10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-38792

Alector, Inc.

(Exact name of Registrant as specified in its Charter)

131 Oyster Point Blvd, Suite 600

South San Francisco, California94080

(Address of principal executive offices, including zip code)

(415) 231-5660

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class Trading Symbol Name of each exchange on which registered

Common Stock ALEC The Nasdaq Stock Market LLC (The Nasdaq Global Select Market)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesNo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YesNo

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  Accelerated filer 

Non-accelerated filer  Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $1,192.5 million, based on the closing price of the registrant’s common stock, as reported by the Nasdaq Global Select Market on June 30, 2021 of $20.03 per share.

The number of shares of the registrant’s Common Stock outstanding as of February 15, 2022 was 82,039,774.

Portions of the registrant’s Definitive Proxy Statement relating to the registrant’s Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s 2021 fiscal year ended December 31, 2021.

Alector, Inc.

Annual Report on Form 10-K

TABLE OF CONTENTS

Page

PART I

Item 1. Business 3

Item 1A. Risk Factors 47

Item 1B. Unresolved Staff Comments 99

Item 2. Properties 99

Item 3. Legal Proceedings 100

Item 4. Mine Safety Disclosures 100

PART II

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 113

Item 8. Financial Statements and Supplementary Data 114

Item 9A. Controls and Procedures 137

Item 9B. Other Information 138

PART III

Item 10. Directors, Executive Officers and Corporate Governance 139

Item 11. Executive Compensation 139

Item 14. Principal Accounting Fees and Services 139

PART IV

Item 15. Exhibits, Financial Statement Schedules 140

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements about:

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our plans relating to the development and manufacturing of our product candidates and research programs, including additional indications that we may pursue;

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the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;

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the timing and focus of our future clinical trials, and the reporting of data from those trials;

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our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;

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the expected potential benefits of strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

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our estimates of the number of patients in the United States who suffer from the diseases we are targeting and the number of patients that will enroll in our clinical trials;

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the size of the market opportunity for our product candidates in each of the diseases we are targeting;

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our ability to expand our product candidates into additional indications and patient populations;

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the success of competing therapies that are or may become available;

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the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;

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the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates for various diseases;

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our ability to obtain and maintain regulatory approval of our product candidates;

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existing regulations and regulatory developments in the United States and other jurisdictions;

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our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

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our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

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the need to hire additional personnel and our ability to attract and retain personnel, especially in light of a very competitive compensation environment;

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the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

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our financial performance, including potential volatility in our stock price;

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the impact of the ongoing coronavirus (COVID-19) pandemic, including recent and new variants, on our business;

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the effects of a rising rate of inflation; and

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the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this report and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Annual Report on Form 10-K, whether as a result of any new information, future events, or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://investors.alector.com), Securities and Exchange Commission (SEC) filings, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with our stockholders and public about our company, our products, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

PART I

Item 1. Business.

Overview

Our mission is to develop therapies that empower the immune system to cure neurodegeneration and other diseases.

We are a clinical-stage biopharmaceutical company pioneering immuno-neurology, a novel therapeutic approach for the treatment of neurodegeneration. Immuno-neurology targets immune dysfunction as a root cause of multiple pathologies that are drivers of degenerative brain disorders. We are developing therapies designed to counteract these pathologies by restoring healthy immune function to the brain. We have advanced four product candidates, AL001, AL002, AL003, and AL101, into clinical development. Our efforts to restore and improve the function of the innate immune system to counteract disease has led us to discover candidates with potential applications in immuno-oncology. In 2022, we plan to advance three additional Alector-discovered candidates into clinical studies, AL044 for neurodegenerative disease and anti-cancer compounds AL008 and AL009.

AL001 modulates progranulin (PGRN), a key regulator of immune activity in the brain with genetic links to multiple neurodegenerative disorders, including frontotemporal dementia (FTD), Alzheimer’s disease, Parkinson’s disease, and amyotrophic lateral sclerosis (ALS). AL001 is initially being developed to treat FTD, a severe, rapidly progressing neurodegenerative disorder that affects 50,000 to 60,000 people in the United States and roughly 110,000 people in the European Union, with potentially higher prevalence in Asia and Latin America.

AL001 is currently being studied in a global pivotal Phase 3 trial, INFRONT-3, for the potential treatment of adults at risk for or with symptomatic frontotemporal dementia due to a progranulin gene mutation (FTD-GRN). In prior clinical studies, AL001 successfully demonstrated elevation of progranulin levels back to the normal range and encouraging early signals of biomarker and clinical activity. AL001 has been well tolerated in healthy volunteers and FTD patients in our Phase 1a, Phase 1b, and Phase 2 clinical trials.

In 2021, we presented our most comprehensive dataset generated to date for AL001 from our ongoing open-label Phase 2 clinical trial, INFRONT-2 in patients with FTD with a GRN mutation. INFRONT-2 was designed to establish the safety and tolerability of chronic administration of AL001 at therapeutic doses, and also measured biomarkers of disease and clinical outcomes. Treatment with AL001 was well tolerated and demonstrated a reversal of the progranulin deficiency; progranulin levels were rapidly restored to normal ranges in both plasma and cerebrospinal fluid (CSF) for the duration of treatment. Multiple disease-relevant biomarkers trended toward normalization or remained stable, including time-dependent and durable normalization of lysosomal, inflammatory, and astrogliosis biomarkers over twelve months of treatment compared to baseline and age-matched controls, along with stable plasma and CSF neurofilament light chain (NfL) levels over 12 months. A matched historic control cohort of participants from the Genetic FTD Initiative (GENFI2) patient registry was utilized as a comparator for brain atrophy and clinical outcome assessments. Volumetric MRI found a greater than 10% reduction in atrophy rates in favor of AL001 for the whole brain and frontotemporal cortex, and an approximately 50% reduction in the rate of ventricular enlargement, relative to the GENFI2 matched control cohort. Clinical outcome assessments using the CDR® plus NACC FTLD-SB scale found that AL001 treatment slowed clinical progression by 48% compared to the GENFI2 matched control cohort.

AL101, the second product candidate in our PGRN portfolio, is designed to elevate progranulin levels, similar to AL001, but with the potential for easier administration or less frequent dosing for the treatment of more prevalent neurodegenerative diseases, including Alzheimer’s disease and Parkinson’s disease. Mutations that moderately reduce the expression levels of PGRN are associated with increased risk of developing Alzheimer’s disease and Parkinson’s disease. In animal models, increased PGRN levels have been demonstrated to be protective for these diseases. In 2021, we presented interim data from our ongoing Phase 1 clinical trial testing the safety, tolerability, pharmacokinetics, pharmacodynamics, and bioavailability of single doses of intravenously or subcutaneously administered AL101 in healthy volunteers. AL101 increased progranulin levels in the periphery and the brain persisting for one month. AL101 was found to be well tolerated at all doses administered. Alector is continuing to enroll additional cohorts to test further dosages of AL101 administered intravenously and subcutaneously, with data expected to be available in 2022.

We are developing our progranulin franchise candidates, AL001 and AL101, with GlaxoSmithKline plc (GSK).

AL002 targets Triggering Receptor Expressed on Myeloid cells 2 (TREM2) to increase the functionality of TREM2 signaling and enhance microglia cell activation. We are initially developing AL002 for the treatment of Alzheimer’s disease in collaboration with AbbVie Biotechnology, Ltd. (AbbVie). According to the United States Centers for Disease Control and Prevention, Alzheimer’s disease is a chronic neurodegenerative disease that is the most common cause of dementia, affecting nearly six million Americans in 2020, and that number is projected to rise to nearly 14 million by 2060. Alzheimer’s disease is the sixth leading cause of death in the United States.

In our Phase 1 clinical trial, AL002 demonstrated tolerability, target engagement, and proof-of-mechanism in the central nervous systems of healthy volunteers. In January 2021, we initiated INVOKE-2, a randomized, controlled Phase 2 clinical trial of AL002 aiming to enroll approximately 265 patients with early Alzheimer’s disease.

Amyloid Related Imaging Abnormalities (ARIA) have been observed in our ongoing INVOKE-2 Phase 2 clinical trial in Alzheimer’s disease. ARIA are MRI findings suggestive of vasogenic edema or hemosiderin deposits. These conditions are known to occur in Alzheimer’s disease patients and typically resolve or stabilize within four to 16 weeks with or without treatment. The risk of ARIA has been shown to increase in this patient population with the administration of certain Alzheimer's disease therapeutics.

Most ARIA cases observed in our INVOKE-2 Phase 2 clinical trial were asymptomatic and non-serious. However, a small number of serious adverse events occurred in patients with the APOE e4/e4 genotype. APOE e4/e4 homozygotes are estimated at 10-15% percent of the Alzheimer’s disease population.

In addition to voluntary protocol amendments put in place last year to mitigate risks associated with ARIA, we have discontinued dosing of APOE e4/e4 homozygotes currently in our INVOKE-2 Phase 2 clinical trial. We also plan to submit an additional voluntary amendment to the trial protocol to exclude APOE e4/e4 homozygotes from this trial. The potential impact, if any, of this protocol amendment on timing to complete enrollment of the INVOKE-2 Phase 2 clinical trial is currently being assessed. We are conducting this study under the guidance of an Independent Data Monitoring Committee (IDMC), which is allowed to review unblinded data and to make trial recommendations. We, along with the IDMC, will continue to monitor the INVOKE-2 Phase 2 clinical trial, and if necessary, we will make additional modifications to the study protocol.

AL003 is our second therapeutic candidate being developed to treat patients with Alzheimer’s disease in collaboration with AbbVie. AL003 focuses on modulating checkpoint receptors on the brain’s immune cells, targeting sialic acid binding Ig-like lectin 3 (SIGLEC 3, also called CD33). Similar to checkpoint inhibitors, such as drugs targeting PD-1 and PD-L1, which have been successfully developed for the treatment of certain solid tumors, AL003 is intended to block checkpoint inhibition and “release the brakes” on the brain’s immune system and thereby enable increased activation of the microglia cells of the brain to address neurodegenerative pathologies. In 2021, we presented data from the Phase 1 trial of AL003 in healthy volunteers and Alzheimer’s disease patients. AL003 was found to be well tolerated up to and including once-monthly intravenous doses of 15 mg/kg. AL003 demonstrated target engagement of CD33 in both blood and central nervous system (CNS) compartments at the tolerated dose range.

AL044 is the latest Alector-discovered therapeutic candidate for neurodegeneration. AL044 targets MS4A, a major risk locus for Alzheimer’s disease. MS4A gene family members encode a transmembrane receptor protein that is expressed selectively in microglia in the brain and is associated with control of microglia functionality and potentially with microglia viability. We intend to develop AL044 for the treatment of Alzheimer’s disease and potentially orphan neurodegenerative indications. We expect to initiate a first-in-human trial for AL044 in 2022. We own worldwide rights to AL044.

The neuroimmune system of the brain is part of the body’s innate immune system, and based on our pioneering work in immuno-neurology, we have identified potential oncology applications for several of our therapeutic programs. We believe that products focused on innate immune biology may complement and expand the

efficacy of current immuno-oncology drugs that target the adaptive immune system. In 2022, we expect to advance two of our immuno-oncology programs, AL008 and AL009, into the clinic.

AL008 is our lead innate immuno-oncology antibody that is designed to inhibit the CD47-SIRP-alpha (SIRPα) pathway, a potent immune checkpoint pathway co-opted by tumors to evade the immune system. AL008 is a SIRP-alpha inhibitor with a novel dual mechanism of action that inhibits immune suppression and promotes immune stimulation. We entered into a licensing agreement with Innovent Biologics (Innovent) in 2020 to develop and commercialize AL008 in China, while Alector retains development and commercialization rights in the rest of the world. First-in-human clinical studies led by Innovent are expected to commence in China in 2022 in patients with advanced solid tumors.

AL009, our second innate immuno-oncology product candidate, is a multi Siglec inhibitor that is designed to enhance both the innate and adaptive immune system response to tumors by blocking a critical glycan checkpoint pathway that drives immune suppression. We plan to advance AL009 into clinical studies in patients with advanced solid tumors in 2022. We own worldwide rights to AL009.

As part of our efforts to advance our programs through clinical development and execute on the strategic approach outlined in the section titled “Business – Our Strategy,” Alector from time to time may execute partnerships with other biopharmaceutical companies. To date we have executed three licensing, co-commercialization, or co-development agreements for certain programs in our pipeline.

The Immune System is Central to Neurodegeneration

The loss of healthy immune function in the brain, due to cellular aging or mutations of genes that regulate key immune cells, underlies the onset and progression of multiple neurodegenerative disorders. Genomic analyses have shown that there is a strong correlation between genetic mutations that predispose individuals to neurodegeneration and dysfunction in the immune system. As a result of these genetic mutations, the brain’s immune function deteriorates and subsequently would fail to carry out critical activities, which include:

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clearing or counteracting pathological neurodegenerative proteins such as amyloid-beta, TAU, alpha-synuclein, and TDP-43;

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providing metabolic and functional support to nerve cells;

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regulating synaptic connections;

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protecting nerve cells by stimulating the regeneration of myelin sheaths around nerve fibers; and

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controlling the neurotoxic activities of activated astrocytes and rogue microglia.

We believe that restoring the immune system’s ability to perform all of these vital functions in the brain is crucial to addressing neurodegeneration given that past approaches focusing on single degenerative pathologies have proved inadequate to date.

The brain’s immune system undergoes gradual deterioration of functional characteristics as part of normal biological aging or due to harmful genetic mutations that are linked to neurodegeneration and are associated with accelerated senescence of the brain immune cells. Based on our understanding of the role of genetic mutations in neurodegeneration, we have designed our product candidates to target the mutated genes linked to neurodegeneration, with the goal of slowing or reversing the deterioration of the brain’s immune cells to achieve therapeutic benefit. By restoring healthy immune function in the brain, we believe we can simultaneously counteract the multiple independent pathologies responsible for neurodegeneration.

Our Strategy

Our goal is to develop therapies that harness the immune system to combat neurodegenerative diseases. The key tenets of our business strategy to achieve this goal include:

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Building the leading, fully-integrated company focused on delivering innovative immuno-therapies, validated by human genetics, for the treatment of neurodegeneration. We believe that building a fully integrated research, development, and ultimately commercial company will enable us to develop therapies more rapidly and efficiently for patients and realize the full potential of our immuno-neurology approach and discovery capabilities.

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Applying our proprietary capabilities to rapidly advance our product candidates through clinical proof-of-concept studies and beyond.We are focused on maximizing the probability of success of our product candidates by leveraging immunology, neurobiology, and human genetics, as well as our state-of-the-art bioinformatics, to enable better and earlier target selection. In addition, we are also focused on a biomarker-driven approach, including proprietary tools and assays, to confirm target engagement, inform patient selection, and follow clinical outcomes.

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Maximizing the therapeutic potential of our targets and product candidates. Given the central physiological roles played by the distinct targets of our product candidates, we believe that there is significant potential for us to address multiple indications with single targets. Our goal is to expand the therapeutic and commercial potential of our targets and product candidates to additional indications, such as immuno-oncology. However, we will remain disciplined about advancing this strategy, leveraging our discovery capabilities to inform expansion areas of maximum value and highest probability of success.

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Continuing to focus on discovering new targets and product candidates, validated by human genetics, to fulfill the full potential of our insights and platform. Our discovery capabilities are central to our efforts to rapidly identify new product candidates with compelling clinical promise. We will continue to invest in our research and discovery efforts, including evolving our proprietary analytical tools and assays, to further investigate several of our identified immune system targets as well as generate additional targets and product candidates.

Our Approach

The Role of the Innate Immune System and Microglia in Neurodegeneration

Significant evidence in the last decade has shown that neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease, FTD, and ALS, are linked to a dysfunctional brain immune system. In contrast to the dual adaptive and innate components that characterize the broader human immune system, the brain’s immune system consists primarily of innate immune cells, known as microglia. These brain resident macrophages account for 10% to 15% of all cells found within the brain and are responsible for many aspects of brain health and maintenance. As the key innate immune cells in the brain, microglia respond to infection and damage, clear cell debris and pathological proteins, nurture neurons and the brain support cells, and control the number and functionality of inter-neuronal connections. Microglia have been our initial focus and new scientific advances have made it possible to understand how these key innate immune cells in the brain represent a crucial focal point for intervening, treating, or preventing neurodegenerative diseases.

Figure 1. Our antibody product candidates target microglia to harness their many potential beneficial roles in treating neurodegenerative diseases.

Significant Scientific Data Support Our Hypothesis

Understanding how the brain’s immune cells affect its structure and function, in both normal and diseased states, is in our view, the key to understanding many neurological diseases. Human genetic evidence has supported the importance of the interactions between the brain and the innate immune system. For example, most of the top risk genes for Alzheimer’s disease, identified using genetic linkage studies, candidate gene analysis, genome-wide association studies (GWAS), and whole-genome or whole-exome sequencing, regulate immune function in the brain. Many of these risk genes have been shown to express predominantly in microglia and to control the function of these cells.

Microglia have been shown to be key cells in overall brain maintenance, health, and function and are the brain’s first line of immune defense. These innate immune cells are tooled with “microglial sensomes” which enable them to constantly survey brain cells to identify and respond to subtle signs of pathology or dysfunction. Microglia scavenge the brain for toxic misfolded proteins, cell debris, damaged or unnecessary nerve cells, dysfunctional or aged synapses, and infectious agents. In addition, microglia support the generation of new neurons and synapses and remodel neuronal circuits. Microglia also control the survival and function of astrocytes and oligodendrocytes, the main brain support cells which control brain metabolism and blood supply and replenish aged or damaged nerve fibers after injury. Further, microglia have been shown to modulate the permeability of the blood brain barrier allowing access to peripheral immune cells, to assist against infection or injury. Microglia can also change their morphology, functionality, and number in response to changing brain environment.

Analysis of gene transcription at the single-cell level in microglia from normal and diseased brains revealed that multiple microglia subtypes exist which may respond to specific disease pathologies in the brain. Our product candidates are designed to recruit microglia subtypes by targeting microglia check-point proteins that control their survival, proliferation, migration, and function. This allows us to differentially modulate microglia activity as needed to counteract a given degenerative brain disorder.

Findings in the fields of human genetics, immunology, and neuroscience have indicated that as a result of normal aging or genetic mutations, the beneficial functions of the microglia deteriorate leading to dysfunction of neuronal connections, massive death of neurons and neurodegeneration.

Our Research and Discovery Platform

Our research and drug discovery platform leverages human genetic datasets, advanced tools in bioinformatics and imaging, and insights in neurodegeneration and immunology to: (1) identify immune system targets that play a critical role in the development of multiple neurodegenerative diseases, and rapidly develop antibody therapeutics to these targets, (2) interrogate and prioritize those targets for activity using biomarkers and related proprietary assays and preclinical models, and (3) clinically test product candidates, including in genetically defined patient populations that may be most likely to respond to treatment. We believe that these platform capabilities provide us with the tools to solve the conceptual and technical challenges associated with development of drug candidates for neurodegeneration.

We rely on proprietary immuno-neurology bioinformatics algorithms and methodologies to analyze large genetic datasets from diseased and healthy individuals, brain-based gene expression profiling, brain-based proteomics, and human pathology. These proprietary capabilities allow us to rapidly identify tractable targets, pharmacodynamic biomarkers, and patient populations associated with aberrant immune function which lead to neurodegeneration. Specifically, the priorities of our platform efforts are:

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Target Selection. Our target selection capabilities address a wide array of factors that we believe inform efficient, optimized therapeutic outcomes, including genetic and mechanistic rationale. We leverage our bioinformatics expertise to identify genetic mutations in the brain immune system that we believe increase the risk of disease onset and progression. We employ a functional genomics approach which utilizes state of the art techniques such as CRISPRi/a, PERTURB seq, single cell transcriptomics, proteomics and metabolomics in relevant in vitro systems such as hiPSC microglia and in vivo systems such as mouse/rat models to elucidate the immune dysfunction caused by these mutations. We then seek to engineer immune modulating antibody product candidates to functionally counteract the harmful consequence of these genetic mutations. We leverage in vitro and in vivo functional tools to validate the activity of our product candidates and their ability to cross the blood brain barrier at sufficient quantities to be therapeutically effective.

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Biomarker Selection. We are able to identify and employ molecular biomarkers, assays, and imaging techniques that are tailored to our product candidates to confirm target engagement and quantify their therapeutic impact, allowing us to potentially interpret the clinical impact of our compounds earlier than would be expected using traditional clinical measures.

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Patient Selection. We utilize genetic screening and biomarkers in certain orphan disease programs to better align a patient’s specific diagnosis with the targeted intervention in our clinical studies.

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Biologics Discovery. We pursue a comprehensive antibody discovery strategy using in vivo (multiple species, hybridoma and single B cell technology) and in vitro directed evolution (phage and yeast display) approaches. We leverage our advanced antibody engineering capabilities to design and optimize biotherapeutics.

We employ gene expression profiling, proteomics, brain imaging, and data on disease pathology as well as our own preclinical and clinical data to continually refine our proprietary immuno-neurology algorithms and methodologies. Using our drug discovery platform capabilities to identify targets that are validated by human genetics, disease biomarkers, and responsive patient populations, we believe that we are positioned for greater probability of technical success on more efficient timelines relative to historical drug development in neurodegeneration.

Our Pipeline Programs

Figure 2. The following table highlights our clinical programs.

In addition to our preclinical and clinical programs described above, we continue to expand the number of research programs in our pipeline for indications including Alzheimer’s disease, Parkinson’s disease, multiple sclerosis, and oncology.

Our Progranulin Program

Our first development program is focused on modulating levels of PGRN, a key regulator of microglia function in the brain with strong genetic links to FTD and other neurodegenerative disorders. Individuals carry two copies of the PGRN gene that function together to produce healthy levels of PGRN throughout the body. Mutations in both copies of the PGRN gene lead to a neurodegenerative disease called neuronal ceroid lipofuscinosis, which is typified by childhood dementia, vision loss, and epilepsy. Mutations in a single copy of the PGRN gene result in a drop of between 50% and 70% in the level of PGRN and consequently lead to development of FTD with about 90% penetrance by 75 years of age. Moreover, large scale human genetic studies suggest that regulatory mutations in the gene for PGRN, which lead to a more modest decrease in the level of PGRN, increases the risk for Alzheimer’s disease and Parkinson’s disease, making PGRN a significant risk gene for these disorders as well.

Healthy levels of PGRN are associated with many cellular processes that include, but are not limited to, normal microglial activities, neuronal survival, and lysosome function. PGRN deficiency disrupts microglia-neuronal homeostasis in the brain and promotes neurodegeneration through the release of cytotoxic cytokines and complement factors by dysfunctional microglia. Moreover, these microglia activate astrocytes, which in turn, damage neurons. Thus, lack of PGRN leads to disrupted health and function of both neurons and microglia and if not corrected, leads to rapid neurodegeneration.

Figure 3. PGRN deficiency disrupts homeostasis between microglia and neurons, and promotes neurodegeneration during aging.

SORT1 Controls PGRN Levels in the Body

Human and mouse genetic studies have identified the neurotrophic factor PGRN degrading receptor Sortilin (SORT1) as a major negative regulator of PGRN levels in plasma and the brain. SORT1 is a sorting receptor on the cell surface and on the endoplasmic reticulum-Golgi apparatus within the cell. SORT1 binds to extracellular PGRN in the plasma and brain and transports it into cells for degradation by the lysosome resulting in decreasing levels of extracellular PGRN. SORT1 deficiency increases PGRN plasma and brain levels by two to three-fold in mouse models, while variants that modestly reduce expression of SORT1 increase the level of PGRN in humans.

Moreover, genetic loss of SORT1 in mice does not lead to the adverse effects associated with genetic loss of PGRN, and PGRN continues to function as expected in the absence of SORT1. These studies and others have indicated to us that blocking SORT1 with a pharmacological agent could be a safe and effective approach in increasing the level of functional PGRN in the brain.

We have developed two distinct product candidates that target SORT1, AL001 and AL101, designed to increase PGRN levels in the brain of patients to counteract the damage sustained due to low PGRN levels in neurodegenerative disorders. Our first product candidate, AL001, is intended to treat orphan disorders, including genetic forms of FTD such as in patients that are missing a functional copy of the PGRN gene (FTD-GRN). Our second PGRN product candidate, AL101, is intended to treat widely prevalent neurodegenerative disorders such as Alzheimer’s disease and Parkinson’s disease, in addition to FTD. We have partnered with GSK to develop and commercialize our PGRN product candidates. For more information on our collaboration with GSK see the section titled “Business—Strategic Alliance with GSK.”

AL001 and AL101 received orphan drug designation from the FDA for the treatment of FTD, as well as Fast Track designation for the treatment of patients with FTD-GRN. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of market exclusivity. This exclusivity precludes the FDA from approving another marketing application for the same drug for the same indication for that time period, unless the later product is clinically superior. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Fast Track designation is designed to facilitate the development and expedite the review of therapies which treat serious conditions and fill an unmet medical need. Programs with Fast Track designation may benefit from early and frequent communications with the FDA, potential priority review, and additionally, a rolling submission of the marketing application.

AL001 for the Treatment of FTD

Our first product candidate, AL001, is a humanized recombinant monoclonal antibody that increases the levels of PGRN in the brains of FTD-GRN patients. Administered via intravenous peripheral infusion, AL001 functions by shutting down the SORT1 degradation mechanism for PGRN and increasing the circulating half-life of the functional PGRN in the brain. We are initially developing AL001 for the treatment of symptomatic frontotemporal dementia due to a progranulin gene mutation.

Overview of FTD

FTD is a rapidly progressing and severe degenerative brain disease with no approved treatment. FTD is a form of dementia found most frequently in individuals less than 65 years old at time of diagnosis. Patients with FTD exhibit a range of personality-related symptoms, including compulsive behavior, lack of restraint, apathy, and anxiety as well as language and behavioral problems. The rate of disease progression in FTD is faster than in Alzheimer's disease. Average life expectancy in FTD patients is seven to 10 years after the start of symptoms. FTD symptoms have an insidious onset with clinical symptoms usually appearing between 45 to 65 years of age at an average age of 58. Hence, FTD is considered an early-onset dementia as compared to late-onset Alzheimer’s disease, and is more common than Alzheimer’s disease in early-onset dementia under the age of 60 years.

Figure 4. MRI of frontal and temporal atrophy in FTD.

Although FTD was poorly understood and thought to be rare, over the past decade the scientific community has gained a knowledge about the biology of FTD as well as an awareness of disease prevalence. FTD affects roughly 50,000 to 60,000 people in the United States and roughly 110,000 in the European Union. There are multiple heritable forms of FTD; to date, researchers have identified over 70 inherited loss of function mutations in PGRN that lead to FTD. FTD-GRN patients represent 5% to 10% of all people with FTD.

Figure 5. Mutations in a single copy of PGRN result in a 50% or greater decrease in the level of PGRN and result in a greater than 90% probability of developing FTD.

In FTD-GRN patients, inhibition of SORT1 through AL001 represents a potential mechanism to compensate for the over 50% reduction of PGRN. AL001 is intended to reduce the ability of SORT1 to bind to and degrade PGRN, leading to increases in the levels of PGRN by increasing its circulating half-life. We have tested our PGRN program antibodies in various animal models, healthy volunteers, and FTD-GRN patients and have achieved significantly elevated, long-lasting levels of PGRN in the brain after intravenous administration.

Figure 6. Mechanism of action for our PGRN programs. AL001 binds to SORT1 and prevents degradation of PGRN, increasing its circulating half-life significantly. A similar mechanism of action is also applicable for AL101.

Our PGRN Product Candidates Development Plan and Clinical Trial Results to Date

AL001 is currently being studied in a global pivotal Phase 3 trial in both at-risk and symptomatic participants with FTD-GRN, named INFRONT-3. The randomized, double-blind, placebo-controlled trial will enroll up to 180 FTD-GRN mutation carriers across approximately 50 clinical sites in the United States, Canada, Europe and Australia. Symptomatic and at-risk participants will be randomized to receive AL001 or placebo intravenously every four weeks. Participants will also be given the option to continue receiving treatment in an open-label extension

study. The primary endpoint of the pivotal Phase 3 trial is to measure the effect of AL001 on clinical decline by utilizing the CDR® plus NACC FTLD-SB assessment, which evaluates clinical impairments in behavior, language, memory, judgment, and functional activities in trial participants. In addition, the Phase 3 trial will assess secondary clinical endpoints, multiple biomarkers and safety.

In 2021, we presented the most comprehensive dataset generated to date for AL001 from our ongoing open-label Phase 2 INFRONT-2 clinical trial. INFRONT-2 was designed to establish the safety and tolerability of chronic administration of AL001 at therapeutic doses, and also measured biomarkers of disease and clinical outcomes. Results from up to twelve symptomatic FTD-GRN patients treated over twelve months in an open-label study showed that AL001 was well tolerated. Treatment with AL001 rapidly restored progranulin levels to normal ranges in both plasma and CSF for the duration of treatment.

Figure 7. AL001 treatment restores PGRN levels back to normal range in symptomatic FTD-GRN patients enrolled in our Phase 2 trial.

In addition to reviewing PGRN levels in plasma and CSF, we evaluated disease-associated proteins, including lysosomal (e.g., CTSD, LAMP1), complement (C1QB), and astrogliosis (GFAP) biomarkers along with neurofilament light chain (NfL). In our Phase 2 trial results presented in 2021, multiple of these disease-relevant

biomarkers of lysosomal function, complement activation, astrogliosis, and neuronal health trended toward normalization or remained stable over twelve months of treatment compared to baseline and age-matched controls.

Figure 8. AL001 treatment normalizes lysosomal and complement biomarkers in CSF symptomatic FTD-GRN patients enrolled in our Phase 2 trial. (1) The control group included N = 44 age-matched procured control samples, (2) at Baseline N = 11 FTD-GRN participants, (3) at 6 months treatment with AL001 N = 9 FTD-GRN participants, and (4) at 12 months treatment with AL001 N = 10 FTD-GRN participants

Figure 9. AL001 treatment decreases GFAP levels towards normal levels in plasma and CSF of symptomatic FTD-GRN participants enrolled in our Phase 2 trial, suggesting a reduction in astrogliosis.

Figure 10. NfL levels in plasma and CSF are stable over 12 months in AL001-treated symptomatic FTD-GRN participants enrolled in our Phase 2 trial.

To provide context for the clinical outcomes observed in the open-label INFRONT-2 trial, a matched control cohort of ten FTD-GRN participants from the Genetic FTD Initiative (GENFI2) was created using the propensity score matching technique. These ten GENFI2 patients were identified based on the CDR® NACC FTLD SB at baseline and further refined by matching based on age, NfL levels, and clinical diagnosis at baseline, all done on a blinded basis without access to longitudinal results.

Using volumetric MRI, we found a greater than 10% reduction in the atrophy rates in favor of the AL001 treated FTD-GRN patient population for the whole brain and frontotemporal cortex measures, and an approximately 50% reduction in the rate of ventricular enlargement, relative to the matched control GENFI2 cohort of FTD-GRN.

Figure 11. vMRI data suggest slowing of ventricular enlargement and brain atrophy in AL001 treated FTD-GRN patients enrolled in our Phase 2 trial.

In the Phase 2 trial, we also assessed clinical outcomes using the CDR® plus NACC FTLD-SB scale. The CDR® plus NACC FTLD-SB is the Clinical Dementia Rating Scale plus National Alzheimer’s Coordinating Center

frontotemporal lobar degeneration sum of boxes rating scale developed for patients with FTD. AL001 treatment was estimated to slow disease progression by 48% in 12 patients at twelve months.

Figure 12. Treatment with AL001 showed a slowing of clinical progression in FTD-GRN patients enrolled in our Phase 2 trial relative to matched GENFI2 controls. Random Coefficient Model with Repeated Measurements including baseline & all available post-baseline measurements up to 12 months.

In prior clinical trials, AL001 was well tolerated and demonstrated proof of mechanism. In our Phase 1a trial (n=50) in healthy volunteers, AL001 was well tolerated. In the Phase 1b portion of the trial (n=14) in FTD-GRN patients, there was a statistically significant increase in PGRN levels relative to baseline when compared to pooled placebo in plasma and in CSF at the prespecified follow-up time point. In addition, results from these Phase 1 studies showed that AL001 was generally well tolerated, with no drug-related serious adverse events or dose-limiting adverse events reported in the trial.

Figure 13. AL001 restores PGRN levels in symptomatic and asymptomatic FTD-GRN patients back to the normal range as seen in healthy volunteers.

Potential Additional Applications for Our PGRN Program

Beyond FTD-GRN, we believe AL001 has the potential to treat other rare diseases that share pathological mechanisms with FTD-GRN. In order to treat any other neurodegenerative diseases and the broader FTD patient population, we will be required to conduct additional clinical studies to obtain the applicable approvals for that

specific patient population. We enrolled an additional genetic subset of FTD patients (FTD-C9orf72) in our open-label Phase 2 clinical trial of AL001 and may expand to additional indications in the future.

Both decreased progranulin levels and mutations in the chromosome 9 open reading frame 72 (C9orf72) gene are associated with abnormal accumulation of the TAR DNA-binding protein 43 (TDP-43). Excess aggregation of TDP-43 in brain cells is thought to lead to neuronal cell death and is associated with multiple neurodegenerative diseases, including both FTD-C9orf72 and ALS.

In 2021 we initiated a Phase 2 clinical trial evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of AL001 in people with ALS who carry a C9orf72 mutation. In preclinical studies using multiple models of acute and chronic neurodegeneration, increasing progranulin levels has been shown in the literature to reverse and be protective against TDP-43 pathology.

Overview of ALS

ALS is a devastating, fatal, progressive neurodegenerative disorder. In ALS, the motor neurons in the brain and spinal cord die, resulting in weakness, muscle atrophy, paralysis and frequently, cognitive impairment, before resulting in death from respiratory failure. Each year, more than 5,000 people in the U.S. are diagnosed with ALS and an estimated 20,000 are living with the disease. Mutations within multiple genes, including the C9orf72 gene, are believed to cause the disease. Such mutations can lead to an accumulation of TDP-43 in the cells resulting in neuronal death and an estimated 95% of ALS cases are linked to TDP-43 pathology. Approximately 40-50% of all familial ALS and up to 10% of sporadic ALS cases are attributed to the C9orf72 mutation. Currently approved medications for ALS confer only a modest survival benefit and new treatment options are urgently needed.

AL101 for the Treatment of Alzheimer’s Disease and Parkinson’s Disease

We are developing a second product candidate in our PGRN programs, AL101, a humanized recombinant monoclonal antibody that also targets SORT1 and is designed to elevate progranulin levels similar to AL001, but with the potential for easier administration or less frequent dosing. We are developing AL101 to target large chronic neurodegenerative diseases, such as Alzheimer’s disease and Parkinson’s disease.

Polymorphic mutations that moderately reduce the expression levels of PGRN have been shown to increase the risk of developing Alzheimer’s disease and Parkinson’s disease, and increased PGRN levels have been demonstrated to be protective for these diseases in animal models.

In 2021 we presented interim data from our on-going Phase 1 clinical trial testing the safety, tolerability, pharmacokinetics, pharmacodynamics and bioavailability of single doses of intravenously or subcutaneously administered AL101 in healthy volunteers. AL101 was found to be generally well tolerated. Further, we believe study results show proof of mechanism for AL101 given that increases in progranulin levels were observed in the periphery and the brain persisting for one month. We are continuing to enroll additional cohorts to test further dosages of AL101 administered intravenously and subcutaneously and expect data to be available for these cohorts in 2022.

Overview of Alzheimer’s Disease

Alzheimer’s disease is a chronic neurodegenerative disease that usually starts slowly in people over 65 years of age and worsens over time. It is the most common cause of dementia, accounting for 60% to 70% of all cases. The most common early symptom of Alzheimer’s disease is difficulty in remembering recent events. As the disease advances, symptoms can include problems with language, disorientation, mood swings, loss of motivation, failure to manage self-care, and behavioral issues. As a person’s condition declines, they often withdraw from family and society. Gradually, bodily functions are lost, leading to death. Although the speed of progression can vary, the typical life expectancy following diagnosis is eight to ten years.

While estimates of the prevalence of Alzheimer’s disease vary, the Alzheimer’s Association estimates that in 2020, there were more than five million Americans ages 65 and older suffering from Alzheimer’s disease and that number is projected to nearly triple by 2060. Alzheimer’s disease is the sixth leading cause of death in the United States and the fifth-leading cause of death for those ages 65 and older.

In addition to its debilitating effect on patients’ cognition and day-to-day functioning, Alzheimer’s disease places a significant burden on the healthcare system. According to the Alzheimer’s Association, the aggregate cost of care in 2020 for patients with Alzheimer’s disease and other types of dementia in the United States was estimated to be $305 billion, nearly two-thirds of which is borne by the Medicare system. Total payments for health care, long-term care, and hospice care for people with Alzheimer’s and other dementias in the United States are projected to increase to more than $1.1 trillion in 2050.

Overview of Parkinson’s Disease

Parkinson’s disease is a long-term degenerative disorder of the central nervous system that mainly affects the motor system. Early in the disease, the most obvious symptoms are shaking, rigidity, slowness of movement, and difficulty with walking. Cognitive and behavioral problems may also occur. Dementia becomes common in the advanced stages of the disease. Depression and anxiety are also common, occurring in more than a third of people with Parkinson’s disease. Other symptoms include sensory, sleep, and emotional problems. Parkinson’s disease typically occurs in people over the age of 60. The average life expectancy following diagnosis is between three to 10 years after the onset of symptoms.

There is no disease modifying treatment for Parkinson’s disease, and the options for patients are limited to treatments that improve symptoms. Initial treatment is typically with the anti-Parkinson’s drug medication levodopa, with dopamine agonists being used once levodopa becomes less effective. As the disease progresses and neurons continue to be lost, these medications become less effective while at the same time they produce a complication marked by involuntary writhing movements.

According to the Parkinson’s Foundation, more than 10 million people worldwide are living with Parkinson’s disease. Approximately 60,000 Americans are diagnosed with Parkinson’s disease each year and an estimated one million Americans will be living with Parkinson’s disease by the year 2040. According to the Parkinson’s Foundation, the combined direct and indirect cost of Parkinson’s, including treatment, social security payments and lost income, is estimated to be nearly $52 billion per year in the United States alone. It is estimated that by 2040, over 12 million people globally will have Parkinson’s disease.

Our TREM2 Program

TREM2 is a transmembrane receptor protein that is expressed on a subset of innate immune cells and selectively on microglia in the brain. TREM2 on microglia cells is thought to promote improved cell migration to the site of injury, improved cell survival, increased phagocytosis, and increased cell proliferation. Rare individuals with homozygous TREM2 mutations, or mutations on both chromosomal copies, may develop neurodegeneration by the age of 40 with an average lifespan of 10 years following diagnosis. A gene variant in one of the two copies of TREM2 is found to increase the risk of Alzheimer’s disease by threefold. Not only do mutations in a single copy of TREM2 increase the risk of Alzheimer’s disease significantly, but Alzheimer’s disease patients with TREM2 mutations exhibit an earlier onset of symptoms by three years and an increased rate of brain volume loss compared to individuals without such mutation. Evidence also suggests that a gain of function mutation leading to increased expression of TREM2 confers a protective phenotype against Alzheimer’s disease.

The discovery of strong genetic linkage of TREM2 to Alzheimer’s disease in 2013 was one of the first examples in which large scale genomic analyses were used to identify a rare gene variation and link it to an increase in the risk of late-onset Alzheimer’s disease.

TREM2 binds to membrane lipids and lipoproteins such as Apolipoprotein E (ApoE) which are normally found in the brain. Polymorphisms in the gene for ApoE are also known to significantly increase the risk of development of Alzheimer’s disease and are the single highest risk factor for Alzheimer’s disease.

AL002 for the Treatment of Alzheimer’s Disease

Our product candidate, AL002, is a humanized, TREM2 activating, monoclonal antibody that is intended to be delivered by intravenous, peripheral infusion. AL002 is a microglia cell regulator that modulates the TREM2

receptorand is being developed for the treatment of Alzheimer’s disease in collaboration with AbbVie. For more information on our collaboration with AbbVie see the section titled “Business—Strategic Alliance with AbbVie.”

Figure 14. Mechanism of action of our TREM2 activating product candidate AL002.

There are currently no cures for Alzheimer’s disease. One therapy, directed at an underlying pathology of the disease, has been approved by the FDA using Accelerated Approval based on its effect on a surrogate endpoint, the reduction of amyloid-beta plaques. There are only two classes of approved therapies for symptomatic treatment: acetylcholinesterase inhibitors and glutamatergic modulators. These drugs are designed to help preserve neuronal communication, but only provide temporary benefit and do not slow or halt neuronal death. In addition, antidepressants and antipsychotics are often prescribed off-label to treat the symptoms of severe Alzheimer’s disease in patients suffering from agitation, aggressive behaviors, psychosis, and depression.

Recent drug candidates under development for Alzheimer’s disease include those focused on blocking synthesis, enhancing clearance or disaggregating misfolded amyloid-beta or TAU proteins in the brain, reversing chronic inflammation, and repairing vascular dysfunction, metabolic dysregulation, as well as neurotoxicity. Almost all of these candidates were designed to target just one of the multiple Alzheimer’s disease pathologies, and most of these drug candidates have so far failed to demonstrate any significant benefit.

Although amyloid-beta plaques and TAU protein in the brain represent physical pathologies of the disease and are believed to cause a loss of neuronal connectivity in the brain and neuronal death, recent scientific data paints a more complex picture. We believe more efficacious therapies will likely require addressing multiple pathologies including those associated with microglial failure.

Our TREM2 Clinical Program

In January 2021, we initiated our Phase 2 trial in Alzheimer’s disease patients in early stages of the disease. The randomized, double-blind, placebo-controlled, dose-ranging, multi-center Phase 2 trial will enroll approximately 265 participants with early AD at up to 90 sites globally. The primary endpoint of the Phase 2 trial will measure disease progression utilizing the Clinical Dementia Rating Sum of Boxes (CDR-SB). The trial will also measure multiple fluid and imaging biomarkers, and assess several secondary clinical, pharmacokinetic and pharmacodynamic endpoints, as well as safety to generate data enabling pivotal Phase 3 studies. In our Phase 1

clinical trial, AL002 demonstrated tolerability, target engagement, and proof-of-mechanism in the central nervous systems of healthy volunteers and Alzheimer's disease patients.

ARIA have been observed in our ongoing INVOKE-2 Phase 2 clinical trial in Alzheimer’s disease. ARIA are MRI findings suggestive of vasogenic edema or hemosiderin deposits. These conditions are known to occur in Alzheimer’s disease patients and typically resolve or stabilize within four to 16 weeks with or without treatment. The risk of ARIA has been shown to increase in this patient population with the administration of certain Alzheimer's disease therapeutics.

In addition to voluntary protocol amendments put in place last year to mitigate risks associated with ARIA, we have discontinued dosing of APOE e4/e4 homozygotes currently in our INVOKE-2 Phase 2 clinical trial. We also plan to submit an additional voluntary amendment to the trial protocol to exclude APOE e4/e4 homozygotes from this trial. The potential impact, if any, of this protocol amendment on timing to complete enrollment of the INVOKE-2 Phase 2 clinical trial is currently being assessed. We are conducting this study under the guidance of an IDMC, which is allowed to review unblinded data and to make trial recommendations. We, along with the IDMC, will continue to monitor the INVOKE-2 Phase 2 clinical trial, and if necessary, we will make additional modifications to the study protocol.

In 2019, we completed the Phase 1a portion (n=56) of a clinical trial in healthy volunteers with AL002. AL002 was well tolerated in the single ascending dose part of the Phase 1 trial. In addition, a dose dependent and statistically significant change in both soluble TREM2 (sTREM2) and downstream biomarkers for microglia functionality in CSF were observed upon treatment, indicating both target engagement and proof-of-mechanism in healthy volunteers. Based on the tolerability observed in the Phase 1a healthy volunteer trial, as well as encouraging biomarker data, we initiated the Phase 1b portion of the trial with AL002 in people with Alzheimer’s disease. However, based on the data collected to date in preclinical studies as well as in healthy volunteers, and in alignment with our partner AbbVie, we closed enrollment in the Phase 1b trial, which was impacted by the COVID-19 pandemic, and shifted to initiating our Phase 2 trial.

Figure 15. In healthy volunteers, a dose dependent decrease in sTREM2 and an increase in CSF-1R, a biomarker of microglial activation was observed in the AL002 Phase 1 clinical trial. CSF samples were taken from the five highest dose cohorts. The data shown are derived from analysis of CSF samples from 34 healthy volunteers (* denotes p<0.05 by T-test, *** denotes p<0.001 by T-test).

Our TREM2 Preclinical Data

AL002 binds to TREM2 on the surface of microglia and is designed to optimize microglial activity through the phosphorylation of Spleen Associated Tyrosine Kinase (Syk). With prominent academic collaborators, we

demonstrated that AL002s, an antibody that is functionally similar to AL002 but cross-reacts to the mouse TREM2, can normalize gene expression signature associated with Alzheimer’s disease and reduce pathology in a mouse model of Alzheimer’s disease. Furthermore, AL002 was shown to induce microglial proliferation, increase microglial survival and decrease dystrophic neurites associated with damaged neurons in an aggressive mouse model of Alzheimer’s disease that expresses either the normal or genetic risk variant of the human TREM2.

Figure 16. AL002s statistically significantly increases the number of microglia around amyloid-beta plaques (middle) and reduces the area occupied by amyloid-beta plaques (right) in a mouse model of Alzheimer’s disease. (**** indicates p<0.001 by T-test)

Figure 17. AL002s statistically significantly improves cognitive deficit in a mouse model of Alzheimer’s disease. (**** indicates p<0.0001 by T-test)

Our SIGLEC 3 Program

Large scale genomic profiling of datasets from Alzheimer’s disease patients has been used to identify the association between certain variants of SIGLEC 3 and increased risk to develop Alzheimer’s disease. SIGLEC 3 is an inhibitory receptor expressed on microglia and acts as the brakes of the immune system in the brain, slowing down microglial activity. Excessive inhibition of the microglia by the disease risk variant of SIGLEC 3, which increases expression of the inhibitory SIGLEC 3 receptor on microglia, leads to reduced functionality of the myeloid cells, and consequently, increased deposition of amyloid-beta plaques and accelerated loss of tissue in the brain of Alzheimer’s disease patients that carry this risk variant.

Our analysis further showed that the natural inhibitory ligands for SIGLEC 3, which are required for activation of SIGLEC 3, are upregulated in the brain of Alzheimer’s disease patients, further reducing the functionality of the microglia.

Consistent with the genetic findings in humans, Alzheimer’s disease mouse models, in which the gene for SIGLEC 3 was genetically ablated, have microglia with improved phagocytosis of beta amyloid and displayed fewer amyloid-beta plaques compared to the same Alzheimer’s disease model that expressed the mouse SIGLEC 3 gene. In line with the findings that the presence of SIGLEC 3 increased the severity of Alzheimer’s disease, a reduced number of certain disease associated microglia that are thought to counteract the progression of Alzheimer’s disease was observed when the human SIGLEC 3 in Alzheimer’s disease mouse models was over-expressed.

Taken together, this data supports the hypothesis that blocking the function of SIGLEC 3 would increase the number of beneficial microglia and elicit a therapeutic benefit in Alzheimer’s disease.

AL003 for Treatment of Alzheimer’s Disease

Our product candidate, AL003, is a SIGLEC 3 blocking, monoclonal antibody that is intended to be delivered by intravenous, peripheral infusion. The function of SIGLEC 3 on microglia is similar to the immune inhibitory function of PD-1, an immune checkpoint, on T-cells. AL003 acts similarly to checkpoint inhibitors such as drugs targeting PD-1, which have been employed successfully in immunotherapy of cancer. Both checkpoint inhibitor approaches aim to remove the “brakes” on the immune system and, in the case of AL003, thereby enable increased activation of the microglia cells of the brain to address neurodegenerative pathologies. AL003 is being developed for the treatment of Alzheimer’s disease in collaboration with AbbVie. For more information on our collaboration with AbbVie see the section titled “Business—Strategic Alliance with AbbVie.”

Figure 18. Mechanism of action of our SIGLEC 3 blocking product candidate, AL003.

Our SIGLEC 3 Preclinical and Clinical Data

In 2021 we presented data from the Phase 1 trial of AL003 in healthy volunteers and Alzheimer’s disease patients at the CTAD medical meeting. AL003 was found to be well tolerated up to and including once-monthly intravenous doses of 15 mg/kg. AL003 demonstrated target engagement of CD33 in both blood and central nervous system (CNS) compartments at well tolerated doses.

Figure 19. AL003 demonstrated target engagement in both blood and CNS compartments across the tolerated dose range.

The activity of AL003 in mice was assessed in immunodeficient mice containing human immune cells to recapitulate the human immune system as closely as possible. AL003 injected into the bloodstream of these mice blocks SIGLEC 3 on immune cells. In addition, a single intraperitoneal injection of AL003 into mice that express the human SIGLEC 3 in microglia leads to a long-lasting, statistically significant blockade of SIGLEC 3 on the cell surface of microglia in the brain, indicating that AL003 is potentially able to cross the blood brain barrier and exert its desired activity.

Our MS4A Program

MS4A is among the most prominent genetic risk locus for late-onset Alzheimer’s disease. Risk variants of MS4A locus are associated with an increase in the prevalence of Alzheimer’s disease and a decrease in the age of onset. MS4A gene family members encode a transmembrane receptor protein that is expressed selectively in microglia in the brain and is associated with control of microglia functionality and potentially with microglia viability. Our AL044 product candidate was designed to counteract the risk variants of the MS4A gene family and to functionally convert the risk variants of the MS4A gene family to the protective variant. We expect that AL044 will mimic and exceed the beneficial activity of the protective MS4A variant, which we believe may potentially decrease the progression of Alzheimer’s disease.

Figure 20. AL044 is designed to mimic and exceed the beneficial activity of the protective MS4A variant, which we believe may stop or slow the progression of Alzheimer’s disease.

AL044 for the Treatment of Alzheimer’s Disease

AL044 is the latest Alector-discovered humanized, MS4A function modulating monoclonal antibody for neurodegenerative diseases. AL044 targets the MS4A gene family. MS4A has been identified as a genetic risk locus for Alzheimer’s disease. We intend to develop AL044 for the treatment of Alzheimer’s disease and potentially orphan neurodegenerative indications. We expect to initiate first-in-human trials for AL044 in 2022. We own worldwide rights to AL044.

Alector's Emerging Innate Immuno-oncology Pipeline

Immuno-oncology

We are also expanding our discovery platform to other indications, such as the field of immuno-oncology. We believe that products focused on innate immune biology will complement and expand the efficacy of current immuno-oncology drugs that target the adaptive immune system. Microglia display similar gene expression and function to the innate cells of the peripheral, or non-brain, immune system. These peripheral innate immune cells such as macrophages, monocytes, NK cells, and others, likely play a significant role in multiple chronic diseases including cancer, inflammation, and autoimmune disorders. We are leveraging our expertise in the innate immune system to develop additional innate immune checkpoint focused programs, including programs targeting the SIRP protein family and the Siglec protein family, for peripheral disorders, particularly cancer. In 2022, we expect the first two of our innate immuno-oncology programs, AL008 and AL009, to advance into the clinic.

Figure 21. Neurodegeneration and cancer converge at the innate immune system. We believe substantial functional overlap exists between tumor associated macrophages and microglia.

AL008, Our SIRP-alpha Program

AL008 is a monoclonal antibody that inhibits SIRP-alpha. AL008's dual mechanism of action non-competitively antagonizes the CD47-SIRP-alpha pathway by inducing the internalization and degradation of the inhibitory receptor on macrophages to relieve immune suppression (shut down "don't eat me signal") while also engaging Fc gamma receptors to promote immuno-stimulatory pathways that drive anti-tumor immunity. By targeting the SIRP-alpha receptor, which is primarily expressed on myeloid cells, we believe AL008 may be able to avoid the antigen sink and on-target clinical adverse effects observed with certain CD47-targeting agents. Furthermore, AL008 is designed to bind selectively to SIRP-alpha without cross-reacting to other SIRP family members, such as SIRP-gamma. This specificity allows AL008 to antagonize the inhibitory CD47-SIRP-alpha pathway while preserving the T cell-activating CD47-SIRP-gamma pathway. We entered into a regional licensing agreement with Innovent to develop and commercialize AL008 in China and the Phase 1 first-in-human clinical trial led by Innovent is expected to commence in China in 2022. We own the rest-of-world rights to AL008.

AL009, Our Multi Siglec Program

AL009 is our second innate immuno-oncology program and is a multi Siglec inhibitor that works to enhance both the innate and adaptive immune system response to tumors by blocking a critical glycan checkpoint pathway that drives immune suppression. AL009 is a targeted sialic acid trap that is designed to interrupt Siglec inhibitory signals preferentially on innate immune cells in order to confer therapeutic benefit in oncology indications. We plan to initiate Phase 1 first-in-human clinical studies in the United States in 2022. We own worldwide rights to AL009.

Combination Therapies

Our therapies are also likely to act in conjunction with each other or with other experimental drugs that are designed to remove pathological proteins. Therapies such as antibodies against amyloid-beta, the TAU filaments or misfolded alpha-synuclein protein are designed to tag the pathological proteins and recruit microglia to dispose of the drug pathological protein complex. Aging microglia are less likely to perform this function effectively, and our immuno-neurology therapies could ameliorate this deficiency. We are continuing to explore various combination strategies in preclinical models and will, in the future, consider moving this strategy into the clinic based upon results from preclinical models.

Strategic Alliance with GSK

Overview

In July 2021, we entered into a Collaboration and License Agreement with GSK, pursuant to which we and GSK will collaborate on the global development and commercialization of progranulin-elevating monoclonal antibodies, including AL001 and AL101. The GSK Agreement was made effective on August 17, 2021.

Under the terms of the GSK Agreement, we received $700 million in upfront payments, of which $500 million was received in August 2021 and $200 million was received in January 2022. In addition, we may be eligible to receive up to an additional $1.5 billion in clinical development, regulatory, and commercial launch-related milestone payments. In the United States, the parties will equally share profits and losses from commercialization of AL001 and AL101. Outside of the United States, we will be eligible for double-digit tiered royalties.

The parties will jointly develop AL001 and AL101. We will lead the global clinical development of AL001 and AL101, other than with respect to Phase 3 clinical trials for Alzheimer’s disease and Parkinson’s disease and other non-orphan indications, which will be led by GSK. Development costs will be shared 60% by GSK and 40% by us, except that we will solely bear the development costs of the initial Phase 2 clinical trials under the development plan, and the parties will share manufacturing development costs equally.

In the United States, the parties will be jointly responsible for commercialization of AL001 and AL101, with us leading the commercialization for orphan indications and GSK leading the commercialization for Alzheimer’s disease and Parkinson’s disease and other non-orphan indications. Outside of the United States, GSK will be solely responsible for commercialization of AL001 and AL101 for all indications. We may opt out of the sharing of development costs and of profit and losses from commercialization in the United States on a product-by-product basis. In such case, we will no longer conduct development or commercialization of that product and the Company will receive tiered royalties on net sales in the United States instead of a share of profits or losses. GSK may terminate the agreement with 180 days' notice at any time, but the Company does not need to repay any portion of the payments received.

Governance. The collaboration is governed by a joint steering committee (JSC). The JSC may establish additional subcommittees to oversee particular projects or activities. Subject to limitations specified in the GSK Agreement, if the applicable governance committee is unable to make a decision by consensus and the parties are unable to resolve the issue through escalation to specified senior executive officers of the parties, then the issue is escalated to an alternative dispute resolution subject to final decision-making rights retained by each party.

Exclusivity. During the term of the GSK Agreement, each of Alector and GSK are subject to exclusivity requirements prohibiting certain activities outside of the GSK Agreement directed to targets under the GSK Agreement.

Intellectual Property. Ownership of intellectual property created in connection with the GSK Agreement is generally determined on the basis of inventorship. Generally, we have the first right to control prosecution and maintenance of licensed patents, including patents developed solely by us or jointly by the parties, in the United States, and GSK has the first right to control prosecution and maintenance of such patents outside the United States. GSK has the first right to prosecute infringement of such patents by certain third-party products. The parties shall mutually agree on which party shall control the defense against claims that a product developed under either of the programs that are the subject of the GSK Agreement infringes third-party intellectual property rights, with the party against whom such claims have been filed having the first right to defend in the absence of such mutual agreement.

Term and Termination. At any point during the term of the GSK Agreement, after a specified notice period, GSK can terminate the GSK Agreement in its entirety for convenience. Additionally, GSK or we can terminate the GSK Agreement in connection with a material breach of the GSK Agreement by the other party that remains uncured for a specified period of time.

Strategic Alliance with AbbVie

Overview

In October 2017, we entered into the Co-Development and Option Agreement with AbbVie. The primary goal of our global strategic collaboration with AbbVie is to co-develop and commercialize therapeutics to treat Alzheimer’s and other neurodegenerative diseases.

Under the AbbVie Agreement, we granted AbbVie an exclusive option to global development and commercialization for our TREM2 and SIGLEC 3 programs. The terms of the AbbVie Agreement included initial upfront payments of $205.0 million and $20.0 million from the sale of shares of our stock, and if AbbVie exercises its options for both programs, we are eligible for up to an additional $985.6 million in option exercise and milestone payments. Following AbbVie’s exercise of its option for a program, we and AbbVie will share the development costs and will split global profits after marketing approval. However, following AbbVie’s option exercise for a program, we may opt out of sharing in development costs and profits or losses from that program and instead receive a tiered royalty on sales of products from that program. We are responsible for the design and execution of Phase 1 and Phase 2 studies, taking advantage of our significant in-house expertise in running clinical trials in Alzheimer’s disease. Following its exercise of an option for a program, AbbVie will be responsible for certain development activities and global commercialization, taking advantage of its global clinical trial expertise and commercialization networks. Through this partnership, we aim to leverage the strengths of both organizations efficiently to best achieve the desired outcome.

Exercise of options. AbbVie may exercise its option for a program at any time until the expiration of the option term for that program. For each program, the option term ends following a fixed period after AbbVie’s receipt of the data package after completion of Phase 2 clinical trials that includes certain information relating to the applicable program’s research and development activities. If AbbVie fails to exercise its option during the option term for a product candidate, we will retain all rights to that program. If AbbVie exercises its option for a program, then AbbVie will lead development and commercialization activities worldwide. Once AbbVie opts in with respect to a given product candidate, AbbVie must use commercially reasonable efforts to develop and commercialize the corresponding product globally.

Governance. The collaboration is governed by a joint steering committee (JSC). The JSC may establish additional subcommittees to oversee particular projects or activities. Subject to limitations specified in the AbbVie Agreement, if the applicable governance committee is unable to make a decision by consensus and the parties are unable to resolve the issue through escalation to specified senior executive officers of the parties, then the issue is escalated to an alternative dispute resolution subject to final decision-making rights retained by each party.

Exclusivity. During the term of the AbbVie Agreement, we and AbbVie are subject to exclusivity requirements prohibiting certain activities outside of the AbbVie Agreement directed to targets under the AbbVie Agreement.

Intellectual Property. Ownership of intellectual property created in connection with the AbbVie Agreement is generally determined on the basis of inventorship. Generally, each party has the first right to prosecute and maintain its own patents. We generally have the first right to prosecute and maintain joint patents prior to AbbVie’s exercise of its option for the program relating to such patent, and AbbVie has the right following its exercise of such option. AbbVie has the first right to prosecute any infringement of jointly held patents developed under the AbbVie Agreement and our patents that are licensed under the AbbVie Agreement. Additionally, AbbVie has the sole right to prosecute its own patents. AbbVie has the first right to defend against claims that a product developed under either of the programs that are the subject of the AbbVie Agreement infringe third-party intellectual property rights.

Term and Termination. At any point during the term of the AbbVie Agreement, including during the research, development, and clinical trial process, AbbVie can terminate the AbbVie Agreement in its entirety, or with respect to either program under the AbbVie Agreement, for convenience. In that event, all rights related to the applicable program revert to us. Additionally, AbbVie or we can terminate the AbbVie Agreement in connection with a material breach of the AbbVie Agreement by the other party that remains uncured for a specified period of time.

Adimab Collaboration Agreements

Overview

In 2014, we entered into the 2014 Adimab Collaboration Agreement. Under the 2014 Adimab Agreement, we are required to fund, and we and Adimab LLC (Adimab) are required to use commercially reasonable efforts to conduct, certain research to discover and optimize antibodies directed against targets selected by us. We are developing antibodies discovered by Adimab in our AL001 and AL101 product candidates, and we are developing antibodies optimized by Adimab in our AL002 and AL003 product candidates.

Governance. Our collaboration with Adimab is governed by a research committee consisting of at least two representatives from each party. The research committee prioritizes among research programs and prepares and finalizes new proposed research plans, among other activities. If the research committee is unable to make a decision by consensus and the parties are unable to resolve the issue through escalation to specified senior executive officers of the parties, then either party may seek arbitration of the matter.

Exclusivity. Pursuant to the 2014 Adimab Agreement, each party is subject to limitations on its ability to use information or material provided by the other outside the scope of the collaboration.

are specifically assigned to one party or the other. For example, patent rights relating to improvements to Adimab’s background platform technology that are invented in the course of the research are assigned to Adimab. Prior to our exercise of the option described below, we and Adimab each grant the other a non-exclusive license to the relevant intellectual property we own to allow each party to carry out its rights and obligations in connection with the research; and except for Adimab’s retained rights to continue using and licensing its own libraries, each party agrees not to practice or license the patents arising out of the research that it owns for any purpose other than to carry out its rights and obligations in connection with the research. Generally, each party has the obligation to prosecute, maintain, defend, and enforce its own patents, but we are subject to certain contractual restrictions on our ability to prosecute, practice, and license certain of our patents that arose out of the research. These restrictions are lifted once we exercise the option described below as to such patents.

Exercise of Options. The 2014 Adimab Agreement granted us an exclusive option to obtain certain rights relating to a specified number of antibodies discovered or optimized by Adimab directed against the targets we selected. The option extended to ownership of patent rights specifically covering the sequences of such antibodies, and the right to obtain worldwide, royalty-bearing, sublicensable licenses under certain technology owned or developed by Adimab to research, develop, make, have made, use, sell, offer to sell, import and export such antibodies and products based on such antibodies for all human therapeutic, prophylactic and diagnostic uses. These licenses are exclusive, except as to Adimab background and platform technology and Adimab’s retained rights to continue using and licensing its own libraries, as to which the licenses are non-exclusive. We have confirmed with Adimab in writing that key patents we have filed relating to the programs partnered with AbbVie claim inventions owned solely by us, and do not include any such background or platform technology of Adimab. All of our options under the 2014 Adimab Agreement have either expired, are in the process of being exercised, or, with respect to multiple targets and hundreds of antibodies (including the target programs partnered with AbbVie), have already been exercised. Upon our exercise of the option with respect to a target, we are subject to an obligation to devote commercially reasonable efforts to commercialize products using the optioned rights to such target. The assigned and licensed patent rights we obtained from these option exercises are described in more detail above under the section titled “Business—Intellectual Property.”

Financial terms. We fund Adimab’s research in connection with our collaboration, in accordance with the terms and limitations described in the 2014 Adimab Agreement. We also have potential milestone payments per program for use of antibodies and low- to mid-single digit royalty payments for commercial sales of products incorporating such antibodies. However, if we enter into any transaction granting rights to the inventions or sell products created as a result of a collaboration with a third party, we have a choice to pay a share of the resulting revenue instead of royalties from such sales.

Term and Termination. We are able to terminate the 2014 Adimab Agreement, in its entirety or with respect to a products or antibodies directed to particular targets, on three months prior written notice to Adimab. In addition, either party can terminate the 2014 Adimab Agreement in its entirety, or, subject to certain limitations, with respect to specific optioned rights, for material breaches that remain uncured after 90 days’ notice to the breaching party. In the case of a termination before expiration of the 2014 Adimab Agreement, we would have certain continuing payment obligations to Adimab, or would be required to adhere to certain restrictions as to the fruits of the collaboration. The 2014 Adimab Agreement expires on the twelfth anniversary of the first commercial sale of the products created under the collaboration, on a product-by-product and country-by-country basis. The licenses we and Adimab granted to each other do not survive, subject to certain limitations.

Overview—2019 Adimab Collaboration Agreement (2019 Adimab Agreement)

In 2019, we entered into another Adimab collaboration agreement. Under the 2019 Adimab Agreement, we are required to fund, and we and Adimab are required to use commercially reasonable efforts to conduct, certain research to discover and optimize antibodies directed against targets selected by us. We have not yet identified any research programs under the 2019 Adimab Agreement.

Governance. Our collaboration with Adimab is governed by a research committee consisting of at least two representatives from each party. The research committee facilitates communication regarding research under the 2019 Adimab Agreement and has the limited authority to amend a research plan in a manner not substantially

affecting the resources required from a party. If the research committee is unable to make a decision by consensus, no decision will be taken.

Exclusivity. Pursuant to the 2019 Adimab Agreement, each party is subject to limitations on its ability to use information or material provided by the other outside the scope of the collaboration.

Intellectual Property. Ownership of intellectual property arising from the research is generally owned by the party that invents or creates the applicable intellectual property, although certain categories of intellectual property are specifically assigned to one party or the other. Certain intellectual property relating to Adimab’s background platform technology including any improvements thereto that are invented in the course of the research are assigned to Adimab. Patents covering antibodies that are the subject of the collaboration are owned by us; however, prior to our exercise of the option described below, we are prohibited from practicing such patents for any purpose other than to perform our research obligations under the 2019 Adimab Agreement. Upon the expiration of the option term described below, in the event we elect not to exercise our option right with respect to an antibody, ownership of such patents is transferred to Adimab. Prior to our exercise of the option described below, we and Adimab each grant the other a non-exclusive license to the relevant intellectual property we own to allow each party to carry out its rights and obligations in connection with the research. Generally, each party has the obligation to prosecute, maintain, defend, and enforce its own patents, but we are subject to certain contractual restrictions on our ability to prosecute, practice, and license certain of our patents that arose out of the research. These restrictions are lifted once we exercise the option described below as to such patents.

Exercise of Options. The 2019 Adimab Agreement granted us an exclusive option to obtain certain rights relating to a specified number of antibodies discovered or optimized by Adimab directed against the targets we selected. The option extends to ownership of the applicable optioned antibody, and the right to obtain worldwide, royalty-bearing, sublicensable non-exclusive licenses under certain technology owned or developed by Adimab to research, develop, make, have made, use, sell, offer to sell, import and export such antibodies and products based on such antibodies for all human therapeutic, prophylactic and diagnostic uses. Upon our exercise of the option with respect to a target, we are subject to an obligation to devote commercially reasonable efforts to commercialize products using the optioned rights to such target.

Financial terms. We fund Adimab’s research in connection with our collaboration, in accordance with the terms and limitations described in the 2019 Adimab Agreement. We are also responsible for certain development fees and, in the event we exercise the option right, we are obligated to pay an option fee. We also have potential milestone payments per product for use of antibodies, subject to certain limitations on total payments owed on any given target, and low-single digit royalty payments for commercial sales of products incorporating such antibodies.

Term and Termination. We are able to terminate the 2019 Adimab Agreement, in its entirety or with respect to a products or antibodies directed to particular targets, on 60 days’ prior written notice to Adimab. In addition, either party can terminate the 2019 Adimab Agreement in its entirety for material breaches that remain uncured after 90 days’ notice to the breaching party. In the case of a termination before expiration of the 2019 Adimab Agreement, we would be prohibited from using the fruits of the collaboration. The 2019 Adimab Agreement expires, on a product-by-product and country-by-country basis, on the later of the twelfth anniversary of the first commercial sale of such product in such country and expiration of the last patent covering such product in such country, or, in the event no product is optioned under the 2019 Adimab Agreement, upon the last to expire option period. Upon expiration, the licenses Adimab granted to us with respect to products for which we have exercised our option will continue on a non-exclusive, royalty-free basis.

Overview—2021 Adimab Collaboration Agreement (2021 Adimab Agreement)

In 2021, we entered into another Adimab collaboration agreement. Under the 2021 Adimab Agreement, we are required to fund antibody engineering research programs with respect to targets selected by us, and both parties are required to use commercially reasonable efforts to conduct such programs. As of execution, we identified one such target, and we may nominate up to five additional targets for additional research programs.

Governance. Our collaboration with Adimab under the 2021 Adimab Agreement is governed by a research committee consisting of at least two representatives from each party. The research committee facilitates

communication regarding research under the 2021 Adimab Agreement and has the limited authority to amend a research plan in a manner that does not substantially affect the resources required from a party. If the research committee is unable to make a decision by consensus, no decision will be taken.

Exclusivity. Pursuant to the 2021 Adimab Agreement, each party is subject to limitations on its ability to use information or materials provided by the other party outside the scope of the collaboration.

Intellectual Property. Ownership of intellectual property arising from the research is generally based on subject matter, with certain categories of intellectual property being specifically assigned to one party or jointly owned, regardless of inventorship.

Exercise of Options. The 2021 Adimab Agreement grants us an exclusive option to obtain a specified number of engineered sequences discovered or optimized by Adimab and directed against targets that we select. If we exercise an option, we would own the applicable optioned sequences and the patents covering them, and we would obtain worldwide, royalty-bearing, sublicensable, non-exclusive licenses under certain technology owned or developed by Adimab to research, develop, make, have made, use, sell, offer to sell, import and export such sequences and products containing such sequences for all human therapeutic, prophylactic and diagnostic uses. Upon our exercise of the option, we must use commercially reasonable efforts to commercialize products containing the optioned sequences.

Financial terms. We fund Adimab’s research in connection with our collaboration and are also responsible for certain development fees, each in accordance with the terms and limitations described in the 2021 Adimab Agreement. We are obligated to pay an option fee for each research program for which we exercise our option. We also have potential milestone payments for products that contain an engineered sequence that was either delivered by Adimab under a research program or was derived therefrom. Finally, subject to certain exceptions and limitations, we are required to pay Adimab low-single digit royalty payments for commercial sales of such products.

Term and Termination. We are able to terminate any research program under the 2021 Adimab Agreement on 60 days’ prior written notice to Adimab. In addition, either party can terminate the 2021 Adimab Agreement in its entirety for material breaches that remain uncured after 90 days’ notice to the breaching party. In the case of a termination before expiration of the 2021 Adimab Agreement, we would be prohibited from using the fruits of the collaboration. If no option is exercised under the 2021 Adimab Agreement, then the 2021 Adimab Agreement expires upon the last to expire option period. If we exercise an option, then the 2021 Adimab Agreement expires, on a product-by-product and country-by-country basis, on the later of the twelfth anniversary of the first commercial sale of such product in such country and expiration of the last of certain patents in such country. Upon expiration, the licenses Adimab granted to us with respect to products for which we have exercised our option will continue on a non-exclusive, royalty-free basis.

Manufacturing

We must manufacture our product candidates for clinical trial use in compliance with cGMP regulations. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our product candidates must meet cGMP requirements and FDA or comparable foreign regulatory authority’s satisfaction before any product is approved for human clinical trial use. Our third-party manufacturers will also be subject to periodic inspections of their respective facilities for general cGMP compliance by the FDA and other foreign authorities. These inspections may include review of procedures and operations used in the testing and manufacture of our products to assess compliance with applicable regulations.

We do not currently have the infrastructure or internal capability to manufacture our product candidates for use in clinical trials and commercialization. We rely, and expect to continue to rely, on third-party cGMP manufacturers or our collaboration partners for the production of our products for human clinical trials in compliance with FDA and other foreign authority regulations for such products. We rely on CDMOs to manufacture and supply our preclinical and clinical materials to be used during the preclinical and clinical development of our product candidates. As part of our broad manufacturing strategy to expedite the manufacturing of our product candidates and minimize manufacturing risk, we currently have established relationships with several CDMOs for the manufacturing of our drug substance or product candidates.

We do not have long-term supply agreements and we purchase our required drug product on a development manufacturing services agreement or purchase order basis. We expect to continue to rely on third-party manufacturers or our collaboration partners for the commercial supply of any of our product candidates for which we obtain marketing approval. We have personnel with significant technical, manufacturing, analytical, quality, regulatory, including cGMP, and project management experience to oversee our third-party manufacturers and to manage manufacturing and quality data and information for regulatory compliance purposes.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations and civil and criminal penalties. Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Any of these actions or events could have a material impact on the availability of our products.

Commercialization Plan

We do not currently have any approved drugs and we do not expect to have any approved drugs in the near term. Therefore, we have no sales, marketing or commercial product distribution capabilities and have no experience as a company in marketing drugs. When, and if any of our product candidates are approved for commercialization, we intend to develop a commercialization infrastructure for those products in the United States, Europe, Asia, and potentially in certain other key markets. We may also rely on partnerships, such as our AbbVie and GSK collaborations, to provide commercialization infrastructure, including sales and marketing and commercial distribution.

Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our strategy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business. Our patent portfolio is intended to cover our product candidates and related components, their methods of use and processes for their manufacture, our proprietary reagents and assays and any other inventions that are commercially important to our business. We also rely on trademarks as well as trade secret protection of our confidential information and know-how relating to our proprietary technology, platforms and product candidates. We believe that we have substantial know-how and trade secrets relating to our technology and product candidates.

As of December 31, 2021, our patent portfolio contains over 50 families, which include 20 issued patents and over 380 pending patent applications, directed to over 20 different targets and/or technologies, that are solely owned or we have rights to exclusive licenses by us. For our product candidates, we generally pursue multilayered patent protection covering the composition of matter based on binding epitopes of the product candidates on the target protein, functional characteristics of the product candidates, degenerative sequence of the product candidates, and/or specific sequence of the product candidates. In addition to composition of matter coverage, we also generally pursue claims directed to methods of making, nucleic acids, formulations, and methods of use of the product candidates. The method of use claims further include claims directed to patient selection criteria, biomarkers, disease subgroups, pharmacodynamic and clinical end-points, and dosage regimes. As further described below, we intend to strengthen the patent protection of our product candidates and technologies through additional patent application filings.

PGRN Programs

We own six patent families directed to our PGRN programs, AL001 and AL101, which include six issued U.S. patents, covering the compositions and uses of our PGRN program product candidates. The first two patent families are expected to expire in 2036, the third patent family is expected to expire in 2039, the fourth patent family is expected to expire in 2040, the fifth patent family is expected to expire in 2041, and the sixth patent family, assuming that the necessary non-provisional patent applications are timely filed and all other applicable

requirements are satisfied for the U.S. provisional patent application, is expected to expire in 2041, in all cases excluding any patent term adjustments and any patent term extensions.

TREM2 Program

We own seven patent families directed to the TREM2 program, which include two issued U.S. patents, covering the compositions and uses of our TREM2 program product candidates. The first patent family is expected to expire in 2035, the second patent family is expected to expire in 2036, the third patent family is expected to expire in 2038, the fourth patent family is expected to expire in 2040, the fifth and sixth patent families are expected to expire in 2041, and the seventh patent family, assuming that the necessary non-provisional patent applications are timely filed and all other applicable requirements are satisfied for the U.S. provisional patent application, is expected to expire in 2042, in all cases excluding any patent term adjustments and any patent term extensions.

SIGLEC 3 Program

We own six patent families directed to the SIGLEC 3 program, which include three issued U.S. patents, covering the compositions and uses of our SIGLEC 3 program product candidates. The first two patent families are expected to expire in 2036, the third patent family is expected to expire in 2038, the fourth patent family is expected to expire in 2039, the fifth patent family is expected to expire in 2040, and the sixth patent family, assuming that the necessary non-provisional patent applications are timely filed and all other applicable requirements are satisfied for the U.S. provisional patent application, is expected to expire in 2042, in all cases excluding any patent term adjustments and any patent term extensions.

MS4A Program

We own two patent families directed to the MS4A program covering the compositions and uses of our MS4A program product candidates. The first patent family is expected to expire in 2039 and the second patent family is expected to expire in 2040.

The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. The Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act) permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory review while the patent is in force. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it, may be extended.

Similar provisions are available in the European Union and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. Expiration dates referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.

We also rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Competition

The biotechnology and pharmaceutical industries, including in the neurodegenerative disease field, are characterized by rapidly advancing technologies, strong competition and an emphasis on intellectual property. We face substantial competition from many different sources, including large and specialty pharmaceutical and biotechnology companies, academic research institutions, governmental agencies and public and private research institutions. Some of the pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of the neurodegenerative disease indications for which we have research programs, including FTD, Alzheimer’s disease, Parkinson’s disease, and ALS, include large companies with significant financial resources, such as Biogen, Eli Lilly, Merck and Roche Holding AG. We believe that the key competitive factors affecting the success of any of our product candidates will include efficacy, safety profile, method of administration, cost, level of promotional activity and intellectual property protection.

Our product candidates will compete with current therapies approved for the treatment of neurodegenerative diseases, which to date have been primarily targeted at treating the symptoms of such diseases rather than halting or slowing the progression of the disease. However, in addition to such currently approved therapies, we believe that our product candidates, if approved, may also compete with other potential therapies intended to halt or slow the progression of neurodegenerative disease that are being developed by a number of companies and institutions.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. Drug Development

In the United States, the FDA regulates drugs under the Food, Drug, and Cosmetic Act (FDCA) and biologics under the FDCA and the Public Health Service Act (PHSA). Both drugs and biologics also are subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Any future product candidates must be approved by the FDA through either a biologics license application (BLA) or new drug application (NDA) process before they may be legally marketed in the United States. The process generally involves the following:

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Completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with GLP;

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Submission to the FDA of an investigational new drug application (IND), which must become effective before human clinical trials may begin;

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Approval by an independent Institutional Review Board (IRB), or ethics committee at each clinical trial site before each trial may be initiated;

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Performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practice (GCP), requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;

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Submission to the FDA of an NDA or BLA;

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A determination by the FDA within 60 days of its receipt of an NDA or Biologics License Application (BLA) to accept the filing for review;

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Satisfactory completion of a FDA pre-approval inspection of the manufacturing facility or facilities where the drug or biologic will be produced to assess compliance with cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug or biologic’s identity, strength, quality, and purity;

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Potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA or BLA;

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FDA review and approval of the NDA or BLA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug or biologic in the United States; and

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Compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy (REMS), and the potential requirement to conduct post-approval studies.

The data required to support an NDA or BLA are generated in two distinct developmental stages: preclinical and clinical. The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for any future product candidates will be granted on a timely basis, or at all.

The preclinical developmental stage generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as studies to evaluate toxicity in animals, which support subsequent clinical testing. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin.

Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until

completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA or BLA. The FDA will accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the trial was conducted in accordance with GCP requirements and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials in the United States generally are conducted in three sequential phases, known as Phase 1, Phase 2, and Phase 3, and may overlap.

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Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, tolerability and safety of the drug.

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Phase 2 clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.

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Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval. These trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug or biologic, findings from animal or in vitro testing that suggest a significant risk for human volunteers and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check-points based on access to certain data from the trial. Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality, and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that our product candidates do not undergo unacceptable deterioration over their shelf life.

As a result of the consequences of the COVID-19 pandemic, the FDA has issued various COVID-19 related guidance documents applicable to biopharmaceutical manufacturers and clinical trial sponsors. For example, in March 2020, the FDA issued a guidance, which the FDA subsequently updated, on conducting clinical trials during the pandemic, which describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical trial report contingency measures implemented to manage the clinical trial, any disruption of the clinical trial as a result of the COVID-19 pandemic, and impact of implemented contingency measures (e.g., participant discontinuation from investigational product and/or study, alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the clinical trial, among others. In 2020 and 2021, the FDA has published a number of industry guidance documents, including updates to previous guidance, related to Good Manufacturing Practices, remote interactive evaluations of drug manufacturing and bioresearch monitoring facilities, and drug product manufacturing and supply chain inspections, among others. These and future guidance documents and regulatory requirements, including future legislation, may require us to develop and implement new policies and procedures, make significant adjustments to our clinical trials, or increase the amount time and resources needed for regulatory compliance, which may impact our clinical development plans and timelines. The extent to which the COVID-19 public health emergency impacts our business, including non-clinical studies and clinical trials, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

NDA/BLA Review Process

Following completion of the clinical trials, data is analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of an NDA or BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. In short, the NDA or BLA is a request for approval to market the drug or biologic for one or more specified indications and must contain proof of safety and efficacy for a drug or safety, purity, and potency for a biologic. The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA or BLA must be obtained before a drug or biologic may be marketed in the United States.

Under the Prescription Drug User Fee Act (PDUFA), as amended, each NDA or BLA must be accompanied by a user fee. FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s 2022 fee schedule for prescription drug user fees, which became effective on October 1, 2020, and will remain in effect through September 30, 2022, the user fee for an application requiring clinical data, such as an NDA or BLA, is approximately $3.1 million. PDUFA also imposes an annual program fee for each marketed human drug or biologic ($369,413 in 2022) and an annual establishment fee on facilities used to manufacture prescription drugs and biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The FDA reviews all submitted NDAs and BLAs before it accepts them for filing, and may request additional information rather than accepting the NDA or BLA for filing. The FDA must make a decision on accepting an NDA or BLA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months, from the filing date, in which to complete its initial review of a new molecular-entity NDA or original BLA and respond to the applicant, and six months from the filing date of a new molecular-entity NDA or original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs or BLAs, and the review process is often extended by FDA requests for additional information or clarification.

Before approving an NDA or BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The

FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. After the FDA evaluates an NDA or BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.

Orphan Drugs

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product.

Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety or providing a major contribution to patient care or in instances of drug supply issues. However, competitors may receive approval of either a different product for the same indication or the same product for a different indication but that could be used off-label in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if a product candidate is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Expedited Development and Review Programs

The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor can request the FDA to designate the product for fast track status any time before receiving NDA or BLA approval, but ideally no later than the pre-NDA or pre-BLA meeting.

Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies.

A product may also be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (IMM), which is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it may require such post-marketing restrictions as it deems necessary to assure safe use of the product.

Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.

Abbreviated Licensure Pathway of Biological Products as Biosimilar or Interchangeable

The Patient Protection and Affordable Care Act, or ACA, signed into law in 2010, includes the BPCIA, which created an abbreviated approval pathway for biological products shown to be highly similar to an FDA-licensed reference biological product. The BPCIA attempts to minimize duplicative testing, and thereby lower development costs and increase patient access to affordable treatments. An application for licensure of a biosimilar product must include information demonstrating biosimilarity based upon the following, unless the FDA determines otherwise:

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analytical studies demonstrating that the proposed biosimilar product is highly similar to the approved product notwithstanding minor differences in clinically inactive components;

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animal studies (including the assessment of toxicity); and

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a clinical trial or trials (including the assessment of immunogenicity and pharmacokinetic or pharmacodynamic) sufficient to demonstrate safety, purity, and potency in one or more conditions for which the reference product is licensed and intended to be used.

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In addition, an application must include information demonstrating that:

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the proposed biosimilar product and reference product utilize the same mechanism of action for the condition(s) of use prescribed, recommended or suggested in the proposed labeling, but only to the extent the mechanism(s) of action are known for the reference product;

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the condition or conditions of use prescribed, recommended or suggested in the labeling for the proposed biosimilar product have been previously approved for the reference product;

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the route of administration, the dosage form and the strength of the proposed biosimilar product are the same as those for the reference product; and

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the facility in which the biological product is manufactured, processed, packed or held meets standards designed to assure that the biological product continues to be safe, pure, and potent.

Biosimilarity means that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components; and that there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product. In addition, the law provides for a designation of “interchangeability” between the reference and biosimilar products,

whereby the biosimilar may be substituted for the reference product without the intervention of the healthcare provider who prescribed the reference product. The higher standard of interchangeability must be demonstrated by information sufficient to show that:

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the proposed product is biosimilar to the reference product;

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the proposed product is expected to produce the same clinical result as the reference product in any given patient; and

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for a product that is administered more than once to an individual, the risk to the patient in terms of safety or diminished efficacy of alternating or switching between the biosimilar and the reference product is no greater than the risk of using the reference product without such alternation or switch.

FDA approval is required before a biosimilar may be marketed in the United States. However, complexities associated with the large and intricate structures of biological products and the process by which such products are manufactured pose significant hurdles to the FDA’s implementation of the law that are still being worked out by the FDA. For example, the FDA has discretion over the kind and amount of scientific evidence—laboratory, preclinical and/or clinical—required to demonstrate biosimilarity to a licensed biological product.

The FDA intends to consider the totality of the evidence provided by a sponsor to support a demonstration of biosimilarity, and recommends that sponsors use a stepwise approach in the development of their biosimilar products. Biosimilar product applications thus may not be required to duplicate the entirety of preclinical and clinical testing used to establish the underlying safety and effectiveness of the reference product. However, the FDA may refuse to approve a biosimilar application if there is insufficient information to show that the active ingredients are the same or to demonstrate that any impurities or differences in active ingredients do not affect the safety, purity, or potency of the biosimilar product. In addition, as with BLAs, biosimilar product applications will not be approved unless the product is manufactured in facilities designed to assure and preserve the biological product’s safety, purity, and potency.

The submission of a biosimilar application does not guarantee that the FDA will accept the application for filing and review, as the FDA may refuse to accept applications that it finds are insufficiently complete. The FDA will treat a biosimilar application or supplement as incomplete if, among other reasons, any applicable user fees assessed under the Biosimilar User Fee Act of 2012 have not been paid. In addition, the FDA may accept an application for filing but deny approval on the basis that the sponsor has not demonstrated biosimilarity, in which case the sponsor may choose to conduct further analytical, preclinical or clinical studies and submit a BLA for licensure as a new biological product.

The timing of final FDA approval of a biosimilar for commercial distribution depends on a variety of factors, including whether the manufacturer of the branded product is entitled to one or more statutory exclusivity periods, during which time the FDA is prohibited from approving any products that are biosimilar to the branded product. The FDA cannot approve a biosimilar application for 12 years from the date of first licensure of the reference product. Additionally, a biosimilar product sponsor may not submit an application for four years from the date of first licensure of the reference product. A reference product may also be entitled to exclusivity under other statutory provisions. For example, a reference product designated for a rare disease or condition (an orphan drug) may be entitled to seven years of exclusivity, in which case no product that is biosimilar to the reference product may be approved until either the end of the twelve-year period provided under the biosimilarity statute or the end of the seven-year orphan drug exclusivity period, whichever occurs later. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block biosimilarity applications from being approved on or after the patent expiration date. In addition, the FDA may under certain circumstances extend the exclusivity period for the reference product by an additional six months if the FDA requests, and the manufacturer undertakes, studies on the effect of its product in children, a so-called pediatric extension.

The first biological product determined to be interchangeable with a branded product for any condition of use is also entitled to a period of exclusivity, during which time the FDA may not determine that another product is interchangeable with the reference product for any condition of use. This exclusivity period extends until the earlier of: one year after the first commercial marketing of the first interchangeable product; 18 months after resolution of a patent infringement against the applicant that submitted the application for the first interchangeable product, based

on a final court decision regarding all of the patents in the litigation or dismissal of the litigation with or without prejudice; 42 months after approval of the first interchangeable product, if a patent infringement suit against the applicant that submitted the application for the first interchangeable product is still ongoing; or 18 months after approval of the first interchangeable product if the applicant that submitted the application for the first interchangeable product has not been sued.

Post-Approval Requirements

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping requirements, requirements to report adverse experiences and comply with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations, known as “off-label use”, and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the drug or biologic, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new NDA/BLA or NDA/BLA supplement, which may require the development of additional data or preclinical studies and clinical trials.

The FDA may also place other conditions on approvals including the requirement for REMS, to assure the safe use of the product. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls;

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fines, warning letters, or holds on post-approval clinical studies;

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refusal of the FDA to approve pending applications or supplements to approved applications;

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applications, or suspension or revocation of product license approvals;

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product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Other U.S. Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human Services, the Department of Justice,

the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments.

For example, in the United States, sales, marketing and scientific and educational programs also must comply with state and federal fraud and abuse laws. These laws include the federal Anti-Kickback Statute, which makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of biologic and pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: changes to our manufacturing arrangements; additions or modifications to product labeling; the recall or discontinuation of our products; or additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

U.S. Patent-Term Restoration and Marketing Exclusivity

ALEC US Equity

ALEC · 10-K · period ended 2021-12-31

Item 1. Business.

ALEC US Equity☆

ALEC · 10-K · period ended 2021-12-31

Item 1. Business.

ALEC US Equity