Alto Neuroscience Inc

Previous wording

We are a clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options. Building on more than a decade of research by our founder, Dr. Amit Etkin, we aim to deeply understand brain function and match patients to the right medication more efficiently through the use of treatments that, if approved, are tailored to specific patient populations. As a result, we believe we can help patients avoid the often lengthy process of trying multiple ineffective treatments before finding one to which they respond, potentially helping patients get better faster. Through insights derived from our scalable and proprietary Precision Psychiatry Platform, or our Platform, which applies rigorous data science and robust analytics to data gathered by neurocognitive assessments, electroencephalography, or EEG, and wearable devices, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates. Our approach is designed to improve patient outcomes and increase the likelihood of clinical success and commercial impact of our product candidates by using neurobiological profiles to identify more homogeneous patient groups. We build upon and leverage vast data sets of longitudinal clinical and biomarker data from thousands of patients across central nervous system, or CNS, disorders, which we believe serves as a foundation for applying our approach across numerous patient populations. Ultimately, if we are successful, we believe our approach can substantially improve upon the traditional, all-comer approach to CNS drug development. Our current pipeline consists of five clinical-stage assets initially targeting major depressive disorder, or MDD, and schizophrenia populations characterized by independent brain-based biomarkers. Each of our clinical-stage product candidates has been evaluated through at least initial Phase 1 clinical trials and observed to be well tolerated. Our most advanced programs, including our two product candidates being evaluated in ongoing late-stage (Phase 2b or later) trials, are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.

Current wording

We are a clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options. Our current pipeline consists of five clinical-stage assets initially targeting major depressive disorder, or MDD, bipolar depression, or BPD, and schizophrenia populations characterized by independent brain-based biomarkers. Each of our clinical-stage product candidates has been evaluated through at least initial Phase 1 clinical trials and observed to be well tolerated. Our most advanced programs, including our two product candidates being evaluated in ongoing Phase 2b trials, are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.

Previous wording

In addition to our two most advanced programs, we recently initiated a Phase 2 proof-of-concept, or POC, trial evaluating ALTO-203, a novel histamine H3 receptor inverse agonist, in patients with MDD and higher levels of anhedonia, or the lack of motivation or pleasure. We expect to report topline data from this trial in the first half of 2025. We are also developing ALTO-101, a novel PDE4 inhibitor for patients with cognitive impairment associated with schizophrenia, or CIAS. In April 2024 we reported positive Phase 1 data from a healthy volunteer trial evaluating a proprietary transdermal formulation of ALTO-101. In the trial, transdermal delivery of ALTO-101 resulted in significantly higher drug exposure in plasma and a more favorable tolerability profile than that observed with oral administration of ALTO-101. We recently initiated a Phase 2 POC trial evaluating ALTO-101 in patients with CIAS. We expect to report topline data from this trial in the second half of 2025. We also plan to develop ALTO-202, our novel, oral N-methyl-D-aspartate, or NMDA, receptor antagonist, for the treatment of patients with MDD.

Current wording

Enrollment is ongoing in a Phase 2 proof-of-concept, or POC, trial evaluating ALTO-203, a novel histamine H3 receptor inverse agonist, in patients with MDD and higher levels of anhedonia, or the lack of motivation or pleasure. We expect to report topline data from this trial in the first half of 2025.

Previous wording

We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $16.0 million and $29.4 million for the three and six months ended June 30, 2024, respectively. Our net losses were $8.7 million and $15.9 million for the three and six months ended June 30, 2023. As of June 30, 2024, we had an accumulated deficit of $106.4 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase substantially with our ongoing activities, particularly as we:

Current wording

We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $16.8 million and $46.2 million for the three and nine months ended September 30, 2024, respectively. Our net losses were $9.1 million and $25.1 million for the three and nine months ended September 30, 2023. As of September 30, 2024, we had an accumulated deficit of $123.2 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase substantially with our ongoing activities, particularly as we:

Previous wording

As of June 30, 2024, we had cash, cash equivalents and restricted cash of$193.6 million. In February 2024, we raised net proceeds of approximately$133.0 million through our IPO. We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. See “—Liquidity and Capital Resources.”

Current wording

As of September 30, 2024, we had cash, cash equivalents and restricted cash of$182.2 million. In February 2024, we raised net proceeds of approximately$133.0 million through our IPO. We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. See “—Liquidity and Capital Resources.”

Previous wording

•an increase of approximately $3.1 million related to our ongoing ALTO-100 and ALTO-300 Phase 2b clinical trials, which began in 2023, and an increase of $1.4 million related to our ALTO-203 Phase 2 POC clinical trial, which began in 2024;

Current wording

•an increase of approximately $1.4 million related to our ongoing ALTO-100 and ALTO-300 Phase 2b clinical trials, which began in 2023, an increase of $2.1 million related to our ALTO-203 and ALTO-101 Phase 2 POC clinical trials, which began in 2024;

Previous wording

•an increase of approximately $1.4 million in salary and personnel-related costs, which includes $0.6 million of non-cash stock-based compensation; and

Current wording

•an increase of approximately $1.9 million in salary and personnel related costs, which includes $0.6 million of non-cash stock-based compensation.

Previous wording

•an increase of approximately $0.9 million in professional fees related to being a publicly traded company.

Current wording

•an increase of approximately $0.8 million in professional fees and other expenses related to being a publicly traded company.

Previous wording

Other income, net increased $1.8 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase was primarily due to an increase in interest income of $2.0 million related to higher interest earned on our money market funds due to larger cash balances invested, offset by a $0.1 million decrease related to the prior year increase in the fair value of our warrant liability.

Current wording

Other income, net increased $1.5 million in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to an increase in interest income of $1.8 million related to higher interest earned on our money market funds due to larger cash balances invested, offset by a $0.2 million decrease related to the prior year increase in the fair value of our warrant liability.

Previous wording

The following table summarizes our results of operations for thesix months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

•an increase of approximately $1.7 million related to our ongoing ALTO-100 and ALTO-300 Phase 2b clinical trials, which began in 2023, and an increase of $0.8 million related to our ALTO-203 Phase 2 POC clinical trial, which began in 2024;

Current wording

•an increase of approximately $4.4 million related to our ongoing ALTO-100 and ALTO-300 Phase 2b clinical trials, which began in 2023, and an increase of $3.9 million related to our ALTO-203 and ALTO-101 Phase 2 POC clinical trials, which began in 2024;

Previous wording

•an increase of approximately $1.8 million in professional fees related to being a publicly traded company.

Current wording

•an increase of approximately $5.0 million in professional fees and other expenses related to being a publicly traded company.

Previous wording

Other income, net increased $2.9 million in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase was primarily due to an increase in interest income of $3.3 million related to higher interest earned on our money market funds due to larger cash balances invested, offset by $0.4 million of expense related to the change in fair value of our warrant liability.

Current wording

Other income, net increased $4.4 million in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was primarily due to an increase in interest income of $5.1 million related to higher interest earned on our money market funds due to larger cash balances invested, offset by $0.6 million of expense related to the change in fair value of our warrant liability.

Previous wording

As of June 30, 2024 and December 31, 2023, we had cash, cash equivalents and restricted cash of $193.6 million and $82.5 million, respectively.

Current wording

As of September 30, 2024 and December 31, 2023, we had cash, cash equivalents and restricted cash of $182.2 million and $82.5 million, respectively.

Previous wording

In July 2024, we entered into the Grant Agreement with Wellcome. The Grant Agreement provides for an unsecured convertible loan, or the Convertible Loan, from Wellcome of up to approximately $11.7 million, payable in six tranches, $2.0 million of which is being funded upon the execution of the Grant Agreement, and the remainder of which will be funded upon the completion of certain milestones as set forth in the Grant Agreement, subject to certain conditions described therein. Proceeds from the Convertible Loan may be used by the Company solely to advance development of ALTO-100 in bipolar depression. Outstanding amounts under the Convertible Loan accrue interest at an annual rate equal to the Sterling Overnight Index Rate plus 2%, subject to potential adjustment if such interest rate equals or exceeds 9% at any time. At any time after the second anniversary of the effective date of the Grant Agreement or in connection with an event of default, Wellcome has the right, at its election, to convert some or all of the Convertible Loan into shares of our common stock at a price per share equal to a 20% discount to the thirty-day volume-weighted average price of Common Stock on the New York Stock Exchange at the date of such conversion. The Grant Agreement provides that in no event shall the aggregate number of shares of our common stock issued pursuant to conversion of the Convertible Loan exceed 5,363,326, which is equal to 19.9% of the number of shares of our common stock outstanding as of the date of the Grant Agreement. At any time after the fifth anniversary of the date of the Grant Agreement or in connection with an event of default, Wellcome may require repayment of the Convertible Loan in full, together with accrued interest, to the extent not converted as described above.

Current wording

In July 2024, we entered into the Convertible Grant Agreement with Wellcome. The Convertible Grant Agreement provides for an unsecured convertible loan, or the Convertible Loan, from Wellcome of up to approximately $11.7 million, payable in six tranches, $1.3 million of which was funded upon the execution of the Convertible Grant Agreement, and the remainder of which will be funded upon draw down of the remaining initiation payment or the completion of certain milestones as set forth in the Convertible Grant Agreement, subject to certain conditions described therein. Proceeds from the Convertible Loan may be used by the Company solely to advance development of ALTO-100 in bipolar depression. Outstanding amounts under the Convertible Loan accrue interest at an annual rate equal to the Sterling Overnight Index Rate plus 2%, subject to potential adjustment if such interest rate equals or exceeds 9% at any time. At any time after the second anniversary of the effective date of the Convertible Grant Agreement or in connection with an event of default, Wellcome has the right, at its election, to convert some or all of the Convertible Loan into shares of our common stock at a price per share equal to a 20% discount to the thirty-day volume-weighted average price of Common Stock on the New York Stock Exchange at the date of such conversion. The Convertible Grant Agreement provides that in no event shall the aggregate number of shares of our common stock issued pursuant to conversion of the Convertible Loan exceed 5,363,326, which is equal to 19.9% of the number of shares of our common stock outstanding as of the date of the Convertible Grant Agreement. At any time after the fifth anniversary of the date of the Convertible Grant Agreement or in connection with an event of default, Wellcome may require repayment of the Convertible Loan in full, together with accrued interest, to the extent not converted as described above.

Previous wording

Net cash used in operating activities was$22.7 million for thesix months ended June 30, 2024, as compared to$14.2 million for thesix months ended June 30, 2023. The increase in cash used was primarily the result of the increase in net loss of $13.5 million, primarily attributable to our increased spending on research and development expenses. Additional changes in operating cash flow were driven by:

Current wording

Net cash used in operating activities was$34.4 million for thenine months ended September 30, 2024, as compared to$21.9 million for thenine months ended September 30, 2023. The increase in cash used was primarily the result of the increase in net loss of $21.1 million, primarily attributable to our increased spending on research and development expenses. Additional changes in operating cash flow were driven by:

Previous wording

◦increased non-cash expenses including stock-based compensation expenses which increased by $2.3 million to $4.1 million for the six months ended June 30, 2024, compared to $1.7 million for the six months ended June 30, 2023 and $0.7 million of non-cash expense in the six months ended June 30, 2024 related to the achievement of a milestone related to a license agreement which was settled, in part, through the issuance of shares of our common stock.

Current wording

◦increased non-cash expenses including stock-based compensation expenses which increased by $3.8 million to $6.1 million for the nine months ended September 30, 2024, compared to $2.3 million for the nine months ended September 30, 2023, and $0.7 million of non-cash expense in the nine months ended September 30, 2024 related to the achievement of a milestone related to a license agreement which was settled, in part, through the issuance of shares of our common stock.

Previous wording

◦increased accrued expenses and other liabilities of $2.0 million in the six months ended June 30, 2024 compared to a decrease in accrued expenses and other liabilities of $1.1 million in the six months ended June 30, 2023.

Current wording

◦increased accrued expenses and other liabilities of $3.6 million in the nine months ended September 30, 2024 compared to an increase in accrued expenses and other liabilities of $0.1 million in the nine months ended September 30, 2023.

Previous wording

Net cash used in investing activities was$0.6 million for thesix months ended June 30, 2024, for corporate and clinical trial related capital expenditures, specifically EEG machines utilized in our clinical trials. The net cash used in investing activities for thesix months ended June 30, 2023 was negligible.

Current wording

Net cash used in investing activities was$1.6 million for thenine months ended September 30, 2024, for corporate and clinical trial related capital expenditures, primarily EEG machines utilized in our clinical trials. The net cash used in investing activities for thenine months ended September 30, 2023 was negligible.

Previous wording

Net cash provided by financing activities was$134.3 million for thesix months ended June 30, 2024 primarily related to the issuance of 9,246,000 shares of common stock in our IPO at aprice to the public of $16.00 per share, offset by $3.2 million of other offering expenses related to our IPO that were paid during the six months ended June 30, 2024.

Current wording

Net cash provided by financing activities was$135.6 million for thenine months ended September 30, 2024 primarily related to the issuance of 9,246,000 shares of common stock in our IPO at aprice to the public of $16.00 per share, offset by $3.2 million of other offering expenses related to our IPO that were paid during the nine months ended September 30, 2024.

Previous wording

Net cash provided by financing activities was$24.9 million for thesix months ended June 30, 2023, primarily related to the issuance of Series B convertible preferred stock.

Current wording

Net cash provided by financing activities was$25.0 million for thenine months ended September 30, 2023, primarily related to the issuance of Series B convertible preferred stock.

Previous wording

We believe that our existing cash and cash equivalents of $193.1 million will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we currently expect.

Current wording

We believe that our existing cash and cash equivalents of $181.7 million will be sufficient to fund our operating expenses and capital expenditure requirements into 2027. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we currently expect.

Previous wording

In addition to ongoing needs to fund our operations, our material cash requirements as of June 30, 2024 consist primarily of obligations under our Term Loan. For additional information regarding our Term Loan, see Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

In addition to ongoing needs to fund our operations, our material cash requirements as of September 30, 2024 consist primarily of obligations under our Term Loan, and lease commitments of $7.1 million over the next five years. For additional information regarding our Term Loan, see Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

In July 2024, we entered into the Grant Agreement with Wellcome. The Grant Agreement provides for the Convertible Loan from Wellcome of up to approximately $11.7 million, payable in six tranches, $2.0 million of which is being funded upon the execution of the Grant Agreement, and the remainder of which will be funded upon the completion of certain milestones as set forth in the Grant Agreement, subject to certain conditions described therein. For additional information regarding the Grant Agreement, see Note 13 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

In July 2024, we entered into the Convertible Grant Agreement with Wellcome. The Convertible Grant Agreement provides for the Convertible Loan from Wellcome of up to approximately $11.7 million, payable in six tranches, $1.3 million of which was funded upon the execution of the Convertible Grant Agreement, and the remainder of which will be funded upon draw down of the remaining initiation payment or the completion of certain milestones as set forth in the Convertible Grant Agreement, subject to certain conditions described therein. For additional information regarding the Convertible Grant Agreement, see Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

In April 2024, we achieved a clinical milestone under the Teva Agreement related to the initiation of our Phase 2 POC trial evaluating ALTO-203 and paid Teva $0.5 million in cash during the three months ended June 30, 2024. For a detailed description of this milestone payment, see Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

In April 2024, we achieved a clinical milestone under the Teva Agreement related to the initiation of our Phase 2 POC trial evaluating ALTO-203 and paid Teva $0.5 million in cash during the nine months ended September 30, 2024. For a detailed description of this milestone payment, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

In April 2024 we achieved a milestone under the MedRx Agreement and paid MedRx $0.75 million in cash and issued 46,875 shares of our common stock, recognizing expense of $1.5 million during the three months ended June 30, 2024. For a detailed description of this milestone payment, see Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

In April 2024 we achieved a milestone under the MedRx Agreement and paid MedRx $0.75 million in cash and issued 46,875 shares of our common stock, recognizing expense of $1.5 million during the nine months ended September 30, 2024. For a detailed description of this milestone payment, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.