Amylyx Pharmaceuticals Inc

(unaudited)

1. Nature of the Business

Amylyx Pharmaceuticals, Inc., together with its wholly owned subsidiaries, known as Amylyx or the Company, is a biotechnology company that is committed to the discovery and development of new treatment options for communities with high unmet needs, including people living with serious and fatal diseases. The Company has preclinical or clinical development programs underway in neurodegenerative, neuroendocrine and endocrine diseases.

On July 9, 2024, Amylyx completed the acquisition of avexitide for the potential treatment of hyperinsulinemic hypoglycemia, a disease of the endocrine system. Avexitide is an investigational, first-in-class glucagon-like peptide-1, or GLP-1, receptor antagonist that has been evaluated in five clinical trials for post-bariatric hypoglycemia, or PBH, and has also been studied in congenital hyperinsulinism, or HI, two indications characterized by hyperinsulinemic hypoglycemia. The U.S. Food and Drug Administration, or FDA, has granted avexitide breakthrough therapy designation for both indications, rare pediatric disease designation in congenital HI, and orphan drug designation for the treatment of hyperinsulinemic hypoglycemia (which includes PBH and congenital HI). Amylyx expects to begin the Phase 3 program for avexitide in PBH in the first quarter of 2025.

The Company is also investigating AMX0035, developed by Amylyx, in both neurodegenerative and neuroendocrine diseases where endoplasmic reticulum, or ER, stress and mitochondrial dysfunction are implicated, including progressive supranuclear palsy, or PSP, and Wolfram syndrome. The Company dosed the first participant in the HELIOS trial, a Phase 2 trial of AMX0035 for the treatment of Wolfram syndrome, in April 2023. Amylyx plans to present the HELIOS topline data for all 12 participants at Week 24, including all of the longer-term data available for participants who have reached their Week 36 or Week 48 visit at that time, at a medical meeting this fall. The Company is engaging with stakeholders, including the FDA, and planning for a single Phase 3 clinical trial and will share additional details on the clinical trial design once finalized. The Company dosed the first participant in the ORION trial, a Phase 2b/3 global clinical trial of AMX0035 for the treatment of PSP, in December 2023. Data from an interim analysis of the ORION are expected in mid-2025. The Company is also advancing additional drug candidates developed by Amylyx for neurodegenerative diseases including AMX0114, a potent antisense oligonucleotide targeting inhibition of Calpain-2, a key contributor to the axonal (also known as Wallerian) degeneration pathway. The Company is preparing to initiate a multiple ascending dose clinical trial of AMX0114 in people living with ALS in the second half of 2024.

In April 2024, the Company announced it had started a process with the FDA and Heath Canada to voluntarily discontinue the marketing authorizations for RELYVRIO®/ALBRIOZA™ (AMX0035) for amyotrophic lateral sclerosis, or ALS, and remove the product from the market in the U.S. and Canada based on topline results from the global Phase 3 PHOENIX trial, which failed to meet its prespecified primary and secondary endpoints. The Company will continue to collect available data on survival and to share learnings from PHOENIX to help inform future ALS research. Amylyx is planning to wind down the Open Label Extension by the end of 2024. Separately, the PHOENIX survival data collection efforts will continue at the encouragement of ALS specialists.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to companies in the biotechnology industry, including, but not limited to, the outcome of preclinical studies and clinical trials, potential difficulties with or delays in timing with respect to regulatory approval processes, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, ability to secure additional capital to fund operations, and risks associated with the economic challenges caused by economic uncertainty in various global markets caused by geopolitical instability and conflict. The Company and its contractors may experience disruptions in supply of items that are essential for its research and development activities, including, for example, raw materials and bulk drug substances that the Company imports from Europe and Canada used in the manufacturing of AMX0035, avexitide and any additional or future product candidates.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 and the notes thereto, which are included in the Company’s most recent Annual Report on Form 10-K. Since the date of those consolidated financial statements, there have been no material changes to its significant accounting policies.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP, and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company's management, all normal and recurring adjustments necessary for a fair presentation have been reflected. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, or ASU 2023-09, to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on a prospective basis. Early adoption and retrospective application are permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-09, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for the Company beginning the year ended December 31, 2024. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

3. PRODUCT REVENUE, NET

To date, the Company’s only source of product revenue had been from sales of RELYVRIO, known as ALBRIOZA in Canada. Significant judgment was required in estimating GTN adjustments considering historical experience, payer channel mix (e.g., Medicare or Medicaid), current contract prices under applicable programs, unbilled claims and processing time lags and inventory levels in the distribution channel. In April 2024, the Company announced it had started a process with the FDA and Health Canada tovoluntarily discontinue the marketing authorizations for RELYVRIO®/ALBRIOZA™ and remove the product from the market in the U.S. and Canada based on topline results from the Phase 3 PHOENIX trial. As a result, the Company didnot generate significant revenue from product sales for thethree months ended June 30, 2024. The following table reconciles gross product revenue to net product revenue (in thousands):

The activity and ending reserve balance for GTN adjustments were as follows for thesix months ended June 30, 2024 and 2023 (in thousands):

Included in the ending reserve balance for GTN adjustments are chargebacks resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who directly purchase the product from the Company, discounts to customers for prompt payment and estimates for product returns. Chargebacks, discounts and returns are recorded as reductions of accounts receivable, net on the condensed consolidated balance sheets to the extent there are receivable balances to reduce. If there are net balance owed to customers, they are recorded as a component of accrued expenses on the condensed consolidated balance sheets. In addition, included in the ending reserve balance for GTN adjustments are Medicaid and Medicare rebates, other rebates for obligations under voluntary patient assistance programs, and accrued fees payable to customers. Medicaid and Medicare rebates, other rebates and fees are recorded as a component of accrued expenses on the condensed consolidated balance sheets.

4. SHORT-TERM INVESTMENTS

The Company has classified all of its marketable securities at June 30, 2024 as “available-for-sale”. The Company records available-for-sale securities at fair value, with the unrealized gains and losses included as a separate component of other accumulated comprehensive income (loss). There wereno realized gains or losses recognized during thethree and six months ended June 30, 2024 and 2023.

The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. The cost of securities sold is based on the specific identification method. The Company includes interest and dividends on securities classified as available-for-sale in interest income. Accrued interest receivable relating to the Company's available-for-sale securities is presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets, and amounted to less than $0.1 million and$0.5 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, there wereno securities in an unrealized loss position for greater than 12 months. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company did not record an allowance for credit losses as of June 30, 2024.

Short-term investments, which are classified as available-for-sale, consisted of the following (in thousands):

5. INVENTORIES

Inventories consisted of the following (in thousands):

In April, 2024, the Company announced it had started a process with the FDA and Health Canada to voluntarily discontinue the marketing authorizations for RELYVRIO®/ALBRIOZA™ and remove the product from the market in the U.S. and Canada based on topline results from the global Phase 3 PHOENIX trial. As a result, the Company recorded approximately$92.5 million of charges associated with the write-down of inventory for the six months ended June 30, 2024. Inventory write-downs for the six months ended June 30, 2023 were immaterial.

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

7. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

The Company classifies its money market funds and treasury bills as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices for identical assets in active markets without any valuation adjustment. The Company classifies its U.S. agency bonds as Level 2 assets under the fair value hierarchy, as these assets have been valued using information obtained through a third-party pricing service at each balance sheet date, using observable market inputs for similar assets that may include trade information, broker or dealer quotes, bids, offers, or a combination of these data sources.

8. Stock Option and Grant Plan

Stock Incentive Plan

General Option Information

A summary of option activity for thesix months ended June 30, 2024, is as follows:

The aggregate intrinsic value of options exercised during the six months ended June 30, 2024 and 2023 was$0.7 million and$16.2 million, respectively.

The total fair value of stock options vested during the six months ended June 30, 2024 and 2023 was$23.7 million and$19.9 million, respectively.

Restricted Stock Unit Activity

A summary of restricted stock unit activity for thesix months ended June 30, 2024, is as follows:

Summary of Stock-Based Compensation Expense

Stock-based compensation expense for thethree and six months ended June 30, 2024 and 2023, is as follows (in thousands):

The following table summarizes unrecognized stock-based compensation expense as of June 30, 2024, by type of awards (in thousands), and the weighted-average period over which that expense is expected to be recognized (in years). The total unrecognized stock-based compensation expense will be adjusted for actual forfeitures as they occur.

9. NET (LOSS) INCOME PER SHARE

Net (Loss) Income per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the combined weighted average number of common shares and potentially dilutive shares, which include the assumed exercise of employee stock options and unvested restricted stock units. In computing diluted earnings per share, the Company utilizes the treasury stock method.

A summary of the numerator and denominators used in the computation of earnings per share follows (in thousands, except share and per share data):

Because the Company reported a net loss for the three and six months ended June 30, 2024, basic and diluted net loss per share attributable to common stockholders were the same. All stock options and restricted stock units were excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact for the three and six months ended June 30, 2024. The following stock options and restricted stock units outstanding at each period end have been excluded from the calculation of diluted net income (loss) per share because their inclusion would have been antidilutive:

10. Commitments and Contingencies

Letter of Credit

Restricted cash equivalents consist of $0.2 million of cash serving as collateral for a letter of credit issued for the Company’s office space, and $0.5 million as collateral for a corporate credit card program. As of June 30, 2024 and December 31, 2023, the Company’s restricted cash equivalents balance was $0.7 million on its condensed consolidated balance sheets.

Legal Proceedings

On February 9, 2024, a putative class action lawsuit was filed in the U.S. District Court for the Southern District of New York against the Company and certain of its current and former officers (Shih v. Amylyx Pharmaceuticals, Inc., et al., Case Number 1:24-CV-00988, or the Shih Complaint). Plaintiff filed an amended complaint on June 24, 2024. The Shih Complaint asserts a claim against all defendants for alleged violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and a claim under Section 20(a) against certain current and former officers as alleged controlling persons. The Shih Complaint alleges that defendants made materially false and misleading statements related to the commercial results and prospects for RELYVRIO. The Shih Complaint seeks unspecified damages, interest, costs and attorneys’ fees, and other unspecified relief that the court deems appropriate. The Company intends to defend against the Shih Complaint vigorously, and filed a motion to transfer venue on July 11, 2024. On July 12, 2024, the court granted the motion to transfer, ordering the clerk to transfer the case to the United States District Court for the District of Massachusetts, or the Order. The parties await a new docket number and assigned judge in light of the Order regarding the transfer to the District of Massachusetts. At this time, an estimate of the impact, if any, of the claims made in the Shih Complaint cannot be made.

Royalty Payments

Between August 2016 and February 2019, the Company entered into grant agreements with the ALS Association, ALS Finding a Cure Foundation, Alzheimer’s Drug Discovery Foundation, Alzheimer’s Association and Cure Alzheimer’s Fund, or Grantors. Under the terms of the respective grant agreements among the Company, Alzheimer’s Drug Discovery Foundation, the Alzheimer’s Association, and Cure Alzheimer’s Fund, the Company will make royalty payments up to the maximum amount of $15.0 million to each Grantor (or $45.0 million in aggregate). As the conditions that would trigger royalty payments under the agreements have not occurred, no amounts have been recorded in the condensed consolidated financial statements for thethree and six months ended June 30, 2024 and 2023.

Purchase Commitments

The Company enters into agreements in the normal course of business with contract manufacturing organizations for raw material purchases and manufacturing services. As disclosed in Note 18 Commitments and Contingencies to the Company's financial statements for the year ended December 31, 2023, including in the Company’s Annual Report on Form 10-K, as of December 31, 2023, the Company had committed approximately $195.0 million under these agreements related to raw material purchases and manufacturing services, which were expected to be paid through 2028. While these commitments are estimates and are subject to changes based on the outcomes of ongoing negotiations with the contract manufacturing organizations, as of June 30, 2024, the Company estimated approximately$31.7 million of obligations under these agreements, which are expected to be paid through 2025. The actual obligations may differ from these estimates, and such differences will be reflected in the Company's financial statements in future periods as they become known.

The Company recognized a loss on purchase commitments of$7.4 million and$25.3 million for the three and six months ended June 30, 2024, respectively, which was recorded to cost of sales on the condensed consolidated statement of operations and as part of accrued expenses on the condensed consolidated balance sheet. The purchase commitment loss is based on an estimate of future commitments related to supply agreements with third party vendors for which the Company does not expect to have related sales.

11. Restructuring

In April 2024, the Company announced a restructuring plan designed to focus the Company’s resources on key clinical and preclinical programs, or the Restructuring Plan. The Restructuring Plan includes a reduction in force which is expected to reduce the Company’s workforce by approximately 70% and a decrease in external financial commitments outside of its priority areas. The Company substantially completed the Restructuring Plan in the second quarter of 2024.

Restructuring expense consists primarily of employee severance and termination benefits, contract termination costs, impairment of long-lived assets and other costs. Liabilities for costs associated with a restructuring activity are recognized when the liability is incurred and are measured at fair value. According to ASC 420, Exit or Disposal Cost Obligations, one-time employee severance and termination benefits are expensed at the date the entity notifies the employee of the plan, unless the employee must provide future service, in which case the benefits are expensed in the period when the service ends. One-time termination benefits primarily include severance, continuation of health insurance coverage, and other benefits such as outplacement support services for a specified period of time.

In connection with the Restructuring Plan, the Company performed an impairment evaluation of its long-lived assets resulting in an impairment charge of$0.9 million in three months ended June 30, 2024 related to the impairment of capitalized internal-use software.

Restructuring expensesfor the three months ended June 30, 2024 were as follows (in thousands):

The Company’s accrued restructuring expenses were$2.6 million and are included in accrued expenses on its condensed consolidated balance sheet as of June 30, 2024. These expenses are expected to be paid through December 31, 2024.

12. Subsequent Events

On July 9, 2024, the Company completed the acquisition of substantially all the assets and interests in the development, manufacture and commercialization of avexitide from Eiger BioPharmaceuticals, Inc., (the “Seller”), for $35.1 million, subject to final adjustment. As part of the transaction, the Company assumed certain contractual obligations from the Seller, including royalty obligations between 4% and 7% on future sales owed to certain academic institutions and individuals.