Executive Summary / Key Takeaways

• Alto Neuroscience is a clinical-stage biopharmaceutical company aiming to redefine psychiatry through its proprietary Precision Psychiatry Platform, which uses brain-based biomarkers to identify patients most likely to respond to novel treatments.
• The company boasts a diverse pipeline of five clinical-stage assets targeting major depressive disorder (MDD), bipolar depression (BPD), and schizophrenia, with key Phase 2b and Phase 2 proof-of-concept (POC) data readouts anticipated in mid-2025 through late 2026.
• Financially, Alto is in a pre-revenue stage, reporting a net loss of $15.2 million for Q1 2025, but holds a strong cash position of $161.3 million as of March 31, 2025, following its February 2024 IPO and recent debt/grant agreements, providing a projected cash runway into 2028.
• The Precision Psychiatry Platform, leveraging EEG and other measures, represents Alto's core technological moat, aiming to improve clinical trial efficiency and patient response rates compared to traditional broad-spectrum approaches.
• Key catalysts include upcoming topline data for ALTO-203 (Q2 2025), ALTO-101 (2H 2025), ALTO-300 (mid-2026), and ALTO-100 (2H 2026), which will be critical tests of the platform's predictive power and the drug candidates' efficacy in biomarker-defined populations.

The Promise of Precision in a Challenging Landscape

The field of psychiatry has long grappled with the challenge of treatment response variability. Patients suffering from debilitating conditions like major depressive disorder (MDD), bipolar depression (BPD), and schizophrenia often cycle through multiple medications before finding one that offers meaningful relief, if at all. This trial-and-error approach is costly, time-consuming, and deeply frustrating for both patients and clinicians.

Alto Neuroscience, Inc. ($ANRO), founded in 2019, is built on a mission to fundamentally change this paradigm. The company's core strategy revolves around its proprietary Precision Psychiatry Platform. This platform is designed to move beyond symptom-based diagnosis by identifying brain-based biomarkers – measurable biological indicators – that can predict which patients are most likely to respond to specific novel product candidates. By leveraging neurobiological insights, including electroencephalogram (EEG) data, functional MRI, and other measures, Alto aims to match the right patient to the right treatment, thereby increasing response rates, accelerating clinical development, and ultimately improving patient outcomes. This biomarker-driven approach is foundational to the company's competitive positioning, seeking to offer a more targeted and potentially more effective alternative to the broad-spectrum drugs that dominate the current market.

The company's journey began with foundational license agreements, including technology from Stanford University related to brain guidance for psychiatric treatment, and expanded through key asset acquisitions and licenses for its pipeline candidates like ALTO-100, ALTO-101, ALTO-202, and ALTO-203. This strategic assembly of assets, coupled with the development of its platform, has positioned Alto with a diverse clinical pipeline.

In the competitive landscape, Alto faces established players like Intra-Cellular Therapies (ITCI) with commercial-stage products and significant revenue, as well as clinical-stage biotechs such as Sage Therapeutics (SAGE) and Compass Pathways (CMPS), who are also developing novel therapies for neuropsychiatric conditions, albeit often with different technological approaches (e.g., SAGE's focus on neuroactive steroids, CMPS on psychedelics). While ITCI benefits from established sales channels and positive cash flow, Alto's differentiator lies in its platform's potential to improve clinical trial success rates and patient outcomes through precision. Alto's platform, which has evaluated biomarkers in over 2,000 participants, aims for greater predictive accuracy in patient response, potentially offering a significant advantage in a market where treatment non-response is a major issue. Compared to peers, Alto is currently pre-revenue, reflecting its earlier stage of development compared to ITCI, but its substantial cash reserves provide a longer funding runway than some clinical-stage competitors, enabling continued investment in its platform and pipeline.

The Precision Pipeline: Targeting Specific Patient Profiles

Alto's pipeline currently features five clinical-stage assets, each being developed with the potential application of the Precision Psychiatry Platform to identify likely responders:

• ALTO-100: Aims to treat bipolar depression (BPD) as an adjunctive therapy. Following the completion of a Phase 2b trial in MDD in Q4 2024, which showed a signal in the adjunctive subgroup and evidence of biomarker enrichment, the company is now evaluating ALTO-100 in a Phase 2b trial in BPD. Enrollment is ongoing with a target of approximately 200 patients, and topline data is expected in the second half of 2026. The pro-neuroplasticity mechanism is believed to address cognitive and memory deficits common in BPD.
• ALTO-300: An oral small molecule (agomelatine) acting as a melatonin agonist and 5-HT2C antagonist, being developed at a 25mg dose for MDD patients characterized by an EEG biomarker signature. Agomelatine is approved in Europe and Australia, but Alto is pursuing a U.S. approval for a biomarker-defined population at a dose intended to optimize efficacy and safety. A double-blind, placebo-controlled Phase 2b trial is enrolling approximately 200 biomarker-positive patients for the final analysis (total enrollment expected around 320). Topline data is anticipated in mid-2026. A favorable interim analysis in February 2025 recommended continuing the study and increasing the biomarker-positive sample size, suggesting potential for success. The company recently received a U.S. patent covering ALTO-300 for treating MDD patients with an EEG biomarker.
• ALTO-203: Being evaluated in a Phase 2 POC trial for MDD patients with increased anhedonia (inability to experience pleasure). The trial includes a single-dose period to assess pharmacodynamic effects (including acute change in positive emotion via BL-VAS and EEG measures) and a 28-day treatment period for clinical activity and safety. Enrollment is complete with 69 patients, and topline data is expected in the second quarter of 2025. This trial is powered based on the pharmacodynamic outcomes, not clinical significance, reflecting its POC nature.
• ALTO-101: A brain-penetrant PDE4 inhibitor in a novel transdermal formulation, being evaluated in a Phase 2 POC trial for Cognitive Impairment Associated with Schizophrenia (CIAS). The trial is a cross-over, double-blind, placebo-controlled, dose-escalating study targeting approximately 70 adults with schizophrenia. The transdermal formulation aims to maintain the brain effects seen with oral PDE4 inhibitors while potentially avoiding associated tolerability issues. The primary endpoint is the effect on theta band activity, an EEG measure linked to CIAS. Topline data is expected in the second half of 2025.
• ALTO-202: An orally bioavailable antagonist of the GluN2B subunit of the NMDA receptor, planned for development in MDD. The company is currently planning the next phase of clinical development.
• ALTO-207: A novel dopamine agonist combination product candidate acquired in June 2025, targeting treatment-resistant depression (TRD). This acquisition adds a late-stage readout opportunity within the company's current cash runway.

The strategic rationale behind this diverse pipeline is to apply the Precision Psychiatry Platform across multiple mechanisms and indications, seeking to validate the platform's ability to identify patient responders and de-risk development.

Financial Footing and Future Funding

As a clinical-stage biopharmaceutical company, Alto Neuroscience has not generated revenue from product sales and has incurred significant operating losses since inception, resulting in an accumulated deficit of $153.6 million as of March 31, 2025. The company expects this trend of operating losses and negative cash flows to continue as it advances its pipeline.

For the three months ended March 31, 2025, Alto reported a net loss of $15.2 million, an increase from $13.4 million for the same period in 2024. Operating expenses totaled $15.7 million in Q1 2025, up from $14.4 million in Q1 2024. Research and development expenses remained relatively stable at approximately $10.0 million in both periods, reflecting a shift in spending from completed or slower-enrolling trials (ALTO-100 MDD, ALTO-300) towards progressing the ALTO-203 and ALTO-101 POC trials and increased personnel costs. General and administrative expenses increased by $1.3 million to $5.7 million, primarily due to higher personnel costs and professional fees associated with operating as a public company. Other income, net decreased by $0.5 million, largely due to a $0.7 million loss on debt extinguishment related to the refinancing of the K2 loan.

Alto's liquidity position is crucial for funding its extensive clinical development activities. As of March 31, 2025, the company held $161.3 million in cash, cash equivalents, and restricted cash. This strong cash balance was significantly bolstered by the net proceeds of approximately $133.0 million from its initial public offering in February 2024.

The company has also strategically utilized debt and grant financing. In January 2025, Alto amended its loan agreement with K2 HealthVentures, increasing the potential facility to $75.0 million and drawing an initial $20.0 million, which included refinancing the prior loan. This amended facility extends the maturity to January 2029 and includes an interest-only period potentially extending to January 2028, contingent on drawing additional tranches. The agreement includes a cash runway covenant starting January 2026, requiring at least five months of cash, waived if market capitalization exceeds $700.0 million. The loan also includes a conversion option for the lender to convert up to $9.0 million into common stock at specified prices ($10.49 or $4.83 per share) and warrants to purchase common stock.

Additionally, in July 2024, Alto secured a Convertible Grant Agreement with the Wellcome Trust for up to approximately $11.7 million, specifically for the ALTO-100 BPD program. As of March 31, 2025, $1.3 million of the initial tranche had been drawn, with further amounts available upon achieving milestones. This non-dilutive funding source is a valuable asset for advancing a key pipeline program.

Based on its existing cash and anticipated proceeds from the Wellcome grant, Alto believes it has sufficient capital to fund its operating expenses and capital expenditure requirements into 2028. However, the company acknowledges that its future capital requirements are substantial and depend heavily on the progress and costs of its clinical trials, regulatory timelines, manufacturing needs, intellectual property costs, and potential commercialization activities. While the company filed a shelf registration statement for up to $300.0 million and entered into an ATM facility for up to $75.0 million in February 2025, signaling potential future equity financing options, the ability to raise additional funds on acceptable terms is not assured and is a key risk factor.

Risks and Outlook

The primary risks for Alto Neuroscience are typical of a clinical-stage biopharmaceutical company. The successful development and regulatory approval of its product candidates are uncertain, costly, and time-consuming. Clinical trials may not yield positive results, or the Precision Psychiatry Platform may not prove effective in identifying responders in later-stage trials, undermining the core investment thesis. Competition is intense, and other companies may develop more effective or faster-to-market therapies. The company's reliance on third parties for manufacturing and clinical trials also presents risks. Furthermore, Alto will require significant additional funding beyond its current runway to bring any product candidates to market, and the terms of future financings could be dilutive or restrictive.

Despite these risks, the near-term outlook is marked by significant potential catalysts. The expected topline data readouts for ALTO-203 (Q2 2025), ALTO-101 (2H 2025), ALTO-300 (mid-2026), and ALTO-100 (2H 2026) represent critical inflection points. Positive data from these trials, particularly if demonstrating the predictive power of the Precision Psychiatry Platform, could significantly de-risk the pipeline and validate the company's approach. The recent favorable interim analysis for ALTO-300 and the strategic acquisition of ALTO-207 for TRD add further layers of potential upside and broaden the scope of the pipeline within the existing financial framework.

Conclusion

Alto Neuroscience presents a compelling, albeit high-risk, investment thesis centered on its innovative Precision Psychiatry Platform. By seeking to leverage neurobiological biomarkers to personalize treatment, the company aims to address a fundamental challenge in mental healthcare and potentially unlock greater efficacy for its pipeline candidates compared to traditional approaches.

While currently operating at a loss and facing the significant capital requirements inherent in drug development, Alto's robust cash position, secured through its IPO and strategic debt/grant financing, provides a solid foundation to execute on its near-term clinical goals. The upcoming data readouts over the next 18-24 months are paramount. Success in demonstrating the clinical utility of its biomarker-driven approach and the efficacy of its lead candidates in defined patient populations will be crucial for validating the platform, attracting future investment, and ultimately realizing the potential of precision psychiatry to transform mental health treatment. Investors should closely monitor these catalysts and the company's ability to manage its cash resources as it progresses towards these critical milestones.