Vallon Pharmaceuticals and GRI Bio Enter into Merger Agreement

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PHILADELPHIA, PA — Vallon Pharmaceuticals, Inc. (NASDAQ: VLON and GRI Bio, Inc. this week announced that they have entered into a definitive agreement pursuant to which GRI Bio will merge with a wholly-owned subsidiary of Vallon in an all-stock transaction. The combined company will focus on advancing GRI Bio’s innovative pipeline of NKT cell regulators for the treatment of inflammatory, fibrotic and autoimmune diseases. Following the closing of the Merger, the combined company is expected to operate under the name “GRI Bio, Inc.” and will focus on the development of GRI Bio’s pipeline and trade on The Nasdaq Capital Market under the ticker symbol “GRI”. The transaction is expected to close in the first quarter of 2023.

Concurrently with the execution of the Merger Agreement, Altium Capital (“Altium”) has agreed to invest approximately $15 million at the close of the Merger (in cash and through the surrender of GRI Bio promissory notes purchased from GRI Bio concurrently with the execution of the Merger Agreement) and committed to an additional $10 million future investment in the combined company (the “Financing”), subject to the terms and conditions described in the securities purchase agreements and related agreements being met. The combined company is expected to use the proceeds from the Financings to fund the advancement of GRI Bio’s NKT development pipeline targeting multiple inflammatory, fibrotic and autoimmune indications into mid-2024 with an initial focus on idiopathic pulmonary fibrosis (“IPF”).

David Baker, Chief Executive Officer of Vallon, commented, “Following an extensive and thorough strategic review process, we believe merging with GRI Bio represents the best path forward for Vallon’s shareholders. GRI Bio provides an exciting opportunity for value creation by advancing a potentially deep pipeline leveraging its innovative NKT regulator technology. Our board and management believe the combined company will be well positioned with the potential to address shortcomings that exist with current therapeutic treatments targeting inflammation and fibrosis across a number of high-value indications.”

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“We believe the proposed Merger and Financing will mark a transformational evolution for GRI Bio. We expect these transactions, including the additional Altium investment, to provide us with the necessary capital to propel GRI Bio forward in a meaningful way and to fund our planned operations into mid-2024, with the goal of realizing multiple catalytic clinical and regulatory milestones. Additionally, as a public company, I believe we will be in a position to drive value for both GRI Bio investors and Vallon’s current investors,” added Marc Hertz, PhD, Chief Executive Officer of GRI Bio.

GRI Bio is a clinical stage biotechnology company focused on fundamentally changing the way inflammatory disease is treated by targeting NKT immune cells earlier in the inflammatory chain than the current standard of care, to interrupt disease progression more effectively. GRI Bio’s lead program, GRI-0621 is a small molecule RAR-βɣ dual agonist that inhibits the activity of human NKT I cells. In in vitro studies and after 28 days dosing in the study GRI-0621-201 (NCT02949375), oral dosing of GRI-0621 has been shown to inhibit NKT I cells in patients and improve fibrosis in multiple disease models. GRI Bio is planning to launch a Phase 2a biomarker study evaluating GRI-0621 for the treatment of IPF with data expected in the second quarter of 2024.

GRI Bio’s second asset in development, GRI-0803, is a novel activator of human NKT II cells in development for the treatment of autoimmune disorders, with an initial focus on systemic lupus erythematosus. GRI Bio expects to launch a Phase 1 study in 2023. Additionally, GRI Bio has a library of 500+ proprietary compounds to fuel a growing pipeline targeting a number of high value indications with unmet need.

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About the Proposed Transaction

Under the terms of the Merger Agreement, Vallon will acquire 100% of the outstanding equity interests of GRI Bio, by means of reverse triangular merger of a wholly owned subsidiary of Vallon with and into GRI Bio, with GRI Bio surviving as a wholly owned subsidiary of Vallon. In connection with the closing of the Merger, Vallon is expected to change its name to “GRI Bio, Inc.”

Immediately following the closing of the Merger and the Financing, the equity holders of GRI Bio are expected to own approximately 83% of the outstanding equity of the combined company on a fully diluted basis, and the equity holders of Vallon are expected to own approximately 17% of the outstanding equity of the combined company on a fully diluted basis. These final ownership stakes are subject to adjustment, as necessary, to meet requirements for listing on Nasdaq and the issuance of warrants on the 11th trading day following the Merger.

The Merger and the Financing have been unanimously approved by the board of directors of each company and are expected to close in the first quarter of 2023, subject to the satisfaction or waiver of customary conditions, including the requisite approval by Vallon’s and GRI Bio’s stockholders.

Ladenburg Thalmann & Co. Inc. is acting as the exclusive financial advisor and Thompson Hine LLP is serving as legal counsel to Vallon. Evolution Venture Partners LLC are serving as the exclusive financial advisor and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. are serving as legal counsel to GRI Bio.

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Management and Organization

The combined company will be led by Dr. Marc Hertz, GRI Bio’s Chief Executive Officer, and will be headquartered in La Jolla, CA. The board of directors is expected to be composed of five members, with four such members designated by GRI Bio, one such member designated by Vallon. David Baker, Chief Executive Officer of Vallon will be joining the board of directors as the Vallon designee.

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