Shield Therapeutics PLC (LON:STX) said it has executed formal agreements with two of its shareholders for loans that were originally announced on December 10.
The pharmaceuticals firm said AOP Orphan International AG, which owns a 10.7% stake in the company, and Christian Schweiger, a board member with a 3.5% stake, have provided letters of intent stating that they would be prepared to lend the group up to €4mln (£3.54mln) and 1mln Swiss francs (£820,021) respectively in order to provide additional working capital, amounting to around £4.4mln in total.
Shield said if drawn down in full, the funds will extend its cash runway until around the end of 2021, a significant extension on its current runway which extends into the second quarter of 2021.
The two loan facilities, the company said, are unsecured and are structured identically and provide for 50% of each facility to be drawn down by March 31, 2021, and the remaining 50% to be available for drawdown at Shield’s request during the rest of 2021. Interest of 10% per annum is payable on any amounts drawn down.
Shield added that the loans will be repayable in cash in the event that it receives an upfront licence payment of no less than €10mln (£8.85mln) for US rights to its Accrufer iron deficiency treatment, secures a debt facility with another lender for no less than approximately £4.4mln, raises more than €10mln of new equity or, in any event, by January 31, 2022.
The firm also said the lenders will have the right to convert any outstanding loan balances into new ordinary shares in Shield at any time at a 5% discount to the average closing middle market price for the preceding ten business days or, in the event of a new equity raise, on the same terms as all other investors subscribe.
“I am very grateful to AOP and Dr Schweiger for making these loan facilities available to the Group as they will provide the cash runway and the time for the Board to reach the optimal outcome for shareholders regarding the commercialisation of Accrufer in the US”, Shield’s chief executive Tim Watts said in a statement.
Shares in Shield were 2.8% lower at 54.4p in late-afternoon trading on Friday.