Kalytera Therapeutics, Inc. (TSXV:KALY) (“Kalytera”) is pleased to announce that it has entered into a binding letter of intent (the “LOI”) to acquire all of the issued and outstanding securities of Talent Biotechs Ltd. (“Talent”), a privately held, Israeli-based developer of proprietary cannabidiol (“CBD”) therapeutics (the “Transaction”).
Under the terms of the LOI, Kalytera has made a non-refundable payment of USD$1,000,000 to Talent. The acquisition is subject to final due diligence by Kalytera, the negotiation and execution of a definitive agreement, and other customary closing conditions. The acquisition is expected to close on or before February 15, 2017.
Talent is advancing a Phase 2 clinical program investigating the use of CBD to prevent and treat Graft versus Host Disease (“GvHD”), described below. GvHD is an orphan condition that can arise following stem cell or bone marrow transplants. GvHD occurs when the transplanted cells attack the patient’s organs, including the liver, lungs, heart, kidneys, skin, and nervous system. GvHD is associated with acute and chronic illness and infections, disability, reduced quality of life, and death.
In May 2015, Moshe Yeshurun, M.D., who also serves as the Head of the Bone Marrow Transplantation Department at the Rabin Medical Center in Israel and the Chief Medical Officer of Talent, published results from a Phase 2a clinical study investigating the use of CBD for the prevention of GvHD, with promising initial results1. Results show, that when administering CBD, there is a significant decrease in the incidence of acute and chronic GvHD following transplantation as compared to historical control patients. Talent is conducting several additional pilot studies in the treatment of GvHD and has obtained four orphan drug designations (“ODD”) for the prevention and treatment of GvHD in the U.S. and Europe.
The license for this patent was obtained from Mor Research Applications Ltd., the technology transfer company of Clalit Health Services, the largest HMO (Health Maintenance Organization) in Israel.
“We are thrilled to announce the signing of this LOI, which brings us closer to acquiring a late-stage program in GvHD with strong proof-of-concept,” said David Stefansky, Co-Founder of Kalytera and Chairman of the Board of Directors. “There are currently few options to prevent or treat GvHD. We feel incredibly fortunate to be working towards the advancement of this important program.”
“Multiple studies have demonstrated that CBD possesses remarkable therapeutic potential across a broad range of diseases and disorders,” said Andrew Salzman, M.D., Kalytera Chief Executive Officer. “The proposed acquisition of Talent and its late-stage GvHD program significantly advances Kalytera’s mission of becoming a global leader in CBD pharmaceuticals. We are encouraged by Talent’s GvHD data and we are hopeful that Kalytera will be able to rapidly advance the program into placebo-controlled, double blind, randomized studies.”
Summary of Transaction Terms
As consideration for the acquisition of Talent, Kalytera will provide a combination of cash, securities and future contingent payments. Under the terms of the LOI, Kalytera has made a non-refundable payment of USD$1,000,000 to Talent, and, at closing, Kalytera will pay an additional USD$9,000,000 cash and will issue such number of common shares as is equal to 15% of Kalytera’s outstanding common shares prior to closing. Subject to the completion of certain milestones in relation to the development and commercialization GvHD treatments, Kalytera will pay up to USD$20,000,000 in aggregate future contingent payments. Kalytera shall also issue an additional number of common shares as is equal to 2.5% of Kalytera’s outstanding common shares prior to closing of the Transaction, in each case upon the completion of the first Phase 2 clinical study and upon the issuance of the first patent by the USPTO or EU with respect to certain assets of Talent acquired in connection with the Transaction. The vendors of Talent shall also receive additional royalty payments equal to 5% of the aggregate annual net sales of all products covered by patent rights included in the business of Talent.
Upon closing of the Transaction, one director designee of Talent shall be appointed to the board of directors of Kalytera. The vendors of Talent have each agreed to a 12-month lock-up in respect to any Kalytera shares issued on closing and as future contingent payments.
Closing of the Transaction is subject to certain conditions customary in a transaction of this nature including, but not limited to, the completion of satisfactory due diligence, shareholder and TSX Venture Exchange (“TSXV”) approval, as applicable, and the execution of a definitive agreement. The acquisition is expected to close on or before February 15, 2017.
About Graft versus Host Disease
A hematopoietic stem cell transplant (“HSCT”) is a procedure where the cells of the bone marrow or blood of a healthy donor are transplanted into a new host after chemotherapy or radiation. This 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 HSCT procedures in the U.S. in 20142 and the use of HSCT procedures is expected to continue to increase. While HSCT 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 many months or years after HSCT (Chronic GvHD).
GvHD can be mild, moderate, severe, and even life threatening. Patients with GvHD may suffer from rashes and blistering of the skin, nausea, vomiting, abdominal cramps accompanied by diarrhea, and liver damage. Generally, acute reactions are more severe and life threatening.
The exact incidence of GvHD is unknown, but it is a major cause of morbidity and mortality following HSCT. 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 GvHD3. 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 research and consulting firm GlobalData4.
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, and tacrolimus. There is no agreed upon standard regimen and clinical practice varies by institution5.
Treatment of GvHD involves pharmacologic suppression of the graft’s immune cell activation and reestablishment of donor-host immunotolerance. 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 outcomes6. 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 time7. CBD has shown benefit in a number of inflammatory diseases including diabetes8, rheumatoid arthritis9, multiple sclerosis10, and inflammatory bowel disease11.
Talent Clinical Research
In May 2015, Dr Yeshurun published the results of a Phase 2a study that followed adult recipients of HSCT receiving standard GvHD prophylaxis12. Study participants were provided with daily doses of CBD for the seven days prior to transplantation and for 30 days after HSCT. Participants were monitored for an average of 16 months following treatment. Talent researchers compared the trial results to historical data and reported that:
No patients developed Acute GvHD while being treated with CBD
The risk of developing Acute GvHD by day 100 was decreased
Among those that did develop GvHD after HSCT, the time to onset was significantly longer (60 days in the CBD group versus 20 days in the control group)
Patients treated with CBD had fewer skin and gastrointestinal issues compared to the control group
CBD treatment was found to be safe and well tolerated
Talent is conducting several additional pilot studies that may support additional trials in GvHD, including treatment of acute and chronic GvHD using CBD, and plans placebo-controlled, double blind, randomized studies. Those clinical studies may support U.S. Food and Drug Administration (“FDA”) Breakthrough Therapy and Fast Track Designations, which could accelerate the approval process. Talent’s scientific team is led by Moshe Yeshurun, M.D., who also serves as the Head of the Bone Marrow Transplantation Department at the Rabin Medical Center in Israel.
