Annovis Bio Inc

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with: (i) the interim financial statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) our annual financial statements for the year ended December 31, 2023 which are included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with: (i) the interim financial statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) our annual financial statements for the 2023 fiscal year, which are included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

We are a clinical stage, drug platform company addressing neurodegeneration, such as Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). We are developing our lead product candidate, Buntanetap, which is designed to address AD, PD, and potentially other chronic neurodegenerative diseases. Buntanetap is a synthetically produced small molecule, orally administered, brain penetrant compound. In several studies, Buntanetap was observed to inhibit the synthesis of neurotoxic proteins - APP/Aβ (“APP”), tau/phospho-tau (“tau”) and α-Synuclein (“αSYN”) - that are one ofthe main causes of neurodegeneration. High levels of neurotoxic proteins lead to impaired axonal transport, which is responsible for the communication between and within nerve cells. When that communication is impaired, the immune system is activated and attacks the nerve cells, eventually killing them. We have observed in our clinical studies in early AD and early PD patients and pre-clinical studies in mice and rats that Buntanetap lowered neurotoxic protein levels leading to improved axonal transport, reduced inflammation, lower nerve cell death and improved affected function.

Current wording

We are a clinical stage, drug platform company addressing neurodegeneration, such as Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). We are developing our lead product candidate, Buntanetap, which is designed to address AD, PD, and potentially other chronic neurodegenerative diseases. Buntanetap is a synthetically produced small molecule, orally administered, brain penetrant compound. In several studies, Buntanetap was observed to inhibit the synthesis of neurotoxic proteins - APP/Aβ (“APP”), tau/phospho-tau (“tau”) and α-Synuclein (“αSYN”) - that are one of the main causes of neurodegeneration. High levels of neurotoxic proteins lead to impaired axonal transport, which is responsible for the communication between and within nerve cells. When that communication is impaired, the immune system is activated and attacks the nerve cells, eventually killing them. We have observed in our clinical studies in early AD and early PD patients and pre-clinical studies in mice and rats that Buntanetap lowered neurotoxic protein levels leading to improved axonal transport, reduced inflammation, lower nerve cell death and improved affected function.

Previous wording

In 2021, we completed two Phase 1/2 clinical studies: one in 14 early AD patients, and one in 54 early PD patients (together, the “AD/PD Trials”). In the AD/PD Trials, early AD patients were defined as those with a Mini Mental State Examination (“MMSE”) score between 19 and 28 and early PD patients as those patients at Hoehn & Yahr stages 1, 2 or 3. MMSE is a brief screening instrument used to assess cognitive function, with total scores ranging from 0 to 30 and a lower score indicating greater disease severity, while the Hoehn & Yahr scale is a medical assessment used to measure staging of the functional disability associated with PD, where a higher stage indicates greater disease severity. In collaboration with the Alzheimer’s Disease Cooperative Study (“ADCS”), we also conducted a trial in 16 early AD patients (the “ADCS Trial”). In the ADCS Trial, early AD patients were defined as those patients with a MMSE score between 19 and 28. All three clinical trials were double-blind, placebo-controlled studies. We designed the studies by applying our understanding of the underlying neurodegenerative disease states, and measured both target and pathway validation in the spinal fluid of patients to determine whether patients improved following treatment. In addition to meeting their primary endpoints of safety and tolerability and secondary endpoint of pharmacokinetics of Buntanetap, our AD/PD Trials met exploratory endpoints of measures of biomarkers and improvements in cognition in AD patients, and in function in PD patients. We believe that the AD/PD Trials represent the first double-blind placebo-controlled studies that showed improvements in AD patients, as measured by ADAS-Cog, and in PD patients, as measured by UPDRS. Following completion of the AD/PD Trials, we submitted our data to the U.S. Food and Drug Administration (“FDA”) and requested direction to further pursue the development of Buntanetap in early PD patients. With the FDA’s guidance, we initiated a Phase 3 study in early PD patients in August 2022 (our “Phase 3 PD Study”). In the Phase 3 PD Study, early PD patients were defined as those at Hoehn & Yahr stages 1, 2 or 3 and OFF times of less than two hours per day. OFF time refers to when PD motor and/or non-motor symptoms occur between medication doses. We also submitted a proposed protocol for the treatment of moderate AD to the FDA, and after receiving permission to proceed, we initiated a Phase 2/3 study in mild to moderate AD patients in February 2023 (our “Phase 2/3 AD Study”). In the Phase 2/3 AD Study, mild to moderate AD patients were defined as those with a MMSE score between 14 and 24. At the completion of the ADCS Trial, the data

Current wording

In 2021, we completed two Phase 1/2 clinical studies: one in 14 early AD patients, and one in 54 early PD patients (together, the “AD/PD Trials”). In the AD/PD Trials, early AD patients were defined as those with a Mini Mental State Examination (“MMSE”) score between 19 and 28 and early PD patients as those patients at Hoehn & Yahr stages 1, 2 or 3. MMSE is a brief screening instrument used to assess cognitive function, with total scores ranging from 0 to 30 and a lower score indicating greater disease severity, while the Hoehn & Yahr scale is a medical assessment used to measure staging of the functional disability associated with PD, where a higher stage indicates greater disease severity. In collaboration with the Alzheimer’s Disease Cooperative Study (“ADCS”), we also conducted a trial in 16 early AD patients (the “ADCS Trial”). In the ADCS Trial, early AD patients were defined as those patients with an MMSE score between 19 and 28. At the completion of the ADCS Trial, the data showed that Buntanetap is a translational inhibitor in humans just like in animals, and we further observed that there was statistical improvement in cognition in early AD patients, just like in the AD/PD Trials.

Previous wording

Our Phase 3 PD Study and Phase 2/3 AD Study each had built in interim analyses. Our Phase 3 PD Study incorporated an interim analysis at two months, the results of which were disclosed on March 31, 2023. The pre-planned interim analysis was conducted by our data analytics provider based on 132 patients from all cohorts collectively for which baseline and two-month data was available. As the interim analysis was conducted at two months of the six-month endpoint and only on 132 patients, it may not be indicative of the results at six months for the full patient population. Based on the results of the interim analysis, we proceeded with the Phase 3 PD Study as planned in accordance with the previously established protocol. The study was completed on December 4, 2023, and we have been organizing and cleaning data since that date. On May 9, 2024, we announced unblinding of the Phase 3 PD data. We expect to release topline PD Study efficacy data in June 2024.

Current wording

Our Phase 3 PD Study incorporated an interim analysis at two months, the results of which were disclosed on March 31, 2023. The pre-planned interim analysis was conducted by our data analytics provider based on 132 patients from all cohorts collectively for which baseline and two-month data was available. Based on the results of the interim analysis, we proceeded with the Phase 3 PD Study as planned in accordance with the previously established protocol. The study was completed on December 4, 2023 and we released the topline PD Study efficacy data on July 2, 2024. The data showed that in two subgroups, Buntanetap improved UPDRS 2, 3, 2+3 and total. It also showed that in the whole ITT population Buntanetap stopped the loss of cognition and that in the 12% of patients that already had cognitive issues, Buntanetap improved cognition in a dose-dependent, statistically significant way. We expect to discuss the PD data with the FDA in the fall of 2024. During that meeting we plan to propose continued development of Buntanetap in an 18-month disease-modifying trial.

Previous wording

We disclosed the results of the interim analysis for our Phase 2/3 AD Study on October 23, 2023, and similar to our PD study, based on the outcome of the interim analysis we proceeded with the study as planned. The Phase 2/3 AD study was completed on February 13, 2024. On April 29, 2024, we announced data from the AD study. We will report the data to the FDA and ask for an end-of-Phase 2 meeting for AD. We expect to discuss the AD data with the FDA in the two to three months following the release and then move on to the next Phase 3 study to confirm and expand these findings in an 18-month disease-modifying trial, focusing on biomarker-positive early AD patients. We further plan to present the data at AAIC 2024 and to publish it in a peer-reviewed journal.

Current wording

For the AD Study, we disclosed the results of the interim analysis on October 23, 2023, and similar to our PD study, based on the outcome of the interim analysis we proceeded with the study as planned. The Phase 2/3 AD study was completed on February 13, 2024 and on April 29, 2024, we announced topline efficacy data. The data showed that in early AD patients Buntanetap improved ADAS-Cog11 in a dose-dependent fashion and was statistically significant from placebo and from baseline. We have reported the data to the FDA and asked for an end-of-Phase 2 meeting for AD. We expect to discuss the AD data with the FDA in the fall of 2024. We are also proposing continued development of Buntanetap in an 18-month disease-modifying trial, focused on biomarker-positive early AD patients. We presented the data at AAIC 2024 and further plan to publish it in a peer-reviewed journal.

Previous wording

By the end of 2026, our goal is to have conducted the required pivotal studies for Buntanetap to be able to file two new drug applications (“NDAs”) with the FDA.

Current wording

By the end of 2026, our goal is to have conducted the required pivotal studies for Buntanetap and to be able to file two new drug applications (“NDAs”) with the FDA.

Previous wording

We believe that we are the only company developing a drug for AD and PD that is designed to inhibit more than one neurotoxic protein and has a mechanism of action designed to restore nerve cell axonal and synaptic activity. By improving brain function, our goal is to treat memory loss and dementia associated with AD, as well as body and brain function associated with PD. Based on pre-clinical and clinical data collected to date, we believe that Buntanetap has the potential to be the first drug to interfere with the underlying mechanism of neurodegeneration, potentially enabling Buntanetap to be the only drug to improve cognition in AD and motor function in PD. The industry has encountered challenges in specifically targeting one neurotoxic protein, be it APP, tau or αSYN, indicating that doing so does not change the course of neurodegeneration. Our goal is to develop a disease modifying drug (“DMD”) for patients with neurodegeneration by leveraging our clinical and pre-clinical data to inhibit the three most relevant neurotoxic proteins. Studies have found that AD and PD are the most common neurodegenerative diseases in the U.S. and accordingly, these diseases present two unmet needs of the aging population and two potentially large U.S. markets if a DMD is developed and approved.

Current wording

We believe that we are the only company developing a drug for AD and PD that inhibits more than one neurotoxic protein and has a mechanism of action designed to restore nerve cell axonal and synaptic activity. By improving brain function, our goal is to treat memory loss and dementia associated with AD, as well as body and brain function associated with PD. Based on pre-clinical and clinical data collected to date, we believe that Buntanetap has the potential to be the first drug to interfere with the underlying mechanism of neurodegeneration, potentially enabling Buntanetap to be the only drug to improve cognition in AD and motor function in PD. The industry has encountered challenges in specifically targeting one neurotoxic protein, be it APP, tau or αSYN, indicating that doing so only modestly or does not change the course of neurodegeneration. Our goal is to develop a disease-modifying drug (“DMD”) for patients with neurodegeneration by leveraging our clinical and pre-clinical data to inhibit the four most relevant neurotoxic proteins. Studies have found that AD and PD are the most common neurodegenerative diseases in the U.S. and accordingly, these diseases present two unmet needs of the aging population and two potentially large U.S. markets if a DMD is developed and approved.

Previous wording

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at March 31, 2024 was $111,326.0 thousand. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

Current wording

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at June 30, 2024 was $116,346.4 thousand. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

Previous wording

We do not have sufficient capital on hand to fund our operations for the next 12 months and will need to raise additional capital to meet our obligations as they become due. We believe that actively managing our cash and working capital as of March 31, 2024, as well as the additional $0.8 million of proceeds received under our ELOC Purchase Agreement during May 2024, will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2024. We will need to raise substantial additional capital to complete the development and commercialization of our product candidates through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we

Current wording

We do not have sufficient capital on hand to fund our operations for the next 12 months and will need to raise additional capital to meet our obligations as they become due. We believe that our cash and cash equivalents as of June 30, 2024, combined with warrant exercise proceeds from July 2024 and proceeds from share issuances under our ELOC Purchase Agreement (both discussed below), will be sufficient to fund our operating expenses and capital expenditure requirements until we initiate additional FDA approved studies for AD and PD, which we expect to take place after the planned end-of-study meetings, in the second half of 2024. We will need to raise substantial additional capital to complete the development and commercialization of our product candidates through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital or defer sufficient operating expenses, we may be compelled to reduce the scope of our operations.

Previous wording

In order to fund operations and additional clinical trials, we plan to finance our cash needs through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. We have no committed external sources of funds other than our ELOC facility, which was announced on April 25, 2024. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.

Current wording

In order to fund operations and additional clinical trials, we plan to finance our cash needs through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. We have no committed external sources of funds other than our ELOC Purchase Agreement, which was announced on April 25, 2024 and is discussed further below. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.

Previous wording

Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three Months Ended June 30, 2024 and 2023

Previous wording

Change in fair value of warrants was a gain of $6,698.7 thousand for the three months ended March 31, 2024, as compared to zero for the prior year period. This increase was attributable to the fair value remeasurement with respect to our liability-classified Canaccord Warrants during the first quarter of 2024. The associated gain recorded in Results of Operations was primarily driven by the decrease in our stock price during the first quarter of 2024, which caused the fair value of the liability to decrease substantially.

Current wording

Change in fair value of warrants was a gain of $4,062.3 thousand for the three months ended June 30, 2024. There was no change in fair value for the three months ended June 30, 2023. The $4,062.3 thousand increase was attributable to the fair value remeasurement with respect to our liability-classified Canaccord Warrants during the second quarter of 2024. The associated gain recorded in the Statements of Operations was primarily driven by the decrease in our stock price during the second quarter of 2024, which caused the fair value of the liability to decrease.

Previous wording

Interest income decreased $188.3 thousand for the three months ended March 31, 2024 compared to the prior year period. This decrease was primarily the result of lower cash and cash equivalent balances when compared to the prior year period.

Current wording

Interest income was $26.0 thousand for the three months ended June 30, 2024. Interest income was $222.6 thousand for the three months ended June 30, 2023. The decrease of $196.6 thousand was the result of lower cash and cash equivalent balances when compared to the prior year period.

Previous wording

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock and warrants. To date, we have not generated any revenue from the sale of products, and we do not anticipate generating any revenue from the sale of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of March 31, 2024, our principal source of liquidity was our cash and cash equivalents, which totaled $3,137.0 thousand.

Current wording

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock and warrants. To date, we have not generated any revenue from the sale of products, and we do not anticipate generating any revenue from the sale of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of June 30, 2024, our principal source of liquidity was our cash and cash equivalents, which totaled $3,997.8 thousand. We do not believe that our cash on hand will be sufficient to fund our operations for at least twelve months beyond the date of this filing.

Previous wording

Contingent upon continued achievement of our fundraising objectives, we expect cash used in operating activities to continue to be elevated during and after 2024 due to expected operating losses associated with ongoing development of our product candidates, including clinical trial expenses for our additional studies in early PD patients and a next Phase 3 study in AD patients.

Current wording

Contingent upon continued achievement of our fundraising requirements, we expect cash used in operating activities to continue to be elevated during and after 2024, due to expected operating losses associated with continued development of our product candidates, including clinical trial expenses for our planned disease-modifying studies.

Previous wording

The preparation of financial statements in conformity with GAAP requires us to use judgment in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in our financial statements and accompanying notes. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require difficult, subjective and complex judgments by Management in order to make estimates about the effect of matters that are inherently uncertain. During the three month period ended March 31, 2024, there were no significant changes to our critical accounting policies from those described in our annual financial statements for the year ended December 31, 2023, which we included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

The preparation of financial statements in conformity with GAAP requires us to use judgment in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in our financial statements and accompanying notes. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require difficult, subjective and complex judgments by Management in order to make estimates about the effect of matters that are inherently uncertain. During the three and six month periods ended June 30, 2024, there were no significant changes to our critical accounting policies from those described in our annual financial statements for the 2023 fiscal year, which we included in our Annual Report on Form 10-K for the year ended December 31, 2023.