Executed US$7.3M initial contract with U.S. Air Force Academy for ATI-1701

Upcoming PDUFA date of September 23, 2023 for ATI-1501

Appili Therapeutics Inc. (TSX:APLI; OTCQB: APLIF) (the “Company” or “Appili”), a biopharmaceutical company focused on drug development for infectious diseases and biodefense products, today announced 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 US$14 million 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, Pharm.D., M.B.A., 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 September 23, 2023.”

ATI-1701, Biodefense Vaccine Candidate with Secured Funding from U.S. Air Force Academy

ATI-1701 is a novel, live-attenuated vaccine for F. 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 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.

In May 2023, Appili executed the initial contract with USAFA (the “USAFA Cooperative Agreement”) 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 US$7.3 million, 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. 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 FDA, 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 them to meet with the FDA to discuss the previously generated Phase 3 data, the topical cream formulation, and agree on the necessary registration package to support an NDA submission. The development timelines for ATI-1801 will be driven by the FDAs feedback on the required bridging study design. Appili expects to pursue non-dilutive funding and partnership opportunities with NGOs 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 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.

Appili recently received US$250,000 in milestone payments from Saptalis in 2023 and expects to receive additional milestone payments in Q3 2024 and Q4 2024 based on Saptalis’ 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 November 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 IFRS 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 $0.08 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 $0.38 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, $0.2 million decrease in general and administrative expenses, $0.5 million decrease in business development expenses and $0.5 million decrease in financing costs, offset by $0.4 million 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 to $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 funding 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 (the “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 at www.sedar.com.

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 the funding commitment from USAFA, further anticipated milestones and the timing thereof, the Company’s development plans with respect to ATI-1501, ATI-1701 and ATI-1801, the timing of any milestone and/or royalty payments in respect of ATI-1501, potential Priority Review Voucher eligibility for ATI-1701 and ATI-1801 and the Company’s expectations with respect to its ability to operate as a going concern and satisfy its ongoing working capital requirements. 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. These forward-looking statements reflect the current expectations of the Company’s management for future growth, results of operations, performance and business prospects and opportunities and involve significant known and unknown risks, uncertainties and assumptions, including, without limitation, those listed in the annual information form of the Company dated June 22, 2023, 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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