Provention Bio takes a $125M loan to advance Eli Lilly’s once-rejected diabetes drug

Amidst the ongoing biotech market slowdown, companies are trying various ways to stay afloat. Some are going public, and some are taking on debt.

The newest entrant to the borrowers’ club is New Jersey-based Provention Bio, which has secured a term loan facility of up to $125 million with Hercules Capital.

The funding will be available in five tranches, with the first tranche of $25 million drawn at closing. The company has the option to draw the second tranche of $40 million upon approval of teplizumab, subject to certain conditions.

Teplizumab is an experimental anti-CD3 monoclonal antibody intended to delay clinical type 1 diabetes in at-risk people. The company in-licensed the drug from MacroGenics after Eli Lilly dumped it as it had failed in a pivotal diabetes study.

In July 2021, the FDA issued a complete response letter to Provention, saying that the commercial production of teplizumab had failed to show pharmacokinetic comparability with the drug substance manufactured for clinical trials.

However, the company is hoping that the drug will make it to the market this year. This July, Provention announced that the FDA has extended its review period by three months for the BLA for teplizumab.

Thierry Chauche

“This term loan facility significantly strengthens our balance sheet ahead of teplizumab’s potential commercial launch and provides the Company with additional financial flexibility as we continue to work to change the landscape for patients with type 1 diabetes,” said the company’s CFO, Thierry Chauche, in a press statement.

Meanwhile, the third and fourth tranches will combine for $35 million in the aggregate, subject to satisfaction of certain unspecified conditions. And the availability of the fifth tranche of up to $25 million is subject to the approval of the lenders.

Provention joins a list of companies that are resorting to borrowing loans to sustain their operations and push their pipeline. For example, Alladapt Immunotherapeutics, which focuses on IgE-mediated food allergies, entered into a loan agreement with Hercules Capital for up to $50 million earlier this week. The funds will be used to support the clinical development of Alladapt’s lead asset, ADP101, through the initiation of a Phase III trial, as well as the completion of its manufacturing facility, the company announced.

Atai Life Sciences, which develops treatments for mental health disorders, also took a loan of $175 million with Hercules Capital last month. The company drew $15 million at closing and has the option to draw another $45 million, split across two tranches, next year. The new funds would be used to develop its pipeline which includes psilocybin therapy.

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