Mr. Frank Gleeson reports

SATELLOS BIOSCIENCE ANNOUNCES 2023 YEAR END FINANCIAL RESULTS AND OPERATIONAL HIGHLIGHTS

Satellos Bioscience Inc. has released its financial results and operational highlights for the year ended Dec. 31, 2023.

"Two thousand twenty-three has been a pivotal year in transitioning Satellos from a discovery-stage company to a preclinical company, positioning Satellos to further transition into a clinical-stage company during 2024 as we work to advance our lead drug candidate, SAT-3247, into first-in-human studies," said Frank Gleeson, co-founder and chief executive officer, Satellos. "We've generated and publicly presented exciting preclinical data showing the broad potential of SAT-3247 to regenerate muscle tissue and disclosed its molecular drug target as AAK1. We look forward to initiating our clinical development program with a phase 1 study of SAT-3247 midyear."

Program and business update

Highlights for the year ended Dec. 31, 2023, along with recent developments include the following.

Advanced SAT-3247

During Q1, 2024, the company engaged a contract research organization (CRO) to design and implement its planned phase 1 clinical trial for SAT-3247, initiated requisite GLP (good laboratory practice) toxicology studies in two species with SAT-3247, made kilogram quantities of SAT-3247 under GLP conditions at the contract manufacturing organization it selected as its manufacturing partner, and initiated GMP (good manufacturing practice) manufacturing for SAT-3247. The company continues to be on target to initiate and conduct a phase 1 clinical trial in 2024 with SAT-3247.

Subsequent to the year-end, on March 4, 2024, Satellos announced positive preclinical data presented at the Muscular Dystrophy Association Clinical and Scientific Conference. The preclinical data presented show the broad potential of SAT-3247 to improve skeletal muscle function, as has been demonstrated in three mouse models of muscle degeneration: mdx model of Duchenne muscular dystrophy (DMD), FLExDUX4 model of facioscapulohumeral muscular dystrophy (FSHD), and a muscle injury model in wildtype mice. In all instances, treatment with SAT-3247 over a three-to-four-week period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.

On Nov. 14, 2023, the company disclosed for the first time that the molecular 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 its lead development candidate, with SAT-3153 becoming the backup development candidate. The company based this change on preclinical data it generated demonstrating that, compared with SAT-3153, SAT-3247 exhibits improved oral bioavailability, target specificity and tissue distribution. In addition, SAT-3247 exhibits a similar capacity to SAT-3153 to effect muscle regeneration and functional benefit in the mdx mouse model of Duchenne. These properties of SAT-3247 are viewed by the company as important enhancements for clinical development of a novel therapeutic drug.

On Aug. 1, 2023, Satellos announced that the United States Food and Drug Administration (FDA) had granted orphan drug designation and rare pediatric disease designation to SAT-3153 for the potential treatment of DMD. Subsequent to year-end, Satellos submitted similar applications to the FDA for orphan drug and rare pediatric disease designations for SAT-3247.

Progressed capital markets strategy

As reported, during May, 2023, Satellos closed an equity offering led by health-care-specific institutional investors of common shares and prefunded warrants for gross proceeds of $55-million. Investors purchased a total of 110 million securities consisting of 70,297,220 common shares and 39,702,780 prefunded warrants.

Subsequent to the year-end, on Feb. 15, 2024, trading of the company's common shares graduated from the TSX Venture Exchange to the Toronto Stock Exchange.

Throughout 2023 and to date in 2024, Satellos has increased investor exposure through invitations to attend and present at numerous bank-sponsored conferences and through being named as Life Sciences Ontario company of the year, and recognized as a Top 50 TSX Venture Company.

Expanded leadership team

Following the $55-million financing in May, 2023, Satellos expanded its leadership team to fulfill key positions, including:

• Elizabeth Williams, CPA, CA, as chief financial officer (CFO) of the company. Ms. Williams has nearly 20 years of experience in biotech, working with publicly listed entities in both Canada and the United States.
• Michael Cross, PhD, MBA, as chief business officer. Dr. Cross has more than 25 years of biotech and life science experience, including financing and licensing transactions, operations, clinical development, and corporate strategy.
• Courtney Wells as senior vice-president of clinical development operations. Ms. Wells has more than 20 years of experience in clinical development, including orphan and neuromuscular diseases. Among other achievements, Ms. Wells led the clinical trial programs resulting in regulatory approvals of the corticosteroid Emflaza (deflazacort) for the treatment of DMD and the first-ever gene therapy for the treatment of spinal muscular atrophy, Zolgensma.
• In addition to these appointments, Dr. Phil Lambert was appointed chief scientific officer and Dr. Michael Rudnicki as chief discovery officer.

Financial results

Satellos had cash and cash equivalents, and short-term investments, of $39.6-million as of Dec. 31, 2023, compared with $1.9-million at Dec. 31, 2022. The increase in cash and cash equivalents, and short-term investments, is due to proceeds of the $55-million equity offering completed during 2023. Management estimates that, based on current estimates, cash on hand should provide runway through 2025, and advance SAT-3247 through preclinical work, investigational new drug submission and subsequent phase 1 studies.

For the year ended Dec. 31, 2023, Satellos reported a net loss of $15.9-million (18 cents loss per share), compared with a net loss $11.3-million (32 cents loss per share) for the year ended Dec. 31, 2022. The increase in net loss for the year ended Dec. 31, 2023, compared with the year ended Dec. 31, 2022, was primarily a result of higher R&D (research and development) and G&A (general and administrative) expenses in the current-year period.

Research and development expenses increased to $8.8-million for the year ended Dec. 31, 2023, compared with $3.7-million for the year ended Dec. 31, 2022. The increase in R&D expenses was the result of higher salary and management fees related to new hires to advance the company's research programs, increased preclinical pre-IND-enabling expenses, and chemistry, manufacturing and controls expenses for work continuing in the current year as SAT-3247 advanced from the discovery stage to the preclinical stage of development. These increases were offset by lower discovery expenditures as the company selected its lead candidate in 2023 and has advanced into the preclinical stage of development. Non-cash, stock-based compensation increased in the current year due to more grants in the current-year period associated with new hires and increased headcount.

General and administrative expenses increased to $6.6-million for the year ended Dec. 31, 2023, as compared with $4.7-million for the year ended Dec. 31, 2022. The increase in general and administrative expenses in the current year period is primarily the result of increased salary and management fees related to increased headcount, salary adjustments and variable compensation in the year, higher professional fees associated with increased legal fees, consultant fees, and investor relations expenses. Non-cash, stock-based compensation increased due to new grants issued in the current fiscal year, offset by higher fair value of options granted in the prior periods.

Satellos's audited financial statements for the year ended Dec. 31, 2023, and the related management's discussion and analysis (MD&A) will be available on SEDAR+.

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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