10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

Commission File Number 001-39503

Athira Pharma, Inc.

(Exact name of registrant as specified in its charter)

18706 North Creek Parkway, Suite 104

Bothell, Washington98011

(Address of principal executive officer)

(425) 620-8501

(Registrant’s telephone number, including area code)

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

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

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 ☐No☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐No☒

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

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

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

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The aggregate market value of the common stock held by non-affiliates of the registrant, based on the closing price of the shares of common stock on June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter) as reported by The Nasdaq Stock Market LLC on such date was approximately $328.3 million. Shares of the registrant’s common stock held by each executive officer and director and by each other person who may be deemed to be an affiliate of the registrant have been excluded from this computation. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

The number of shares of Registrant’s Common Stock outstanding as of March 21, 2022 was 37,624,058.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be delivered to stockholders in connection with the 2022 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the Registrant’s fiscal year ended December 31, 2021.

Table of Contents

Page

PART I

Item 1. Business 5

Item 1A. Risk Factors 48

Item 1B. Unresolved Staff Comments 111

Item 2. Properties 111

Item 3. Legal Proceedings 111

Item 4. Mine Safety Disclosures 112

PART II

Item 6. [Reserved] 113

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 130

Item 8. Financial Statements and Supplementary Data 130

Item 9A. Controls and Procedures 159

Item 9B. Other Information 160

PART III

Item 10. Directors, Executive Officers and Corporate Governance 161

Item 11. Executive Compensation 161

Item 14. Principal Accounting Fees and Services 161

PART IV

Item 15. Exhibits, Financial Statement Schedules 162

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The following is a summary of the principal risks we face:

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We are a late clinical-stage biopharmaceutical company with a limited operating history.

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Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve a number of objectives.

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Our development of fosgonimeton may never lead to a marketable product.

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Our approach to targeting brain growth factors through the use of small molecules is based on a novel therapeutic approach, which exposes us to unforeseen risks. We have limited data from our Phase 1a/1b clinical trial, including only 11 patients with mild to moderate Alzheimer’s disease, and we cannot be certain that future trials will yield similar data. In addition, our use of electroencephalogram methods to gather data requires placement of electrodes on a subject’s scalp and, if not properly placed, we may be unable to obtain the data sought or data obtained may be unreliable.

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We have concentrated our research and development efforts on the treatment of central nervous system and peripheral degenerative disorders, a field that has seen very limited success in product development.

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An independent special committee of our board of directors engaged in a review of papers co-authored by our former chief executive officer in connection with her doctoral research at Washington State University. The special committee’s findings included that (i) our former chief executive officer altered images in her 2011 doctoral dissertation and at least four research papers that she co-authored while a graduate student at Washington State University, and published from 2011 to 2014, (ii) that we cited challenged research papers in certain communications and applications, and (iii) that WSU’s dihexa patent, exclusively licensed to us, incorporated certain of these altered images. Washington State University has undertaken a review of claims of potential research misconduct involving our former chief executive officer’s doctoral research at Washington State University. We cannot predict when WSU’s investigation will be completed or what conclusions WSU will reach.

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Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of early, smaller-scale preclinical studies and clinical trials with a single or few clinical trial sites may not be predictive of eventual safety or effectiveness in large-scale pivotal clinical trials across multiple clinical trial sites. We may encounter substantial delays in clinical trials, or may not be able to conduct or complete clinical trials on the expected timelines, if at all.

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If we experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented.

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The loss of any of our key personnel could significantly harm our business, results of operations and competitive position.

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We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer, or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

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The continuing effects of the novel coronavirus disease, or COVID-19, pandemic could adversely impact our business, including our nonclinical studies and clinical trials.

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We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

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We will require substantial additional funding to finance our operations, complete the development and commercialization of fosgonimeton, and evaluate other and future product candidates. If we are unable to raise this funding when needed, we may be forced to delay, reduce, or eliminate our product development programs or other operations.

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The regulatory approval processes of the U.S. Food and Drug Administration and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

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We rely on third parties to conduct our nonclinical studies and clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

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Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

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We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.

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Our success depends on our ability to protect our intellectual property and our proprietary technologies.

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If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.

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The market price of our common stock may be volatile, which could result in substantial losses for investors.

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We and certain of our directors and executive officers have been named as defendants in lawsuits that could result in substantial costs and divert management’s attention.

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Actions of an activist stockholder against us have been disruptive and costly and the notice the activist stockholder has sent indicating he will wage a proxy contest and seek representation on our board of directors could cause uncertainty about the strategic direction of our business.

Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

PART I

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. This section should be read in conjunction with our audited consolidated financial statements and related notes included in Part II, Item 8 of this report. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

In some cases, you can identify forward- looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target”, “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to, statements about:

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our financial performance;

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

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our ability to obtain funding for our operations, including funding necessary to develop and commercialize our product candidates;

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the ability of our nonclinical studies and clinical trials to demonstrate safety and efficacy of our product candidates;

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the success, cost and timing of our development activities, nonclinical studies and clinical trials;

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the rate and degree of market acceptance of our product candidates;

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the timing or likelihood of regulatory filings and approvals;

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

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our plans relating to commercializing our product candidates, if approved;

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our plans and ability to establish sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain approval;

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our ability to attract and retain key managerial, scientific and clinical personnel;

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our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

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

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the pricing and reimbursement of our product candidates, if approved;

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

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

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

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

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regulatory developments in the United States and other jurisdictions;

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our ability to obtain and maintain regulatory approval of our product candidates in the United States and other jurisdictions, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;

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future agreements with third parties in connection with the commercialization of our product candidates;

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our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue regulatory approval;

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

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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

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the outcome of legal proceedings which have been or may in the future be instituted against us and certain of our directors and officers, including the legal proceedings discussed in Part I, Item 3 — "Legal Proceedings,” and elsewhere in this report;

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the actions of an activist stockholder against us, which have been disruptive and costly, and the outcome of any proxy contest, which could cause uncertainty about the strategic direction of our business;

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our expectations regarding the continuing impact of COVID-19 on our business;

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the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets;

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the potential benefits of any strategic collaboration agreements we may enter into; and

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our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part I, Item 1A — “Risk Factors,” and elsewhere in this report. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and although 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 a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

This report includes our trademarks and registered trademarks, including Athira, Athira Pharma, the Athira logo, and other trademarks or service marks of Athira. Each other trademark, trade name or service mark appearing in this report belongs to its holder.

In this report, “we,” “our,” “us,” “Athira,” and “the Company” refer to Athira Pharma, Inc.

Item 1. Business.

Overview

Athira is derived from the word Athir, the energy that reaches everyone. It captures our mission to restore lives by advancing bold therapies for neuronal health, thoughtfully and urgently. We aim to restore neuronal health for those suffering from devastating neurological diseases, including Alzheimer’s, Parkinson’s, and neuropsychiatric diseases, so that patients can regain their memories, lives, and family relationships.

We are a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and slow neurodegeneration. With our product candidates, we aim to provide rapid cognitive improvement and alter the course of neurological diseases, leveraging our novel mechanism of action. Our approach is designed to augment neuronal growth factor signaling through the hepatocyte growth factor/MET, or HGF/MET, a naturally occurring, repair and regenerative system. We believe enhancing HGF/MET signaling has the potential to protect existing neurons from damage, reduce inflammation, promote regeneration, and benefit brain physiology. We anticipate that all of these characteristics may improve neuronal health and translate into clinical benefits. Our pipeline is built from our proprietary drug discovery platform, or ATH platform, and consists of a series of small molecules that are designed to target either (1) the central nervous system, or CNS, by crossing the blood brain barrier, or BBB, or (2) the peripheral nervous system.

Our lead candidate, fosgonimeton (ATH-1017), is a subcutaneously administered, BBB-penetrating, small molecule HGF/MET positive modulator. The primary target indication is Alzheimer’s disease (AD). In our Phase 1a/b clinical trial, fosgonimeton was well tolerated in healthy young and elderly volunteers and AD subjects, without serious adverse events. This clinical trial recruited 88 subjects, including 11 AD subjects with mild to moderate AD, who were randomly assigned to active and control groups. Nonclinical studies and Phase 1 clinical trials with fosgonimeton demonstrated improvements in brain network activity indicating potentially positive effects on brain function. In AD subjects, multiple dosing of fosgonimeton significantly improved Event Related Potential (ERP) P300 latency. ERP P300 latency is a functional measure that is highly correlated with cognition; however, we have not yet established a connection between these ERP P300 latency results and improved cognition. In September 2020, we began site initiation and patient screening for LIFT-AD, our Phase 2/3 clinical trial with fosgonimeton designed with the potential to provide pivotal data in support of registration, for the treatment of mild-to-moderate AD, with topline results expected in the first half of 2023. In November 2020, we also initiated ACT-AD, a proof-of-concept Phase 2 clinical trial with ERP P300 latency as the primary endpoint, in mild-to-moderate AD, which trial is designed to better characterize the overall effects of fosgonimeton on working memory processing speed and cognitive measures, with topline results expected in the second quarter of 2022. In July 2021, we announced that we are enrolling patients into a 26-week open-label extension study for our LIFT-AD and ACT-AD clinical trials, which will allow us to collect up to a total of one year of safety and other data with fosgonimeton. In October 2021, we announced that we completed patient enrollment in our ACT-AD clinical trial. In January 2022, we increased the LIFT-AD study sample size by approximately 120 participants, from 300 to 420, to strengthen the statistical power of co-key secondary endpoints, including ADAS-Cog11.

The primary focus of our Phase 1a/b clinical trial of fosgonimeton was to establish safety and obtain single plus multiple dose pharmacokinetics. Fosgonimeton was well tolerated at all tested doses, produced predictable pharmacokinetics with dose-linear exposures, and did not accumulate over the course of treatment. Pharmacodynamic measures evaluating brain penetration, target engagement and brain function with quantitative electroencephalography, or qEEG, methods produced a strong suite of data justifying further investigation of fosgonimeton in future clinical trials. Individuals with AD typically experience a general slowing of qEEG, including a reduction in higher frequency waves, such as gamma. Gamma power is typically associated with learning, memory and cognitive function. Administration of fosgonimeton treatment increased gamma power activity with a single dose in both young healthy volunteers and elderly healthy volunteers. Gamma power also improved in AD subjects. ERP P300 latency, a functional measure of working memory processing speed and executive function that highly correlates with cognition, was also substantially improved in AD subjects. After a single dose of fosgonimeton, all AD subjects started improving on ERP P300 latency, and by the end of the once-daily 8-day treatment cycle, average ERP P300 latency across the AD treatment group had improved by 73 milliseconds, a statistically

significant change compared to the placebo group that did not show any directional change. These results suggest that fosgonimeton has the potential to substantially improve synaptic connectivity and brain function in AD subjects.

AD is a significant unmet medical need with currently 35 million cases estimated worldwide and no treatments that can significantly reduce the burden on individuals and families impacted by the disease. Failures of approaches targeting specific hypotheses of underlying AD pathology highlight the need for novel strategies to address the disease. Regardless of the underlying pathology, it has been established that the loss of synaptic density and breakdown of neuronal network connectivity leads to cognitive impairment in subjects with AD and other forms of dementia. We believe the enhancement of the HGF/MET neurotrophic system in the brain will lead to increased synaptic density, network recovery and information transmission in the brain, which could ultimately result in cognitive improvement and clinical benefit.

Fosgonimeton has the potential to address the broader dementia patient population beyond AD. Therefore, at the end of 2021, we initiated a 26-week, double-blind Phase 2 proof-of-concept trial for the treatment of Parkinson’s disease dementia (PDD) and Dementia with Lewy Bodies (DLB). Dementia is a significant unmet medical need affecting over 55 million people worldwide. Given underlying healthcare trends, specifically the aging population globally, the prevalence of dementia is expected to grow significantly and almost triple by 2050.

We are pioneering the use of small molecules that are designed to enhance the HGF/MET neurotrophic system, a naturally occurring regenerative system, in neurological diseases. While discovered in the liver, HGF is a critical growth factor across multiple organs, including in the brain. HGF/MET has long been known as a promising therapeutic target for CNS disorders; however, delivery of large proteins or gene therapy to the CNS to augment HGF/MET is challenging due to the invasive methods needed for them to bypass the BBB and the risk of potential adverse immune response. Our novel BBB-penetrating small molecules are designed to overcome many of these hurdles, allowing us to efficiently tap into the regenerative potential of HGF/MET. For therapeutic applications in CNS disorders, particularly AD, treatments that target neuronal growth factors can potentially accomplish several therapeutic goals, including rapid cognitive improvement and sustained neuroprotective effects.

It is our goal to establish in current and future clinical trials that our ATH platform, which is designed to enhance the body’s natural repair mechanism of HGF/MET, can potentially address a wide range of clinical applications ranging from CNS disorders, such as AD, PDD/DLB, multiple sclerosis, or MS, and amyotrophic lateral sclerosis, or ALS, to more peripheral conditions such as peripheral neuropathy. In addition, pre-existing literature suggests that HGF/MET biology plays a role in neuropsychiatric indications such as depression, anxiety and schizophrenia.

Our product candidate for our neuropsychiatric program is ATH-1020. ATH-1020 is a new compound for which we recently filed an Investigational New Drug (IND) application with the FDA at the end of 2021, and received notice of acceptance in January 2022. ATH-1020 is a novel small molecule compound designed to be an orally available once-daily treatment, to enhance the HGF/MET system, and to distribute to the CNS. In vivo testing has demonstrated that following oral delivery, ATH-1020 distributes to the brain and is neuroactive in animals, and has demonstrated anti-depressant effects in several models of depression, including the forced swim model of depression. A first-in-human Phase 1 study in healthy volunteers was initiated during the first quarter of 2022.

Currently, we have several preclinical candidates for non-AD indications, including ATH-1019, which is being developed to address peripheral indications such as peripheral neuropathy. Late-stage non-clinical development work and potentially early clinical studies will support decisions on selection of further product candidates and target indications moving forward. Our ATH platform allows us the flexibility to engineer compounds that are BBB-penetrant or that generate specific activity in the periphery, and molecules that are suitable for the subcutaneous or oral routes of administration.

Our Pipeline

Figure 1 below illustrates the current development stage of our ATH compounds and discovery and development programs. In addition, we are expanding our ATH platform to additional indications in the CNS and peripheral nervous system as we aim to improve neuronal health in multiple disorders. Our drug discovery efforts are focused on exploring the potential of ATH technology, which is designed to promote HGF/MET activity for a variety of clinical applications.

Figure 1. Summary of Our Preclinical and Clinical ATH Programs.

The fosgonimeton LIFT-AD Phase 3 clinical trial may provide pivotal data in support of registration with the FDA.

Our Strategy

We intend to create, develop, and commercialize therapeutics with the potential to transform lives by repairing, restoring, and reversing the damage to nerve cells throughout the body. Key aspects of our business strategy to achieve these goals are to:

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Advance fosgonimeton through clinical development for AD. We believe fosgonimeton has the potential to rapidly improve cognition and durably improve the lives of the millions of people suffering from AD who currently have limited therapeutic options. We initiated one clinical trial for AD in September 2020 and an additional clinical trial for AD in November 2020 to potentially accelerate our development timelines and further inform our development decisions. The first of these clinical trials is LIFT-AD, our Phase 3 clinical trial evaluating the holistic impact of fosgonimeton in AD, initiated in September 2020 with topline results expected in the first half of 2023, which results may provide pivotal evidence in support of registration. The second clinical trial is our ACT‐AD ERP P300 Phase 2 proof-of-concept clinical trial for AD evaluating the overall effects of fosgonimeton on working memory processing speed and cognitive measures, initiated in November 2020 with topline results expected in the second quarter of 2022.

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Expand the development of fosgonimeton to include additional dementia indications.We are developing fosgonimeton as a treatment for mild-to-moderate AD, but over time we aim to expand development to cover all stages of AD. Beyond AD, we believe that fosgonimeton can ultimately address a broader dementia patient population, irrespective of cause. To begin this expansion, we initiated a Phase 2 proof-of-concept clinical trial for PDD and DLB at the end of 2021, dosing the first patient in the first quarter of 2022.

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Focus on translational and functional endpoints to efficiently develop product candidates. We intend to use highly translatable and predictive measures, such as qEEG and ERP methods, early in development to guide clinical dose decisions, provide predictive and quantitative measures for potential clinical benefit, and advance product candidates through clinical development. We have focused on changes in cognitive processing and function, coupled with

measures of brain function with qEEG and ERP P300 latency, allowing for more efficient and cost-effective clinical trials.

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Advance innovative research to expand and develop our preclinical and clinical pipeline. Our strategy is to only advance product candidates that show both strong pharmacokinetics and pharmacodynamics (PK/PD) translation and early predictive clinical data. We plan to continue growing our discovery organization in the field of neuronal health and regeneration by building on our strong foundational knowledge of neuronal network, behavior, and translatable measures. It is our goal to establish in current and future clinical trials that our ATH platform, which is designed to enhance the body’s regenerative mechanism of HGF/MET, can potentially address a wide range of clinical applications ranging from CNS disorders, such as AD, PDD/DLB, MS, and ALS, to peripheral conditions such as peripheral neuropathy. In addition, we believe that HGF/MET biology plays a role in neuropsychiatric indications such as depression, anxiety, and schizophrenia.

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Optimize the value of fosgonimeton and other candidates in major markets.We own worldwide rights to fosgonimeton as well as our pipeline of proprietary small molecule candidates. We plan to develop and pursue approval of fosgonimeton and other future candidates in major markets. Where appropriate, we may use strategic collaborations or partnerships to accelerate development and maximize the commercial potential of our programs.

Addressing the Key Aspects of Neuronal Health and Alzheimer’s Disease

Maintenance of neuronal health is critical to preserving normal neuronal and brain function. Several neurodegenerative diseases, such as AD, PDD/DLB, MS, and ALS, share a common consequence of continued neuronal damage and death that ultimately lead to progressive impairment of the neuronal network and loss of both cognitive and general functions. Globally, these diseases affect millions of people.

AD, our initial focus, is a progressive dementia caused by widespread neurodegeneration. The causal pathophysiological mechanism of AD has yet to be identified. This fundamental lack of understanding, combined with the complex range of pathological features, has led to a history of late-stage drug development failures. Regardless of the underlying pathology, it has been established that the loss of synaptic density and breakdown of the neuronal network lead to cognitive impairment in subjects with AD and other forms of dementia.

There is a vast unmet need for effective pharmacological treatment for AD. Despite significant investments in drug discovery programs and strategies to treat AD, there have been no approved therapeutics developed that can boost cognition, alter the course of the disease, and provide long-term symptomatic improvement. There are currently four marketed drugs for the management of AD symptoms: donepezil, galantamine, and rivastigmine (all acting on cholinergic neurotransmission) and memantine (targeting the NMDA receptor and glutamatergic neurotransmission/excitotoxicity). Beyond 6 to 12 months, the long-term efficacy for all of these drugs has not been proven; they can provide only temporary and modest clinical improvement.

Additionally, Aduhelm, which recently received accelerated approval due to effects on a biomarker directed to clear amyloid beta, or Aβ, may have potential as a disease-modifying therapy, though impact on clinical efficacy has yet to be firmly established. Several other experimental therapeutic agents directed towards Aβ clearance, and inhibition of Tau protein aggregation or phosphorylated-Tau, or pTau, clearance for AD, are in various stages of clinical development. Though Aduhelm has been approved by the FDA, its early adoption has been limited. And with several other clinical failures involving Aβ clearance, this highlights the incomplete understanding of the pathological processes in AD and clearly demonstrate the need for novel strategies to fight the disease effectively.

The HGF/MET Pathway – A Crucial System for Regeneration

The HGF/MET system has diverse roles relevant for synaptic function, network recovery, survival, and regeneration. We believe activation of HGF/MET offers a unique opportunity to address many aspects of AD pathology through a single, highly specific, targeted approach. Promoting the HGF/MET system has been shown to have multiple downstream beneficial effects relevant to improving symptoms and reversing the neurodegenerative process, making it an ideal target for complex neurodegenerative diseases, as illustrated below in Figure 2.

Figure 2. Normal HGF/MET System and Pathway.HGF is a protein ligand that binds to MET, which is a receptor expressed on the surface of neurons, glia, and vascular cells in the brain.HGF binding converts MET to an active state and initiates processes including changes in gene expression that help maintain normal cellular health and function. In the brain, the HGF/MET system contributes to neuronal signaling and healthy function including regulating N-methyl-D-aspartate, or NMDA, receptor activity, modulating glial activity to regulate inflammation, and helping maintain cerebral blood flow. These multiple downstream effects of the HGF/MET system play critical roles in maintaining healthy connectivity and brain function.

Significant Scientific Data Support HGF/MET’s Role in Maintaining Neuronal Health and Function

Normal MET expression is crucial in homeostasis of the healthy adult brain. Multiple studies have demonstrated that the MET system is strictly regulated to have a stable expression pattern. MET is one of

a small number of uniquely regulated genes with very high differential stability in its quantitative pattern of mRNA gene transcript levels across hundreds of structures throughout the healthy adult brain. In fact, compared to approximately 17,000 other human genes, the MET receptor has the most differentially stable expression pattern in the cortex of the normal adult human brain. The cortex is a brain region that has important roles in learning, memory, and executive functioning, and this stable expression pattern demonstrates that the MET receptor is an important signature of a healthy brain.

Additionally, although MET expression is very stable in healthy adults, expression is reduced in AD subjects, particularly in the hippocampus. Previous studies have shown that AD subjects have a significantly reduced MET expression in different brain regions compared to healthy age-matched adults. This reduction highlights another rationale to rescue the activity of this critical regenerative system. Amplification of the HGF/MET system has the potential to provide critical neuroprotective and neuroregenerative effects to rescue damaged and dysfunctional neurons and promote recovery of cognitive functions.

Multiple third-party studies have documented the regenerative impact of HGF/MET promotion in models of AD, PDD, MS, and ALS, with examples shown in Figure 3 below. Notably, promotion of the HGF/MET system improved memory in AD and PDD models and improvement in neuronal survival was reported in various disease models including MS and ALS. These studies indicate that an enhanced HGF/MET system has substantial beneficial effects and support the HGF/MET system as a therapeutic target in a diverse array of neurological disorders.

Figure 3. Effects of HGF Treatment in Animal Models of CNS Disorders. Below is a list of preclinical studies conducted by third parties that show the beneficial effects of HGF/MET on functional endpoints or processes that are critical in recovering neuronal health and function. These studies demonstrate that boosting the activity of the HGF/MET system, whether through direct injection of HGF or increasing expression of HGF by gene therapy techniques, promotes neuronal health and regeneration, and rescues memory and function in several animal models of CNS disorders.

Disease Animal model (species) HGF Delivery Method Outcomes Reference

(mouse)

(gerbil)

(rat)

(mouse)

As demonstrated by these studies, HGF/MET has long been known as a promising therapeutic target for CNS disorders, but the delivery of large proteins or gene therapy to the CNS to augment HGF/MET has been problematic and fraught with challenges. These approaches are not BBB-penetrating and require invasive methods to deliver to the CNS, which increases the risk of an immune reaction or infection. Further, they are also expensive and more challenging to scale which could limit their availability to patients.

Challenges with Approved and Traditional Neuronal and AD Therapy Approaches

The development of neuronal therapies presents unique challenges including: an imperfect understanding of the biology, the presence of the BBB that restricts the flow of drugs to the brain, and a lack of translatability of preclinical study results in human trials. Currently approved therapies have limited efficacy, often poor side effect profiles, and transient impact on quality of life if any. There remains an urgent need for new and novel approaches to address most neurodegenerative disorders including progressive and severe conditions such as AD, PDD, MS, and others.

Specific to AD, each of the currently approved symptomatic therapies only targets a single neurotransmitter, with limited and transient effects on cognition and low tolerability, which negatively impacts compliance and minimally reduces the caregiver burden. Other therapies in development that target a slowdown in disease progression so far showed only a marginal benefit on clinical decline and are mainly focused on the pre-dementia stages, i.e. amnestic mild cognitive impairment, or aMCI, to early-mild AD. All lack any immediate benefit in reducing the burden on patients and caregivers impacted by the disease. After targeting toxic proteins, these approaches may rely on the body’s repair mechanisms, which may also be damaged, and do not promote additional activation of regenerative pathways. This can add to variability of treatment outcomes and necessitates longer clinical development timelines. Further complicating drug development in AD has been the lack of utilization of biomarkers and measures that are able to detect early signs of efficacy and uncover promising candidates to take forward into larger trials. Biomarkers have revolutionized clinical research in oncology and other therapeutic areas, but traditionally not in AD. Historically, AD testing in clinical trials has relied heavily on imaging techniques to assess changes in amyloid and tau PET scans over several years, creating enormous costs and elongated timelines for the development process while not showing any direct correlation to cognitive functional improvement. We believe that these traditional methods can be replaced or supplemented by the use of rapid, non-invasive markers of brain activity and cognitive processing, like qEEG and ERP.

Our Differentiated Approach

We believe our ATH platform of small molecules will promote neuronal health and function through stimulating the HGF/MET system. Our small molecules are BBB-penetrating, can be delivered non-invasively, have very low risk of an immune reaction and are more cost efficient to manufacture and distribute. Boosting the HGF/MET system leads to the following primary downstream effects:

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Synaptogenesis as the core need of disrupted neuronal networks, overcoming the disconnection syndrome common to many neurodegenerative diseases.

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Modulation of NMDA neurotransmitter system by enhancing synaptic localization and signaling, leading to a rapid increase in brain network function. The NMDA receptor plays a key role in memory and learning. Other approaches work directly on the NMDA receptors and lack the specificity to modulate the NMDA receptor to the synaptic cleft, which is required to increase transmission of brain signals.

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Restoration of traditional neuronal growth factor pathways that are critical to neuronal survival, and activate brain systems that reduce oxidative stress, which is expected to reduce damage, slow down disease progression and improve network activity. Many therapies in development are focused only on slowing disease progression.

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Improvement in cerebral blood flow, as well as reducing inflammation by modulating inflammatory cytokine expression from the glia. Many other therapies only have a single mode of activity.

It is our goal to establish in current and future clinical trials that our ATH platform can positively impact neuronal health and function, not only by slowing down disease progression but also by improving brain network activity and function. We believe these effects could position Athira, and initially fosgonimeton, to address the complex pathology in neurodegenerative diseases.

We have designed fosgonimeton to specifically enhance the ability of HGF to activate MET. This substantially increases MET activation levels, and amplifies the beneficial effects downstream of the HGF/MET system.

Figure 4. Our ATH Small Molecule Candidates Are Designed to Enhance the HGF/MET System and Promote Multiple Beneficial Effects with the Potential to Improve Connectivity and Brain Function in Neurodegenerative Diseases.

By promoting endogenous pro-survival and regenerative mechanisms orchestrated by HGF/MET signaling, our ATH platform is designed to be a novel path to treat AD and neurodegeneration using a systemic approach. Enhancing the HGF/MET system also captures the modulation of the NMDA neurotransmitter pathway in a way distinct from the only FDA approved NMDA modulator, memantine. Modulation of neurotransmitter systems serves as the basis for the four currently approved AD drugs.

However, unlike these currently approved AD drugs, fosgonimeton is designed to also activate regenerative and anti-inflammatory pathways. Figure 5 below illustrates the typical timing of the different beneficial effects as an outcome of activating the HGF/MET system, as derived from experimental results.

Figure 5. Our ATH Candidates Are Designed to Positively Modulate the HGF/MET System Which May Lead to Both Rapid and Long-term Beneficial Effects.We believe that following administration of fosgonimeton, the HGF/MET system will activate and lead to several downstream effects. We anticipate that these effects may rapidly boost cognition with multiple regenerative mechanisms and lead to a stable and sustained recovery of the brain network and function.

Timeline of Potential Effects with Daily Fosgonimeton Treatment

For therapeutic applications in CNS disorders, particularly AD, treatments that target neuronal growth factors can potentially accomplish several therapeutic goals including rapid cognitive improvement and sustained neuroprotective effects.

Our Use of Highly Translatable and Predictive Measures to Guide Clinical Development

We believe qEEG and ERP have the potential to revolutionize the development paradigm in AD clinical trials. Quantitative EEG and ERP methods are highly translatable, quantitative, and predictive measures that can guide clinical dose decisions and provide live measures which were shown to correlate to potential clinical benefit. These methods focus on electrophysiological changes known to occur in cognitive processing and function, can result in more efficient and cost-effective clinical trials, and potentially provide an accelerated development path compared to traditional AD drug development programs.

Quantitative EEG and ERP Methods Reflect Brain Activity and Function

Our focused drug development approach aims to understand the potential clinical benefit of a product candidate at the early stages of clinical development by utilizing qEEG and ERP methods. Certain EEG/ERP components are valuable measures of cognition, such as quantitative EEG, or qEEG, an assessment of high frequency gamma power brain waves, and the P300 latency component of ERP.

Commonly used in clinical research and clinical practice, qEEG and ERP methods provide valuable insight into cognitive function but have been largely overlooked in AD clinical trials. At Athira, we are innovatively using these non-invasive methods to gain early insight into potential therapeutic effects. Improvement in the brain network, as well as changes in neurotransmitter activity, can be captured in the electrical activity of the brain. These methods assess the brain’s electrical activity from electrodes on the scalp. This non-invasive look at live brain activity is highly informative and can give insight into the brain penetration and neuroactivity of therapeutics directed to the brain. Quantitative EEG is a method to measure

brain activity at rest, while ERP is measured from the same (or certain key) electrodes but only arises in response to a task-related stimulus. Quantitative EEG/ERP methods can provide substantial insight into the overall brain health and connectivity, as these measures are significantly altered in disorders that lead to cognitive impairment, such as AD.

For fosgonimeton, we incorporated a variety of translatable tools and measures into our clinical development plan. These measures, including both qEEG and P300 latency, have guided dose selection and provided predictive measures of cognitive improvement.

Quantitative Electroencephalogram: qEEG

EEG is a way to measure the electrical activity of the brain using small electrodes placed on the scalp. Neurons communicate and perform all functions using electrical impulses. EEG captures this electrical activity through the scalp and displays these electrical impulses as waves, as illustrated in Figure 6 below. The electrical activity will present at different frequencies or waves which provide various insights into neuronal health. We are most focused on the faster, higher frequency gamma waves which are associated with learning, memory formation and higher cognitive functions. Quantitative EEG is a method to quantitatively determine the amount of electrical signal that resides in each waveform, often described as power.

Figure 6. Noninvasive qEEG Recordings Reflect Brain Activity and Function.

Changes in qEEG power or shifts in the amount of activity in each waveform can be caused by several factors including response to stimulus, cognitive state (healthy or dementia), and CNS-directed therapies. Because qEEG is a non-invasive direct measure of brain activity, it represents a valuable tool for

investigating therapies in AD and broader dementia. Changes in qEEG signals following administration of therapies targeting the brain indicate the therapy has reached the brain and likely engaged the intended target. Additionally, AD subjects present a general slowing of qEEG, where activity in higher frequency waves, such as gamma, is reduced. If therapies can reverse this pattern in AD, and increase gamma power, this may suggest treatment has helped improve brain activity. We utilized qEEG in our fosgonimeton Phase 1 clinical trial in healthy young, healthy elderly, and AD subjects as an indicator of CNS penetration and target engagement.

Event-related Potential: P300

ERP refers to changes in the electrical activity of the brain in response to external stimuli. Recording brain activity while a subject is presented with a task reveals neural activity related to cognitive processing. Presenting subjects with a stimulus associated with a task, such as counting specific tones within a sequence, induces a series of electrical peaks that represent cognitive processing and memory access. P300 is the peak positive signal which is reported to typically arise 300 milliseconds after a tone stimulus and is the most studied component of the ERP waveform.

Figure 7. ERP Recording with an Auditory Oddball Paradigm.

The latency, or the amount of time that it takes to reach the peak of the positive wave following the stimulus, is typically reported to be 300 milliseconds in healthy, young, cognitively normal individuals. Numerous studies have shown that P300 latency is strongly correlated with cognition. P300 latency is increased and continues to worsen as AD and cognitive decline progresses. As an example, P300 latency is expected to be markedly increased in subjects with severe AD, compared to subjects with mild AD. The connection between P300 latency and increased cognitive decline has been characterized in a number of diseases including AD, PDD, DLB, Huntington’s, major depressive disorder with cognitive impairment, and traumatic brain injury. Loss of synaptic connections and neuronal dysfunction are well characterized in AD, and likely are the primary causes of the increased P300 latency. Figure 8 below illustrates the latency of cognitive processing as demonstrated by the delayed peaks in P300 in AD subjects compared to healthy, age-matched subjects. While the P300 amplitude is often reported as lower in AD subjects compared to healthy, age-matched subjects, this measure is much less consistent and not as strongly correlated to cognition as latency.

Figure 8. ERP Waveforms in AD Subjects Show Increased P300 Latency.

Insights from Approved Therapies

Companies with approved therapies have demonstrated parallel improvement in P300 latency and cognition as assessed by the Alzheimer’s Disease Assessment Scale-Cognitive Subscale, or ADAS-Cog, as shown in Figure 9 below. ADAS-Cog is a neuropsychological assessment used to assess the severity of cognitive symptoms of dementia. While these changes induced by acetylcholinesterase inhibitors are modest and often transient, these previously published results support the correlation of P300 latency and cognition in AD subjects. The magnitude of effects in P300 latency measures for current AD treatments is shown in Figure 9 below. The studies of donepezil and rivastigmine were conducted in patient populations at similar stages of disease (mild to moderate AD with an average P300 latency of 382.7 ms for the donepezil group and 382.3 ms for the rivastigmine group). The P300 methodology used was similar to that of our fosgonimeton Phase 1 study. Both drugs showed a modest improvement in P300 latency, with donepezil demonstrating a peak improvement of 16 ms and rivastigmine demonstrating a peak improvement of 22 ms.

Figure 9. Changes in P300 Latency Correlate with Cognitive Outcomes with Treatment of Approved Therapies in AD Subjects.

Figure 10, below, summarizes the correlation between P300 latency and changes in cognition in studies involving approved therapies.

Figure 10. Studies Suggest Changes in P300 Latency Have Been Predictive of Changes in Cognition.

Source: Results for donepezil and rivastigmine adapted from Thomas et al., 2001; results for memantine adapted from Sallach et al., 2011, and results for scopolamine adapted from Potter et al., 2000.

Applications to Our ATH Platform

In CNS disorders, fluid or imaging biomarkers have been extensively used in drug development. However, these can be invasive and expensive, and inconclusive in determining the connection of these biomarkers to cognition. We sought to develop a translational strategy for ATH that was highly correlated to brain function and cognition which led us to use qEEG/ERP for the clinical development of fosgonimeton. We believe these measures are particularly well-suited to provide early insight into drug effects in AD, given that as the cognitive decline progresses, subjects display a decrease in qEEG gamma power, and a progressive increase in ERP P300 latency.

Utilizing qEEG/ERP as non-invasive, translatable, and quantitative measures early in clinical development helps to inform future clinical trial designs. Positive changes in qEEG and ERP P300 latency

potentially indicate a positive cognitive effect of our ATH treatments, which increases our confidence that these effects may translate to clinical benefit in later-stage clinical trials.

Fosgonimeton for the Potential Treatment of AD and Other Neuronal Diseases

We are developing our lead product candidate, fosgonimeton, for the treatment of neurodegenerative disorders, with an initial focus on AD. Fosgonimeton is designed to improve neuronal health and promote regeneration, thereby improving symptoms in cognitively impaired subjects. As we continue to develop fosgonimeton, we will plan to assess additional functional and behavioral benefits. In our Phase 1a/b clinical trial, fosgonimeton for the treatment of AD was well tolerated with no serious adverse events across 88 subjects recruited in the study, including 11 subjects with mild-to-moderate AD, who were assigned to treatment and control groups. Additionally, fosgonimeton treatment led to improvements in brain network activity that indicated potentially positive effects on brain function. In the AD subjects, multiple dosing of fosgonimeton significantly improved P300 latency. P300 latency is a functional measure that is highly correlated with cognition; however, we have not yet established a connection between these P300 latency results and improved cognition. It is our goal to establish in current and future clinical trials that administration of fosgonimeton is effective in promoting cognitive improvement. In September 2020, we began site initiation and patient screening for LIFT-AD, our Phase 2/3 clinical trial with fosgonimeton designed with the potential to provide pivotal data in support of registration, for the treatment of mild-to-moderate AD, with topline results expected in the first half of 2023. In November 2020, we also initiated ACT-AD, a proof-of-concept Phase 2 clinical trial with ERP P300 latency as the primary endpoint, in mild-to-moderate AD, which trial is designed to better characterize the overall effects of fosgonimeton on working memory processing speed and cognitive capacity, with topline results expected in the second quarter of 2022. In July 2021, we announced that we are enrolling patients into a 26-week open-label extension study for our LIFT-AD and ACT-AD clinical trials, which will allow us to collect up to a total of one year of safety data with fosgonimeton. In October 2021, we announced that we completed patient enrollment in our ACT-AD clinical trial. In January 2022, we increased the LIFT-AD study sample size by approximately 120 participants, from 300 to 420, in order to strengthen the statistical power of co-key secondary endpoints, including ADAS-Cog11.

Mechanism of Action

Growing evidence suggests that complex CNS disorders, such as AD, are unlikely to be caused by a single route of pathology. Modulation of a neuronal growth factor has gained considerable attention for the potential treatment of neurodegenerative disorders. Our lead candidate, fosgonimeton, is a small molecule pro-drug therapeutic specifically designed to promote the ability of HGF to activate MET. This promotion substantially increases MET activation levels and amplifies the beneficial downstream effects of the HGF/MET system, with several attributes relevant to AD:

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HGF/MET is a critical neurotrophic factor for normative brain function and it is reduced in AD subjects;

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promotion of the HGF/MET system has shown in several animal models the potential to directly halt neurodegeneration and induce regeneration, improve cerebral blood flow, and reduce inflammation; and

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we expect HGF/MET system activation to improve P300 latency, as observed in AD subjects after fosgonimeton treatment in our Phase 1a/b clinical trial.

Clinical Results

Phase 1 Clinical Trial

The IND for fosgonimeton in AD was filed in September 2017. Since then, we have completed our Phase 1 clinical trial, which enrolled a total of 88 subjects, including 48 healthy young male subjects (mean age = 33.4 ± 6.3), 29 healthy elderly subjects (mean age = 63.8 ± 4.0; 14 male, 15 female), and 11 AD subjects (mean age = 69.2 ± 7.1; 5 male, 6 female, median [range] MMSE = 20 [5–29]), as illustrated below in Figure 11. The clinical trial was randomized and double-blind and consisted of daily single injections over a nine-day period. While the primary endpoints of our Part A single ascending dose, or SAD, and Part B multiple ascending dose, or MAD, trial were focused on safety and assessment of human pharmacokinetics, we also included qEEG and ERP as measures to evaluate effects of fosgonimeton on brain activity in AD subjects. Together, these clinical trials assessed qEEG as a measure of brain circuitry and network activity and ERP as a measure of working memory access and cognitive processes in the brain.

Figure 11. 88 Subjects Included in the Phase 1 Clinical Trial.

Fosgonimeton was shown to be well-tolerated across all doses tested. There were no serious adverse events (AEs), or clinically relevant findings reported in blood chemistry, urinalysis, vital signs, ECG, EEG, physical, or neurological examinations. A maximum tolerated dose was not achieved. Fosgonimeton demonstrated a pulsatile mode of target activation, and the PK profile is compelling, with linear dose relationship, no accumulation, and no sex or age effect. We did not have any subject dropout due to serious adverse events during this clinical trial.

Translation of Fosgonimeton Changes in Brain Circuitry Activity

Quantitative EEG was used as a translational tool to recapitulate the changes in brain network activity from fosgonimeton that were observed in our preclinical models and to help guide dose selection for late-stage clinical development. We collected qEEG recordings from healthy young, healthy elderly, and AD subjects to determine qEEG changes after the administration of fosgonimeton.

The criteria for healthy young were male subjects who at the time of screening were between the ages of 18 and 45, met certain body mass index and weight standards, and who were determined at the investigators’ discretion to be generally in good health as determined by medical history, vital signs, and physical and clinical examination. The criteria for healthy elderly were male and female subjects, who at the time of screening were between the ages of 60 and 85, met certain body mass index and weight

standards, and who were determined at the investigators’ discretion to be generally in good health as determined by medical history, vital signs, and physical and clinical examination.

In the clinical trials, fosgonimeton increased the levels of the high frequency gamma power which is the frequency band that is associated with learning, memory, and cognitive function. Gamma is typically decreased in AD subjects. Fosgonimeton showed dose-dependent and consistent changes in gamma brain activity signals across all treated cohorts, consistent with the changes observed in non-clinical models.

Quantitative EEG Changes Observed in the Phase 1 Part A SAD Clinical Trial

Rapid induction in the high frequency gamma power was observed after a single dose and is most likely explained by fosgonimeton promoting HGF/MET induced synaptic relocation of NMDA receptors and potentiation of NMDA receptor currents. A dose-dependent increase was observed across the low, mid, and high doses with statistically significant changes at the highest dose levels assessed. Figure 12 below shows the change in qEEG gamma power from baseline following administration of placebo, low dose fosgonimeton (2 and 6 mg, pooled), mid dose (20 and 40 mg, pooled), and high dose (60 and 90 mg, pooled). The p-value maps show the statistics based on analysis of covariance, or ANCOVA, analysis. There were 12 subjects for each of the low- and mid-dose groups, and 11 subjects for the high-dose group. A single subject from the high-dose group in the single-dose data set in Figure 12 below was excluded from analysis due to an inability to capture or analyze data as a result of technical issues such as electrode placement or subject movement. All AD subjects’ data were captured at all data points.

Figure 12. Single Dose of Fosgonimeton Increased qEEG Gamma Power in Humans.

Quantitative EEG Changes Observed in Phase 1 Part B MAD Clinical Trial in Healthy Elderly Subjects

The main qEEG effect of fosgonimeton administration at all doses (20, 40, and 60 mg) in the healthy elderly subjects was increased gamma power, both at 3 hours post-dose on Day 1 and across multiple data points collected on Days 4 and 8 for all assessed doses of fosgonimeton. Figure 13 below shows the change in gamma power with once-daily administration of the 20 mg dose of fosgonimeton over 9 days. Similar effects were observed at 40 mg and 60 mg doses of fosgonimeton; data for the 80 mg dose level were not analyzed due to technical issues during data collection and a smaller sample size. All subjects completed the planned administration and data collection schedule; however, data from two of the healthy elderly subjects on Day 8 was lost due to an inability to capture or analyze that data as a result of technical issues such as electrode placement or subject movement. All AD subjects’ data were captured at all data points.

Figure 13. Fosgonimeton Administration Increased qEEG Gamma Power in Elderly Subjects.

We also observed increased gamma power on Days 4 and 8 at the pre-dose recording: 24 hours after the last dose of fosgonimeton, fosgonimeton was measured and shown to be completely cleared from the plasma. These results suggest that the beneficial effects of fosgonimeton are sustained. The increase in gamma power was specific to the treatment groups as no increase was observed in subjects receiving placebo.

The multiple dose clinical trial in AD subjects (40 mg subcutaneous injection once daily over 9 days) suggested a potential effect in AD subjects. Analysis of qEEG indicates an acute induction of gamma power (Day 4 and Day 8) after multiple doses. Figure 14 below shows emerging recovery of acute gamma power induction after 4 days of fosgonimeton treatment which continues to increase after 8 days of treatment. This pattern was not observed in subjects receiving placebo, where there was no consistent change in acute gamma power induction.

Figure 14. Fosgonimeton Administration Rescued Acute Gamma Power Signal in AD Subjects.

Overall, the qEEG results in humans are indicative of CNS penetration and target engagement, suggesting an active dose range of fosgonimeton from 20 to 90 mg.

Event-related Potential

In our Phase 1 Part B clinical trial, ERP P300 recordings were collected from the MAD healthy elderly and AD subjects. Analysis of these P300 data demonstrated that one daily dose of fosgonimeton improved P300 latency over an 8-day dosing period in AD subjects, as shown in Figures 15–17. P300 latency, a functional measure of working memory processing speed and executive function that highly correlates with cognition, was dramatically improved; however, we have not yet established a connection between these P300 latency results and improved cognition. After a single dose of fosgonimeton, all AD subjects tested had improved P300 latency, and by the end of a 9-day treatment cycle, average P300 latency across the AD treatment group had improved by 73 milliseconds, as measured on day 8, a statistically significant change compared to placebo group that did not show any significant directional change. We also observed sustained effects on P300 latency in the pre-dose recordings on subsequent testing days (the arrows in Figure 15 show the average P300 latency value from the fosgonimeton group as a heat map). At these time points, which are 24 hours after the last dose, fosgonimeton was measured and shown to be completely cleared from the plasma, while recorded P300 latency values remained lower than baseline. These data indicate fosgonimeton treatment potentially recovered disruptions to brain function and network connectivity, which we believe are likely through several components of the mechanism, including NMDA receptor modulation, increased connectivity through recovery of synaptic density, and improved overall neuronal health and function.

Figure 15. Fosgonimeton Treatment Led to Continued and Sustained Improvement in P300 Latency in AD Subjects.The arrows highlight the sustained P300 latency benefit due to fosgonimeton treatment.

Figure 16. Quantification of the Change in P300 Latency from Baseline, Fosgonimeton Significantly Reduced P300 Latency Compared to the Placebo Group on Day 8 Recordings. Data show average P300 latency values of 7 AD subjects treated with fosgonimeton vs. 4 AD subjects on placebo * p=0.027

Figure 17. Data from Each Subject in the Clinical Trial Showing the Change in P300 Latency from Baseline. Every Subject Receiving Fosgonimeton Showed a Level of Improvement in P300 Latency and Subjects Receiving Placebo Had No Consistent Change.

Safety

Fosgonimeton, administered once daily by subcutaneous injection, was well tolerated with no serious adverse events in our placebo-controlled double blind Phase 1 clinical trial completed to date, where we enrolled 88 subjects recruited in the study, including 11 subjects with mild-to-moderate AD, who were randomized to treatment and control groups.

Additionally, three chronic GLP toxicology studies, a 6-month toxicity study in rats, a 6-month toxicity study in dogs, and a separate 9-month toxicity study in dogs showed no fosgonimeton-related clinical or veterinary observations or effects on quantitative ECG parameters (dogs) or clinical pathology parameters, macroscopic findings, or organ weight changes in both species. Daily subcutaneous administration of fosgonimeton to rats and dogs for 26 weeks and 39 weeks in dogs at dose levels of 2, 4, and 8mg/kg/day was tolerated. The only adverse finding was necrosis of the injection site subcutaneous tissue in male animals at 8mg/kg/day. The systemic NOAEL was the high dose at 8mg/kg/day, equivalent to a 290mg Human Equivalent Dose (based on ATH-1001 Cmax in rats). Moreover, GLP safety pharmacology studies on rats and dogs reported no fosgonimeton-related effects on cardiovascular, respiratory, or CNS function at the high dose of 8mg/kg/day. There were no indications of fosgonimeton-related mutagenicity or genotoxicity in in vitro genotoxicity assays or evidence of clastogenicity or aneugenicity in in vivo micronucleus assays.

In summary, human exposures from the planned dose range of 40-70 mg for the Phase 2 and 3 clinical trials are well below the animal no observable adverse event level, or NOAEL, exposures.

Furthermore, the NOAEL from the 26-week GLP toxicity study was defined by injection site reactions, which are monitorable and reversible, and may be less of a risk in humans due to greater surface area, a higher number of injection sites, and a lower volume of injection relative to body size.

Administration

Fosgonimeton is delivered by once-daily subcutaneous injection. The fosgonimeton formulation is non-viscous, near physiological pH, and is expected to be dispensed and administered at room temperature. These attributes and the use of small-gauge needles (29), and low volume (1 mL) significantly optimize the fosgonimeton product profile for a subcutaneous route of administration. Subcutaneous injections are a common route of administration of chronic therapies, including those for diabetic or MS patients, and are easy to administer for patients and/or caregivers while being generally well tolerated. With the progression of neurodegenerative disorders, oral administration can become challenging as:

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safe swallowing often becomes increasingly difficult;

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daily trays of multiple solid oral dosage forms add to patient/caregiver burden; and

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potential resistance to care can also impact compliance.

Subcutaneous injectables do not present as a potential barrier to adoption, and as the base-case target product profile, represents a significant opportunity. Following our initial medication management research initiative, where we surveyed a number of caregivers and medical professionals to understand compliance challenges in the AD population, an external market research firm independently assessed the adoption potential of fosgonimeton as a once-daily subcutaneous injectable across neurologists, patients/caregivers and subcutaneous injectables experts. Key findings are in line with prior research and continue to support this product profile (pre-filled syringe, subcutaneous injection) as a well-known route of administration among this patient population; and has the potential to overcome identified patient-related challenges, including forgetfulness and compliance, swallowing, agitation and behavior.

Development Strategy

Our development strategy is designed to support a rapid and risk mitigated approach to bring fosgonimeton to the market. While we believe the compound can improve cognition in all stages of AD, our initial focus is on the mild to moderate AD stage because this is the area of highest medical need while allowing for shorter pivotal trials and in following an established regulatory pathway.

LIFT-AD Trial: A 26-Week Phase 3 Clinical Trial in Mild-to-Moderate AD Subjects

Based on the safety and translational Phase 1a/b clinical trial results, including AD subjects, we are conducting LIFT-AD, a Phase 3 randomized, double-blind, placebo-controlled clinical trial. This clinical trial is designed to assess the efficacy, safety, and tolerability of two dose levels of fosgonimeton (40 mg and 70 mg) in subjects with mild-to-moderate AD compared to placebo over a 26-week period. The clinical trial is intended to enroll approximately 420 AD subjects. Subjects enrolled in the clinical trial will have a severity range within the conventional boundaries for mild-to-moderate AD, based on MMSE 14-24 inclusive. Clinical dementia rating, or CDR, is a 5-point scale used to assess cognitive processing and function in AD and related dementias. CDR 1 or 2 are an additional inclusion criterion to ensure overt dementia. In September 2020, we began the site initiation and patient screening for the LIFT-AD trial and anticipate topline results in the first half of 2023. While the results may qualify for pivotal data in support of registration, the FDA or other regulators might still require additional trials, even if results from the LIFT-AD trial are positive.

Compared to therapies focused on AD progression, which traditionally require multi-year clinical trials to measure changes in disease progression, we believe that fosgonimeton may induce a rapid boost in cognition, which enables us to design our trial with a 26-week treatment period and potentially accelerate the clinical development of fosgonimeton.

The primary endpoint in LIFT-AD is the Global Statistical Test, or GST, and this unbiased, unweighted composite single outcome will provide the assessment of proof-of-concept. The GST is a mathematical algorithm based on actual psychometric performance tests of ADAS-Cog11 and either ADCS-CGIC or ADCS-ADL23. The co-key secondary endpoints will potentially provide pivotal evidence to support registration. ADAS-Cog11 refers to the 11 tasks that make up the ADAS-Cog neuropsychological assessment. ADCS-CGIC refers to the Alzheimer’s Disease Cooperative Study-Clinical Global Impression of Change, a systematic method to support clinical relevance of statistically significant benefits in cognitive performance testing. The GST composite provides a more sensitive endpoint to the overall treatment effect of multiple variables and increases our chances of understanding the full impact of fosgonimeton clinical outcomes. If co-key secondary endpoints – e.g., ADAS-Cog-11 and ADCS-CGIC – are only trending, then GST may still be statistically significant. Thus, positive GST data will support proof of concept, and positive results from the co-key secondary endpoints will potentially provide pivotal evidence to support regulatory approval.

Further secondary endpoints include the Controlled Oral Word Association Test, or COWAT, to specifically assess changes in executive memory function, the Alzheimer’s Disease Cooperative Study – Activities of Daily Living, or ADCS-ADL23, scale to assess 23 instrumental activities of daily living, and the Neuropsychiatric Inventory, or NPI, to assess any changes in behavior.

Exploratory pharmaco-economic outcomes are comprised of validated scales to capture resource utilization (RUD-lite 3.3), caregiver burden (Zarit Burden Interview) and quality of life (EQ-5D-5L).

The clinical trial design for LIFT-AD was informed by our previous interactions and discussions with the FDA. In order to be considered a pivotal trial supportive of FDA approval for mild to moderate AD, LIFT-AD will need to achieve a statistically significant improvement separately on our co-key outcomes, e.g. the ADAS-Cog11, ADCS-CGIC, and ADCS-ADL23. In January 2022, we announced that we are increasing the LIFT-AD study sample size by approximately 120 participants, from 300 to 420, in order to strengthen the statistical power of these co-key secondary endpoints.

ACT-AD P300 Trial: A 26-Week Phase 2 Clinical Trial in Mild-to-Moderate AD Subjects

In addition to LIFT-AD, in November 2020 we initiated ACT‐AD, a randomized, placebo-controlled P300 Phase 2 clinical trial designed to test the same dose levels of fosgonimeton (40 and 70 mg/d) in subjects with mild-to-moderate AD compared to placebo. We completed enrollment in October 2021 at 77 mild-to-moderate AD subjects using the same enrollment criteria as described above and include a 26-week treatment period.

The primary endpoint of ACT-AD is change in ERP P300 latency. Several secondary endpoints will be assessed, including ADAS-Cog11, ADCS-CGIC, and ADCS-ADL23. The ACT-AD trial was similarly designed to the potentially pivotal LIFT-AD trial; key findings from ACT-AD could function as an interim analysis for LIFT-AD without statistical penalty. Additionally, ACT-AD will continue to assess safety of fosgonimeton in mild-to-moderate AD during the 26-week trial period, with potential to add an additional up to 26-weeks of safety data in an optional open label extension study.

Open Label Extension of LIFT-AD and ACT-AD Clinical Trials

Following the completion of the 26-week treatment period during the LIFT-AD and ACT-AD trials, patients may elect to continue on an open label extension and receive treatment with fosgonimeton at the high dose (70mg/day) for up to an additional 26-weeks. The data collected from this open label extension may provide us with a better understanding of the long-term safety and efficacy profile of fosgonimeton. Additionally, we are currently considering further extending the open label extension of the LIFT-AD and ACT-AD trials.

Phase 2 Proof-of-Concept Clinical Trial in PDD and DLB Subjects

In addition to the three AD clinical trials, we are moving beyond AD and are also testing the effects of fosgonimeton in PDD and DLB subjects. After initial limitation to the nigrostriatal system neurons, PD is a condition that leads to a progressive damage of more neuronal networks over time, ultimately impacting function and cognition and resulting in dementia in the majority of subjects affected. Like AD, PDD subjects demonstrate an increase in their P300 latency, which increases the likelihood that fosgonimeton can potentially address dementia in PDD subjects. This clinical trial was called SHAPE and is a randomized, double-blind, placebo-controlled, parallel-group Phase 2 proof-of-concept clinical trial in PDD and DLB subjects. It was initiated at the end of 2021 and the first patient was dosed in January 2022. The population severity will include Hoehn-Yahr stages 1 through 4, inclusive, who will receive 40 mg and 70 mg once daily of fosgonimeton versus placebo. Endpoints will include ERP P300 latency, cognition, function, and behavior, and also motor function.

Preclinical Results

Fosgonimeton was assessed in multiple preclinical studies, including in vitro assays and several animal models of memory deficits. Fosgonimeton promoted the formation of new spines and functional synapses in hippocampal neurons in vitro (neuronal cultures). Fosgonimeton also activated HGF/MET, which in turn has been shown to enhance long-term potentiation. Long-term potentiation refers to a process at the individual neuron level, where memory formation is thought to involve a sustained increase in synaptic efficiency following repeated stimulation. In the aged animal model of dementia, fosgonimeton increased synaptic density and in multiple models of dementia improved performance in tests of spatial memory.

Similar to the clinical findings, fosgonimeton treatment also increased the qEEG gamma power that is associated with cognitive processing and memory in a non-clinical AD animal model (APP1/PS1), as shown in Figure 18. Changes in gamma brain activity signals are highly translatable which helped guide our selection of the clinical doses.

Figure 18. Fosgonimeton Treatment Induces Acute Increases in Gamma Power within One Hour of Administration (left) and Daily Treatment for Two Weeks Followed by a Seven-Day Washout Shows a Sustained Effect on Gamma Power (right).

***p<0.001

Our ATH Platform

Our ATH platform leverages the activity of a validated regenerative pathway, the HGF/MET system, that is critical for normal brain function. It is our goal to establish in current and future clinical trials that our ATH platform, which is designed to enhance the body’s repair mechanism of HGF/MET, can potentially address a wide range of clinical applications ranging from CNS disorders, such as AD, PDD, MS, and ALS, to more peripheral conditions such as neuropathy. In addition, we believe that HGF/MET biology plays a role in neuropsychiatric indications such as depression and anxiety.

Key Aspects of Our ATH Platform

Our ATH platform utilizes proprietary technology to target and enhance the activity of a vital neuronal growth factor that promotes neuronal health and regeneration. We believe that our ATH platform has multiple advantages compared to previous strategies that have targeted growth factors, including:

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Small molecules. Previous attempts to promote neurotrophic factor activity with recombinant proteins or stem cells involved invasive surgeries or risked immune response. Our small molecules overcome these challenges, allowing for non-invasive systemic drug delivery through subcutaneous or oral routes that distribute to the nervous system.

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Efficient and scalable manufacturing process. Small molecules are manufactured using scalable chemical synthesis routes, representing a cost and time efficient process that does not require custom manufacturing infrastructure.

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Avoids alteration of target system regulation. ATH compounds are designed to enhance the activity of the target system with neither disruption to nor evasion of the normal regulatory processes that are in place to prevent hypo- or hyper-activation. This design aims to reduce safety risks.

We believe that the ATH platform represents a significant opportunity to develop therapeutics for the treatment of diseases of the nervous system and has the potential to drive significant advancement in regenerative medicine.

Our Therapeutic Discovery Process

We utilize a rigorous process to identify small-molecule compounds that activate regenerative systems.

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Focus on activity. Our drug screening process is an efficient blend of modern and traditional methods, starting with extensive modeling to create compound libraries. In our process, focus is placed on early activity assays, in which potential hits are advanced to further discovery.

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Maximize hit potential.When hits are identified, we employ a comprehensive set of studies to collect compound characteristics and optimize for drug-like characteristics with medicinal chemistry and structure-activity relationship studies to produce candidates ready for further development.

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Gain insight to inform future therapeutic development.We consider the drug discovery process as a cycle, with past work continuously informing future drug design, ultimately optimizing the process as we advance our knowledge and expertise.

This system has supported the identification of several candidates for development, including fosgonimeton. We are using our ATH platform and discovery engine to explore potential development of therapeutic candidates in additional nervous system disorders including ALS, MS, and neuropsychiatric indications, as well as in peripheral indications such as peripheral neuropathy. We are also actively exploring the potential of expanding the focus of our discovery engine to multiple molecular targets relevant to nervous system disorders.

Additional Development Opportunities

Our Neuropsychiatric Program (ATH‐1020)

We are currently developing ATH-1020 for neuropsychiatric conditions. The HGF/MET system is relevant for multiple neuropsychiatric indications including depression, anxiety and schizophrenia, as well as the cognitive impairment regularly associated with these conditions. The lifetime prevalence of common mental disorders is reported to be almost 30% and, despite the sizable number of available treatments, a large portion of subjects show an unsatisfactory or a lack of response to treatment. This context, combined with slow responses to common treatments, results in a major burden for patients, public healthcare, and disability systems. ATH compounds represent a novel mechanism for the treatment of neuropsychiatric conditions.

Our product candidate for the neuropsychiatric program is ATH-1020. ATH-1020 is a new compound for which we recently filed an IND application with the FDA at the end of 2021, and received notice of acceptance in January 2022. We initiated the Phase 1 clinical trial for ATH-1020 in the first quarter of 2022, which is designed to evaluate the safety, tolerability, and pharmacokinetics of ATH-1020 in approximately 68 healthy young and elderly volunteers. ATH-1020 is a novel small molecule compound designed to be an orally available once-daily treatment, to enhance the HGF/MET system, and to distribute to the CNS. Preclinical testing has demonstrated neuroprotective effects leading to increased neuron viability in response to several neurotoxic insults. Additionally, treatment with ATH-1020 mitigated depression-related behaviors in an animal model of depression, as shown in Figure 19. In the MK-801 rodent model of schizophrenia, ATH-1020 rescued mismatch negativity response, a translatable electroencephalogram (EEG) measure that shows consistent and robust deficits in both rodent models and schizophrenia patients (Figure 20).

Figure 19. ATH-1020 Improve Depressive-like Behaviors in Rats in the Forced Swim Model of Depression. Data show average frequency of behaviors normalized to vehicle for ten rats per group. ATH-1020 significantly improved performance in the forced swim test, by reducing immobility, a depressive-like behavior, and increasing swimming, commonly interpreted as an antidepressant effect, compared to vehicle (*p<0.05, **p<0.01, ***p<0.001).

Figure 20. ATH-1020 Rescues the Mismatch Negativity (MMN) Deficit Seen in the Rat MK-801 Schizophrenia Model. Data show EEG recordings in vehicle control, MK-801 only, and MK-801 plus ATH-1020 treatment groups. ATH-1020 rescues MMN wave back to the range of normal healthy animals. (*p<0.05, ***p<0.001).

From several preclinical findings, we believe the stimulating activity of ATH compounds on the HGF/MET system is well-suited to address neuropsychiatric conditions because:

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HGF/MET signaling is deficient in neuropsychiatric patients and negatively correlated to disease severity;

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reductions in HGF/MET signaling is a causative agent of depression and anxiety behaviors in rodents;

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enhancement of HGF concentrations in the brain has anti-depressive and anxiolytic effects in rodent models; and

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in a rodent model of schizophrenia, enhancement of HGF/MET activity rescued MMN response (a translatable EEG measure from rodents to humans).

Further, patients suffering from major depression display reduced function and connectivity of neural pathways, resulting in prolonged P300 latency compared to healthy controls. This effect is particularly apparent in those experiencing cognitive dysfunction. The extent of P300 latency slowing is strongly correlated with the severity of depression, and a normalization of P300 latency is associated with response to treatment. A similar correlation is observed in patients suffering from other neuropsychiatric disorders. Our HGF positive modulator for the treatment of AD, fosgonimeton, reduced the P300 latency of AD subjects in a Phase 1b clinical trial within 8 days of treatment. While the patient populations in neuropsychiatric conditions and AD are substantially different, the root cause of the diseases may not be, and properties of P300 latency have been shown to be conserved across many diseases. These results highlight the ability of HGF/MET activators to impact P300 latency, which when combined with the preexisting research on the effects of activating the HGF/MET system in neuropsychiatric disorders indicates that treatment with HGF/MET activating compounds may be capable of improving patient outcomes in neuropsychiatric indications. We are advancing ATH-1020 for further development for neuropsychiatric indications and submitted our IND to the FDA at the end of 2021. Late-stage non-clinical development work and potentially early clinical studies will support decisions on selection of the product candidate and indication moving forward.

Our Peripheral Indication Program (ATH-1019)

We have initiated a discovery program to evaluate ATH compounds for peripheral nervous system disorders, such as neuropathy. ATH-1019 (formerly ATH-1018) is a novel, orally active candidate that has demonstrated ability to significantly promote the activity of the HGF/MET system. We are planning to administer ATH-1019 at doses that are expected to largely relegate its activity to the periphery. ATH-1019 potentially represents a new strategy to address peripheral nervous system disorders by promoting the regenerative power of the HGF/MET system with a small molecule therapy. Consideration of HGF/MET activators as a therapeutic approach for peripheral nervous system disorders including neuropathy was initiated following review of studies demonstrating that HGF/MET activating treatment repaired peripheral nerve injury and reduced neuropathy.

We believe the activity of ATH compounds, through enhancement of the HGF/MET system, is well-suited to address peripheral nervous system disorders including neuropathy given that HGF/MET signaling has been shown to:

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protect nerve cells from damage and death;

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promote regeneration of damaged peripheral nerves, mediated through Schwann cell activity;

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inhibit inflammation by reduction of the expression of pro-inflammatory cytokines; and

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down-regulate the expression of pain-related genes in damaged peripheral neurons, including ATF3.

Furthermore, previous clinical trials have shown that with HGF plasmid therapy, designed to increase circulating HGF, promoting the HGF/MET system significantly reduced pain in patients with diabetic peripheral neuropathy. We believe these clinical trials provide a proof of concept for the therapeutic target. However, our oral small-molecule candidates offer distinct advantages over plasmid therapies, including controlled dose and ease of administration. Targeting HGF/MET signaling for the treatment of peripheral nervous system disorders is supported by both preclinical and clinical research, and we are evaluating the

next generation oral ATH compounds for peripheral activity. We are advancing ATH-1019 to further discovery and development for peripheral nervous system indications.

Market Opportunity

AD and Dementia

Fosgonimeton is being advanced for mild-to-moderate AD patients initially. The AD dementia market today in 2022 is reported to be approximately 6.2 million Americans and is projected to reach nearly 14 million by 2050 in the U.S. alone. Worldwide, as many as 35 million people are estimated to have AD and the patient population was projected in 2007 to grow to over 100 million by 2050. Our strategy is to ultimately position fosgonimeton as a treatment for dementia broadly. Spanning all dementias globally, an estimated 55 million people are reported to be affected today in 2022 and this number is projected to be 150 million by 2050. Many factors contribute to the growing numbers of the potentially treatable population, including “baby boomers” reaching age 65 and increasing life expectancy beyond 80.

Other Target Indications

Our immediate next pipeline opportunities include: ATH-1020 for neuropsychiatric indications and ATH-1019 for peripheral neuropathy. Neuropsychiatric indications, specifically depression and schizophrenia, are estimated to affect approximately 280 million and 20 million people worldwide, respectively. In the U.S., 13.1 million adults 18 and older and 3.2 million Americans are affected by depression and schizophrenia, respectively. Beyond these specific examples of depression and schizophrenia, and with a reported lifetime prevalence of nearly 30% for all neuropsychiatric indications, the addressable 2020 patient population of adults 18 and older is reported to reach nearly 50 million in the U.S. alone.

The estimated prevalence of peripheral neuropathy in the U.S. averages approximately 10% but could be higher due to a larger undiagnosed population. Conservatively, and with nearly 10% of the U.S. population over 30 years old estimated to be diagnosed with some form of neuropathy, the reported addressable patient population today is approximately 30 million patients for peripheral neuropathy, a type of neuropathic pain, alone.

Potential Commercialization Plan

Fosgonimeton is initially being developed as a regenerative medicine for AD. For the initial target patient population of mild-to-moderate AD patients, our commercialization strategy of fosgonimeton will consider the following key elements:

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potential first-line therapy;

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an add-on therapy for patients on existing therapies;

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a monotherapy for patients who are not suitable for acetylcholinesterase inhibitors, or AChEIs;

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a monotherapy for patients who have stopped AChEIs due to loss of effect or side effects; and

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a treatment to other dementias such as PDD, Lewy body dementia and Frontal temporal dementia over time.

We aim to demonstrate the unique short- and long-term value provided by fosgonimeton by linking the core symptoms of dementia (cognition and behavioral and psychological symptoms of dementia) to both improved outcomes and reduced costs and the benefits of fosgonimeton through increased compliance rates in our initial indications.

We anticipate exploring two distribution strategies for fosgonimeton, traditional wholesaler and specialty pharmacy. While the traditional wholesaler could be a suitable option, we believe that the additional patient services that could be provided through specialty pharmacy may offer more value to

patients, caregivers, and their providers. Such services could include training on subcutaneous administration, patient counseling and assistance with reimbursement or insurance issues. This could also allow us to reduce the need for costly in house or field-based resources such as patient training or reimbursement support specialists.

Manufacturing

We are focused on the development of small molecule therapeutics which enables us to use well-established and widely available manufacturing processes and infrastructure, formulation compositions, and drug administration technologies or devices. We do not currently operate our own facilities for manufacturing, storing, or distributing our product candidates. We utilize third-party contract development and manufacturing organizations, or CDMOs, to manufacture and supply our preclinical and clinical materials during the development of our product candidates. We and various regulatory bodies have audited the CDMOs we contract with, and they have a proven track record of FDA-compliant manufacturing with an infrastructure to support large and commercial scale manufacturing.

We have enough fosgonimeton supply to support our LIFT-AD Phase 3 and our ACT‐AD Phase 2 clinical trials in AD. We believe the synthesis of fosgonimeton is reliable and reproducible and the synthetic routes can be further optimized to enable large-scale production that continues to avoid use of toxic materials or specialized equipment or handling during the manufacturing process. We continue to optimize the manufacturing process to support future large-scale and commercial supply. Fosgonimeton is purified as a stable solid and then released to additional CDMOs for formulation and packaging into final drug product for use in clinical testing.

The final drug product profile is a ready-to-use pre-filled syringe with a clear, non-viscous aqueous solution of fosgonimeton. The syringes utilize materials and components that are readily available commercially. The fosgonimeton drug product has shown extended stability (at least 2 years) under storage conditions when stored in vials that were composed of identical materials to the syringes. Confirmatory stability studies in syringes are ongoing and data collected thus far support the translation of the extended stability from vials to syringes under refrigerated conditions as well as short-term dispensation and at-home storage in ambient conditions. Room temperature storage allows patients to avoid cumbersome storage requirements and reduces overall burden.

We plan to maintain our focus to identify and develop small molecule product candidates that are expected to have cost-effective manufacturing using third party CDMOs.

We expect to use similar contract resources for commercialization of our products, at least until our resources and operations are at a scale that justifies investment in internal manufacturing capabilities.

Competition

The biotechnology and biopharmaceuticals industries are characterized by rapid technological advancement, significant competition, and an emphasis on intellectual property. As a clinical-stage biopharmaceutical company developing small molecules to restore neuronal health and slow neurodegeneration, with our most advanced product candidates focused on the treatment of AD and dementia, we face, and in the future may face, increased competitive pressures from both large and small pharmaceutical companies and from established and emerging biotechnology companies, as well as academic, government, and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with current treatments and new treatments that may become available in the future. With the advancement of fosgonimeton as a novel small molecule therapeutic positively modulating a neurotrophic factor pathway, the HGF/MET system, and its liquid formulation as a subcutaneous deliverable, we also consider as competitors companies developing small molecule AD therapies targeting neurotrophic factors with or without a subcutaneous route of administration.

Because of the range of potential competitors, many of our competitors, alone or with strategic partners, have greater access to financial resources, market presence, and resources and expertise in development, preclinical and clinical testing, manufacturing, commercialization, the regulatory approval process, and/or marketing and sales than we do. In addition, these same competitors, who may be in a clinical development stage, could also be competing with us for patient recruitment, clinical research organization, and operational resources. These entities also compete with us in the recruitment and retaining of qualified scientific and management personnel, as well as the acquisition of enabling or complementary technologies for advancing fosgonimeton across all competitors. Merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be substantially limited if our competitors develop and commercialize products that are more effective, safer, more convenient or less expensive than our comparable products. In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of the entry of our products. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of other treatments.

Key competitive forces that could potentially affect the success of our products, if approved, are safety, efficacy, price, adoption, convenience, time-to-market, level of promotional activity, intellectual property protection, and reimbursement likelihood from government and private payors. Despite these forces, we view our competitive advantage in not only our lead product candidate, fosgonimeton, but also our novel pipeline of therapeutics with a focus on overall neuronal health. In particular, the following summarizes certain categories of our potential competition.

As a small molecule therapeutic targeting the HGF/MET system, we are aware of a number of potential competitors in this space, including ANG-3777, an HGF mimetic, developed by Angion for the treatment of kidney injury; KP-100, a recombinant HGF protein, developed by Kringle Pharma for acute spinal cord injury and ALS; and Collategene developed by Mitsubishi Tanabe and AnGes as a gene therapy for the treatment of critical limb ischemia. Although ANG-3777 was reported to not have reached primary endpoints for their Phase 2 and 3 trials in 2021, the scientific basis remains unchanged and the company is evaluating next steps for the program. KP-100 is currently in Phase 3 studies for acute spinal cord injury and Phase 2 studies for ALS. Collategene was launched in Japan in the third quarter of 2019. In addition, we are aware of p75 ligands being developed by PharmatrophiX for the treatment of neurodegenerative and other disorders, including AD, as well as VM-202, a regenerative plasmid DNA therapy candidate in Phase 3 development by Helixmith for the treatment of diabetic peripheral neuropathy. We are not aware of any direct competitors currently targeting the HGF/MET system for neurological conditions.

Fosgonimeton is being advanced as either a monotherapy (potentially as a first-line therapy) or an add-on therapy for patients on AChEIs. In addition to being a potential add-on therapy to currently approved therapies, we do not anticipate fosgonimeton to be a direct competitor to, but rather complementary to, other therapeutic developments focused on Aβ, pTau, AChE, BACE inhibitors, inflammation and others. Similarly, because fosgonimeton presents a novel mechanism of action, we do not view monoclonal antibody therapies currently approved or under development by large pharmaceutical companies of which we are aware, including Biogen, Eisai, Eli Lilly and Roche, as competitors, but potentially as complementary to our approach.

Intellectual Property

We own or have in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to the development and commercialization of our product candidates, including related manufacturing processes and technologies.

As of December 31, 2021, our patent portfolio includes our exclusively owned intellectual property, including one issued U.S. patent, two pending U.S. patent applications, one issued patent in a jurisdiction outside of the United States, nine pending patent applications in jurisdictions outside of the United States,

and three pending international patent applications filed under the Patent Cooperation Treaty. The patents and patent applications issued and pending outside the United States are generally counterparts to the foregoing U.S. patents and patent applications and are held in Europe, Canada, Japan, Australia, Hong Kong, India, China, Argentina and Taiwan. These owned patents and patent applications have claims directed to fosgonimeton and related compounds, including but not limited to ATH-1019 and ATH-1020, methods of using fosgonimeton, and methods of using related compounds, including but not limited to ATH-1019 and ATH-1020. We intend to pursue, when possible, further composition, method of use, dosing, formulation, and device patent protection directed to the neuroregenerative products and processes we develop. We may also pursue patent protection with respect to manufacturing and drug development processes and technology.

Our patent portfolio also includes eight issued U.S. patents and approximately 13 patents issued and one patent application pending in jurisdictions outside of the United States that are exclusively licensed to us by Washington State University. Our in-licensed patents and patent applications include, among others, claims directed to dihexa, the active metabolite of fosgonimeton.

Individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications filed in the United States are effective for 20 years from the earliest nonprovisional filing date. In addition, in certain instances, a patent term can be adjusted or extended to recapture a portion of the term effectively lost as a result of the USPTO delay and the FDA regulatory review period. The restoration period for FDA delay cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest nonprovisional filing date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent. Our in-licensed issued patents will expire on dates ranging from 2023 to 2035, exclusive of any patent term adjustment or patent term extension. Our owned issued patents will expire in 2037, exclusive of any patent term adjustment or patent term extension. If patents are issued on our owned pending patent applications, the resulting patents are projected to expire on dates ranging from 2037 to 2041, exclusive of any patent term adjustment or patent term extension.

When appropriate, we seek to protect aspects of our technology and business not amenable to, or that we do not consider appropriate for, patent protection as trade secrets. We seek to protect this intellectual property, in part, as trade secrets, by entering into confidentiality agreements with those who have access to our confidential information, including our employees, contractors, consultants, collaborators, and advisors. We also seek to preserve the integrity and confidentiality of our proprietary technology and processes by maintaining physical security of our premises and physical and electronic security of our information technology systems.

We seek trademark protection in the United States and in certain other jurisdictions where available and when we deem appropriate. Our trademark portfolio currently consists of two pending trademark applications in the United States, two pending trademark applications in Australia, two issued trademark registrations in the United Kingdom, and two issued trademark registrations in the European Union.

Our Collaboration and Grant Agreements

Amended and Restated Washington State University License Agreement

We are party to an amended and restated exclusive license agreement with Washington State University (“WSU”) that we entered into in September of 2015. Under this agreement, WSU granted us an exclusive license to make, use, sell, and offer for sale products covered by certain licensed patents, including dihexa, the chemical compound into which fosgonimeton metabolizes following administration. We do not expect WSU’s joint ownership of the patent with Pacific Northwest Biotechnology, Inc. will

materially affect our license of such patent or the development of any of our product candidates to which the patent relates.

The initiation of our first Phase 2 clinical trial in September 2020 triggered a $50,000 liability to WSU.

We may also be obligated to pay to WSU the following if the related milestones are reached:

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$300,000 – At initiation of the first Phase 3 clinical trial in the United States, European Union or Japan for the first licensed product.

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$600,000 – Marketing approval in the United States, European Union or Japan for the first licensed product.

We are obligated to pay WSU a royalty in the mid-single digits of net sales.

Additionally, under the agreement we have the right to sublicense the licensed rights, subject to additional payments to WSU for sublicense consideration received. Such amounts are dependent on the terms of the underlying sublicense, and range from the mid-single digits to mid tens of any non-sales based payments received, and low twenties of net sales-based sublicense royalties.

The term of the agreement will continue until the earlier of the date that no valid claim in a licensed patent remains enforceable or payment of earned royalties, once such payments begin, ceases for more than four consecutive calendar quarters. We have not yet commenced payment of royalties to WSU pursuant to the terms of the agreement, since, as of the date of this report, we do not have any approved products with respect to which we may generate revenue. If any of our product candidates to which the patents relate are approved for commercial sale, our obligations to pay royalties would commence upon net sales of such approved product candidates and cease no later than the date that no valid claim in a licensed patent remains enforceable. Such licensed patents in major markets with respect to indications we are currently pursuing will expire on dates ranging from 2023 to 2032, exclusive of any patent term adjustment or patent term extension. We may terminate this agreement with 90 days’ prior written notice to WSU. WSU may terminate this agreement with 90 days’ prior written notice if we fail to achieve certain performance milestones by the agreed upon dates. WSU may also terminate this agreement with 90 days’ prior written notice (or thirty days’ prior written notice in the case of our failure to make a timely payment owed to WSU) following our failure to conduct certain development activities for two consecutive calendar quarters or upon our material breach of the agreement and our failure to cure any such breach within 90 days of our receipt of notice of such breach from WSU (or within 30 days in the case of our failure to make a timely payment owed to WSU).

Grant Liability

In 2014 and 2015, we received $250,000 and $500,000, respectively, from the Washington Life Sciences Discovery Fund (“LSDF”) under the terms of two matching grant award agreements. The consummation of the Company’s initial public offering in September 2020 was a triggering event under the terms of the grant and the liability was remeasured to the pay-off amount of $1.5 million as of September 30, 2020 and repaid in full as of December 31, 2020.

National Institutes of Health Grant

In December 2020, we accepted a grant from the National Institutes of Health (“NIH”) for Alzheimer’s research in the amount of approximately $7.8 million with the potential for an additional $7.4 million up to an aggregate of $15.2 million, subject to the availability of funds and satisfactory progress of the research. As this grant involves federally funded research, per the Bayh-Dole Act, we will be obligated to (1) report each new invention to the government, (2) decide whether to retain ownership, (3) file for patent protection to retain title, and (4) provide a license to the government to practice the invention. The “march-in” rights provided by the Bayh-Dole Act would apply to new subject matter arising from the use of the NIH funds, but would exclude pre-existing subject matter such as our product candidates existing prior to the receipt of

such grant. We also are expected to commercialize any inventions we file patent protection on for the benefit of public health. For more information see the section of this report titled “Risk Factors—Risks Relating to Our Intellectual Property—Intellectual property discovered through government funded programs may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S. manufacturers.”

Government Regulation

Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the research, development, nonclinical and clinical testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of products such as those we are developing. Generally, before a new drug can be marketed, considerable data must be generated, which demonstrate the drug’s quality, safety, and efficacy. Such data must then be organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. Drug Development Process

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

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

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completion of nonclinical laboratory tests, animal studies, and formulation studies in accordance with FDA’s good laboratory practice requirements and other applicable regulations;

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submission to the FDA of an IND, which must become effective before human clinical trials may begin;

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approval by an independent IRB ethics committee, either centralized or with respect to each clinical site, before each clinical trial may be initiated;

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performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to establish the safety and efficacy of the proposed drug for its intended use;

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submission to the FDA of an NDA after completion of all pivotal trials;

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determination by the FDA within 60 days of its receipt of an NDA to accept the filing for substantive review;

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satisfactory completion of an FDA advisory committee review, if applicable;

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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP requirements to ensure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality, and purity, and of selected clinical investigation sites to assess compliance with GCPs; and

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FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the clinical trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which may review data and endpoints at designated check points, make recommendations and/or halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

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Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism, and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

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Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages, and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

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

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a clinical trial may move forward at designated check points based on access to certain data from the clinical trial.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 clinical trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

While the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

NDA Review and Approval Process

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development nonclinical and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User Fee Act (PDUFA) guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes 12 months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after the application is submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines that the application, manufacturing process, or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 clinical trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies, or manufacturing. If a Complete Response Letter is issued, the sponsor must resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a REMS to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use. It could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may offer conditional approval subject to, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.

Expedited Development and Review Programs

The FDA has a fast track designation program that is intended to expedite or facilitate the process for reviewing new drug products that meet certain criteria. Specifically, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis, or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to ten months for review of new molecular entity NDAs under its current PDUFA review goals.

In addition, a product may be eligible for accelerated approval. Drug products intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.

The Food and Drug Administration Safety and Innovation Act established a category of drugs referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of such drug.

Fast track designation, priority review, accelerated approval, and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.

Post-Approval Requirements

Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There are continuing, annual program fees for any marketed products. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

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

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

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fines, warning letters, or untitled letters;

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clinical holds on post-approval or Phase IV clinical studies, if applicable;

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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

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

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consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs;

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mandated modification of promotional materials and labeling and the issuance of corrective information;

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the issuance of safety alerts, Dear Healthcare Provider letters, press releases, and other communications containing warnings or other safety information about the product; or

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injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined companies from engaging in off-label promotion. The FDA and other regulatory agencies have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.

Marketing Exclusivity

Market exclusivity provisions authorized under the FDCA can delay the submission and approval of certain marketing applications for products containing the same active ingredient. The FDCA permits patent term restoration of up to five years as compensation for a patent term lost during product development and FDA regulatory review process to the first applicant to obtain approval of an NDA for a new chemical entity in the United States. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application (ANDA) or an NDA submitted under Section 505(b)(2) (505(b)(2) NDA), submitted by another company for another drug based on the same active

moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to any nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

Other Healthcare Laws

Pharmaceutical manufacturers are subject to additional healthcare laws, regulation, and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation, U.S. federal anti-kickback, anti-self-referral, false claims, transparency, including the federal Physician Payments Sunshine Act, consumer fraud, pricing reporting, data privacy, data protection, and security laws and regulations as well as similar foreign laws in the jurisdictions outside the U.S. Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information; state and local laws which require the tracking of gifts and other remuneration and any transfer of value provided to physicians, other healthcare providers and entities; and state and local laws that require the registration of pharmaceutical sales representatives; and state and local laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The risk of our being found in violation of these or other laws and regulations is increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts and their provisions are open to various interpretations. These laws and regulations are subject to change, which can increase the resources needed for compliance and delay drug approval or commercialization. Any action brought against us for violations of these laws or regulations, even successfully defended, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Also, we may be subject to private “qui tam” actions brought by individual whistleblowers on behalf of the federal or state governments. Actual or alleged violation of any such laws or regulations may lead to investigations and other claims and proceedings by regulatory authorities and in certain cases, private actors, and violation of any of such laws or any other governmental regulations that apply may result in penalties, including, without limitation, significant administrative, civil and criminal penalties, damages, fines, additional reporting

obligations, and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and imprisonment.

Coverage and Reimbursement

Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage for the product. As a result, the coverage determination process can require manufacturers to provide scientific details, information on cost-effectiveness, and clinical support for the use of a product to each payor separately. This can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and related services. The U.S. government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, that it will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available, or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably.

Healthcare Reform

In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States. By way of example, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; it required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs; it implemented a new methodology under which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; it expanded the eligibility

criteria for Medicaid programs; it created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and it established a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

LONA US Equity

LONA · 10-K · period ended 2021-12-31

Item 1. Business.

LONA US Equity☆

LONA · 10-K · period ended 2021-12-31

Item 1. Business.

LONA US Equity