Kalytera Therapeutics, Inc. (TSX VENTURE: KLY and OTCQB: KALTF) (the “Company” or “Kalytera”) today reported financial results for the third quarter of 2019. (All dollars U.S. unless otherwise noted.)
Third Quarter Financial Results
In Q3 2019, the Company had no revenues from product sales, and recorded a net loss of approximately $1.0 million ($0.002 per Common Share), compared with a net profit of approximately $1.8 million ($0.01 per Common Share) in Q3, 2018. The Company’s net loss in Q3 2019 and net profit in Q3 2018 resulted from several factors in each such period, including, primarily, changes in the amounts of certain contingent liabilities and in-process research and development that were charged to income.
Second Quarter Operating Expenses
Research and development expenses in Q3 2019 decreased to approximately $1.0 million, from approximately $1.9 million in Q3 2018. This decrease was due primarily to a decrease in subcontracted R&D costs relating to the Company’s Phase 2 clinical trial in the prevention of acute GVHD, which is nearing completion.
General and administrative expenses in Q3 2019 were approximately $1.1 million, compared to approximately $800,000 in Q3 2018. This increase in general and administrative expenses was primarily due to a loss on investments of approximately $180,000 in Q3 2019 that the Company incurred in connection with the Company’s decision to not proceed with the acquisition of a CBD extraction business, as well as an increase in legal and professional fees in the amount of approximately $80,000 in Q3 2019.
Changes in Fair-Value
The primary factors relating to the Company’s net loss in Q3 2019 compared with its net profit in Q3 2018 were several partially offsetting changes in the fair-values of certain contingent liabilities and in-process research and development that were charged to income. These changes in fair-values also resulted in corresponding changes to the Company’s balance sheet.
Liquidity and Capital Resources
At September 30, 2019, the Company’s current assets, including cash and cash equivalents and other receivables, increased to approximately $861,000 from approximately $747,000 at December 31, 2018. The Company’s current liabilities at September 30, 2019, including accounts payable, current maturities on certain outstanding convertible debentures, and other payables and accrued expenses, decreased to approximately $6M from approximately $7.8M at December 31, 2018.
The Company is currently in discussions with potential partners and buyers for its GVHD program, and believes that any such transaction would be expected to close during Q1 2020. However, there can be no assurance that any such transaction will close during Q1 2020, if at all.
Extension to Maturity Date of Note Owing to Former Shareholders of Talent Biotechs Ltd.
The Company has completed an agreement to extend the maturity date of the promissory note owing to the former shareholders of the Company’s subsidiary, Talent Biotechs Ltd. (“Talent”) (see discussion under “Liquidity and Capital Resources” in the Company’s most recent MD&A) to December 15, 2019, which maturity date may be further extended to March 15, 2020 in the event that the Company enters into a term sheet providing for the license or disposition of the Company’s GVHD program or the sale or merger of the Company by December 15, 2019. In connection with the extension of the maturity date of the promissory note, the Company amended the milestone payment schedule under the share purchase agreement with the former shareholders of Talent. As further described in the Company’s most recent MD&A, the milestone payment schedule was amended in order to reduce the number and amount of milestone payments that the Company will be required to make in the short term, and grants the Company the ability to defer 50% of the amount of some of the milestone payments for up to one year (provided that interest of 8% per annum will accrue on the deferred amount and the Company will issue 13.32 common shares for each dollar deferred). In addition, the aggregate maximum amount of milestone payments that are potentially payable to the former shareholders of Talent was increased from $20M to $25M (this includes the approximately $1.8M principal amount which remains outstanding under the promissory note, as well as approximately $2.8M of payments which have already been made in cash).
The promissory note and the milestone payments are secured by the rights of Talent as licensee under the Mor License and clinical data generated in connection therewith, in addition to a second ranking lien on the shares of certain of the Company’s subsidiaries, being Talent and Kalytera Therapeutics Israel Ltd.
In connection with such amendments, and in order to preserve cash and eliminate expenses, the Company agreed to cease making additional payments to one of its significant research and development consultants, the Salzman Group (except as required to complete the current Phase 2 clinical study in prevention of GVHD). In addition, the Company has agreed to put its program in treatment of acute and chronic pain on hold, and any further payments and expenses in connection with the pain program, and the maintenance of any associated agreements, are subject to discussions with and the approval of the former shareholders of Talent.
The agreement is subject to the approval of the TSX Venture Exchange.
Kalytera Therapeutics, Inc. is pioneering the development of CBD therapeutics. Through its proven leadership, drug development expertise, and intellectual property portfolio, Kalytera seeks to establish a leading position in the development of CBD medicines for a range of important unmet medical needs, with an initial focus on GVHD and treatment of acute and chronic pain.
President and CEO
Phone: (888) 861-2008
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release may contain certain forward-looking information and statements (“forward-looking information”) within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including without limitation in respect of any potential transaction with respect to the Company’s GVHD program or the Company as a whole, its product candidate pipeline, planned clinical trials, regulatory approval prospects, intellectual property objectives and other statements containing the words “believes”, “anticipates”, “plans”, “intends”, “will”, “should”, “expects”, “continue”, “estimate”, “forecasts” and other similar expressions. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risk that the Company may not be successful in entering into or completing a transaction with respect to the Company’s GVHD program, or the Company as whole, on favourable terms or at all, the risk that required regulatory approvals may not be obtained, and the risk that future clinical studies may not proceed as expected or may produce unfavourable results. Kalytera undertakes no obligation to comment on analyses, expectations or statements made by third-parties, its securities, or financial or operating results (as applicable). Although Kalytera believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond Kalytera’s control. The forward-looking information contained in this press release is expressly qualified by this cautionary statement and is made as of the date hereof. Kalytera disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.