Small companies accessing capital to fund growth mostly have an uphill challenge. With inflation slamming the global economy like a wrecking ball this year, the market mayhem is going to make it even harder for small caps eyeing capital.
However, San Diego, California-based Skye Bioscience inc (OTCQB:SKYE), which is building a cannabinoid platform and pipeline in ophthalmology, is ahead of the curve.
“We just announced an important transaction that if approved could fund Skye into late 2023 and, most importantly, fund our Phase 1 and 2 trials of SBI-100 Ophthalmic Emulsion (OE) for glaucoma,” Punit Dhillon, CEO and chair at Skye, told Proactive in an interview.
On May 12, 2022, Skye and Emerald Health Therapeutics Inc entered into a definitive agreement that will see Skye, subject to shareholder approval, acquiring Emerald in a share-for-share transaction.
A careful risk-taker and veteran biotech executive, Dhillon has painstakingly engineered the deal.
Emerald boosts Skye’s balance sheet
Emerald first announced in November last year that it had decided to pivot into pharmaceutical development and wind down its existing operations, monetize its non-cash assets, and apply its capital to a new investment opportunity.
“Acquiring Emerald and its cash and non-cash assets will provide a more favorable capital cost for our shareholders compared to other alternatives in light of current investment market conditions,” said Dhillon.
In addition to financial strengthening, the Emerald transaction will give Skye access to a licensed R&D facility in Vancouver, which could help Skye as it ramps up its cannabinoid-related research efforts.
Ultimately, combining with Skye presents Emerald’s shareholders with an opportunity to benefit from a new class of synthetic cannabinoid-derivative drugs.
Under the proposed plan, Skye will issue Emerald shareholders 1.95 shares of its shares in exchange for each Emerald share, resulting in current Skye stockholders owning around 54% of its stock and former shareholders of Emerald owning 46%.
“Skye's proposed acquisition of Emerald stands to strengthen our balance sheet and ability to advance our well-positioned technology and development platform that has generated promising preclinical data in the past year and a half,” said Dr Praveen Tyle, chair of the Skye board's special committee.
Skye has a cash position of roughly $6 million, according to the last 10-Q quarterly filed by the biotech.
“Skye’s current burn rate remains lean and in-line with companies at the same early stage of clinical development,” noted Dhillon. “We expect it to increase slightly as we initiate more clinical-related activities but intend to keep the burn at approximately $1 million a month, allowing the Emerald transaction to provide funding into late 2023 or for approximately 18 months.”
Clinical inflection points
Through the completion of the Emerald transaction, Skye said it expects to have funding for a Phase 1 study planned to start soon, followed by a Phase 2 study. Development efforts for the initiation of both studies are ongoing in parallel.
Skye’s Phase I trial is with its lead candidate, SBI-100 Ophthalmic Emulsion (SBI-100 OE), a topical formulation of a bioengineered synthetic prodrug of tetrahydrocannabinol (THC) aimed at treating glaucoma, a degenerative disease with no cure and the world's leading cause of irreversible blindness.
In glaucoma, damage to the optic nerve is caused in part by increased intraocular pressure (IOP) due to improper drainage and/or overproduction of fluid in the eye. Cannabinoids, specifically THC, have been shown to decrease IOP, making them an ideal candidate for new glaucoma treatments.
According to Skye, the eye is rich with cannabinoid receptors, specifically in tissues involved in managing fluid production and drainage. The challenge is that natural THC consumed systemically, for example through smoking or oral consumption, does not provide the right therapeutic benefit and safety characteristics to be a suitable long-term medicine. There needs to be a better method to deliver THC into the eye to achieve a more appropriate “pharmaceutical profile.”
Skye has worked assiduously to chemically modify THC to create a unique synthetic molecule that can be locally delivered into the eye and safely realize the known positive effects of THC.
"We believe our unique, fully patented drug can avoid the adverse systemic effects of THC while providing superior IOP-lowering activity to help protect and preserve vision,” said Dhillon.
Skye has engaged Australian clinical trial operator CMAX to run its Phase 1 study of SBI-100 OE, with preliminary topline data expected in 4Q 2022. CMAX will conduct Skye's first-in-human single ascending dose (SAD) and multiple ascending dose (MAD) Phase 1 study in healthy volunteers in Adelaide, evaluating both SBI-100 OE’s safety and pharmacokinetics. The study will also assess effects of the drug on intraocular pressure in healthy subjects, potentially providing some preliminary insights.
CMAX is working to prepare for enrollment of the first participants in the study as soon as it gets approval from the Human Research Ethics Committee (HREC) in Australia. “Our HREC application was submitted in March. We have responded to several rounds of comments and are optimistic of an imminent approval,” said Dhillon.
In parallel, Skye is working to file an Investigational New Drug application (IND) with the US Food and Drug Administration (FDA) in 4Q 2022, which would enable it to initiate a US-based Phase 2 study of SBI-100 OE in patients with glaucoma. The Phase 2 proof-of-concept study will zero in on both safety and the IOP-lowering effects of SBI-100 OE in patients with glaucoma, said the company.
High growth potential
Skye has several near-term catalysts that can galvanize its stock. In 4Q 2022, Skye plans to share Phase I topline data on SBI-100 OE. It is also planning a Phase 2 study.
“With the right outcome in the Phase 2 trial, Skye could be well-positioned to demonstrate commercial viability of the drug to a potential commercial partner,” said Dhillon. He noted that in the ophthalmology space commercial opportunities and deals continue to occur at “an early stage.”
Despite glaucoma being a dominant force in the ophthalmic market, no new classes of glaucoma drugs have demonstrated better therapeutic benefit than the standard of care, which was first approved as Xalatan (latanoprost) in 1996. Skye’s potential groundbreaking treatment for glaucoma is eyeing a market opportunity of $7 billion.
“In preclinical studies, our lead molecule has demonstrated greater IOP–lowering benefits compared to latanoprost, making it a candidate as a new class of therapy with blockbuster potential in patients with glaucoma,” said Dhillon.
Skye is also working to expand its pipeline of clinical drug candidates. Last fall it launched its Cannabinoid Pharmaceutical Innovation Program to discover and develop a library of proprietary molecules designed to modulate the endocannabinoid system, with a broad focus across diseases but an initial emphasis on ophthalmic applications.
On June 7, 2022, Skye revealed new collaborations with the University of Eastern Piedmont in Italy and the Spanish Research Council (CSIC) focused on creating up to 100 novel molecules in the first year. The ongoing research is focused on selecting the next clinical candidate to expand Skye’s pipeline.
There’s great upside in successfully unlocking the potential of cannabinoids. In 2021, Jazz Pharmaceuticals agreed to pay up $7.2 billion for cannabinoid hotshot GW Pharmaceuticals to bolster its neuroscience business with the addition of GW’s FDA-approved cannabis-based epilepsy medicine, Epidiolex. Clearly, pursuing the distinct but uncommon path of clinical, regulatory, and intellectual property development in the realm of cannabinoids would appear to be highly promising.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive