Acasti Announces Definitive Agreement to Acquire Grace Therapeutics, Inc.

Grace Merger

Grace Merger

On May 7, 2021, Acasti announced it has entered into a definitive agreement to acquire Grace Therapeutics, Inc., a privately held emerging biopharmaceutical company focused on developing innovative drug delivery technologies for the treatment of rare and orphan diseases. Subject to the completion of the Proposed Transaction, Acasti will acquire Grace’s pipeline of drug candidates addressing critical unmet medical needs with the potential to deliver significant value to patients and providers. It is anticipated that the cash at closing of about $64 million will be principally used to pursue the clinical development of the first two assets through Phase 3, and further advance earlier pipeline assets into the clinic.

The Proposed Transaction has been approved by the boards of directors of both companies and is supported by Grace shareholders through voting and lock-up agreements with the Company. The transaction remains subject to approval of Acasti stockholders, as well as applicable stock exchanges.

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About Grace

Grace Therapeutics is an emerging biopharmaceutical company focused on rare and orphan diseases with high unmet medical needs. Grace’s product candidates aim to improve clinical outcomes by applying proprietary formulation and drug delivery technologies to existing pharmaceutical compounds to achieve improvements over the current standard of care or provide treatment for diseases with no currently approved therapy. Grace’s three lead programs have all received Orphan Drug Designation1 from the U.S. Food & Drug Administration1 (FDA), which could provide up to seven years of marketing exclusivity in the United States upon FDA’s approval of the New Drug Application (NDA), provided that certain conditions are met.

In connection with the Proposed Transaction, Acasti will acquire Grace’s entire therapeutic pipeline consisting of three unique clinical stage and multiple pre-clinical stage assets supported by an intellectual property portfolio consisting of more than 40 granted and pending patents in various jurisdictions worldwide.

Transaction Highlights

  • Acasti and Grace are a strong strategic fit:
    • Acasti gains a new pipeline of high potential clinical and preclinical programs
    • Acasti expands its expertise with Grace’s competencies in novel drug delivery technology and rare diseases
    • Combined company has significant drug development, regulatory and commercialization experience
  • First three clinical-stage assets from Grace have total US market potential of $850 million:
    • Each program addresses unmet medical needs with a highly differentiated value proposition for patients and providers
    • All assets granted Orphan Designation status, with potential for 7-year US and 10-year EU market exclusivity
    • Pursuing lower cost, lower risk 505(b)(2) regulatory pathway
    • Orphan drugs generally command premium pricing
    • Potential near-term, value-enhancing milestones for each product candidate
  • Approximately $64 million cash on hand expected to fund two lead assets through approval and pipeline advancement
    • Multiple additional preclinical drug candidates in pipeline for potential future development or partnering
    • Strong and growing intellectual property portfolio of >40 granted and pending patents in various global jurisdictions

Management and Operations

Upon shareholder approval of the Proposed Transaction, the combined companies will be led by Jan D’Alvise as president and chief executive officer, and the corporation will continue to maintain its corporate headquarters in Laval, Quebec, Canada. All Grace employees will transition to Acasti and they will continue to maintain an R&D laboratory and commercial presence in North Brunswick, New Jersey. The new Board of Directors will be composed of 4 representatives from Acasti and 3 from Grace, with more details to be provided in the proxy statement.

About the Proposed Transaction

Pending approval by Acasti shareholders as well as applicable stock exchange approvals, Grace will merge with a new wholly owned subsidiary of Acasti. Grace stockholders will receive newly issued Acasti common shares pursuant to an exchange ratio formula set forth in the definitive agreement. Under the terms of the definitive agreement, immediately following the consummation of the Proposed Transaction, Acasti’s securityholders on a pro forma basis would own approximately 55% of the combined company’s common shares, and Grace’s securityholders would own approximately 45% of the combined company’s common shares, in each case calculated on a fully-diluted basis, subject to upward adjustments in favor of Acasti based on each company’s capitalization and net cash balance as set forth in the definitive agreement, with more details to be provided in the proxy statement.

In connection with the entering into the definitive agreement, Grace stockholders representing substantially all of the outstanding shares of Grace have entered into voting and lock-up agreements with the Company pursuant to which they have agreed, amongst other things to (i) vote their shares of Grace in favor of the Proposed Transaction, (ii) be subject to lock-up provisions for a period of 12 months (subject to certain exceptions), and (iii) support the election of board nominees through to the 2023 annual general meeting of shareholders.

The Proposed Transaction is expected to close in calendar Q3 of 2021, immediately following approval by Acasti shareholders, subject to any applicable SEC review and stock exchange approvals, as well as satisfaction of other closing conditions by each company specified in the definitive agreement.

Grace’s Leading Drug Assets:

  • GTX-104: Subarachnoid Hemorrhage (SAH) – Intravenous Infusion
    • Clinical stage: PK Bridging study results expected Q1‘22; Phase 3 Safety Study expected to start enrollment Q3’22.
    • Product Description: Novel aqueous nanoparticle formulation of water insoluble nimodipine, that enables a continuous peripheral IV infusion for rapid and enhanced bioavailability. Acasti and Grace believe GTX-104 can potentially improve the management of hypotension and vasospasm in SAH patients, thereby improving patient outcomes and potentially preventing death and/or reduce long-term disability.
    • Disease Target: SAH is a rare and life-threatening medical emergency in which bleeding occurs over the surface of the brain in the subarachnoid space between the brain and skull. A primary cause of such hemorrhage is rupture of an aneurysm or ballooning of a weakened blood vessel wall. Notably, 10-15% of SAH patients currently die before reaching hospital and 20% of admitted patients die in hospital2.
    • Target Market: SAH affects approximately 50,000 patients per year in the U.S.3 with an estimated addressable market of over $300 million4. Nimodipine, the current standard of care for SAH, is only available as an oral capsule and liquid solution in the U.S., making drug delivery very difficult particularly when a patient is unconscious. Oral nimodipine also has suboptimal absorption when administered through the gut5.
  • GTX-102: Ataxia-telangiectasia (A-T) - Oral Mucosal Spray
    • Clinical stage: PK Study results expected 2H’22; start of Phase 3 expected 1H’23.
    • Product Description: A novel and convenient oral mucosal spray formulation of betamethasone intended to significantly improve neurological symptoms of A-T, including improving clinical assessments of posture and gait disturbance, and kinetic speech and oculomotor functions. Currently, there are no FDA approved pharmacotherapies for A-T. Acasti and Grace also believe that GTX-102 could ease drug administration for patients experiencing A-T given its application as a more convenient, concentrated and metered betamethasone liquid spray onto the tongue, as these A-T patients typically have difficulty swallowing6.
    • Disease Target: A-T is a progressive, neurodegenerative genetic disease that primarily impacts children causing severe disability, for which no treatment currently exists. A-T affects many parts of the body, including areas of the brain, causing difficulty with motor function and motion. The disease is also associated with weakening of the immune system predisposing patients to infection, and with faulty repair of damaged DNA that may increase the risk of cancer7.
    • Target market: A-T affects approximately 4,300 patients per year in the U.S.8 with an estimated addressable market of approximately $150 million4.
  • GTX-101: Post Herpetic Neuralgia (PHN) - Topical Spray
    • Clinical Stage: Phase 1 results expected 2H’22; start of Phase 2 expected 2H’22.
    • Product Description: A novel, topical bio-adhesive film-forming spray of bupivacaine for the treatment of PHN, which could provide significant benefits over the standard of care, including greater convenience, and faster onset and longer action. GTX-101’s metered-dose of bupivacaine spray forms a thin bio-adhesive topical film on the surface of the patient’s skin, which enables a touch-free, non-greasy application. No skin sensitivity was reported in its Phase 1 study.
    • Disease Target: PHN is a persistent and often debilitating neuropathic pain caused by nerve damage from the varicella zoster virus (shingles). PHN pain varies from mild to excruciating in severity, and may persist for months and even years, adversely impacting quality of life and leading to social withdrawal and depression. As a result, PHN is often cited as the leading cause of suicide in chronic pain patients over the age of 709.
    • Target market: PHN affects approximately 150,000 patients per year in the U.S.10 with an estimated addressable market of approximately $400 million4. Current treatment of PHN most often consists of oral gabapentin and lidocaine patches, and refractory cases may be prescribed opioids to address persistent pain. Current lidocaine patches used for PHN are suboptimal, as these patches are difficult to use; 40% of patients experience insufficient pain relief, the analgesic effect could take up to 2 weeks, and many patients suffer from skin sensitivity and irritation4. Unlike oral gabapentin and lidocaine patches, Acasti and Grace believe that the biphasic delivery mechanism of GTX-101 has the potential for rapid onset and continuous pain relief for up to eight hours11.

References:

  1. The Orphan Drug Designation program provides orphan status to drugs and biologics which are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition, which is one that affects less than 200,000 persons in the United States or meets cost recovery provisions of the Orphan Drug Act. The status helps incentivize the development of therapies to treat unmet medical needs by providing a company with seven years of exclusivity rights once a drug reaches market.
  2. Rinkel G. 2016
  3. Becske T. et al 2018
  4. Fletcher Spaght Inc., Market Research Report
  5. Soppi V. et al 2007
  6. Lefton-Greif 2000
  7. U.S. National Cancer Institute, Ataxia-Telangiectasia (2015)
  8. National Organization for Rare Disorders, Ataxia-Telangiectasia (2015)
  9. Hess et al 1990
  10. CDC Morbidity and Mortality Weekly Report (2008)
  11. Grace GTX-101 Phase 1 Study Report