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Kalytera Therapeutics Enters into Binding Letter of Intent to Acquire Talent Biotechs and its Phase 2 Clinical-Stage Graft versus Host Disease Program

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 01/13/17 -- Kalytera Therapeutics, Inc. (TSX VENTURE: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 results(1). 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 2014(2) 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 GvHD(3). 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 GlobalData(4).

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 institution(5).

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 outcomes(6). 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 time(7). CBD has shown benefit in a number of inflammatory diseases including diabetes(8), rheumatoid arthritis(9), multiple sclerosis(10), and inflammatory bowel disease(11).

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 prophylaxis(12). 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.

About Kalytera Therapeutics

Kalytera (TSX VENTURE:KALY) 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.

Kalytera is focused first on developing a new class of proprietary cannabidiol ("CBD") therapeutics. CBD is a remarkable compound that has shown activity against a number of pharmacological targets. However, there are limitations associated with natural CBD, including its poor oral bioavailability and short half-life. Kalytera is developing innovative CBD formulations and prodrugs in an effort to overcome these limitations, and to target specific disease sites within the body. Kalytera intends to file composition of matter and method of use patents covering its novel inventions, with the goal of limiting future competition.


--  Website Home: https://kalytera.co/ 
--  News and Insights: https://kalytera.co/news/ 
--  Investors: https://kalytera.co/investors/ 

Cautionary Note

Completion of the proposed Transaction is subject to a number of conditions including, but not limited to, completion of satisfactory due diligence, execution of the definitive agreement in respect of the proposed Transaction, TSXV acceptance and, if applicable, shareholder approval. Where applicable, the proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed Transaction will be completed as proposed, or at all.

Investors are cautioned that any information released or received with respect to the proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Kalytera should be considered highly speculative.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) has in any way passed upon the merits of the proposed Transaction and associated transactions and neither of the foregoing entities has in any way approved or disapproved of the contents of this press release.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Forward-Looking Statement Disclosure

This news release contains "forward-looking information" within the meaning of applicable securities laws relating to the proposed Transaction including statements regarding the terms and conditions of the proposed Transaction, as well as information relating to Talent. The information about Talent contained in the press release has not been independently verified by Kalytera. Although Kalytera believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate, that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because Kalytera can give no assurance that they will prove to be correct. 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 risks that the parties will not proceed with the proposed Transaction; that the ultimate terms of the proposed Transaction will differ from those that currently are contemplated by the LOI; and that the proposed Transaction will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The terms and conditions of the proposed Transaction may change based on Kalytera's due diligence and the receipt of tax, corporate and securities law advice for both Kalytera and Talent. The statements in this press release are made as of the date of this release. Kalytera undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of Kalytera, Talent, their securities, or their respective financial or operating results (as applicable). Kalytera disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

(1) Yeshurun M, Shpilberg O, Herscovici C, et al. Cannabidiol for the Prevention of Graft-versus-Host-Disease after Allogeneic Hematopoietic Cell Transplantation: Results of a Phase II Study. Biol Blood Marrow Transplant. 2015;21(10):1770-5.

(2) Center for International Blood and Marrow Transplant Research (CIBMTR) HCT Trends and Survival Data

(3) Weisdorf D. GVHD the nuts and bolts. Hematology Am Soc Hematol Educ Program. 2007;:62-7.

(4) GlobalData Report (2015)

(5) Ruutu T, Van biezen A, Hertenstein B, et al. Prophylaxis and treatment of GVHD after allogeneic haematopoietic SCT: a survey of centre strategies by the European Group for Blood and Marrow Transplantation. Bone Marrow Transplant. 2012;47(11):1459-64.

(6) Weisdorf D. GVHD the nuts and bolts. Hematology Am Soc Hematol Educ Program. 2007;:62-7.

(7) Mechoulam R, Peters M, Murillo-rodriguez E, Hanus LO. Cannabidiol--recent advances. Chem Biodivers. 2007;4(8):1678-92.

(8) Weiss L, Zeira M, Reich S, et al. Cannabidiol lowers incidence of diabetes in non-obese diabetic mice. Autoimmunity. 2006;39(2):143-51.

(9) Malfait AM, Gallily R, Sumariwalla PF, et al. The nonpsychoactive cannabis constituent cannabidiol is an oral anti-arthritic therapeutic in murine collagen-induced arthritis. Proc Natl Acad Sci USA. 2000;97(17):9561-6.

(10) Trojano M. Advances in the management of MS symptoms: real-life evidence. Neurodegener Dis Manag. 2015;5(6 Suppl):19-21.

(11) Schicho R, Storr M. Topical and systemic cannabidiol improves trinitrobenzene sulfonic acid colitis in mice. Pharmacology. 2012;89(3-4):149-55.

(12) Yeshurun M, Shpilberg O, Herscovici C, et al. Cannabidiol for the Prevention of Graft-versus-Host-Disease after Allogeneic Hematopoietic Cell Transplantation: Results of a Phase II Study. Biol Blood Marrow Transplant. 2015;21(10):1770-5.

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