Pelthos to Merge with Castle Creek, adding DEB Gene Therapy Candidate

Pelthos Therapeutics has agreed to merge with Castle Creek Biosciences in a deal that would pair Pelthos’ dermatology business with an experimental gene-modified cell therapy for dystrophic epidermolysis bullosa, a rare inherited disease that causes fragile skin and difficult-to-heal wounds.

Castle Creek stockholders would receive 5.2 million Pelthos shares at closing, representing approximately 32.5 percent of Pelthos’ fully diluted shares, according to the announcement. They could receive up to another 5.8 million shares if D-Fi gains FDA approval, along with as much as $300 million in milestone payments. Those payments include $50 million tied to specified phase 3 clinical endpoints and up to $250 million linked to D-Fi’s first commercial sale and sales milestones.

Castle Creek stockholders would also receive 80 percent of the net proceeds from the sale of any priority review voucher awarded upon D-Fi’s approval.

Both companies’ boards have approved the transaction. Closing remains subject to customary conditions, including approval by Castle Creek stockholders. The companies expect the transaction to close by the end of the first quarter of 2027. The combined company would operate as Pelthos Therapeutics and continue trading on the NYSE American under the ticker PTHS.

For patients with dystrophic epidermolysis bullosa, or DEB, the deal’s central asset is D-Fi, Castle Creek’s lead treatment candidate. Castle Creek is preparing to advance its phase 3 development program, although the announcement did not provide a timetable for the study or a potential regulatory submission.

DEB results from mutations in the COL7A1 gene, which provides instructions for making type VII collagen. That protein helps form anchoring structures that hold the skin’s outer and underlying layers together. A shortage of functioning collagen weakens that connection, contributing to skin fragility and wounds. Patients also face an increased risk of squamous cell carcinoma, a form of skin cancer, according to the companies.

D-Fi, also known as dabocemagene autoficel or FCX-007, uses a patient’s own fibroblasts—cells found in the skin’s connective tissue. The cells are genetically modified outside the body using a lentiviral vector to introduce the COL7A1 gene, enabling them to produce type VII collagen.

The modified cells are then injected into the skin at chronic wound sites, where the collagen is intended to support the formation of anchoring structures. The companies described an every-other-month injection schedule and said the treatment can be administered repeatedly.

Castle Creek is also developing a topical formulation of D-Fi and exploring other applications of its fibroblast technology, including for skin cancers and inflammatory conditions. The announcement did not specify how far those efforts have progressed.

The companies said D-Fi has generally been well tolerated in clinical studies, with the most commonly reported adverse reactions being injection-site reactions, discoloration, redness, bleeding, pain and swelling.

The FDA has granted D-Fi orphan drug designation for DEB, as well as rare pediatric disease, fast track and regenerative medicine advanced therapy designations for recessive DEB. Those designations do not constitute marketing approval.

Pelthos currently markets treatments for molluscum contagiosum, impetigo and head lice. The companies said Pelthos’ existing dermatology business and physician relationships could support a future D-Fi launch if the treatment wins approval.

“Joining with Pelthos will provide the commercial infrastructure to help realize the D-Fi opportunity and accelerate the pipeline of new indications from our platform,” said Matt Gantz, Castle Creek’s chairman and CEO.