The London-based biotech drew an initial $30 million at the closing on June 30, with the remaining $20 million to be provided in two tranches of up to $10 million each, depending on the achievement of certain performance milestones or lender’s approval.
Kabir Nath, CEO of Compass Pathways, said this financing option helps bolster the company’s financial stability and extend its cash runway. Nath added that this agreement is crucial in advancing the company’s COMP360 phase 3 program in treatment-resistant depression, with preliminary data expected by summer 2024.
“COMPASS is pleased to partner with Hercules for this source of non-dilutive financing. Most importantly, this supports our plans to deliver new options to patients suffering with treatment-resistant depression as soon as possible,” Nath said in a statement.
The first of the two subsequent tranches will be available the earlier of either 30 days following the achievement of certain performance milestones or until December 15, 2024. The second tranche will be available during the interest-only period, subject to lender’s approval.
The company stressed it is under no obligation to draw funds in the future, even if such tranches become available.
Bryan Jadot, Senior Managing Director and Life Sciences Group Head at Hercules Capital, signaled satisfaction in establishing the partnership.
“Hercules is pleased to enter into a strategic relationship with COMPASS Pathways as it advances its clinical stage programs,” Jadot said.
Just two months ago, Green Market Report reported that Compass was going to need more money. The company had cash and cash equivalents of $117.1 million at the end of the quarter versus $143.2 at the end of 2022.
Second quarter 2023 net cash used in operating activities is expected to be in the range of $22 million to $30 million and the full-year 2023 to be in the range of $85 million to $110 million. An additional $26.9 million in net cash was raised through the ATM facility to date in the second quarter.
At the time, the company said in its earnings statement, “We will need substantial additional funding to complete the development and commercialization of our Phase 3 clinical program, and our Phase 2 studies in anorexia nervosa and PTSD. Further, changing circumstances, some of which may be beyond our control, such as heightened or fluctuating inflation and interest rates, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.”