10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2022

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. ☐

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

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

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, 2022 (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 $99.0 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 20, 2023 was 37,944,190.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be delivered to stockholders in connection with the 2023 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, 2022.

Table of Contents

Page

PART I

Item 1. Business 5

Item 1A. Risk Factors 45

Item 1B. Unresolved Staff Comments 112

Item 2. Properties 112

Item 3. Legal Proceedings 113

Item 4. Mine Safety Disclosures 115

PART II

Item 6. [Reserved] 116

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 131

Item 8. Financial Statements and Supplementary Data 131

Item 9A. Controls and Procedures 156

Item 9B. Other Information 157

PART III

Item 10. Directors, Executive Officers and Corporate Governance 158

Item 11. Executive Compensation 158

Item 14. Principal Accounting Fees and Services 158

PART IV

Item 15. Exhibits, Financial Statement Schedules 159

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:

•

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

•

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

•

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

•

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 and Phase 2 clinical trials to date, and we cannot be certain that future trials will yield data in support of the safety, efficacy, and tolerability of our product candidates.

•

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

•

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, or WSU. The special committee’s findings included that (1) 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, (2) that we cited challenged research papers in certain communications and applications, and (3) 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.

•

We are and may in the future be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal, regulatory and administrative proceedings and face potential liability and expenses related thereto, which could have a material adverse effect on our business, operating results and financial condition.

•

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 potentially 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.

•

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

•

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

•

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.

•

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.

•

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

•

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

•

We will require substantial additional funding to finance our operations, complete the development and commercialization of fosgonimeton, and develop and commercialize 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.

•

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.

•

Intellectual property discovered or developed through government funded programs may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a manufacturing 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.

•

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.

•

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.

•

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.

•

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

•

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.

•

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

•

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

•

Actions by activist stockholders have in the past been, and may in the future be, disruptive and 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:

•

our financial performance;

•

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

•

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

•

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

•

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

•

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

•

the timing or likelihood of regulatory filings and approvals;

•

the potential learnings from our ACT-AD trial and LIFT-AD independent unblinded interim efficacy and futility analysis and their ability to inform and improve future clinical development plans;

•

the potential of LIFT-AD to show clinical benefits of fosgonimeton following the September 2022 protocol amendment;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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;

•

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

•

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

•

regulatory developments in the United States and other jurisdictions;

•

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

•

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

•

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

•

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

•

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

•

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;

•

the actions by activist stockholders, which have in the past been, and may in the future be, disruptive and could cause uncertainty about the strategic direction of our business;

•

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

•

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

•

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 and its wholly-owned subsidiary.

Item 1. Business.

Overview

At Athira, our scientific philosophy is rooted in the need for a healthy neuronal network to help build, restore, and maintain connections. Loss of neuronal network connections can be an underlying cause for numerous neurological diseases, which in turn may result in the loss of personal connections for people afflicted by these diseases. Our mission is to restore these neuronal networks and, in turn, personal connections by advancing bold therapies for neuronal health, thoughtfully and urgently.

We are a late clinical-stage biopharmaceutical company focused on developing small molecules engineered to restore neuronal health and slow neurodegeneration. Our approach is designed to target the hepatocyte growth factor (HGF), and its receptor, MET neurotrophic system, or HGF/MET system, that is critical to normal brain function and may play a key role in maintaining the health and functioning of neuronal networks. We believe that by acting on the HGF/MET system and its multiple downstream signaling pathways, we may be able to enhance the body’s natural ability to protect and repair neuronal networks by reducing inflammation, promoting regeneration, and reducing disease-specific protein pathologies, thereby positively impacting the course of disease. We aim to achieve these goals by advancing our pipeline of novel small molecule compounds which are designed to and have exhibited properties in enhancing the HGF/MET system in either the central nervous system, or CNS, by crossing the blood brain barrier, or BBB, or the peripheral nervous system, or PNS.

Over time, the body’s innate ability to heal itself deteriorates due to a variety of factors associated with the normal aging process and other internal and external factors leading to various injuries and insults at the cellular and molecular level. In the case of neurodegenerative diseases, where neuronal networks may be damaged due to inflammation, oxidative stress, protein pathologies, excitotoxicity, or synaptic dysfunction, HGF/MET is often reduced, thereby limiting the body’s ability to protect and repair neurodegeneration. Hallmarks of neurodegeneration include neuronal damage, loss of network connectivity, loss of function and, ultimately, disease progression.

Scientific evidence supporting the HGF/MET system as a naturally occurring repair mechanism is backed by over 30 years of research, which includes establishing its multimodal mechanism of action and critical role to healthy nervous system functioning. As a notable example, MET is one of the most stably expressed genes in the adult human brain and is a signature of a healthy, viable nervous system. In Alzheimer’s disease, or AD, neuronal MET expression is reduced in the brains of patients by approximately 25% and 75% in the frontal cortex and hippocampus, respectively. And although evidence supports HGF/MET as an attractive target with its multimodal mechanism of action for combating neurodegenerative diseases, it has proven a difficult drug target. There are approved and in-development gene therapy approaches to increase HGF expression beyond normal physiological levels, but these are limited primarily due to challenges with delivery. Athira has chosen a different path. Athira’s novel approach is to enhance the innate levels of HGF/MET through our proprietary small molecules.

We have developed and tested preclinically a series of potential novel small molecule drug candidates, of which two candidates are in clinical phase, that we believe show promising evidence in modulating or enhancing the HGF/MET system and its neuroprotective, neurotrophic, and anti-inflammatory effects. Our pipeline consists of both BBB permeable and peripherally restricted drug candidates for CNS, PNS and other indications. Today, our most advanced asset is fosgonimeton (formerly known as ATH-1017), which is currently being investigated in a Phase 2/3 clinical trial for mild-to-moderate AD, and a Phase 2 clinical trial for Parkinson’s disease dementia and dementia with Lewy bodies. We are also advancing potential drug candidates for neuropathic pain, amyotrophic lateral sclerosis, or ALS, and other neurodegenerative diseases. Our neuropathic pain drug candidate, ATH-1020, completed a Phase 1 single ascending dose evaluation in healthy volunteers. For ALS, we expect to complete our investigational new drug, or IND, enabling studies with ATH-1105 in 2023, and initiate a Phase 1 clinical trial in 2024.

Our Pipeline

Figure 1 below illustrates the current development stage of our ATH compounds and early discovery and development programs. Our pipeline consists of both BBB permeable and peripherally restricted drug candidates for CNS, PNS and other indications. In addition, we are exploring the use of our ATH compounds in additional indications in the CNS and PNS as we aim to improve neuronal health in multiple neurodegenerative diseases. Our drug discovery efforts are focused on designing and testing new early compounds to enhance the HGF/MET system for a variety of clinical applications.

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

Fosgonimeton (ATH-1017)

Our lead candidate, fosgonimeton, is a subcutaneously administered, small molecule positive modulator of the HGF/MET system for CNS disorders.

Alzheimer’s Disease

The effects of fosgonimeton in its primary target indication AD are currently being evaluated in Phase 2/3 clinical trials:

•

In vitro studies in primary neuron cultures with fosgonimeton active metabolite, or fosgo-AM, showed enhanced synaptogenesis and neurite outgrowth, supporting the neurotrophic effects of positively modulating HGF/MET. Neurotoxic insults were applied to primary neuron cultures that typically result in neuron death. However, treatment with fosgo-AM offered neuroprotection from several different neurotoxic insults. In an animal model of cognitive deficit and dementia, treatment with fosgo-AM rescued this cognitive impairment. In a separate inflammation-induced animal model of cognitive impairment, fosgonimeton also reversed cognitive deficits. These study results were published in Neurotherapeutics in December 2022 and support the therapeutic potential of fosgonimeton to promote neuroprotective and anti-inflammatory effects and procognitive benefits in animal models of dementia.

•

Fosgonimeton was assessed in a Phase 1a/b clinical trial and was well tolerated in healthy young and elderly volunteers and AD subjects, without serious adverse events. This clinical trial recruited a total of 88 participants, including 11 with mild to moderate AD, who were randomly assigned to active and placebo groups. Findings from the Phase 1 trial provided safety data, as well as translational and supportive evidence of fosgonimeton crossing the BBB and improving brain network activity by significantly improved event-related potential, or ERP, P300 latency. 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. Trial results were published in the Journal of Alzheimer’s Disease in April 2022, and helped inform the study design of our exploratory Phase 2 ACT-AD and Phase 2/3 LIFT-AD trials.

•

ACT-AD* was a randomized, double-blind, placebo-controlled, parallel-group 26-week exploratory Phase 2 clinical trial in mild-to-moderate AD, with ERP P300 latency as the primary endpoint. Initiated in November 2020, the trial was designed to better characterize the overall effects of fosgonimeton on working memory processing speed and cognitive measures and inform the Phase 2/3 LIFT-AD trial. Topline results for this exploratory Phase 2 ACT-AD trial were announced in June 2022, and the primary endpoint and all secondary endpoints were not met by protocoled analysis. However, a post hoc analysis of results from ACT-AD in a pre-specified subgroup suggested positive effects on measures of cognition, function and neurodegeneration in participants taking fosgonimeton alone without background acetylcholinesterase inhibitors (AChEIs). Additionally, data from post hoc analysis of plasma biomarkers from participants on fosgonimeton without background AChEIs showed descriptive improvements (non-statistically significant) in markers of neuroinflammation and AD-specific protein pathologies when compared to placebo. Fosgonimeton was generally well tolerated in the ACT-AD study, with a favorable safety profile, and there were no treatment-related serious adverse events or deaths observed.

•

LIFT-AD, randomized, double-blind, placebo-controlled, parallel-group 26-week Phase 2/3 clinical trial with fosgonimeton for the treatment of mild-to-moderate AD. In September 2020, we began site initiation and patient screening for LIFT-AD. The primary endpoint for the Phase 2/3 LIFT-AD trial will be measured by the Global Statistical Test, or GST, which is a composite score that combines the scores from cognition (Alzheimer's Disease Assessment Scale-Cognitive Subscale or ADAS-Cog11), and function (Alzheimer’s Disease Cooperative Study-Activities of Daily Living or ADCS-ADL23). Guided by the results from the completed exploratory ACT-AD Phase 2 trial, in September 2022, we proactively amended LIFT-AD to focus on participants not on background AChEIs. In October 2022, we announced that following an unblinded interim efficacy and futility analysis, an independent data monitoring committee recommended continuation of the LIFT-AD trial. The committee also determined that, with the additional enrollment of fewer than 150 participants for a total enrollment of less than 300 participants without background AChEIs, the amended trial will be well powered for the primary endpoint given the preliminary effect size observed. We are targeting to complete enrollment in mid-2023 and report topline data in early 2024.

•

In July 2021, we announced that we are enrolling participants 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 May 2022, we announced that we extended the 26-week open-label extension study for our LIFT-AD and ACT-AD clinical trials for an additional 12 months, enabling eligible participants who have completed either trial, and elect to participate in the ongoing open label extension, to now receive up to 18 months of open-label treatment with fosgonimeton.

*The ACT-AD trial and the related open-label extension for ACT-AD participants (described further below) was and are supported by a grant from the National Institute on Aging of the National Institutes of Health under Award Number R01AG06268. The information presented is solely the responsibility of Athira and does not necessarily represent the official views of the National Institutes of Health.

Parkinson’s Disease

In Parkinson’s-relevant cell and animal models, treatment with fosgonimeton or fosgo-AM demonstrated significant neuroprotective, neurotrophic and motor function improvements. Fosgo-AM significantly protected against neurotoxic insults and minimized PD-specific toxic protein buildup in neuron models of disease. Neurotrophic effects, with or without neurotoxic insults, were significantly improved

following fosgo-AM treatment. Cellular improvements translated to improvements in motor function in several animal models, including improved coordination and balance and strength. These data were presented at the Society for Neuroscience Annual Conference in November 2022.

Fosgonimeton is also being assessed in an exploratory Phase 2 trial, SHAPE, for Parkinson’s disease dementia and dementia with Lewy bodies. Enrollment in the SHAPE trial was closed in October 2022 with 28 participants. Topline data from this exploratory trial are expected to be available in 2023 and will help to inform next steps in this or related disease indications.

ATH-1020

ATH-1020 is a novel small molecule compound designed to be an orally available once-daily treatment, to enhance the HGF/MET system. We filed an Investigational New Drug (IND) application with the FDA for ATH-1020 at the end of 2021, and received notice of acceptance in January 2022. This compound was originally assessed for neuropsychiatric indications in preclinical models as presented at the American Society for Experimental Therapeutics Annual Conference in February 2022. However, upon further characterization, properties of ATH-1020 were found to be more suited for PNS and other neurodegenerative diseases.

Neuropathic Pain

In preclinical models of diabetic neuropathic pain, we demonstrated significant improvements in two separate nerve pain paradigms that are prominent symptoms in people suffering from neuropathic pain. The significant improvements in nerve pain were sustained after seven days of not receiving ATH-1020, suggesting persistent and potentially disease-modifying effects. Data from these studies were presented at the Society for Neuroscience Annual Conference in November 2022. We completed the single ascending dose escalation portion of our Phase 1 trial with ATH-1020 demonstrating a favorable safety profile and which was well-tolerated in healthy volunteers. We plan to evaluate options with this compound and will consider its advancement in relation to other opportunities and resources.

ATH-1105

ATH-1105 is a novel small molecule compound designed to be an orally available once-daily treatment, to enhance the HGF/MET system.

Amyotrophic Lateral Sclerosis (ALS)

In a preclinical model of ALS, treatment with ATH-1105 significantly protected against weight loss, while improving balance, coordination and muscle strength. We additionally reported that treatment with ATH-1105 significantly improved electrophysiological measures of muscle integrity and protected against axon degeneration and demyelination. ATH-1105 treatment also significantly reduced biomarkers of inflammation and neurodegeneration. Study results were presented at the Motor Neurone Disease Association International Symposium in December 2022. Weight loss, motor deficits, inflammatory effects, loss of muscle integrity, nerve degeneration and demyelination are all classical hallmarks of ALS disease; treatment with ATH-1105 significantly improved all of these deficits in the preclinical model tested. IND-enabling studies are ongoing with a target towards completing such studies in 2023 and initiating a Phase 1 clinical trial in 2024.

Early Compounds

In addition to the compounds described above, we have several other compounds in preclinical discovery and development for neurodegenerative diseases, including ATH-1018 and ATH-1019.

Upcoming Pipeline Milestones

•

For AD, we anticipate completing enrollment of our Phase 2/3 LIFT-AD trial for mild-to-moderate AD by mid-2023 and reporting on topline data in early 2024. We also have an ongoing open label extension, or OLEX, trial for completers of ACT-AD and LIFT-AD. As of year-end 2022, greater than 85% of participants who had completed either trial have been enrolled in the OLEX trial. As with any voluntary clinical trial, participant dropout in the OLEX has also been observed.

•

For Parkinson’s disease dementia and dementia with Lewy bodies, topline data from the exploratory Phase 2 trial are expected to be available in 2023 and will help to inform next steps in this or related disease indications.

•

For ALS, treatment with ATH-1105 demonstrated consistent improvements across measures of motor function, nerve function, and neurodegeneration in a mouse model of ALS. We plan to initiate first-in-human studies of this promising product candidate as a treatment for ALS in 2024.

Our Strategy

Our strategic imperative and responsibility to people with neurological diseases is to advance our pipeline of small molecule drug candidates designed to target and enhance this naturally occurring repair mechanism to help build, restore, and maintain healthy neuronal connections. The multimodal mechanism of action of the HGF/MET system has the potential to address complex multifactorial neurological diseases. We are encouraged by the scientific evidence we have generated thus far and will continue adding to the scientific foundation behind this neuroprotective and reparative approach with the potential to transform the treatment paradigm and provide meaningful therapeutic options for AD, PD, ALS, neuropathic pain, and beyond, where limited effective options exist today. Key aspects of our business strategy to achieve these goals are to:

•

Advance fosgonimeton through clinical development for mild-to-moderate AD. We believe fosgonimeton has the potential to rapidly improve cognition and function to help improve the lives of the millions of people suffering from AD who currently have limited therapeutic options. We initiated both the exploratory Phase 2 ACT-AD trial and the ongoing Phase 2/3 LIFT-AD trial in 2020 and have applied learnings from the completed ACT-AD trial to help inform our LIFT-AD trial design. The topline results for our ACT-AD trial were announced in June 2022 and are discussed in further detail in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.” While the primary and secondary endpoints were not achieved, encouraging results from our post hoc analyses of a subgroup in the ACT-AD trial informed our decision to proactively amend LIFT-AD to focus on participants not on background AChEIs and the independent unblinded interim analysis further supported our decision. We anticipate completing recruitment in LIFT-AD by mid-2023 and reporting topline data in early 2024.

•

Expand the development of fosgonimeton to maximize opportunities in other neurodegenerative diseases. We are developing fosgonimeton as a treatment for mild-to-moderate AD, but over time we aim to expand development to cover more stages of AD. Beyond AD, we believe that fosgonimeton can ultimately address a broader neurodegenerative disease population. To begin this expansion, we initiated an exploratory Phase 2 clinical trial for PDD and DLB at the end of 2021, dosing the first participant in the first quarter of 2022 and completing enrollment with 28 participants in 2022. With the compelling preclinical data recently presented at Society for Neuroscience Annual Conference in November 2022 on the broader potential of fosgonimeton to improve motor function in Parkinson’s disease, we will seek to evaluate trial designs that will further explore fosgonimeton’s therapeutic potential in this complex disease. Topline data from this exploratory trial are expected to be available in 2023 and will help to inform next steps in this or related disease indications.

•

Advance innovative research to expand and develop our ATH pipeline of small molecule drug candidates. Our strategy is to advance drug candidates that show both strong pharmacokinetics and pharmacodynamics, or PK/PD, translation and early predictive clinical data. We plan to continue growing our discovery organization across neurological disorders in general, but with a near-term focus on neurodegenerative diseases, by building upon the strong foundational knowledge of our ATH positive modulators and enhancing the multimodal mechanism of action through the HGF/MET system. It is our goal to advance our pipeline of ATH positive modulators, designed to enhance the body’s naturally occurring repair mechanism, HGF/MET. With several drug candidates in development, we will prioritize development to potentially address a wide range of clinical applications ranging from CNS and PNS diseases to other indications. One such candidate is ATH-1105, currently in IND-enabling studies for ALS.

•

Optimize the value of fosgonimeton and other positive modulators of the HGF/MET system 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 across major markets. Where appropriate, we may use strategic collaborations or partnerships to accelerate development and maximize the commercial potential of our programs.

Mechanism of Disease

Causes of neurodegenerative diseases are not fully understood as these diseases are complex with several contributing factors including inflammation, oxidative stress, neurotoxicity, excitotoxicity, synaptic dysfunction, and protein pathologies that ultimately lead to neuronal damage, neuronal network degeneration and a decline in function. Intrinsic to these diseases is the disruption of a healthy neuronal network that can be overcome and repaired or maintained when the body’s natural repair mechanisms are intact. However, a loss of or reduction in ability of the body to repair itself can lead to dysregulation that then manifests as symptoms and overall functional decline. One such naturally occurring repair mechanism is the HGF/MET system.

Scientific evidence supporting the HGF/MET system as a naturally occurring repair mechanism is backed by over 30 years of research. As a notable example, MET is one of the most stably expressed genes in the adult human brain and is a signature of a healthy, viable nervous system, In AD, neuronal MET expression is reduced in the brains of participants by approximately 25% and 75% in the frontal cortex and hippocampus, respectively. And although evidence supporting HGF/MET as an attractive target with a multimodal mechanism of action for neurodegenerative diseases exists, it has not been an easily druggable target. There are approved and in-development gene therapy approaches to increase HGF expression beyond normal physiological levels, but these are limited as potentially viable treatment options for neurological disorders due to more invasive delivery requirements, such as intrathecal or intravenous, or locally restricted to the periphery, such as via intramuscular routes of administration.

To date, drug developers have been deploying approaches that typically address only a single factor of the cascade of pathologies that lead to neurodegeneration, yet translating early successful results to meaningful clinical benefit has been mixed if not elusive. We believe that to address such complex and multifactorial diseases requires a novel multimodal approach, such as targeting the HGF/MET system through non-invasive or minimally invasive HGF-dependent small molecules that enhance innate levels of HGF/MET activation to protect and repair neuronal networks.

Mechanism of Action

We have developed a pipeline of small molecule positive modulators designed to enhance the HGF/MET system and promote its neuroprotective, neurotrophic and anti-inflammatory effects, including protection of neurons from a variety of insults. Our potential novel small molecules are designed to cross the blood-brain barrier for CNS disorders or remain in the periphery for PNS and other indications, and mechanistically provide a series of multimodal effects that support its therapeutic promise to: reduce inflammation, promote regeneration, provide neuroprotection, and, ultimately, slow disease progression.

Figure 2 below shows the hypothesized mechanism of action of ATH positive modulators and the cellular disease state where diseased neurons produce a biomarker of neurodegeneration, neurofilament light chain, or NfL, as well as other signature markers of neuronal damage. Contributing to a diseased neuron are also proinflammatory cytokines produced by activated microglia. In the treated neuron state where ATH positive modulators are designed to enhance HGF/MET signaling to promote neuroprotective and neurotropic pathways, reduced neuron degeneration and NfL production occurs while the treated glia show reduced activation and production of proinflammatory cytokines, thereby ATH positive modulators are reducing neurodegeneration and inhibiting neuroinflammation through HGF/MET.

Figure 2. Hypothesized Mechanism of Action of ATH Positive Modulators.

As ATH positive modulators interact with HGF/MET, neurotrophic and neuroprotective pathways are activated downstream, including the activation of the extracellular-signal regulated kinase, or ERK and protein kinase B, or AKT pathways, which play critical roles in protecting neurons from damage and death, including from oxidative stress, excitotoxicity, and apoptosis. Figure 3 below shows cell culture data demonstrating one of the key mechanisms of action of ATH positive modulators is through activation of ERK and AKT via MET activation.

Figure 3. Enhancement of HGF/MET by Fosgonimeton Active Metabolite Activates ERK and AKT Signaling Pathways.

Data presented as mean + SEM. Statistics applied: One-way ANOVA with Tukey’s multiple comparisons.

** p<0.01; *** p<0.001 vs. HGF only.

AKT, protein kinase B; ERK, extracellular-signal regulated kinase; Fosgo-AM, fosgonimeton active metabolite; GSK3b, glycogen synthase kinase-3 beta; HGF, hepatocyte growth factor.

Positively modulating HGF/MET promotes its multimodal effects, which we believe can potentially address the complex pathology in neurodegenerative diseases. These positive multimodal effects taken together may lead to improvement in function. Figure 4 below illustrates the protect and repair therapeutic potential of enhancing the HGF/MET system.

Figure 4. ATH Compounds are Designed to Protect and Repair Neuronal Networks.

Preclinical Evidence

Fosgonimeton is also being assessed in multiple preclinical studies, including in vitro assays and several animal models of neurodegenerative diseases, including AD and PD.

ATH Positive Modulator, Fosgonimeton, for AD and PD

Several preclinical studies support the therapeutic potential of our drug candidates through positively modulating HGF/MET, which leads to significant enhancement of downstream pathways that promote its multimodal effects. Studies in cultured hippocampal primary neuron cultures with the active metabolite of fosgonimeton (fosgo-AM) showed enhanced synaptogenesis and neurite outgrowth, supporting the neurotrophic effects of fosgonimeton (Figure 5).

Figure 5. Neurotrophic Effects of ATH Positive Modulator, Fosgo-AM in Hippocampal Neurons.

Synaptogenesis assay immunostained with Synaptobrevin II; Neurite outgrowth cultures immunostained for β-tubulin III.

Data presented as mean + SEM. Statistics applied – 1-way ANOVA with Dunnett posttest for synaptic count; Unpaired t-test for neurite outgrowth *p<0.05; ****p<0.0001 vs. Control. Scale bar = 20 μm.

Fosgo-AM, fosgonimeton active metabolite; HGF, hepatocyte growth factor.

To demonstrate potential for neuroprotection, neurotoxic insults were applied to primary neuron cultures that typically result in neuron death. However, treatment with fosgo-AM, across all concentrations tested, offered neuroprotection from several different insults including neurotoxicity, excitotoxicity, neuroinflammation and oxidative stress (Figure 6).

Figure 6. Neuroprotection by Fosgo-AM across Several Neurotoxic Insults in Primary Cortical Neurons.

Data are presented as mean + SEM. Statistical differences were determined by one-way ANOVA followed by Tukey's multiple comparison post-test. *p<0.05; **p<0.01; ***p<0.001 compared with insult control.

Fosgo-AM, fosgonimeton active metabolite; H2O2, hydrogen peroxide; LPS, lipopolysaccharide; MPP+, methyl-4-phenylpryidinium.

Aggregated amyloid-β or Aβ, proteins are hallmarks of AD and are neurotoxic. In a neuronal cell model, applied Aβ leads to neurotoxicity and activation of phosphorylated Tau, or pTau proteins. Treatment with fosgo-AM significantly reduced pTau protein pathology and protected neurons from degeneration induced by Aβ (Figure 7). In images below, green represents neuronal marker, microtubule-associated protein 2, or MAP-2, and red represents pTau staining. The left most image shows cortical neurons not exposed to Aβ toxin where MAP-2 positive neurons are healthy and abundant. In Aβ-toxic conditions, treatment with fosgo-AM significantly rescued the number of healthy cortical neurons and reduced pTau toxic protein pathologies, as shown in the right most image, compared to the middle image also under Aβ-toxic conditions but treated with vehicle only. Quantified effects of reduced toxic Aβ- induced neuron death and Tau phosphorylation are shown in the bar charts.

Figure 7. Fosgo-AM Reduces Protein Pathology Associated with AD and Protects against Amyloid-β-induced Neurodegeneration in Primary Cortical Neurons.

Data presented as mean + SEM. Statistics applied: Aβ assay: One-way ANOVA with Dunnett’s posttest. ***p<0.001 versus Aβ Control. Scale bar: 100 μm.

Aβ, amyloid beta; AT100, hyperphospho-tau antibody; fosgo-AM, fosgonimeton active metabolite; MAP-2, microtubule-associated protein-2.

In an inflammation-induced animal model of cognitive impairment using lipopolysaccharide, or LPS, fosgonimeton significantly improved diverse biomarkers of inflammation: interleukin-1β, or IL-1β; interleukin-6, or IL-6; and tumor necrosis factor-α, or TNF-α (Figure 8).

Figure 8. Treatment with Fosgo-AM Improves Biomarkers of Inflammation in an LPS-animal Model of Cognitive Impairment.

Data presented as mean + SEM. Statistics applied: 1-way ANOVA with Dunnett’s test. *p<0.05; **p<0.01; ***p<0.001 vs. LPS Control.

Fosgo-AM, fosgonimeton active metabolite; IL-1β, interleukin 1 beta; IL-6, interleukin 6; LPS, lipopolysaccharide; TNF-α, tumor necrosis factor alpha.

In the LPS-induced animal model of cognitive impairment, fosgonimeton also significantly reversed cognitive deficits (Figure 9). Treatment with fosgo-AM also rescued cognitive impairment in a second animal model of cognitive deficit and dementia. These study results were published in Neurotherapeutics in December 2022 and support the therapeutic potential of fosgonimeton promoting neuroprotective and anti-inflammatory effects and procognitive benefits in animal models of dementia.

Figure 9. Fosgonimeton Reverses Cognitive Deficits Caused by LPS.

Data presented as means + SEM. Statistics applied: One-way ANOVA with Dunnett’s multiple comparisons.

*** p<0.001; **** p<0.0001 vs. LPS Control.

LPS, lipopolysaccharide.

In PD-relevant cell and animal models, treatment with fosgonimeton or fosgo-AM demonstrated significant neuroprotective, neurotrophic and motor function improvements. Data supporting these findings were presented at the Society for Neuroscience Annual Conference in November 2022.

Fosgo-AM significantly protected against neurotoxic insults and minimized PD-specific toxic protein buildup in neuron models of disease. Figure 10 below shows results from cell models of PD exposed to the neurotoxin rotenone. TH+ staining in green identifies dopaminergic neurons, the affected neurons in PD, and α-synuclein staining in red identifies toxic proteins of PD pathology. The left most image shows cultures not exposed to rotenone toxin where TH+ dopaminergic neurons are healthy and abundant with robust processes. In rotenone-toxic conditions, treatment with fosgo-AM significantly rescued the number of healthy dopaminergic neurons and reduced toxic α-synuclein aggregation, as shown in the right most image, compared to the middle image showing cultures exposed to rotenone but treated with vehicle only. Quantified effects of reduced rotenone-induced dopaminergic neuron death and α-synuclein aggregation are shown in the bar charts.

Figure 10. Fosgo-AM Reduces α-synuclein Aggregation and Protects Neurons from Degeneration Induced by the Neurotoxin Rotenone in Primary Mesencephalic Neurons.

Data presented as mean + SEM. Statistics applied: 1-way ANOVA with Fisher least significant difference test. ***p<0.001 versus Rotenone Control.

α-syn; alpha synuclein; fosgo-AM, fosgonimeton active metabolite; TH, tyrosine hydroxylase.

Cellular improvements translated to improvements in motor function in several experimental paradigms, including improved coordination and balance and strength. Figure 11 below are two examples of improved motor function in the grip strength and rotarod tests where treatment with fosgonimeton rescues grip strength and balance and coordination deficits in a 6-hydroxydopamine, or 6-OHDA, animal model of PD.

Figure 11. Fosgonimeton Rescues Grip Strength and Balance and Coordination Deficits in an Animal Model of PD.

Data presented as means ± SEM. Statistics applied: 2-way ANOVA with Dunnett test. Statistical significance indicated with * represent sham control versus disease control; # represent fosgonimeton versus disease control. For all symbols: *p<0.05; **p<0.01; ***p<0.001; ****p<0.0001 versus disease control.

6-OHDA, 6-hydroxydopamine.

ATH Positive Modulator, ATH-1020, for Neuropathic Pain

ATH-1020 is an oral small molecule drug candidate being assessed as a potential treatment for neuropathic pain. Enhancing HGF/MET signaling promotes neuroprotective, neurotrophic, and anti-inflammatory effects, and as neuropathic pain disorders, including diabetic neuropathy, have components of oxidative stress, nerve damage, and inflammation, positive modulation of the HGF/MET pathway may provide therapeutic benefit in these disease areas. Data below were presented at the Society for Neuroscience Annual Conference in November 2022.

In animal models of diabetic neuropathy, or DNP, hypersensitivity to mechanical and thermal pain are commonly experienced, which are also representative of symptoms in people with neuropathic pain. Shown in Figure 12 below, treatment with ATH-1020 significantly reduced pain behaviors over the testing period compared to DNP controls alone, shown in the red bars. Normal controls shown in grey; pregabalin, a positive control as an approved therapy for neuropathic pain, shown in green, and treatment with ATH-1020 shown in blue.

Figure 12. Reduced Mechanical and Thermal Pain Behaviors Following ATH-1020 Treatment.

Data presented as means + SEM. ****p<0.0001 using one-way ANOVA with Dunnett test vs DNP control.

ANOVA, analysis of variance; AUC, area under the curve; DNP, diabetic neuropathic pain; PWL, paw withdrawal latency; PWT, paw withdrawal threshold.

Persistence of reduced pain behaviors following ATH-1020 treatment were assessed after a short-term (23-hour) or a long-term (7-day) washout period. Study results demonstrated that even after short- and long-term washout periods, where no drug is present, the effects of ATH-1020 reduction of pain behaviors remained persistent, suggesting a potential disease modifying effect (Figure 13).

Figure 13. Persistent Pain Reduction after 7-day Washout Following ATH-1020 Treatment.

Data presented as means + SEM. *p<0.05; **p<0.01; ****p<0.0001 using one-way ANOVA with Dunnett test vs DNP control.

ANOVA, analysis of variance; AUC, area under the curve; DNP, diabetic neuropathic pain; PWL, paw withdrawal latency; PWT, paw withdrawal threshold.

ATH Positive Modulator, ATH-1105, for ALS

ATH-1105 is an oral small molecule drug candidate being assessed as a potential treatment for ALS. In a spinal motor neuron model, ATH-1105 significantly protected against neuron death by excitotoxicity with glutamate, while reducing proteotoxic TAR DNA-binding protein 43, or TDP-43, protein aggregates. Figure 14 summarizes the data with images of spinal motor neurons in green, MAP-2, and cytoplasmic TDP-43 protein in red. In the control image on the left with no excitotoxic insult (glutamate), there’s little overlap of healthy MAP-2 neurons with TDP-43. When glutamate is applied to the motor neuron cultures, there’s an overall reduction in the number of neurons and increased TDP-43 in the nucleus as shown by overlapping red-green staining in the middle image. When cell cultures were treated with ATH-1105, the effect of toxic impact on overall number of motor neurons and overlapping red-green staining with toxic TDP-43 proteins in the nucleus was significantly reduced, as seen in the right most image and as quantified in the bar charts.

Figure 14. ATH-1105 is Neuroprotective Against Excitotoxic Insult and Reduces Toxic TDP-43 Proteinopathy in Spinal Motor Neurons.

Data presented as mean + SEM. Statistics applied: 1-way ANOVA with Fisher least significant difference test. *p<0.05; **p<0.01; ***p<0.001 versus Glutamate Control. Scale bar: 100 μm.

MAP-2, microtubule-associated protein-2; TDP-43, TAR DNA-binding protein 43.

Using an ALS animal model, treatment with ATH-1105 significantly preserved body weight compared to ALS disease control animals treated with vehicle only. Data from wild-type, or WT, healthy control animals are shown in gray and ALS disease control animals in red. Animals treated with ATH-1105, shown in blue, are indistinguishable from the healthy controls. These animals continue to gain body weight, which may suggest overall improved health (Figure 15).

Figure 15. Treatment with ATH-1105 Significantly Protects Against Loss of Body Weight in Animal Model of ALS.

Data presented as mean ± SEM. Statistical significance was determined by 2-way ANOVA with the Dunnett test versus ALS + vehicle. **p<0.01; ***p<0.001.

ALS, amyotrophic lateral sclerosis; TDP-43, TAR DNA-binding protein 43; WT, wild-type.

Biomarkers of inflammation and neurodegeneration were also assessed and were significantly reduced following treatment with ATH-1105 in animal model of ALS (Figure 16). These results support the anti-inflammatory and neuroprotective effects by enhancing HGF/MET through ATH-1105. In this animal model and in ALS in humans, inflammation plays a significant role in disease pathology. In ALS disease control animals, significant increases in TNF-alpha and IL-6, which are pro-inflammatory cytokines, were observed compared to WT healthy control animals. However, when ALS animals were treated with ATH-1105 significant reductions in both TNF-alpha and IL-6 were observed, demonstrating anti-inflammatory effects. Consistent with the neuroprotective effects from cell models, a significant reduction in NfL (marker of neurodegeneration) in ALS animals treated with ATH-1105 was observed, which is indicative of neuroprotection.

Figure 16. ATH-1105 Improves Biomarkers of Inflammation and Neurodegeneration in an ALS Animal Model.

Data presented as mean ± SEM.Statistical significance was determined by 2-way ANOVA with the Dunnett test versus ALS + vehicle. ****p<0.0001.

ALS, amyotrophic lateral sclerosis; IL-6, interleukin 6; NfL, neurofilament light chain; TDP-43, TAR DNA-binding protein 43; TNF-α, tumor necrosis factor alpha; WT, wild-type.

Treatment with ATH-1105 in animal model of ALS protects against axon degeneration and demyelination as observed from histological examination of the sciatic nerve. Figure 17 below includes cross section images of the sciatic nerve where healthy large diameter axons surrounded by a healthy myelin sheath are seen in the left image of nerves from WT healthy control animals. In the sciatic nerve image from ALS disease control animals in the middle, a marked reduction in axon size occurs –degenerating axons are noted by the black arrows and examples of demyelination by the red stars. In contrast, when ALS animals are treated with ATH-1105, sciatic nerve integrity is preserved with a healthy population of large diameter axons and normal levels of myelin. Graphs below the images are quantified data showing a significant rescue of the number of axons and increase in overall average axonal diameters or preservation of large diameter motor neurons in ALS animals treated with ATH-1105 compared to ALS disease control animals. Myelin g-ratio informs relative thickness of the myelin versus axon diameter; in the bar chart below, treatment with ATH-1105 significantly improved this measure compared to ALS disease control animals, suggestive of normalized sciatic nerve myelination.

Figure 17. Treatment with ATH-1105 Protected Against Axon Degeneration and Demyelination in Animal Model of ALS.

Graphical representation of the number of axons (per 100 μm2), axonal diameter (in micrometers), and mean of myelin g-ratio, defined as the ratio of the inner axonal diameter to the total axonal diameter, following 2 months of treatment. Data presented as mean + SEM. Statistical significance was determined by 1-way ANOVA with the Dunnett test versus ALS + vehicle. ****p<0.0001.

ALS, amyotrophic lateral sclerosis; TDP-43, TAR DNA-binding protein 43; WT, wild-type.

Further analyses of electrophysiological and behavioral assessments indicated the protection of the motor neurons with ATH-1105 translated to improved nerve and motor function (Figure 18). Compound muscle action potential, or CMAP, and nerve conduction velocity, or NCV, are two electrophysiological measures of sciatic nerve function. Treatment with ATH-1105 in animal model of ALS demonstrated consistent and significant improvements of nerve function compared ALS disease control animals.

Two examples of motor function improvements are shown by the balance beam and grip test, assessments of balance and coordination, and strength. ALS disease animals showed significant motor impairments compared to WT healthy control animals. ATH-1105 treatment in animal model of ALS led to significant improvements in both the balance beam and grip tests compared to the vehicle treated ALS disease animals, demonstrating improved motor function. Other motor behaviors assessing balance, coordination and muscle strength were rotarod and Kondziela screen test. Across all motor function measures, significant improvements were seen in ALS disease animals treated with ATH-1105 compared to ALS disease control animals.

Figure 18. Treatment with ATH-1105 Improves Nerve and Motor Function in ALS Animals.

Data presented as mean ± SEM. Statistical significance was determined by 2-way ANOVA with the Dunnett test versus ALS + vehicle. *p<0.05; **p<0.01; ***p<0.001; ****p<0.0001.

ALS, amyotrophic lateral sclerosis; CMAP, compound muscle action potential; NCV, nerve conduction velocity; TDP-43, TAR DNA-binding protein 43; WT, wild-type.

Study results were presented at the Motor Neuron Disease Association Annual Conference in December 2022. Weight loss, motor deficits, inflammatory effects, loss of muscle integrity, nerve degeneration and demyelination are all classical hallmarks of disease in people with ALS; treatment with ATH-1105 significantly improved all of these deficits preclinically. IND-enabling studies are ongoing with a target towards completing such studies in 2023 and initiating a Phase 1 clinical trial in 2024.

Clinical Trials

Phase 1 Clinical Trial

The IND for fosgonimeton in AD was submitted in September 2017. Since then, we have completed our Phase 1 clinical trial, which enrolled a total of 88 participants, including 48 healthy young male participants (mean age = 33.4 ± 6.3), 29 healthy elderly participants (mean age = 63.8 ± 4.0; 14 male, 15 female), and 11 AD participants (mean age = 69.2 ± 7.1; 5 male, 6 female, median [range] MMSE = 20 [5–29]) was completed in 2019. In both the single ascending dose, or SAD and multiple ascending dose, or MAD parts of the trial, fosgonimeton was well tolerated, without serious adverse events. All participants were randomly assigned to active and control groups. Findings from the Phase 1 trial provided safety data, as well as translational and supportive evidence in the form of qEEG measures to evaluate effects of fosgonimeton on brain activity in study participants. Results from qEEG measures demonstrated fosgonimeton crossing the BBB and improving brain network activity by significantly improved event-related potential or ERP, P300 latency, a measure of working memory processing speed, over 8-days. Trial results were published in the Journal of Alzheimer’s Disease in April 2022, and helped inform the study design of our exploratory Phase 2 ACT-AD and Phase 2/3 LIFT-AD trials.

Phase 2 ACT-AD Trial*

ACT-AD was a randomized, double-blind, placebo-controlled, parallel-group 26-week trial evaluating fosgonimeton in participants with mild-to-moderate Alzheimer’s disease. The trial enrolled 77 participants in the United States and Australia (age 55 to 85 years, Mini-Mental State Exam (MMSE) score of 14-24 and Clinical Dementia Rating, or CDR, scale global score of 1 or 2). Participants were allowed to continue receiving background acetylcholinesterase inhibitors, or AChEIs; 60% remained on stable doses of AChEIs and 40% were not receiving AChEIs during the study. Participants were randomized 1:1:1 to receive placebo or fosgonimeton at either 40 mg/day or 70 mg/day. The primary endpoint for ACT-AD was ERP P300 latency, a measure of working memory processing speed, measured by change from baseline averaged over Weeks 12, 16, 20, and 26. Secondary endpoints included correlation of change from baseline in ERP P300 latency with a composite score of cognition and executive memory defined by the Alzheimer's Disease Assessment Scale-Cognitive Subscale, or ADAS-Cog11, and the Controlled Oral Word Association Test, or COWAT; various composite scores of clinical assessments as measured by the GST, Alzheimer’s Disease Cooperative Study-Clinical Global Impression of Change, or ADCS-CGIC, a measure of global clinical change; and Alzheimer’s Disease Cooperative Study-Activities of Daily Living, 23-item version, or ADCS-ADL23, a measure of functional change as well as measures of caregiver burden, quality of life, resource utilization, and psychiatric symptoms. Plasma samples were also bio banked for future analysis. Safety data were evaluated throughout.

ACT-AD was completed in 2022; topline data was reported in June 2022, later presented at the Alzheimer’s Association International Conference in August 2022, and in early 2023 was finalized. The recently finalized data show some numerical differences from the previously reported preliminary topline data, which we had reported were not statistically significant (n.s.). As reported previously, we did not meet the primary endpoint of a statistically significant change in ERP P300 latency by protocoled analysis nor did we meet the secondary endpoints. However, the data showed a numerical improvement in the functional measure of ADCS-ADL23, which evaluates participants’ activities of daily living as assessed by their caregivers, compared to placebo at 26 weeks (41% or +1.7 points improvement, n.s.). Although not statistically significant, a post hoc analysis of results from ACT-AD in a pre-specified subgroup suggested positive effects on measures of working memory processing speed and cognition, plus improvements in plasma biomarkers of neurodegeneration, inflammation and AD-specific protein pathologies in participants taking fosgonimeton alone without background AChEIs. All data and analyses presented are from pooled 40mg and 70mg of fosgonimeton. During the ACT-AD trial, fosgonimeton, at either dose, was generally well tolerated with a favorable safety profile, and there were no treatment related serious adverse events or deaths observed.

Based on the recently finalized post hoc analysis, in participants treated with fosgonimeton alone, a potentially beneficial change in ERP P300 latency (-28 milliseconds, n.s.), as well as cognitive improvement, as measured by ADAS-Cog11 (74% or -3.0 points, n.s.), compared with placebo at 26 weeks was observed (Figure 19).

Figure 19. Treatment with Fosgonimeton Results in Consistent Directional Improvements in Working Memory Processing Speed and Cognition.

Data from ACT-AD were additionally analyzed post hoc for effects across plasma biomarkers in participants treated with fosgonimeton without background AChEIs. In concert with the multimodal mechanism of action, targeting the HGF/MET system with fosgonimeton resulted in directional improvements across fluid biomarkers of inflammation and AD-specific protein pathologies, and a statistically significant improvement in neurodegeneration, all of which are pending further analysis and clinical investigation in our ongoing Phase 2/3 LIFT-AD clinical trial.

Figure 20 below shows that treatment with fosgonimeton appears to improve neuroinflammation in mild-to-moderate AD as measured by glial fibrillary acidic protein, or GFAP, and chitinase-3-like protein 1, or YKL-40. The observed nominal GFAP improvement and statistical trend in YKL-40 improvement, plus the magnitude of decrease below baseline for those on active treatment is encouraging in this continuously progressive condition and indicates the translation of the anti-inflammatory effects of fosgonimeton.

Figure 20. Treatment with Fosgonimeton Appears to Improve Neuroinflammation.

Treatment with fosgonimeton additionally resulted in a statistical trend and directional improvements in plasma biomarkers of AD-specific protein pathologies, Aβ and pTau, respectively. The changes observed, as shown in Figure 21, continue to support the relevance of targeting the HGF/MET system and its relevance to AD, with a potentially disease-modifying effect by impacting these protein pathologies.

Figure 21. Treatment with Fosgonimeton Induces Directional Improvements in Protein Hallmarks of AD.

Supportive of the potentially neuroprotective mechanism of action of HGF/MET, treatment with fosgonimeton showed a statistically significant improvement in NfL (an objective marker of neurodegeneration) levels, even to the extent of improvement below baseline (Figure 22). This decrease of NfL below baseline levels (-6.49 pg/mL, p=0.0241), is suggestive of repair in this continuously progressive condition.

Figure 22. Treatment with Fosgonimeton Shows Neuroprotective Effects.

With the potential of fosgonimeton to be both neuroprotective and anti-inflammatory for AD, we assessed the relevance or predictive value of these biomarkers potentially translating to clinical effects. A correlation analysis of NfL and GFAP with the GST, a composite endpoint of cognition (ADAS-Cog11), and function (ADCS-ADL23), and the primary endpoint of our ongoing Phase 2/3 LIFT-AD trial was performed. In Figure 23, scatterplots from the full ACT-AD trial population are shown with the change from baseline, or CFB, in the GST on the Y axis and on the X axis, CFB in NfL on the left and GFAP on the right, respectively. From this analysis, we showed the statistically significant correlation between clinical and plasma biomarker improvements, and despite the limited trial size, these data support the interpretation of the clinical results.

Figure 23. Decreases in Disease-State Biomarkers Significantly Correlate with Improvements in Cognitive and Functional Measures.

The consistent clinical effects and plasma biomarker data from this exploratory Phase 2 ACT-AD trial clinical effects and plasma biomarkers continue to support the multimodal mechanism of action by

enhancing the HGF/MET system through fosgonimeton and suggests that fosgonimeton may have potential benefit for Alzheimer’s patients.

*The ACT-AD trial and the related open-label extension for ACT-AD participants was and are supported by a grant from the National Institute on Aging of the National Institutes of Health under Award Number R01AG06268. The information presented is solely the responsibility of Athira and does not necessarily represent the official views of the National Institutes of Health.

Phase 2/3 LIFT-AD Trial

LIFT-AD is a randomized, double-blind, placebo-controlled, parallel-group 26-week Phase 2/3 clinical trial with fosgonimeton for the treatment of mild-to-moderate AD. In September 2020, we began site initiation and patient screening. The primary endpoint for LIFT-AD will be measured by the GST, which is a composite score of cognition (ADAS-Cog11) and function (ADCS-ADL23). Guided by the results from the completed exploratory Phase 2 ACT-AD trial, in September 2022, we proactively amended LIFT-AD to focus on participants not on background AChEIs. Though going forward we are focusing on LIFT-AD recruitment of participants without background AChEIs, an unblinded adjudication of drug safety was performed by the drug safety monitoring board, which resulted in no serious adverse findings to date for both participants on or off background AChEIs.

An independent data monitoring committee, or DMC, consisting of one neurologist and two biostatisticians, performed an unblinded efficacy and futility interim analysis using a 2011 published method by Mehta and Pocock. This adaptive method enables a sample-size re-estimation based on actual observed interim data based on our co-key secondary endpoints, ADAS-Cog11 and ADCS-ADL23, which these two endpoints inform our primary endpoint, GST.

Pre-specified constraints were protocolled in the interim statistical analysis plan, or SAP, which consisted of a sample size range with a maximum enrollment limit, and a minimum target power. The formal efficacy analysis was then based on approximately 100 completers at week 26 (end of the double-blind treatment period) without background AChEIs. The primary analysis used was a mixed model for repeated measures, or MMRM, to compare the change from baseline in the GST between fosgonimeton treatment and placebo. Two potential outcomes were also pre-specified: 1) to stop the study for futility or 2) to continue the enrollment within the pre-specified range to achieve an adequate target power for the primary endpoint.

Following this interim analysis, the DMC recommended to “continue LIFT-AD study” and also determined that, with the additional enrollment of fewer than 150 participants for a total enrollment of less than 300 participants without background AChEIs, the study will be well-powered for the primary endpoint given the preliminary effect size observed.

Figure 24 below shows the pre-specified decision framework and potential outcomes for the primary GST composite endpoint of cognition (ADAS-Cog11) and function (ADCS-ADL23). The shaded area in grey was pre-determined as the futility zone where the recommended sample size would exceed Athira's pre-specified maximum and shaded in green are the GST combinations resulting in a recommendation from the DMC to continue the study.

Figure 24. Independent Data Monitoring Committee Recommends to Continue LIFT-AD after Unblinded Interim Analysis Using a Published Methodology and Pre-Specified Decision Framework.

The results from the DMC unblinded analysis give us confidence in a potentially positive outcome for LIFT-AD. Stringent evaluation criteria were applied based on validated and clinically meaningful cognitive and functional outcomes, which support the potential clinical benefits and underscores the rationale for continued development of fosgonimeton. LIFT-AD trial is ongoing and with anticipated enrollment completion by mid-2023 and reporting topline data in early 2024.

Open Label Extension Trial

In July 2021, we announced that we are enrolling patients into an optional 26-week open-label extension, or OLEX, trial for our LIFT-AD and ACT-AD clinical trials. In May 2022, we announced a further extension of the 26-week OLEX for our LIFT-AD and ACT-AD clinical trials for an additional 12 months, enabling eligible participants who have completed either trial, and elect to participate in the ongoing OLEX, to now receive up to 18 months of open-label treatment with fosgonimeton, which will allow us to collect up to a total of two years of safety data with fosgonimeton. As of year-end 2022, greater than 85 percent of patients who have completed either study have elected to participate in the OLEX study.

Exploratory Phase 2 SHAPE Trial

Fosgonimeton is also being assessed in a randomized, double-blind, placebo-controlled, parallel group exploratory Phase 2 clinical trial, SHAPE, for Parkinson’s disease dementia and dementia with Lewy bodies. We enrolled a total of 28 participants and plan to evaluate the learnings from trial results to help determine next steps for this program. With the compelling preclinical data presented at Society for Neuroscience Annual Conference in November 2022 on the broader potential of fosgonimeton to improve motor function in Parkinson’s disease, we will seek to evaluate trial designs that will further explore fosgonimeton’s therapeutic potential in this complex disease. Topline data from this exploratory trial are expected to be available in 2023 and will help to inform next steps in this or related disease indications.

Phase 1 Trial with ATH-1020 in Healthy Volunteers

ATH-1020 is an oral small molecule drug candidate for neuropathic pain that is being assessed in an ongoing Phase 1 trial that completed the single-ascending dose escalation phase. ATH-1020 demonstrated a favorable safety profile and was well-tolerated in healthy volunteers. We plan to evaluate options with this drug candidate for neuropathic pain and other neurodegenerative diseases.

Market Opportunity

AD and Dementia

We believe fosgonimeton has the potential as a viable treatment option across all stages of AD, but is initially being developed for mild-to-moderate stage of disease. Stages of this progressive disorder start with mild cognitive impairment, or MCI, mild AD, moderate AD, and finally severe AD. The AD dementia market, as last reported in 2022, consists of approximately 6.5 million Americans age 65 and older and is projected to reach nearly 13 million by 2050 in the U.S. alone. Worldwide, as many as 55 million people are estimated to have Alzheimer’s and other dementias, and this number is projected to grow to nearly 140 million by 2050. Alzheimer’s disease may account for an approximate 60-70% of all diagnosed dementia cases, however, with the continued innovation of diagnostic approaches coupled with better understanding of the disease pathology, diagnosis of AD and overall cases could continue to grow.

As shown in Figure 25 below, our initial focus is on mild-to-moderate AD as this stage has been identified where disease may progress rapidly and currently available therapies are few with only modest effects. Currently 81% of all diagnosed cases of AD are mild-to-moderate, and with many new therapies under development targeting earlier stages in AD, this is a highly underserved population with a high unmet need. Fosgonimeton is initially being developed for mild-to-moderate AD, but as we continue to advance fosgonimeton, and with our multimodal mechanism of action, we believe we will have the opportunity to address all stages of AD as well as expand into other dementias.

Figure 25. Significant Opportunity for Fosgonimeton in Alzheimer's Disease.

Other Target Indications

Our next potential target indications include PD, ALS and neuropathic pain. Parkinson’s disease is the second most common neurodegenerative disease after AD with a prevalence of nearly one million people and more than 10 million people in the United States and worldwide living with PD, respectively. Growth projections of United States cases of PD are expected to reach 1.2 million in the United States by 2030.

For ALS, an estimated approximately 75,000 people are affected globally and approximately 40% of those cases are in the US. Currently, there are only three approved drugs that are specifically indicated for the treatment of ALS, of which none target neurotrophic factor systems with a multimodal mechanism of action with the potential to offer neuroprotective, anti-inflammatory and potentially disease modifying effects.

Potential Commercialization Plan

Fosgonimeton is initially being developed as a multimodal neuroprotective, neurotrophic and anti-inflammatory therapy 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:

•

potential first-line therapy;

•

an add-on therapy for patients on existing therapies;

•

a therapeutic option for patients who are not suitable for acetylcholinesterase inhibitors, or AChEIs; and

•

a therapeutic option for patients who have stopped AChEIs due to loss of effect or side effects.

We will initially target launching fosgonimeton in the US with plans to expand into the European Union, or EU, and Asian markets as part of our global strategy. Beyond our regional launch plans, and because of our multimodal mechanism of action, we also expect to advance fosgonimeton beyond the mild-to-moderate AD stage into both earlier and later stages of disease.

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 a robust fosgonimeton clinical supply chain to ensure sufficient supply for our LIFT-AD Phase 2/3 clinical trial in AD and the open-label extension of our LIFT-AD and ACT-AD clinical trials. 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 two years) in the proposed prefilled syringe supporting use of the product under refrigerated conditions as well as short-term dispensation and at-home storage in ambient conditions. Room temperature short-term 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 potentially 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 late clinical-stage biopharmaceutical company developing small molecules to restore neuronal health and slow neurodegeneration, with our most advanced product candidate focused on the treatment of AD, 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 that positively modulates the HGF/MET neurotrophic system, we must consider companies as competitors who are developing other novel approaches, including those that target other neurotrophic systems to address AD and other neurological diseases. Additionally, because fosgonimeton is being advanced as a once daily liquid formulation for subcutaneous delivery, we must also consider as competitors companies developing AD therapies as subcutaneous or other routes of administration, including oral formulations, and dosing frequency.

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, 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.

The Alzheimer’s market is experiencing a significant transformation where innovation and drug approvals have been limited for nearly 20 years. With the recent approval of two new monoclonal antibody therapies since 2021 (Biogen’s Aduhelm and Biogen/Eisai’s Leqembi) and the increased attention on novel approaches to AD, we are focused on strategically positioning ourselves in the evolving landscape to maximize our competitive advantage. 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 targeting the multimodal HGF/MET system with a focus on overall neuronal health. In particular, the following summarizes certain categories of our potential competition.

Our direct competitors can potentially be viewed through two different lenses – stage of disease and mechanism of action, or MOA. While the AD space has just recently seen two new approvals specifically addressing earlier stages of disease, MCI and mild AD, limited options exist for the mild-to-moderate disease stage. Companies developing therapies for mild-to-moderate AD, such as AB Bioscience, Annovis Bio, Biomed Industries, BioVie, or Cassava Sciences, may emerge as direct competitors if they are quicker to market, demonstrate superior clinical effects, are safe and offer treatment options to our same initial target patient population.

Monoclonal antibody therapies have been the focus of drug developers over the past decades, and though the two recent approvals of Aduhelm and Leqembi provide options for those in early AD, more novel approaches and treatment options are needed. Through the MOA lens, companies developing non-amyloid, non-tau, or NANT, therapies may be direct competitors as well. Companies developing NANT therapies include those targeting other neurotrophic systems such as Pharmatrophix, anti-inflammation such as AB Sciences, translational inhibitors such as Annovis Bio, and several other assets with single or multiple target approaches like Cassava or Alzecure.

Specific to targeting HGF/MET however, we are not aware of any direct competitors currently targeting the HGF/MET system for neurological conditions. We are aware of several companies developing HGF/MET-directed therapies for other disease indications, 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 VM-202, a regenerative plasmid DNA therapy candidate in Phase 3 development by Helixmith for the treatment of diabetic peripheral neuropathy.

Fosgonimeton has the potential to offer neuroprotective and anti-inflammatory effects by targeting the HGF/MET system. Our preclinical and clinical data have demonstrated this multimodal approach may have positive benefits across several biological and clinical measures. While several potential direct competitors may exist, we have not yet identified any competitive asset that has demonstrated consistent and congruent positive effects offering neuroprotection, anti-inflammation, reducing disease-specific protein pathologies, neurotrophic, and functional benefits. AD is a complex multifactorial disease, and we view our opportunity with fosgonimeton as potentially complementary to several approaches, including the recently approved monoclonal antibody therapies.

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, 2022, our patent portfolio includes our exclusively owned intellectual property, including one issued U.S. patent, twelve pending U.S. patent applications, three issued patents in jurisdictions outside of the United States (not including European country validations), ten pending patent applications in jurisdictions outside of the United States, and four pending international patent applications filed under the Patent Cooperation Treaty. The patents and patent applications issued and pending outside the United States are counterparts to the foregoing U.S. patents and patent applications and are generally held in Europe, Canada, Japan, Australia, Hong Kong, India, China, Argentina and Taiwan. Our owned patents and patent applications have claims directed to fosgonimeton and our other small molecule therapeutic candidates, including ATH-1020 and ATH-1105, as compositions of matter and methods of use thereof. Our patent portfolio also includes eight issued U.S. patents and nine patents issued in jurisdictions outside of the United States (not including European country validations) that are exclusively licensed to us by Washington State University. Our in-licensed patents include, among others, claims directed to dihexa, the active metabolite of fosgonimeton, and its use.

Individual patents are in force 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 in force 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 or the FDA regulatory review period (a patent term adjustment or patent term extension, respectively). 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 non-provisional patent applications, the resulting patents are projected to expire on dates ranging from 2037 to 2042, 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 issued trademark registrations 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 sublicensing terms with Washington State University, or WSU, that we entered into in 2015. Under this agreement, we have 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. One of these licensed patents is jointly owned by WSU and Pacific Northwest Biotechnology, Inc. We do

not expect Pacific Northwest Biotechnology, Inc.’s joint ownership to 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:

•

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

•

$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).

National Institutes of Health Grant

In December 2020, we accepted a grant from the National Institute on Aging, or NIA, of the National Institutes of Health, or NIH, to support our ACT-AD Phase 2 clinical trial for fosgonimeton (then-named ATH-1017), our lead therapeutic candidate being developed for the treatment of individuals with mild-to-moderate Alzheimer’s disease. Under the terms of the agreement and approval received from the NIH, we may receive up to an aggregate of $15.2 million, subject to the availability of funds and satisfactory progress of the research. Post award, we received approval from NIA to use these grant funds to support our open label extension of the ACT-AD trial. As this grant involves federally funded research, per the Bayh-Dole Act, we are 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 or developed 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:

•

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

•

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

•

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

•

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;

•

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

•

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

•

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

•

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

•

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 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:

•

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.

•

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.

•

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, or 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. On December 29, 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act, or FDORA, was signed into law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.

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:

•

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

•

fines, warning letters, or untitled letters;

•

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

•

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

•

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

•

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

•

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

•

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

•

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, or 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.

In Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the orphan drug exclusivity only applies to the approved use or indication within an eligible disease. This decision created uncertainty in the application of the orphan drug exclusivity. On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst, the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of the orphan drug exclusivity.

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.

Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, in June 2021 the U.S. Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case on procedural grounds without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and healthcare measures promulgated by the Biden administration will impact the ACA, our business, financial condition and results of operations. On January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2031 with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2022, unless additional congressional action is taken. Under current legislation, the actual reduction in Medicare payments can vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, to review the relationship between pricing and manufacturer patient programs, and to reform government program reimbursement methodologies for pharmaceutical products. For example, under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions,

if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. The impact of these legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is unclear. The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.

In addition, individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, mechanisms to encourage importation from other countries and bulk purchasing. A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products. It is possible that additional governmental action may be taken to address the COVID-19 pandemic. Furthermore, there has been increased interest by third party payors and governmental authorities in reference to pricing systems and publication of discounts and list prices. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.

Employees and Human Capital Resources

As of December 31, 2022, we had 64 employees, 63 of whom were full-time and 39 of whom were engaged in research and development activities. Twenty-three of our employees hold Ph.D. or M.D. degrees. None of our employees is represented by a labor union or covered under a collective bargaining agreement. We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Corporate Information

We were incorporated in Washington as a corporation in March 2011 under the name M3 Biotechnology, Inc. In October 2015, we converted to a Delaware corporation and subsequently changed our name to “Athira Pharma, Inc.” Our principal executive office is located at 18706 North Creek Parkway, Suite 104, Bothell Washington 98011. Our telephone number is (425) 620-8501. Our website is www.athira.com. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report, and the inclusion of our website address in this report is an inactive textual reference only.

We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

Item 1A. Risk Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and our consolidated financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report. 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.

Risks Relating to Our Business and the Development of Our Product Candidates

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

We are a late clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and slow neurodegeneration. Our limited operating history may make it difficult to evaluate the success of our business. Drug development is a highly uncertain undertaking and involves a substantial degree of risk. To date, we have not completed a pivotal clinical trial, obtained marketing approval for any product candidate, manufactured a commercial scale product candidate, arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product candidate commercialization. Our history as a company makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to overcome such risks and difficulties successfully. If we do not address these risks and difficulties successfully, our business will suffer.

LONA US Equity

LONA · 10-K · period ended 2022-12-31

Item 1. Business.

Item 1A. Risk Factors.

LONA US Equity☆

LONA · 10-K · period ended 2022-12-31

Item 1. Business.

Item 1A. Risk Factors.

LONA US Equity