What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-03-26 · 58 added, 80 removed, 196 unchanged (41% of the section changed)

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Currently available therapies for these diseases are limited, with few Alzheimer’s disease (“AD”) treatments, two approved treatments for geographic atrophy (“GA”) secondary to dry age-related macular degeneration (“dAMD”) and no approved treatments for dementia with Lewy bodies.

Our goal is to develop disease-modifying treatments for patients with these degenerative disorders by initially leveraging our expertise in the σ-2 (sigma-2) receptor (“S2R”), which is expressed by multiple cell types, including neuronal synapses, and acts as a key regulator of cellular damage commonly associated with certain age-related degenerative diseases of the CNS and retina.

We believe that targeting the S2R complex represents a mechanism that is functionally distinct from other current approaches in clinical development for the treatment of degenerative diseases.

Recent clinical results support this hypothesis.

In the SNAP study, results of which were published in May 2023 in the journal, Translational Neurodegeneration and showed that a single oral dose of CT1812 rapidly displaces Aβ oligomers from synapses of individuals with AD.

In the SEQUEL study, top-line results showed that four weeks of treatment with CT1812 improved synapse activity and connectivity of brain regions as measured via quantitative electroencephalogram (“qEEG”).

Together, these findings provide evidence that the displacement of oligomers from synapses via CT1812 engagement with the S2R results in improved synapse function.

In blinded and unblinded clinical trials, several patients experienced asymptomatic, reversible elevations in serum liver chemistries prompting harmonization of monitoring, increasing frequency where appropriate, across our clinical trials.

Since our inception in 2007, we have incurred significant operating losses and devoted substantially all of our time and resources to developing our lead product candidate, CT1812, building our intellectual property portfolio, raising capital and recruiting management and technical staff to support these operations.

Our goal is to develop disease-modifying treatments for participants with these degenerative disorders.

Since our inception in 2007, we have incurred significant operating losses and devoted substantially all of our time and resources to developing our lead product candidate, zervimesine, building our intellectual property portfolio, raising capital and recruiting management and technical staff to support these operations.

As of December 31, 2024, we had an accumulated deficit of $175.2 million.

We incurred net losses of $34.0 million and $25.8 million for the years ended December 31, 2024 and 2023, respectively.

To date, we have funded our operations primarily with proceeds from grants awarded by the National Institute of Aging (the “NIA”), a division of the National Institutes of Health (the “NIH”), and proceeds from our initial public offering (the “IPO”), completed in October 2021, proceeds from our follow-on public offerings in November 2022 and March 2024, sales of our common stock through our ATM (as defined below), sales of our convertible promissory notes, convertible preferred stock, simple agreements for future equity (“SAFE”) and stock option exercises.

Since our inception, we have received approximately $171.0 million in cumulative grant awards to fund our clinical trials, primarily from the NIA, and we have raised approximately $124.5 million in net proceeds from sales of our equity securities, convertible notes, SAFE, stock option exercises, IPO, follow-on public offerings, ATM, and equity line financing with Lincoln Park.

To date, we have funded our operations primarily with proceeds from grants awarded by the National Institute of Aging (the “NIA”), a division of the National Institutes of Health (the “NIH”), and proceeds from our initial public offering (the “IPO”), completed in October 2021, proceeds from our follow-on public offerings, sales of our common stock through our ATM (as defined below), sales of our convertible promissory notes, convertible preferred stock, simple agreements for future equity (“SAFE”) and stock option exercises.

Since our inception, we have raised approximately $138.0 million in net proceeds from sales of our equity securities, convertible notes, SAFE, stock option exercises, IPO, follow-on public offerings, ATM, and equity line financing with Lincoln Park.

As of December 31, 2024, we had cash and cash equivalents of $25.0 million.

On October 13, 2021, we completed our IPO, pursuant to which we issued and sold 3,768,116 shares of our common stock at a public offering price of $12.00 per share.

Additionally, on November 12, 2021, the underwriters exercise of their over-allotment option in full to purchase 565,217 shares of our common stock closed.

In connection with the IPO, we received net proceeds of approximately $44.2 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us, which includes net proceeds of approximately $6.3 million from the exercise of the over-allotment option.

On November 15, 2022, we completed our follow-on public offering, pursuant to which we issued and sold 5,000,000 shares of our common stock at a public offering price of $1.20 per share.

In connection with the follow-on public offering, we received net proceeds of approximately $5.2 million, after deducting underwriting discounts and commissions and other offering related expenses.

As of December 31, 2024, we had approximately $50.0 million available from obligated NIA funds for applicable expenses to be incurred in the future.

On December 23, 2022, we entered into a sales agreement with Cantor Fitzgerald & Co.

Riley Securities, Inc., or the Sales Agents, providing for the offering, issuance and sale by us of up to $40 million of our common stock from time to time in “at-the-market” offerings (the “ATM”).

For the period ended December 31, 2023, we sold 2,859,074 shares of its common stock pursuant to the ATM for gross proceeds of approximately $5.3 million.

For the period ended December 31, 2024, we sold 19,913,189 shares of our common stock pursuant to the ATM for gross proceeds of approximately $12.8 million.

As of December 31, 2024, we have approximately $21.9 million remaining in gross proceeds available for future issuances of common stock under the ATM.

On March 10, 2023, we entered into a purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) for an equity line financing (the “Lincoln Park Purchase Agreement”).

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333-268992) covering the resale of shares of common stock that are issued under the Lincoln Park Purchase Agreement.

During the year end December 31, 2023, we sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

During the year end December 31, 2024, we did not sell any shares of common stock to Lincoln Park .

As of December 31, 2024, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

On March 14, 2024, we completed our follow-on public offering, pursuant to which we issued and sold 6,571,428 shares of our common stock at a public offering price of $1.75 per share.

On March 28, 2024, the underwriters exercised their option to purchase 985,714 shares of our common stock at a public offering price of $1.75 per share.

In connection with the follow-on public offering, we received net proceeds of approximately $11.9 million, after deducting underwriting discounts and commissions and other offering related expenses.

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We do not own or operate manufacturing facilities.

We rely, and expect to continue to rely, on third parties for the manufacture of CT1812 for preclinical studies and clinical trials, as well as for commercial manufacture if CT1812 obtains

marketing approval.

We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute CT1812, if marketing approval is obtained.

We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of CT1812.

Impact of COVID-19 on Our Business

Our business has been and could be adversely affected by the effects of the COVID-19 pandemic or other national health issues.

For example, our ongoing and/or planned clinical trials may be impacted by interruptions or delays in the operations of the FDA and comparable foreign regulatory authorities.

Additionally, we have made certain adjustments to the operation of our trials in an effort to ensure the monitoring and safety of patients and minimize risks to trial integrity during the pandemic in accordance with the guidance issued by the FDA and may need to make further adjustments in the future.

While the potential further economic impact brought by the COVID-19 pandemic may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position.

As a result, we may face difficulties raising capital through future sales of our common stock or such sales may be on unfavorable terms.

We rely, and expect to continue to rely, on third parties for the manufacture of zervimesine for preclinical studies and clinical trials, as well as for commercial manufacture if zervimesine obtains marketing approval.

We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute zervimesine, if marketing approval is obtained.

Components of Our Results of Operations

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As of December 31, 2024, the Company has been awarded grants with project periods that extend through May 31, 2027, subject to extension.

Our clinical trials have been funded by approximately $171.0 million in cumulative grants awarded primarily by the NIA, which includes an approximately $81.0 million grant from the NIA to fund our Phase 2 (COG0203) study of CT1812 in patients with early-stage AD, an approximately $30.5 million grant from the NIA to fund our Phase 2 (COG0201) study of CT1812 in patients with mild-to-moderate AD, and an approximately $29.5 million grant from the NIA to fund our Phase 2 (COG1201) study of CT1812 in patients with dementia with Lewy bodies.

Our clinical trials have been funded by approximately $171.0 million in cumulative grants awarded primarily by the NIA, which includes an approximately $81.0 million grant from the NIA to fund our Phase 2 (COG0203-START) study of zervimesine in participants with early-stage AD, an approximately $30.5 million grant from the NIA to fund our Phase 2 (COG0201-SHINE) study of zervimesine in participants with mild-to-moderate AD, and an approximately $29.5 million grant from the NIA to fund our Phase 2 (COG1201-SHIMMER) study of zervimesine in participants with dementia with Lewy bodies.

Other Income, Net

Other income, net consists primarily of interest income from money market funds, offset partially by other fees such as costs incurred to establish financing opportunities.

Interest Expense

Interest expense for the years ended December 31, 2024 and 2023 consisted of interest expense related to the insurance premium financing arrangement with a lender.

Other Income (Expense), Net

Other income (expense), net consists primarily of interest income from money market funds, other fees such as offering costs incurred to establish our equity line financing, as well as foreign currency transaction gains or losses.

Results of Operations

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Year Ended December 31,

(in thousands)

Consolidated Statements of Operations Data:

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Other income (expense):

Other income (expense), net

Other income, net

Interest expense

Loss on currency translation from liquidation of subsidiary

Total other income, net

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Clinical programs

Preclinical programs

Manufacturing

Preclinical programs

Other expense

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● an increase of $1.6 million in personnel costs associated with expanded research and development activities, and equity-based compensation expense;

● an increase of $1.5 million in preclinical programs, and other expense primarily due to increased research spend;

● a decrease of $2.9 million in preclinical programs, and other expense primarily due to decreased research spend;

● a decrease of $0.7 million in manufacturing related to lower costs with contract manufacturing organizations for the production of pre-clinical and future clinical trial supply.

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General and administrative expenses were $12.3 million for the year ended December 31, 2024, compared to $13.5 million for the year ended December 31, 2023.

The increase of $0.3 million was primarily due to:

● an increase of $0.6 million in equity-based compensation from stock option grants and restricted stock unit (“RSU”);

● an increase of $0.3 million in compensation and employee benefits driven by increased headcount;

● a decrease of $0.2 million in professional fees driven by decreased audit, tax, and legal services;

● a decrease of $0.4 million in Director & Officer liability insurance and other expenses.

The decrease of $1.2 million was primarily due to:

● a decrease of $1.0 million in equity-based compensation due to vesting of stock option grants;

● a decrease of $0.9 million in professional fees driven by lower consulting and outside services;

● an increase of $0.6 million in personnel cost related to increased employee headcount, compensation and benefits;

● an increase of $0.1 million in other expenses.

Other Income (Expense)

Grant income was $19.5 million for the year ended December 31, 2024, compared to $24.8 million for the year ended December 31, 2023.

The change in grant income is correlated with the increase in eligible reimbursable costs related to clinical trials incurred during 2023 as compared to 2022.

Other Income (Expense), Net

Other income, net was $0.2 million for the year ended December 31, 2023, compared to other expense, net of less than $0.1 million for the year ended December 31, 2022.

The change in other income (expense), net was driven primarily by interest earned on money market funds.

The change in grant income is correlated with the decrease in eligible reimbursable costs related to clinical trials incurred during 2024 as compared to 2023.

Other Income, Net

Other income, net was $0.7 million for the year ended December 31, 2024, compared to $0.2 million for the year ended December 31, 2023.

The change in other income, net was driven primarily by interest earned on money market funds.

Interest Expense

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To date, we have funded our operations primarily with proceeds from grants awarded by the NIA, and proceeds from the sales of our convertible promissory notes, convertible preferred stock, SAFE, stock option exercises, follow-on equity offerings, sales under our ATM and equity line financing, and our IPO.

Since our inception, we have received grant awards primarily from the NIA in the aggregate amount of approximately $171.0 million and have raised approximately $124.5 million in net proceeds from sales of our equity securities, convertible notes and SAFE, stock option exercises, our ATM, our equity line financing with Lincoln Park, our IPO and our follow-on public offerings.

Since our inception, we have been awarded grant awards primarily from the NIA in the aggregate amount of approximately $171.0 million and have raised approximately $138.0 million in net proceeds from sales of our equity securities, convertible notes and SAFE, stock option exercises, our ATM, our equity line financing with Lincoln Park, our IPO and our follow-on public offerings.

The net proceeds from our IPO, which closed on October 13, 2021, were approximately $44.2 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us.

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As of December 31, 2024, there was $21.9 million of common stock remaining available for sale under the ATM.

In addition, in March 2023, we entered into the Lincoln Park Purchase Agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park, giving the Company the right, but not the obligation to sell to Lincoln Park up to $35 million worth of shares

of our common stock.

During the year ended December 31, 2023, we sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

As of December 31, 2024, we sold 125,000 shares of common stock to Lincoln Park for proceeds of $0.2 million, as part of the equity line financing arrangement.

As of December 31, 2024, $34.8 million was available to draw pursuant to the Lincoln Park Purchase Agreement.

On March 14, 2024, we closed our follow-on public offering, selling 6,571,428 shares of our common stock at a public offering price of $1.75 per share.

On March 14, 2024, we closed a follow-on public offering of 6,571,428 shares of our common stock at a public offering price of $1.75 per share.

As part of the follow-on offering, the underwriters exercised their option to purchase 985,714 shares of our common stock on March 28, 2024, at a public offering price of $1.75 per share.

The net proceeds were approximately $11.9 million, after deducting underwriting discounts and commissions and other offering related expenses payable by us.

As of December 31, 2024, we had $25.0 million in cash and cash equivalents and have not generated positive cash flows from operations.

Based on our current business plans, we believe that our existing cash and cash equivalents, income from non-dilutive grants, and net proceeds from our March 2024 follow-on public offering will be sufficient for us to fund our operating expenses and capital expenditures requirements through May of 2025, which assumes no usage from the remaining ATM nor the Lincoln Park Purchase Agreement.

Based on our current business plans, we believe that our existing cash and cash equivalents, income from non-dilutive grants, and net proceeds from our March 2024 follow-on public offering will be sufficient for us to fund our operating expenses and capital expenditures requirements into the fourth quarter of 2025, which assumes no usage from the remaining ATM nor the Lincoln Park Purchase Agreement.

We have based these estimates on assumptions that may prove to be incorrect or require adjustment as a result of business decisions, and we could utilize our available capital resources sooner than we currently expect.

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Our future funding requirements will depend on many factors, including, but not limited to:

● the scope, progress, costs and results of our ongoing and planned clinical trials of CT1812, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to a pandemic, such as the COVID-19 pandemic, or other diseases, macroeconomic conditions, global or political instability, such as the ongoing global and regional conflicts, inflation, or other delays;

● the scope, progress, costs and results of our ongoing and planned clinical trials of zervimesine, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to a pandemic, such as the COVID-19 pandemic, or other diseases, macroeconomic conditions, global or political instability, such as the ongoing global and regional conflicts, inflation, or other delays;

● the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for any future product candidates we may decide to pursue;

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● the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;

● the availability, timing, and receipt of any future NIA grants;

● the availability, timing, and receipt of any future NIA grants, or any changes to our grants based on political or regulatory pressures;

● the number and development requirements of other product candidates that we may pursue;

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● the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

● our ability to establish collaborations to commercialize CT1812 or any of our other product candidates outside the United States;

● our ability to establish collaborations to commercialize zervimesine or any of our other product candidates outside the United States;

● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

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Net decrease in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $16.0 million, which consisted primarily of our net loss of $25.8 million partially offset by net non-cash charges of $5.0 million and a net change of $4.8 million in our operating assets and liabilities.

The non-cash charges primarily consisted of $0.3 million of other expense related to the Lincoln Park Purchase Agreement, amortization of right-of-use assets and other depreciation and

amortization of $0.3 million, and equity-based compensation of $4.4 million.

The net change in our operating assets and liabilities was primarily due to an increase in grant receivables of $2.4 million, an increase in prepaid expenses and other assets of $1.8 million, an increase in accounts payable and accrued expenses of $2.4 million, partially offset by a decrease in deferred grant income and other liabilities of $1.6 million, and a decrease of $0.1 million of operating lease liabilities.

Net cash used in operating activities for the year ended December 31, 2022 was $18.5 million, which consisted primarily of our net loss of $21.4 million partially offset by net non-cash charges of $3.8 million and a net change of $0.9 million in our operating assets and liabilities.

The non-cash charges primarily consisted of depreciation and amortization of less than $0.1 million, amortization of right-of-use assets of $0.2 million, and equity-based compensation of $3.6 million.

The net change in our operating assets and liabilities was primarily due to an increase in grant receivables of $1.9 million, an increase in other assets of $1.7 million, a decrease in accounts payable of $1.1 million, partially offset by an increase in deferred grant income and other liabilities of $2.6 million, and a decrease of $0.9 million of prepaid expenses, other current assets, and other receivables.

Investing Activities

During the years ended December 31, 2023 and 2022, we used $0.1 and $0.2 million of cash, respectively, for investing activities related to purchases of property and equipment.

Financing Activities

Cash used in operating activities

Net cash used in operating activities for the years ended December 31, 2024 and 2023 was $28.5 million and $16.0 million, respectively.

The change in cash used in operating activities of $12.5 million was primarily driven by an increase in net loss of $8.2 million from a reduction in grant income, combined with increased research and development expenses during the year ended December 31, 2024.

Additionally, decreases in operating assets and liabilities of $3.5 million driven primarily by a decrease in grant receivables, and decreases in non-cash adjustments of $0.7 million from decreased equity-based compensation expense drove increased cash used in operating activities for the year ended December 31, 2024.

Cash used in investing activities

During the years ended December 31, 2024 and 2023, we used less than $0.1 million and $0.1 million of cash, respectively, for investing activities related to purchases of property and equipment.

Cash provided by financing activities

Net cash provided by financing activities was $23.6 million and $4.5 million for the years ended December 31, 2024 and 2023, respectively.

The change in net cash provided by financing activities is primarily related to net proceeds from the issuance of common stock under the ATM program and sale of common stock pursuant to the Lincoln Park Purchase Agreement during the year ended December 31, 2023 as compared to the proceeds from the issuance of common stock in our November 2022 follow-on public offering in the amount of $5.3 million during the year ended December 31, 2022.

The change in net cash provided by financing activities is primarily related to net proceeds from the issuance of common stock in our follow-on offering in March 2024 and under the ATM program.

Contractual Obligations

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Operating lease obligations

In October 2022, we entered into an insurance premium financing arrangement with a lender.

Under the agreement, we financed $0.8 million of certain premiums at a 6.85% annual interest rate.

Payments of less than $0.1 million are due monthly from October 2022 through September 2023.

As of December 31, 2023, there was no remaining outstanding principal on the loan.

In October 2023, we entered into an insurance premium financing arrangement with the same lender whereby we financed $0.7 million of certain premiums at a 8.65% annual interest rate.

Payments of less than $0.1 million are due monthly from October 2023 through September 2024.

Other obligations

In October 2023, we entered into an insurance premium financing arrangement with a lender whereby we financed $0.7 million of certain premiums at a 8.65% annual interest rate.

Payments of less than $0.1 million are due monthly from November 2023 through October 2024.

As of December 31, 2024, there was no outstanding balance on the loan.

In October 2024, we entered into an insurance premium financing arrangement with a lender whereby we financed $0.4 million of certain premiums at a 8.65% annual interest rate.

Payments of less than $0.1 million are due monthly from November 2024 through July 2025.

As of December 31, 2024, the outstanding principal of the loan was $0.3 million.

We have entered into operating leases for office and laboratory facilities under agreements that run through May 31, 2029.

We have entered into operating leases for office and laboratory facilities under non-cancelable agreements that run through May 31, 2029.

The amounts reflected in the table above consist of the future minimum lease payments under the non-cancelable lease arrangements.

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Research and development costs are expensed as incurred.

Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs.

Research and development expenses include, among other costs, personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs.

Non-refundable advance payments for research and development costs are deferred and expensed as the related goods are delivered or services are performed.

Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks.

Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in the consolidated financial statements as prepaid expenses or as accrued research and development expenses.

The estimated costs of research and development expenses incurred, but not yet invoiced, are recorded in accrued expenses on our consolidated balance sheet.

If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly.

Payments made to CROs, contract manufacturing organizations and other companies under these arrangements in advance of the performance of the related services are recorded as prepaid expenses.

Equity-Based Compensation

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Up until October 13, 2021, the Company was privately held and did not have a trading history of common stock.

As such, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to

be comparable to our business over a period equivalent to the expected term of the stock-based awards.

As such, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to be comparable to our business over a period equivalent to the expected term of the stock-based awards.

The Company will continue to derive expected volatility from average historical stock volatilities of industry peers until the Company has compiled a trading history of its own for a sufficient period of time.

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The expected dividend yield is zero as we have not paid and do not anticipate paying any dividends in the foreseeable future.

● Fair Value of Common Stock.

Prior to the IPO, the fair value of the shares of common stock underlying the stock-based awards had historically been determined by the board of directors with input from management.

Because there was no public market for the common stock, the board of directors has determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist.

Subsequent to the IPO, the board of directors will determine the fair value of the shares of common stock underlying the stock-based awards based off of the closing price as reported on the Nasdaq Stock Market LLC on the grant date.

See Note 9 to our audited financial statements for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options.

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As of December 31, 2024, the total unrecognized compensation expense related to unvested time-based vesting awards was $2.1 million, which is expected to be recognized over weighted-average remaining vesting period of approximately 1.9 years.

As of December 31, 2024, the total unrecognized compensation expense related to unvested performance-based vesting awards was $0.5 million, which is expected to be recognized over a weighted-average remaining vesting period of approximately 0.8 years.

Recent Accounting Pronouncements

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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