Pelthos to Give Castle Creek Shareholders 32.5% Stake in Merger to Expand Skin Disease Treatments
Key Facts
Pelthos Therapeutics announced on October 30, 2026, an agreement to merge with Castle Creek Biosciences, under which Castle Creek will become a subsidiary of Pelthos through two merger transactions, subject to the satisfaction of closing conditions. Under the agreement, Castle Creek shareholders will receive 5.2 million Pelthos shares at closing, equivalent to about 32.5% of the company’s fully diluted shares. Another portion of the consideration depends on the progress of Castle Creek’s lead asset, D-Fi. The agreement provides for the issuance of up to 5.8 million additional shares if the U.S. Food and Drug Administration approves the treatment, subject to development and sales criteria. The agreement also includes milestone payments of up to $300 million. The companies said the deal combines their platforms to develop treatments for serious skin diseases, but the transaction had not closed at the time of the announcement.
The milestone payments are divided into $50 million tied to the achievement of specified Phase 3 clinical trial milestones, and up to an additional $250 million tied to the first commercial sale and specified net sales milestones. This structure links part of the consideration to development results, then to the treatment’s ability to reach the market and generate sales. The additional shares, which could total up to 5.8 million, are tied to U.S. regulatory approval of D-Fi, along with the development and sales criteria set out in the agreement. The consideration therefore combines shares issued at closing with shares and payments due only upon reaching subsequent conditions. Maximum cash milestone payments total $300 million, including a tranche tied to Phase 3 trials and a commercial tranche tied to launch and sales.
Castle Creek describes D-Fi, also known as FCX-007 or dabocemagene autoficel, as an investigational autologous cell-based gene therapy it is developing to treat recessive dystrophic epidermolysis bullosa. The asset is a major focus of the contingent consideration, as the agreement ties the issuance of additional shares to U.S. Food and Drug Administration approval and links part of the payments to development and sales milestones. According to Castle Creek, the disease is caused by mutations in the COL7A1 gene and can lead to fragile skin, blisters and wounds. Castle Creek’s focus on cell and gene therapy adds capabilities to Pelthos’s existing platform, according to the companies’ announcement. The companies say the deal targets serious skin diseases, with D-Fi aimed at a rare condition that causes painful skin symptoms.
Castle Creek said D-Fi has received FDA designations including orphan drug, rare pediatric disease, fast track and regenerative medicine advanced therapy. These designations do not mean the treatment has been approved for marketing, according to the company; its candidates remain investigational and are not approved for sale. This distinction puts the development and regulatory approval pathway at the heart of the deal, alongside the achievement of required clinical trial milestones. At the corporate level, both companies’ boards approved the deal, and the combined company’s board is expected to comprise 10 members, including two appointed by Castle Creek. The deal is also subject to approval by Castle Creek shareholders, in addition to customary closing conditions.
The companies expect to complete the deal by the end of the first quarter of 2027, with closing remaining subject to its conditions, foremost among them approval by Castle Creek shareholders. In the stock market, EL7 data showed PTHS closed at $16.54 on October 29, compared with a close of $15.74 on October 28. The available closing data preceded the announcement of the agreement dated October 30, and therefore do not document the stock’s movement after the announcement. The October 29 data did not include a session high or low. The available figures therefore do not support describing the deal as having caused the stock to fall.