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Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-03-26 · 40 added, 46 removed, 211 unchanged (29% of the section changed)

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Based on decades of research and supporting evidence, AßOs have gained increasing scientific acceptance as a primary toxin involved in the initiation and propagation of AD pathology.

We are currently focused on advancing a targeted immunotherapy drug candidate, sabirnetug, in clinical development following Phase 1 results in “early AD” patients (patients with mild cognitive impairment or mild dementia due to Alzheimer’s pathology) that were reported in July 2023.

Sabirnetug is a recombinant humanized IgG2 mAb that was designed to selectively target AßOs, has demonstrated functional and protective effects in in vitro assays, and has demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic mouse models for AD.

In July 2023, we announced topline results from our Phase 1 clinical trial of sabirnetug, called INTERCEPT-AD, which demonstrated that sabirnetug met the primary and secondary objectives of this study in 62 participants with early AD.

We expect to initiate a Phase 2 clinical trial of sabirnetug, called ALTITUDE-AD, in the first half of 2024.

ALTITUDE-AD is a randomized, double-blind, placebo-controlled, three arm study designed to evaluate the clinical efficacy, safety and tolerability of sabirnetug, with up to 180 participants per arm for a total of up to 540 participants with mild cognitive impairment or mild dementia due to AD.

We intend to use the Integrated Alzheimer’s Disease Rating Scale, or iADRS, at 18 months as the primary outcome measure.

Our planned doses for ALTITUDE-AD are 35 mg/kg and 50 mg/kg both dosed every four weeks, or Q4W.

These dose levels and frequency were selected based on extensive pharmacokinetic, or PK, and pharmacodynamic, or PD, modeling of our Phase 1 data.

Based on regulatory feedback from the European Medicines Agency, or EMA, and to enhance the probability that the EMA will consider our Phase 2 study a registration-eligible study for sabirnetug, we anticipate amending the ALTITUDE-AD protocol later this year to change the current Phase 2/3 study to a Phase 2 standalone study.

If this happens, any interim analysis may then lead to an initiation of a confirmatory Phase 3 study.

We were incorporated in 1996 and were party to an exclusive license and research collaboration with Merck in 2003.

We are currently focused on advancing a targeted immunotherapy drug candidate, sabirnetug, in our Phase 2 ALTITUDE-AD clinical trial following Phase 1 results in “early AD” patients (patients with mild cognitive impairment or mild dementia due to AD) that were reported in July 2023.

Sabirnetug is a recombinant humanized immunoglobulin gamma 2, or IgG2, monoclonal antibody, or mAb, that was designed to selectively target AßOs, has demonstrated functional and protective effects in in vitro assays, and has demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic mouse models for AD.

We announced the initiation of our Phase 2 ALTITUDE-AD clinical trial of sabirnetug in May 2024 and completed enrollment in March 2025 .

We expect to announce top-line results for ALTITUDE-AD in late 2026.

ALTITUDE-AD is a randomized, double-blind, placebo-controlled, three-arm clinical trial designed to evaluate the clinical efficacy, safety and tolerability of sabirnetug, with up to 180 participants per arm for a total of up to 540 participants with mild cognitive impairment or mild dementia due to AD.

We plan to use the Integrated Alzheimer’s Disease Rating Scale at 18 months as the primary outcome measure.

The active doses for ALTITUDE-AD are 35 mg/kg and 50 mg/kg, both dosed intravenously every four weeks.

These dose levels and frequency were selected based on extensive pharmacokinetic and pharmacodynamic modeling of our Phase 1 clinical trial data.

We were incorporated in 1996 and were party to an exclusive license and research collaboration with Merck & Co., Inc., or Merck, in 2003.

Although we acquired the exclusive rights to sabirnetug from Merck in 2011 following Merck’s strategic decision to focus its AD development efforts on a different product candidate, we did not recommence meaningful operations until we completed our first institutional fundraising in 2018.

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Our net losses and cash flows from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of nonclinical studies, clinical trials and our expenditures on other research and development activities.

We expect our expenses and operating losses will increase substantially for the foreseeable future as we advance sabirnetug in clinical trials, seek to expand our product candidate portfolio through developing additional product candidates, grow our clinical, regulatory and quality capabilities, and incur additional costs associated with operating as a public company.

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We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all.

In addition, global economic conditions may impact our ability to raise additional funds, and we may be impacted by disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide, rising inflation and supply disruptions, the ongoing conflict between Russia and Ukraine and Israel and Hamas and related sanctions, and otherwise.

In addition, global economic conditions may impact our ability to raise additional funds, and we may be impacted by disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, rising inflation and supply disruptions, the ongoing conflict between Russia and Ukraine, and Israel and Hamas and related sanctions, and otherwise.

If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted.

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Research and Development Expenses

Research and development costs primarily consist of direct costs associated with consultants and materials, biologic storage, third party, contract research organizations, or CRO, costs and contract manufacturing organization, or CMO, expenses, salaries and other personnel-related expenses.

Research and development costs primarily consist of direct costs associated with consultants and materials, biologic shipping and storage, third-party contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, license agreements, salaries and other personnel-related expenses.

Research and development costs are expensed as incurred.

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• consulting and professional fees related to research and development activities, including stock-based compensation to non-employees;

• payments made pursuant to our license agreements;

• costs related to compliance with clinical regulatory requirements;

• employee-related expenses, including salaries, benefits and stock-based compensation expense for our research and development personnel.

• employee-related expenses, including salaries, benefits and stock-based compensation expenses for our research and development personnel.

As we currently only have one product candidate, sabirnetug, in development, we do not separately track expenses by program.

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General and administrative expenses consist primarily of employee-related expenses, including stock-based compensation costs, as well as business insurance, management and business consultants and other related costs.

General and administrative expenses also include professional fees for legal, consulting, accounting, auditing, tax and patent services, investor and public relations, board of directors’ expenses, information technology, franchise taxes, rent, travel expenses and subscriptions.

We expect that our general and administrative expenses will increase as our organization and headcount needed in the future grows to support continued research and development activities and potential commercialization of our product candidates.

These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses.

General and administrative expenses also include professional fees for legal, consulting, accounting, auditing, tax and patent services, investor and public relations, recruiting expenses, board of directors’ expenses, information technology, franchise taxes, rent, travel expenses and subscriptions.

We expect that our general and administrative expenses will increase as our organization and headcount required in the future grows to support continued research and development activities and potential commercialization of our product candidates.

These increases will likely include increased costs related to the hiring of additional personnel and fees incurred for outside consultants, attorneys and accountants, among other expenses.

Additionally, we expect to continue to incur significant expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance costs, and investor and public relations costs.

Other Income (Expense)

Other income (expense) primarily includes interest income, interest expense, change in fair value of embedded derivatives and other expense, net.

The interest income earned, as well as amortization and accretion of premiums and discounts, related to our investments in marketable securities are recorded in interest income.

Other income (expense) includes interest income, interest expense, change in fair value of embedded derivatives and other expense, net.

Interest income consists of interest income earned, as well as amortization and accretion of premiums and discounts, related to our investments in marketable securities.

Interest expense includes interest due under the Loan Agreement, as well as the amortization of the related debt discount.

The change in fair value of embedded derivatives relates to the embedded derivatives that were bifurcated from the term loan, borrowed under the Loan Agreement, and accounted for as a derivative at fair value and is remeasured at each reporting period for the term of the loan.

Other expense, net generally consists of fees incurred on our investments in marketable securities partially offset by sublease income.

The change in fair value of embedded derivatives relates to the embedded derivatives that were bifurcated from the term loan, borrowed under the Loan Agreement, and accounted for as a derivative at fair value and which is remeasured at each reporting period for the term of the loan.

Other expense, net generally consists of fees incurred on our investments in marketable securities.

Results of Operations

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Interest income 14,317 10,791 3,526 33 %

Change in fair value of embedded derivatives (1,360) — (1,360) 100 %

Interest expense (4,068) (581) (3,487) 600 %

Change in fair value of embedded derivatives 1,590 (1,360) 2,950 (217) %

Other expense, net (151) (83) (68) *

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Research and development expenses were $93.8 million and $42.3 million for the years ended December 31, 2024 and 2023, respectively.

The $9.9 million increase was primarily due to increases in expenses of $4.0 million for personnel-related expenses, including an increase of $1.0 million for non-cash stock-based compensation expenses, $3.2 million for services provided by contractors and consultants, $1.0 million for license agreements, $0.8 million for other clinical trial expenses, $0.6 million for storage, shipping and packaging, $0.3 million for materials, $0.3 million for CRO costs and $0.1 million for travel expenses;

all of which was primarily related to increases in costs associated with the planning phase of our anticipated Phase 2 clinical trial and decreases associated with the conclusion of our Phase 1 clinical trial, which was initiated in 2021 with topline results announced in July 2023.

All of the above increases were partially offset by a $0.4 million decrease in assay development costs.

The $51.5 million increase was primarily due to $35.6 million for CRO costs associated with the ALTITUDE-AD clinical trial, for which we announced the dosing of the first patient in May 2024.

Additionally, we incurred $5.3 million for higher personnel-related costs, which included a $1.7 million increase for non-cash stock-based compensation expenses, as well as increases in the following:

$3.2 million for license agreement expenses, $2.9 million for manufacturing and materials, $1.4 million for storage, shipping and packaging, $1.1 million for other research projects, $0.8 million for other clinical trial expenses, $0.5 million for travel and conferences, $0.4 million related to services provided by research and development contractors and consultants and $0.3 million for other miscellaneous costs.

General and Administrative Expenses

General and administrative expenses were $20.2 million and $18.8 million for the years ended December 31, 2024 and 2023, respectively.

The $5.9 million increase was primarily due to increases of $4.7 million for personnel costs, including an increase of $2.1 million for non-cash stock-based compensation expenses, $0.8 million for consulting expenses, $0.6 million for legal/patent expenses, $0.2 million for audit-related expenses, and $0.2 million for software licenses and computer equipment, partially offset by a reduction of $0.7 million in corporate insurance expenses.

The $1.4 million increase was primarily due to increases of $2.3 million for personnel costs, including an increase of $1.8 million for non-cash stock-based compensation expenses, and $0.3 million for recruiting expenses, partially offset by reductions of $0.5 million in corporate insurance expenses, $0.4 million for consulting expenses and $0.3 million for legal/patent expenses.

Other Income (Expense)

Other income increased $6.4 million to $8.8 million for the year ended December 31, 2023 from $2.4 million for the year ended December 31, 2022.

The increase was primarily attributable to an $8.4 million increase in interest income on our portfolio of marketable securities due to both higher interest rates and increased investment in marketable securities following the Offering;

partially offset by a $1.4 million increase in change in the fair value of embedded derivatives due to the increase in fair value of the embedded derivatives that are bifurcated from the term loan under the Loan Agreement, from the time of the closing of the Loan Agreement until December 31, 2023 and an increase in interest expense of $0.6 million related to our Loan Agreement funded in November 2023.

Other income increased by $2.9 million to $11.7 million for the year ended December 31, 2024 from $8.8 million for the year ended December 31, 2023.

The increase was primarily attributable to a $3.5 million increase in interest income on our portfolio of marketable securities due to both higher interest rates and higher average investments in marketable securities during 2024, as well as a $3.0 million increase in change in fair value of embedded derivatives due to the decrease in fair value of the embedded derivatives that are bifurcated from the term loan under the Loan Agreement.

These increases in other income were partially offset by an increase in interest expense of $3.5 million related to our Loan Agreement funded in November 2023 and other expense, net of $0.1 million.

Liquidity and Capital Resources

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We have not yet commercialized any products and we do not expect to generate revenue from sales of any drug candidates for at least several years, if ever.

Our operations have been financed primarily by net proceeds from the sale and issuance of our common stock and convertible preferred stock, net proceeds from our IPO and Offering, the issuance of notes, grant revenue and, during our collaboration with Merck & Co.

which was in place from 2003 to 2011, certain payments received under our collaboration agreement.

Our operations have been financed primarily by net proceeds from the sale and issuance of our common stock and convertible preferred stock, net proceeds from our initial public offering, or the IPO, and the Offering, the issuance of notes, grant revenue and, during our collaboration with Merck, which was in place from 2003 to 2011, certain payments received under our collaboration agreement.

On July 21, 2023, we issued 16,774,193 shares of our common stock, $0.0001 par value per share, or Common Stock, in the Offering at a price of $7.75 per share.

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In connection with the filing of the Registration Statement, we also entered into a sales agreement, or the Sales Agreement, with BofA Securities, Inc.

and Stifel, Nicolaus & Company, Incorporated, as sales agents, pursuant to which we may issue and sell shares of our Common Stock for an aggregate offering price of up to $50.0 million under an at-the-market offering program, or ATM, which is included in the $200.0 million of securities that may be offered pursuant to the Registration Statement.

and Stifel, Nicolaus & Company, Incorporated, as sales agents, pursuant to which we may issue and sell shares of our Common Stock for an aggregate offering price of up to $50.0 million under an ATM, which is included in the $200.0 million of securities that may be offered pursuant to the Registration Statement.

On April 23, 2023, we entered into an amendment to the Sales Agreement, or, as amended, the Amended Sales Agreement, to add BTIG, LLC as a sales agent under the Amended Sales Agreement.

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We are not obligated to make any sales of shares of our Common Stock under the ATM.

We did not sell any shares of our Common Stock under the ATM during the year ended December 31, 2023.

In January 2024, we issued 2,068,246 shares of Common Stock under the ATM for net proceeds of $7.9 million, or $3.84 per share.

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Net cash provided by financing activities 6,928 151,753

Net change in cash and cash equivalents $ (62,982) $ 7,939

Net change in cash and cash equivalents and restricted cash $ (31,260) $ (62,982)

Operating Activities

Net cash used in operating activities increased by $43.1 million to $86.2 million for the year ended December 31, 2024, from $43.1 million for the year ended December 31, 2023.

The $9.5 million increased net loss for the year ended December 31,

2023, as adjusted for non-cash net expenses totaling $1.7 million, some of which included an increase in stock-based compensation of $3.1 million, a decrease in amortization and accretion on marketable securities of $3.6 million, an increase in change in fair value of embedded derivatives of $1.4 million and an increase in non-cash equipment lease costs of $0.7 million, was responsible for $7.8 million of the increase in cash used in operating activities as compared to the prior year.

Working capital changes, including increases in cash used for prepaid expenses and other current assets of $2.1 million, related primarily to advances for research and development, accrued clinical trial expenses of $0.9 million and accounts payable of $0.8 million, were partially offset by increases in cash provided by accrued expenses and other current liabilities of $3.6 million.

The $50.0 million increase in our net loss for the year ended December 31, 2024, as adjusted for non-cash net expenses totaling $1.0 million, accounted for a $49.6 million increase in cash used in operating activities as compared to the prior year.

Non-cash items included increases in stock-based compensation expense and non-cash interest expense of $3.5 million and $1.0 million, respectively, which were partially offset by an $1.9 million increase in amortization and accretion income on marketable securities, a $2.9 million increase in income related to a change in fair value of embedded derivatives and a $0.7 million decrease in non-cash equipment lease costs.

The adjusted net loss was partially offset by working capital changes of $7.8 million, including increases in cash provided by accrued clinical trial expenses of $9.3 million, accounts payable of $4.5 million and other long-term assets of $0.1 million, partially offset by increases in cash used in prepaid expenses and other current assets of $3.3 million and accrued expenses and other current liabilities of $2.8 million.

Investing Activities

Net cash used in investing activities increased by $210.9 million to $171.7 million for the year ended December 31, 2023 from cash provided by investing activities of $39.2 million for the year ended December 31, 2022, and was primarily due to an increase in purchases of marketable securities of $209.1 million and a decrease in maturities of marketable securities of $1.9 million.

Net cash provided by investing activities increased by $219.7 million to $48.0 million for the year ended December 31, 2024 from cash used in investing activities of $171.7 million for the year ended December 31, 2023, and was primarily due to an increase in maturities of marketable securities of $139.8 million and a decrease in purchases of marketable securities of $79.9 million.

Financing Activities

Net cash provided by financing activities increased by $147.9 million to $151.8 million for the year ended December 31, 2023 from $3.9 million for the year ended December 31, 2022.

The increase was primarily due to $121.9 million of net proceeds from the Offering, and $29.5 million of net proceeds under the Loan Agreement for the year ended December 31, 2023, as compared to $3.8 million of net proceeds from the issuance of Common Stock under our ATM for the year ended December 31, 2022.

Net cash provided by financing activities decreased by $144.9 million to $6.9 million for the year ended December 31, 2024 from $151.8 million for the year ended December 31, 2023.

The decrease was primarily due to a reduction in cash provided from the issuance of common stock of $114.0 million, as well as a decrease in proceeds from the term loan of $30.0 million, as well as cash used of $0.7 million for the financing lease and $0.2 million of other costs.

Funding Requirements

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We calculate the fair value of options using the Black-Scholes option-pricing model, which requires the use of various highly subjective assumptions as follows:

• Fair Value of Common Stock —We use the closing price of our publicly traded Common Stock.

• Expected Term —We have opted to use the “si mplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the mid-point between the vesting date and the end of contractual term of the option (generally ten years).

• Expected Volatility —Due to our limited operating h istory and a lack of sufficient company-specific historical and implied volatility data, we have based our estimate of expected volatility on a blended volatility of the volatility of our stock price following our IPO and the historical volatility of a group of industry peers that are publicly traded.

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The probability is reassessed at each reporting period during the term of a loan.

We calculate the fair value of embedded derivatives using the Monte Carlo option-pricing model, which requires the use of various highly subjective assumptions, including the expected term, expected volatility, risk-free interest rate and expected

dividend yield.

Our selection of the expected volatility, risk-free interest rate and expected dividend yield are discussed above under Stock-Based Compensation Expense.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis