Corporate Presentation MAY 2023 ADVANCING NEW THERAPIES FOR NEURONAL HEALTH Disclaimer This presentation and the accompanying oral commentary contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our management’sbeliefsandassumptionsandoninformationcurrentlyavailabletoourmanagement.Forward-lookingstatementsareinherentlysubjecttorisksanduncertainties,someofwhichcannotbepredictedorquanti ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | --- | |----------------------------------------------------------------------------|-------------------------------------------------------------------|---------------------------|-- ...

Company Overview - The company is a late clinical-stage biopharmaceutical firm focused on developing small molecules to restore neuronal health and slow neurodegeneration, with no products approved for commercial sale yet [228]. - The company has concentrated its research on central and peripheral nervous system degenerative disorders, a field with limited success in product development [245]. - The company has limited financial and managerial resources, which may lead to missed opportunities in pursuing more profitable product candidates [288]. - The company has never commercialized a product candidate before and may lack the necessary expertise, personnel, and resources for successful commercialization [421]. Clinical Trials and Development - The primary and all secondary endpoints of the Phase 2 ACT-AD clinical trial were not met, but a post hoc analysis showed a meaningful improvement in cognitive performance compared to placebo at 26 weeks [243]. - The independent data monitoring committee recommended continuation of the LIFT-AD study with an additional enrollment of fewer than 150 patients to ensure the study is well powered for the primary endpoint [243]. - The lead product candidate, fosgonimeton, is in clinical development for Alzheimer's disease, but the company cannot predict when or if it will receive regulatory approval [259]. - The Phase 2 ACT-AD clinical trial did not meet its primary endpoint, raising concerns about the efficacy of fosgonimeton in larger populations [262]. - The company may face delays in clinical trials due to various factors, including regulatory disagreements and recruitment challenges [267]. - Conducting clinical trials in foreign countries presents additional risks that may delay completion, including adherence to protocols and political/economic factors [268]. - If clinical trials yield inconclusive results or safety concerns arise, the company may incur unplanned costs and face delays in obtaining marketing approval [272]. - The company announced that topline data from clinical trials may change as more patient data become available and are subject to audit and verification procedures, which could result in material changes in the final data [273]. - The company initiated the ACT-AD exploratory Phase 2 clinical trial in November 2020 to understand the effects of fosgonimeton on cognitive measures, with topline results announced in June 2022 [277]. Regulatory Challenges - The company has not previously submitted a new drug application (NDA) to the FDA, and the success of its product candidates in clinical trials remains uncertain [236]. - The company faces significant challenges in obtaining marketing approval and establishing sales and marketing capabilities for fosgonimeton if approved [238]. - Regulatory approval processes for product candidates are lengthy and unpredictable, which may delay commercialization and revenue generation [329]. - The company has not yet submitted for or obtained regulatory approval for any product candidate, and there is a risk that none will ever receive approval [331]. - The approval process may require extensive clinical data, and changes in regulations could result in delays or insufficient data for approval [334]. - Regulatory authorities may impose restrictions or require additional trials post-approval, affecting the commercial potential of approved products [343]. - Obtaining approval in one jurisdiction does not guarantee approval in others, and delays in one region may negatively impact the approval process elsewhere [344]. - The company must comply with ongoing regulatory obligations post-approval, which may result in significant additional expenses [347]. - Disruptions at regulatory agencies, such as the FDA, could hinder the approval process and negatively impact the company's operations [353]. - The FDA has been working to resume routine inspections, but continues to face a backlog of foreign inspections, which could extend review timelines [355]. Financial Performance - The company reported net losses of $95.6 million and $54.9 million for the years ended December 31, 2022, and 2021, respectively, with an accumulated deficit of $191.5 million as of December 31, 2022 [308]. - The company has not generated any revenue from product sales and anticipates significant losses for the foreseeable future due to ongoing research and development activities [308]. - As of December 31, 2022, the company had cash, cash equivalents, and investments of $245.2 million, which are expected to fund operations for at least the next 12 months [315]. - The company anticipates incurring significant commercialization expenses related to sales, marketing, manufacturing, and distribution if it obtains marketing approval for fosgonimeton [314]. - The company may face difficulties raising capital due to market volatility and adverse events affecting the financial services industry [306]. Legal and Compliance Issues - The company is facing lawsuits alleging violations of federal securities laws, which could result in substantial costs and divert management's attention [250]. - An independent special committee found that the former CEO altered images in research papers, which could adversely affect the company's reputation and business prospects [249]. - Washington State University is conducting an ongoing review of potential research misconduct involving the former CEO's doctoral research, which may impact the company's reputation and business [251]. - The independent special committee found that the former CEO altered images in her doctoral dissertation and at least four research papers published from 2011 to 2014, which could adversely affect the company's scientific credibility and prospects [253]. - The company received a Civil Investigative Demand from the Department of Justice in November 2022, seeking documents related to its relationship with WSU and certain NIH grant applications [256]. - The SEC issued a subpoena in February 2023 regarding the former CEO's alteration of images in research papers, and the company is cooperating with the investigation [256]. Market Competition and Opportunities - The company faces significant competition from both large and small pharmaceutical companies, which may impact its commercial opportunities and market position [285]. - The FDA recently granted accelerated approval for lecanemab, a competing drug, highlighting the competitive landscape for Alzheimer's disease therapies [286]. - The company may not achieve adequate market acceptance for its product candidates even if they receive regulatory approval, impacting commercial success [418]. - The approval of new therapies for the same indications could limit the market opportunity for the company's product candidates [425]. Strategic Alternatives - The company may explore strategic alternatives, including mergers or acquisitions, if it does not demonstrate the safety and efficacy of fosgonimeton in ongoing trials [239]. - The company may incur increased operating expenses and cash requirements if it engages in future acquisitions or strategic partnerships [416]. - The company may need to obtain additional capital to fund development or commercialization activities if it cannot establish collaborations [411]. Operational Risks - The company relies on third-party manufacturers for product candidates, and disruptions in their operations could impact clinical supply availability [307]. - The company relies on third-party clinical trial conductors, which may lead to delays or termination of clinical trials if they do not meet contractual obligations [397]. - There is no long-term supply agreement in place, and raw materials are sometimes sourced from single-source suppliers, leading to potential supply chain disruptions [399]. - The company faces significant risks if third-party manufacturers fail to comply with cGMP regulations, which could result in delays or withdrawal of marketing approvals [402]. - The ongoing COVID-19 pandemic has significantly impacted the company's operations, including clinical trials, due to worker shortages and supply chain disruptions [300]. - A resurgence of COVID-19 or other disease outbreaks could materially negatively impact the company's business, financial condition, and operating results [302].

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]