KALYTERA THERAPEUTICS, INC. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. As of November 28, 2018

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1 KALYTERA THERAPEUTICS, INC. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of November 28, 2018 For the three and nine months ended September 30, 2018 This management discussion and analysis ( MD&A ) of Kalytera Therapeutics, Inc. (the Company or Kalytera ) is for the three and nine months ended September 30, 2018 and is performed by management using information available as of November 28, Kalytera has prepared this MD&A with reference to National Instrument Continuous Disclosure Obligations of the Canadian Securities Administrators. This MD&A should be read in conjunction with the Company s unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2018 and the related notes thereto ( Interim Financial Statements ), as well as the Company s audited consolidated financial statements for the year ended December 31, 2017 and the related notes thereto ( Annual Financial Statements ). The Company s Interim Financial Statements and Annual Financial Statements are prepared in accordance with International Financial Reporting Standards ( IFRS ). All amounts are expressed in United States dollars unless otherwise indicated. This MD&A contains certain forward-looking statements and certain forward-looking information as defined under applicable Canadian securities laws that may not be based on historical fact, including, without limitation, statements containing the words believe, may, plan, will, estimate, continue, anticipate, intend, expect and similar expressions. Forward-looking statements are necessarily based on estimates and assumptions made by us in light of Kalytera s experience and perception of historical trends, current conditions and expected future developments, as well as the factors Kalytera believes are appropriate. Forward-looking statements in this MD&A include but are not limited to statements relating to: the initiation, timing, cost, progress and success of Kalytera s research and development programs, pre-clinical studies and clinical trials; Kalytera s ability to advance product candidates into, and successfully complete, clinical trials; Kalytera s ability to recruit sufficient numbers of patients for Kalytera s future clinical trials; Kalytera s ability to achieve profitability; Kalytera s ability to obtain funding for Kalytera s operations, including funding for research and commercial activities; Kalytera s ability to establish and maintain relationships with collaborators with acceptable development, regulatory and commercialization expertise and the benefits to be derived from such collaborative efforts; whether Kalytera s third party collaborators will maintain their intellectual property rights in the technology Kalytera licenses; the implementation of Kalytera s business model and strategic plans; Kalytera s ability to develop and commercialize product candidates; Kalytera s anticipated regulatory submissions and commercial activities; Kalytera s estimates of the size and characteristics of the potential markets for its product candidates; Kalytera s commercialization, marketing and manufacturing capabilities and strategy;

2 - 2 - Kalytera s ability to protect its intellectual property and operate its business without infringing upon the intellectual property rights of others; Kalytera s expectations regarding federal, provincial and foreign regulatory requirements; whether the Company will receive, and the timing and costs of obtaining, regulatory approvals in the U.S., Canada, the European Union and other jurisdictions; the therapeutic benefits, effectiveness and safety of Kalytera s product candidates; the rate and degree of market acceptance and clinical utility of Kalytera s future products, if any; the timing of, and Kalytera s ability and its collaborators ability, if any, to obtain and maintain regulatory approvals for its product candidates; Kalytera s expectations regarding market risk, including interest rate changes and foreign currency fluctuations; Kalytera s ability to engage and retain the employees required to grow its business; the compensation that is expected to be paid to employees of the Company; Kalytera s future financial performance and projected expenditures; developments relating to Kalytera s competitors and its industry, including the success of competing therapies that are or may become available; and estimates of Kalytera s expenses, future revenue, capital requirements and its needs for additional financing. Such statements reflect Kalytera s current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kalytera, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Kalytera s actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including, but not limited to: (i) enrollment in, completion of and obtaining positive results from clinical trials; (ii) obtaining regulatory approvals; (iii) general business and economic conditions; (iv) the Company s ability to develop and commercialize, or otherwise monetize, its product candidates and inlicense and develop new products; (v) the assumption that Kalytera s current good relationships with its collaborators, licensors and other third parties will be maintained; (vi) the availability of financing on reasonable terms; (vii) the Company s ability to attract and retain skilled staff; (viii) the products and technology offered by the Company s competitors; and (ix) the Company s ability to protect patents and proprietary rights. In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks outlined under the heading Financial Instruments and Risks and under the heading Risk Factors in the Company s 2017 Annual Information Form ( 2017 AIF ) filed on SEDAR ( on May 1, Should one or more of these risks or uncertainties, or a risk that is not currently known to us materializes, or should assumptions underlying those forward-looking statements prove incorrect, actual results may vary materially from those described herein. These forward-looking statements are made as of the date of this MD&A, and Kalytera does not intend, and do not assume any obligation, to update these forward-looking statements, except as required by applicable securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and are inherently uncertain. Accordingly, investors are cautioned not to put undue reliance on forward-looking statements.

3 - 3 - OVERVIEW OF THE COMPANY Kalytera is a clinical-stage specialty pharmaceutical company developing a portfolio of cannabidiol ( CBD ) pharmaceuticals. We are also developing pharmaceuticals made with our proprietary CBD analogues, which are patent pending variations of CBD and CBD conjugates. Kalytera believes interest in CBD and cannabinoid therapeutics has increased significantly over the past several years as preclinical and clinical data have emerged highlighting the potential efficacy and safety benefits of these compounds. Kalytera is developing product candidates in the following programs: (1) cannabidiol ( CBD ) therapeutics; (2) proprietary CBD analogues; and (3) proprietary CBD prodrugs; with an initial focus on CBD therapeutics. CBD is a non-psychoactive cannabinoid compound that has been shown to be an effective therapeutic against a number of pharmacological targets. Kalytera currently has no product candidate that has received regulatory approval. Lead Program in Prevention and Treatment of Graft Versus Host Disease Kalytera s lead clinical-stage program is focused on developing CBD formulations for both treatment and prevention of acute graft versus host disease ( GVHD ). Kalytera s lead program in GVHD has completed three Phase 2a clinical studies evaluating the safety and efficacy of (1) short term use of CBD in the prevention of acute GVHD, (2) prolonged use of CBD in the prevention of acute GVHD, and (3) prolonged use of CBD in the treatment of steroid-refractory grades 3-4 acute GVHD. Kalytera s GVHD program was acquired pursuant to Kalytera s acquisition of Talent Biotechs Ltd. ( Talent ), a privately held, Israeli-based developer of CBD therapeutics, as announced on February 16, With its recent acquisition of Talent, Kalytera transitioned from a pre-clinical stage company to a clinical-stage pharmaceutical company pioneering the development of a next generation of cannabinoid therapeutics. Through its experienced leadership, drug development expertise, and intellectual property rights, Kalytera is seeking to establish a leading position in the development of cannabinoid medicines for a range of important unmet medical needs, with an initial focus on GVHD. On November 15, 2017, the Company announced that the United States Patent and Trademark Office (the USPTO ) issued a Notice of Allowance for US Patent Application 15/143,694 covering the use of CBD in the treatment of GVHD, which patent has now issued as U.S. Patent No. 9,889,100 B2. On November 27, 2017, the Company announced that it had received a Notice of Allowance for U.S. Patent Application 14/787,515 covering the use of CBD in prevention of GVHD, which patent has now issued as U.S. Patent No. 9,956,182. Kalytera has licensed these method of use patents from Mor Research Applications Ltd. of Israel. The allowance of these patents by the USPTO for this proprietary technology represents an important step forward for the Company in its work focused on the treatment of this serious and life-threatening disease. Related patents are pending in Europe and Israel. GVHD is a multisystem disorder that occurs when the transplanted cells from a donor ( the graft ) recognize the transplant recipient ( the host ) as foreign. This interaction initiates an immune reaction that causes disease in the transplant recipient. This reaction can occur within days after the transplant (acute GVHD) or months to years after the transplant (chronic GVHD). GVHD commonly occurs following hematopoietic stem cell transplantation ( HCT ), a procedure whereby the stem cells of the bone marrow or peripheral blood of a healthy donor are transplanted into a new host

4 - 4 - after chemotherapy or radiation. This is a lifesaving procedure for many diseases of the blood and bone marrow including leukemia, Hodgkin and Non-Hodgkin lymphoma, multiple myeloma, sickle cell anemia, and thalassemia. According to a report prepared by GlobalData PharmaPoint, the Graft-Versus-Host- Disease Opportunity Analysis and Forecasts to 2023 Update (the GlobalData Report ), there were over 8,000 HCT procedures in the U.S. in 2014 and the use of HCT is expected to continue to increase at a rate of 7% per year. Whereas HCT procedures can be lifesaving, they pose many dangerous side effects, including infection and GVHD. Acute GVHD presents with rashes and blistering of the skin, nausea, vomiting, abdominal cramps accompanied by diarrhea, and jaundice. Generally, acute reactions are more severe and life threatening. Acute GVHD is graded from grades 1 to 4, based on the severity of symptoms, and the degree to which various organ systems are involved. In general, grade 1 can be described as mild, grade 2 can be described as moderate, grade 3 can be described as severe, and grade 4 can be described as life threatening. Acute GVHD is a major cause of morbidity and mortality following HCT. As reported in the GlobalData Report, it is estimated that even with intensive prophylaxis with immunosuppressive treatments, 30-50% of patients transplanted from fully-matched sibling donors and 50-70% of patients transplanted from unrelated donors will develop some level of acute GVHD. The first step in prevention of acute GVHD is the selection of donor cells that closely match the genetics of the immune system of the transplant recipient, ideally a sibling donor. From there, the patient relies upon drugs that have been developed to prevent or treat acute GVHD. Medicinal prevention of acute GVHD is dependent upon immunosuppression of the donor cells, either pharmacologically or through T-cell depletion. Common drugs used to prevent and to treat acute GVHD include methotrexate, cyclosporine tacrolimus, sirolimus, mycophenolate mofetil and ATG. Preventive and therapeutic measures and clinical practices vary by institution. Treatment of GVHD involves pharmacologic suppression of the graft s immune cell activation and reestablishment of donor-host immune-tolerance. Most patients are prescribed corticosteroids, which directly suppress the donor s immune cell attack on host tissue, but also raise the risk of infection and cancer relapse. As with prevention of acute GVHD, the optimal drug strategy for treatment of acute GVHD is not well defined. As stated in the GlobalData Report, only 30-50% of patients with moderate to severe GVHD respond to corticosteroids, placing many at risk for fatal outcomes. Better treatment options are thus needed to improve the mortality and morbidity outcomes for transplant recipients. In 2015, Professor Moshe Yeshurun, previously the Chief Medical Officer of Talent and Head of the Bone Marrow Transplantation Department at the Rabin Medical Center in Israel and who is now Kalytera s Chief Medical Officer, published the results of a Phase 2a clinical trial evaluating the safety and efficacy of CBD in the prevention of acute GVHD. These results were published in Biology of Blood and Marrow Transplantation, 21 (2015) As reported in this peer-reviewed article, 48 patients undergoing matched unrelated donor transplantation received oral CBD a week before and 30 days after HCT. The incidence of acute grades 2-4 GVHD among these patients was 12%, compared to a rate of 48% in 102 consecutive patients evaluated previously at the same unit at Beilinson Hospital in Petach Tikvah, Israel. Based on the promising results of that study, a subsequent Phase 2a clinical study was undertaken to evaluate the efficacy of prolonged administration of CBD following HCT. In that study, which enrolled 12 patients, participants were provided daily doses of CBD seven days prior to transplantation and for 100 days following the procedure. With a median follow-up of 8.5 months following transplantation, 85% of patients in the study did not develop significant (grades 2-4) acute GVHD, despite the fact that the majority of the patients in the study (10) received stem cells from unrelated donors, including five patients who received stem cells from non-fully matched donors. Only 15% of these patients developed grades 2-4

5 - 5 - GVHD, versus the predicted incidence of 60% in the scientific literature, potentially representing a more than four-fold reduction. In a further Phase 2a study, Professor Yeshurun established that treatment of grades 3-4 steroid-refractory acute GVHD with oral CBD resulted in a complete response in 7 of 10 patients and a very good partial response in 2 of 10 patients. These findings contrast with historical data from Dr. Yeshurun s unit at Beilinson Hospital, where since 2006, among 32 consecutive patients presenting with grades 3-4 acute GVHD, those with grade 3 GVHD had a mortality rate of 33%, and those with grade 4 GVHD had a 100% mortality rate. On December 7, 2017, the Company announced the initiation of a Phase 2, open label, multicenter clinical study to evaluate the safety, pharmacokinetics, pharmacodynamics, efficacy and dose ranging of CBD for the prevention of GVHD following bone marrow transplantation procedures (the Initial Prevention Study ). Patients enrolled in this clinical study will be administered CBD at doses of 75, 150, or 300 mg twice daily beginning 7 days prior to their bone marrow transplant procedure, and for up to 98 days after such transplant procedure. The study is expected enroll a total of 36 patients. The study is being conducted at four sites in Israel and has been is being expanded to include one additional site in Israel and two additional sites in Australia. Results of the study are expected by Q The Company previously expected results from the Initial Prevention Study by Q3 2018, but completion of the Initial Prevention Study has taken longer than expected due to slower than expected patient enrollment, as compared to the initially expected rate of patient enrollment communicated by the clinical sites participating in the study. As a result, the study has been expanded to include additional sites that will permit sufficient patient enrollment, but such expansion has taken additional time resulting in the changes in timeline for the Initial Prevention Study. The Company estimates that the total remaining costs for the Initial Prevention Study are approximately USD $1.99 million. This total exceeds the amount of previously estimated costs for completion of this study by approximately USD $1.3 million. These additional costs are attributable to the addition of one clinical site in Israel and up to four additional clinical sites in Australia, as well as additional analytical work to address and resolve stability issues related to the CBD drug formulation that the Company is evaluating in this clinical study, as well as additional issues relating to GMP manufacturing, analytical testing and release of this CBD drug formulation. In addition to the Initial Prevention Study, the Company will also seek to carry out a Phase 3 pivotal registration study in the prevention indication and is currently in the process of evaluating the associated costs and timeline involved in doing so. In order to obtain regulatory approval in the United States for the treatment of acute grade 3 and grade 4 GVHD, it is expected that the Company will be required to complete the Initial Prevention Study, to be followed by a Phase 2 and Phase 3 pivotal registration study in the treatment indication (the GVHD Treatment Study ). The Phase 2 and Phase 3 studies are expected to take approximately months to complete, and the Company estimates that the total remaining costs for the set-up and completion of the planned Phase 2 and Phase 3 pivotal registration study for treatment of acute GVHD, will be approximately USD $9.6 million to USD $11.4 million. As a result of feedback provided by the U.S. Food and Drug Administration in its meeting with the Company on July 31, 2018, in parallel with the Phase 2 portion of the treatment study the Company will also conduct two clinical studies in healthy volunteers to assess certain safety and laboratory parameters of CBD (including the effect of food intake and drug interactions). These parallel studies are not expected to have a material effect on the costs and timeline to completion of the Company s GVHD prevention research and development program. Upon completion of the pivotal registration studies in both prevention of GVHD and in treatment of acute GVHD, the Company intends to file New Drug Applications ( NDA ) with the U.S. Food and Drug Administration ( FDA ), as well as with other regulatory bodies, including in Canada, Europe, Australia and Japan. Upon filing of an NDA for a new molecular entity, the review process typically takes approximately one-year. The Company intends to file for Fast-Track designation with the FDA, which may shorten the review process by approximately 4 months.

6 - 6 - Kalytera, through its wholly-owned subsidiary Talent, has the right to pursue the commercialization and development of CBD for the prevention and treatment of GVHD as the licensee under a world-wide exclusive license of certain technology (the Mor License ) with Mor Research Applications Ltd. ( Mor ). Under the Mor License, Kalytera (through Talent) has been granted exclusive rights under certain applications of Mor for method of use patents for certain CBD formulations, and all documentation relating thereto or created in connection therewith, in the field of cannabidiol compositions in the prevention and treatment of the acute and chronic forms of GVHD. Under the Mor License, Mor is entitled to royalties equal to a low single-digit percentage of the Net Sales (as defined in the Mor License) of products covered by the Mor License received by or on behalf of Talent (or in the case of certain sublicenses that may be granted by Talent) and a low single-digit percentage of Net Sales of products covered by the Mor License actually received by the sublicensee. Under the Mor License, Talent is required to achieve certain clinical and regulatory milestones on timelines agreed with Mor, failing which Mor will have the right to terminate the Mor License following the expiry of all applicable cure periods. New Product Development Program in Treatment of Acute and Chronic Pain On March 20, 2018, the Company announced that it had begun development of a novel cannabinoid-based compound for the treatment of acute and chronic pain. Patents for this compound have been filed in the U.S. and other jurisdictions, and Kalytera has obtained an exclusive, worldwide license for this compound from Beetlebung Pharma, Ltd. ( BPL ), an Israeli-based pharmaceutical discovery company focused on cannabinoid-based therapeutics for the treatment of human disease. Kalytera s compound consists of a cannabinoid conjugated with naproxen, a generic, non-steroidal, antiinflammatory drug that is already approved for treatment of pain. This cannabinoid/naproxen conjugate has potential to become a next generation pain medication, and, based on the potentially complementary methods of action of the cannabinoid and naproxen, there is reason to believe these molecules may have a synergistic effect in treatment of pain, as well as a superior safety profile compared with opioid analgesics. This novel compound is comprised of two active agents, the cannabinoid and naproxen, which may provide effective pain reduction, without the risks of addiction or respiratory suppression that exist with opioid analgesics. The objective of this program is to develop a potent, non-psychotropic, oral analgesic for intractable pain that will be safe and well tolerated. The cannabinoid component is intended to act as a cannabinoid receptor agonist, targeting the alpha3 glycine pain receptor in the spinal cord, and the naproxen component is intended to block the synthesis of the pain-inducing molecule PGE2. Although the initial route of administration is expected to be oral, Kalytera will also seek to develop an intravenous formulation. The commercial opportunity for Kalytera s cannabinoid/naproxen conjugate is large. According to a 2016 report by Transparency Market Research, the global pain management therapeutics market is projected to reach $83 billion by Current treatments for pain mainly include non-steroidal anti-inflammatory drugs ( NSAIDs ), such as naproxen, for mild to moderate pain, and opioids, such as morphine, for moderate to severe and chronic pain. Kalytera believes that its product, if it can be successfully developed, may be suitable for mild to severe pain, without the risks of respiratory suppression and dependence associated with opioid analgesics. As consideration for the exclusive license with BPL, Kalytera will provide a combination of upfront payments ($25,000 plus historical patent costs), royalties equal to a single-digit percentage of Net Sales (as defined in the license agreement), sublicensing fees in the event that Kalytera sublicenses its rights under the license, and future contingent milestone payments payable in cash and securities. Cash milestone payments are due upon recruitment of the first subject in Phase 1a, Phase 2a and pivotal registration clinical trials, and upon receipt of regulatory approvals in the United States, the UK, Europe and Japan. Following receipt of regulatory approval

7 - 7 - by the FDA, and subject to the approval of the TSX-V, Kalytera will issue to BPL 6,500,000 common shares of the Company ( Common Shares ), and will make an additional cash payment equal to the amount of any positive difference between (i) the value of 5% of Kalytera s outstanding common shares based on the closing price of such shares on the date on which such FDA regulatory approval is announced and (ii) the value (based on the same closing price) of the Kalytera Common Shares being issued to BPL. In connection with the license agreement, Kalytera has also entered into a master services agreement pursuant to which Beetlebung will provide significant research, development, clinical trial research, manufacturing and related support services in connection with the development and commercialization of the licensed technology. Kalytera may terminate the license agreement together with the master services agreement at any time. The Company s newly announced program for treatment of pain is a first step in the expansion and diversification of its cannabinoid-based product development portfolio beyond its lead program in prevention and treatment of GVHD. Our strategy will be advance this program through Phase 1 and Phase 2 clinical testing, and then seek to out-license or sell the program to a multinational pharmaceutical company. We began work on this program in Q and have only incurred a minimal amount of research and development expenses at this time. Going forward, we estimate that we may spend approximately $2.4 million dollars for preliminary research and pre-ind enabling studies prior to the time that we will initiate a Phase 1 clinical study. New Product Development Program for Treatment of Dermatologic Diseases and for Women s Health On July 19, 2018, the Company announced that it had entered into an agreement with BPL to secure an exclusive option to license worldwide rights to medical cannabis products in development by BPL for the treatment of dermatologic diseases and for women s health. To secure the exclusive option from BPL, the Corporation has paid an initial fee of US$25,000. If the Corporation exercises its option to enter into an exclusive license in either of these fields, then for each license Kalytera will pay an additional US$25,000 plus historical patent costs, royalties equal to a single-digit percentage of net sales, sublicensing fees in the event that Kalytera sublicenses its rights under the license and future contingent milestone payments. Kalytera would also enter into a sponsored research contract with BPL under which BPL would design, manage and conduct a clinical study of patients (likely in Canada and/or Israel) designed to provide data to be used to market products covered by the license. The Company is currently assessing the anticipated costs and timeline associated with development of products in the dermatologic disease and women s health field; however, the Company expects that any development and commercialization of the dermatologic technology and/or the women s health technology described above would most likely involve the negotiation of a joint venture, licensing or other commercial agreement or strategic transaction during the next three months under which such technologies would be commercialized and developed through a third party. CBD Prodrugs Kalytera is also developing a pre-clinical stage pipeline of CBD prodrugs for the treatment of a variety of disorders, with an initial focus on atopic dermatitis and acne vulgaris. CBD prodrugs are designed to specifically modify physiochemical properties and functionality of CBD. These modifications are intended to enhance regional therapy and enable bifunctional therapy. Kalytera anticipates that, based on preclinical animal studies conducted by Kalytera to date, its prodrug pipeline will be well tolerated. Prodrugs are covalently-modified derivatives of a pharmacologically active agent and must undergo transformation in vivo in order to release the active agent.

8 - 8 - Kalytera s product candidate portfolio includes a number of proprietary, synthetic, non-psychoactive CBD prodrugs, all of which remain in preclinical testing. Kalytera s CBD prodrugs are designed to improve the bioavailability of CBD, as well as to permit targeted delivery of CBD to specific disease sites within the body. Kalytera has invented and applied for composition of matter patent protection for four CBD prodrugs: K- 1012, K-1022, K-1032, and K These programs have not advanced beyond the preclinical research stage, and are currently on hold, though Kalytera may pursue further development in the future, when the Company expects that it will have greater resources available for such work. Corporate Developments During the Three Months Ended September 30, 2018 In the first half of 2018, the Company became obligated to make a cash payment of US$4,000,000 to former Talent shareholders from whom the Corporation acquired Talent and its clinical-stage program evaluating CBD in the prevention and treatment of GVHD for two patents. In July 2018, the Company announced that it had reached an agreement with the former shareholders of Talent modifying the Company s obligation to make such payments. Under such agreement, Kalytera made a minimum payment to the former Talent shareholders of US$2,011,380 following the closing of the Company s public offering in August The remaining balance of US$1,988,620 not paid at closing of the public offering will be evidenced through a promissory note bearing interest at 8% annually and maturing July 31, The note will be secured by the rights of Talent as licensee under the exclusive license agreement with Mor. On July 10, 2018, the Company also paid the Talent Shareholders a late payment fee of US$50,000. As additional consideration for the deferral of payment until July 31, 2019 as described above, the former Talent shareholders were granted a right to receive an additional payment in the form of Common Shares of Kalytera and warrants to purchase shares of Kalytera s Common Shares bearing terms and having a deemed issued price as similar as possible to the those issued to investors in the Company s August 2018 public offering at an amount equivalent to US$795,448, which will result in the issuance of 9,438,352 units at a deemed issue price of C$0.11. The interest accrued at the end of September 30, 2018 relating to the promissory note is US$23,000. On August 8, 2018, the Corporation announced the closing of the first tranche a public offering (the August Offering ) of units of Kalytera ( Units ) for aggregate gross proceeds of CDN$4,297,260. Each Unit consists of one Common Share of Kalytera and one-half of one Common Share purchase warrant (each whole warrant, a August Warrant ). Echelon Wealth Partners Inc. ( Echelon ) acted as agent for and on behalf of Kalytera in connection with the August Offering. The August Offering was made by way of a short form prospectus in British Columbia, Alberta and Ontario. The net proceeds of the August Offering will be used by Kalytera to pay milestone payments owing to the former shareholders of Talent, for research and development expenses and for general and administration expenses. Pursuant to the first tranche of the August Offering, Kalytera issued a total of 39,066,000 Units at an issue price of CDN$0.11 per Unit. Each August Warrant will entitle the holder thereof to acquire one Common Share of the Company at a price of CDN$0.155 (subject to customary adjustments for certain events) for a period of 36 months from the closing date of the August Offering. On closing of the August Offering, Echelon was paid a commission consisting of a cash fee in the amount of CDN$322,295 and was issued an aggregate of 1,953,300 agent warrants. Each agent warrant is exercisable for Common Shares at a price of CDN$0.11 until August 8, 2020.

9 - 9 - On August 16, 2018, the Company closed the second tranche of the August Offering upon exercise of its over-allotment option in full and an additional 5,859,900 Units were issued representing additional gross proceeds of CDN$644,589. On closing of the second tranche, Echelon was paid an additional commission consisting of a cash fee in the amount of CDN$48,344 and was issued an aggregate of 292,995 agent warrants for the second tranche. Each agent warrant is exercisable for Common Shares at a price of CDN$0.11 until August 8, During the third quarter Kalytera issued 18,824,145 Common Shares of the Company to the Salzman Group in payment of invoices in the amount of $1,260,748 (or CAD$1,657,163 based on the daily average exchange rate published by the Bank of Canada on the day before the Company elected to issue the Common Shares as payment). The number of Common Shares issued was based on a deemed issue price of 90% of the closing price of the Common Shares on the trading day prior to the Company s election to pay the debt in Common Shares. The Company recorded an expense of US$184,129 in respect of the discount on the shares issued. On September 24, 2018, the Company granted 10,055,219 stock options to purchase Common Shares of the Company to members of management and the board of directors. The stock options have an exercise price of CAD$0.135 and expire ten years from the date of grant. One third of the options granted will vest on September 24, 2019 and the remaining options will vest in twenty-four (24) equal monthly installments commencing October Corporate Developments Subsequent to September 30, 2018 On November 12, 2018, the Company announced that it had elected to issue 3,963,988 Common Shares of the Company to The Salzman Group in payment of an invoice issued under the Salzman Services Agreement at a deemed issue price of CAD$0.099 per Common Share as payment of invoiced amounts of $297,164 at a 10% discount from the price of the Company s Common Shares based on the closing price of the Common Shares on the trading day prior to the Company s election to pay the debt in Common Shares. OVERALL PERFORMANCE Amounts in this section are specified in thousands unless otherwise specified. Since its inception in July 2014, Kalytera has accumulated a deficit of $39,180 as at September 30, The Company did not generate any revenue from product sales during the nine months ended September 30, Kalytera expects its operating losses to continue in the next fiscal year as it invests in its product development programs, with primary focus for the next two years on development of Kalytera s lead product development program in the treatment and prevention of GVHD. This product development program was initiated by Talent, a privately held, Israeli-based developer of CBD therapeutics that was acquired by Kalytera in February The Company has funded its operations with proceeds from equity and convertible debt financings and expects to seek additional funding through equity financings and partnership collaborations to finance its product development, and corporate growth. However, if Kalytera s product development activities do not show positive progress, or if capital market conditions in general or with respect to the life sciences sector or development stage companies such as Kalytera are unfavorable, its ability to obtain additional funding will be adversely affected. The following table summarizes selected unaudited consolidated financial data for the quarters ended September 30, 2018 and 2017, prepared in accordance with IFRS:

10 Quarter Ended 30-Sep-18 Unaudited ( Q ) Research and development expenses 1,864 General and administrative income (12,124) Finance expense 272 Finance income (114) Other expense 10,211 Net loss for the period 109 Income tax benefit (1,910) Net income and comprehensive income (1,801) Basic earnings per common share 0.01 Diluted earnings per common share Sep-17 Unaudited ( Q ) Research and development expenses 20 General and administrative expenses 796 Finance expense 48 Other expense 331 Net loss for the period 1,195 Basic and diluted loss per common share (0.01) Variations in the Company s net income and expenses for the periods above resulted primarily from the following factors: In general, 2018 research and development expenditures trended upwards as Kalytera advanced its prevention and treatment programs into phase II clinical trials for the development of intellectual property acquired from Talent. In the quarter ended September 30, 2017, research and development expenditures trended downwards as Kalytera slowed the advancement of its lead product development program in prevention and treatment of GVHD. General and administration expenses remained consistent in third quarter of 2018 ($785) compared to the third quarter of 2017 ($796), however, this comparison excludes the income in the amount of $12,908 from the change in fair value of the contingent liability relating to the Talent acquisition as part of general and administrative expenses, which led to the decrease of $12,920 in general and administrative expenses. Kalytera recorded net income of $1,801 ($0.01 per Common Share) in Q as compared to net loss of $(1,195) ($(0.01) per Common Share) in Q An increase of $2,996 is mainly due to decrease of $12,920 in general and administrative expense, of which $12,908, is made of income recorded in respect of the change in fair value of the contingent liability relating to the Talent acquisition and increase of $9,880

11 in other expense due to the impairment of Talent intellectual property. This is offset by an increase of $1,844 in research and development expenditures, and an increase in finance expenses of $230. Research and development expenditures increased to $1,864 in Q from $20 in Q due primarily to an increase in subcontract research costs incurred in the third quarter of 2018 relating to the advancement of the Company s patented drugs through phase II clinical trials, increase in share-based payments, and an increase in salaries and benefits as a result of hiring a Chief Scientific Officer and Chief Medical Officer. The following table provides a detailed breakdown of Kalytera s research and development expenditures in Q3 2018, as compared to those in Q3 2017: Q Q Salaries and benefits 44 - Share-based payments 40 - Subcontract research costs 1,778 3 Subcontract development costs - 14 Laboratory supplies - 3 Travel 2 - Total $1,864 $20 Generally, general administration expenditures remained consistent in the third quarter of 2018 at $785 compared to $796 in the third quarter of 2017, however, this comparison excludes the income in the amount of $12,908 in respect of a change in fair value of contingent liabilities related to the Talent acquisition. Apart from the above, general and administration expenses show increases mainly in consulting fees, insurance costs, investor relations expenditures, salaries and benefits as a result of hiring Kalytera s Chief Financial Officer and share based payments. These increases were offset by a decrease in expenditures related to legal and professional fees and office and other expenses. The following table provides a detailed breakdown of Kalytera s general administration expenditures (income) in Q3 2018, as compared to those in Q3 2017: Q Q Consulting and management fees $ 171 $ 137 Change in fair value of contingent liabilities (12,908) - Audit fees Insurance Legal and professional fees Investor relations 50 - Office and other expenses Board member fees Salaries and benefits Share-based payments Travel and accommodation Total ($12,124) $796

12 Year to Date Discussion The following table summarizes selected unaudited consolidated financial data for the nine months ended September 30, 2018 and 2017, prepared in accordance with IFRS: Year-to-Date 30-Sep-18 Unaudited Year-to-Date Research and development expenses 5,464 General and administrative income (10,566) Finance expense 3,654 Finance income (12,534) Other expense 10,211 Net income for the period (3,771) Income tax (benefit) (1,989) Net income and comprehensive income 5,760 Basic earnings per common share 0.03 Diluted loss per common share Sep-17 Unaudited Year-to-Date Research and development expenses 1,449 General and administrative expenses 2,895 Finance expense 47 Finance income (1) Other income 331 Net loss for the period 4,721 Basic and diluted loss per common share (0.04) Variations in the Company s net income and expenses for the periods above resulted primarily from the following factors: Research and development expenditures trended upwards during the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017, as Kalytera continues to advance its lead product development programs in prevention and treatment of GvHD thru phase II clinical trials. Generally general and administration expenses trended downwards in the third quarter of 2018 to $2,342, compared to $2,895 in the third quarter of 2017 as a result of a change in the Company s agreements for the provision of general and administrative consulting and support services, and a decrease in legal and professional fees, however, in the third quarter of 2018, Kalytera recorded as part of the general and administrative expenses, income in the amount of $12,908 in respect of a change in fair value of contingent liabilities related to the talent acquisition.

13 Kalytera recorded net comprehensive income of $5,760 ($0.03 per Common Share) in the nine months ended September 30, 2018, as compared to net loss of ($4,721) ($(0.04) per Common Share) in the nine months ended September 30, The increase of $10,481 in net income was attributable mainly due to income recorded in the first nine months of 2018 of $12,908 in the general and administrative line item in connection with changes in the fair value of contingent liabilities, income of $12,526 recorded in connection with equity and debt instruments issued to investors in December 2017 and August 2018, offset by an increase in research and developmental expenses of $4,015, other expenses of $10,211 due to adjustments arising from the revaluation of the intellectual property from the Talen acquisition, as well as an increase in finance expense of $3,607. Research and development expenditures increased to $5,464 in the nine months ended September 30, 2018 from $1,449 in the nine months ended September 30, 2017 due primarily to the advancement of Kalytera s lead product development programs in prevention and treatment of GvHD, offset by decreases in salaries and benefits, as a result of separation from the Company s former Chief Executive Officer in June 2017, and subcontract research costs and laboratory supplies, as a result of termination of Kalytera s pre-clinical development programs in the treatment of bone disease. The following table provides a detailed breakdown of Kalytera s research and development expenditures in the nine months ended September 30, 2018, as compared to those in the nine months ended September 30, 2017: Nine months Ended September Salaries and benefits $ 206 $ 472 Share-based payments Subcontract research costs 5, Subcontract development costs Laboratory supplies Travel 12 7 Total $5,464 $1,449 General administration income increased in the nine months ended September 30, 2018, to $10,566 due to income recorded of $9,612 in connection with changes in the fair value of contingent liabilities related to the Talent acquisition, offset by general and administrative expense incurred in the third quarter of $2,343, a decrease from $2,895 incurred in the nine months ended September 30, 2017 due primarily to decrease in consulting and support services as a result of changes in agreements for the provision of general and administrative consulting and support services, decrease in legal costs, audit fees and office and other expenses, offset by an increase in share-based payments, however, general and administrative expenses include.

14 The following table provides a detailed breakdown of Kalytera s general administration expenditures (income) in the nine months ended September 30, 2018, as compared to those in the nine months ended September 30, 2017: Nine months Ended September Consulting and management fees $ 402 $ 581 Change in fair value of contingent liabilities (12,908) - Audit fees Insurance Legal and professional fees Investor relations Office and other expenses Board member fees Salaries and benefits Share-based payments Travel and accommodation Total ($10,566) $2,895 QUARTERLY FINANCIAL INFORMATION The following table summarizes selected unaudited consolidated financial data for each of the last eight fiscal quarters, prepared in accordance with IFRS (expressed in thousands): Quarter Ended 30-Sep Jun Mar Dec-17 Unaudited Unaudited Unaudited ( Q ) ( Q ) ( Q ) ( Q ) Research and development expenses 1,864 2,313 1, General and administrative expenses (income) (12,124) Finance expense ,404 9,060 Finance income (114) (8,925) (4,573) 7,927 Other expense 10, ,583 Income taxes (1,910) (79) - - Net income (loss) for the period 1,801 5,882 (1,916) (27,143) Basic earnings (loss) per common share (0.01) (0.21) Diluted earnings (loss) per common share (0.01) (0.21)

15 Sep Jun Mar Dec-16 Unaudited Unaudited Unaudited ( Q ) ( Q ) ( Q ) ( Q ) Research and development expenditures 20 1, General administration expenditures ,209 2,081 Expenses in connection with merger transaction with Santa Maria ,923 Petroleum Inc. Finance expense (income), net 48 (10) 8 (442) Other income Net income (loss) for the period (1,195) (1,904) (1,621) (9,280) Basic and diluted loss per common share (0.01) (0.01) (0.02) (0.26) Variations in the Company s net income, losses and expenses for the periods above resulted primarily from the following factors: In general, research and development expenditures trended upwards as Kalytera continued to advance its lead product development program in prevention and treatment of GvHD. During the third quarter 2018, income was recorded of $12,908 in the general and administrative line item in connection with changes in the fair value of contingent liabilities Beside the period noted above, general administration expenses remained similar in recent quarters. However, expenditures fluctuated more significantly in certain quarters, including due to the costs associated with legal expenses and the TSX-V listing in Q pursuant to the merger transaction with Santa Maria Petroleum Inc. the acquisition of Talent in Q and the August 2018 financing. In Q3 of 2018, the Company performed an impairment analysis on the Talent assets. Based on the valuation performed, other expenses of $10,211 arose due to adjustments from the revaluation of the intellectual property from the Talent acquisition. In Q4 2017, the Company recorded finance expenses of $8,972 in connection with equity and debt instruments issued to investors in December 2017, $7,927 recorded to re-valuate derivative instruments issued as part of the December 2017 financing and other expense of $9,583 in respect of change in fair-value recognized for contingent liabilities in respect of the Talent acquisition. As a result of changes in fair-value recognized for contingent liabilities in respect of the Talent acquisition and equity and debt instruments issued to investors in December 2017 and August 2018, the Company recorded finance income in the first, second and third quarters of LIQUIDITY AND CAPITAL RESOURCES The Company s operational activities during the first nine months of 2018 were financed mainly by a brokered private placement financing in Canada in December 2017 and a public offering in August of At September 30, 2018, the Company s cash and cash equivalents decreased to $966 from $3,686 at December 31, Working capital at September 30, 2018 decreased to ($4,291) as compared to ($209)

16 at December 31, The decrease in the Company s working capital was mainly due to the increase in the amount of current liabilities due to the former shareholders of Talent. 1 The Corporation funds it operating costs through a combination of cash and equity payments to its creditors. The Corporation s largest creditor during calendar 2018 and calendar 2019 will be the Salzman Group of Israel. Under agreements with the Salzman Group, the Corporation may elect to pay amounts due to the Salzman Group in either cash or through the issuance of common shares to the Salzman Group. For the period October - December 2018, the Corporation estimates that its total operating costs for both G&A and R&D expenses will be approximately US $1.5 million, including approximately US $1.2 million that the Corporation will elect to pay to the Salzman Group through the issuance of common shares thru November The US $1 million in cash that the Corporation had at September 30, 2018 is sufficient to fund the Corporation s other operating costs (costs that will be paid in cash to creditors other than the Salzman Group) through December In addition to the Corporation s estimated total operating costs of US $1.5 million through year-end 2018, the Corporation also owes acquisition related expenses of US $1.9 million to the former shareholders of Talent, from whom the Corporation acquired Talent and its clinical-stage program evaluating CBD in the prevention and treatment of GVHD. On July 20, 2018, the Corporation announced that it had reached an agreement with the former shareholders of Talent modifying the Corporation s obligation to make such payments. Under such agreement, Kalytera made a minimum payment to the former Talent shareholders of US$2,011,380 following the closing of the August Offering from the net proceeds thereof. The remaining balance of US$1,988,620 not paid at closing of the August Offering will be evidenced through a promissory note bearing interest at 8% annually and maturing July 31, The note will be secured by the rights of Talent as licensee under the exclusive license agreement with Mor. As additional consideration for the deferral of payment, the former Talent shareholders were granted a right to receive an additional payment in units (bearing terms and having a deemed issued price as similar as possible to the Units issued in the Offering) equivalent to $795,448, which will result in the issuance of 9,438,352 units at a deemed issue price of C$0.11. The Company completed the acquisition of Talent in February The consideration for the acquisition of Talent included a combination of cash, securities, and future contingent payments to Talent shareholders. To date, Kalytera has made cash payments to Talent former shareholders totaling approximately $12.5 million, and in addition, the Company has issued 20,184,743 Common Shares to former Talent shareholders and will issue an additional 9,438,352 units to former Talent shareholders as described above. In addition to the payments previously made and the payments owing as described above, subject to the completion of certain milestones in relation to the development and commercialization of the GVHD program, the Company will pay up to an additional $13.5 million in aggregate future contingent payments and may be required to issue an additional 2,883,535 Common Shares to former Talent shareholders. The former shareholders of Talent will also receive additional earn-out payments equal to 5% of the aggregate annual net sales of all products covered by patent rights included in the business of Talent. Management plans to raise additional capital through equity financing (in addition to the Offering) to continue to finance the payments to former Talent shareholders and its working capital requirements and clinical development of its lead product program, CBD in the treatment and prophylaxis of GVHD. The Company s future cash requirements may vary materially from those expected now due to a number of factors, including costs associated with product development and strategic opportunities. As a result, it may be necessary to raise further additional funds sooner than currently expected. These funds may come from sources such as entering into strategic collaboration arrangements, the issuance of shares from treasury, or 1 Amounts in this paragraph specified in thousands.