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 with a mission to end the suffering caused by neurodegenerative diseases. The Company is investigating AMX0035 in diseases where endoplasmic reticulum, or ER, and mitochondrial stress are implicated, including progressive supranuclear palsy, or PSP, and Wolfram syndrome, or WS. The Company dosed the first participant in the HELIOS trial, a Phase 2 trial of AMX0035 for the treatment of WS, in April 2023. The Company dosed the first participant in the ORION trial, a Phase 3 trial of AMX0035 for the treatment of PSP, in December 2023. 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. Preclinical studies completed to date have shown that AMX0114 achieves potent, dose-dependent, and durable knockdown of CAPN2 mRNA expression and Calpain-2 protein levels in human motor neurons. In preclinical efficacy studies, treatment with AMX0114 reduced extracellular neurofilament light chain levels following neurotoxic insult in induced pluripotent stem cell (iPSC)-derived human motor neurons, and improved survival of iPSC-derived human motor neurons harboring ALS-linked, pathogenic TDP-43 mutations. Neurofilament is a broadly researched biomarker in ALS. The Company plans to file an investigational new drug (IND) application, then initiate a multiple ascending dose clinical trial of AMX0114 in people living with ALS in the second half of 2024.

On April 4, 2024, the Company announced it started a process with the U.S. Food and Drug Administration, or the FDA, and Health 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, 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. Estimates are used in the following areas, among others: gross-to-net, or GTN, adjustments; recoverability of inventories; accrued expense and research and development expenses.

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 is 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 May 31, 2025. 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 has been from the sales of RELYVRIO, known as ALBRIOZA in Canada. Significant judgment is 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. 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 thethree months ended March 31, 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. 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.

In April 2024, the Company announced it 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 Phase 3 PHOENIX trial.

4. SHORT-TERM INVESTMENTS

The Company has classified all of its marketable securities at March 31, 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 months ended March 31, 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$0.3 million and$0.5 million at March 31, 2024 and December 31, 2023, respectively.

The following is a summary of available-for-sale securities with unrealized losses for less than 12 months as of March 31, 2024 and December 31, 2023 (in thousands):

At March 31, 2024, the Company's security portfolio consisted of 9 securities related to investments in debt securities available-for-sale, of which 8 securities were in an unrealized loss position. There wereno securities in an unrealized loss position for greater than 12 months as of March 31, 2024. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. 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 March 31, 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):

On April 4, 2024, the Company announced it 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 three months ended March 31, 2024. Inventory write-downs for the three months ended March 31, 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, treasury notes 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 commercial paper, corporate debt securities, and 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 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 thethree months ended March 31, 2024, is as follows:

The aggregate intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was$0.7 million and$11.7 million, respectively.

The total fair value of stock options vested during the three months ended March 31, 2024 and 2023 was$14.9 million and$14.7 million, respectively.

Restricted Stock Unit Activity

A summary of restricted stock unit activity for thethree months ended March 31, 2024, is as follows:

Summary of Stock-Based Compensation Expense

Stock-based compensation expense for thethree months ended March 31, 2024 and 2023, is as follows (in thousands):

The following table summarizes unrecognized stock-based compensation expense as of March 31, 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 attributable to common stockholders for the three months ended March 31, 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 months ended March 31, 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. Related party transactions

Supplier Agreements

In the ordinary course of business, the Company may purchase materials or supplies or services from entities that are associated with a party that meets the criteria of a related party of the Company. These transactions are reviewed quarterly and to date have not been material to the Company’s condensed consolidated financial statements.

11. Commitments and Contingencies

Lease Commitments

The Company hastwo operating lease agreements for its office space.

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 March 31, 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. 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. At this time, an estimate of the impact, if any, of these claims 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 agreements, the Company was granted, in aggregate, $4.3 million. These grants were provided to the Company for the purpose of furthering the research and development of AMX0035 as a therapeutic benefit for ALS and Alzheimer’s disease. Under the terms of the arrangements, the Company would receive a tranche of funds as it completed certain milestones. Pursuant to the terms of the grant agreements, the Company has certain payment obligations that are contingent upon future events such as the achievement of commercialization or the receipt of proceeds from a revenue generating transaction resulting from the projects for which the grants are used for.

Pursuant to the terms of the respective grant agreements among the Company, ALS Association and ALS Finding a Cure, the Company will be required to make royalty payments to each Grantor in the total amount equal to 150% of the grant received. The royalty payments will be achieved through a combination of the following payment methods: (i) an annual installment payment of 3% of net sales of any products developed under the project for which the grant was used for and (ii)3% of cash proceeds resulting from revenue generating transaction under the project for which the grants are used for. During thethree months ended March 31, 2024, the Company didnot record any royalty expense. During thethree months ended March 31, 2023, the Company recorded$2.5 million in royalty expense, which is included in cost of sales in the condensed consolidated financial statements. As of March 31, 2024, no further royalties remain to be accrued under the grant agreements with the ALS Association and ALS Finding a Cure Foundation.

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). The royalty payment will be made through a combination of the following payment methods: (i)4% of annual net sales of any product commercialized from the project for which the grant was used for and directly related to the treatment of the Alzheimer’s disease and (ii)15% of all royalties and cash proceeds resulting from revenue generating transactions associated with the projects for which the grants were used for under the grant agreements. 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 months ended March 31, 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 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 March 31, 2024, the Company had estimated approximately$35.1 million of commitments under these agreements related to raw material purchases and manufacturing services, 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$17.9 million for the three months ended March 31, 2024, 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.

12. Subsequent Events

In April 2024, the Company announced that it has started a process with the FDA and Health Canada to voluntarily discontinue the marketing authorizations for RELYVRIO®/ALBRIOZA™ (sodium phenylbutyrate and taurursodiol [also known as ursodoxicoltaurine]; also known as AMX0035) for the treatment of ALS and remove the product from the market in the U.S. and Canada. As of April 4, 2024, RELYVRIO/ALBRIOZA was no longer available for new patients. The Company also 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 expects to substantially complete the Restructuring Plan by the end of the third quarter of 2024. As part of this Restructuring Plan, the Company expects to incur severance and severance-related charges of approximately $19.1 million. The Company may also incur other charges or cash expenditures not currently contemplated or that cannot be currently estimated due to events that may occur as a result of, or associated with, the Restructuring Plan.

As the Company will no longer sell RELYVRIO or ALBRIOZA, the Company recorded approximately$92.5 million of charges associated with the write-down of inventory for the three months ended March 31, 2024. In addition, the Company recognized a loss on purchase commitments of$17.9 million for the three months ended March 31, 2024, which 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.