plan to reduce its workforce by approximately **11%** (30 employees) to align resources with strategic priorities. This is expected to result in a one-time charge of approximately **$2.1 million**[57](index=57&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the immuno-neurology pipeline, including latozinemab and AL002/AL101, noting decreased Q1 2023 collaboration revenue and R&D expenses, with existing cash projected to fund operations through 2025 [Overview](index=17&type=section&id=Overview) Alector, a clinical-stage biopharmaceutical company, focuses on immuno-neurology with lead candidates latozinemab, AL002, and AL101, advancing programs through collaborations and a recent 11% workforce reduction - The company is focused on advancing its late-stage immuno-neurology programs: latozinemab for FTD and AL002/AL101 for Alzheimer's Disease[60](index=60&type=chunk) - The pivotal Phase 3 INFRONT-3 trial for latozinemab is on track, with a data readout targeted for early **2025** and a potential BLA filing in late **2025**[60](index=60&type=chunk) - Enrollment for the INVOKE-2 Phase 2 trial of AL002 is expected to complete in **Q3 2023**, with top-line data anticipated by **Q4 2024**[62](index=62&type=chunk) - In March 2023, the company reduced its workforce by approximately **11%** (30 employees) to prioritize its late-stage programs[62](index=62&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q1 2023 saw collaboration revenue decrease by $7.9 million to $16.5 million, while R&D expenses decreased by $1.2 million to $51.9 million, and G&A expenses also declined Results of Operations Comparison (in thousands) | Account | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $16,549 | $24,474 | ($7,925) | | Research and development | $51,887 | $53,043 | ($1,156) | | General and administrative | $14,777 | $15,554 | ($777) | | Loss from operations | ($50,115) | ($44,123) | ($5,992) | | Net loss | ($45,857) | ($44,617) | ($1,240) | R&D Expense Breakdown (in thousands) | Program | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Latozinemab | $4,311 | $9,653 | ($5,342) | | AL101 | $1,772 | $650 | $1,122 | | AL002 | $11,064 | $6,822 | $4,242 | | Other programs | $6,974 | $11,194 | ($4,220) | | Indirect R&D | $27,766 | $24,724 | $3,042 | | **Total R&D** | **$51,887** | **$53,043** | **($1,156)** | [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, Alector held $669.3 million in cash and equivalents, which management believes is sufficient to fund operations through 2025, with future needs dependent on clinical and regulatory progress - The company had **$669.3 million** in cash, cash equivalents, and marketable securities as of March 31, 2023[80](index=80&type=chunk) - Management believes existing cash is sufficient to fund operations and capital requirements through **2025**[81](index=81&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and foreign currency sensitivities, with a 100 basis point interest rate change impacting investments by $2.4 million, while foreign currency risk is not material - The company is exposed to interest rate risk. An immediate **100 basis point** increase or decrease in interest rates would cause a change in the fair value of its marketable securities of approximately **$2.4 million** as of March 31, 2023[93](index=93&type=chunk) - Foreign currency risk is not considered material as expenses are generally denominated in U.S. dollars[94](index=94&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[96](index=96&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[97](index=97&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - Alector is not currently a party to any litigation or legal proceedings that are likely to have a material adverse effect on the business[99](index=99&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including limited operating history, ongoing net losses, the need for substantial additional financing, dependence on key clinical candidates and collaborators, and challenges inherent in drug development and regulatory processes - The company has a limited operating history, no approved products, and has incurred significant net losses since inception, which are expected to continue[101](index=101&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - Successful development is heavily dependent on key product candidates (latozinemab, AL002, AL101) and collaborations with GSK and AbbVie[101](index=101&type=chunk)[117](index=117&type=chunk) - The company will need substantial additional financing to complete development and commercialization, and failure to obtain it could force delays or termination of programs[101](index=101&type=chunk)[111](index=111&type=chunk) - Clinical trials may be delayed or fail due to issues with enrollment, adverse events (such as ARIA observed in the INVOKE-2 trial), or failure to demonstrate efficacy[103](index=103&type=chunk)[132](index=132&type=chunk) - The company relies on third-party CDMOs for manufacturing, which is complex and subject to rigorous regulatory standards and potential supply chain disruptions[142](index=142&type=chunk)[195](index=195&type=chunk) [Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an amendment to the AbbVie co-development agreement and certifications by the Principal Executive and Financial Officers - Key exhibits filed include Amendment Number One to the Co-Development and Option Agreement with AbbVie Biotechnology Ltd., effective February 13, 2023[277](index=277&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906 are included[277](index=277&type=chunk)

Alector Corporate Overview Forward-Looking Statement This presentation contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this presentation are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative o ...

PART I [Business](index=3&type=section&id=Item%201.%20Business) Alector is a clinical-stage biopharmaceutical company treating neurodegenerative diseases via immuno-neurology and strategic collaborations - Alector is a clinical-stage biopharmaceutical company pioneering immuno-neurology, a therapeutic approach targeting immune dysfunction as a root cause of neurodegenerative disorders[15](index=15&type=chunk) - The company has **three product candidates in clinical development**: latozinemab (AL001), AL002, and AL101, with a cash runway extended through 2025[15](index=15&type=chunk) - Alector has **significant strategic collaborations** with GlaxoSmithKline (GSK) for its progranulin programs and with AbbVie for its TREM2 program[15](index=15&type=chunk) [Pipeline Programs](index=11&type=section&id=Our%20Pipeline%20Programs) The company's clinical pipeline is led by its Progranulin (PGRN) and TREM2 programs for neurodegenerative and oncology indications Clinical Pipeline Status | Product Candidate | Target | Indication | Development Stage | | :--- | :--- | :--- | :--- | | **Latozinemab (AL001)** | Progranulin (PGRN) | FTD-GRN | Pivotal Phase 3 (INFRONT-3) | | **AL101** | Progranulin (PGRN) | Alzheimer's Disease (AD) | Phase 2 planned for 2023 | | **AL002** | TREM2 | Early Alzheimer's Disease | Phase 2 (INVOKE-2) | | **AL044** | MS4A | Alzheimer's Disease | Phase 1 trial closed; backup program active | | **AL009** | Multi-Siglec | Oncology | Preclinical | | **AL008** | SIRP-alpha | Oncology | Preclinical (IND submitted in China) | - In the ongoing INVOKE-2 Phase 2 trial for AL002 in Alzheimer's, **Amyloid Related Imaging Abnormalities (ARIA) were observed**, leading to the voluntary discontinuation of dosing for patients with the APOE e4/e4 genotype[18](index=18&type=chunk) - The Phase 1 trial for AL044 was closed based on initial data, and Alector is now **actively pursuing a backup MS4A program**[18](index=18&type=chunk)[90](index=90&type=chunk) [Strategic Alliances](index=26&type=section&id=Strategic%20Alliances) Alector advances its pipeline through key collaborations with GSK and AbbVie, involving significant upfront payments and milestone potential - Entered a collaboration with GSK in July 2021 for latozinemab and AL101, receiving **$700 million in upfront payments** and eligibility for up to **$1.5 billion in milestones**[98](index=98&type=chunk)[99](index=99&type=chunk) - Partnered with AbbVie in October 2017 to co-develop TREM2 programs, receiving **$225 million in upfront payments**, with AbbVie holding an exclusive option for global development[102](index=102&type=chunk) - Utilizes Adimab's antibody discovery and optimization platform for several product candidates, including latozinemab, AL101, and AL002[105](index=105&type=chunk) [Manufacturing, Commercialization, and IP](index=30&type=section&id=Manufacturing%2C%20Commercialization%2C%20and%20IP) The company relies on third-party CDMOs for manufacturing, lacks commercial infrastructure, and protects its assets with a multi-layered patent strategy - The company **lacks internal manufacturing infrastructure** and relies on third-party cGMP manufacturers (CDMOs) for production[112](index=112&type=chunk)[113](index=113&type=chunk) - Alector has **no existing sales, marketing, or distribution capabilities** and intends to leverage partnerships if its products are approved[115](index=115&type=chunk) Key Program Patent Expiration Outlook | Program | Number of Patent Families | Expected Expiration Range (excluding extensions) | | :--- | :--- | :--- | | **PGRN (latozinemab, AL101)** | 6 | 2036 - 2042 | | **TREM2 (AL002)** | 7 | 2035 - 2043 | | **MS4A** | 2 | 2039 - 2040 | [Government Regulation](index=32&type=section&id=Government%20Regulation) Operations are subject to extensive FDA and international regulation, with key programs holding Orphan Drug and Fast Track designations - Product candidates are regulated by the FDA and require a **Biologics License Application (BLA)** before marketing[125](index=125&type=chunk)[127](index=127&type=chunk) - Latozinemab and AL101 have received **Orphan Drug and Fast Track designations** for FTD to expedite development and review[40](index=40&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) - Sales will depend on third-party payor reimbursement and face pressure from healthcare reforms like the **Inflation Reduction Act of 2022**[160](index=160&type=chunk)[251](index=251&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, clinical, and operational risks due to its clinical-stage status and reliance on key collaborations - **Financial Risks**: The company has a history of **significant net losses ($133.3M in 2022)** and will require substantial additional financing[176](index=176&type=chunk)[177](index=177&type=chunk)[183](index=183&type=chunk) - **Clinical & Development Risks**: Drug development is highly uncertain, and candidates could show adverse side effects, such as the **ARIA observed in the AL002 trial**[172](index=172&type=chunk)[197](index=197&type=chunk)[206](index=206&type=chunk) - **Operational & Strategic Risks**: The company is **heavily dependent on its collaborations** with GSK and AbbVie and on third parties for manufacturing[215](index=215&type=chunk)[268](index=268&type=chunk)[276](index=276&type=chunk) [Properties](index=97&type=section&id=Item%202.%20Properties) Alector leases approximately 105,000 square feet for its headquarters in South San Francisco, with the lease expiring in May 2029 - The company's headquarters are located in South San Francisco, California, where it leases approximately **105,000 square feet** of office and lab space[362](index=362&type=chunk) - An additional **18,700 square feet** of office and lab space is leased in Newark, California[362](index=362&type=chunk) [Legal Proceedings](index=97&type=section&id=Item%203.%20Legal%20Proceedings) Alector is not a party to any litigation or legal proceedings expected to have a material adverse effect on its business - The company is **not currently a party to any material legal proceedings** that management believes would have a material adverse effect on the business[363](index=363&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=98&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Alector's common stock trades on Nasdaq under "ALEC," and the company has never paid cash dividends and does not plan to - The company's common stock is traded on the Nasdaq Global Select Market under the symbol **"ALEC"**[365](index=365&type=chunk) - Alector has **not paid any cash dividends** since its inception and does not plan to pay any in the foreseeable future[367](index=367&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=99&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported a net loss of $133.3 million in 2022, with cash reserves of $712.9 million expected to fund operations through 2025 [Results of Operations](index=104&type=section&id=Results%20of%20Operations) Net loss widened to $133.3 million in 2022 from $36.3 million in 2021, driven by lower revenue and higher R&D expenses Comparison of Financial Results (2022 vs. 2021) | Financial Metric | 2022 (in millions) | 2021 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $133.6 | $207.1 | $(73.5) | | Research & Development | $210.4 | $189.4 | $21.0 | | General & Administrative | $61.0 | $55.0 | $6.0 | | **Net Loss** | **$(133.3)** | **$(36.3)** | **$(97.0)** | - The decrease in 2022 collaboration revenue was primarily due to the recognition of **$173.4 million in license revenue from the GSK Agreement in 2021**[381](index=381&type=chunk) R&D Expenses by Program (2022 vs. 2021) | Program | 2022 (in millions) | 2021 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Latozinemab | $22.1 | $31.7 | $(9.6) | | AL101 | $7.8 | $6.7 | $1.1 | | AL002 | $34.8 | $25.9 | $8.9 | | AL044 | $7.5 | $9.9 | $(2.4) | | Other early stage | $37.4 | $37.7 | $(0.3) | | Personnel & Unallocated | $100.8 | $77.4 | $23.4 | [Liquidity and Capital Resources](index=105&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended 2022 with $712.9 million in cash, which is expected to be sufficient to fund operations and capital needs through 2025 - The company held **$712.9 million in cash, cash equivalents, and marketable securities** as of December 31, 2022[389](index=389&type=chunk) - Based on the current operating plan, existing cash is expected to **fund operations and capital requirements through 2025**[390](index=390&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Operating Activities** | $(20,329) | $298,551 | $(166,734) | | **Investing Activities** | $(159,014) | $(49,663) | $(105,051) | | **Financing Activities** | $4,514 | $30,295 | $232,113 | [Quantitative and Qualitative Disclosures About Market Risk](index=107&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its investment portfolio, while foreign currency risk is minimal - The company's main market risk is interest rate sensitivity on its **$712.9 million portfolio** of cash, cash equivalents, and marketable securities[409](index=409&type=chunk) - A hypothetical **100 basis point (1%) change in interest rates** would impact the fair value of the investment portfolio by approximately **$2.6 million**[409](index=409&type=chunk) - **Foreign currency risk is minimal** as most expenses are denominated in U.S. dollars[410](index=410&type=chunk) [Financial Statements and Supplementary Data](index=108&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements for 2022 show total assets of $787.6 million, a net loss of $133.3 million, and stockholders' equity of $214.4 million Key Balance Sheet Data (as of Dec 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | Cash, cash equivalents, and marketable securities | $712,851 | | Total Assets | $787,648 | | Deferred Revenue (Current & Long-term) | $491,601 | | Total Liabilities | $573,206 | | Total Stockholders' Equity | $214,442 | Key Income Statement Data (Year ended Dec 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | Collaboration Revenue | $133,617 | | Research and Development Expenses | $210,418 | | General and Administrative Expenses | $61,033 | | **Net Loss** | **$(133,310)** | [Controls and Procedures](index=130&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2022[500](index=500&type=chunk) - Management's assessment concluded that the company's **internal control over financial reporting was effective** as of December 31, 2022[502](index=502&type=chunk)[504](index=504&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=132&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - The required information for this item is **incorporated by reference** from the company's 2023 Proxy Statement[509](index=509&type=chunk) [Executive Compensation](index=132&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement - The required information for this item is **incorporated by reference** from the company's 2023 Proxy Statement[510](index=510&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=132&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement - The required information for this item is **incorporated by reference** from the company's 2023 Proxy Statement[511](index=511&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=132&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2023 Proxy Statement - The required information for this item is **incorporated by reference** from the company's 2023 Proxy Statement[512](index=512&type=chunk) [Principal Accounting Fees and Services](index=132&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2023 Proxy Statement - The required information for this item is **incorporated by reference** from the company's 2023 Proxy Statement[513](index=513&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=133&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section contains the list of financial statements and exhibits filed with the Form 10-K[515](index=515&type=chunk)