10-K

altoneuroscienceinc-10xk.htm

10-K

Document

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-K

___________________________

(Mark One)

For the fiscal year ended December 31, 2023

Commission file number 001-41944

_____________________________________________________

Alto Neuroscience, Inc.

(Exact Name of Registrant as Specified in Its Charter)

_____________________________________________________

369 South San Antonio RoadLos Altos, CA 94022

(Address of Principal Executive Offices) (Zip Code)

(650) 200-0412

Registrant’s telephone number, including area code

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, $0.0001 par value per share ANRO New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

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

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

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 o No x

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 o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 o Accelerated filer o

Non-accelerated filer x Smaller reporting company x

Emerging growth company x

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. o

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. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

The registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and therefore cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date. The registrant’s Common Stock began trading on the New York Stock Exchange on February 2, 2024.

The number of shares of registrant’s Common Stock outstanding as of March 18, 2024 was 26,883,988.

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Part I

Item 1. Business 1

Item 1A. Risk Factors 56

Item 1B. Unresolved Staff Comments 121

Item 1C. Cybersecurity 121

Item 2. Properties 122

Item 3. Legal Proceedings 122

Item 4. Mine Safety Disclosures 122

Part II

Item 6. [ Reserved ] 124

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 137

Item 8. Financial Statements and Supplementary Data F-1

Item 9A. Controls and Procedures 142

Item 9B. Other Information 142

Part III

Item 10. Directors, Executive Officers and Corporate Governance 143

Item 11. Executive Compensation 148

Item 14. Principal Accounting Fees and Services 163

Part IV

Item 15. Exhibits and Financial Statement Schedules 164

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or Annual Report, contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Annual Report, including statements regarding our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans, or intentions relating to product candidates and markets and business trends are forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “predict,” “project,” “shall,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

These statements involve known and unknown risks, uncertainties, and other factors which 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. Forward-looking statements include, but are not limited to, statements about:

•the initiation, timing, progress, and results of our research and development programs, preclinical studies, any clinical trials, and IND and other regulatory submissions;

•the ability of our approach to reproducibly predict treatment outcomes for product candidates amongst identified patient populations and achieve clinical success;

•our ability to continue to identify appropriate biomarkers for use in further clinical development;

•the timing of and costs involved in obtaining and maintaining regulatory approval of our current product candidates and any future product candidates that we may identify or develop;

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

•our ability to efficiently and cost-effectively conduct our current and future clinical trials;

•our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates, if approved;

•our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements, including our ability to comply with our financial obligations pursuant to the terms of such agreements;

•the timing and likelihood of the achievement of milestones pursuant to our existing collaboration and licensing agreements;

•our ability to identify and develop product candidates for treatment of additional indications;

•the performance of our third-party service providers, including our suppliers and manufacturers;

•the rate and degree of market acceptance and clinical utility for our current product candidates and any other product candidates we may develop;

•the effects of competition with respect to our current product candidates or any of our future product candidates, as well as innovations by current and future competitors in our industry;

•our estimates regarding the potential market opportunities and the number of patients for our product candidates and any future product candidates, if approved for commercial use;

•the implementation of our strategic plans for our business, any product candidates we may develop;

•our intellectual property position, including the scope of protection we are able to establish, maintain, defend and enforce for intellectual property rights covering our product candidates and our Precision Psychiatry Platform;

•our ability to attract and retain key scientific or management personnel;

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•regulatory and legal developments in the United States and foreign countries;

•our ability to attract and retain employees and collaborators with development, regulatory, and commercialization expertise;

•our ability to comply with the terms of our term loan agreement and our expectations regarding our ability to access additional tranches thereunder;

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

•the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements; and

•our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Annual Report and are subject to risks and uncertainties. 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 Annual 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 investors are cautioned not to unduly rely upon these statements.

You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results under “Item 1A. Risk Factors” in this Annual Report, as well as our other reports filed with the Securities and Exchange Commission, or SEC. 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 such statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any public statements or disclosures by us following this Annual Report that modify or impact any of the forward-looking statements contained in this Annual Report will be deemed to modify or supersede such statements in this Annual Report. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events, or otherwise.

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Part I

Item 1. Business.

Overview

We are a clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options. Building on more than a decade of research by our founder, Dr. Amit Etkin, we aim to deeply understand brain function and match patients to the right medication more efficiently through the use of treatments that, if approved, are tailored to specific patient populations. As a result, we believe we can help patients avoid the often lengthy process of trying multiple ineffective treatments before finding one to which they respond, potentially helping patients get better faster. Through insights derived from our scalable and proprietary Precision Psychiatry Platform, or our Platform, which applies rigorous data science and robust analytics to data gathered by neurocognitive assessments, electroencephalography, and wearable devices, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates. Our approach is designed to improve patient outcomes and increase the likelihood of clinical success and commercial impact of our product candidates by using neurobiological profiles to identify more homogeneous patient groups. We build upon and leverage vast data sets of longitudinal clinical and biomarker data from thousands of patients across central nervous system, or CNS, disorders, which we believe serves as a foundation for applying our approach across numerous patient populations. Ultimately, if we are successful, we believe our approach can substantially improve upon the traditional, all-comer approach to CNS drug development. Our current pipeline consists of five clinical-stage assets initially targeting major depressive disorder, or MDD, and schizophrenia populations characterized by independent brain-based biomarkers. Each of our clinical-stage product candidates has been evaluated through at least initial Phase 1 clinical trials and observed to be well tolerated. Our most advanced programs, including our two product candidates being evaluated in ongoing late-stage (2b or later) trials, are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.

We have successfully completed Phase 2a trials for our two most advanced product candidates, ALTO-100 and ALTO-300, in more than 200 patients each. In each of these trials, we identified patient populations who demonstrated greater response based on objectively defined biomarker profiles, and then prospectively replicated these biomarker findings in independent datasets from within the same trial. Based on these biomarker findings, we initiated a placebo-controlled, double-blind, randomized Phase 2b trial for each candidate in patients with MDD characterized by an objective biomarker. Specifically, in the ALTO-100 Phase 2b trial we are enrolling 266 patients with MDD characterized by a cognitive biomarker, and we expect to report topline data from this trial in the second half of 2024; and in the ALTO-300 Phase 2b trial we are enrolling 200 patients with MDD characterized by an electroencephalography, or EEG, biomarker, and we expect to report topline data from this trial in the first half of 2025. We estimate one or both of these two independent biomarkers are present in approximately three-quarters of the overall MDD population.

In addition to our two most advanced programs, we expect to initiate proof-of-concept, or POC, trials evaluating ALTO-101 and ALTO-203 in the first half of 2024. ALTO-101 is being developed for patients with cognitive impairment associated with schizophrenia, or CIAS, and ALTO-203 is being developed for patients with MDD and higher levels of anhedonia, or the lack of motivation or pleasure. We expect to report topline data from these trials in 2025 and the first half of 2025, respectively. We also plan to develop ALTO-202, our novel, oral N-methyl-D-aspartate, or NMDA, receptor antagonist, for the treatment of patients with MDD.

Our Platform and differentiated approach aim to disrupt the trial-and-error method that is currently standard practice in CNS drug development and clinical care. The data we leverage in connection with the development and application of our Platform comes from multiple sources, including proprietary research, commercial licenses, and publicly available databases. Data we have generated through our own clinical trials, combined with various data sets acquired through licenses or research collaborations, amount to approximately 250 terabytes of clinical and biomarker data, which have been used to develop and enhance our methodologies aimed at discovering predictive biomarkers. Our Platform and approach employ modern tools for measuring human neurobiology together with rigorous data science analytics to discover, and prospectively replicate, biomarker responders, or patients that may demonstrate better clinical response to our novel product candidates. We believe this approach has the potential signatures. We use these signatures to identify drug to increase the probability of clinical success by magnifying the impact of each product candidate, thereby yielding a differentiated drug profile. However, our approach to the discovery and development of product candidates based on our Platform is novel and has not been used for the approval of other CNS products. We currently anticipate that the modalities we use to define brain-based biomarkers, for some of our product candidates, may require us to develop and obtain approval by the U.S. Food and Drug Administration, or FDA, of a companion diagnostic for the accompanying product candidate. We expect to initiate discussions with the FDA concerning the development of companion diagnostics at our end

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of Phase 2 meetings with respect to ALTO-100 and ALTO-300. The modalities we use to define brain-based biomarkers include:

•Computerized Neurocognitive Battery: Neurocognitive tasks have been used over many decades of neuropsychological assessment to help researchers understand cognitive functioning across core domains such as memory, processing speed, attention, and executive functioning. We have implemented digital versions of well-validated neurocognitive tasks in our proprietary battery, Spectra, which we use to test and characterize patients across cognitive domains.

•Electroencephalogram (EEG): An EEG is a non-invasive test measuring electrical activity in the brain. While more commonly used to assess seizures, EEG has a long track record of sensitivity to clinically relevant brain wave patterns across neuropsychiatric disorders and treatments. We leverage machine learning to identify potentially useful features from EEG signals.

•Wearable Devices: We use wearable devices to analyze patient sleep and activity patterns. Through correlating these patterns with drug intervention outcomes, we aim to derive biomarker signatures that may predict therapeutic responses.

In addition to identifying likely drug responders, we deploy our Platform in early-stage clinical development aimed to robustly characterize drug effects on the human brain using these biomarker modalities, thereby informing dose and indication selection for later-stage clinical development in a patient population characterized by the applicable biomarker. Together with our process for identifying likely drug responders, our approach is meaningfully differentiated from traditional, all-comer CNS drug development, wherein often little is known about the effects of a drug on the human brain. The traditional approach has resulted in high rates of failure in CNS drug development across all phases of clinical development, with a 7.3% and 6.2% likelihood of approval from Phase 1 in psychiatry and neurology, respectively. With our differentiated approach, we aim to improve upon the high failure rates in late-stage clinical development in CNS through better characterizing our product candidates, and the populations we are targeting with them, early in development. Our Platform is unproven and clinical evidence to support our approach is preliminary and limited at this time, and, as such, there can be no guarantee that our approach will result in an increased rate of approval for our therapeutic candidates.

Mental health conditions are a leading cause of disability globally. Current estimates suggest that over 50% of the U.S. population will be diagnosed with a psychiatric disorder during their lifetime, with an estimated $280 billion spent on mental health services in the United States in 2020. We believe limitations of currently available treatments, which are often ineffective in a large portion of patients, are a key driver of these rising costs. We believe better outcomes can be achieved through precision medications tailored specifically to address heterogenous alterations in brain functioning seen across individual patients within any psychiatric diagnosis. While personalized medicine has made significant advances in fields like oncology, neuropsychiatry drug development and patient treatment remain largely untargeted.

The magnitude of the populations and clinical need within our two lead indications, MDD and schizophrenia, are significant. MDD is one of the most prevalent and incapacitating medical conditions, with an estimated 21 million, or 8.3% of, adults in the United States experiencing at least one major depressive episode in 2021. Despite the availability of approved medications, a significant majority of patients do not achieve adequate response after standard treatment protocols. Moreover, most antidepressants work through similar mechanisms, with little true innovation to address patients who do not respond to medications that primarily target monoamine neurotransmitters, such as serotonin and dopamine. Schizophrenia is a life-long, highly debilitating mental health disorder affecting approximately 2.8 million adults in the United States as of 2020. Currently available medications generally target positive symptoms of schizophrenia, and there are no approved medications for the cognitive and negative symptoms despite their prevalence and often strong correlation with functional impairment.

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Our Pipeline

Our clinical-stage product candidates are being advanced based on extensive preclinical and clinical data that suggest the potential to bring significant improvements to patient populations not adequately treated with current standard-of-care medications.

Our pipeline of clinical-stage product candidates is depicted below:

ALTO-100 is a novel small molecule that has shown evidence of a pro-neurogenesis/neuroplasticity mechanism of action, and we believe binds a receptor not targeted by other CNS therapeutics, which would make it first-in-class if approved. We acquired ALTO-100 from Palisade Bio., Inc. (f/k/a Neuralstem Inc.), or Palisade. In January 2023, we announced results from a Phase 2a trial evaluating ALTO-100, in which patients with MDD characterized by impaired cognition responded significantly better to ALTO-100 than patients without objectively defined cognitive impairment. Based on the results from the Phase 2a trial, we advanced ALTO-100 into an ongoing, randomized, double-blind, placebo-controlled Phase 2b clinical trial in 266 patients with MDD characterized by the cognitive biomarker profile. The Phase 2b trial was initiated in January 2023, and we expect to report topline data from this trial in the second half of 2024. Additionally, we reported results from the PTSD cohort in this Phase 2a trial in September 2023, in which we observed that the same poor cognition biomarker was also predictive of response to ALTO-100 in patients with PTSD. Assuming positive Phase 2b data from the ongoing trial for patients with MDD, we also plan to launch a Phase 2b/3 program in PTSD with ALTO-100. We have worldwide rights to develop and commercialize ALTO-100 and have employed a robust intellectual property strategy. We have issued and pending patents or patent applications that we believe provide protection of ALTO-100 to at least 2043.

ALTO-300 is a small molecule melatonergic (MT1 and MT2) agonist and serotonergic (5-HT2C) antagonist with antidepressant properties. The product candidate we are developing as ALTO-300 has been approved as an antidepressant in Europe and Australia with the International Nonproprietary Name agomelatine. We are developing ALTO-300 solely in the United States. We recently completed a Phase 2a clinical trial evaluating ALTO-300 as an adjunctive treatment in patients with MDD. We observed, and prospectively replicated, a significantly greater response to ALTO-300, as measured by improvements in depressive symptoms, within a patient group characterized by a machine learning-derived EEG biomarker profile as compared to the group without that profile. Based on the results from the Phase 2a trial, we

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advanced ALTO-300 into an ongoing randomized, double-blind, placebo-controlled Phase 2b clinical trial in the United States in 200 patients with MDD characterized by the EEG biomarker. This Phase 2b trial was initiated in June 2023, and we expect to report topline data from this trial in the first half of 2025. Our development of ALTO-300 in the United States is protected by a pending patent application. We have U.S. rights to ALTO-300 and believe our patent portfolio for ALTO-300 provides protection to at least 2044.

ALTO-101is a novel small molecule phosphodiesterase 4 inhibitor, or PDE4i, that we are developing for the treatment of CIAS. We licensed the exclusive rights to ALTO-101 from Sanofi. ALTO-101 has been studied across multiple Phase 1 trials, in which it showed human brain penetration and was observed to be well tolerated across therapeutically relevant dose ranges. Data from our recently completed Phase 1 trial demonstrated robust effects of ALTO-101 on cognitive processing, measured with EEG, and cognitive test performance. Based on these data, we plan to initiate a proof-of-concept trial evaluating ALTO-101 in patients with CIAS in the first half of 2024 and expect to report topline data from this trial in 2025. We are developing ALTO-101 in a patch formulation as a drug/device combination in collaboration with MedRx — we believe this formulation will enable the delivery of steady state concentrations of drug. We have worldwide rights to develop and commercialize ALTO-101 and have a pending provisional patent application to protect the utilization of the product candidate in the indications for which we are developing it. We believe our patent applications for ALTO-101 will provide protection to at least 2044.

ALTO-203 is a novel small molecule histamine H3 receptor inverse agonist. We acquired ALTO-203 from Teva Pharmaceutical Industries, Ltd. and its affiliate Cephalon, Inc., or together Teva. We are currently developing ALTO-203 for the treatment of patients with MDD and higher levels of anhedonia. In a Phase 1 trial completed by its originator, ALTO-203 demonstrated an acute increase in subjective positive emotions equivalent to or greater than modafinil, an FDA approved drug that acts through a dopamine enhancing mechanism. We believe these positive emotional effects position ALTO-203 to uniquely address the unmet needs of patients with MDD and higher levels of anhedonia. ALTO-203 was previously evaluated in a Phase 1 trial to evaluate tolerability by Teva and it was well tolerated in the study. We plan to initiate a Phase 2 POC trial evaluating ALTO-203 in patients with MDD and higher levels of anhedonia in the first half of 2024 pursuant to an active IND for ALTO-203 and expect to report topline data from this trial in the first half of 2025. We have exclusive worldwide rights to develop and commercialize ALTO-203. Our development of ALTO-203 is protected by a robust intellectual property estate, including issued patents and a pending patent application which we believe provides protection to at least 2044.

Other Pipeline Programs. Additionally, we have leveraged our proprietary insights to discover and develop novel pharmacodynamically synergistic combinations. In December 2022, we announced results from a Phase 1 trial in which one of our proprietary investigational combination drugs demonstrated significant pro-cognitive effects.

Our Team and Corporate History

We were founded in 2019 by Amit Etkin, M.D., Ph.D., a Professor of Psychiatry at Stanford University, to revolutionize mental health and neuropsychiatry. Through more than a decade of research at Stanford, Dr. Etkin recognized opportunities to break through the stagnation present in traditional CNS drug development. Learning from other fields such as oncology, he dedicated his work to better understanding individual patient biology and redefining the diagnosis and treatment of psychiatric disorders. Alto was founded with the goal of applying neurobiological insights to identify and develop personalized, highly effective, and clinically differentiated treatment options. Our management team has extensive clinical and scientific expertise and consists of leaders across CNS drug development and commercialization, biomarker analysis, finance, and legal, with significant experience in the biopharmaceutical industry. To date, our management team

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has been involved in the approval of 25 drugs and the clinical development of more than 100 product candidates. On February 6, 2024, we completed an initial public offering, or IPO, of our common stock.

Our Strategy

We are building a leading precision psychiatry company with a mission to redefine neuropsychiatric care by leveraging neurobiology to develop personalized and highly effective treatment options. We intend to accomplish our mission by implementing the following key strategies.

•Leverage our Platform and proprietary approach to improve patient outcomes and increase the likelihood of clinical success in neuropsychiatric drug development. Based on a deep understanding of neurobiology and brain-based biomarkers, we designed our Platform and approach to align groups of patients with the appropriate medication in a manner that we believe could readily scale commercially. Our proprietary approach relies on rigorous analytics using patient-derived data to discover, and prospectively replicate, biomarker signatures for likely drug responders. Our approach differs markedly from traditional CNS clinical drug development, which often fails due to, among others, reliance on findings from small early studies, non-replicated post-hoc analyses, lack of biologically driven patient definitions, and absence of knowledge of the effects of a drug on the human brain. As a result, clinical de-risking in traditional CNS clinical drug development typically does not occur until late in development. We believe our Platform and approach can increase the probability of success in our drug development efforts and we will continue to leverage our Platform and approach, including our machine learning methodologies and clinical expertise, to advance our pipeline of novel product candidates.

•Advance ALTO-100 for the treatment of patients with MDD characterized by a neurocognitive biomarker. ALTO-100 is a novel small molecule that has shown evidence of a pro-neurogenesis/neuroplasticity mechanism of action. We believe ALTO-100 binds a receptor that is not targeted by existing CNS therapeutics, which would make it first-in-class if approved. We estimate approximately 40% of patients with MDD have the poor cognition biomarker that we have demonstrated to be predictive of a better response to treatment with ALTO-100 in our Phase 2a clinical trial. Following prospectively replicated results observed in our Phase 2a trial, we have advanced ALTO-100 into an ongoing double-blinded, placebo-controlled Phase 2b trial in 266 patients with MDD characterized by this neurocognitive biomarker. The Phase 2b trial was initiated in January 2023 and we expect to report topline data from this trial in the second half of 2024. Pending successful data from this trial, we plan to advance ALTO-100 into a Phase 3 program.

•Advance ALTO-300 (agomelatine) as an adjunctive treatment of patients with MDD characterized by an EEG biomarker. Agomelatine is an approved antidepressant in Europe and Australia. We are developing agomelatine as ALTO-300 in the United States for a patient population characterized by a biomarker that we believe will better respond to the product candidate. This biomarker-characterized patient population is independent from the population we are targeting with ALTO-100, and the respective biomarkers are uncorrelated. We estimate approximately 50% of patients with MDD have the EEG biomarker that we have discovered. Following prospectively replicated results from our recently completed Phase 2a trial, and based on the large number of patients analyzed to date, we have advanced ALTO-300 into a double-blinded, placebo-controlled Phase 2b trial in 200 patients with MDD characterized by this EEG biomarker. The Phase 2b trial was initiated in June 2023, and we expect to report topline data from this trial in the first half of 2025. Pending successful data from this trial, we plan to advance ALTO-300 into a Phase 3 program.

•Advance ALTO-101, ALTO-203, and our other clinical-stage programs in biomarker-enriched patient populations. Our early clinical-stage pipeline consists of compounds with unique mechanistic effects and highly differentiated profiles. We plan to leverage our Platform to develop these product candidates to address patient populations with high unmet needs that have been historically difficult to treat. Based on observed pharmacodynamic effects in humans, we plan to initiate proof-of-concept trials evaluating ALTO-101 and ALTO-203 in the first half of 2024, and we expect to report topline data from these trials in 2025 and the first half of 2025, respectively. ALTO-101 is being developed for patients with CIAS, while ALTO-203 is targeting patients with MDD and higher levels of anhedonia. We also plan to develop ALTO-202, our novel, oral NMDA receptor antagonist, for the treatment of MDD. Pending successful data from ongoing or planned clinical trials, we plan to advance these product candidates into later stages of development.

•Expand our pipeline by strategically evaluating in-licensing and acquisition opportunities. We recognize that CNS drug development is challenging. The high rate of clinical failure presents a compelling opportunity for us to leverage our experience, proprietary approach to neuropsychiatric drug development, and insights from our Platform to evaluate, and be an attractive partner for, in-licensing or co-development and co-commercialization opportunities. We plan to seek opportunities to in-license, acquire, or partner on new product candidates in clinical indications

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where we are able to offer unique expertise to potentially enhance the product candidate’s value and streamline development through targeted patient selection.

•Selectively partner our product candidates to maximize their value to patients and our stockholders. As we advance the development of our product candidates, in addition to internal commercial capabilities that we may establish, we may also selectively partner with global pharmaceutical companies to maximize the value of our targeted product candidates and robust intellectual property portfolio. We may seek partnerships where the efficiency of development and/or the commercial infrastructure required is best achieved through external capabilities.

The Challenge with CNS and Neuropsychiatric Treatment Today

Mental health conditions are among the leading causes of disability worldwide. It is estimated that approximately 50% of the U.S. population will be diagnosed with a psychiatric disorder at some point in their lifetime, a number expected to further increase as a result of the COVID-19 pandemic. Mental health is one of the largest drivers of U.S. healthcare spending, with an estimated $280 billion spent on mental health services in 2020, representing an increase of over 60% over the prior decade. An important factor driving these costs is that currently available therapies do not work adequately for many people, leading to a significant number of those with mental health conditions remaining untreated or left unresolved symptoms. We believe a key contributing factor to the current suboptimal treatment landscape for mental health patients, and the significant cost burden of mental health, is the lack of targeted or precision medicines. We believe better outcomes can be achieved through precision medications that are based on an understanding of a patient’s specific pattern of brain function and dysfunction, and that are tailored specifically to address heterogenous alterations in brain functioning seen across individual patients within any psychiatric diagnosis. While personalized medicine has made significant advancements in fields like oncology, the field of neuropsychiatry continues to develop and deploy treatments in an unguided manner, despite widespread awareness that the clinical definitions of mental health disorders obscure vast biological heterogeneity. As a result, drug development efforts are generally long, costly, and often result in failure. FDA-approved CNS medicines often have fairly modest overall efficacy, driven by a minority of patients who respond well and a majority who do not. We believe the next major advancement in mental health drug development requires targeted patient selection to match specific patient populations with the medicine most likely to elicit a response with the goal of improving efficacy within such populations and de-risking drug development.

MDD is a psychiatric disorder characterized by key symptoms such as low mood, anhedonia, poor concentration and decision-making, and changes in sleep and appetite. It is one of the most common and debilitating medical disorders and, according to the World Health Organization, is a leading cause of disability worldwide. According to the National Institute of Mental Health, an estimated 21 million, or 8.3% of, adults in the United States experienced one major depressive episode in 2021. Current treatment options for MDD include psychotherapy and pharmacotherapy, with selective serotonin reuptake inhibitors, or SSRIs, and serotonin-norepinephrine reuptake inhibitors, or SNRIs, being the most commonly prescribed antidepressants. SSRIs primarily increase serotonin levels in the brain, while SNRIs boost both serotonin and norepinephrine levels. Despite these available medications, there remains a significant unmet need for patients with MDD. For example, in the STAR*D study, a collaborative study funded by the National Institute of Mental Health and first published in 2006, only 35% of patients experienced remission of their depression after aggressive four-step antidepressant algorithmic treatment, including SSRI, SNRI, a tricyclic antidepressant, and cognitive therapy. Prescription data also shows that approximately 13% of adults in the United States are on antidepressant drugs, most of which act through similar mechanisms.

Schizophrenia is a severe, debilitating, and life-long mental health disorder that is underserved by the current therapeutic landscape. As of 2020, there were approximately 2.8 million people in the United States living with schizophrenia. Currently available antipsychotic treatments primarily address the positive symptoms of schizophrenia, but are largely ineffective for the cognitive and negative symptoms, which are the most determinative with respect to long-term functioning and disability. Despite nearly 90% of patients with schizophrenia experiencing cognitive impairment, there are no currently approved medications only targeting these symptoms. We believe a new medication targeting the cognitive aspects of schizophrenia would be well positioned to achieve significant commercial success, in particular if targeted at those patients who would most benefit from that intervention.

Our Differentiated Approach and Capabilities

Our approach leverages advances in brain function measurements and data science to develop novel precision neuropsychiatric medicines, with the goal of improving patient outcomes and increasing the likelihood of clinical success. Over the past decade, through work in Dr. Etkin’s lab at Stanford and Alto’s internal research and development efforts, we

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have honed our approach, which is designed to reproducibly predict treatment outcomes by leveraging neurocognitive assessment, EEG, and sleep and activity patterns as measured by wearable devices. By analyzing data amassed from a multitude of treatments, including both novel and known antidepressants, neurostimulation, and psychotherapy, we have observed trends that strongly support our approach. We are now utilizing our Platform and approach to guide late-stage clinical trials of our product candidates. We believe our unique approach offers the following key advantages:

•Efficient drug development. Our Platform is designed to enable us to fully characterize the effects of a drug on the brain early in development, and to efficiently identify patient populations more likely to respond to a particular product candidate. In identifying specific patient populations for treatment, our approach seeks to better translate early pharmacodynamic signals and potentially improve clinical trial success and may provide for a differentiated commercial strategy.This approach contrasts with traditional CNS drug development, in which often early exploratory studies fail to translate to late-stage clinical success and approval.

•Cost efficiencies. We believe developing product candidates for biomarker-characterized patient populations and likely drug responders could improve efficacy within such populations, potentially enabling us to demonstrate a statistically significant effect in more cost-efficient trials with smaller patient numbers than those in prior neuropsychiatric trials. Our expertise in the collection of biomarkers also enables us to conduct our trials with internal clinical operational resources, which can significantly reduce trial costs relative to comparable trials leveraging a more typical, outsourced, clinical development model.

•Unique insights across diagnoses. Since our Platform taps into neural circuitry that underlies disparate diagnoses, we believe we are able to better characterize patients beyond diagnostic categories set forth in the Diagnostic and Statistical Manual of Mental Disorders. As we have shown in our Phase 2a trial of ALTO-100 in MDD and PTSD, we have been able to leverage the same biomarkers across distinct diagnoses to predict better outcomes—tying the drug to patient biology rather than diagnosis.

The image below provides an overview of how we identify and segment patients into biomarker-characterized patient populations that correspond to product candidates in our pipeline. First, we collect patient-specific biomarker data through our Platform. We then apply data analytics, including machine learning algorithms, to segment patients into different biomarker-characterized populations that we believe are more likely to respond to one of our product candidates. We are developing various product candidates for multiple, significant biomarker-characterized patient populations in furtherance of supporting and treating as many patients as possible. For example, ALTO-100 and ALTO-300 are both being developed for the treatment of MDD, but for use by patient populations with distinct biomarkers. We estimate one or both of these two independent biomarkers are present in approximately three-quarters of the overall MDD population.

Methodical Approach to Curate Product Candidates

We have curated a pipeline of novel clinical-stage product candidates. We have focused on acquiring or in-licensing novel chemical entities that were well-tolerated in earlier trials, that exhibited clear biological rationale, and that demonstrated preliminary pharmacodynamic data we believe could be indicative of potential effects in biomarker-characterized patient groups. With this focus, we aim to avoid the uncertainties and long preclinical timelines needed to

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discover and develop new molecules, which are often derivatives of existing molecules or against existing targets, and which can have substantial molecule and toxicology risk. Based on our deep neuroscientific expertise, we prioritized the evaluation of more than 200 molecules against a set of key criteria to identify those with the highest potential. These key criteria included:

•Evidence of brain penetration with favorable tolerability results in humans;

•Pharmacodynamic effects – directly or through related mechanisms;

•Early signals on clinical outcome measures in relevant indications; and

•A potential initial stratification biomarker that can be systematically applied and tested.

We have also undertaken systematic discovery efforts to identify potential synergies in pharmacodynamic effects of distinct mechanisms. This effort involves using a proprietary computational approach together with an in vitro cell-based assay to nominate novel drug combinations. We believe that by employing our unique insights generated through our Platform and approach, we have established a pipeline of highly differentiated product candidates.

Our Precision Psychiatry Platform

With conviction in our approach, we developed our Platform by combining inputs and expertise across multiple domains. We designed a framework for our Platform to provide for the integration and processing of data from multiple sources and then designed and refined sophisticated quantitative analytics to assess data outputs. The initial development and refinement process involved specialists in data science, neuroscience, and psychiatry, and we continue to leverage expertise to further expand and improve our Platform as we collect additional data across our clinical development programs.

Using our Platform, we collect and analyze data from a computerized neurocognitive battery, EEG, and wearable devices. We also collect data from genetic and genomic samples. With our Platform, we employ quantitative analytics, including machine learning, to discover and evaluate biomarkers. We believe this approach eliminates the need for interpretation of the biomarker data by a clinician, and allows for seamless integration of our biomarker approach into current clinical practice. The Platform is designed for commercial scalability, emphasizing the use of reliable and reproducible biomarkers that can be easily collected in any patient care setting without significant logistical or financial burden. The scalability of our Platform has been demonstrated through the biomarker collection in our completed and ongoing clinical trials. In our clinical trials completed to date, we have collected patient biomarker data, including neurocognitive task performance, EEG data, and wearable device data, in clinical settings as well as in patients homes through our decentralized clinical trial operations. We believe this in-home, remote data collection provides a strong basis for our ability to scale our tools and biomarker collection in the commercial setting should any of our product candidates achieve FDA approval. Our Platform is unproven and clinical evidence to support our approach is preliminary and limited at this time, and, as such, there can be no guarantee that our approach will result in an increased rate of approval for our therapeutic candidates.

Computerized Neurocognitive Battery

Neurocognitive tasks have been used over many decades of neuropsychological assessments to help researchers and clinicians understand cognitive functioning across the core domains such as memory, processing speed, attention, and executive functioning. Our proprietary computerized neurocognitive assessment, Spectra, currently consists of up to 20 computerized tests that are digital implementations of well-validated traditional tests. Each test is designed to evaluate different aspects of cognitive functioning that differentiate patients with neuropsychiatric disorders from healthy individuals. Moreover, the cognitive profiles defined with our battery can be used to predict whether a patient is likely to be sensitive to certain forms of intervention. Participants self-administer this battery of tests, with the R&D version taking up to 60 minutes to complete. Spectra is deployed via an internet browser and we plan to develop and launch a mobile device-compatible version. Spectra is a self-guided battery and is designed to be deployed in any setting, including in a patient’s home—we believe this scalability will make it suitable for broad commercialization. As Spectra has been developed internally, we are able to continually adapt and add new test capabilities to diversify across diagnoses, brain circuits, and drug mechanisms. Spectra is currently being used in our ongoing Phase 2b trial of ALTO-100 to prospectively characterize patients based on their neurocognitive biomarker profile.

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EEG

We have developed proprietary software platforms, Altoscope and Techcheck, to facilitate the measurement of EEG biomarkers in our trials, and ultimately for commercial use. Our software tools provide real-time feedback during data collection, ensuring the recording is of sufficient quality, with back-end processing of quality-controlled EEG data to report out a patient’s biomarker profile. This functionality enables us to prospectively identify patients for the ALTO-300 Phase 2b trial based on their EEG biomarker profile rapidly, without a manual reading by an investigator or clinician. We believe that our EEG software infrastructure provides a clear translation to the ultimate commercial setting, in which patients or their caretakers can conduct high quality EEGs and biomarker assessment in their home without expertise in EEG administration or interpretation.

Wearable Devices

We utilize commercially available wearable devices to capture sleep and activity patterns data. Sleep-wake cycles, known as circadian rhythms, have been shown to be impacted in patients with neuropsychiatric conditions and modifiable with various pharmacological interventions. Through correlating these patterns with drug intervention outcomes, we aim to derive biomarker signatures that could predict therapeutic outcomes.

Genetic/Genomic Signatures

In addition to the primary phenotypic biomarkers, we recognize the value of genetic/genomic research in relation to neuropsychiatric disorders. We therefore collect genetic and genomic samples in all of our clinical trials and evaluate molecular markers of disease.

Our Approach to Biomarker Discovery and Managing Development Risk

CNS drug developers often advance product candidates to late-stage clinical trials with only a limited understanding of the expected activity, which we believe contributes to the low success rates in the field. At Alto, we aim to deeply understand an investigational medicine, and the patient population it is best suited for, early in development, before we advance it to large, expensive, and time-consuming clinical trials. To achieve this, we use biomarker findings to support our decision to advance or deprioritize a product candidate. Specifically, biomarker findings guide our understanding of brain effects, dose-response profiles, and effects on potential signatures of likely drug responders. Our approach prioritizes prospective replication of our findings in independent data for decision making, a philosophy that applies to data across development stages. This approach is a deliberate contrast to typical post-hoc analyses employed across traditional CNS drug development, which generally have no built-in control for false discovery and are thus prone to yielding misleading results unlikely to replicate in future studies.

To power our biomarker approach, we run well-powered Phase 1 and Phase 2a trials in order to gather insights on the brain activity of our product candidates as well as the potential patient populations in which a product candidate may show greater benefit. Often early Phase 2 “proof-of-concept” trials in CNS are small, open-label trials that do not control for potential false findings, whereas our approach imparts proper data science controls to protect us from advancing a product candidate based on spurious signals. For example, in our Phase 2a trials for ALTO-100 and ALTO-300, we enrolled a large (243 patients and 239 patients for ALTO-100 and ALTO-300, respectively) and broad “all-comer” population to avoid biases in biomarker identification. We then divided this all-comer patient dataset into two subsets: a “discovery” dataset for biomarker identification and a locked and blinded “test” dataset for biomarker validation.

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The graphic below illustrates our process for discovery and prospective validation of biomarkers with the potential for meaningful patient stratification, and testing of efficacy in patients characterized by the biomarker signature.

Bio + = patients with biomarker profile

Bio - = patients without the biomarker profile

PBO ‘= Placebo

1)Biomarker Identification—“Discovery” Data

In the biomarker identification phase, we employ a combination of hypothesis-driven and machine learning-led analyses to evaluate the discovery dataset. We then conduct analyses to associate single biomarkers, or combinations of biomarkers, with clinical outcomes following administration of the product candidate (e.g., Montgomery-Åsberg depression rating scale, or MADRS, change in depression). These analyses systematically determine the most relevant features for analysis, from which we develop models that can be used as biomarker signatures. Prior to progressing a biomarker model into the next phase of clinical development, we subject it to a rigorous series of proprietary “stress tests” to determine which biomarker findings are most likely to be replicated and most useful for predicting patient response.

2)Biomarker Validation—“Test” Data

Following biomarker identification, we develop a tailored statistical analysis plan to guide the unlocking and analysis of test data, to determine whether replication of a sufficient magnitude of enrichment on clinical outcome was observed. Successful replication of a biomarker is defined based on whether stratification of the test set achieved a pre-specified clinical outcome effect size that was designed to ultimately yield a differentiated drug profile (e.g., a larger drug-placebo difference than is typical with standard-of-care drugs). In addition, using our various large archival datasets, we also verify that the replicated biomarker is specific to our product candidate and confirm that a given biomarker profile is not known to predict better response to either placebo or current standard-of-care interventions. We believe the independent prospective validation not only directly demonstrates the robustness of the biomarkers we identify, but also increases the probability of success for our future clinical trials, as it represents substantially more knowledge about a product candidate than is typical at that stage of CNS drug development.

3)Efficacy Assessment in Biomarker-Characterized Patients—Phase 2b/3

There are two key elements in these large and well-powered biomarker-guided studies: 1) prospective patient selection and enrichment based on the biomarker profile, and 2) a traditional registration-like efficacy trial design. We power the primary statistical analysis to detect the intervention effect compared to placebo in the biomarker positive group, which we believe will reflect the ultimate label if approved. In addition, our trials enroll a portion of the study as biomarker negative patients to potentially demonstrate preferential response in biomarker positive patients and investigate the risk/benefit profile of the product candidate and biomarker. By employing a standard registrational trial design (e.g., one-to-

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one randomization to drug versus placebo, use of conventional primary clinical outcomes, and treatment for well-accepted durations), the impact of prospective patient selection can be best appreciated by the CNS field and by regulatory agencies.

The use of biomarkers in our Platform as pharmacodynamic outcomes in Phase 1 trials similarly supports data-driven decision-making on factors such as CNS penetration, dose-response relationships on key brain functions, and indication selection. To maintain this high level of rigor, which is uncommon in Phase 1 trials, we enroll larger numbers of healthy subjects and may divide samples into discovery and test subsets for product candidates whose effects on the brain are less well understood.

To date we have sought the feedback of the FDA on our approach to patient stratification using our brain-based biomarkers through various interactions. We believe, based on these interactions, that our development plans will appropriately align with the expectations of the FDA and we plan to continue to seek their input at each stage of development of our product candidates. Further, we believe our development plans align well with the FDA’s final guidance published March 2019 titled “Enrichment Strategies for Clinical Trials to Support Approval of Human Drugs and Biological Products”.

Our Internal Clinical Development Expertise and Decentralized Clinical Trial Infrastructure

We make use of our own internal capabilities and expertise to conduct our clinical trials, rather than outsourcing clinical development execution to contract research organizations, or CROs. We have built a team of clinical operations experts, led by Dr. Adam Savitz and Jessica Powell, that engage directly with clinical trial sites and provide clinical monitoring, oversight, and support to ensure trials are run with the highest emphasis on quality and efficiency. This insourced model creates synergies between trials, and enables us to conduct multiple studies simultaneously, reduce cost, and apply learnings across programs to enhance execution. We believe our approach results in higher quality clinical and biomarker data, benefits we have now observed through our two completed Phase 2a trials. Finally, our strict approach to data oversight enables us to design software tools, such as Spectra, Techcheck, and Altoscope, which are tailored to the requirements of our biomarker data collection with an understanding of how these data will ultimately be gathered in clinical practice. While we conduct most of our clinical work internally, we do selectively employ CROs when conducing our Phase 1 pharmacodynamic trials and use certain CRO capabilities to augment our internal expertise.

The insights from running our trials internally have additionally enabled us to build infrastructure to support decentralized clinical trials, managed by dedicated clinical trial investigators trained specifically for remote-only patient care and monitoring. Patients are recruited nation-wide through online advertising campaigns, screened for eligibility, and then biomarkers are collected in a patient’s home, or at a convenient location. Follow-up visits can be conducted remotely via telehealth, similar to how the majority of routine psychiatric care is currently conducted. This enables our clinical trials to have broader demographic and geographic reach, and to further support equity and diversity in our trial populations. Importantly, we believe it also establishes the technology platform for large-scale commercial dissemination of our technologies to identify biomarkers if approved, giving us early experience reaching and assessing our target populations in unique ways.

Our Product Candidates

ALTO-100

ALTO-100 is an investigational novel small molecule that has shown evidence of a pro-neurogenesis/neuroplasticity mechanism of action, and we believe binds a receptor not targeted by other CNS therapeutics, which would make it first-in-class if approved. In January 2023, we announced results from a Phase 2a trial of ALTO-100, in which a patient population characterized by impaired cognition responded significantly better to ALTO-100, as measured by improvement in depressive symptoms, than patients without objectively defined cognitive impairment. Based on the results from the Phase 2a trial, we advanced ALTO-100 into an ongoing, randomized, double-blind, placebo-controlled Phase 2b clinical trial in 266 patients with MDD characterized by this cognition biomarker. The Phase 2b trial was initiated in January 2023 and we expect to report topline data from this trial in the second half of 2024.

On January 25, 2024, the California Institute for Regenerative Medicine, or CIRM, held a meeting to determine a funding recommendation regarding a grant application we submitted to support a proposed Phase 2b clinical trial of ALTO-100 in patients with bipolar depression defined by the same cognitive biomarker being used for patient characterization in the ALTO-100 Phase 2b trial in patients with MDD. In the meeting, the Application Review Board for CIRM approved a funding award of $15.0 million to support the proposed clinical trial. As of January 25, 2024, the grant has been approved by CIRM for funding, subject to finalization and acceptance of requisite grant terms and conditions. As

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a result, timing of the funding of the grant has not yet been finalized. If the terms and conditions are finalized and accepted and the grant is funded, we intend to conduct a 200 patient Phase 2b trial in patients with bipolar depression characterized by the same cognitive biomarker as is being used in the ongoing ALTO-100 Phase 2b trial in patients with MDD. Patients with bipolar depression have been shown to have cognitive deficits and reduced hippocampal plasticity, similar to the MDD population. Currently the only approved medications for bipolar depression are antipsychotics. However, we may be unable to initiate the Phase 2b bipolar depression trial prior to completion of the ALTO-100 Phase 2b trial in patients with MDD if we do not agree upon terms and conditions of the CIRM grant and obtain such funding timely or at all.

We have worldwide rights to develop and commercialize ALTO-100 and have employed a robust intellectual property strategy. We have issued and pending patents or patent applications that we believe provide protection of ALTO-100 to at least 2043.

MDD With Poor Cognition Background

MDD is a psychiatric disorder characterized by key symptoms such as low mood, anhedonia, poor concentration and decision-making, and changes in sleep and appetite. According to the National Institute of Mental Health, an estimated 21 million, or 8.3% of, adults in the United States experienced one major depressive episode in 2021. Most patients with MDD go untreated or do not meaningfully respond to the limited therapies currently available. A 2017 study showed that 17% of adults in the United States take a psychiatric medicine, 71% of which are on antidepressants. In addition, psychiatric medication use increased approximately 46% from 1999 to 2018, and we believe that trend has continued in recent years. Unfortunately, more than two-thirds of people treated with an antidepressant fail to achieve an adequate response to therapy.

MDD is currently diagnosed through subjectively assessed symptoms, and thus diagnosis can vary from clinician to clinician. The Diagnostic and Statistical Manual of Mental Disorders provides no objective metrics for defining MDD. We believe it is highly unlikely that all patients with MDD have the same neurobiological features characterizing their depression. Therefore, we believe we need to approach treatments in a manner that enables segmenting of patients based on objective measurement of brain circuit disruptions to deliver better outcomes.

One prominent and high need group of patients with MDD are those in whom an impairment in cognition can be demonstrated with objective testing (i.e., below-healthy levels of cognitive task performance), distinct from subjective reports of cognitive symptoms. These impairments are evident relative to both other patients with MDD and matched healthy controls. Patients with MDD and poor cognition typically show a suboptimal response on depressive symptoms to current standard of care treatment options. This leads to greater chronicity, disability, and risk of recurrence among these patients. Disease pathophysiology is also relevant, as genetic risk for depression predicts poor cognition. We believe this population comprises at least one-third of patients with MDD, translating to at least 7 million people in the United States. Because of the high clinical need of patients with MDD and poor cognition and a mechanism of ALTO-100 that we believe will be first-in-class if approved, we are developing ALTO-100 as both a monotherapy and as an adjunctive to an antidepressant to which the patient has experienced an inadequate response.

ALTO-100 Biological Rationale

Published data in humans and preclinical animal models have demonstrated a connection between impairments in cognition in depression and reductions in hippocampal neuroplasticity, the process by which the brain adapts to changing stimuli and experiences. Deficits in neuroplasticity lead to reductions in an individual’s ability to effectively adapt to their environment, which in patients with depression reinforces negative thought and behavioral patterns. Hippocampal volume has been observed to be reduced in patients with depression. The hippocampus is a key brain structure for cognition and mood, which is associated with both poor cognition and greater treatment resistance. Reductions in plasticity-promoting signaling molecules, such as brain derived neurotrophic factor, or BDNF, are also seen in the hippocampus of patients with depression, giving rise to a “neurotrophin hypothesis of depression” in which a central component is the resulting hippocampal neuroplasticity impairment. BDNF plays key roles in neuroplasticity at the synaptic and cellular levels, as well at the level of hippocampal neurogenesis, or the process of forming new neurons in the adult brain. Therefore, given the neuroplasticity enhancement observed with ALTO-100, including its observed effects on BDNF signaling, we believe this product candidate is well-suited to address patients with MDD and poor cognition. As depicted in the figure below, ALTO-100 has demonstrated enhanced hippocampal neuroplasticity at the synaptic and cellular levels, along with neurogenesis, which we believe suggests the potential to ameliorate depression symptoms in patients with this disruption, identified clinically as deficits in hippocampus-dependent verbal memory.

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ALTO-100 was discovered using a functional screen for neurogenesis in vitro and has demonstrated enhanced neuroplasticity and neurogenesis in multiple preclinical models in vivo completed by Neuralstem, who initially discovered ALTO-100. In these preclinical models, ALTO-100 acutely increased hippocampal synaptic plasticity, which over days to weeks of exposure drove cellular plasticity (i.e., synaptogenesis) as well as neurogenesis, and also increased hippocampal volume, as shown in the figure below. These effects point to the potential of ALTO-100 as a mood enhancing and pro-cognitive agent in patients with depression and poor cognition.

The mechanism of action for ALTO-100 is believed to work through BDNF signaling, as depicted below, with check marks indicating effects observed to be triggered by ALTO-100.

Impact of ALTO-100 on Molecular Signaling Driving Neuroplasticity and Neurogenesis Effects Downstream of BDNF Activation

Completed ALTO-100 Phase 2a Trial — MDD Cohort

In January 2023, we reported results from an exploratory Phase 2a trial of ALTO-100 in patients with MDD. The trial was conducted over eight weeks to evaluate the efficacy and safety of ALTO-100 in patients with MDD. Depression

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severity was assessed using MADRS, a widely accepted, rater-assessed scale for depression that has been used as a primary endpoint in pivotal trials of other depression treatments. All patients underwent biomarker testing pre-treatment. The trial enrolled 133 patients with primary moderate to severe MDD, of which 123 met the pre-specified criteria for inclusion in both the responder biomarker identification and prospective validation analyses. All patients received 40mg of ALTO-100 twice daily over an eight-week treatment period, either as a monotherapy or adjunctive to an antidepressant to which they had an inadequate response. In our trial, the primary endpoint was the change in MADRS score from baseline at week six. The pre-specified replication threshold was a Cohen’s d effect size of 0.5 or greater for the effect of the verbal memory biomarker, which we estimate could support an ultimate drug-placebo effect size of d=0.4 in poor memory patients based on the all-comer effect of ALTO-100 in MDD populations. Cohen’s d, which is represented in certain figures below as “d,” is a statistical measure that quantifies the difference between two groups or conditions, taking into account the variance in that measure. A Cohen’s d value of 0.2 is considered small, 0.5 medium, and 0.8 or higher large. For context, the typical drug-placebo Cohen’s d effect size difference is approximately 0.3.

ALTO-100 Cognition Biomarker Identification in Discovery Dataset from Phase 2a Trial in MDD

Using a 30-patient discovery dataset, we found that poor verbal memory relative to matched healthy subjects, based on an objective cognitive test, predicted a better response to ALTO-100, as measured by MADRS. Verbal memory, or memory for verbally presented information such as lists of unrelated words, is a well-validated index of hippocampal neuroplasticity. Thus, verbal memory mechanistically ties together the responder biomarker, an understanding of depression pathophysiology around reduced hippocampal neuroplasticity in these patients, and the potential role of ALTO-100 in increasing hippocampal neuroplasticity. Least squares mean, or LSM, change in MADRS scores over eight weeks in the discovery dataset are shown in the figure below. In this and additional figures below, “p” refers to “p-value,” the conventional method for determining the statistical significance of a result, which represents the probability that random chance caused the result (i.e., a p-value = 0.01 means that there is a 1% probability that the difference between the control group and the treatment group is purely due to random chance).

ALTO-100 Cognition Biomarker Validation in Test Data Set from Phase 2a Trial in MDD

After biomarker identification, we unlocked the blinded test data using a pre-specified statistical analysis plan and found replication of the data described above (i.e., verbal memory as a biomarker better predicted ALTO-100 clinical outcomes). Moreover, verbal memory-based enrichment of clinical response was similar in patients taking ALTO-100 as monotherapy or adjunctive to an antidepressant to which they had an inadequate response, indicating the primacy of patient biology over clinical use context. Changes in MADRS scores for the full test dataset are shown in the figure below.

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ALTO-100 Additional Clinical Data from Phase 2a Trial

Following the discovery and replication of verbal memory as a predictive biomarker, we further analyzed the entire trial population to evaluate consistency of effects across clinical outcomes in the biomarker-characterized population. The data below include the 123 patients with MDD that met the pre-specified criteria for inclusion in both the responder biomarker identification and prospective validation analyses. An important measure of the robustness of a drug’s effect is the overall response rate, or percentage of patients achieving a ≥50% reduction in MADRS score. Significantly more patients with the poor verbal memory biomarker profile responded to ALTO-100 at six and eight weeks, as reflected in the figure below. Further, in patients with the poor verbal memory biomarker taking ALTO-100 as monotherapy, an 81% response rate was observed at week eight compared to 38% for patients without this biomarker. Patients with the poor verbal memory biomarker who received ALTO-100 as adjunctive treatment to an antidepressant responded at a 50% rate compared to 31% of those without this biomarker.

Patients with the poor verbal memory biomarker also responded better across other endpoints measured in the trial as compared to those patients that did not have the biomarker. The two graphs below depict clinical outcomes after eight weeks from the ALTO-100 trial on the Hamilton Depression Rating Scale, or HDRS, and the Clinician Global Impression—Severity scale, or CGI-S.

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Establishing Specificity of the ALTO-100 Biomarker Against Placebo and Standard-of-Care Medication Outcomes

We have also evaluated whether the biomarker profile for ALTO-100 predicted response to placebo as well as to other treatments. We observed that patients with poor cognition did not respond better to placebo, evaluated across eight different studies. Likewise, poor cognition did not predict better response to a variety of standard-of-care antidepressants, and instead predicted worse outcomes in several cases. The ALTO-100 and ALTO-300 biomarkers were likewise uncorrelated and independent. We believe that this specificity will make it more likely that we can demonstrate clinical efficacy in patients with MDD and poor cognition, and thereby increase the probability of success for ALTO-100.

Ongoing Phase 2b Trial in MDD

In January 2023, we initiated a Phase 2b trial in patients with MDD using the verbal memory-based biomarker profile discovered and prospectively replicated in our Phase 2a trial. While the biomarker is assessed using our proprietary computerized neurocognitive battery, Spectra, we also collect EEG and wearable device data at baseline to enrich the data supporting our Platform.

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The Phase 2b trial is a six-week, double-blind, placebo controlled, randomized trial in 266 patients as either monotherapy or adjunctive to an antidepressant to which they had an inadequate response. Within the screening period, patients are assessed for biomarker status in an automated and software-driven manner, the outcome of which will remain blinded to patients, treating physicians, site staff, and our clinical development team. Patients are then randomized on a one-to-one basis to receive either 40mg twice daily, or BID, of ALTO-100 or placebo. The primary endpoint in the trial is the change in MADRS score from baseline to week six. The trial includes both patients with and without the poor memory biomarker profile, but the powered primary analysis will be conducted only in patients with the poor memory biomarker profile. Patients then have the option of continuing into a seven-week open label extension in which they will receive 40mg BID of ALTO-100. The schematic below shows the overall trial design:

Data from Prior ALTO-100 Clinical Trials in MDD

ALTO-100 was previously studied in two clinical trials for patients with MDD by Neuralstem. In a 2012-2013 placebo-controlled Phase 1b trial of 40mg once, twice, and three times daily, ALTO-100 was well tolerated and demonstrated robust antidepressant effects as measured by MADRS scores in people with MDD, as shown in the figure below. No treatment emergent adverse events, or TEAEs, led to withdrawal and there were no serious adverse events reported.

In a 2016-2017 two-stage, placebo-controlled Phase 2 trial of 40mg once and twice daily (in which the second stage re-randomized placebo non-responders from the first stage), ALTO-100 demonstrated numerical improvements in MADRS scores in the all-comer population but did not achieve statistical significance. The primary endpoint in the study completed by Neuralstem was the pooled stage 1 and stage 2 analysis of MADRS change from baseline compared to placebo. Neither dose group achieved statistical significance on the primary outcome measure. On certain secondary outcome measures, the 40mg/day dose group achieved statistical significance. In the study, ALTO-100 was well tolerated and there were significantly fewer discontinuations in the active arms than in the placebo arm during stage 1. No subjects on ALTO-100 experienced serious adverse events. The full data from this study were published by Neuralstem in Molecular Psychiatry in 2019 in a peer reviewed manuscript with first author G.I. Papakostas.

Prior to acquiring ALTO-100, we conducted a retrospective analysis of the Phase 2 data. We found that a group of patients characterized by poor cognition on the limited cognitive battery collected in this trial demonstrated statistically significant improvement versus placebo. Following our analysis, we acquired the product candidate and initiated the Phase 2a trial in patients with MDD and/or PTSD to validate these findings prior to advancing ALTO-100 into our ongoing Phase 2b trial. Results from stage 1 of the originator’s trial are shown in the figure below, and results from stage 2 were similar.

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Change in MADRS in Patients with MDD from the Originator’s ALTO-100 Phase 1b Trial and in Patients with Poor Cognition from the Originator’s ALTO-100 Phase 2 Trial (Stage 1 Shown), Only for 40mg BID and Placebo Arms

No TEAEs led to withdrawal and there were no serious adverse events reported. Significantly fewer patients discontinued ALTO-100 relative to placebo (p=0.013). The rate of treatment-related TEAEs during stage 1 in the 40mg BID group was 45.5%, compared to 44.6% in the placebo group (56.8% of 40mg BID and 56.9% of placebo reported any TEAE). 22.7% of both groups reported related TEAEs in stage 2 (40.9% and 36.4% reported any TEAE in the 40mg BID and placebo groups respectively). The only TEAEs observed in 5% or more of patients on 40mg BID ALTO-100 in stage 1 were headache (18.2% in 40mg BID and 10.0% in placebo in stage 1), abnormal dreams (6.8% in 40mg BID and 3.1% in placebo), and nasopharyngitis (6.8% in 40mg BID and 3.8% in placebo). No reported TEAE exceeded 5% in the drug arm in stage 2.

Completed ALTO-100 Phase 2a Trial — PTSD Cohort

PTSD is a psychiatric disorder characterized by symptoms such as intrusive memories and feelings associated with a prior life-threatening trauma, avoidance of triggers or reminders, depression, and exaggerated startle or vigilance. It is also commonly comorbid with MDD and present in approximately 9 million individuals in the United States in any given year (3.6% of adults). The only FDA-approved treatments for PTSD are two SSRI antidepressants from over two decades ago, with psychotherapy considered the best first-line treatment. Like MDD, PTSD is characterized by cognitive impairment in a portion of patients, reductions in hippocampal volume, and impairments in hippocampal neuroplasticity across molecular, cellular, and behavioral levels. PTSD patients with poor verbal memory also respond more poorly to treatment. There is a pressing clinical need to identify new treatment options for patients with PTSD, and in particular those with poor verbal memory. As the prevalence of poor cognition in patients with PTSD is estimated to be at least similar to that in MDD, we believe this population comprises at least 3 million people in the United States alone.

In September 2023, we reported results from the PTSD cohort of our exploratory Phase 2a trial of ALTO-100, which consisted of 90 patients, of which 84 met the pre-specified criteria for inclusion in both the responder biomarker identification and prospective validation analyses. In this cohort, we observed that the same verbal memory biomarker profile discovered in the MDD cohort also demonstrated a greater response to ALTO-100 on PTSD symptoms as measured by the clinician administered PTSD scale aligned with the Diagnostic and Statistical Manual of Mental Disorders, or CAPS-5. Reductions in CAPS-5 scores, a common clinical endpoint in PTSD, were observed at week four (the primary outcome timepoint; d=0.37, p=0.04) with a 17.5-point reduction for patients with poor memory and a 12.9-point reduction for patients without this biomarker. The difference between the groups was also present at week eight, when the patients with poor memory demonstrated a 20.2-point reduction as compared to an 18.5-point reduction in patients without the biomarker.

We believe the data from this trial provide significant support for the transdiagnostic potential of our biomarker approach. Assuming positive data from the ongoing Phase 2b trial in patients with MDD, we also plan to launch a Phase 2b/3 program in PTSD with ALTO-100 in addition to MDD.

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ALTO-100 Safety Data from Phase 2a Trial in MDD and PTSD

ALTO-100 was well tolerated in the trial among 243 patients exposed to the drug in the safety analysis dataset, with no treatment-related serious adverse events reported. The overall incidence rate of TEAEs was 60% and the most common TEAEs reported were headache (16.5%) and abdominal discomfort (5.4%). The rate of TEAEs that were determined by the investigator to be related to treatment with ALTO-100 was 40.2%. Additionally, approximately 5.8% of patients discontinued treatment due to adverse events. No related serious TEAEs were identified. We observed no material difference in rate of TEAEs between patients with MDD with or without the cognition biomarker in this Phase 2a trial.

Regulatory Interaction on ALTO-100 Development

In 2023, we received written feedback from the FDA on our Phase 2b trial protocol. In response to this feedback, we increased the number of patients targeted for enrollment. The increased number of patients in the trial is designed to improve the overall powering of the study, including with respect to the largest subgroup of patients—those receiving ALTO-100 as monotherapy.

ALTO-300

ALTO-300 is an investigational small molecule melatonergic (MT1 and MT2) agonist and serotonergic (5-HT2C) antagonist with antidepressant properties. The compound has been approved as an antidepressant in Europe and Australia with the International Nonproprietary Name agomelatine. We recently completed a Phase 2a clinical trial evaluating ALTO-300 as an adjunctive treatment in patients with MDD. We observed, and prospectively replicated, a significantly greater response to ALTO-300 within a patient group with a machine learning-derived EEG biomarker profile as compared to those without it. Based on the results from the Phase 2a trial, we advanced ALTO-300 into an ongoing randomized, double-blind, placebo-controlled Phase 2b clinical trial in the United States in 200 patients with MDD characterized by the EEG biomarker. This Phase 2b trial was initiated in June 2023 and we expect to report topline data from this trial in the first half of 2025.

Our development of ALTO-300 in the United States is protected by a pending patent application. We believe our patent portfolio for ALTO-300 provides protection to at least 2044.

Background on ALTO-300 (Agomelatine) and History of Clinical Development

ALTO-300 is a product candidate known as agomelatine, initially developed by Servier. Agomelatine is a melatonergic (MT1 and MT2) agonist and serotonergic (5-HT2C) antagonist that is approved and commercially available in Europe (for the treatment of major depressive episodes in adults) and Australia (for the treatment of major depression in adults including prevention of relapse). As illustrated in the figure below, its MT1/2 agonism is thought to elevate mood through effects on circadian rhythms, while its 5-HT2C antagonism is thought to elevate mood by disinhibiting dopamine and norepinephrine release, particularly in the frontal cortex. This unique pattern of pharmacological activity is thought to contribute to agomelatine’s favorable tolerability data, characterized by a low reported incidence of canonical antidepressant side effects such as gastrointestinal intolerability, anxiety, sleep disturbance, and sexual dysfunction.

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Agomelatine has also been shown to better treat anhedonia symptoms as compared to SSRIs or SNRIs in third-party clinical trials.

Agomelatine has been studied in thousands of patients globally and was previously studied in a Phase 3 clinical development program for MDD in the United States by Novartis from 2006 to 2011. Agomelatine demonstrated positive results in one Phase 3 trial at the 25mg dose and another Phase 3 trial at the 50mg dose, a common pattern in all-comer antidepressant trials. The observed antidepressant effects of 25mg and 50mg agomelatine were approximately similar. However, higher rates of reversible liver enzyme elevation have been observed in the 50mg relative to the 25mg dose, both in Servier’s studies and in clinical practice, we are developing only 25mg agomelatine as ALTO-300. This is reinforced by results from Novartis’ fixed dose Phase 3 trials where comparable low rates of liver function test, or LFT, elevation were seen in the 25 mg (0.3%) and placebo arms (0.3%), relative to the 50 mg arm (3.7%). Overall rates of total TEAEs were similar across 25mg of agomelatine and placebo (72.9% compared to 70.0% with placebo). Discontinuation rates due to TEAEs were also similar, at 4.3% with 25mg agomelatine and 5.7% with placebo.

A large recent third-party network meta-analysis published in the Lancet reported that the benefits of agomelatine in all-comer MDD populations were similar to those of other common antidepressants, while it has demonstrated tolerability advantages over other antidepressants, as summarized in the charts below.

Network Meta-Analytic Data from All-Comer Third-Party Clinical Trials of Agomelatine as well as Other Antidepressants Evaluating Efficacy (Odds Ratio of Response) and Tolerability (Odds Ratio of Discontinuation, also Termed Acceptability). * p<0.05

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Our Development Plan for ALTO-300: An EEG-Based Predictive Biomarker Strategy

Our plan is to use a predictive EEG biomarker to develop ALTO-300 for patients with MDD most likely to be responders to treatment.

As previously reported and published in peer-reviewed journals, we have developed machine learning-derived, EEG-based, predictive models for various interventions, including antidepressants, neurostimulation, and psychotherapy. EEG measures used in our models may include indices of activity (e.g., excitation/inhibition), inter-regional connectivity, information processing, and signal dynamics. We used the same approach to choose a model designed to predict response to treatment with ALTO-300. In our completed Phase 2a trial we discovered, and prospectively replicated, an EEG-based biomarker profile that we observed to be robust, reliable, and readily scalable. This EEG biomarker is specific to ALTO-300, as it has not been observed to predict response in patients taking either placebo or standard-of-care SSRI/SNRIs.

ALTO-300 is being developed as an adjunctive treatment in MDD. Given the extensive utilization of antipsychotic medications in depression, which are typically poorly tolerated, and the favorable tolerability profile of agomelatine, we believe the opportunity for a treatment with a novel mechanism in an adjunctive treatment population could provide a substantial benefit to patients and providers. Given the prevalence of patients with the biomarker profile observed in our clinical trials to date, we estimate approximately 50% of patients with MDD, or more than 10 million people, to be eligible candidates for potential treatment with ALTO-300. Importantly, the ALTO-300 biomarker is uncorrelated with the ALTO-100 biomarker, meaning that these two product candidates are being developed for independent patient subgroups within the larger MDD population. We estimate one or both of these two independent biomarkers are present in approximately three-quarters of the overall MDD population.

ALTO-300 Clinical Data

Completed ALTO-300 Phase 2a Trial in MDD

We recently completed an exploratory Phase 2a clinical trial of ALTO-300 as an adjunctive treatment in patients with MDD who experienced inadequate response to an antidepressant. The eight-week clinical trial was conducted across more than 20 sites in the United States and enrolled 239 patients with MDD between the ages of 18-74 years old to evaluate potential predictive biomarkers as well as the efficacy and safety of ALTO-300. Patients remained on a background antidepressant and were administered 25mg of ALTO-300 once daily before bedtime, or QHS. A total of 110 of these patients underwent EEG recordings, of which 105 met pre-specified eligibility requirements to be included in the EEG analyses. The primary analysis was change in depressive symptoms as measured by MADRS at week four. The pre-specified replication threshold was a Cohen’s d effect size of 0.35 or greater for the effect of the EEG biomarker, which we estimate could support an ultimate drug-placebo effect size of d=0.4 in biomarker positive patients based on the meta-analytically reported effect size for agomelatine in all-comer MDD populations.

ALTO-300 EEG Biomarker Identification in the Discovery Dataset from the Phase 2a Trial in MDD

We successfully trained a machine learning model to predict ALTO-300 responders in the discovery dataset, which heavily weighted parietal cortex signal dynamics measures, the results of which are shown in the figure below.

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ALTO-300 EEG Biomarker Validation in the Test Dataset from the Phase 2a Trial in MDD

After biomarker identification, we unlocked the blinded test data using a pre-specified statistical analysis plan and observed replication of our discovery dataset findings (i.e., the EEG biomarker predicted ALTO-300 clinical outcomes). Within the patient group with the EEG biomarker profile, we observed a significantly greater response to ALTO-300 as compared to the patient population without the EEG biomarker profile across multiple timepoints. The following graph shows the results from the test dataset, which provides support for prospective validation of the biomarker and its potential predictive ability in patients with MDD.

Additionally, across the whole sample, significantly more biomarker-characterized patients (n=55) than patients without the biomarker (n=50) achieved clinical response (defined as ≥50% reduction in depression symptoms) at week four (47% vs. 28%), week six (58% vs. 34%), and week eight (62% vs. 48%) of treatment.

Patients with the EEG biomarker also responded better across other endpoints measured in the trial as compared to those patients that did not have the biomarker. The two graphs below depict the outcomes of ALTO-300 on HDRS and CGI-S.

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Assessing Specificity of the ALTO-300 Biomarker Against Placebo and Standard-of-Care Medication Outcomes

We have also evaluated whether the biomarker profile for ALTO-300 predicted response to placebo or to other treatments. We observed that patients with the EEG biomarker did not respond better to placebo, nor did they respond better to standard-of-care antidepressant drugs. We believe that this specificity will make it more likely that we can demonstrate clinical efficacy in patients with MDD with the EEG biomarker, and thereby increase the probability of success for ALTO-300.

ALTO-300 Safety Data from Phase 2a Trial in MDD

ALTO-300 was well tolerated in the Phase 2a trial among 239 patients, with no treatment-related serious adverse events reported. Importantly, we did not observe any incidents of LFT elevations across aspartate transaminase or alanine transaminase greater than three times the upper limit of normal. Overall the adverse events reported in the Phase 2a trial were generally mild. The overall incidence rate of TEAEs was 72%, and the most common TEAEs reported were headache (14.6%), nausea (7.5%), dyspepsia (6.3%), insomnia (6.3%), COVID-19 infection (5.9%), and rash (5.0%). The rate of TEAEs that were determined by the investigator to be related to treatment with ALTO-300 was 35.7%. Additionally, 5.0% of patients discontinued treatment due to adverse events. No related serious TEAEs were identified. We observed no material difference in rate of TEAEs between patients with MDD with or without the EEG biomarker in this Phase 2a trial.

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Ongoing Phase 2b Trial in MDD

In June 2023, we initiated a six-week, double-blind, placebo-controlled, randomized trial Phase 2b clinical trial in 200 patients with MDD receiving ALTO-300 adjunctive to an antidepressant to which they had an inadequate response. Within the screening period, patients are assessed for EEG biomarker status. Patients are then randomized on a one-to-one basis to receive either 25mg QHS of ALTO-300 or placebo. The primary endpoint in the trial is the change in MADRS score from baseline to week six. The trial includes both patients with and without the pre-specified EEG biomarker, but the powered primary analysis is in the population with the pre-specified EEG biomarker profile. Patients are then enrolled into an eight-week open label extension in which they will receive 25mg QHS of ALTO-300. The schematic below shows the overall trial design:

ALTO-101

ALTO-101 is an investigational novel small molecule PDE4i that we are developing for the treatment of CIAS. ALTO-101 has been studied across nine Phase 1 trials, in which the product candidate demonstrated human brain penetration and was well tolerated. ALTO-101 was studied in eight Phase 1 studies prior to our acquisition of the product candidate — seven in healthy volunteers and one in patients with Parkinson’s disease. The prior studies were conducted by Sanofi between 2006 and 2012 and are summarized in a table below. Results from our recently completed Phase 1 trial demonstrated robust effects of ALTO-101 on cognitive processing, measured with EEG, and cognitive test performance. Based on these results, we plan to initiate a proof-of-concept trial of ALTO-101 in patients with CIAS in the first half of 2024 and expect to report topline data from this trial in 2025.

We have a pending provisional patent application to protect the utilization of the product candidate in the indications for which we are developing it. We believe our patent applications for ALTO-101 will provide protection to at least 2044.

Cognitive Impaired Schizophrenia (CIAS) Background

Schizophrenia afflicts more than 2.8 million people in the United States alone. The hallmark symptoms of schizophrenia include hallucinations, delusions, irrational/illogical thoughts, and movement disorders. In addition to these positive symptoms, which are the target of all currently approved medications, approximately 90% of patients with schizophrenia also experience cognitive and/or negative symptoms. Cognitive symptoms include memory disturbances, inability to process information and make decisions, and trouble focusing or paying attention. Negative symptoms entail blunting of affect and are more akin to other affective disorders such as depression. Cognitive and negative symptoms of schizophrenia are also often more predictive of impairment in daily function than positive symptoms. Despite significant need for interventions to treat these aspects of schizophrenia, there are no currently approved treatments for the cognitive and negative symptoms.

ALTO-101 Biological Rationale

ALTO-101 is a brain-penetrant small molecule that inhibits the phosphodiesterase 4, or PDE4, enzyme. PDE4 normally acts to break down cyclic adenosine monophosphate, or cAMP, terminating its ability to drive downstream signaling. Post-mortem and genetic studies of patients with cognitive disorders, including schizophrenia, have demonstrated reduction in a key neuroplasticity-related second messenger signaling pathway involving cAMP. This pathway has been extensively studied in humans and a wide range of preclinical models, with findings indicating that

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reduction in cAMP signaling has been observed to be associated with impaired cognition and mood, while increasing cAMP has been shown to rescue deficits in animal models of a variety of neuropsychiatric disorders. While several drugs that increase cAMP levels by inhibiting the breakdown of this second messenger are approved for non-CNS indications (e.g., psoriasis), none have yet been approved in the United States to treat neuropsychiatric disorders.

By inhibiting PDE4, ALTO-101 is designed to elevate cAMP levels, which in the hippocampus has enhanced neuroplasticity and improved various forms of memory in preclinical models. ALTO-101 has demonstrated pro-cognitive effects in vivo at doses as low as five micrograms per kilogram. The figure below illustrates the potential mechanism of action of ALTO-101.

ALTO-101 Phase 1 Clinical Data

A total of eight Phase 1 trials were performed prior to our acquisition of the product candidate, in which ALTO-101 was observed to be well tolerated at multiple dose levels. In addition, ALTO-101 penetrated the blood brain barrier in humans in a positron emission tomography study. In all, ALTO-101 was studied in 154 healthy subjects and 11 Parkinson’s disease patients at dosage levels ranging between 0.05 mg to 4.5 mg in various dosing paradigms in these Phase 1 studies. We have used the data from prior trials to inform our clinical development plan in CIAS, including dose selection based on target engagement/occupancy and tolerability profile.

In order to understand the pharmacodynamic effects of ALTO-101 and neurocognitive outcomes relevant to CIAS, in the summer of 2023, we completed a dose-mapping trial in healthy adults using our Platform. Specifically, 40 individuals completed a three-condition cross-over design study, with each participant receiving single doses of placebo, 0.5mg, and 1.5mg of ALTO-101 orally at seven-day intervals. Key outcomes on EEG, event-related potentials, and neurocognitive task performance measures relevant to schizophrenia and other cognitive disorders were assessed. Compared to placebo, we observed significant effects in a dose response relationship for ALTO-101 on multiple measures as shown in the figure below, including: decreases in EEG resting theta power, which is known to be elevated in multiple cognitive and psychiatric disorders; increases in stimulus-driven gamma-band phase locking, which is known to be reduced in schizophrenia patients; and increases in mismatch negativity, which is known to be blunted in patients with schizophrenia. We also observed statistically significant, dose-dependent increases in information processing speed, a core cognitive domain important to multiple higher-level functions, as well as promising effects on a global cognition composite. These results support the potential utility of ALTO-101 as a pro-cognitive agent and demonstrate our approach to using biomarkers as outcome measures in well-powered Phase 1 trials. Data from our Phase 1 trials directly inform dosing and indication selection and serve as an early stage go/no-go signal for development of a product candidate.

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Higher doses of PDE4 inhibitors, broadly, have been associated with increased rates of nausea, which we believe is associated with peak concentrations in the brain after oral dosing. In our Phase 1 trial, we likewise observed a dose-dependent increase in nausea (2.4% at 0.5mg and 28% at 1.5mg), dizziness (4.8% and 23.3%), and lightheadedness (2.4% and 14%), though only 2.3% of patients discontinued due to an adverse event. No serious TEAEs were identified. The vast majority of these TEAEs occurred near Tmax, or the time it takes to reach peak drug concentration in the brain. Given the potency of ALTO-101, and our observation of its dose-response pharmacodynamic effects on brain biomarkers of cognition, we reformulated ALTO-101 to be delivered transdermally. We believe this may allow us to deliver a consistent

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and pharmacodynamically relevant dose while avoiding the peaks in blood concentration typical of immediate release oral drugs. In the case of ALTO-101, this peak was observed to contribute to nausea-related adverse events in some individuals.

ALTO-101 Clinical Development Plan

A Phase 1 trial is ongoing in healthy subjects for assessment of the safety, tolerability, and pharmacokinetics of transdermally delivered ALTO-101, and we expect to report topline data from this trial in the first half of 2024. We then plan to initiate a proof-of-concept trial in patients with CIAS in the first half of 2024. We expect to report topline data from this trial in 2025.

ALTO-101 Prior Human Clinical Trial Data

Prior to us licensing ALTO-101 from Sanofi, Sanofi had evaluated ALTO-101 across eight Phase 1 clinical trials — seven trials in healthy subjects, and one in patients with Parkinson’s disease — between 2006 and 2012. The Parkinson’s disease Phase 1b study was conducted in collaboration with the Michael J. Fox Foundation.

ALTO-203

ALTO-203 is an investigational novel small molecule histamine H3 receptor inverse agonist. We are currently advancing ALTO-203 for the treatment of patients with MDD with anhedonia. In a Phase 1 trial completed by its originator, Cephalon (subsequently acquired by Teva), ALTO-203 acutely increased subjective positive emotions by levels equivalent to or greater than modafinil, an FDA approved drug acting through dopamine release. We believe these positive emotional effects position ALTO-203 to uniquely address the unmet needs in patients with MDD and higher levels of anhedonia. We plan to initiate a Phase 2 POC trial in patients with MDD and higher levels of anhedonia in the first half of 2024 pursuant to an active IND for ALTO-203 expect to report topline data from this trial in the first half of 2025.

Our development of ALTO-203 is protected by a robust intellectual property estate, including issued patents and pending patent applications. We believe our patent portfolio for ALTO-203 provides protection to at least 2044.

MDD with Anhedonia Background

Symptoms of reduced experience of pleasure or motivation to engage in rewarding activities, termed anhedonia, are a common component of many neuropsychiatric disorders. In MDD, anhedonia is associated with poorer treatment response, as well as greater chronicity and disability. Neurobiological studies have suggested that reductions in dopamine release and/or dopaminergic signaling in the reward system, inclusive of the nucleus accumbens, may contribute to anhedonia. As such, a drug that enhances nucleus accumbens dopamine release may prove to be a particularly fruitful approach to treating anhedonia, as well as related depressive symptoms. Moreover, an increase in reward system dopamine may have beneficial effects on elements of cognition in these patients, essentially by increasing motivational processes.

Anhedonia is a common symptom, reported in more than 75% of people with depression. Based on this, we estimate that at least 15 million people in the United States have both depression and anhedonia.

ALTO-203 Biological Rationale

The histamine H3 receptor, unlike other histamine receptors, is located predominantly in the brain and acts as a master regulator, inhibiting the release of a number of other major neurotransmitters including histamine, dopamine, acetylcholine, and norepinephrine. By inhibiting the “brake” driven through tonic activity the H3 receptor, levels of these neurotransmitters are thought to increase. Use of an H3 inverse agonist may therefore be important given its potential to block both histamine-induced and basal levels of receptor activity. The figure below illustrates the potential mechanism of action of ALTO-203.

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Despite these theoretical effects of blocking H3 receptors, as well as the action of many H3 inverse agonists on cortical dopamine release, prior data on several H3 inverse agonists have failed to demonstrate any effects on dopamine release in the nucleus accumbens. This lack of an effect on dopamine is particularly notable for the only approved H3 inverse agonist, pitolisant, which is indicated for the treatment of excessive daytime sleepiness in narcolepsy. By contrast, as shown in the figure below, in a preclinical study conducted by ALTO-203’s originator, ALTO-203 demonstrated an elevation of dopamine in the nucleus accumbens, a region of the brain thought to be particularly implicated for reward and motivation. The preclinical study was conducted in 2009 using in vivo microdialysis to measure the effects of ALTO-203 on acetylcholine and dopamine efflux in rats (n=6 per group in the graph below) in two different brain regions, the medial prefrontal cortex and the nucleus acumbens. We believe this activity in the nucleus accumbens differentiates ALTO-203 from other H3 inverse agonists given that the ability to drive dopamine release may be critical for mood enhancement. The approach to treating depression through a dopamine-enhancing treatment, like modafinil or armodafinil, has been successful in third-party clinical trials in MDD and bipolar depression.

ALTO-203 Phase 1 Clinical Data

The originator of ALTO-203 completed three Phase 1 trials evaluating ALTO-203 in healthy subjects, including trials designed to primarily evaluate safety and pharmacokinetics. The three Phase 1 studies were conducted by Cephalon and Teva prior to us licensing ALTO-203. The studies were conducted between 2009 and 2014 in healthy volunteers to support planned development in cognitive disorders. The first safety study was a single dose study in 48 healthy subjects evaluating doses ranging from 0.02 mg up to 5.0 mg. The second safety study was a single- and multiple-dose study evaluating doses ranging from 0.02 mg up to 0.5 mg in single and daily doses for 9 days in 48 healthy subjects. Across these trials, ALTO-203 was well tolerated and exhibited predictable pharmacokinetics. In addition to these safety and pharmacokinetic evaluations, one trial was conducted as a cross-over design in 40 healthy individuals in which three dose levels of ALTO-203 were compared to placebo as well as two active control arms, modafinil, as a dopaminergic control, and donepezil, as a cholinergic control. Results demonstrated that single doses of 25μg ALTO-203 increased positive subjective emotion on the well-validated alertness and mood components of the Bond and Lader scale. The magnitude of these effects, shown as placebo-adjusted differences below, was similar to or larger than that achieved by modafinil, with

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donepezil not having an impact appreciably different from placebo. Additional data from that trial demonstrated improved reaction time and adaptive eye tracking.

Placebo-Adjusted Visual Analog Scale (VAS) Rating from Originator’s Phase 1 Trial of ALTO-203 in Healthy Subjects

We have leveraged all of the data generated by Cephalon/Teva prior to our licensing of ALTO-203 to inform our clinical development plan, including dosing, tolerability, and the acute pharmacodynamic effects.

ALTO-203 Clinical Development Plan

Building on the acute effects on positive subjective emotion observed with single doses of ALTO-203 in healthy volunteers, we expect to initiate a placebo-controlled POC monotherapy trial in patients with MDD and higher levels of anhedonia in the first half of 2024 pursuant to an active IND for ALTO-203. We expect to report topline data from this trial in the first half of 2025.

ALTO-202

ALTO-202 is an investigational orally bioavailable antagonist of the GluN2B subunit of the NMDA receptor. NMDA receptors are receptors for glutamate, the major excitatory neurotransmitter in the brain, and its excessive release is associated with excitotoxicity-induced brain injury. This involvement of the glutamatergic system in depression is supported by the antidepressant effects of NMDA receptor antagonists, like ketamine and its enantiomer, esketamine. Given the evidence of antidepressant activity of NMDA receptor antagonists, and the drawbacks of those currently used, we plan to develop ALTO-202 in MDD as an oral GluN2B antagonist. We licensed exclusive worldwide rights to ALTO-202 from Cerecor. Prior to our licensing of ALTO-202, it was evaluated by Merck and Cerecor across 10 clinical trials, including five Phase 1 safety and PK trials and two Phase 2 trials in MDD, a pilot study in treatment resistant depression, and two Phase 1b trials in patients with Parkinson’s disease. Specifically, the originator conducted a 115-patient clinical trial using a sequential parallel comparison design, wherein patients received a sequential single dose regimen of 12 mg or 20 mg of ALTO-202 or placebo. The primary endpoint in the trial was the HDRS-6, using the average change across day two and day four post-dosing. ALTO-202 did not demonstrate statistically significant changes compared to placebo on the primary endpoint, but potentially clinically meaningful differences were observed on total HDRS score change at day two compared to placebo in a prespecified secondary analysis. Based on these results, we believe ALTO-202 may have potential rapid-onset antidepressant effects that could potentially be elucidated in a well-powered study. Across the trials, ALTO-202 was well tolerated with the most common adverse events being increased blood pressure, dizziness, somnolence, and paresthesia (numbness or tingling feeling). There were no treatment related serious adverse events observed in the prior studies of ALTO-202.

We are currently in the process of planning the next phase of clinical development for ALTO-202, which we expect to be informed by the outcomes of our Phase 2b trials of ALTO-100 and ALTO-300.

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License and Other Agreements

License Agreement with Stanford University

In December 2019, we entered into an exclusive license agreement with equity, or the Stanford Agreement, with the Board of Trustees of the Leland Stanford Junior University, or Stanford, which was subsequently amended in May 2020 and December 2023.

Under the terms of the Stanford Agreement, we obtained a worldwide, royalty-bearing license, with the right to sublicense during the exclusive term only, under certain patent rights in five patent families relating to brain stimulation, electroencephalogram and functional MRI that we could use to guide treatment of psychiatry patients, or the Stanford Licensed Patents, and under certain technology relating to the inventions covered by the Stanford Licensed Patents, or Stanford Licensed Technology, to make, have made, use, import, offer for sale and sell licensed products for use in any indication. Our rights under the Stanford Licensed Patents are exclusive until December 2029, at which time it will become non-exclusive, and our rights under the Stanford Licensed Technology are non-exclusive. Some of the Stanford Licensed Patents are jointly owned by the United States Department of Veterans Affairs and/or the Board of Regents of the University of Texas System, or the UT Board, but all the Stanford Licensed Patents are exclusively managed by Stanford under invention management agreements between Stanford and those other institutions. Stanford retained the right for itself and all other non-profit research institutions to practice the Stanford Licensed Patents and use the Stanford Licensed Technology for any non-profit purpose, including sponsored research and collaborations. Additionally, the United States Government has the nonexclusive, nontransferable, irrevocable, royalty-free, paid-up right to practice or have practiced the Stanford Licensed Patents throughout the world by or on behalf of the United States Government and on behalf of other governments or organizations, and requires us to manufacture the licensed product substantially in the United States.

As partial consideration to acquire these license rights, we paid Stanford an upfront fee of $20,000 and reimbursed Stanford approximately $80,000 of prior patent prosecution expenses related to the licensed patents. Additionally, we are required to pay a low five-digit annual license maintenance fee beginning on each anniversary of the effective date through the term of the Stanford Agreement. We also issued an aggregate of 104,348 shares of our common stock to Stanford, the UT Board and five inventors, including Amit Etkin, M.D., Ph.D., our Chief Executive Officer. We additionally granted to Stanford a right to participate in subsequent private financings of our equity securities, pursuant to which Stanford has purchased an aggregate of 627,189 shares of our Series Seed and Series A convertible preferred stock. This purchase right terminated upon the closing of the IPO.

We are required to diligently develop, manufacture and offer to sell licensed products and to diligently develop markets for licensed products, in addition to meeting certain specified development and commercial diligence milestones. We do not owe any milestone payments to Stanford in connection with our development and commercialization of products or services covered by the Stanford Licensed Patents, however beginning with our first commercial sale of the licensed products, we owe Stanford royalties on aggregate annual net sales of all licensed products by us, our affiliates or sublicensees at a very low single digit percentage. We are also required to pay Stanford mid-teen to low-mid double digit percentages of any sublicensing consideration that we receive from third parties to whom we sublicense rights under the Stanford Licensed Patents, depending on the timing of entry into the applicable sublicense.

Unless terminated earlier, the Stanford Agreement will expire upon the expiration of the last Stanford Licensed Patent. Stanford has the right to terminate the Stanford Agreement on thirty days’ written notice upon our uncured material breach of the Stanford Agreement, including failure to achieve the specified diligence milestones by the specified dates, as well as for certain other specified breaches. We have the right to terminate the Stanford Agreement for any reason upon specified prior written notice to Stanford.

License Agreement with Sanofi

In May 2021, we entered into a license agreement, or the Sanofi Agreement, with Sanofi, pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how of Sanofi relating to a PDE4 inhibitor compound, now known as ALTO-101, to use, have used, develop, have developed, manufacture, have manufactured, commercialize, have commercialized or otherwise exploit ALTO-101 and products incorporating ALTO-101, or the Sanofi Licensed Products, for all human therapeutic, prophylactic and diagnostic uses. We also obtained a non-exclusive, worldwide license to use certain other specified know-how licensed to Sanofi by a specified third party to exploit Sanofi Licensed Products solely with respect to Parkinson’s disease. During a time period that ends at a specified point in late-stage clinical development for the first Sanofi Licensed Product, Sanofi retains a limited right of first negotiation to negotiate to obtain from us, on an indication-by-

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indication basis, exclusive worldwide rights to exploit such Sanofi Licensed Product in such indication. If we do not agree upon terms for such exclusive license with Sanofi within a specified negotiation period, we are free to continue the development and commercialization of the Sanofi Licensed Product ourselves or via the grant of rights to any third party, subject to certain specified limitations on the grant of such rights, and the reinstatement of Sanofi’s right of first negotiation after a specified period.

We are required to use commercially reasonable efforts to develop Sanofi Licensed Products and to obtain regulatory approval for Sanofi Licensed Products in at least one indication in each of the United States, a major European country, the United Kingdom and Japan or China, and to commercialize any Sanofi Licensed Product for which we obtain regulatory approval. We paid Sanofi an upfront fee of $0.5 million upon the entry into the Sanofi Agreement, and will be required to pay Sanofi up to an aggregate amount in the low-mid double digit millions upon the achievement of certain one-time development and regulatory approval milestones for the first Sanofi Licensed Product to achieve the specified milestone events. In addition, if we grant sublicenses under the patents and know how licensed to us under the Sanofi Agreement, we are required to pay sublicense revenue to Sanofi at tiered percentages ranging from low-mid double-digit percentages down to the very low double-digit percentages, reducing based on the time of entry into the applicable sublicense agreement.

If we achieve regulatory approval for one or more Sanofi Licensed Products, we will owe Sanofi certain commercial milestone payments for the achievement of specified levels of aggregate, annual worldwide net sales of all Sanofi Licensed Products, up to an aggregate amount of $102.0 million for all Sanofi Licensed Products. Beginning with our first commercial sale of a Sanofi Licensed Product, we will also be required to pay Sanofi a tiered royalty on aggregate, annual, worldwide net sales of Sanofi Licensed Products at percentages ranging from the mid-to-high single digits, subject to certain customary reductions that are applicable on a product-by-product and country-by-country basis, and a customary overall royalty floor. Royalties are payable, on an aggregate basis for all licensed products and all countries, with the royalty term commencing on a Sanofi Licensed Product-by-Sanofi Licensed Product and country-by-country basis on the first commercial sale of a Sanofi Licensed Product in such country, until the latest to occur of (a) expiration of the last valid claim of either a licensed patent or certain patents filed by us after the effective date of the Sanofi Agreement that claim the know-how licensed to us by Sanofi, (b) the expiration of any regulatory exclusivity for such Sanofi Licensed Products in such country, and (c) the tenth anniversary of the first commercial sale of such Sanofi Licensed Product in such country, or the Sanofi Royalty Term. The patents licensed from Sanofi are due to expire in 2033, without taking into account any possible patent term adjustment or extension or terminal disclaimers, and assuming payment of all appropriate maintenance, renewal, and fees. Please refer to the section titled “—Intellectual Property—Product Candidate Patent Portfolio” for details of certain patent terms.

In addition, if we use specified know-how licensed to Sanofi by the specified third party to exploit the Sanofi Licensed Products for Parkinson’s disease, we will pay an additional premium at a mid-single digit percentage on all fees, milestone payments and royalties payable by us to Sanofi under the Sanofi Agreement, which premium will be payable by Sanofi directly to the specified third party.

Unless terminated earlier, the Sanofi Agreement will expire with respect to each licensed product, on a country-by-country basis, upon the expiration of the Sanofi Royalty Term, and with respect to the agreement in its entirety upon the expiry of the Sanofi Royalty Term for the last licensed product for which there has been a first commercial sale. Either we or Sanofi may terminate the Sanofi Agreement upon 60 days’ prior written notice for the uncured material breach of the Sanofi Agreement by the other party. Sanofi also has the right to terminate the Sanofi Agreement for our insolvency or if we bring or otherwise participate in a patent challenge against any licensed patents. We may terminate the Sanofi Agreement for any reason upon specified prior written notice to Sanofi.

License Agreement with Cerecor

In May 2021, we entered into a patent and know-how license agreement, or the Cerecor Agreement, with Cerecor Inc. (n/k/a Avalo Therapeutics, Inc.), or Cerecor, pursuant to which we obtained an exclusive worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how owned or controlled by Cerecor relating to an NR2B inhibitor compound now known as ALTO-202, including certain rights licensed to Cerecor by Essex Chemie AG, or Merck, to research, develop, make, have made, use, import, offer for sale and sell ALTO-202 and products incorporating ALTO-202, or Cerecor Licensed Products, for the prevention, diagnosis and/or treatment of all diseases in humans. Merck and its affiliates retained a co-exclusive, worldwide right under Merck’s patent rights and know-how sublicensed to us by Cerecor to research, make, have made, use and import ALTO-202 and Cerecor Licensed Products solely for non-human, non-commercial purposes, and we received a non-exclusive worldwide, royalty-bearing license, with

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the right to sublicense, under certain patent rights covering improvements made by Merck through its exercise of such retained right. We are required to use commercially reasonable efforts to develop and commercialize at least one Cerecor Licensed Product in the licensed field in the United States, a major European country or Japan, whether ourselves or through an affiliate or licensee.

As partial consideration for the licenses granted by Cerecor, we paid Cerecor an upfront fee of $0.5 million. We will be required to pay Cerecor or Merck, depending on the specific milestone as set forth in the Cerecor Agreement, up to an aggregate of $59.1 million per Cerecor Licensed Product if we achieve certain development, regulatory approval and first commercial sale milestones for such Cerecor Licensed Product in up to a specified number of indications. If we successfully commercialize Cerecor Licensed Products, we will also be required to pay to Merck sales milestones totaling up to $15.0 million for all Cerecor Licensed Products, for the achievement of certain specified levels of worldwide annual aggregate net sales of all Cerecor Licensed Products. Beginning on the date of our first commercial sale of a Cerecor Licensed Product, on a Cerecor Licensed Product-by-Cerecor Licensed Product and country-by-country basis, we will also be obligated to pay Merck and Cerecor tiered royalties on aggregate annual worldwide net sales of such Cerecor Licensed Product at percentages in the high single digits in the aggregate, until the later of (a) the expiration of the last valid claim within the licensed patents covering such Cerecor Licensed Product in such country and (b) 10 years after the first commercial sale of such Cerecor Licensed Product in such country, or the Cerecor Royalty Term. The latest-expiring patents licensed from Cerecor are due to expire in 2040, without taking into account any possible patent term adjustment or extension or terminal disclaimers, and assuming payment of all appropriate maintenance, renewal, and fees. Please refer to the section titled “—Intellectual Property—Product Candidate Patent Portfolio” for details of certain patent terms. If we develop and commercialize a companion diagnostic as a standalone product in connection with a Cerecor Licensed Product, we will be required to make a one-time milestone payment to Cerecor upon the achievement of a specified level of net sales of such companion diagnostic product, at an amount in the very low single digit millions.

The Cerecor Agreement will remain in force, unless earlier terminated, until the expiration of the Cerecor Royalty Term. Either we or Cerecor may terminate the Cerecor Agreement upon 60 days’ prior written notice for an uncured material breach of the Cerecor Agreement by the other party, or in the case of an insolvency event of the other party. We may terminate the agreement for any reason upon specified prior written notice to Cerecor.

Teva Asset Purchase Agreement

In October 2021, we entered into an asset purchase agreement, or the Teva Agreement, with Teva Pharmaceutical Industries, Ltd. and its affiliate Cephalon, Inc., or together Teva, pursuant to which we acquired patents, know-how and other rights to ALTO-203 and a specified related compound, or Teva Acquired Compounds, and we assumed all post-acquisition liabilities related thereto. Pursuant to the Teva Agreement, we are required to use commercially reasonable efforts to research, register, manufacture, develop, and commercialize the acquired assets, including exploiting products that incorporate a Teva Acquired Compound, or Teva Products.

As partial consideration for the acquisition of these rights, we paid Teva an upfront fee of $0.5 million. For the first Teva Product that we develop pursuant to the Teva Agreement, we are required to pay Teva up to an aggregate of $27.0 million upon the achievement of certain development and regulatory approval milestones, and up to $35.0 million in the aggregate for the achievement of certain tiered sales milestones for such Teva Product. In addition, if we successfully achieve regulatory approval, then beginning with first commercial sale, on a Teva Product-by-Teva Product and country-by-country basis, we will be required pay Teva tiered royalties on worldwide annual net sales of Teva Products at percentages ranging from the mid-single-digit to ten percent, until the latest to occur of (a) expiration of the last valid claim of an acquired patent covering the composition of matter, or use or formulation of the composition of matter of a Teva Acquired Compound incorporated in or comprising such Teva Product in such country, (b) the expiration of new chemical entity data and/or market exclusivity for such Teva Product in such country and (c) the 10th anniversary of the date of first commercial sale of such Teva Product in such country. The patents acquired from Teva covering ALTO-203 are due to expire in 2027, without taking into account any possible patent term adjustment or extension or terminal disclaimers, assuming payment of all appropriate maintenance, renewal, and fees, and unless the patents are invalidated earlier in a patent challenge. Please refer to the section titled “—Intellectual Property—Product Candidate Patent Portfolio” for details of certain patent terms.

Palisade Asset Purchase Agreement

In October 2021, we entered into an asset transfer agreement, or the Palisade Agreement, with Palisade to pursuant to which we acquired all patent, know-how and other rights to ALTO-100.

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As partial consideration for the acquisition of these rights, we paid Palisade an upfront fee of $0.5 million. In addition, we will be required to pay Palisade up to an aggregate of $4.5 million upon the achievement of certain development and regulatory approval milestones for ALTO-100 (or a product containing ALTO-100 or otherwise derived from the acquired assets), or Palisade Acquired Products. If we sell or grant to a third party a license to the patents, know-how and other rights included in the acquired assets prior to the achievement of a specified clinical development milestone, we will be required to pay to Palisade a low-double digit percentage of any consideration received by us from such license or sale, provided that the maximum aggregate consideration we will be required to pay to Palisade under the Palisade Agreement, including the upfront payment and all potential milestones and transaction-related payments, will not exceed $5.0 million.

In connection with the transactions effected by the Palisade Agreement, Palisade also transferred and assigned to us all right, title, and interest in, to, and under that certain exclusive license agreement, or the Dow Agreement, between Dow Agrosciences LLC, or Dow, and Palisade (f/k/a Neuralstem, Inc.), dated as of December 1, 2016, as a result of which we obtained an exclusive, sublicensable license under certain patent rights of Dow to make, have made, use, and have used, certain compounds covered by such patent rights and to make, have made, offer for sale, sell, import, and have imported, products using such compounds, including Palisade Acquired Products, for the development, synthesis, and commercialization of such products as prescription human pharmaceutical in the United States. The patent rights licensed to us under the Dow Agreement cover an intermediate compound in the manufacturing process for ALTO-100.

Under the Dow Agreement, we are required to pay Dow an annual license maintenance fee that is customary for a license of this nature and not material to us. Additionally, we are required to pay Dow a single milestone payment that is customary for a license of this nature in the range of several million dollars upon the achievement of the first commercial sale of a product containing ALTO-100 (including any Palisade Acquired Product) in the United States. In addition, if we continue to manufacture ALTO-100 using a process that includes the manufacturing step covered by the patents included in the Dow Agreement, we will be required to pay Dow tiered royalties calculated as a percentage of any cash or non-cash consideration payable to us by our commercial partners that arise from net sales of products covered by the Dow patent rights, including Palisade Acquired Products, by such commercial partners, at percentages in the single digits. The licensed patent from Dow expires in 2029. Please refer to the section titled “—Intellectual Property—Product Candidate Patent Portfolio” for details of certain patent terms.

Unless earlier terminated, the Dow Agreement will expire upon the last to expire valid claim of the licensed patent rights in the United States. Either we or Dow may terminate the Dow Agreement for the uncured material breach of this Agreement by the other party following a specified notice period.

License Agreement with MedRx

In September 2023, we entered into a joint development and license agreement, or the MedRx Agreement, with MedRx Co., Ltd., or MedRx, pursuant to which we obtained an exclusive, sublicensable, worldwide license, with the right to sublicense, under certain patent rights and know-how of MedRx relating to transdermal drug delivery to develop (excluding any pre-clinical development), manufacture, and commercialize transdermally delivered pharmaceutical products comprising MedRx’s transdermal patch technology and our ALTO-101, or MedRx Licensed Products, for all therapeutic, prophylactic, and diagnostic uses. We granted MedRx an exclusive, sublicensable, worldwide license under certain patent rights and know-how relating to ALTO-101 owned or controlled by us, including certain patents and know how licensed to us pursuant to the Sanofi Agreement, solely to conduct pre-clinical development and manufacturing of the MedRx Licensed Products for us in accordance with the MedRx Agreement and a separate manufacturing and supply agreement to be entered into between us and MedRx. During the term of the MedRx Agreement, we agreed that we will not, directly or indirectly, develop, manufacture, or commercialize any pharmaceutical product that is a transdermal patch formulation containing similar active pharmaceutical ingredients as ALTO-101 and that is used in the same field and labeled for the same indications as the MedRx Licensed Products, or MedRx Competitive Product. MedRx agreed that it will not, directly or indirectly, exploit any patch formulations of PDE4-inhibitor drugs for use within CNS disorders or exploit any MedRx Competitive Product, provided that if certain specified development or first commercial sale milestones are not achieved by certain specified dates, then MedRx has the right to cause the non-compete restrictions on both parties to lapse.

Under the MedRx Agreement, MedRx will be solely responsible for conducting all pre-clinical development of the MedRx Licensed Products to support IND and institutional review board filing, and we will be solely responsible for all other development (including non-clinical studies and clinical studies) necessary to obtain regulatory approval for the licensed products and subsequent commercialization of MedRx Licensed Products. We are obligated to use commercially reasonable efforts to commercialize the MedRx Licensed Products in each of the following countries in which we have

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obtained regulatory approval: the United States; at least two of Germany, Spain, France, Italy or the United Kingdom; and one of China or Japan.

Pursuant to the MedRx Agreement, we paid MedRx an upfront fee of $150,000. We are required to pay MedRx up to an aggregate of $11.0 million for the achievement of certain development and first commercial sale milestones for the first MedRx Licensed Product to achieve such milestones with respect to a first indication, and an additional milestone in the mid single digit millions for each additional approved distinct indication for such first MedRx Licensed Product or a subsequent MedRx Licensed Product. In addition, we will be required to pay MedRx sales milestones based on the achievement of specified thresholds of aggregate annual worldwide net sales of all MedRx Licensed Products of up to $110.0 million in the aggregate, if all such sales thresholds are achieved. Commencing on the first commercial sale of a MedRx Licensed Product, we will also be obligated to pay MedRx a mid-single digit royalty on annual, worldwide net sales of all MedRx Licensed Products, subject to certain customary reductions and a royalty floor. Royalties will be payable, on a MedRx Licensed Product-by-MedRx Licensed Product and country-by-country basis, until the latest to occur of (a) expiration of the last valid claim of certain specified patent rights covering such MedRx Licensed Products in such country, (b) the expiration of any regulatory exclusivity for such MedRx Licensed Product in such country, (c) the first approval of a specified generic product referencing such MedRx Licensed Product in such country, and (d) the tenth anniversary of the first commercial sale of such MedRx Licensed Product in such country, or the MedRx Royalty Term.

The MedRx Agreement will expire with respect to each MedRx Licensed Product, on a country-by-country basis, upon the expiration of the MedRx Royalty Term, and with respect to the entire MedRx Agreement upon the expiry of the last-to-expire MedRx Royalty Term for the last MedRx Licensed Product for which there has been a first commercial sale. Please refer to the section titled “Business—Intellectual Property—Product Candidate Patent Portfolio” for details of certain patent terms. Either we or MedRx may terminate the MedRx Agreement in its entirety or on a MedRx Licensed Product-by-MedRx Licensed Product basis upon an uncured material breach by the other party or in connection with an insolvency event of such party. In addition, if we or MedRx bring or otherwise participate in a patent challenge against any patents licensed by the other party, such other party may terminate the MedRx Agreement immediately. We have the right to terminate the MedRx Agreement in its entirety or on a MedRx Licensed Product-by-MedRx Licensed Product basis for any reason upon specified prior written notice to MedRx provided that the effective date of such termination will not be earlier than the completion date of a specified development event. We also have the right to terminate the MedRx Agreement with respect to a MedRx Licensed Product immediately upon our reasonable determination of a material safety issue with respect to such MedRx Licensed Product.

Intellectual Property

Overview

We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including by seeking, maintaining, enforcing and defending patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications 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. We also rely, in part, on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of precision psychiatry and neuropsychiatric drug development; however, trade secrets are difficult to protect and provide us with only limited protection. Our commercial success will depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned by third parties; and to defend and enforce our proprietary rights, including any patents that we own or may obtain in the future. Intellectual property rights may not address all potential threats to our competitive advantage.

As of December 31, 2023, we owned, co-owned, or have an exclusive license to approximately 115 patents and pending patent applications in the United States and foreign jurisdictions, including 23 issued U.S. patents and 52 issued foreign patents, with expected expiry dates between 2024 and 2044, without taking into account potentially available patent term adjustments or extensions in the U.S. and other countries, and assuming payment of all appropriate maintenance, renewal, and annuity fees.

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Product Candidate Patent Portfolio

As of December 31, 2023, we owned, co-owned, or have an exclusive license to approximately 88 patents and pending patent applications in the United States and foreign jurisdictions relating to our product candidates, including 14 issued U.S. patents and 44 issued foreign patents.

Patents and patent applications directed to our most advanced programs are summarized below:

Program Indication(s) Subject Matter ExpirationDate* Owner

ALTO-100 MDD and PTSD Composition of Matter 2024 Alto

Intermediate 2029 Dow

Method of Manufacturing 2030 Alto

Method of Treatment (Poor Cognition) 2042 Alto

Method of Treatment (Impaired Memory/EEG) 2043 Alto

ALTO-101 Schizophrenia Method of Manufacturing 2033 Sanofi

Patch (platform) 2034 MedRx

Method of Treatment 2044 Alto

Transdermal Patch 2044 Alto and MedRx

ALTO-202 MDD Composition of Matter (Compound) 2024 a Merck

Composition of Matter (Polymorph) 2035 Cerecor and Merck

Method of Treatment 2040 Cerecor

ALTO-203 MDD Composition of Matter 2027 Altob

Method of Treatment 2044 Alto

ALTO-300 MDD Method of Treatment 2044 Alto

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*Expiration dates do not take into account any possible patent term adjustment or extensions or terminal disclaimers and assumes payment of all appropriate maintenance, renewal, and annuity fees.

a.Expires in 2026 after accounting for patent term adjustment awarded by USPTO.

b.One patent in this family (U.S. 8,247,414) expires in 2028 after accounting for patent term adjustment awarded by the USPTO.

ALTO-100

With respect to ALTO-100, as of December 31, 2023, we owned four issued U.S. patents, 18 issued foreign patents, three pending U.S. patent applications, nine pending foreign applications, and one pending international application with claims directed to composition of matter, method of manufacturing, and method of treating depression. The issued patents covering the composition of matter of ALTO-100 are expected to expire in 2024, patents covering the method of manufacturing ALTO-100 are expected to expire in 2030, and any patents covering the method of treating depression that issue from such patent applications are expected to expire in 2043, in each case, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. Our foreign patents and pending patent applications are filed in jurisdictions including Australia, Brazil, Canada, China, Israel, India, Japan, South Korea, Mexico, Philippines, Singapore, Hong Kong, Czech Republic, Germany, Spain, France, United Kingdom, Ireland, and Italy.

ALTO-300

With respect to ALTO-300, as of December 31, 2023, we owned one U.S. pending provisional patent application with claims directed to a method of treating depression in patients with certain EEG measurements. Any patents that issue from applications that claim priority to this provisional application would be expected to expire in 2044, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees.

ALTO-101

With respect to ALTO-101, as of December 31, 2023, we owned one U.S. pending provisional patent application with claims directed to method of treatment of neuropsychiatric disorders. Any patents that issue from applications that claim priority to this provisional application would be expected to expire in 2044, without taking into account any possible patent

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term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. We also exclusively in-license from Sanofi one issued U.S. patent and three issued foreign patents in Germany, France, and United Kingdom, which are expected to expire in 2033, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. Additionally, we exclusively in-license from MedRx one issued U.S. patent, one granted European application, and two issued foreign patents in Japan and China, as well as one pending U.S. patent application. The issued U.S. and foreign patents that are in-licensed from MedRx are expected to expire in 2034, and any patent issued from the pending patent application is expected to expire in 2034, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. We also co-own one pending foreign priority patent application in Japan with MedRx that is directed to an ALTO-101 formulation, which is expected to expire in 2044, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees.

ALTO-203

With respect to ALTO-203, as of December 31, 2023, we owned three issued U.S. patents with claims directed to composition of matter and method of treatment for cognition/cognitive disorders. These patents are expected to expire in 2027, without taking into account patent term adjustment or any possible patent term extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. In addition, we own one U.S. provisional application with claims directed to a method of treating a psychiatric or neurological disorder in a patient who has anhedonia with ALTO-203. Any patents that issue from applications that claim priority to this provisional application are expected to expire in 2044, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees.

ALTO-202

With respect to ALTO-202, as of December 31, 2023, we in-licensed from Cerecor one issued U.S. patent and eight issued foreign patents in Australia, Canada, Switzerland, Liechtenstein, Germany, France, United Kingdom, and Japan, with claims directed to composition of matter (ALTO-202 compound). These patents are expected to expire in 2024, without taking into account patent term adjustment or any possible patent term extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. We also in-licensed from Cerecor three issued U.S. patents and one pending U.S. application, and ten foreign issued patents or pending applications in Australia, Canada, China, Germany, Spain, France, India, Japan, United Kingdom, and Italy, with claims directed to composition of matter (polymorphic forms of ALTO-202). These patents are expected to expire in 2035, without taking into account patent term adjustment or any possible patent term extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. Lastly, we in-licensed from Cerecor one pending U.S. application, with claims directed to method of treatment. Any patents that issue from this application are expected to expire in 2040, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees.

Precision Psychiatry Platform Patent Portfolio

With respect to our Platform, as of December 31, 2023, we owned one pending U.S. patent application with claims directed to the method of identifying patient subtypes which relates to one aspect of our Platform. Any patent that issues from this application is expected to expire in 2040, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. We also exclusively in-license from Stanford three issued U.S. patents and three U.S. pending patent applications with claims directed to machine learning techniques for identifying treatable patient populations. The issued patents are expected to expire between 2037 and 2040, and any patents that issue from the pending patent applications are expected to expire between 2037 and 2039, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. These Stanford patents may be relevant to future iterations of our Platform.

Trademarks

We also protect our brands, including through the procurement of trademark registrations. As of December 31, 2023, we owned U.S. trademark registrations for our house mark ALTO NEUROSCIENCE and our Brain logo.

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Intellectual Property Protection

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