June 2019 Shareholder and Stakeholder Letter

June 27, 2019

Dear Shareholders and Stakeholders,

As we approach the end of the 2nd Quarter, I wanted to provide an update on our business and our planned endeavors for 3Q19. Overall, our executive team is working diligently to make sure the promise of Alitair remains alive and that our firm remains very investable. Our target markets, our pipeline, our intellectual property, our clinical development and our regulatory strategy all remains very viable. And, the long-term opportunity to capture increasing value for shareholders and stakeholders is exciting.

First, a look back to early 2019.

(1) As we exited 2018, Alitair was under a Term Sheet Agreement complete with confidentiality, exclusivity and non-circumvention contractual positions with two funders. These contractual guardrails limited us to what we could communicate. Under the Term Sheet, Alitair planned a new preferred stock offering with a new entity that was focused on launching a large venture fund with leading US healthcare systems. This new entity had committed an initial tranche of $20 million to Alitair as well as an additional second tranche of $10 million, if needed. Based on this funding commitment, Alitair also had negotiated an agreement with an Investment Bank for $10 million once the initial $20 million capital raise was underway. With both firms, Alitair held a strong valuation and the proposed share pricing was very attractive. Our team worked extensively with both firms for over 12 months, extending our Term Sheet several times, as the new entity was in “launch mode”.

Based on ongoing feedback from the new entity’s well recognized management team, we felt we had good information on the status of the raise and that it was appropriate to show patience. But, at the end, closing dates were delayed and delayed. The continued lack of funds had severely limited or halted our ability to continue projects and initiate new projects. In mid-January, the new entity’s “Fund 1” was still not closed, and we learned that investment criteria were potentially changing and companies like Alitair may no longer be candidates for funding. Alitair was in a difficult spot. Therefore, we reached a point following the J.P. Morgan (JPM) Healthcare Conference where our team decided to part ways with this venture fund and immediately pursue alternate funding opportunities.

So, we have closed this chapter, moved on and have no encumbrances to new capital raises. We have left an open door to the new fund entity to participate in future Alitair raises once they get fully funded themselves.

(2) Alitair also had an intra-company milestone in February. Our co-founder, Dr. William Howard, retired from the company and resigned his position as Chairman and President. Bill was instrumental in driving Alitair to where it is today; however, moving forward, he has no active role in either the day-to-day operations or in strategic board decisions. Bill remains our largest shareholder and his share position remains tied to a Voting Rights Agreement with the Proxy held by the Board of Directors. We wish Bill well as he moves into this new phase of his life. You can find more information regarding Bill’s retirement on our website and our Facebook page. Following this retirement and a vote at our March 2019 Board Meeting, I will hold the position of Chairman and CEO. I look forward to this expanded set of responsibilities. I am fully committed to getting Alitair funded, executing our business plan and moving towards an IPO. I have also decided not to fill the President role right now (based on need and on our funding situation), so this position will remain an open spot on my Executive team for the foreseeable future.

Now, the current situation.

As we exited JPM, we kicked our alternate funding plans into gear. We rebuilt relationships that had been on hold for over 12 months, we built new contacts, and we refocused our near-term business plan. Today, the Alitair Board of Directors and Executive Team is pleased to announce that a capital raise of up to $8 million is underway. Our lead agent is Network 1 Financial Securities (www.network1.com) and we anticipate support from at least two additional firms. This financing round is focused on a Common Stock offering and share pricing is consistent with our prior funding round. Although we cannot provide assurance that we will succeed in completing this funding, the capital raise will run through the summer months and ends September 30th. We believe this funding will allow for the achievement of key product development and key intellectual property milestones that will drive the Alitair valuation higher and position the company well for an IPO or other additional financing.

We are now limiting our business efforts in the next 12-months to two IND-enabling studies and two IP-enabling studies … with some funds targeted to General Corporate Purposes. This will focus product development on gaining IND’s for benzonatate (for the symptomatic treatment of cough) and for Overdose Reduction (ODR) formulation technology. Benzonatate tablets are a non-narcotic treatment option for cough and benzonatate, as a class, has become the leading therapeutic option within this large market comprised of 26 million doctor visits and 23 million prescription. Benzonatate has the potential to be a large revenue contributor to Alitair. And, ODR remains an innovative approach to minimizing the risk of prescription medicine abuse and misuse. Once we complete the proof-of-principal study, ODR could bring substantial royalty streams and milestone payments to Alitair. We believe this product portfolio is a potent “1-2 punch” against the Opioid Crisis – benzonatate avoids the use of opioids altogether and ODR minimizes the risk of overdose when opioids are truly needed.

The intellectual property (IP) investment focus is on ALT-09 and ALT-07. We will not move ahead with a costly Phase II study on ALT-09 until we see the new IP opportunity unfold. We will work to determine the best path forward for ALT-07 depending on our ability to secure new IP that could significantly extend exclusivity. We have discussed these IP plans with our licensors, Recipharm and ABC Farmaceutici, respectively, and they are aligned with our approach. In addition, we will place our product development related to the narcotic cough products on hold until we gain additional financing.

This is a sound financial plan that best utilizes the anticipated funding to grow our valuation and position Alitair for success in the coming months. This has been a very, very difficult period for Alitair. We have made it through this period and now see a clearer path forward.

As we are now positioned to receive funding, I wanted to comment on 3 long-standing commitments made to investors. The first, launching an updated website, was completed in January. The other two remain on target with our “within 60 days of funding” commitment:

  1. Initiate a quarterly Investor Relations (IR) newsletter to shareholders

  2. Launch a web-based book entry listing of existing stock certificates using American Stock Transfer (AST) as our Transfer Agent. This will provide you with a web portal to view your Alitair holdings, eliminate the need for paper stock certificates, provide us with updated contact information and provide you a mechanism to transfer shares to your individual brokerage account if/when Alitair shares are listed on a public exchange.

Closing Comments.

I would like to acknowledge the Alitair Executive team for their day-to-day perseverance, and unyielding commitment to Alitair and to protecting shareholder value (even in a long period of working for no pay and having little company resources). These individuals have performed well in trying times and have always acted in the most professional manner.

I would also like to thank our many shareholders for their patience as we work to optimize their return on investment. Initial investors have driven us to where we are today and that is much appreciated. And, we welcome our new investors who will help reinvigorate our product development programs in 3Q/4Q 2019 and into 2020.

Lastly, you can keep in contact with Alitair Pharmaceuticals via our website (www.alitair.com) and on Facebook (www.facebook.com/alitairpharma). I invite you to stay tuned for future updates as the capital raise is implemented and we move towards the end of the 3rd quarter.

On behalf of Alitair, and the entire Executive Team …


James Hoyes

Chairman & CEO

Alitair Forward-Looking Statement

The information contained in this June 2019 Investor Letter may contain information about the Company’s future plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical facts and may be "forward looking statements". Forward looking statements may be identified through the use of words such as “may”, "expects/excepted", "will", "anticipates", “allows”, "estimates", "believes", “provides” or by statements indicating certain actions "may", "could", "should" or "might" occur. Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. For example, the Company and its agents may not succeed in raising the $8 million sought in the current capital raise. The information contained in this June 2019 Investor Letter was current as of the date prepared and we specifically disclaim any obligation to update any forward-looking statements, whether as a result of new information, future developments, or otherwise. Version: 06.21.2019

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