Mr. Don Cilla reports

APPILI THERAPEUTICS REPORTS FISCAL YEAR 2023 FINANCIAL AND OPERATIONAL RESULTS

Appili Therapeutics Inc. has released its financial and operational results for the fiscal year ended March 31, 2023, and provided an update on the company's strategy for fiscal 2024. All figures are stated in Canadian dollars unless otherwise stated.

"During this fiscal year, the Defense Threat Reduction Agency (DTRA) in partnership with the U.S. Air Force Academy (USAFA) approved approximately $14-million (U.S.) in funding over two years for the advancement of ATI-1701, our vaccine against tularemia, a top-priority biothreat. Recently, we executed an agreement with USAFA for an initial amount of this funding. With this funding and the additional strength added to our senior leadership team, we have the resources in place to continue the advancement of this program and to execute our strategy in advancing our infectious disease assets forward," said Don Cilla, PharmD, MBA, president and chief executive officer of Appili Therapeutics. "In addition, we recently received patent coverage providing exclusivity through at least 2039 for ATI-1501, our taste-masked liquid oral suspension formulation of metronidazole. This is a key achievement prior to the upcoming FDA PDUFA date of Sept. 23, 2023."

ATI-1701, biodefence vaccine candidate with secured funding from U.S. Air Force Academy

ATI-1701 is a novel, live-attenuated vaccine for Francisella tularensis, which causes tularemia, 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 countermeasures for F. tularensis are a top biodefence 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.

In May, 2023, Appili executed the initial contract with USAFA for the previously announced funding of the ATI-1701 program. This contract represents the first stage of funding from the previously announced award from the U.S. Department of Defense (DOD). This initial funding, in the amount of $7.3-million (U.S.), will be used to kick off ATI-1701 early-stage development and regulatory activities. As the initial activities progress, Appili will be engaging USAFA for additional tranches of funding to continue development through IND (investigational new drug). Under the terms of its agreement with USAFA, Appili will be reimbursed for direct costs and labour associated with budgeted program activities, plus will recover a portion of its overhead costs. Appili has submitted its first invoice for such costs and anticipates receiving payment by the end of June, 2023.

If approved by the Food and Drug Administration, Appili may be well placed to receive stockpiling contracts and if ATI-1701 is approved by the FDA as a countermeasure for the prevention of tularemia, it is the company's expectation that the program may be eligible for a priority review voucher (PRV).

ATI-1801, demonstrated safe and effective across phase 3 studies

ATI-1801 is Appili's topical paromomycin product with demonstrated phase 3 efficacy used to treat cutaneous leishmaniasis, a disfiguring infection of the skin that affects hundreds of thousands of people around the world annually. It is an infection characterized by the formation of lesions and ulcers often leading to scarring, disfigurement and stigmatization for those infected.

Appili selected a contract drug manufacturing organization to produce the topical cream which will allow it to meet with the FDA to discuss the previously generated phase 3 data, and the topical cream formulation and agree on the necessary registration package to support an NDA (new drug application) submission. The development timelines for ATI-1801 will be driven by the FDA's feedback on the required bridging study design. Appili expects to pursue non-dilutive financing and partnership opportunities with non-government organizations and government agencies which share the company's focus on tropical diseases to help complete the remaining development work.

ATI-1801 has received an orphan drug designation from the FDA for the treatment of certain forms of cutaneous leishmaniasis. The company is actively evaluating the eligibility of ATI-1801 for a PRV which, if confirmed, would make ATI-1801 the second PRV eligible program at Appili, joining ATI-1701.

ATI-1501, with patent coverage through 2039

ATI-1501 is a taste-masked liquid oral suspension formulation of an antibiotic, metronidazole. Metronidazole is a front-line antibiotic currently only available in a large tablet dosage form 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 2023, and commercialization would commence shortly after approval. The company expects to receive milestone payments in Q3 2023 and Q4 2023 based on Saptalis's proposed NDA submission timeline and commercialization plans.

Appili recently received $250,000 (U.S.) in milestone payments from Saptalis in 2023 and expects to receive additional milestone payments in Q3 2023 and Q4 2023 based on Saptalis's NDA submission and commercialization plans.

In May, 2023, the United States Patent and Trademark Office published patent claims for ATI-1501 under the U.S. application No. 18/072,154 filed on Nov. 30, 2022, and titled "Oral Formulations of Metronidazole and Methods of Treating an Infection Using Same." The patent covers the composition and preparation methods for the drug through 2039.

Annual financial results

The company prepares its financial statements in accordance with international financial reporting standards as issued by the International Accounting Standard Board and Part I of Chartered Professional Accountants of Canada Handbook -- Accounting.

The net loss and comprehensive loss of $9.2-million or eight-cent loss per share for the year ended March 31, 2023, was $15.9-million lower than the net loss and comprehensive loss of $25.1-million or 38-cent loss per share during the year ended March 31, 2022. This relates mainly to a $17-million decrease in research and development (R&D) expenses, $200,000 decrease in general and administrative expenses, $500,000 decrease in business development expenses, and $500,000 decrease in financing costs, offset by a $400,000 increase in exchange loss and a $1-million decrease in government assistance and $1.1-million decrease in revenue.

On March 31, 2023, the company had cash of $2.5-million compared with $6.7-million on March 31, 2022. The company has included a going-concern note in its financial statements for the fiscal year ended March 31, 2023. In particular, the company is dependent in large part on receiving all DOD funding in a timely manner. Delays in reimbursement for previously submitted expenses in the near term may, in the absence of alternative financing arrangements, result in the company not being able to maintain a minimum cash balance as required in its long-term debt arrangements with Long Zone Holdings. For further details, please refer to the company's going-concern note in the company's management's discussion and analysis (MD&A) for the fiscal year ended March 31, 2023.

As of June 22, 2023, the company had 121,266,120 issued and outstanding common shares, 7,842,000 stock options, and 58,247,879 warrants outstanding.

This press release should be read in conjunction with the company's audited annual consolidated financial statements for the fiscal year ended March 31, 2023, and the related MD&A, copies of which are available under the company's profile on SEDAR.

About Appili Therapeutics Inc.

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 anti-parasitic 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 epicentre of the global fight against infection.

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