Mr. Frank Gleeson reports

SATELLOS BIOSCIENCE ANNOUNCES 2023 Q3 FINANCIAL RESULTS AND OPERATIONAL HIGHLIGHTS

Satellos Bioscience Inc. has released its financial results and operational highlights for the three months ended Sept. 30, 2023.

"This quarter we've significantly expanded our leadership team bringing essential experience and expertise to support advancing our novel small-molecule therapeutic approach for muscle regeneration into clinical trials next year for Duchenne muscular dystrophy," said Frank Gleeson, co-founder and chief executive officer of Satellos. "We are pleased that the ongoing preclinical studies for our Duchenne program continue to support our drug target, mechanism of action and proprietary drug candidates, as we progress our lead drug candidate in IND-enabling [investigational new drug] studies and GMP [good manufacturing practice] manufacturing and remain on track to initiate clinical trials mid-2024."

Program and business update

Highlights for the three months ended Sept. 30, 2023, along with recent developments include:

• Disclosed drug target for Duchenne program and SAT-3247 nominated as lead drug candidate (DC):
  • Subsequent to the quarter-end, on Nov. 14, 2023, the company disclosed for the first time that the drug target for the Duchenne program is AAK1 (formerly K9), a protein kinase in the Notch pathway, which the company discovered can be modulated to enable muscle regeneration. Satellos also announced that SAT-3247 would be nominated as the lead DC based on results generated by the company during its preclinical studies. Preclinical data generated by Satellos demonstrated that SAT-3153 and SAT-3247 have a similar capacity to affect muscle regeneration and functional benefit in the mdx mouse model of Duchenne. SAT-3247 also exhibited improved oral bioavailability, target specificity and tissue distribution when compared directly with SAT-3153 in preclinical studies. Satellos is conducting IND-enabling studies and GMP manufacturing for SAT-3247.
  • The company remains on track to initiate clinical trials mid-2024.
• Expands key leadership team:
  • Satellos announces the appointment of Dr. Michael Cross, PhD, MBA, as chief business officer of the company. Dr. Cross has more than 25 years of biotech and life science experience with demonstrated success in financing and licensing transactions and leadership in operations, clinical product development and corporate strategy.
  • On Sept. 5, 2023, Satellos announced the appointment of Elizabeth Williams, CPA, CA, as chief financial officer of the company and that Warren Whitehead, CPA, CMA, who has served as chief financial officer for Satellos for two years, will now become head of corporate strategy. Ms. Williams has nearly 20 years of experience in biotech, working with publicly listed entities in both Canada and the United States.
  • Satellos also announced the appointment of Courtney Wells as senior vice-president of clinical development operations to lead and implement the clinical trial plans. Ms. Wells has more than 20 years of experience in clinical development for large pharmaceutical companies and innovative biotech companies, including orphan diseases and Duchenne.

Financial results

Satellos had cash and cash equivalents of $44.3-million as of Sept. 30, 2023, compared with $1.9-million at Dec. 31, 2022. The increase in cash and cash equivalents is due to proceeds of a $55-million equity offering completed in the quarter ended June 30, 2023. Management estimates that cash on hand should provide runway through 2025 and advance SAT-3247 through preclinical work, IND submission and subsequent phase 1 studies.

For the three months ended Sept. 30, 2023, Satellos reported a net loss of $3.6-million (three-cent loss per share), compared with a net loss of $1.9-million (five-cent loss per share) for the three months ended Sept. 30, 2022. The increase in net loss was primarily the result of increased R&D (research and development) expenses associated with increased head count and development activity as well as increased G&A (general and administrative) expenses due to increased personnel, recruitment, travel and professional fees.

R&D expenses increased by approximately $1.8-million to $2.7-million for the three months ended Sept. 30, 2023, as compared with $900,000 for the comparative period in 2022. The increase in R&D costs is the result of an increase in salaries, management fees and stock-based compensation related to new hires to advance the company's research programs as well as preclinical pre-IND-enabling expenses and chemistry and manufacturing controls expenses for which there were no comparable costs in the prior year. These increases were offset by lower discovery expenditures as the company's lead program has moved from discovery into preclinical development.

General and administrative expenses increased by approximately $800,000 to $1.8-million for the three months ended Sept. 30, 2023, as compared with $900,000 for the comparative period in 2022. The increase is primarily due to an increase in salaries, management fees and stock-based compensation related to new hires in the current-year period as well as higher legal, investor relations and travel expenses associated with increased activity.

Satellos's interim condensed consolidated financial statements for the three and nine months ended Sept. 30, 2023, and the related management discussion and analysis (MD&A) are available on SEDAR+.

About muscle progenitor cells and Duchenne muscular dystrophy

Duchenne patients suffer from an inability to regenerate, grow and repair muscle. Muscle tissue is regenerated through asymmetric division of muscle stem cells into stem and progenitor cells. Duchenne patients have abundant muscle stem cells but lack muscle progenitor cells, which leads to a defect in muscle tissue regeneration and results in progressive muscle loss. Satellos's scientific founder, Dr. Michael Rudnicki, discovered and has demonstrated how dystrophin is present in muscle stem cells and co-ordinates a biological process known as stem cell polarity to regulate asymmetric cell division. Furthermore, in the absence of dystrophin, the ability to generate progenitor cells is lost, which the company believes is the underlying cause of Duchenne. For the company's Duchenne program, Satellos has designed small molecules to inhibit AAK1, a protein kinase member of the Notch pathway. The company believes AAK1 inhibition, independent of dystrophin, has the capacity to regulate polarity to restore asymmetric muscle stem cell division, generate muscle progenitor cells and enable muscle regeneration.

About Satellos Bioscience Inc.

Satellos is a publicly traded biotechnology company dedicated to developing life-improving medicines to treat degenerative muscle diseases. Satellos has incorporated breakthrough research in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenX, to identify degenerative muscle diseases where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention. With this platform, Satellos is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body's innate muscle repair and regeneration process. The company's lead program is an oral, small-molecule drug candidate in development as a potential disease-modifying treatment for Duchenne muscular dystrophy. Satellos is headquartered in Toronto, Ont.

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