Axsome Therapeutics entered into a $20 million term loan agreement with Silicon Valley Bank.

Axsome intends to use the additional capital to support the ongoing development of its late-stage clinical pipeline.

“The initial $10 million tranche of the term loan will allow us to conduct our planned Phase 2/3 trial of AXS-05 in agitation in patients with Alzheimer’s disease and simultaneously extend our cash runway through the end of 2017,” said Herriot Tabuteau, M.D., CEO of Axsome.

Under the terms of the three-tranche loan agreement, the initial $10 million tranche is triggered upon closing. The remaining $10 million can be drawn, at Axsome’s option, subject to the achievement of certain clinical and financial milestones. The loan bears interest at an annual rate equal to 4.50% plus the prime rate, which is currently 3.50%. It matures in November 2020 and has an interest-only payment period of 12 months, which may be extended to 18 months upon the drawing of the second tranche.

In addition, upon the funding of each tranche, Axsome will issue warrants to purchase shares of Axsome common stock equal to between approximately 2.1% and 4.8% of each tranche drawn.

Axsome Therapeutics is a clinical-stage biopharmaceutical company developing novel therapies for the management of central nervous system disorders for which there are limited existing treatment options.