Company Overview - The company is a late clinical-stage biopharmaceutical firm focused on developing small molecules to restore neuronal health and combat neurodegeneration, with no products approved for commercial sale yet [243]. - The company has not initiated or completed any pivotal clinical trials or obtained marketing approval for any product candidates, leading to significant uncertainty regarding future success [243][244]. - The company does not anticipate generating any revenue from product sales for the next several years, if ever, heavily relying on the successful clinical development and commercialization of fosgonimeton and other future product candidates [245]. Product Development - Fosgonimeton is under development to treat Alzheimer's disease (AD) and Parkinson's disease dementia (PDD), with a Phase 1a/1b clinical trial enrolling 88 subjects, including 11 patients with mild to moderate AD [256]. - The lead product candidate, fosgonimeton, is in clinical development for the treatment of Alzheimer's Disease (AD) and Parkinson's Disease Dementia (PDD), with additional candidates ATH-1019 and ATH-1020 in nonclinical development [268]. - The company initiated the ACT-AD Phase 2 clinical trial in November 2020, with topline results expected in the first half of 2022, which will inform future pivotal trials [282]. - The LIFT-AD trial was initiated in September 2020, which may provide pivotal data for registration [269]. - Clinical trials are subject to delays and may be suspended or terminated for various reasons, including regulatory disagreements and patient recruitment challenges [273]. - The company faces a high risk of failure in developing marketable products due to the lengthy and expensive nature of clinical trials [269]. - Variability in safety or efficacy results can occur between different clinical trials, potentially leading to suspension or termination of trials [270]. - The company may incur unplanned costs and face delays in obtaining marketing approval if clinical trial results are inconclusive or raise safety concerns [277]. - Preliminary or top-line data from clinical trials may change as more patient data become available, impacting strategic decisions [279]. - Patient enrollment challenges could delay or prevent the initiation or continuation of clinical trials, affecting regulatory submissions [285]. - Enrollment in the ongoing ACT-AD clinical trial was delayed due to COVID-19, with top-line results now expected in the first half of 2022 [286]. - The company completed enrollment in the ACT-AD clinical trial, but future enrollment issues may arise, potentially increasing clinical trial costs [286]. - The COVID-19 pandemic has caused significant disruptions, including delays in patient recruitment and increased dropout rates in clinical trials [288]. Financial Condition - The company incurred net losses of $54.9 million and $19.9 million for the years ended December 31, 2021, and 2020, respectively, with an accumulated deficit of $95.9 million as of December 31, 2021 [319]. - The company expects to incur significant expenses and increasing operating losses for the foreseeable future due to ongoing research and development activities, including clinical trials for product candidates [320]. - As of December 31, 2021, the company had cash, cash equivalents, and investments of $319.7 million, which are estimated to be sufficient to fund operations at least through 2022 [325]. - The company will require substantial additional funding to finance operations and complete the development of product candidates, particularly fosgonimeton [323]. - The company has federal net operating loss carryforwards of approximately $9.5 million and federal tax credit carryforwards of approximately $2.9 million as of December 31, 2021 [330]. Regulatory Challenges - The regulatory approval processes for product candidates are lengthy and unpredictable, which may delay commercialization and revenue generation [331]. - The company has not yet submitted for or obtained regulatory approval for any product candidate, which poses a risk to future revenue [336]. - The company anticipates that additional funding may not be available on acceptable terms, which could lead to significant curtailment of research or development programs [329]. - The company may need to conduct additional clinical safety trials post-approval if toxicities develop that were not seen during clinical testing [342]. - Obtaining foreign regulatory approvals could result in significant delays and costs, impacting the introduction of products in certain countries [346]. - The FDA may require Risk Evaluation and Mitigation Strategies (REMS) for approved products, which could impose additional regulatory burdens [348]. - Changes in FDA policies or regulations could delay or prevent the approval of product candidates, affecting the company's ability to achieve profitability [351]. - The company may seek accelerated approval for product candidates, but failure to obtain such approval could extend the time to commercialization and increase development costs [359]. Legal and Compliance Risks - An independent special committee found that the former CEO altered images in her doctoral research, which could adversely affect the company's reputation and business prospects [261][264]. - The company has been named in lawsuits alleging violations of federal securities laws related to the former CEO's misconduct, resulting in negative publicity that may harm its credibility and relationships [265]. - The company may face difficulties in recruiting and retaining talent due to negative publicity, which could materially affect its business and financial condition [265]. - Washington State University is conducting an ongoing review of potential research misconduct involving the former CEO's doctoral research, which could materially impact the company's business and reputation [266]. - The company faces potential legal challenges due to the broad scope of healthcare fraud and abuse laws, which could lead to significant civil and criminal penalties [389]. - The company is exposed to risks from misconduct by employees and third parties, which could result in regulatory sanctions and reputational harm [391]. - The company must ensure compliance with Good Clinical Practices (GCP) and current Good Manufacturing Practices (cGMP) to avoid delays in regulatory approval [399]. Market and Competitive Landscape - The company faces intense competition from both large and small pharmaceutical companies, which may impact its commercial opportunities [290]. - The historical failure rate for product candidates is high, and unexpected failures can occur at any stage of development [298]. - The company is exploring strategic collaborations and partnerships to enhance the development and commercialization of its programs, but these efforts may incur additional costs and risks [413]. - There is a risk that potential collaborations may not materialize due to the early stage of product candidates or negative perceptions regarding their safety and efficacy [414]. - If collaborations are established, they may not yield the expected benefits, potentially delaying product development and commercialization timelines [419]. Insurance and Reimbursement - Uncertainty exists regarding insurance coverage and reimbursement for newly approved products, which could harm the company's ability to generate revenue [434]. - Adequate coverage and reimbursement from governmental and private payors are critical for the acceptance of new products, with significant implications for commercialization [436]. - Cost containment trends in the healthcare industry may limit coverage and reimbursement levels, affecting revenue generation [439]. - The reimbursement determination process is often time-consuming and costly, with no assurance of consistent coverage across payors [440]. - Net prices for drugs may be reduced by mandatory discounts or rebates, impacting the company's financial condition [441].

Financial Data and Key Metrics Changes - Research and development expenses increased to $42.8 million for the year ended December 31, 2021, compared to $13.3 million for the previous year, driven by increased clinical trial activities and expanded personnel [25] - General and administrative expenses rose to $21.2 million for the year ended December 31, 2021, up from $6.7 million in 2020, primarily due to increased personnel expenses and infrastructure expansion [26] - The net loss for the year was $54.9 million or $1.49 per share, compared to a net loss of $19.9 million or $1.67 per share in 2020 [26] - Cash, cash equivalents, and investments at the end of 2021 were $319.7 million, up from $268.2 million at the end of 2020, indicating a strong position to support clinical programs [26] Business Line Data and Key Metrics Changes - The company is advancing its clinical development programs, particularly focusing on fosgonimeton (fosgo) for neurodegenerative diseases, with significant progress in clinical trials [6][20] - Enrollment for the Phase 2 ACT-AD study was completed with 77 participants, and top-line data is expected in the second quarter of 2022 [14][17] - The Phase 3 LIFT-AD study is currently enrolling up to 420 subjects in the US, with an anticipated completion of enrollment in the third quarter of 2022 [10][20] Market Data and Key Metrics Changes - There are currently 55 million people suffering from Alzheimer's disease worldwide, projected to grow to 100 million by 2050, highlighting a significant market opportunity [23] - The company noted that only three to four drugs are available for treating mild-to-moderate Alzheimer's disease, indicating a substantial gap in treatment options [24] Company Strategy and Development Direction - The company is pursuing a diverse clinical development pipeline targeting various neurodegenerative diseases, with a focus on the HGF/MET neurotrophic system [10][20] - The strategy includes leveraging insights from the ACT-AD trial to optimize the statistical analysis plan for the LIFT-AD study [15][21] - The management emphasized the importance of providing tangible cognitive improvements to patients, particularly in the mild to moderate Alzheimer's segment, which accounts for nearly 80% of all Alzheimer's patients [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming data readouts and the potential for clinical benefits from fosgo, aiming to address the unmet needs in neurodegenerative disease treatment [22][25] - The company is aware of the trust placed by shareholders and is committed to disciplined financial management while advancing its clinical programs [25][26] Other Important Information - The company expanded its Board of Directors with two industry veterans to strengthen its leadership in drug development [7] - The Phase 2 SHAPE study for Parkinson's disease dementia is also underway, with a focus on the same HGF/MET mechanism [18][19] Q&A Session Summary Question: What to expect from the topline release in Q2 for ACT-AD? - Management indicated that the primary endpoint is P300, with hopes for statistically significant data over six months, and trends in secondary endpoints like ADAS-Cog11 [29] Question: Historical performance of approved drugs for mild-moderate Alzheimer's? - Historically, a 2 to 3 point benefit over placebo is expected in a 26-week trial for mild to moderate Alzheimer's [32] Question: Impact of concurrent cholinergic medication on ACT-AD results? - Management believes that having 60% of patients on cholinergic medication could support the efficacy of the treatment rather than hinder it [34] Question: Enrollment pace for the LIFT study? - Management is targeting completion of enrollment by the end of Q3 2022 [44] Question: Any insights from the blinded data of ACT-AD? - Management stated that the trial is still blinded, and no comments could be made on the findings [42] Question: Need for both cognitive and functional endpoints for registration? - Management acknowledged the importance of both endpoints for registration and emphasized the need for a comprehensive analysis of the data [39]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements, management's discussion and analysis, and disclosures on market risk and controls [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Athira Pharma's unaudited condensed consolidated financial statements, detailing balance sheets, income statements, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to **$347.3 million**, driven by cash and investments, while liabilities and equity also grew Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $107,328 | $60,625 | | Total current assets | $238,992 | $192,337 | | Total assets | $347,331 | $279,563 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $9,386 | $4,405 | | Total liabilities | $11,094 | $5,281 | | Total stockholders' equity | $336,237 | $274,282 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the nine months ended September 30, 2021, the company reported a net loss of **$38.5 million**, driven by increased R&D and G&A expenses Statement of Operations Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Research and development | $30,176 | $8,099 | | General and administrative | $15,068 | $2,817 | | Total operating expenses | $45,244 | $10,916 | | Loss from operations | ($45,244) | ($10,916) | | Grant income | $6,499 | $22 | | Net loss | ($38,514) | ($12,253) | | Net loss per share | ($1.12) | ($2.38) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows, showing net cash used in operating and investing activities, largely offset by cash provided by financing activities Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($24,921) | ($13,448) | | Net cash used in investing activities | ($25,452) | ($94,310) | | Net cash provided by financing activities | $97,076 | $271,427 | | **Net increase in cash and cash equivalents** | **$46,703** | **$163,669** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the financial statements, including business focus, financing, liquidity, and significant legal and operational contingencies - The company is a **late clinical-stage biopharmaceutical company** focused on developing small molecules to restore neuronal health and stop neurodegeneration[27](index=27&type=chunk) - In January and February 2021, the company completed a follow-on public offering, raising net proceeds of approximately **$96.8 million**[28](index=28&type=chunk) - As of September 30, 2021, the company had **$339.4 million** in cash, cash equivalents, and investments, estimated to fund operations for at least the next 12 months[29](index=29&type=chunk)[30](index=30&type=chunk) - The company is subject to several putative **securities class action lawsuits** filed in June 2021, alleging false and misleading statements regarding former CEO Dr. Leen Kawas's research, with an unpredictable outcome[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) - Subsequent to the quarter's end, an independent special committee concluded that former CEO Dr. Leen Kawas **altered images in her doctoral dissertation and research papers**, leading to her resignation on October 18, 2021, and the appointment of Mark Litton as new CEO[116](index=116&type=chunk)[120](index=120&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, highlighting increased operating expenses, a net loss, and strong liquidity from recent equity offerings - The company is a **late clinical-stage biopharmaceutical company** focused on developing small molecules, with its lead candidate, **ATH-1017**, in Phase 2/3 and Phase 2 trials for Alzheimer's disease[130](index=130&type=chunk)[133](index=133&type=chunk) Comparison of Operating Results (in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Research & Development | $30,176 | $8,099 | | General & Administrative | $15,068 | $2,817 | | **Loss from Operations** | **($45,244)** | **($10,916)** | | Grant Income | $6,499 | $22 | | **Net Loss** | **($38,514)** | **($12,253)** | - The increase in R&D expenses was primarily driven by a **$17.9 million increase** in costs for ATH-1017 related to patient enrollment and clinical site activity for Phase 2 and Phase 2/3 trials[171](index=171&type=chunk) - The increase in G&A expenses was primarily due to higher personnel-related costs (**$4.6 million**), legal costs (**$2.6 million**) related to litigation and the special committee investigation, and insurance costs (**$2.2 million**)[172](index=172&type=chunk) - As of September 30, 2021, the company had **$339.4 million** in cash, cash equivalents, and investments, estimated to be sufficient to fund operations at least through 2022[142](index=142&type=chunk)[145](index=145&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Athira Pharma is not required to provide the information requested under this item - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a **smaller reporting company**[195](index=195&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding they were effective as of September 30, 2021, with no material changes in internal control - Management concluded that the company's **disclosure controls and procedures were effective** at a reasonable assurance level as of September 30, 2021[197](index=197&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021[198](index=198&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section details significant legal challenges, including consolidated securities class action lawsuits alleging false statements related to the former CEO's research - Three putative **securities class action lawsuits** were filed against the company and certain officers and directors in June 2021[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - The lawsuits allege violations of federal securities laws related to allegedly false and misleading statements about the company's business and the scientific integrity of former CEO Dr. Leen Kawas's research[201](index=201&type=chunk)[202](index=202&type=chunk) - The three cases were **consolidated into a single action** in August 2021, with the company unable to predict the outcome or potential financial impact[204](index=204&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including limited operating history, dependence on ATH-1017, fallout from the former CEO's research investigation, and the need for substantial additional funding - An independent special committee found that former CEO Dr. Leen Kawas **altered images in her doctoral dissertation and research papers**, potentially harming the company's reputation, patents, and business prospects[223](index=223&type=chunk)[224](index=224&type=chunk) - The company and certain directors/officers are defendants in **securities class action lawsuits** related to the former CEO's alleged misconduct, potentially incurring substantial costs and diverting management's attention[473](index=473&type=chunk)[474](index=474&type=chunk) - The company's success is highly dependent on its lead product candidate, **ATH-1017**, which is based on a novel therapeutic approach and may never lead to a marketable product[216](index=216&type=chunk)[217](index=217&type=chunk) - The company has incurred significant losses since inception (**$79.6 million accumulated deficit** as of September 30, 2021) and will require substantial additional funding to finance operations and complete product development[277](index=277&type=chunk)[279](index=279&type=chunk) - The company relies on **third parties to conduct clinical trials and manufacture product candidates**, increasing risks related to quality control, supply chain disruptions, and regulatory compliance[343](index=343&type=chunk)[348](index=348&type=chunk) - The company's intellectual property, including patents licensed from Washington State University, could be challenged, invalidated, or found unenforceable, particularly in light of the **WSU investigation into the former CEO's research**[399](index=399&type=chunk)[400](index=400&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=127&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities and no material change in the planned use of IPO proceeds - There were **no unregistered sales of equity securities** in the reporting period[502](index=502&type=chunk) - There has been **no material change in the planned use of net proceeds** from the company's IPO[505](index=505&type=chunk) [Defaults Upon Senior Securities](index=129&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period [Mine Safety Disclosures](index=129&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Other Information](index=129&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company for the reporting period [Exhibits](index=130&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, the former CEO's separation agreement, and officer certifications - A key exhibit filed is the **Separation Agreement** dated October 18, 2021, between the company and former CEO Leen Kawas[508](index=508&type=chunk) - Standard **officer certifications (SOX 302 and 906)** and XBRL data files are included as exhibits[508](index=508&type=chunk)[509](index=509&type=chunk)[510](index=510&type=chunk)

Financial Performance - The company reported net losses of $22.8 million for the six months ended June 30, 2021, compared to $3.8 million for the same period in 2020, indicating a significant increase in losses [128]. - As of June 30, 2021, the company had an accumulated deficit of $63.9 million and cash, cash equivalents, and investments totaling $349.9 million [128]. - The company has not generated any revenues related to its products since inception and does not have any products approved for commercial sale [123]. - Total operating expenses for the six months ended June 30, 2021, were $27.4 million, a 679% increase from $3.5 million in the same period of 2020 [156]. - The net loss for the six months ended June 30, 2021, was $22.8 million, compared to a net loss of $3.8 million for the same period in 2020, reflecting a 502% increase [156]. - Net cash used in operating activities was $14.6 million for the six months ended June 30, 2021, compared to $4.0 million for the same period in 2020 [173]. Research and Development - The lead candidate, ATH-1017, is in a Phase 2/3 clinical trial for the treatment of mild-to-moderate Alzheimer's disease, with topline results expected by the end of 2022 [121]. - Research and development expenses increased by 617% to $12.0 million for the three months ended June 30, 2021, compared to $1.7 million for the same period in 2020 [149]. - Research and development expenses for the six months ended June 30, 2021, totaled $19.5 million, a 758% increase from $2.3 million in the prior year [156]. - The company expects substantial increases in research and development expenses as it conducts Phase 2 and Phase 2/3 clinical trials for ATH-1017 [139]. - Direct costs for ATH-1017 increased by 635% to $10.2 million for the three months ended June 30, 2021, compared to $1.4 million in the same period of 2020 [151]. - Research and development expenses increased by $17.2 million, from $2.3 million for the six months ended June 30, 2020 to $19.5 million for the six months ended June 30, 2021, primarily driven by an increase in expenses for ATH-1017 of $14.6 million [158]. Funding and Cash Flow - The company has raised approximately $407.4 million in net cash proceeds since inception, primarily from equity securities [128]. - The company expects to require substantial additional funding to support ongoing operations and product development [132]. - The company anticipates that its existing cash, cash equivalents, and investments will be sufficient to fund operating expenses and capital expenditures at least through 2022 [132]. - Net cash provided by financing activities was $96.9 million for the six months ended June 30, 2021, primarily from a follow-on public offering [176]. - Future funding requirements will depend on various factors, including the scope and results of ongoing clinical trials and the ability to establish collaborations [168]. - The company expects to finance operations through the sale of equity securities, debt financings, or other capital until significant revenue is generated from product sales [165]. Legal and Regulatory Issues - The company is currently facing multiple securities class action lawsuits alleging misleading statements related to its business and research [190]. - The lawsuits claim that the company's positive statements were materially misleading due to undisclosed issues with research conducted by the CEO [190]. - An independent special committee is reviewing the CEO's doctoral research papers in connection with the ongoing legal proceedings [193]. - The company cannot predict the outcome of the lawsuits, which could materially affect its business and financial condition [193]. Operational Expenses - General and administrative expenses rose by 702% to $4.6 million for the three months ended June 30, 2021, up from $0.6 million in the prior year [149]. - General and administrative expenses rose by $6.6 million, from $1.3 million for the six months ended June 30, 2020 to $7.9 million for the six months ended June 30, 2021, mainly due to increased personnel-related costs and insurance costs [160]. - The company anticipates significant increases in general and administrative expenses due to growth and compliance with public company regulations [144]. Grant Income - Grant income for the three months ended June 30, 2021, was $2.6 million, recognized from the NIH grant, with no grant income reported in the same period of 2020 [153]. - Grant income increased by $4.4 million, from less than $0.1 million for the six months ended June 30, 2020 to $4.4 million for the six months ended June 30, 2021, driven by the acceptance of an NIH grant [161]. - Grant income associated with the NIH grant is expected to increase, with potential total funding of up to $15.2 million [145]. Internal Controls - The company maintains effective disclosure controls and procedures, ensuring timely reporting and communication to management [185]. - No changes in internal control over financial reporting were reported during the quarter ended June 30, 2021, that materially affected internal controls [187].

Company Overview - Athira Pharma is a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and stop neurodegeneration[7] - The company's lead asset, ATH-1017, is in a potentially pivotal trial for Alzheimer's disease, with topline data expected from the LIFT-AD trial by late 2022 and from the ACT-AD trial by early 2022[9] - Athira is expanding its pipeline of novel, small molecule compounds designed to improve neuronal health, targeting CNS degenerative disorders, PNS disorders, and neuropsychiatric indications[11, 14] Scientific Rationale - The HGF/MET system is critical to normal brain function, with MET expression reduced by 75% in the hippocampus and 25% in the frontal cortex of AD patients[23, 25] - ATH-1017 is designed to promote the HGF/MET neurotrophic system, resulting in multi-modal downstream effects and acute and sustained effects on synaptic and network function[26] - Clinical trial designs assess the effects of ATH-1017's novel mechanism of action (MOA) using qEEG and ERP P300, non-invasive methods that provide a direct measure of brain activity[34] Clinical Trial Data and Design - Phase 1b trial data showed that ATH-1017 treatment improved P300 latency in AD subjects, with a significant change from baseline observed on Day 8 in the treated group compared to placebo[47, 54] - The Phase 2/3 LIFT-AD trial is a 26-week randomized, double-blind treatment study with 240-300 mild-to-moderate AD dementia subjects, using a Global Statistical Test (GST) as the primary endpoint[60] - ATH-1020, an orally bioavailable small molecule, is in development for neuropsychiatric indications and has demonstrated anti-depressant effects in animal models[89, 90] Financial Position - Athira Pharma reported a strong capital position with $357.7 million in cash, cash equivalents, and marketable securities as of March 31, 2021, compared to $268.2 million as of December 31, 2020[95] - In the first quarter of 2021, Athira completed a follow-on public offering and raised total gross proceeds of $103.5 million[95]

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Athira Pharma's Q1 2021 unaudited financials show cash and investments increased to **$357.7 million**, with a net loss of **$8.9 million** due to higher expenses [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets increased to **$369.4 million** and stockholders' equity to **$363.2 million**, primarily due to a follow-on public offering Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $127,823 | $60,625 | | Short-term investments | $176,367 | $124,057 | | Total current assets | $311,568 | $192,337 | | Total assets | $369,414 | $279,563 | | **Liabilities & Stockholders' Equity** | | | | Total liabilities | $6,197 | $5,281 | | Total stockholders' equity | $363,217 | $274,282 | | Total liabilities and stockholders' equity | $369,414 | $279,563 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For Q1 2021, the company reported a net loss of **$8.9 million**, up from **$1.8 million** in Q1 2020, driven by increased R&D and G&A expenses Condensed Consolidated Statements of Operations (in thousands) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $7,445 | $592 | | General and administrative | $3,336 | $675 | | **Total operating expenses** | **$10,781** | **$1,267** | | Loss from operations | ($10,781) | ($1,267) | | Grant income | $1,831 | $22 | | **Net loss** | **($8,866)** | **($1,805)** | | Net loss per share, basic and diluted | ($0.25) | ($0.48) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2021, operating activities used **$7.3 million**, investing activities used **$22.7 million**, and financing activities provided **$97.2 million**, leading to a **$67.2 million** net cash increase Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,305) | ($1,175) | | Net cash (used in) provided by investing activities | ($22,708) | $1 | | Net cash provided by financing activities | $97,211 | $1,840 | | **Net increase in cash and cash equivalents** | **$67,198** | **$666** | | Cash and cash equivalents, end of period | $127,823 | $2,722 | - The primary source of cash from financing activities in Q1 **2021** was **$97.2 million** in net proceeds from the follow-on public offering and stock option exercises[138](index=138&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's biopharmaceutical business, significant financing activities including a January **2021** follow-on offering, accounting policies, and confirm funding for at least the next **12** months - In January and February **2021**, the company completed a follow-on public offering, selling a total of **4,600,000** shares and raising approximately **$96.8 million** in net proceeds[21](index=21&type=chunk)[111](index=111&type=chunk) - The company received a grant from the National Institute on Aging (NIA) of the NIH, which could provide up to **$15.2 million** to support the ACT-AD Phase **2** clinical trial for ATH-1017. In Q1 **2021**, **$1.831 million** was recognized as grant income from this source[30](index=30&type=chunk)[29](index=29&type=chunk) - Based on its current operating plan, the company estimates its cash, cash equivalents, and investments of **$357.7 million** as of March **31**, **2021**, are sufficient to fund operations for at least the next **12** months[23](index=23&type=chunk)[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on neurodegeneration with lead candidate ATH-1017, highlighting increased operating expenses from clinical trials and a strong financial position with **$357.7 million** in cash, expected to fund operations through at least **2022** - The company is a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and stop neurodegeneration. Its lead candidate, ATH-1017, is being evaluated in two trials for mild-to-moderate Alzheimer's disease: the LIFT-AD Phase **2/3** trial and the ACT-AD Phase **2** trial[95](index=95&type=chunk)[97](index=97&type=chunk) Anticipated Upcoming Milestones | Program (RoA) | Indication | Anticipated Upcoming Milestones | | :--- | :--- | :--- | | ATH-1017 (SC) | Alzheimer's Disease | LIFT-AD topline data by end of 2022; ACT-AD topline data by early 2022 | | ATH-1017 (SC) | Parkinson's Disease Dementia | Phase 2 initiation by end of 2021 | | ATH-1019/20 (PO) | Neuropsychiatric Indications | IND filing by end of 2021 | | ATH-1018 (PO) | Peripheral Indications | IND filing by end of 2022 | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) In Q1 **2021**, total operating expenses increased from **$1.3 million** to **$10.8 million**, primarily due to higher R&D and G&A costs, leading to a net loss of **$8.9 million** versus **$1.8 million** in Q1 **2020** Research and Development Expenses Breakdown (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Direct costs:** | | | | ATH-1017 | $6,188 | $349 | | Preclinical programs and other | $312 | $18 | | **Indirect costs:** | | | | Personnel-related costs | $852 | $176 | | Facilities and other costs | $93 | $49 | | **Total R&D Expenses** | **$7,445** | **$592** | - The increase in R&D expenses was primarily driven by a **$5.8 million** increase in costs for ATH-1017, related to start-up activities for Phase **2** clinical trials[123](index=123&type=chunk) - General and administrative expenses increased by **$2.6 million**, mainly due to a **$1.1 million** increase in personnel costs from higher headcount, a **$0.8 million** increase in insurance costs, and a **$0.4 million** increase in facilities costs[124](index=124&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of March **31**, **2021**, the company held **$357.7 million** in cash and investments, primarily from equity sales, sufficient to fund operations through at least **2022**, with future funding needs for full development - As of March **31**, **2021**, the company had **$357.7 million** in cash, cash equivalents and investments[106](index=106&type=chunk)[129](index=129&type=chunk) - The company estimates that its existing cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements at least through **2022**[109](index=109&type=chunk)[203](index=203&type=chunk) Recent Common Stock Sales (in millions) | Offering | Net Proceeds | | :--- | :--- | | September 2020 IPO | $186.4 | | October 2020 overallotment | $22.1 | | January 2021 follow-on | $84.1 | | February 2021 overallotment | $12.7 | | **Total** | **$305.3** | [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Athira Pharma, Inc. is not required to provide market risk disclosures - The company is not required to provide information on this item as it qualifies as a smaller reporting company[148](index=148&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March **31**, **2021**, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March **31**, **2021**[150](index=150&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March **31**, **2021**, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[151](index=151&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=36&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 or financial condition - The company is not currently a party to or aware of any proceedings that are expected to have a material adverse effect on its business[152](index=152&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces numerous risks, primarily its dependence on the success of lead candidate ATH-1017, lengthy clinical development, intense competition, historical losses, and the need for substantial additional funding - The company is a late clinical-stage biopharmaceutical company with a limited operating history, and its ability to generate revenue depends on the success of its objectives, particularly the development of ATH-1017[7](index=7&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk) - The company's therapeutic approach of using small molecules to target brain growth factors is novel, and clinical data is limited to Phase **1a/1b** trials involving only **11** Alzheimer's patients, with no certainty that future trials will yield similar results[7](index=7&type=chunk)[162](index=162&type=chunk) - The company has incurred significant losses since inception and expects to continue incurring them for the foreseeable future, requiring substantial additional funding to complete development and commercialization[7](index=7&type=chunk)[198](index=198&type=chunk)[202](index=202&type=chunk) - The company faces significant competition from larger pharmaceutical companies with greater financial resources and expertise in development, manufacturing, and commercialization[7](index=7&type=chunk)[181](index=181&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales and no material change in the planned use of IPO net proceeds during the period - There were no unregistered sales of equity securities in the reported period[380](index=380&type=chunk) - There has been no material change in the planned use of proceeds from the company's IPO[382](index=382&type=chunk) [Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the quarterly report, including corporate documents, officer certifications, and XBRL data