Arrangement is expected to fund Skye's proprietary synthetic cannabinoid-derivative therapeutic initially targeting glaucoma for first Phase 2 clinical study planned to start later in 2022
Preclinical studies have demonstrated potential advantages of Skye's unique, patent-protected therapeutic drug, SBI-100 Ophthalmic Emulsion, compared to the standard of care
Vancouver, British Columbia--(Newsfile Corp. - May 12, 2022) - Emerald Health Therapeutics, Inc. (CSE: EMH) (OTCQB: EMHTF) ("Emerald") and Skye Bioscience, Inc. (OTCQB: SKYE) ("Skye") announced today that the companies have entered into a definitive agreement with respect to a transaction to be completed by way of a Plan of Arrangement (the "Arrangement") whereby Skye would acquire all of the issued and outstanding shares of Emerald in a share-for-share-transaction. Skye is a San Diego-based pharmaceutical company developing proprietary, synthetic cannabinoid derivatives to treat glaucoma and other diseases with significant unmet needs. Emerald possesses cash and non-cash assets that Skye would acquire through the Arrangement. The proposed Arrangement is subject to approval by each company's common stockholders and by the Supreme Court of British Columbia, Canada.
As a result of the Arrangement, current Skye stockholders would own approximately 54% of the common stock of Skye and former shareholders of Emerald would own approximately 46% of Skye's common stock.
Skye possesses patented technology and know-how focused on enabling, enhancing, and clinically validating therapeutic outcomes of uniquely modified and synthetically manufactured cannabinoid-derivative molecules. This outcome has already been shown in preclinical studies that have demonstrated notable advantages of Skye's lead therapeutic drug, SBI-100 Ophthalmic Emulsion ("SBI-100 OE"), over the established clinical standard of care for treating glaucoma and potentially represents a new and necessary class of therapeutic for the world's leading cause of irreversible blindness. Through the completion of this transaction, Skye expects to have funding for a Phase 2 study it is planning to start in the fourth quarter of 2022, following a Phase 1 study beginning in the second quarter of 2022.
Details of the Proposed Arrangement
Under the Arrangement, Skye will issue Emerald shareholders 1.95 shares of Skye's common stock (the "Exchange Ratio") in exchange for each Emerald share. Based on the number of outstanding shares as of the date of this press release, it is expected that Skye would issue approximately 416M Skye shares to Emerald shareholders. All stock options and warrants of Emerald will be exchanged for replacement options and warrants of Skye on identical terms, as adjusted in accordance with the Exchange Ratio.
The board of directors of each of Emerald and Skye has unanimously approved the Arrangement and recommend that their respective shareholders vote in favor of the Arrangement. Evans & Evans, Inc. has provided an opinion to the board of directors of Emerald stating that as of the date of the opinion and based upon and subject to the assumptions, limitations, and qualifications set forth therein, the Exchange Ratio to be received by the holders of Emerald common shares pursuant to the Arrangement is fair from a financial point of view to such holders.
The completion of the Arrangement is subject to customary terms and conditions, including the following:
- Approval of the Arrangement by special resolutions of disinterested Skye and Emerald shareholders;
- Court approval of the Arrangement; and
- Receipt of all required regulatory approvals, including acceptance by the Canadian Securities Exchange (the "CSE") of Skye's listing on the CSE.
The Arrangement is anticipated to close in the third quarter of 2022. Skye expects to file a proxy statement and supporting materials on Schedule 14A and will hold a special meeting of stockholders to seek approval of the Arrangement and related stockholder proposals. Emerald expects to file an information circular required for Emerald's shareholder meeting to seek approval of the Arrangement.
Upon completion of the transaction, the combined company would continue to operate under the name Skye Bioscience, Inc. with its existing management team. Sukhwinder (Bobby) Rai, BSc. Biochem, BSc. Pharm, RPh., from Emerald's Board of Directors would join Skye's Board of Directors.
Scalar CA, LLC provided certain financial advisory services to Skye in connection with the Arrangement. Fasken Martineau DuMoulin LLP is acting as Skye's Special Committee legal counsel and Morrison & Foerster LLP is acting as Skye's outside legal counsel. Vantage Point Partners and Evans & Evans, Inc. provided certain advisory services to Emerald in connection with the Arrangement. Bennett Jones LLP and Dorsey and Whitney LLP are acting as Emerald's outside legal counsel.
Comment from Emerald
"We are excited to present this opportunity with Skye to our shareholders. Since announcing the strategic pivot of Emerald last November, we have been working to wind down our past operations, monetize our non-cash assets, and apply our capital to a new investment opportunity. We have searched for a company with differentiated positioning and a pedigree of expertise and experience. We believe we have found it in Skye Bioscience," said Bobby Rai, Chair of the Board's Special Committee of Emerald Health Therapeutics.
"Emerald has always recognized the therapeutic potential of cannabinoids based on our experience with the body's endocannabinoid system and its modulating and balancing activities in the body. We also recognize that the goal to clinically and commercially capitalize on the potential therapeutic benefits of cannabinoid-derived drugs may benefit from advanced technology and drug products with mechanisms of action or formulations enhanced to realize effects superior to not only natural cannabinoids but to existing approved classes of drugs and those under development. The beauty of this situation is that the underlying cannabinoid that Skye is working with has previously been shown through prior third-party research to have promising potential. And Skye's recent preclinical work has shown improved delivery of the underlying cannabinoid to the back of the eye and notable effects in reducing intraocular pressure, which is a key risk factor of glaucoma.
"Skye Bioscience has proprietary technology, R&D initiatives to expand its therapeutic capabilities, a strong focus on IP, along with a management team, board, and advisory board with many decades of experience in pharmaceutical drug development and clinical practice, notably in ophthalmology and in fundamental cannabinoid research. This company is uniquely positioned to capitalize on the substantially untapped opportunities represented by the intersection of cannabinoids with modern science and traditional drug development.
"We believe this is an excellent opportunity for Emerald shareholders to potentially benefit from a new class of cannabinoid-derivative drug candidates."
Comment from Skye
"Skye's proposed acquisition of Emerald stands to strengthen its balance sheet and ability to advance its well-positioned technology and development platform that has generated promising preclinical data in the past year and a half. Despite the constraints of COVID on all facets of the life science industry, Skye has completed the preclinical preparation necessary to launch its first-in-human study of its lead drug, SBI-100 OE, in the second quarter of 2022. We expect regulatory approval to start our Phase 1 study and begin enrolling patients shortly. The transaction with Emerald is expected to provide funding into 2023 and, importantly, for our planned Phase 2 study starting in the fourth quarter of 2022," said Praveen Tyle, Ph.D., Chair of the Board's Special Committee of Skye Bioscience and President, CEO and Board member of Invectys, Inc.
Dr. Tyle continued, "The shortcomings of today's glaucoma drugs are significant for patients. Today we are focused on clinically validating what could potentially be an advantageous new class of therapeutic drug for glaucoma. With this in mind, we are actively designing a Phase 2 efficacy study to deliver potentially meaningful data, yet optimized to minimize time and cost. We believe we can see preliminary data from this study in 2023, and the nature of this data could be transformational from a validation and value creation perspective. Securing the capital to achieve these goals is vital. We believe that acquiring Emerald and its cash and non-cash assets would provide a more favorable capital cost for our shareholders compared to other alternatives in light of current investment market conditions. In addition, Emerald possesses a research and development facility in the greater Vancouver area licensed to undertake cannabinoid-related research under applicable Canadian law, which could be beneficial to Skye as we continue to progress our R&D efforts."