Filana Therapeutics, Inc.: Form 10-Q for the period ended Jun 30, 2025

This discussion and analysis should be read in conjunction with Cassava Sciences, Inc.’s (the “Company,” “we,” “us,” or “our”) condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. Operating results are not necessarily indicative of results that may occur in future periods.

Forward-looking Statements and Notices

This Quarterly Report on Form 10-Q contains certain statements that are considered forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to statements about:

• the safety profile or treatment benefits, if any, of simufilam;
• our ability to conduct planned preclinical studies of simufilam relating to epilepsy in Tuberous Sclerosis Complex (“TSC”)
• our plans to file an Investigational New Drug (“IND”) application in respect of a proof-of-concept clinical trial for simufilam in TSC-related epilepsy
• our ability to initiate an initial proof-of-concept clinical study of simufilam in TSC-related epilepsy in first-half 2026
• our ability to initiate, conduct or analyze additional clinical and non-clinical studies with our product candidates targeted at central nervous system disorders, including TSC-related epilepsy;
• our ability to successfully carry out our obligations under our License Agreement with Yale, for which we have assumed all responsibility for global development and commercialization for simufilam for the treatment of TSC-related epilepsy;
• our plans or ability to expand therapeutic indications for simufilam outside of Alzheimer’s disease;
• our reliance on third-party contractors to conduct all of our clinical and non-clinical trials and to make drug supply, or their ability to do so on-time or on-budget;
• limitations around the interpretation of data from any studies that are not randomized controlled trials;
• the impact of pre-clinical findings on our ability to develop our product candidates;
• the interpretation of results from our pre-clinical or early clinical studies, such as Phase 1 and Phase 2 studies;
• the safety, efficacy, or potential therapeutic benefits of our product candidates;
• our use of exploratory ‘research use only’ non-safety related biomarkers in our clinical studies;
• our ability to file for and obtain regulatory approval of our product candidates;
• our strategy and ability to establish an infrastructure to commercialize any product candidates, if approved;
• the potential future revenues of our product candidates, if approved and commercialized;
• the market acceptance of our product candidates, if approved and commercialized;
• the pricing and reimbursement of our product candidates, if approved and commercialized;
• the utility of protection, or the sufficiency, of our intellectual property;
• our potential competitors or competitive products for therapeutic areas we may elect to pursue;
• our need to raise new capital from time to time to finance our operations and the impact of macroeconomic conditions on our ability to effectively raise capital;
• our use of multiple third-party vendors and collaborators, including a Clinical Research Organization (“CRO"), to conduct clinical and non-clinical studies of our lead product candidate;
• expectations regarding trade secrets, technological innovations, licensing agreements and outsourcing of certain business functions;
• our expenses or incurred costs increasing by material amounts in excess of budgeted amounts due to unexpected cost overruns, imperfect forecasting, increased scope of activities or other causes;
• fluctuations in our financial or operating results;
• our operating losses, anticipated operating and capital expenditures and legal expenses;
• expectations regarding the issuance of shares of common stock, options or other equity to employees or directors pursuant to equity compensation awards, net of employment taxes;
• the development and maintenance of our internal information systems and infrastructure;
• our ability to minimize the likelihood and impact of adverse cybersecurity incidents in our information systems and infrastructure;
• our ability to attract and retain personnel;
• existing or emerging regulations and regulatory developments in the United States and other jurisdictions in which we operate;
• our expectations regarding the appropriate size and scope of our operations;
• the sufficiency of our cash resources to continue to fund our operations;
• potential future agreements with third parties in connection with the commercialization of our product candidates;
• the accuracy of our estimates regarding expenses, loss contingency reserves, capital requirements, and needs for additional financing;
• assumptions and estimates used for our disclosures regarding stock-based compensation;
• potential impacts of reductions-in-force at government agencies, including FDA, whose engagement with us in the drug development process is critical for the advancement of our investigational product candidates;
• the expense, timing and outcome of pending or future litigation or other legal proceedings and claims (including U.S. government inquiries) including the potential for negotiated settlements of such matters; and
• litigation, claims or other uncertainties that may arise from allegations made against us or our former employees or collaborators and the potential resolution of same.

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Please also refer to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as such risk factors may be further amended, updated or modified periodically in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) for further information on these and other risks affecting us.

We caution you not to place undue reliance on forward-looking statements because our future results may differ materially from those expressed or implied by them. We do not undertake to update any forward-looking statement, whether written or oral, relating to the matters discussed in this Quarterly Report on Form 10-Q, except as required by law.

This Quarterly Report on Form 10-Q may also contain statistical data and drug information received from our independent consultants or based on industry publications or other publicly available information. We have not independently verified the accuracy or completeness of the data contained in these sources of data and information. Accordingly, we make no representations as to the accuracy or completeness of such data and information. You are cautioned not to give undue weight to such data and information.

Our research programs in neurodegeneration have historically benefited from scientific and financial support from the National Institutes of Health (“NIH”). The contents of this Quarterly Report on Form 10-Q are solely our responsibility and do not necessarily represent any official views of NIH, the Department of Health and Human Services, or any other agency of the United States government, or any of our vendors, collaborators or unrelated third-parties.

All our pharmaceutical assets under development are investigational product candidates. These have not been approved for use in any medical indication by any regulatory authority in any jurisdiction and their safety, efficacy or other desirable attributes, if any, have not been established in any patient population. Consequently, none of our product candidates are approved or available for sale anywhere in the world.

Our clinical results from earlier-stage clinical trials may not be indicative of future results from later-stage or larger scale clinical trials and do not ensure regulatory approval. You are cautioned that subsequent results may differ materially.

Overview

Cassava Sciences, Inc. is a clinical-stage biotechnology company based in Austin, Texas. Our mission is to detect and treat central nervous system disorders, such as Tuberous Sclerosis Complex (“TSC”)-related epilepsy. Our novel science is based on affecting the activity of a critical protein in the brain for patients with certain central nervous system disorders, such as TSC. Our lead therapeutic drug candidate, simufilam, was under clinical evaluation for the proposed treatment of Alzheimer’s disease in two Phase 3 clinical studies through 2024, when all ongoing clinical trials for simufilam in Alzheimer’s disease were discontinued. The phase out of the Company’s Alzheimer's disease development program was completed in the second quarter of 2025.

We combine innovative technology with new insights in neurobiology to develop novel solutions targeting central nervous system disorders, such as TSC-related epilepsy. Our strategy is to leverage our unique scientific/clinical platform to develop first-in-class programs for treating central nervous system disorders. In addition, we are in the early stages of exploring potential artificial intelligence (“AI”) capabilities and related data analytics to target improvements in productivity and efficiency in our business, enhancements to research and development activities, and advancements in statistical analysis capabilities.

Our lead therapeutic product candidate, called simufilam, is a proprietary small molecule oral treatment drug being studied for the treatment of TSC-related epilepsy.

Simufilam was discovered and designed in-house and was characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date.

Simufilam targets a protein called filamin A (“FLNA”) in the brain of patients with central nervous system disorders, such as TSC. Our and our collaborators' published studies have demonstrated that changes in the expression or conformation of FLNA is linked to seizures, neuronal abnormalities, and neuroinflammation in certain circumstances and disorders. For example, published pre-clinical studies show that overexpression of FLNA in patients with TSC may be associated with neuronal abnormalities and epileptic seizure activity. On February 26, 2025, we entered into a License Agreement (the “License Agreement”) with Yale to support our development and commercialization efforts for simufilam for the treatment of TSC-related epilepsy.

We solely own patents covering the composition of matter of our drug simufilam in the United States, Europe, Australia, Israel and Canada. We solely own patents covering certain methods of use of our drug simufilam in the United States, Europe and Japan. We solely own pending patent applications that cover diagnostic assets for simufilam in the United States, Europe, Japan, China, Canada, and Australia. We solely own pending patent applications that cover other diagnostic assets in the United States, Europe, Japan, China and Canada. We have no obligation to pay any royalty to any third party in connection with any of the foregoing described patents and patent applications. In the United States, our patent protection with respect to simufilam, its solid forms, and uses of simufilam for Alzheimer’s disease and other neurodegenerative diseases includes nine issued United States patents, with terms expiring on dates ranging from 2029 to 2040, subject to any patent extensions that may be available for such patents. Corresponding foreign filings have been made for each of the Unites States filings.

About Tuberous Sclerosis Complex (TSC)

TSC is a genetic disorder that results from a mutation in the TSC1 or TSC2 genes. According to the Tuberous Sclerosis Alliance (“TSCA”), TSC is estimated to affect around 1 in 6,000 live births with approximately 50,000 people affected in the United States and more than one million worldwide. Clinical symptoms of TSC are variable and can impact organ systems with non-malignant tumors developing in brain, eyes, heart, kidney, skin and lungs. Interrelated neuropsychiatric manifestations of TSC such as intellectual disability, autism spectrum disorder, anxiety, aggression, attention deficit hyperactivity disorder, and sleep disturbance can significantly impact quality of life. Epilepsy is common in TSC, occurring in 84% of patients registered in the TSC Alliance Natural History Database with onset often occurring in their first year of life. Approximately 60 percent of TSC patients suffer from treatment-resistant seizures despite use of multiple anti-seizure medications. TSC-related epilepsy is associated with poor outcomes and increases the risk of cognitive deficits.

Preclinical Studies with Simufilam in Tuberous Sclerosis Complex

Preclinical research conducted at Yale indicates that simufilam (then PTI-125) may be effective in reducing TSC-related seizure activity. A study conducted by Angelique Bordey, PhD, at Yale and published in the peer-reviewed journal Neuron in 2014 found overexpression of FLNA and neuronal abnormalities in brain tissue from TSC patients, as well as in brain tissue from mice that had been genetically altered to model TSC. The study further found that genetically normalizing FLNA expression in the mice prevented neuronal abnormalities. The paper, MEK-ERK1/2-Dependent FLNA Overexpression Promotes Abnormal Dendritic Patterning in Tuberous Sclerosis Independent of mTOR (Neuron. 2014 Oct 1. PMID: 25277454), was co-authored by Zhang L, Bartley CM, Gong X, Hsieh LS, Lin TV and Feliciano DM.

A later study conducted by Dr. Bordey and published in the peer-reviewed journal Science Translational Medicine in 2020 likewise found elevated FLNA and neuronal abnormalities in brain tissue from patients with focal cortical dysplasia type II (FCDII), a genetic disorder with similar characteristics to TSC, as well as in the brains of mice that had been genetically altered to model TSC and FCDII. That study showed that normalizing FLNA expression in the mice through genetic knockdown both limited the neuronal abnormalities and reduced the frequency of epileptic seizures in the mice. This 2020 paper, Filamin A Inhibition Reduces Seizure Activity in a Mouse Model of Focal Cortical Malformations (Sci Transl Med. 2020 Feb 19. PMID: 32076941), was co-authored by Zhang L, Huang T, Teaw S, Nguyen LH, Hsieh LS, Gong X, and Lindsay Burns, a former employee of the Company.

In this 2020 study, Dr. Bordey and her colleagues also studied the effect of treatment with simufilam in the mice that had been altered to model TSC and FCDII. The research showed that treatment with simufilam limited neuronal abnormalities and reduced seizure activity in the mouse model at a level similar to genetic knockdown of FLNA expression. Treatment with simufilam did not, however, affect the level of FLNA in the brains of the mice.

Dr. Bordey joined the Company as Senior Vice President, Neuroscience, on May 1, 2025, while continuing her tenured academic position at Yale School of Medicine on a part time basis.

On August 4, 2025, the Company announced positive preclinical results of a study evaluating simufilam in a well-accepted mouse model of TSC-related epilepsy. The study was conducted in collaboration with the TSCA and the TSC Preclinical Consortium using an animal model of TSC-related epilepsy, the Tsc1 conditional knockout (CKO) mouse line (Tsc1-CKO)1. These mice develop spontaneous seizures and are used by the TSC Alliance to evaluate the effectiveness and safety of novel and repurposed therapeutics in the potential treatment of TSC-related epilepsy. The study was conducted by PsychoGenics, Inc., the TSC Preclinical Consortium’s research partner.

The Tsc1-CKO mice were treated with several doses of simufilam. Seizure activity was monitored for approximately three weeks after onset, and simufilam was evaluated against treatment with vehicle alone. The data showed that simufilam attenuated the progression of seizure activity, with a statistically significant correlation between simufilam dose and the number of seizures by the end of the study. Not all parameters measured reached statistical significance. The Company intends to present data and analyses in an upcoming scientific conference and publication.

Based on the results of these studies, the Company is planning to file an Investigational New Drug (“IND”) application in order to initiate a proof-of-concept clinical trial for simufilam in TSC-related epilepsy. This first clinical study for simufilam in TSC-related epilepsy is expected to begin in first-half 2026. In connection with the initiation of this clinical program, the Company appointed Dr. Joseph Hulihan as Chief Medical Officer. Dr. Hulihan, who brings over 25 years of industry experience, will devote approximately half of his professional time to Cassava and will advise on this clinical development of simufilam.

License Agreement with Yale

On February 26, 2025, we entered into the License Agreement with Yale pursuant to which we were granted exclusive worldwide rights, with rights to sublicense, to Yale’s interest in certain patent and other intellectual property rights that could be useful or necessary to the development and commercialization of simufilam for the treatment of TSC-related epilepsy and other potential indications. Pursuant to the License Agreement, we have agreed to use reasonable commercial efforts to implement a plan designed for such development and commercialization.

In exchange for the rights acquired pursuant to the License Agreement, we agreed to pay Yale (i) a nominal upfront license fee, (ii) payments upon the achievement of specified clinical, regulatory and commercial milestones, totaling up to $4.5 million and (iii) upon transfer to a third party of a regulatory priority review voucher, if issued, a low-to-mid double digit percentage of any consideration received for such transfer. We also agreed to pay Yale tiered royalties, ranging from a low- to mid- single digit percentage, on aggregate net sales of licensed products, subject to tiered minimum annual royalty payments ranging from the low- to mid- hundreds of thousands of dollars.

Unless earlier terminated, the License Agreement will continue on a country-by-country basis until the later of (i) the date on which the last valid claim of the license patents expires or otherwise lapses, (ii) the end of any government or regulatory exclusivity period, and (iii) 10 years following the date of first sale of licensed product in such country. We may terminate the License Agreement: (i) at our option, upon specified advance notice to Yale and (ii) if Yale commits a material breach of the License Agreement that is not cured within a specified timeframe. Yale may terminate the License Agreement under specified circumstances, including if we (i) fail to make any payment due under the License Agreement and fail to cure such non-payment within a specified timeframe, (ii) commit a breach of the License Agreement that is not cured within a specified timeframe, (iii) default on a material obligation to any creditor, unless cured within a specified timeframe, (iv) fail to obtain or maintain insurance required by the License Agreement, (v) bring or assist a patent challenge against Yale (or if a sublicensee does so). In addition, the License Agreement will terminate automatically upon the occurrence of certain bankruptcy and insolvency events involving us.

The License Agreement includes customary confidentiality, reporting and inspection, and indemnification provisions.

1. https://www.tscalliance.org/researchers/preclinical-research/

Clinical Trials in Alzheimer’s Disease (Discontinued)

We have conducted two randomized placebo-controlled Phase 3 clinical trials of oral simufilam in patients with mild-to-moderate Alzheimer’s disease. Our first Phase 3 study, called RETHINK-ALZ, was designed to evaluate the safety and efficacy of simufilam 100 mg tablets versus placebo over 52 weeks (NCT04994483). Our second Phase 3 study, called REFOCUS-ALZ, was designed to evaluate the safety and efficacy of oral simufilam 100 mg and 50 mg tablets versus placebo over 76 weeks (NCT05026177).

On November 25, 2024, we announced that the top-line results from the Phase 3 RETHINK-ALZ study of simufilam in mild-to-moderate Alzheimer's disease did not meet each of the pre-specified co-primary, secondary and exploratory biomarker endpoints. The co-primary endpoints were the change in cognition and function from baseline to the end of the double-blind treatment period at week 52, assessed by the ADAS-COG12 and ADCS-ADL scales, comparing simufilam to placebo. Simufilam continued to demonstrate an overall favorable safety profile.

In light of the top-line results from the Phase 3 RETHINK-ALZ study, the Company also discontinued the Phase 3 REFOCUS-ALZ study and Open Label Extension study.

On March 25, 2025, we announced that top-line results from the Phase 3 REFOCUS-ALZ study of simufilam in mild-to-moderate Alzheimer's disease did not meet each of the pre-specified co-primary, secondary and exploratory biomarker endpoints. The co-primary endpoints were the change in cognition and function from baseline to the end of the double-blind treatment period at week 76, assessed by the ADAS-COG12 and ADCS-ADL scales, comparing simufilam to placebo. REFOCUS-ALZ enrolled 1,125 patients and was discontinued on November 25, 2024, following the report that a prior 52-week Phase 3 study, RETHINK-ALZ, did not meet its co-primary endpoints. A large portion of subjects enrolled in REFOCUS-ALZ completed their final study visit prior to the termination of the trial. Simufilam continued to demonstrate an overall favorable safety profile.

Following the release of the topline RETHINK-ALZ and REFOCUS-ALZ results, the Company announced the decision to phase out the Company's Alzheimer's disease development program, which was completed in the second quarter of 2025.

Leadership Changes

Departure of Certain Executives

As previously announced, James W. Kupiec, M.D., retired as the Company’s Chief Medical Officer, with his resignation effective as of May 9, 2025.

Appointment of Principal Operating Officer

On April 18, 2025, R. Christopher Cook, previously our Senior Vice President and General Counsel, was appointed Chief Operating and Legal Officer of the Company.

Risk is Fundamental to the Drug Development Process

We are in the business of new drug discovery and development. Our research and development activities are long, complex, costly and involve a high degree of risk. Holders of our common stock should carefully read our 2024 Annual Report on Form 10-K and any subsequent Quarterly and Current Reports filed with the SEC in their entirety, including important disclosures under the caption “Risk Factors”. Because risk is fundamental to the process of drug discovery and development, you are cautioned to not invest in our publicly traded securities unless you are prepared to sustain a total loss of the money you have invested.

Our Scientific Approach is Different

Our scientific approach is to treat central nervous system diseases by targeting a scaffolding protein called FLNA. In light of existing research, we believe that FLNA is a promising target for drug development with respect to TSC-related epilepsy.

Research that we sponsored has identified a family of high-affinity, small molecules to target FLNA as a means of potentially treating central nervous system disorders such as TSC-related epilepsy. This family of small molecules, including simufilam, our lead small molecule (oral) therapeutic product candidate, was designed in-house and characterized by our academic collaborators.

Our science is based on affecting a critical protein in the brain

Proteins are essential for cell function because they participate in virtually every biological process. If protein function is impaired, the health consequences can be devastating. When disease changes the shape and/or function of critical proteins, multiple downstream processes can be impaired. Restoring shape and/or function is a well-accepted therapeutic strategy in clinical medicine.

FLNA is a scaffolding protein found in the brain. A healthy scaffolding protein brings multiple proteins together, coordinating their interaction. Our product candidate, simufilam, targets FLNA and attempts to prevent abnormal functioning of this critical protein in diseases such as TSC.

We believe simufilam may present an opportunity to potentially reduce seizures in patients with TSC. Preclinical studies in a mouse model indicate that simufilam reduces seizure activity and limits neuronal abnormalities in a manner similar to genetically normalizing FLNA levels, but without lowering the level of FLNA in the brain.

Expansion of Our Science to Other Indications

We may leverage our scientific insights in neurodegeneration and neuroinflammation and advanced tools in molecular biology, biochemistry, and imaging to expand our science to other diseases, initially focusing on central nervous system disorders. New indications and new drug development approaches may complement or supersede our current focus priorities.

We intend to continue exploratory preclinical studies in collaboration with the TSCA and other researchers to better understand simufilam’s potential as a treatment for TSC-related seizures. The Company also intends to submit an IND application in respect of a proof-of-concept clinical trial for simufilam in TSC-related epilepsy.

REFOCUS-ALZ (Discontinued)

Our second Phase 3 study in Alzheimer's disease, called REFOCUS-ALZ, was designed to evaluate the safety and efficacy of oral simufilam 100 mg and 50 mg over 76 weeks (NCT05026177). Details of the REFOCUS-ALZ Phase 3 study include:

• Approximately 1,100 patients were randomized into this study.
• Patients were randomized (1:1:1) to simufilam 100 mg tablets, 50 mg tablets, or matching placebo twice daily.
• Patients that completed the trial prior to its early termination were treated for 76 weeks.
• Co-primary efficacy endpoints were change from baseline in the ADAS-Cog12, a cognitive scale, and the ADCS-ADL, a functional scale, each of which is a standard psychometric assessment tool in trials of Alzheimer’s disease.
• A secondary efficacy endpoint was change from baseline in the iADRS, which is an integrated tool that combines scores from the ADAS-Cog12 and the ADCS-ADL.
• As in the RETHINK-ALZ trial, other secondary endpoints included change from baseline in NPI, MMSE, CDR-SB and ZBI.
• Additional secondary endpoints included sub-studies involving a limited number of patients and research sites to examine changes in baseline in: ● plasma biomarkers of Alzheimer’s Disease pathology, neurodegeneration and neuroinflammation (P-tau217, neurofilament light chain, known as NfL, glial fibrillary acidic protein, known as GFAP, and Total Tau); ● cerebrospinal fluid (CSF) biomarkers of Alzheimer’s Disease pathology, neurodegeneration and neuroinflammation; ● brain volume—hippocampus, ventricles and whole brain—via magnetic resonance imaging (MRI); and ● amyloid and tau deposition in the brain via positron emission topography (PET) imaging
• No interim analyses on efficacy were conducted.

The Company announced top-line results for REFOCUS-ALZ on March 25, 2025 as well as the decision to phase out the Company's Alzheimer's disease development program, which was completed in the second quarter of 2025.

Summary REFOCUS-ALZ Study Results:

Primary Endpoint Data

Safety Data:

The table below provides a high-level summary of the patient demographic and safety data. Simufilam continued to demonstrate an overall favorable safety profile.

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SavaDx

Our investigational product candidate, called SavaDx, is an early-stage program focused on detecting the presence of Alzheimer’s disease from a small sample of blood. For business, technical and personnel reasons, we have discontinued the development of SavaDx as of mid-2025. SavaDx is a research-use only, non-safety related exploratory biomarker. Development activity related to SavaDx accounted for less than 1% of our research budget.

We Own Worldwide Rights to Our Development Program

We own intellectual property, including patents, patent applications, technology, trade secrets and know-how in the U.S. and other countries. The protection of patents, designs, trademarks and other proprietary rights that we own or license is critical to our success and competitive position. We consider the overall protection of our patents and other intellectual property rights to be of material value and act to protect these rights from infringement.

We seek to protect our technology by, among other methods, filing and prosecuting U.S. and foreign patents and patent applications with respect to our technology and products and their uses. The focus of our patent strategy is to secure, maintain, and/or license intellectual property rights to technology for our development program.

Simufilam was discovered and designed in-house and was characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date. We solely own patents covering the composition of matter of our drug simufilam in the United States, Europe, Australia, Israel and Canada. We solely own patents covering certain methods of use of our drug simufilam in the United States, Europe and Japan. We solely own pending patent applications that cover diagnostic assets for simufilam in the United States, Europe, Japan, China, Canada, and Australia. We solely own pending patent applications that cover other diagnostic assets in the United States, Europe, Japan, China and Canada. We have no obligation to pay any royalty to any third party in connection with any of the foregoing described patents and patent applications. In the United States, our patent protection with respect to simufilam, its solid forms, and uses of simufilam for Alzheimer’s disease and other neurodegenerative diseases includes nine issued United States patents, with terms expiring on dates ranging from 2029 to 2040, subject to any patent extensions that may be available for such patents. Corresponding foreign filings have been made for each of the United States filings. We may also pursue additional intellectual property protections in other jurisdictions or in connection with any potential expansion into other indications, including other central nervous system disorders, such as TSC-related epilepsy, in each case, in light of the Company’s overall strategic development plans.

On February 26, 2025, we entered into the License Agreement with Yale pursuant to which we were granted exclusive worldwide rights, with rights to sublicense, to Yale’s interest in certain patent and other intellectual property rights that could be useful or necessary to the development and commercialization of simufilam for the treatment of TSC-related epilepsy and other potential indications.

Financial Overview

We have yet to generate any revenues from product sales. We have an accumulated deficit of $472.7 million at June 30, 2025. These losses have resulted principally from costs incurred in connection with research and development activities, salaries and other personnel-related costs, legal related costs and general corporate expenses. Research and development activities include costs of clinical and preclinical trials as well as clinical supplies associated with our product candidates. Salaries and other personnel-related costs include stock-based compensation associated with stock options and other equity awards granted to employees and non-employees. Our operating results may fluctuate substantially from period to period as a result of enrollment rates of clinical trials for our product candidates, timing of preclinical activities and our need for clinical supplies.

We expect to continue to use significant cash resources in our operations for the next several years. Our cash requirements for operating activities and capital expenditures may increase in the future as we:

• conduct preclinical and clinical studies for our product candidates, including simufilam for TSC-related epilepsy;
• seek regulatory approvals for our product candidates;
• develop, formulate, manufacture and commercialize our product candidates;
• implement additional internal systems and develop new infrastructure;
• acquire or in-license additional products or technologies, or expand the use of our technology;
• maintain, defend and expand the scope of our intellectual property; and
• expend resources related to legal proceedings and claims, including U.S. government inquiries.

Product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our product candidates. If our development efforts result in regulatory approval and successful commercialization of our product candidates, we expect to generate revenue from direct sales of our drugs and/or, if we license our drugs to future collaborators, from the receipt of license fees and royalties from sales of licensed products. We conduct our research and development programs through a combination of internal and collaborative programs. We rely on arrangements with universities, certain collaborators, contract development and manufacturing organizations (“CDMOs”), CROs and clinical research sites for a significant portion of our product development efforts.

We focus substantially all of our research and development efforts in the development of simufilam. Research and development expenses for our investigational diagnostic product candidate, SavaDx, represented less than 1% of total research and development expenses for the periods presented. The following table summarizes expenses by category for research and development efforts (in thousands):

Clinical trial costs include the costs of our CRO. CMC costs include costs related to our contract development and manufacturing organizations. Research and development expenses include compensation, contractor fees and supplies as well as allocated common costs such as facilities.

Estimating the dates of completion of clinical development, and the costs to complete development, of our product candidates would be highly speculative and subjective. Pharmaceutical products take a significant amount of time to research, develop and commercialize. The clinical study portion of the development of a new drug alone usually spans several years. We expect our research and development expenses to decrease in 2025 compared to 2024 as a result of phase out of our Alzheimer's disease development program, which was completed in the second quarter of 2025. The decrease is expected to be partially offset by costs to explore an indication for TSC-related epilepsy as well as higher stock-based compensation expense. We expect to reassess our future research and development plans based on our review of data we receive from our current research and development activities. The cost and pace of our future research and development activities are linked and subject to change.

Critical Accounting Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses and net loss incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates during the six months ended June 30, 2025 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 3, 2025.

Results of Operations – Three and Six Months Ended June 30, 2025 and 2024

Research and Development Expense

Research and development expenses consist primarily of costs of drug development work associated with our product candidates, including:

• clinical trials,
• pre-clinical testing,
• clinical supplies and related formulation and design costs, and
• compensation and other personnel-related expenses.

Research and development expenses were $5.1 million and $15.2 million during the three months ended June 30, 2025 and 2024, respectively. This 66% decrease was due primarily to the phase out of the Alzheimer's disease development program, which was completed in the second quarter of 2025.

Research and development expenses were $18.8 million and $31.4 million during the six months ended June 30, 2025 and 2024, respectively. This 40% decrease was due primarily to the phase out of the Alzheimer's disease development program beginning the fourth quarter of 2024 and completed in the second quarter of 2025. This decrease was partially offset by a $1.6 million increase in stock-based compensation expense due to new awards granted in the third quarter of 2024.

We expect research and development expense to decrease in future periods now that the phase out of the Alzheimer's disease development program is complete, and expenses for the TSC-related epilepsy program are expected to be significantly lower compared to those for the Alzheimer's disease program.

General and Administrative Expense

General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, bonus, benefits and stock-based compensation. Allocated expenses consist primarily of facility costs for our Company owned office complex in Austin, Texas. Depreciation and amortization for office space leased but not occupied by the Company is included in general and administrative expense. Depreciation and amortization for office space occupied by the Company is allocated between general and administrative expense and research and development expense. We also incur expenses associated with operating as a public company, including additional legal fees, expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance and audit expenses, investor relations activities, public company compliance expenses and other administrative expenses and professional services.

General and administrative expenses were $40.3 million and $46.2 million during the three months ended June 30, 2025 and 2024, respectively. The 13% decrease was due primarily to a $40.0 million SEC-related loss contingency recorded in 2024, compared to a $31.3 million securities litigation loss contingency recorded in 2025. General and administrative expense in the second quarter of 2025 included approximately $3.6 million of legal related fees/costs as well as $3.4 million in non-cash stock based compensation expense.

General and administrative expenses were $51.2 million and $49.9 million during the six months ended June 30, 2025 and 2024, respectively. The 3% increase was due primarily to a $40.0 million SEC-related loss contingency recorded in 2024 being partially offset by $8.8 million in insurance recoveries. This compared to a $31.3 million securities litigation loss contingency recorded in 2025, for which there were no insurance recoveries. The change also included a $3.3 million increase in stock-based compensation expense due to new awards granted in late 2024.

We expect general and administrative expense will decrease significantly in future quarters. However, we expect general and administrative expense to remain high compared to historic levels due to professional fees, legal expense and potential settlements related to ongoing litigation. In addition, stock-based compensation expense is expected to be higher than historic levels due to new awards granted in 2024 and 2025.

Interest Income

Interest income was $1.2 million and $2.3 million during the three months ended June 30, 2025 and 2024, respectively. The decrease in interest income was due primarily to lower interest rates and cash balances in 2025 compared to 2024.

Interest income was $2.5 million and $4.1 million during the six months ended June 30, 2025 and 2024, respectively. The decrease in interest income was due primarily to lower interest rates and cash balances in 2025 compared to 2024.

We expect interest income to decrease in future quarters as we utilize cash in our operations and realize the impact of a lower interest rate environment.

Change in fair value of warrants

There were no common stock warrants outstanding or change in fair value of warrants for the three months ended June 30, 2025. The change in fair value of warrants was $65.1 million for the three months ended June 30, 2024.

There were no common stock warrants outstanding or change in fair value of warrants for the six months ended June 30, 2025. The change in fair value of warrants was $108.2 million for the six months ended June 30, 2024.

The 2024 change was attributable to a gain on the change in fair value of our liability-classified warrants from distribution on January 3, 2024 to their redemption in May 2024. The change in fair value was primarily driven by a decrease in fair value at redemption as there was little or no market trading activity and the warrants were redeemed for a nominal payment of $0.001 per warrant.

Other income, net

We record the activities related to leasing office space to third parties in buildings we own as other income, net, as leasing is not core to the Company’s operations. Other income (loss), net, was $(46,000) and $0.1 million during the three months ended June 30, 2025 and 2024, respectively.

Other income (loss), net, was $(0.1) million and $0.3 million during the six months ended June 30, 2025 and 2024, respectively.

We recorded other loss in the three and six months ended June 30, 2025 as due to higher vacancy rates in 2025 compared to the prior year period. We expect other loss to increase in future periods due to the impact of higher vacancy rates on rental income.

Depreciation and amortization for the office complex is included in general and administrative and research and development expense, and thus not reflected in other income, net.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through public and private stock offerings, payments received under collaboration agreements and interest earned on our cash and cash equivalents balances. We intend to continue to use our capital resources to fund research and development activities, capital expenditures, working capital requirements and other general corporate purposes. As of June 30, 2025, cash and cash equivalents were $112.4 million.

2024 Common Stock Warrant Distribution

On January 3, 2024, we made a distribution of approximately 16.9 million warrants to purchase shares of our common stock to holders of record of our common stock as of the close of business on December 22, 2023.

Each warrant entitled the holder to purchase, at the holder’s sole expense and exclusive election, at an exercise price of $33.00 per warrant, one and one-half shares of common stock (rounded down for any fractional shares).

On April 15, 2024, the Company announced that all outstanding warrants were to be redeemed on May 7, 2024 (the “Redemption Date”). The redemption price was equal to 1/10 of $0.01 per warrant. The warrants were exercisable at any time starting on January 3, 2024 until the business day prior to the Redemption Date.

From January 3, 2024 to March 31, 2024, a total of approximately 674,000 warrants were exercised resulting in net proceeds to the Company of approximately $22.3 million. The Company issued approximately 1.0 million shares of common stock from the exercise of warrants through March 31, 2024.

Subsequent to March 31, 2024 and through the Redemption Date, a total of approximately 3.15 million warrants were exercised resulting in gross proceeds to the Company of approximately $104.0 million. The Company issued approximately 4.7 million shares of common stock from the exercise of warrants from March 31, 2024 through the Redemption Date.

Gross proceeds in 2024 from the warrant distribution totaled approximately $126.3 million from the issuance of approximately 5.7 million common shares at $22.00 per share. Total net proceeds of the warrant distribution were approximately $123.6 million after deducting exercise expenses and commissions.

After the first $20 million of gross proceeds, the Company was obligated to pay a commission of 2.5% of the gross proceeds from the sale of shares of common stock from warrant exercises to the Company's financial advisor for the warrant distribution. Total cost of warrant exercises through the Redemption Date were approximately $2.7 million.

2020 Cash Incentive Bonus Plan Obligations

Information with respect to the 2020 Cash Incentive Bonus Plan is included in Note 10 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

No cash payments were authorized or made to participants under the CIB Plan as of June 30, 2025, or through the filing date of this Quarterly Report on Form 10-Q.

Use of Cash

Net cash used in operating activities was $16.3 million for the six months ended June 30, 2025, resulting primarily from a net loss of $67.6 million. This change was partially offset by an increase in accrued development expense of $1.3 million, an increase in accounts payable and accrued expenses of $35.2 million and a decrease in prepaid and other current assets of $5.5 million. There was also a non-cash adjustment for stock-based compensation expense of $9.8 million.

Net cash used in operating activities was $37.4 million for the six months ended June 30, 2024, resulting primarily from the net income of $31.2 million, stock-based compensation expense of $4.9 million and an increase in accounts payable and accrued expenses of $42.0 million, offset by a change in fair value of warrants of $108.2 million, an decrease in accrued developmental expenses of $1.4 million and a decrease in in prepaid and other current assets of $6.3 million.

There was no net cash used in investing activities during the six months ended June 30, 2025.

Net cash used in investing activities during the six months ended June 30, 2024 was $29,000 for computers, equipment and other assets.

Net cash provided by financing activities during the six months ended June 30, 2025 was $0.1 million of proceeds from the exercise of stock options.

Net cash provided by financing activities during the six months ended June 30, 2024 was $123.6 million of net proceeds from the exercise of warrants.

Property and Leases

We own an office complex in Austin, Texas, a portion of which serves as our corporate headquarters. Maintenance, physical facilities, leasing, property management and other key responsibilities related to property ownership are outsourced to professional real-estate managers. The office complex measures approximately 90,000 rentable square feet. At June 30, 2025, we occupied approximately 25% of the property with the remainder either leased or available for lease to third parties. Most tenant leases expired in 2024. We expect to record a net loss on leasing activities in 2025 as the higher vacancy rates are expected to significantly lower rental income.

Other Commitments

We have an accumulated deficit of $472.7 million as of June 30, 2025. We expect our cash requirements to be significant in the future. The amount and timing of our future cash requirements will depend on regulatory and market acceptance of our drug candidates, the resources we devote to researching and developing, formulating, manufacturing, commercializing and supporting our products and other corporate needs. We believe that our current cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months. We may seek additional future funding through public or private financing in the future, if such funding is available and on terms acceptable to us. However, there are no assurances that additional financing will be available on favorable terms, or at all.

As a smaller reporting company, per Item 305(e) of Regulation S-K, we are not required to provide the information called for by this Item 3.

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer (as Principal Executive Officer) and our Chief Financial Officer (as Principal Financial Officer) have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified during the three months ended June 30, 2025 that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

Please refer to “Risk Factors” in Part I, Item 1A of our 2024 Annual Report on Form 10‑K for additional information on our current risks. Other than the supplemental risk factor provided below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K. The risks and uncertainties described in our 2024 Annual Report on Form 10‑K and provided below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition or results of operations.

Disruptions at FDA, including due to a reduction in FDA’s workforce and/or inadequate funding for FDA, could prevent FDA from performing normal functions on which our business relies, which could negatively impact our business.

The ability of FDA to review and approve new products or review other regulatory submissions can be affected by a variety of factors, including statutory, regulatory and policy changes, inadequate government budget and funding levels, a reduction in FDA’s workforce and its ability to hire and retain key personnel. Disruptions at FDA and other agencies may also increase the time to meet with and receive agency feedback, review and/or approve our submissions, conduct inspections, issue regulatory guidance, or take other actions that facilitate the development, approval and marketing of regulated products, which would adversely affect our business. In addition, government proposals to reduce or eliminate budgetary deficits may include reduced allocations to FDA and other related government agencies. For example, in March 2025, the U.S. Department of Health and Human Services (HHS) announced a significant restructuring, which included an FDA workforce reduction of approximately 3,500 employees. It is unclear how existing or planned executive and administrative actions designed to streamline governmental operations and centralize administrative functions will impact FDA or other regulatory authorities that oversee our business. Although the reductions at FDA announced in March 2025 did not target drug and medical device reviewers, such reductions or future reductions in FDA’s workforce as well as budgetary pressures could nevertheless significantly impact the ability of FDA to timely review and process our regulatory submissions or take other actions critical to the development of our products which could have a material adverse effect on our business.