Kalytera Completes Acquisition of Talent Biotechs

“We feel incredibly fortunate to be continuing Talent’s groundbreaking work in GvHD,” said Andrew Salzman, M.D., Kalytera’s Chief Executive Officer. “There are currently few options to prevent or treat persons with GvHD, a large and critically underserved market. The results of Talent’s Phase 2 clinical studies are unprecedented, and mark a major milestone in the potential prevention and treatment of this severe and life-threatening disease. We are encouraged by the data and seek to rapidly advance the GvHD program into FDA Phase 2b clinical studies.”

“This is a transformational transaction for Kalytera,” said Robert Farrell, President, COO, and CFO of Kalytera. “Multiple studies have demonstrated that CBD, a non-psychoactive cannabis constituent, possesses remarkable therapeutic potential across a broad range of diseases and disorders. The acquisition of Talent and its late-stage GvHD program significantly advances Kalytera’s position as an emerging leader in CBD pharmaceuticals. We expect our work in GvHD to be the first of many programs that seek to investigate and commercialize this important compound.”

Summary of Transaction Terms

As consideration for the Acquisition, Kalytera will provide a combination of cash, securities, and future contingent payments to Talent. To date, Kalytera has made cash payments to Talent totaling USD$10,000,000. In addition, Kalytera has issued 17,301,208 common shares to Talent, which securities will be subject to a contractual hold period expiring December 30, 2017. Subject to the completion of certain milestones in relation to the development and commercialization of the GvHD program, Kalytera will pay up to USD$20,000,000 in aggregate future contingent payments. Kalytera shall also issue to Talent an additional 2,883,535 common shares upon the completion of the first Phase 2b clinical study, and a further additional 2,883,535 common shares upon the issuance of the first patent by the USPTO or EU with respect to certain assets of Talent acquired in connection with the Acquisition. The shareholders of Talent shall also receive additional earn-out payments equal to 5% of the aggregate annual net sales of all products covered by patent rights included in the business of Talent.  The Acquisition has been conditionally approved by the TSX Venture Exchange, but remains subject to final approval.

About Graft versus Host Disease

GvHD is an orphan disease that can arise following hematopoietic stem cell transplantation (“HCT”), a procedure where the stem cells of the bone marrow or peripheral blood of a healthy donor are transplanted into a new host after chemotherapy or radiation. HCT is a lifesaving procedure for many diseases of the blood and bone marrow including leukemia, Hodgkin and Non-Hodgkin lymphoma, multiple myeloma, sickle cell anemia, and thalassemia. There were over 8,000 HCT procedures in the U.S. in 2014¹ and the use of HCT procedures is expected to continue to increase. While HCT procedures can be lifesaving, they pose many dangerous side effects, including infection and GvHD.

GvHD is a multisystem disorder that occurs when the transplanted cells from a donor (“the graft”) recognize the transplant recipient (“the host”) as foreign. This interaction initiates an immune reaction that causes disease in the transplant recipient. This reaction can occur within days after the transplant (acute GvHD) or months to years after HCT (chronic GvHD).

GvHD can be mild, moderate, severe, and even life threatening. Patients with acute GvHD may suffer from rashes and blistering of the skin, nausea, vomiting, abdominal cramps accompanied by diarrhea, and jaundice. Generally, acute reactions are more severe and life threatening.

GvHD is a major cause of morbidity and mortality following HCT. Researchers estimate that even with intensive prophylaxis with immunosuppressive treatments, 30-50% of patients transplanted from fully matched sibling donors and 50-70% of patients transplanted from unrelated donors will develop some level of GvHD². The GvHD market was valued at $295M across the six major markets in 2013, and is expected to grow to $544M by 2023, according to the research and consulting firm GlobalData³.

Standard of Care: Prevention and Treatment of GvHD

The first step in prevention of GvHD is the selection of donor cells that closely match the genetics of the immune system of the transplant recipient, ideally a sibling donor. From there, the patient relies on drugs that have been developed to prevent or treat GvHD. Medicinal prevention of acute GvHD is dependent on immunosuppression of the donor cells, either pharmacologically or through T cell depletion. Common drugs include methotrexate, cyclosporine tacrolimus, sirolimus, mycophenolate mofetil, and ATG. Preventive measures and clinical practices vary by institution⁴.

Treatment of GvHD involves pharmacologic suppression of the graft’s immune cell activation and reestablishment of donor-host immune-tolerance. Most patients are prescribed corticosteroids, which directly suppress the donor’s immune cell attack on host tissue, but also raise the risk of infection and cancer relapse. As with prevention, the optimal drug strategy for GvHD is not well defined. Only 30-50% of patients with moderate to severe GvHD respond to corticosteroids, putting many at risk for fatal outcomes⁵. Better treatment options are needed to improve the mortality and morbidity outcomes for transplant recipients.

CBD and GvHD

CBD is a major component of Cannabis sativa, commonly known as marijuana. CBD possesses potent anti-inflammatory and immunosuppressive properties. Unlike the other major component of cannabis, tetrahydrocannabinol (“THC”), CBD is non-psychoactive and is well tolerated by humans when taken over extended periods of time⁶. CBD has shown benefit in a number of models of inflammatory diseases including diabetes⁷, rheumatoid arthritis⁸, multiple sclerosis⁹, and inflammatory bowel disease¹⁰.

GvHD Clinical Research

In May 2015, Moshe Yeshurun, M.D., Chief Medical Officer of Talent and of the Head of the Bone Marrow Transplantation Department at the Rabin Medical Center in Israel, published the results of a Phase 2a study that followed adult recipients of HCT receiving standard GvHD prophylaxis¹¹. Study participants were provided with daily doses of CBD for the seven days prior to transplantation and for 30 days after HCT. Participants were monitored for an average of 16 months following treatment. Talent researchers compared the trial results to historical data and reported that: