Titan Pharmaceutical entered into a venture loan and security agreement with Horizon Technology Finance, which provided Titan with up to $10 million of available borrowing capacity.

A first tranche of $7 million was funded upon execution of the loan agreement. A second tranche of $3 million will be available to Titan, at its option, through March 31, 2018, subject to the satisfaction of certain revenue and product development milestones, and other borrowing conditions.

The loan agreement has a term of 46 months, with interest only payments through December 31, 2018, followed by equal monthly installments of principal and accrued interest for 30 months thereafter. The initial interest rate is 9.63%, which is based on a floating rate equal to the sum of the one month LIBOR (floor of 1.10%) plus 8.4%. Each loan tranche is also subject to a 5.0% final payment when the principal is paid in full. The loan is senior debt and is secured by all of Titan’s assets, with the exception of its intellectual property.

“We believe this transaction balances our capital needs and opportunity to grow the company, and our commitment to minimizing dilution for shareholders to the extent possible,” said Titan President and CEO Sunil Bhonsle. “We were impressed with Horizon’s ability to tailor a financing structure that matched Titan’s objectives. We expect that our existing cash on hand, combined with the net proceeds from the first tranche of this loan, will be sufficient to fund planned operations into early 2019.”

In connection with this transaction, Titan issued to Horizon warrants to purchase an aggregate of 280,612 shares of Titan’s common stock. The per share exercise price of these warrants is the lower of $1.96 or the price per share of any securities that may be issued by the company in an equity financing during the next 18 months. The company also issued the lender a warrant that will only become exercisable upon the funding of the second tranche of the loan, with number of shares and exercise price to be calculated at such time.

South San Francisco-based Titan Pharmaceuticals is developing proprietary therapeutics primarily for the treatment of serious medical disorders.