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.