ESSA Pharma, a company focused on the development of small molecule drugs for the treatment of prostate cancer, secured a $10 million growth capital term loan facility from Silicon Valley Bank (SVB).

Under the loan and security agreement, the company will initially draw down $8 million and has a conditional option to receive an additional $2 million. The proceeds from the term loans will be used to finance the company’s future working capital needs.

“This loan facility strengthens our balance sheet as we continue to enroll patients in the Phase 1 dose escalation clinical trial of EPI-506, our product candidate for castrate-resistant prostate cancer, and prepare for the Phase 2 portion of the clinical trial,” said Dr. David R. Parkinson, ESSA president and CEO.

The term loans bear an interest rate of WSJ Prime Rate plus 3.0% annually and will mature on September 1, 2020. The loan agreement requires ESSA to expense a final payment of 8.6% of the amount advanced under the term loans, due upon the earlier of the maturity or termination of the term loan facility. The term loans will be secured by perfected first priority lien on all the company’s assets, with a negative pledge on intellectual property. The term loans are subject to standard events of default, including default in the event of a material adverse change. There are no financial covenants.

Upon funding of the respective tranches, the company will grant to the bank warrants to purchase shares of the company’s common stock equal to 4% of the amount advanced, divided by the exercise price of the warrants, based on the five-day volume weighted average trading price of the company’s common shares on the Toronto Stock Exchange, to be determined prior to the time of the issuance of the warrants. In connection with the advance to the company of $8 million, the company granted to the bank and Life Science Loans II, an aggregate of 149,532 warrants. Each warrant entitles the holder to purchase one common share of the company for a period of seven years at a price of $2.14 per warrant share. The warrants contain adjustment mechanisms in the event of a share split, stock reclassification, exchange, combination and similar events, and also provide for cashless exercise.

Houston and Vancouver-based ESSA is a clinical-stage pharmaceutical company focused on developing novel and proprietary therapies for the treatment of castration resistant prostate cancer in patients whose disease is progressing despite treatment with current therapies.