Alto Neuroscience, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated fina ncial statements and the related notes included elsewhere in this Quarterly Report and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report filed with the SEC on March 20, 2025.

Previous wording

As discussed in the section titled “Special Note Regarding Forward Looking Statements,” the following discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to those identified below and those set forth in the section titled “Risk Factors” under Part II, Item 1A.

Current wording

As discussed in the section titled “Special Note Regarding Forward Looking Statements,” the following discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to those identified below and those set forth under “Item 1A. Risk Factors” in our Annual Report, under “Item 1A. Risk Factors” in this Quarterly Report, or in our other reports filed with the SEC.

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. 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.

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. Through insights derived from our scalable and proprietary Precision Psychiatry Platform, or our Platform, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates. Our current pipeline consists of five clinical-stage assets addressing high-need therapeutic areas, including major depressive disorder, or MDD, bipolar depression, or BPD, and schizophrenia. Our most advanced programs are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.

Previous wording

We are currently evaluating ALTO-100 in a Phase 2b study in patients with bipolar depression, in which patients are assigned to take ALTO-100 as adjunctive treatment to a stable dose of a background mood stabilizing treatment over a 6-week treatment period. Enrollment in this study is ongoing, with a target of approximately 200 patients, and we expect to report topline data from the study in 2026. In July 2024 we reported that this Phase 2b study is supported in part by a funding award from Wellcome Trust Limited (See “— Liquidity and Capital Resources” for a discussion of the Convertible Grant Agreement).

Current wording

We are currently evaluating ALTO-100 in a Phase 2b trial in patients with BPD in which patients are assigned to take ALTO-100 as adjunctive treatment to a stable dose of a background mood stabilizing treatment over a six-week treatment period. BPD is associated with memory, cognitive, and neuroplasticity abnormalities at similar or greater rates than seen in MDD. Much like MDD, poor memory and cognition patients typically experience greater treatment resistance and disability, with overall worse outcomes. Moreover, the only currently approved therapies are antipsychotics. We believe the pro-neuroplasticity mechanism of ALTO-100 has the potential to address the high unmet need in this important patient population. Enrollment in this trial is ongoing, with a target of approximately 200 patients, and we expect to report topline data from the study in the second half of 2026.

Previous wording

We are currently evaluating ALTO-101, a novel PDE4 inhibitor for patients with cognitive impairment associated with schizophrenia, or CIAS in a Phase 2 POC trial. We expect to report topline data from this trial in the second half of 2025.

Current wording

We are currently evaluating ALTO-101 in a Phase 2 POC trial, which consists of a cross-over, double-blind, placebo-controlled, dose-escalating treatment and we expect to enroll approximately 70 adults with schizophrenia between the ages of 21 and 55. ALTO-101 is an investigational brain-penetrant phosphodiesterase 4, or PDE4, inhibitor that we are developing in a novel transdermal formulation for the treatment of Cognitive Impairment Associated with Schizophrenia, or CIAS. Through this unique formulation, ALTO-101 is designed to retain the desired brain effects shown with the oral formulation and avoid tolerability challenges and adverse effects known to be associated with PDE4 inhibitors. The primary endpoint in the study is the effect of ALTO-101 on theta band activity, the EEG measure shown to be best related to CIAS in replicated analyses of large schizophrenia datasets. Objective cognitive performance will also be evaluated. We expect to report topline data in the second half of 2025.

Previous wording

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

We plan to develop ALTO-202, an investigational orally bioavailable antagonist of the GluN2B subunit of the N-methyl-D-aspartate, or NMDA receptor, for the treatment of patients with MDD. We are currently in the process of planning the next phase of clinical development for ALTO-202.

Previous wording

Since our inception in 2019, we have devoted substantially all of our resources to the research and development of our product candidates by conducting clinical trials and preclinical studies, building our Platform, and recruiting management and technical staff to support these operations. To date, we have funded our operations primarily through the aggregate net proceeds of approximately$275.6 million from equity financings (including from our initial public offering, or IPO, and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.

Current wording

Since our inception in 2019, we have devoted substantially all of our resources to the research and development of our product candidates by conducting clinical trials and preclinical studies, building our Platform, and recruiting management and technical staff to support these operations. To date, we have funded our operations primarily through the aggregate net proceeds from equity financings (including from our initial public offering, or IPO, and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.

Previous wording

We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $16.8 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:

Current wording

We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $15.2 million and $13.4 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $153.6 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 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.”

Current wording

As of March 31, 2025, we had cash, cash equivalents and restricted cash of$161.3 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 2028. See “—Liquidity and Capital Resources.”

Previous wording

We also expect to incur significant manufacturing costs as our CMOs develop scaled commercial manufacturing processes. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

Current wording

We also expect to incur significant manufacturing costs as our contract manufacturing organizations, or CMOs, develop scaled commercial manufacturing processes. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

Previous wording

We expect that our general and administrative expenses will increase in the future as we expand our headcount to support our continued research and development of our product candidates. We also expect to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services, costs related to compliance with the rules and regulations of the Securities and Exchange Commission, or SEC, and listing standards applicable to companies listed on a national securities exchange, director and officer insurance costs, and investor relations costs. In addition, if we obtain regulatory approval for any of our product candidates and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing, and distribution activities.

Current wording

We expect that our general and administrative expenses will increase in the future as we expand our headcount to support our continued research and development of our product candidates. We also expect to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services, costs related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on a national securities exchange, director and officer insurance costs, and investor relations costs. In addition, if we obtain regulatory approval for any of our product candidates and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing, and distribution activities.

Previous wording

Other income (expense) consists primarily of interest income on our cash and cash equivalents, interest expense on borrowings under our loan and security agreement, and non-cash changes in the fair value of our outstanding preferred stock warrant liability. During the three months ended March 31, 2024, in connection with the IPO, the Series A Preferred Stock Warrants were net exercised and settled in common stock and the K2 Warrant was converted into a common stock warrant (see Note 10 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); as a result, both of these warrants are treated as equity instruments prospectively. Therefore, there will be no incremental changes to the fair value of the warrants in future periods.

Current wording

Other income (expense) consists primarily of interest income on our cash and cash equivalents, interest expense on borrowings under our loan and security agreement, loss on debt extinguishment, and non-cash changes in the fair value of our Convertible Grant Agreement with Wellcome (See “— Liquidity and Capital Resources”) and our preferred stock warrant liability. During the three months ended March 31, 2024, in connection with the IPO, the Series A Preferred Stock Warrants were net exercised and settled in common stock and the K2 Warrant was converted into a common stock warrant (see Note 10 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); as a result, both of these warrants are treated as equity instruments prospectively. Therefore, there will be no incremental changes to the fair value of the warrants in future periods.

Previous wording

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. We have not yet commercialized any of our product candidates, which are in various phases of development, and we do not expect to generate revenue from sales of any of our product candidates for several years, if at all. As we progress through the phases of development, we anticipate that we will incur increasing losses in future quarters and years compared to historical periods. To date, we have funded our operations primarily through the aggregate net proceeds of approximately $275.6 million from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.

Current wording

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. We have not yet commercialized any of our product candidates, which are in various phases of development, and we do not expect to generate revenue from sales of any of our product candidates for several years, if at all. As we progress through the phases of development, we anticipate that we will incur increasing losses in future quarters and years compared to historical periods. To date, we have funded our operations primarily through the aggregate net proceeds from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.

Previous 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.

Current wording

As of March 31, 2025 and December 31, 2024, we had cash, cash equivalents and restricted cash of $161.3 million and $168.7 million, respectively.

Previous wording

In December 2022, we entered into the Loan Agreement with the Lender, K2 HealthVentures LLC, as administrative agent for the Lender, and Ankura Trust Company, LLC, as collateral agent for the Lender. The Loan Agreement provides for up to an aggregate principal amount of $35.0 million in term loans, which we refer to collectively as the Term Loan, consisting of a first tranche term loan of $10.0 million, two subsequent tranches of term loans of $7.5 million each to be funded upon the achievement of certain time-based, clinical milestones, and an additional uncommitted tranche term loan of up to $10.0 million, or the Fourth Tranche. We drew $10.0 million upon entry into the Loan Agreement and, as of September 30, 2024 and December 31, 2023, we had an outstanding principal balance of $10.0 million under the Term Loan. Based upon the terms of the Loan Agreement we could potentially access up to $10.0 million of the remaining $25.0 million of the credit facility.

Current wording

In December 2022, weentered into a Loan and Security Agreement, or the Original Loan Agreement, with K2 HealthVentures LLC as a lender, the other lenders party thereto (collectively, the Lenders), K2 HealthVentures LLC, or the Administrative Agent, and Ankura Trust Company, LLC, as collateral agent for the Lender. In January 2025, we entered into an amendment to the Original Loan Agreement (the Amendment, and the Original Loan Agreement as amended thereby, the Amended Loan Agreement) to, among other things, extend the maturity date of the facility and increase the maximum available amount of term loans. The Amended Loan Agreement provides for term loans, which we refer to collectively as the Term Loan, in an aggregate principal amount of up to $75.0 million consisting of:

Previous wording

The Term Loan matures on December 1, 2026. The Loan Agreement provides for an interest only period until January 1, 2025, which may be extended to January 1, 2026 subject to certain conditions, following which the Terms Loan shall be repaid in equal monthly payments through the maturity date, see Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further details.

Current wording

The Amended Loan Agreement has a Term Loan maturity date of January 1, 2029, or the Amended Term Loan Maturity Date. The Amended Loan Agreement provides for an interest only period until January 1, 2027, which shall automatically be extended to January 1, 2028, upon, but subject to, funding of at least $20.0 million of the second tranche term loans, following which the Term Loan shall be repaid in equal monthly payments through the Amended Term Loan Maturity Date.

Previous 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.

Current wording

We may use proceeds from the Convertible Loan solely to advance development of ALTO-100 in bipolar depression. In addition, if we do not exploit or develop ALTO-100 (other than for safety or efficacy concerns) within a specified period following the completion of our Phase 2b clinical trial evaluating ALTO-100 in patients with bipolar depression, the Convertible Grant Agreement provides Wellcome with a limited right to exploit ALTO-100, solely in bipolar depression, subject to a revenue share between Wellcome and us of any proceeds arising from Wellcome’s exploitation. 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$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:

Current wording

Net cash used in operating activities was$16.6 million for thethree months ended March 31, 2025, as compared to$11.0 million for thethree months ended March 31, 2024. The increase in cash used was primarily the result of the timing of bonus payments and the increase in net loss of $1.8 million, primarily attributable to our increased spending on operational activities. The increase in cash used in operating activities was offset by recognition of a non-cash loss on debt extinguishment related to the Amended Loan Agreement.

Previous 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.

Current wording

Net cash provided by financing activities was$134.6 million for thethree months ended March 31, 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 $2.9 million of other offering expenses paid during the three months ended March 31, 2024.

Previous 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.

Current wording

We believe that our existing cash and cash equivalents of $160.8 million, together with anticipated proceeds under our Convertible Grant Agreement with Wellcome Trust, will be sufficient to fund our operating expenses and capital expenditure requirements into 2028. 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 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.

Current wording

In addition to ongoing needs to fund our operations, our material cash requirements as of March 31, 2025 consist primarily of obligations under both our Amended Loan Agreement (see Note 4 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report) and our lease commitment of $7.1 million for our headquarters office space located in Mountain View, California with an initial lease term of 65 months that terminates in March 2030. If the Company elects to terminate the lease after the third lease year, including payments already made, the Company will make payments of approximately $4.0 million over the term of the lease.

Previous wording

In December 2019, we entered into an exclusive license agreement with equity, or the Stanford Agreement, with the Board of Trustees of the Leland Stanford Junior University, or Stanford, which was subsequently amended in May 2020 and December 2023. Under the terms of the Stanford Agreement, we obtained a worldwide, royalty-bearing license, with the right to sublicense during the exclusive term only, under certain patent rights in five patent families relating to brain stimulation, electroencephalogram and functional MRI that we could use to guide treatment of psychiatry patients, or the Stanford Licensed Patents, and under certain technology relating to the inventions covered by the Stanford Licensed Patents, or the Stanford Licensed Technology, to make, have made, use, import, offer for sale and sell licensed products for use in any indication. For a detailed description of the financial terms of the Stanford Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Stanford Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In December 2019, we entered into an exclusive license agreement with equity, or the Stanford Agreement, with the Board of Trustees of the Leland Stanford Junior University, or Stanford, which was subsequently amended in May 2020 and December 2023. Under the terms of the Stanford Agreement, we obtained a worldwide, royalty-bearing license, with the right to sublicense during the exclusive term only, under certain patent rights in five patent families relating to brain stimulation, electroencephalogram and functional MRI that we could use to guide treatment of psychiatry patients, or the Stanford Licensed Patents, and under certain technology relating to the inventions covered by the Stanford Licensed Patents, or the Stanford Licensed Technology, to make, have made, use, import, offer for sale and sell licensed products for use in any indication. For a detailed description of the financial terms of the Stanford Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Stanford Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

In May 2021, we entered into a license agreement, or the Sanofi Agreement, with Sanofi, pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how of Sanofi relating to a PDE4 inhibitor compound, now known as ALTO-101, to use, have used, develop, have developed, manufacture, have manufactured, commercialize, have commercialized or otherwise exploit ALTO-101 and products incorporating ALTO-101, or the Sanofi Licensed Products, for all human therapeutic, prophylactic and diagnostic uses. We also obtained a non-exclusive, worldwide license to use certain other specified know-how licensed to Sanofi by a specified third party to exploit Sanofi Licensed Products solely with respect to Parkinson’s disease. For a detailed description of the financial terms of the Sanofi Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Sanofi Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In May 2021, we entered into a license agreement, or the Sanofi Agreement, with Sanofi, pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how of Sanofi relating to a PDE4 inhibitor compound, now known as ALTO-101, to use, have used, develop, have developed, manufacture, have manufactured, commercialize, have commercialized or otherwise exploit ALTO-101 and products incorporating ALTO-101, or the Sanofi Licensed Products, for all human therapeutic, prophylactic and diagnostic uses. We also obtained a non-exclusive, worldwide license to use certain other specified know-how licensed to Sanofi by a specified third party to exploit Sanofi Licensed Products solely with respect to Parkinson’s disease. For a detailed description of the financial terms of the Sanofi Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Sanofi Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

In May 2021, we entered into a patent and know-how license agreement, or the Cerecor Agreement, with Cerecor Inc. (n/k/a Avalo Therapeutics, Inc.), or Cerecor, pursuant to which we obtained an exclusive worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how owned or controlled by Cerecor relating to an NR2B inhibitor compound now known as ALTO-202, including certain rights licensed to Cerecor by Essex Chemie AG, or Merck, to research, develop, make, have made, use, import, offer for sale and sell ALTO-202 and products incorporating ALTO-202, or Cerecor Licensed Products, for the prevention, diagnosis and/or treatment of all diseases in humans. For a detailed description of the financial terms of the Cerecor Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Cerecor Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023

Current wording

In May 2021, we entered into a patent and know-how license agreement, or the Cerecor Agreement, with Cerecor Inc. (n/k/a Avalo Therapeutics, Inc.), or Cerecor, pursuant to which we obtained an exclusive worldwide, royalty-bearing license, with the right to sublicense, under certain patent rights and know-how owned or controlled by Cerecor relating to an NR2B inhibitor compound now known as ALTO-202, including certain rights licensed to Cerecor by Essex Chemie AG, or Merck, to research, develop, make, have made, use, import, offer for sale and sell ALTO-202 and products incorporating ALTO-202, or Cerecor Licensed Products, for the prevention, diagnosis and/or treatment of all diseases in humans. For a detailed description of the financial terms of the Cerecor Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Cerecor Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

In October 2021, we entered into an asset purchase agreement, or the Teva Agreement, with Teva Pharmaceutical Industries, Ltd. and its affiliate Cephalon, Inc., or together Teva, pursuant to which we acquired patents, know-how and other rights to ALTO-203 and a specified related compound, or Teva Acquired Compounds, and we assumed all post-acquisition liabilities related thereto For a detailed description of the financial terms of the Teva Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Teva Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In October 2021, we entered into an asset purchase agreement, or the Teva Agreement, with Teva Pharmaceutical Industries, Ltd. and its affiliate Cephalon, Inc., or together Teva, pursuant to which we acquired patents, know-how and other rights to ALTO-203 and a specified related compound, or Teva Acquired Compounds, and we assumed all post-acquisition liabilities related thereto. 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 year ended December 31, 2024. For a detailed description of the financial terms of the Teva Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Teva Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

In October 2021, we entered into an asset transfer agreement, or the Palisade Agreement, with Palisade Bio, Inc., or Palisade, pursuant to which we acquired all patent, know-how and other rights to ALTO-100. Palisade also transferred and assigned to us all right, title, and interest in, to, and under that certain exclusive license agreement, or the Dow Agreement, between Dow Agrosciences LLC, or Dow, and Palisade (f/k/a Neuralstem, Inc.), dated as of December 1, 2016, pursuant to which we licensed patent rights covering an intermediate compound in the manufacturing process for ALTO-100. For a detailed description of the financial terms of the Palisade Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Palisade Agreement and the related License Agreement with Dow Agrosciences LLC, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In October 2021, we entered into an asset transfer agreement, or the Palisade Agreement, with Palisade Bio, Inc., or Palisade, pursuant to which we acquired all patent, know-how and other rights to ALTO-100. Palisade also transferred and assigned to us all right, title, and interest in, to, and under that certain exclusive license agreement, or the Dow Agreement, between Dow Agrosciences LLC, or Dow, and Palisade (f/k/a Neuralstem, Inc.), dated as of December 1, 2016, pursuant to which we licensed patent rights covering an intermediate compound in the manufacturing process for ALTO-100. For a detailed description of the financial terms of the Palisade Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the Palisade Agreement and the related License Agreement with Dow Agrosciences LLC, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

In September 2023, we entered into a joint development and license agreement, or the MedRx Agreement, with MedRx Co., Ltd., or MedRx, pursuant to which we obtained an exclusive, sublicensable, worldwide license, with the right to sublicense, under certain patent rights and know-how of MedRx relating to transdermal drug delivery to develop (excluding any pre-clinical development), manufacture, and commercialize transdermally delivered pharmaceutical products comprising MedRx’s transdermal patch technology and our ALTO-101, or MedRx Licensed Product, for all therapeutic, prophylactic, and diagnostic uses. We granted MedRx an exclusive, sublicensable, worldwide license under certain patent rights and know-how relating to ALTO-101 owned or controlled by us, including certain patents and know how licensed to us pursuant to the Sanofi Agreement, solely to conduct pre-clinical development and manufacturing of the MedRx Licensed Products for us in accordance with the MedRx Agreement and a separate manufacturing and supply agreement to be entered into between us and MedRx. For a detailed description of the financial terms of the MedRx Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the MedRx Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

In September 2023, we entered into a joint development and license agreement, or the MedRx Agreement, with MedRx Co., Ltd., or MedRx, pursuant to which we obtained an exclusive, sublicensable, worldwide license, with the right to sublicense, under certain patent rights and know-how of MedRx relating to transdermal drug delivery to develop (excluding any pre-clinical development), manufacture, and commercialize transdermally delivered pharmaceutical products comprising MedRx’s transdermal patch technology and our ALTO-101, or MedRx Licensed Product, for all therapeutic, prophylactic, and diagnostic uses. We granted MedRx an exclusive, sublicensable, worldwide license under certain patent rights and know-how relating to ALTO-101 owned or controlled by us, including certain patents and know how licensed to us pursuant to the Sanofi Agreement, solely to conduct pre-clinical development and manufacturing of the MedRx Licensed Products for us in accordance with the MedRx Agreement and a separate manufacturing and supply agreement to be entered into between us and MedRx. 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 year ended December 31, 2024. For a detailed description of the financial terms of the MedRx Agreement, see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. For additional information on the terms of the MedRx Agreement, see the section titled “Business— License and Other Agreements” in our Annual Report.

Previous wording

Other than the milestones achieved under the Teva Agreement and the MedRx Agreement, we could not estimate when milestones, royalties, and/or other payments due to third parties under our existing license agreements will be due, and none of these events were probable to occur as of September 30, 2024.

Current wording

Other than as described above, we could not estimate when milestones, royalties, and/or other payments due to third parties under our existing license agreements will be due, and none of these events were probable to occur as of March 31, 2025.

Previous wording

We are an “emerging growth company” as defined in the JOBS Act, and we may remain an emerging growth company for up to five years following the completion of our IPO. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in our Annual Report on Form 10-K, we provided only two years of audited financial statements and did not include all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

Current wording

We are an “emerging growth company” as defined in the JOBS Act, and we may remain an emerging growth company for up to five years following the completion of our IPO. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in our Annual Report, we provided only two years of audited financial statements and did not include all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

Previous wording

We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Current wording

We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.