BioPharma anticpates Lexicon prepayment – BioPharma Credit has a $124.5m loan to Lexicon Pharmaceuticals (part of a $150m loan) which is secured against its XERMELO® (telotristat ethyl) product. Lexicon is planning to sell XERMELO to TerSera Therapeutics for $224m. BioPharma believes that Lexicon will use the upfront proceeds from the XERMELO sale to substantially reduce its debt, including full repayment of its $150 million secured term loan.
The Lexicon loan has a prepayment premium of 2 per cent. if prepaid before the fourth anniversary of the relevant closing date plus, if the prepayment is made before the third anniversary, a make whole amount equal to the interest payable between the prepayment date and the third anniversary of the relevant closing date. The Lexicon loan closed on 4 December 2017.
Lexicon has not announced when they plan to close on the sale of XERMELO so Pharmakon (the manager) says it will continue to monitor the disposal and update shareholders as appropriate.
[These prepayments are a logistical headache – in that BioPharma must now find a replacement loan but doesn’t yet know when it will have the money available. However, the prepayment penalty and make whole arrangements can be quite beneficial to the revenue account if the money is redeployed fairly quickly.]