Pelthos Therapeutics has agreed to acquire Castle Creek Biosciences in a stock-based transaction that would make Castle Creek a wholly owned subsidiary. Castle Creek shareholders would receive Pelthos shares at closing, with additional shares and payments tied to the development and commercial performance of Castle Creek’s D-Fi program and any regulatory voucher it generates.
The deal is not yet complete. Its terms remain subject to closing conditions, including shareholder approvals and regulatory clearances.
Key details
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Closing consideration: Castle Creek shareholders would receive a total of 5.2 million Pelthos shares, allocated among them under Castle Creek’s existing share-priority rules. Fractional entitlements would be rounded up. No cash payment at closing is specified in the announced terms.
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Expected ownership split: Before any PIPE financing and excluding possible future contingent shares, Castle Creek’s pre-merger shareholders are expected to own about 32.5% of Pelthos on a fully diluted basis after the merger. Pelthos’s pre-merger securityholders are expected to own about 67.5%.
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Additional shares tied to FDA approval: Castle Creek shareholders could receive 5.8 million more Pelthos shares if D-Fi receives FDA approval by March 31, 2036. The amount would be reduced for certain contingent expenses and by 5% for each full calendar quarter after March 31, 2031, that passes before approval.
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Up to $300 million in milestone payments: Castle Creek shareholders would be entitled to payments tied to D-Fi’s progress and sales:
- $50 million for reaching a specified clinical milestone by June 30, 2029;
- $50 million upon the first U.S. commercial sale;
- $50 million when sales reach $100 million in a trailing 12-month period;
- $75 million at $250 million in trailing 12-month sales; and
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$75 million at $500 million in trailing 12-month sales.
These amounts are subject to certain contingent expenses. -
Potential priority review voucher proceeds: If the FDA grants a priority review voucher in connection with D-Fi’s approval and it is sold, Castle Creek’s former shareholders would be entitled to 80% of the net proceeds.
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Some payments may be made in shares: The composition of milestone or voucher-related payments could be adjusted to include Pelthos stock to preserve the intended tax treatment, subject to a share limit.
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Escrow and claims: Ten percent of the 5.2 million closing shares would be placed in escrow to back certain indemnification obligations. Subject to unresolved claims, those shares are due to be released shortly after the second anniversary of closing. Pelthos may also withhold certain contingent payments to cover specified losses or pending claims, with any amount not ultimately applied to those losses payable after the claim is resolved.
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Existing Castle Creek equity awards: Outstanding Castle Creek options would be terminated before the merger takes effect. Unexercised warrants would be handled under their existing terms and then terminated before closing.
Plain-English implications
If completed, the transaction would add Castle Creek as a wholly owned subsidiary while giving its former shareholders a substantial minority stake in Pelthos. Much of the potential additional value for those shareholders depends on D-Fi reaching clinical, regulatory and sales milestones; the announced terms do not guarantee that those payments or shares will be issued.