Mr. Ryan Mitchell reports

SATELLOS BIOSCIENCE CLOSES $55M FINANCING TO SUPPORT DEVELOPMENT OF ITS LEAD DRUG CANDIDATE FOR DUCHENNE MUSCULAR DYSTROPHY

Satellos Bioscience Inc. has closed an equity offering, issuing a total of 110 million equity securities for gross proceeds of $55-million. The offering included participation from funds managed by Avidity Partners, Qiming Venture Partners USA, Perceptive Advisors, Soleus Capital, FMB Research, Allostery Investments and other leading health care specialized institutional investors.

"This financing culminates a transformational set of results for Satellos, showing the potential for our lead drug candidate for Duchenne muscular dystrophy to address the underlying disease and with the potential to significantly change the prospects for improved quality of life for patients," said Frank Gleeson, co-founder and chief executive officer of Satellos. "We are pleased to have the support and confidence of this high-quality group of health care focused investors. This funding will enable us to advance the clinical development of our lead program as expeditiously as possible. We look forward to providing regular updates on this promising program."

Details of the offering

Bloom Burton Securities Inc. acted as exclusive agent and book-running manager for the offering. Under the offering, subscribers either purchased common shares at 50 cents per common share or prefinanced common share purchase warrants for 49.999 cents per prefinanced common share purchase warrant. Investors purchased a total of 110 million securities (consisting of 70,297,220 common shares and 39,702,780 prefinanced warrants) for gross proceeds of $55-million.

In Canada, the securities purchased pursuant to the offering were qualified for sale by way of a final short form prospectus dated May 9, 2023, which was filed in British Columbia, Alberta and Ontario. The securities were purchased by way of private placement in the United States, pursuant to exemptions from the registration requirements under the U.S. Securities Act of 1933 and pursuant to all applicable U.S. state securities laws. In addition, the securities were also sold by way of private placement in certain other jurisdictions outside of Canada and the United States pursuant to and in compliance with applicable securities laws.

Use of proceeds

The net proceeds of the offering will be used to finance research and development activities, including, but not limited to, advancing its lead program for a small-molecule drug for the treatment of Duchenne muscular dystrophy through preclinical work, IND (investigational new drug) submission and subsequent phase I studies. The company will also invest in its platform and pipeline, along with using the net proceeds of the offering for general and administrative expenses, working capital needs, and other general corporate purposes.

Insider participation

Insiders of the company, including management, members of the board of directors and an affiliate of the agent, purchased an aggregate of 3,323,070 common shares under the offering, or 3.0 per cent of the securities issued under the offering. Subscriptions for common shares by such insiders are related party transactions within the meaning of applicable Canadian securities laws.

The subscriptions by the insiders are exempt from the formal valuation and minority approval requirements applicable to related party transactions on the basis that the value of the transactions insofar as they involve related parties is less than 25 per cent of the company's market capitalization. The board of directors of the company has approved the offering and the directors who subscribed for common shares or were otherwise conflicted declared their interest and abstained from voting thereon. A material change report in respect of the related party transactions could not be filed earlier than 21 days prior to the closing of the offering due to the limited time between the commitment by the insiders to purchase the subject common shares and the closing of the offering.

Agent commissions

The agent (or its subagents) were paid a cash fee equal to 7.0 per cent of the gross proceeds raised under the offering (less gross proceeds of $1,285,000 raised from president list purchasers that carried no fees and less gross proceeds of $3,404,500 raised from certain U.S. individuals that carried fees of 5.0 per cent). The agent (or its subagents) were also granted compensation options equal to 7.0 per cent of the aggregate number of securities issued under the offering (less 2.57 million securities issued to president list purchasers (exempt from any fees) and less 6,809,000 securities issued to certain U.S. individuals in respect of which compensation options equal to 5.0 per cent thereof were granted). Each compensation option entitles the agent (or its subagents) to buy one common share at a price of 50 cents until expiry on May 17, 2025.

About muscle stem cells and Duchenne muscular dystrophy

Satellos scientific founder Dr. Michael Rudnicki discovered and has demonstrated how muscle stem cells employ a biological process known as stem cell polarity to regulate muscle repair and regeneration throughout life. Dr. Rudnicki has also shown how regulatory defects in stem cell polarity lead to a failure of muscle repair and regeneration in Duchenne muscular dystrophy (DMD), representing a previously unrecognized root cause of DMD. As a result of this continuing inability to produce sufficient numbers of new muscle cells, people with DMD are unable to repair the continuous and accumulating muscle tissue damage. Based on this research, Satellos is advancing a novel small-molecule therapeutic designed to rescue the defect in stem cell polarity and provide a disease-modifying treatment for DMD and other muscular dystrophies.

About Satellos Bioscience Inc.

Satellos is a publicly traded biotechnology company dedicated to developing life-improving medicines to treat degenerative muscle diseases. Satellos has incorporated breakthrough research in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenX, to identify degenerative muscle diseases where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention. With this platform, Satellos is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body's innate muscle repair and regeneration process. The company's lead program is an oral, small-molecule drug candidate in development as a disease-modifying treatment for Duchenne muscular dystrophy. Satellos is headquartered in Toronto, Ont.

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