FSD Pharma Inc. and Prismic Pharmaceuticals Inc. announced that they have entered into a securities exchange agreement dated April 22, 2019 (the “Agreement”) pursuant to which FSD Pharma has agreed to acquire all of the outstanding securities of Prismic (the “Transaction”). Prismic is developing novel non-addictive prescription drugs with unique safety profiles with the goal of addressing the opioid crisis based on formulations utilizing micro-palmitoylethanolamide’s (“PEA”) “entourage” effect on certain drugs impacting the endocannabinoid system.
Pursuant to the terms of the Agreement, FSD Pharma will acquire all outstanding common and preferred shares of Prismic for an aggregate purchase price of US$17.5 million (CAD$23.4 million based on an exchange rate of US$1 to CAD$1.3349), to be satisfied by the issuance of an aggregate of 102.7 million Class B subordinate voting shares in the capital of FSD Pharma (each, an “FSD Share”) at a deemed price of CAD$0.2275 (US$0.1704) per FSD Share representing the volume weighted average price of the FSD Shares on the Canadian Securities Exchange (the “CSE”) for the ten trading days prior to the execution of the Agreement. In addition, FSD Pharma has agreed to assume up to US$4.0 million of outstanding Prismic liabilities on terms to be mutually agreed by the two companies, some of which may, potentially, be settled by the issuance of additional FSD Shares. Additionally, all of the outstanding Prismic stock options and warrants will become exercisable into FSD Shares, with the number and exercise price of such securities to be adjusted in accordance with the Transaction’s exchange ratio.
The FSD Shares to be issued to the Prismic shareholders will be deposited into escrow at the closing of the Transaction, and be subject to an 18-month staggered time escrow release.
“This transaction symbolizes FSD Pharma’s vision of acquiring a platform company to advance research and development of FDA-approved applications of synthetic cannabinoids and other synergistic molecules,” said FSD Pharma Executive Co-Chairman & CEO, Dr. Raza Bokhari. “Led by Peter Moriarty, one of the founders of Shire Pharmaceuticals, Prismic’s management team has built a solid foundation for a specialty pharmaceutical company, and we look forward to providing them with milestone-based support in order to advance proprietary drug candidates through the various development stages. This is a very exciting day for FSD Pharma that we believe represents a paradigm shift in the development and outlook of our company.”
Peter Moriarty, Co-Founder and Chairman of the Board of Directors of Prismic, commented, “We are excited to be entering into a new phase of growth with FSD Pharma. We believe our combined resources and highly competent leadership teams will position us to execute on our clinical development programs and on delivering highly effective products that safely address pain, inflammation and neurological disorders with high unmet clinical needs.”
Prismic has exclusive worldwide licensing rights (except for Italy and Spain) to a patent-protected form of palmitoylethanolamide (micro-PEA with particle sizes of 0.6 – 10 microns), on which Prismic’s development platform is based and from which Prismic’s lead prescription drug candidate, PP-101, has been formulated. Such formulations take advantage of micro-PEA “synergistic” or “entourage” effect on certain drugs impacting the endocannabinoid system. This means that lower doses of those drugs may be administered together with micro-PEA to achieve the desired therapeutic effect. This includes the potential combination or concomitant use of micro-PEA formulations with drugs such as THC, CBD, certain anticonvulsants, and opioids where studies have indicated opioid-sparing and tolerance delaying properties of micro-PEA may impact the development of dependence in patients. Prismic’s first prescription drug candidate, PP-101, a 600 mg tablet of micro-PEA, is anticipated to commence a Phase 2/3 accelerated clinical development program in early 2020 as a concomitant medication to be administered with pregabalin (Pfizer’s Lyrica®) for the treatment of fibromyalgia.
Completion of the Transaction is subject to various closing conditions, including: the approval of the CSE, the approval of the boards of directors of FSD Pharma and Prismic, the approval of the security holders of Prismic, and completion of due diligence by the parties.