Kalytera Therapeutics, Inc. (TSX VENTURE: KLY and OTCQB: KALTF) (the “Company” or “Kalytera”) announced today that it has signed a Letter of Intent (“LOI”) to acquire Stero Biotechs, Ltd. (“Stero”). Stero is a privately held Israeli company that is developing cannabidiol (“CBD”) for co-administration with steroids, so that the effective dosages of steroids can be significantly reduced, thereby potentially avoiding or reducing the many safety issues relating to steroid administration. Closing of the transaction is subject to shareholder approval and other conditions, as explained below.
Importance of this Acquisition
Kalytera and Stero are similar, in that each company is developing CBD pharmaceutical products. However, Stero’s CBD programs address many more, and much larger commercial markets than do Kalytera’s programs. For example, Kalytera has issued patents for the use of CBD in prevention and treatment of graft versus host disease (“GVHD”), which is an orphan disease. Stero, on the other hand, has issued patents covering the use of CBD for steroid sparing in over 130 different diseases and disorders, which, in the aggregate, represent a multi-billion dollar commercial opportunity. The addition of Stero’s portfolio of CBD pharmaceutical programs to Kalytera would position Kalytera among the leaders in CBD pharmaceutical development.
Stero’s Ongoing Phase 2 Programs in Steroid Sparing
Stero currently has two ongoing Phase 2a clinical studies evaluating CBD in steroid sparing, and has data from earlier clinical studies demonstrating that co-administration of CBD with steroids may significantly reduce the need for steroid treatment, with the potential to reduce steroid dosing by as much as 80%.
Steroids are used in treatment of more than 130 diseases and disorders. However, steroids carry an array of potential side effects, such as fluid retention, bone damage, elevated blood sugars, and problems with mood, memory, and mania. In some clinical situations, the risks of steroids outweigh the benefits of the treatment, particularly when high doses are required for a prolonged period of time. For this reason, many physicians are focusing on “steroid-sparing” treatments, to help minimize these effects.
Acquisition will Position Kalytera as a Leader in CBD Pharmaceutical Development
“With the acquisition of Stero, Kalytera will be positioned as a leader in the development of CBD pharmaceuticals, with our current program in prevention and treatment of GVHD, and with multiple additional programs in steroid sparing,” stated Robert Farrell, President and CEO of Kalytera. “With more than 130 named diseases and disorders in which steroid treatment is indicated, our programs in steroid sparing will address a large commercial opportunity, much larger than the opportunity in GVHD. Stero has issued U.S. patents covering the use of CBD for steroid sparing in the 133 named diseases and disorders listed below. ”
- Kalytera will purchase all shares of Stero for a purchase price of USD $30 million, with USD $15 million to be paid in Kalytera common shares at closing; USD $10 million to be paid in Kalytera common shares upon completion of either of Stero’s ongoing Phase 2a clinical studies evaluating CBD for steroid sparing in Crohn’s disease and in Chronic Urticaria, or upon completion of any other Phase 2 clinical study evaluating CBD for steroid sparing in any other indication; and USD $5 million to be paid in Kalytera common shares upon commencement of any new Phase 2a clinical study evaluating CBD for steroid sparing in any other indication.
- Closing of the transaction is expected to occur on or about May 1, 2020.
- Closing of the transaction is subject to certain conditions and the receipt of all required regulatory and third party approvals, including the approval of the TSX Venture Exchange.
- Additional closing conditions include shareholder approvals of the transaction by both the shareholders of Kalytera and Stero; Kalytera shareholder approval of a 100:1 share consolidation; and closing of a USD $10 million private placement financing the (“Private Placement”).
- Kalytera will engage both Canadian and Israeli investment banks and advisers to manage the Private Placement. The Private Placement will be priced following effectiveness of the 100:1 share consolidation, and the proceeds of the Private Placement will be escrowed pending Kalytera shareholder approval of both the acquisition of Stero and the 100:1 share consolidation.
- Kalytera will Acquire Issued and Pending Patents Covering the Use of CBD in Steroid Sparing: Stero’s issued U.S. patent covers the use of CBD for steroid sparing in more than 130 named diseases and disorders. This is a very strong patent, which covers the use of CBD and any combination of steroids, in any delivery system and at any dosage. In addition to its issued U.S. patent, Stero also has patents pending in multiple other jurisdictions.
- Kalytera will Acquire Stero’s Two Ongoing Phase 2a Clinical Studies in Steroid Sparing: With the acquisition of Stero, Kalytera will acquire Stero’s two ongoing Phase 2a clinical studies evaluating CBD for steroid sparing in Crohn’s disease and in Chronic Urticaria, each of which are large commercial opportunities. In addition, Stero is preparing to commence a third Phase 2 clinical study evaluating CBD for steroid sparing in treatment of COPD, another large commercial opportunity.
- Kalytera will Acquire Initial Clinical Data that is Highly Positive: Stero’s clinical trial data demonstrate promising results for the use of CBD to reduce steroid dependency, with potential to reduce steroid dosing by as much as 80%.
- Kalytera will Benefit from Stero’s Relationship with Clalit Health Services: Stero’s ongoing Phase 2a studies in steroid sparing are being conducted at hospitals in Israel that are owned and managed by Clalit Health Services. Clalit is Israel’s largest HMO, and the second largest HMO in the world, with 14 hospitals, more than 2,000 community clinics, more than 9,000 physicians and over 4 million members. Stero and Clalit are working cooperatively to advance Stero’s programs in steroid sparing, and this important strategic partnership will enable Kalytera to easily initiate additional clinical studies in other steroid sparing indications within the Clalit network of hospitals.
- Acquisition of Stero will Position Kalytera as a Leader in CBD Pharmaceutical Development: With the acquisition of Stero, Kalytera will become a clear leader in CBD pharmaceutical development: with its current Phase 2 program evaluating CBD in prevention of GVHD; and with additional ongoing Phase 2a programs evaluating CBD in steroid sparing.
- New Program in Steroid Sparing will Address Multiple Large Commercial Opportunities: With the acquisition of Stero, Kalytera will be developing CBD for dozens of commercial opportunities, much larger than the commercial opportunity in GVHD.
Management and Board Changes
On close of the acquisition, Mr. David Bassa, Chairman and CEO of Stero, will be appointed as Chairman and CEO of Kalytera, and Kalytera’s current board of directors will be replaced by directors to be named by Mr. Bassa. In anticipation of this, two of Kalytera’s current independent directors, Jeff Paley, M.D. and Mr. Robin Hutchison, have submitted their notices of resignation, and will be replaced by independent directors to be named by Mr. Bassa.
Issuance of EU Patent for Prevention and Treatment of GVHD
The European Patent Office (the“EPO”) has granted Kalytera’s Patent EP 2 991-733 B1 covering the use of CBD in the prevention and treatment of GVHD.
“We are delighted that the EPO has granted this patent”, said Robert Farrell, Kalytera’s President and CEO. “Kalytera now has issued patents in both the U.S. and EU for the use of CBD in the prevention and treatment of GVHD.”
Kalytera has exclusive worldwide rights to the use of CBD in the prevention and treatment of GVHD under three U.S. patents, as well as this new EU patent. Kalytera has also obtained four orphan drug designations for the treatment and prevention of GVHD in the U.S. and Europe. In addition to protection from competition granted to the Company under its patents, the U.S. and EU orphan drug designations will provide 7-years of market exclusivity in the U.S., and 10-years of market exclusivity in the E.U., upon regulatory approval of the Company’s CBD products for the prevention and/or treatment of GVHD.
Kalytera acquired its program in the prevention and treatment of GVHD in February 2017 through the acquisition of Talent Biotechs, Ltd. of Israel (“Talent“). Under its agreement with the former Talent shareholders, Kalytera is obligated to make additional contingent payments to the former Talent shareholders upon the achievement of certain milestones, including upon the issuance of certain patents. With the issuance of EU patent number EP 2 991-733 B1; Kalytera is now obligated to make an additional cash payment to the former Talent shareholders of USD $2 million. Under an agreement entered into with the former Talent shareholders in October 2019, Kalytera has the option to delay 50% of this amount for a period of one year from the date of issuance of the patent, provided that Kalytera issues to the former Talent shareholders 13,320,000 Kalytera common shares. Kalytera intends to exercise this option to delay payment of 50% of the amount due, USD $1 million, and, accordingly, will issue 13,320,000 common shares to the former Talent shareholders, with the balance of USD $1 million to be paid in cash from the net proceeds of the Private Placement.
About Stero Biotechs Ltd.
Stero Biotechs aims to address unmet medical needs through the use of CBD, a non-psychotropic component of cannabis sativa, which has been shown to possess potent immuno-modulatory and anti-inflammatory properties in various indications. Stero’s clinical data demonstrate that CBD administration enhances the therapeutic effect of steroids, and may permit reduced steroid dosages, while maintaining or improving the original therapeutic effects of such steroids.
Kalytera Therapeutics, Inc. (“Kalytera”) is pioneering the development of a next generation of cannabinoid therapeutics. Through its proven leadership, drug development expertise, and intellectual property portfolio, Kalytera seeks to establish a leading position in the development of novel cannabinoid medicines for a range of important unmet medical needs, with an initial focus on graft versus host disease.
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 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 future clinical studies may not proceed as expected or may produce unfavourable. 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.