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Mast Therapeutics (MSTX) Enters Amended Loan Agreement; Updates on EPIC Study TIming

July 25, 2016 5:15 PM EDT
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Mast Therapeutics (NYSE: MSTX) disclosed the following on Monday:

Item 1.01 Entry into a Material Definitive Agreement.

On July 22, 2016, Mast Therapeutics, Inc. (the “Company”) entered into an amendment (the “Fourth Amendment”) to the Loan and Security Agreement, dated August 11, 2015, as amended by the First Amendment thereto dated September 28, 2015, the Second Amendment thereto dated December 31, 2015, and the Third Amendment thereto dated February 25, 2016 (collectively, the “Loan Agreement”) with Hercules Technology III, L.P. and Hercules Capital, Inc. (together, “Hercules”). As previously disclosed, the Loan Agreement provides for a $15 million debt facility, $5 million of which was funded to the Company in August 2015 and $10 million of which was funded to the Company in September 2015 (the “Second Advance”). As of July 25, 2016, the principal balance of the loan was approximately $14.6 million.

Under the Loan Agreement, as amended by the Fourth Amendment, on or before October 14, 2016, the Company must demonstrate, to the reasonable satisfaction of Hercules, positive results from its Phase 3 clinical study of vepoloxamer in patients with sickle cell disease, known as the EPIC study (the “Second Advance Prepayment Condition”), or prepay to Hercules $10 million of the principal balance of the loan and any accrued but unpaid fees and expenses (the “Second Advance Prepayment”), without any prepayment penalty. In the event that the Second Advance Prepayment Condition is not satisfied, the Second Advance Prepayment would be due on October 14, 2016; provided, however, that if the Company issues a public announcement of EPIC results that do not satisfy the Second Advance Prepayment Condition before October 14, 2016, the Company is required to make the Second Advance Prepayment promptly, but in any case, within three business days of the public announcement.

If the Company achieves the Second Advance Prepayment Condition, is not required to make the Second Advance Prepayment, and no event of default under the Loan Agreement has occurred, the Company may resume making interest-only payments and further payments against the principal balance will be deferred until March 1, 2017. If the interest-only period resumes and is extended to March 1, 2017, then the scheduled maturity date under the Loan Agreement will be extended from January 1, 2019 to October 1, 2019. In accordance with the Fourth Amendment, the Company paid an additional facility charge of $75,000.

Except as specifically amended by the Fourth Amendment, the Loan Agreement remains in full force and effect.

A copy of the Fourth Amendment is filed herewith as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the Fourth Amendment does not purport to be complete and is qualified in its entirety by reference to such exhibit.

Item 2.02 Results of Operations and Financial Condition.

The Company estimates that, as of June 30, 2016, its cash, cash equivalents and investment securities was $35.1 million and its working capital was $10.5 million. During the three months ended June 30, 2016, the Company sold an aggregate of 17,024,743 shares of its common stock under its “at the market” equity offering program for aggregate gross proceeds of $6.7 million and an estimated $6.5 million in net proceeds, after deducting sales agent commission and discounts and other offering costs.

All estimated amounts as of and for the period ended June 30, 2016 are preliminary and actual results may differ.

Item 8.01 Other Events.

On July 25, 2016, the Company provided guidance on the anticipated timing for announcement of top-line data from the EPIC study. The Company expects to report top-line data in September 2016. The Company believes that the additional time needed to lock the study database does not reflect on the quality or integrity of the results or conduct of the study. Rather, validation of the multitude of data points and quality assurance/quality control procedures have taken longer than the Company previously anticipated. Allocation of key resources to the database lock process for longer than initially anticipated has affected the planned timing of submission of the new drug application (NDA) for vepoloxamer. The Company will provide an updated timeline on the NDA submission after the results of the EPIC study and its pre-NDA meeting with the U.S. Food and Drug Administration.



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