Fate Therapeutics announced it completed a long-term debt financing of up to $20 million with Silicon Valley Bank. The company has drawn down $10 million, at a fixed interest rate of 6.9%, under the first tranche of the debt facility.

“This debt financing further secures the necessary cash resources to clinically validate our lead product candidate PROHEMA® across multiple disease franchises including adult and pediatric patients with hematologic malignancies and pediatric patients with inherited metabolic disorders,” said J. Scott Wolchko, chief financial & operating officer of Fate Therapeutics. “The additional capital also enables the company to invest in, and achieve a number of important milestones in connection with, its pipeline of disease-altering hematopoietic- and muscle-based cellular therapeutics.”

Fate Therapeutics is enrolling patients in its Phase 2 PUMA study, a randomized, controlled clinical trial that is designed to assess the efficacy and safety of PROHEMA® (16, 16-dimethyl prostaglandin E2, or dmPGE2, modulated cord blood) in adult patients undergoing hematopoietic stem cell transplantation (HSCT) for the treatment of hematologic malignancies.

“Over the past five years, we have worked closely with Fate Therapeutics, providing capital to support the Company’s development of its hematopoietic stem cell modulation platform, and we are pleased to continue this long-standing relationship as the Company advances and expands its clinical development of PROHEMA®,” said Michael White, Managing Director, Life Sciences, of Silicon Valley Bank’s Southwest Division. “Our dedication to the life science and healthcare sector enables us to put financings in place that our clients, like Fate Therapeutics, need in their pursuit of therapeutics to improve patients’ lives.”

Proceeds from the transaction will be used for general working capital purposes including the expansion of the Company’s research on therapeutic applications of human induced pluripotent stem cell (iPSC)-derived hematopoietic cells and myogenic progenitor cells. Subject to the achievement of a specified clinical milestone relating to the PUMA study, the Company has the option to access a second tranche of up to $10 million through the end of the fourth quarter of 2014. There is no warrant coverage under the first tranche of the debt facility, and 2% warrant coverage on the debt facility in the event the company elects to access the second tranche. Assuming the full amount of the second tranche is accessed, the total cost of capital of the debt financing is approximately 11.8%, including the cost of the warrants, based on current market valuations.