Stellar Pharmaceuticals Inc. announced the closing of the first of two tranches of a $6 million term loan from Midcap Financial. The company received $3.5 million as proceeds of the first tranche of the term loan.

The company plans to use the funds to expand its sales force and its promotional activities to enhance the growth of its existing Canadian product line, prepare for the launch of the recently approved Cambia, and advance pending business development initiatives. According to Rob Harris, president and CEO of Stellar, “with the recent approval by Health Canada and pending launch of Cambia, the company will require a stronger presence in the Canadian health care market to ensure its success.”

The term loan will mature in May 2015. In addition, in connection with each closing of a loan tranche, Stellar will grant Midcap a warrant to purchase shares of common stock equal to 8% of the amount borrowed under the tranche divided by an exercise price, based on the 20-day average closing price at the time of the draw. Warrants will be exercisable for five years from the date of issuance.

“We are pleased to partner with Midcap, a trusted lender within the healthcare industry, to secure minimally dilutive financing in order to support the growth of our business in Canada,” said Scott Langille, Stellar’s CFO. “Based on our ambitious plans for growth, both organically and though business development initiatives, we feel it is important to secure a long-term relationship with a financial partner that understands our business and our market.”

“We’ve been impressed with Stellar’s ability to build a quality specialty pharmaceutical business in Canada and look forward to continued growth in the years to come, both organically and through new product opportunities,” commented Chris York, co-head of Life Sciences at MidCap Financial.

Bloom Burton & Co. of Toronto, Ontario, Canada, acted as Stellar’s agent.

Stellar and its subsidiary, Tribute Pharmaceuticals, is an emerging Canadian specialty pharmaceutical company focused on the acquisition, licensing, development and management of pharmaceutical and healthcare products with its primary focus on the Canadian market.

MidCap Financial is a commercial finance company focused on middle-market lending across the healthcare sector.