Press Release: Santhera Implements Reorganization and Secures Financing to Advance Vamorolone to Pivotal Read-out in Duchenne Muscular Dystrophy

-- Pivotal readout for vamorolone in Duchenne muscular dystrophy (DMD)

expected in the second quarter of 2021

-- Organizational restructuring to reduce workforce by 50%; annualized cost

reductions of CHF 10 million

-- Cost reductions combined with Highbridge facility amendment position

Santhera for the readout of the VISION-DMD study, Santhera's next key

value inflection point

-- Partnering opportunities under evaluation for vamorolone and lonodelestat

in non-core indications and geographies to enable proactive portfolio

management

-- Kristina Sjöblom Nygren, Chief Medical Officer and Head of

Development, to leave Company by end 2020

Pratteln, Switzerland, November 2, 2020 -- Santhera Pharmaceuticals

(SIX: SANN) provides a corporate update following implementation of an

organizational restructuring and its move to a focus on vamorolone, a

first-in-class dissociative steroid with a novel mode of action, to

which the Company recently obtained global rights in all indications.

Vamorolone, the only dissociative steroid in development, is currently

in a pivotal Phase 2b study in DMD patients with a 6-month readout

expected in the second quarter of 2021. If successful, the results could

lead to an NDA submission with the FDA in the fourth quarter of 2021

which is subject to a fast track review. Santhera currently anticipates

to be first to market with a dissociative steroid in the US in 2022.

The refocusing on vamorolone, following discontinuation of Puldysa,

necessitates a realignment of the organization to bring it in line with

its new priorities and an extension of cash reach to advance the

pipeline, above all vamorolone. Concluded amendments of the existing

financing agreements with certain funds managed by Highbridge Capital

Management, LLC (Highbridge) are to provide up to CHF 15 million,

subject to certain conditions, of additional financing. In combination

with the restructuring of the organization, available cash and

additional measures, this is expected to extend Santhera's cash reach to

its next major value enhancing inflection point in the second quarter

2021.

At the Executive Management level, Santhera will see a change with the

departure of Kristina Sjöblom Nygren, Chief Medical Officer and

Head of Development, for family reasons and to pursue other

opportunities. The search for a successor to secure a seamless

transition has been initiated.

"Moving forward as a Company with a focus on vamorolone, upon

acquisition of global rights in all indications through agreements with

Idorsia and ReveraGen and the termination of the Puldysa program, has

forced us to take difficult decisions but at the same time has opened up

new opportunities," said Dario Eklund, Chief Executive Officer of

Santhera. "We are confident that the restructuring, internal cost

reduction and the amended agreement with Highbridge will allow us to

advance operations to the topline readout in the second quarter of 2021

and will help us bring vamorolone to patients according to plan.

Regretfully, we have to let go of many of our valued colleagues and I

thank all of them for their dedication and efforts to do the very best

for patients. In particular and on behalf of the entire management team,

I would like to thank Kristina, who has played an important role in

shaping and executing our clinical development strategy, for her

valuable contributions to our Company. We wish her and others leaving

all the best for their future. Looking forward, we are pleased to be

able to count on an excellent core team committed to advancing our drug

candidates and the continued support of investors recognizing the value

of our pipeline products, above all vamorolone which would, if approved,

be the first dissociative steroid to enter the US market."

Reorganization to realize cost reduction and advance vamorolone towards

approval and market entry

The adjustment of Santhera's business activities is driven by the focus

on vamorolone and the US, which is expected to be the first market for

this drug candidate, and the need to extend cash reach to Santhera's

next major value enhancing inflection point in the second quarter of

2021. Santhera is reducing its workforce by more than 50 positions to 47

full-time equivalent (FTE) employees. This restructuring will result in

one-time costs of approximately CHF 3 million against recurring annual

cost reductions of CHF 10 million. In addition, external development,

marketing and other operating costs will decrease significantly as

activities related to the terminated Puldysa program are closed out.

Furthermore, the Company will incur a one-time non-cash expense of CHF 9

million resulting from an impairment of inventory and other assets

related to Puldysa as well as the reduction in infrastructure use

arising from the organizational restructuring. Following the impairment,

annualized amortization costs will be reduced by approximately CHF 1

million.

Cash runway sufficient to reach next inflection point and continue

operations as planned

The existing financing with Highbridge has been amended to provide up to

CHF 15 million in senior secured notes exchangeable by Highbridge, with

CHF 5 million available immediately and the balance subject to certain

conditions. These amendments replace Highbridge's existing unused

financing commitments and are required to allow further drawdown

following the termination of the Puldysa program. The Company's cash

balances of CHF 10 million (as of October 31, 2020), together with the

amended Highbridge facility, other financing and cost reduction

initiatives, are expected to provide sufficient funding to reach the

next major value enhancing inflection point, namely the 6-month topline

readout of the VISION-DMD study with vamorolone.

In addition to balance sheet related cash inflows, the Company is

entitled to staggered milestone payments of up to EUR 49 million, if and

when license holder Chiesi Group meets certain sales thresholds for

Raxone, and expects additional income from a 10% share of the Priority

Review Voucher which may be granted to upon approval of vamorolone for

DMD in the US.

Santhera's strategic near- and mid-term priorities

In summary, the near-term focus of Santhera will be on advancing its

late-stage clinical drug candidates vamorolone and lonodelestat and

securing sufficient funding to support operations beyond the second

quarter of 2021. The Company expects a positive 6-month readout of the

vamorolone VISION-DMD trial and a restructuring of the convertible bond

to provide the basis to source additional capital aimed at meeting

future needs. For the mid-term, the Company is pursuing proactive

portfolio management strategy through outlicensing agreements for both

vamorolone (in non-DMD indications and geographies outside the US and

Europe) and lonodelestat as an additional source of future non-dilutive

income streams.

About vamorolone and the path forward

Santhera recently announced the completion of a license assignment from

Idorsia (SIX: IDIA) and the early exercise of a licensing option to

vamorolone with ReveraGen BioPharma, Inc (US: private). ReveraGen,

together with Santhera, is developing vamorolone for early stage DMD

patients requiring an anti-inflammatory, muscle strengthening treatment

with a favorable tolerability profile to make it suitable for longer

term administration. Vamorolone is a first-in-class drug candidate that

binds to the same receptor as corticosteroids but modifies its

downstream activity [1-4]. The molecular distinctions of vamorolone

compared to standard corticosteroids are thought to explain the unique

properties of the drug candidate by dissociating efficacy from typical

steroid safety concerns. Recently published data from open-label studies

(VBP15-003 [5, 6] and VBP15-LTE [7, 8]) evaluated the long-term safety,

tolerability and efficacy of vamorolone in patients with DMD and showed

improvements from baseline with vamorolone on all measured motor

functions through the 18-month follow-up period. These improvements were

comparable to those seen in corticosteroid-treated external control

patients. Additionally, vamorolone did not show stunting of growth, as

seen with deflazacort and prednisone, and also showed fewer

physician-reported adverse events such as mood disturbance, excessive

hair growth, and Cushingoid appearance [8]. On this basis, vamorolone

could emerge as a foundational therapy in DMD for all patients

irrespective of gene mutation and a promising alternative to existing

corticosteroids, the current standard of care in children and adolescent

patients with DMD.

The 6-month topline data from the fully enrolled pivotal VISION-DMD

(VBP15-004 [9]) study are expected in the second quarter of 2021, based

on which a regulatory submission to the FDA is planned for the fourth

quarter of 2021. Subject to FDA approval, Santhera anticipates to be the

first to market with a dissociative steroid in the US in 2022. The

European regulatory authorities require 12-month treatment data and a

filing with the EMA could occur in the first half of 2022 followed by

launch approximately one year later. The Company estimates the peak

sales potential for vamorolone for the DMD indication alone to be in

excess of USD 500 million in the US and the largest five EU countries

combined.

In parallel to the DMD program, Santhera is pursuing partnering

opportunities for vamorolone in additional indications outside DMD and

in geographies outside the US and Europe which could result in

significant future non-dilutive income streams. Preclinical data with

vamorolone has been obtained in in vitro and in vivo models for asthma,

multiple sclerosis, inflammatory bowel disease, rheumatoid arthritis,

dysferlin muscular dystrophy, critical illness muscle disease, and brain

tumor [10]. In some of these diseases, the prescription of standard

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November 02, 2020 01:00 ET (06:00 GMT)