Claritas Pharmaceuticals Inc V.CLAS.H

Kalytera Issues CEO Letter to Shareholders ,3pm

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Dear Kalytera Shareholders,

I would like to underscore the importance of the transaction that we announced last week, and provide an update on our programs in prevention and treatment of graft versus host disease and in treatment of pain.

On Tuesday last week, we announced that Kalytera has signed a Letter of Intent to acquire Salzman Group, Inc. (“Salzman Group”). On close of this transaction, Kalytera will have a new pharmaceutical development program, developing R-107 for three indications, including treatment of COVID-19 associated lung disease, chlorine inhalation lung injury (“CILI”) and pulmonary arterial hypertension (“PAH”). The CILI development program has been funded in whole or in part with U.S. federal funds from the Department of Health and Human Services; Office of the Assistant Secretary for Preparedness and Response; Biomedical Advanced Research and Development Authority, under Contract No. HHSO100201600016C.

Salzman Group’s Drug Discovery Team and R-107

The principal assets that Kalytera will acquire in this transaction are the Salzman Group drug discovery team, and R-107, the proprietary drug that was invented by this team. Salzman Group’s drug discovery team has deep expertise with nitric oxide, and has been working since 1994 to deliver nitric oxide in a non-gaseous form. Andrew Salzman, M.D., Chairman of Salzman Group, was the first physician to administer inhaled nitric oxide to a human patient in 1990. R-107 is a non-gaseous, liquid prodrug of nitric oxide that was invented by Salzman Group.

Increased Interest in Nitric Oxide for Treatment of COVID-19 Infection, and COVID-19 Associated Lung Disease

Within the past two months there has been an increased focus on the potential of nitric oxide for treatment of COVID-19 infection, and in its potential for treatment of COVID-19 associated lung disease. For example, Massachusetts General Hospital is initiating an international clinical study, and will be the first hospital in the nation to rigorously test nitric oxide in coronavirus patients.¹ Dr. Lorenzo Berra, the critical-care specialist at Massachusetts General who is overseeing the new, international trial stated, “It’s a pretty remarkable drug. It has a risk profile that is minimal.” Dr. Keith Scott, principal investigator of the Louisiana component of the trial stated that, “We have tremendous confidence this therapy will alter the devastating effects of COVID-19, but we must test it. If results show promise, and since this gas is already FDA-approved, widespread use could begin immediately.”

Following are links to recent articles regarding the potential of nitric oxide for treatment of COVID-19 infection and COVID-19 associated lung disease:

1.  
2. Remarkable Nitric Oxide Being Tested as Coronavirus Drug: https://www.mercurynews.com/remarkable-nitric-oxide-being-tested-as-coronavirus-drug
3.  
4. UAB To Test Nitric Oxide For Severe Coronavirus Patients | Birmingham, AL Patch: https://patch.com/alabama/birmingham-al/uab-test-nitric-oxide-severe-coronavirus-patients
5.  
6. Coronavirus: Nitric Oxide Eyed as a Possible COVID-19 Cure and Answer to Ventilator Shortages: Health: Tech Times: https://www.techtimes.com/articles/248674/20200408/coronavirus-nitric-oxide-eyed-as-a-possible-covid-19-cure-and-answer-to-ventilator-shortages.htm
7.  
8. EmphyCorp News: Nitric Oxide is Currently Being Tested in Clinical Trials as a Potential Treatment for Patients Infected with the Coronavirus: https://www.prnewswire.com/news-releases/emphycorp-news-nitric-oxide-is-currently-being-tested-in-clinical-trials-as-a-potential-treatment-for-patients-infected-with-the-coronavirus-301025740.html
9.  
10. LSU Health Shreveport Testing to See if Inhaled Nitric Oxide | WWL: https://wwl.radio.com/articles/louisiana-radio-network-news/lsu-health-shreveport-testing-to-see-if-inhaled-nitric-oxide
11.  
12. Mallinckrodt, Novoteris’ Nitric Oxide will Start COVID-19 Trial: https://pharmaphorum.com/news/mallinckrodt-novoteris-nitric-oxide-will-start-covid-19-trial/
13.  
14. Inhaled Nitric Oxide Explored for COVID-19 Oxygenation: https://www.medscape.com/viewarticle/930412
15.  
16. Bellerophon Therapeutics Announces FDA Clears Initiation of Phase 3 Study for INOpulse® Inhaled Nitric Oxide Therapy to Treat COVID-19: https://www.benzinga.com/pressreleases/20/05/g15999273/bellerophon-therapeutics-announces-fda-clears-initiation-of-phase-3-study-for-inopulse-inhaled-nit
17.  
18. Researchers Say Nitric Oxide Therapy is Safe, Helps COVID Patients Breathe; Further Biological Data Needed: https://www.wbrz.com/news/researchers-say-nitric-oxide-treatment-is-safe-helps-covid-patients-breathe-further-biological-data-needed/
19.  
20. Ohio State to Test Novel Nitric Oxide Therapy on COVID-19 Patients: https://medicine.osu.edu/recent-highlights/osu-to-test-novel-nitric-oxide-therapy-on-covid19-patients
21.  

Advantages of R-107 Over Nitric Oxide Gas

R-107 is a proprietary and novel molecule that acts as a nitric oxide donor. Nitric oxide normally exists in a gaseous state, and is approved as such by the FDA for administration to patients via inhalation therapy requiring a special type of delivery device, and complex administration by trained respiratory therapists. R-107, in contrast, is a liquid that is readily administered by a single intramuscular injection.

Following a single administration by injection, R-107 slowly releases nitric oxide into lung tissues over 48 hours, providing a sustained level of nitric oxide to the lung. Due to its ease of administration, R-107 will allow for thousands of patients to be treated simultaneously, in a potentially safe and less labor-intensive manner, without the need for special delivery equipment.

In contrast, nitric oxide gas must be administered via inhalation therapy through a CPAP breathing machine for 20 to 30 minutes twice a day. Administration is complex and labor-intensive, requiring a trained respiratory therapist, which substantially limits the number of patients that can be treated at any one time.

Respiratory viruses, such as SARS-CoV and COVID-19, can cause acute respiratory distress syndrome (“ARDS”), in which fluid leaks into the lungs, making breathing difficult or impossible. The prognosis with COVID-19 can be poor if the patient develops respiratory disease. R-107 will be developed for COVID-19 associated lung disease, and, because there are no existing therapies or vaccines to effectively treat or prevent COVID-19, it is anticipated that the FDA will allow an expedited clinical development pathway for R-107 in this indication.

The Company is not making any express or implied claims that its product has the ability to eliminate, cure or contain the Covid-19 (or SARS-2 Coronavirus) at this time.

Kalytera’s Program Evaluating CBD in Prevention and Treatment of GVHD

Over the past year, Kalytera has engaged in an extensive effort to out-license or sell our program evaluating cannabidiol (“CBD”) in the prevention and treatment of graft versus host disease (“GVHD”). As previously announced, we engaged Echelon Wealth Partners to assist the Company in managing this effort. We reached out to several dozen companies in the pharmaceutical and cannabis industries, and engaged in negotiations with several potential corporate partners, but have not yet received an acceptable offer.

Several of the pharmaceutical companies that we approached did not proceed beyond initial due diligence, because the drug we are evaluating is CBD, and they did not want to be involved in any project that is perceived to be associated with cannabis, even though the CBD pharmaceutical we are evaluating is synthetic and not derived from the cannabis plant. Others did not proceed due to the fact that GVHD is an orphan disease, with a small addressable market. At this point, without a corporate partner to help fund the estimated USD $10 million cost of a Phase 3 clinical study in prevention of GVHD, we are not able to move the program forward.

Kalytera acquired its GVHD program through the acquisition of Talent Biotechs Ltd. (“Talent”) in 2017. Kalytera’s subsidiary, Kalytera Therapeutics Israel Ltd. (“Kalytera Israel”) owns the assets of the GVHD program, and is in default under a Promissory Note evidencing a USD $3 million debt that is owed by Kalytera Israel to the former shareholders of Talent. The representative of the former shareholders has extended the cure period for this default to June 30, 2020, in order to provide time for the Company to complete a sale of the GVHD program. The Company is currently engaged in discussions regarding a potential sale of the GVHD program.

KAL-1816 for Treatment of Pain

Kalytera’s molecule in development for treatment of pain, KAL-1816, has been shown in laboratory testing to strongly and selectively bind with and activate the alpha3 glycine pain receptor. Activation of the alpha3 glycine receptor shuts down pain transmission in inflammatory conditions, such as arthritis, colitis, and sciatica.

KAL-1816 is expected to provide pain relief for inflammatory conditions without inducing safety concerns, and may offer hope of pain relief to those who do not respond to or cannot tolerate the side effects of conventional analgesics. The objective of the Company's program is to develop a potent, non-psychotropic, oral analgesic for the treatment of pain that will be safe and well tolerated. We believe that KAL-1816 has the potential to achieve these goals, and to become a next generation pain medication, providing effective pain relief, without the risks of addiction or respiratory suppression that exist with opioid analgesics.

There are four enantiomers of KAL-1816. The next steps in the development of KAL-1816 will involve further laboratory work to determine the most potent enantiomer of this molecule. Following completion of this and additional laboratory work, and the required toxicology studies, our strategy will be to advance this compound through Phase 1 and Phase 2 clinical testing, and then seek to out-license or sell the program.

Kalytera to Raise Up to CDN $5 Million in Private Placement Offering

As we announced last week, Kalytera is initiating a private placement offering of up to CDN $5,000,000 of units at a price of CDN $0.015 per unit (the “Offering”). Each unit will consist of one common share and one common share purchase warrant (the “Units”).

Closing of the Offering is expected to occur prior to July 31, 2020. The Offering is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSX Venture Exchange.

We believe that the acquisition of Salzman Group is an exceptional opportunity for Kalytera. Following close of the transaction, we expect to initiate a Phase 1 clinical study of R-107, which we expect to complete during Q3 this year.

I wish to thank our shareholders for their ongoing support.

Sincerely yours,

Robert Farrell
President and CEO