Appili Therapeutics Inc. (TSX: APLI, OTCQB: APLIF) (the “Company” or “Appili”), a biopharmaceutical company focused on drug development for infectious diseases and biodefense, today announced its financial and operational results for the third quarter of its fiscal year 2023, which ended on December 31, 2022.

“Over the past couple of months, it has been an immense honor to serve as the company’s CEO and I’m incredibly proud of all that we have accomplished to enhance and accelerate our diversified portfolio,” said Don Cilla, Pharm.D., M.B.A., President and Chief Executive Officer of Appili Therapeutics. “Recently we announced that the U.S. Department of Defense (“DoD”) has approved ~US$14 million in funding for ATI-1701 to develop this top-priority biothreat vaccine for tularemia through IND submission. Subject to contract finalization, this is expected to further position Appili as a leader in the infectious disease and biodefense market with two biodefense programs that we believe may be eligible for Priority Review Vouchers (“PRV”) upon U.S. Food and Drug Administration (“FDA”) approval.”

“This next quarter will be an important one for Appili on multiple fronts; with ATI-1501, the FDA has accepted the New Drug Application (“NDA”) and assigned the NDA submission a PDUFA date of September 23, 2023. We are working diligently with our partner, Saptalis, and the FDA on receiving NDA approval and preparing for market launch. On our biodefense programs, we are in the process of finalizing definitive contracts with the DoD and preparing to initiate IND-enabling toxicology studies for ATI-1701, selecting a Contract Drug Manufacturing Organization (“CDMO”), and engaging regulatory authorities to align on development plans for ATI-1801, an urgently needed treatment for those suffering from cutaneous leishmaniasis.”

Program highlights along with recent developments include:

ATI-1701, Biodefense Vaccine Candidate with ~US$14 Million in Funding from U.S. Department of Defense

ATI-1701 is a novel, live-attenuated vaccine for F. tularensis, which causes tularemia, is a Category A pathogen which can be aerosolized, and is over 1,000 times more infectious than anthrax. Since it is a highly infectious pathogen capable of causing severe illness, medical counter measures for F. tularensis are a top biodefense priority for the United States and governments around the world. There is currently no approved vaccine for the prevention of tularemia in the United States or other major global markets.

Drug manufacturing activities have been initiated and additional animal work commenced in 2019. Preliminary data from a recently completed non-human primate study showed a protective effect from ATI-1701 when animals were challenged with a lethal dose of F. tularensis 28 days after vaccination, and complete (100% survival) protection from lethal challenge 90 days after vaccination. At 365 days after vaccination, mice (100% survival) and non-human primates (29% survival) still showed evidence of protection.

In February 2022, the United States Defense Threat Reduction Agency selected the Company’s proposal for additional funding to advance ATI-1701. The U.S. Airforce Academy will serve as the prime contractor for this program, while the Company is preparing to serve as a top tier contractor overseeing the comprehensive development activities for ATI-1701. The expected total funding amount of approximately US$14 million should fund this scope of work through IND submission. If approved by the FDA, Appili may be well placed to receive stockpiling contracts and the program may be eligible for a valuable PRV.

ATI-1801, Robust data and Potential PRV

ATI-1801 is a novel topical formulation of paromomycin (15% w/w) under advanced clinical development for the treatment of cutaneous leishmaniasis, a disfiguring infection of the skin that affects hundreds of thousands of people around the world annually. The disease is a serious impediment to socioeconomic development and a priority for governments and non-governmental organizations around the world.

Appili licensed the full clinical dossier for ATI-1801 from the US Army Medical Materiel Development Activity, including the results of a randomized, vehicle-controlled Phase 3 study which evaluated the safety and efficacy of ATI-1801 for the treatment of cutaneous leishmaniasis in Tunisia. The study met its primary endpoint, with ATI-1801 administered topically once daily for 20 days demonstrating a significant improvement in the rate of clinical cure.

Appili plans to select a Contract Drug Manufacturing Organization to produce the topical cream and then meet with the FDA later this year to discuss the previously generated Phase 3 data, the topical cream formulation, and agree on the necessary registration package to support an NDA submission.

ATI-1801 has received an orphan drug designation from the FDA for the treatment of certain forms of cutaneous leishmaniasis. This program may be eligible for a tropical disease PRV, if approved by the FDA.

ATI- 1501, Partnered, Moving Towards FDA Approval and Commercial Launch

ATI-1501 is a taste-masked liquid oral suspension formulation of an antibiotic, metronidazole. Metronidazole is a front-line antibiotic for the treatment of anaerobic bacterial and parasitic infections. Metronidazole has a strong bitter and metallic taste that is exacerbated by crushing and can reduce patient adherence to treatment. ATI-1501 is aimed at making it easier for patients with difficulties swallowing and sensitivity to taste to take metronidazole, improving compliance and supporting clinical outcomes.

In December 2019, Appili entered into a development and commercialization agreement with Saptalis for the manufacturing, development, and commercialization of ATI-1501. Appili is eligible to receive multiple milestone and royalty payments on the development and sale of ATI-1501 in the United States. It is expected that the FDA review will be complete in Q3 2024, and commercialization would commence shortly after approval. The Company expects to receive milestone payments in Q3 2024 and Q4 2024 based on Saptalis’ proposed NDA submission timeline and commercialization plans.

Financial Results

The Company prepares its financial statements in accordance with IFRS as issued by the International Accounting Standard Board and Part I of Chartered Professional Accountants of Canada Handbook–Accounting. All figures are stated in Canadian dollars unless otherwise stated.

The net loss and comprehensive loss of $6.6 million or $0.06 loss per share for the nine months ended December 31, 2022 was $15.2 million lower than the net loss and comprehensive loss of $21.8 million or $0.33 loss per share during the nine months ended December 31, 2021. This relates mainly to a decrease in research and development costs by $17.3 million, a decrease in business development by $0.6 million and a decrease in general administrative expenses by $0.1 million. These decreases were offset by an increase in financing costs by $0.3 million, an increase in foreign exchange loss by $0.4 million, a decrease in government assistance by $0.7 million and a decrease in revenue and interest income by $1.4 million.

As of December 31, 2022, the Company had cash of $1.4 million, compared to $6.7 million on March 31, 2022. As of February 13, 2023, the Company had 121,226,120­ issued and outstanding Common Shares, 8,081,772 ­stock options, and 51,317,879­­ warrants outstanding.

This press release should be read in conjunction with the Company’s unaudited interim condensed financial statements for the three and nine month period ended December 31, 2022 and the related management discussion and analysis (MD&A), copies of which are available on SEDAR at www.sedar.com.

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About Appili Therapeutics

Appili Therapeutics is an infectious disease biopharmaceutical company that is purposefully built, portfolio-driven, and people-focused to fulfill its mission of solving life-threatening infections. By systematically identifying urgent infections with unmet needs, Appili’s goal is to strategically develop a pipeline of novel therapies to prevent deaths and improve lives. The Company is currently advancing a diverse range of anti-infectives, including a vaccine candidate to eliminate a serious biological weapon threat, a topical antiparasitic for the treatment of a disfiguring disease, and a novel easy to use, liquid oral formulation targeting parasitic and anaerobic infections. Led by a proven management team, Appili is at the epicenter of the global fight against infection. For more information, visit www.AppiliTherapeutics.com.

Forward looking statements

This news release contains “forward-looking statements” including with respect to partnering with the DoD, the anticipated funding amount under the partnership with the DoD, PRV eligibility for ATI-1701 and ATI-1801, the regulatory approval and commercialization timeline for ATI-1501 and other statements relating to the Company’s ongoing development plans and timeline with respect to its various products. Wherever possible, words such as “may,” “would,” “could,” “should,” “will,” “anticipate,” “believe,” “plan,” “expect,” “intend,” “estimate,” “potential for” and similar expressions have been used to identify these forward-looking statements.

Forward-looking statements contained in this press release are provided in reliance on certain assumptions, including with respect to the satisfaction of all conditions precedent to the advancement of the full anticipated funding in a timely manner (including receipt by the DoD of any requisite U.S. federal budget approvals), general development plans with respect to the Company’s products (including ATI-1701, ATI-1501 and ATI-1801), general access to data required to support regulatory submissions, expected PRV eligibility for ATI-1701 and ATI-1801, the nature and scope of the services to be provided by Appili to the DoD with respect to advancing the ATI-1701 program and expected commercialization approval for ATI-1501. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, the Company cannot give assurance that these expectations will prove to have been correct.

Forward looking statements involve significant known and unknown risks, uncertainties and assumptions, including, without limitation, the risk that the final conditions governing the funding and the relationship of between Appili and the DoD may not be satisfactory to the Company, the final funding amount for ATI-1701 may be different than that communicated herein (including as a result of the failure to secure the requisite US government budget approvals), receipt of funding may be delayed in the event that any remaining conditions (including finalization of definitive agreements with the DoD) are not satisfied in a timely manner, either ATI-1701 or ATI-1801 may ultimately be determined not to be PRV eligible, other standard risks associated with governmental funding, ATI-1501 may not be approved for commercialization on the expected timeline or at all, and the other risk factors listed in the annual information form of the Company dated June 29, 2022 and the other filings made by the Company with the Canadian securities regulatory authorities (which may be viewed at www.sedar.com). Should one or more of these risks or uncertainties materialize or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those expressed or implied by the forward-looking statements contained in this news release. These factors should be considered carefully, and prospective investors should not place undue reliance on the forward-looking statements. The Company disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments or otherwise, except as required by law.

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