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PARATEK PHARMACEUTICALS, INC. (NASDAQ:PRTK) Files An 8-K Entry into a Material Definitive Agreement

PARATEK PHARMACEUTICALS, INC. (NASDAQ:PRTK) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement

On February 26, 2019, Paratek Pharmaceuticals, Inc. (the “Company”), through its wholly-owned subsidiary Paratek Royalty Corporation (the “Subsidiary”), entered into a royalty-backed loan agreement (the “Loan Agreement”) with Healthcare Royalty Partners III, L.P. (the “Lender”). to the terms of the Loan Agreement, upon the satisfaction of the conditions precedent set forth therein, the Subsidiary expects to borrow a $32.5 million loan, which will be secured by, and repaid based upon, royalties from the Company’s license agreement with Warner Chilcott Company, Inc. (the “License Agreement”).

Under the Loan Agreement, the outstanding principal balance will bear interest at an annual rate of 12.0%. Payments of interest under the Loan Agreement will be made quarterly, beginning August 2019, out of License Agreement royalty payments received since the immediately preceding payment date. On each interest payment date, any royalty payments in excess of accrued interest on the loan will be used to repay principal until the balance is fully repaid. In addition, the Subsidiary will make up-front payments to the Lender of (i) a 1.5% fee and (ii) up to $300 thousand for the Lender’s expenses. The Loan Agreement matures on May 1, 2029, at which time, if not earlier repaid in full, the outstanding principal amount of the loan, together with any accrued and unpaid interest, and all other obligations then outstanding, shall be due and payable in cash by the Subsidiary. The Company has entered into a Pledge and Security Agreement in favor of the Lender, to which the Subsidiary’s obligations under the Loan Agreement are secured by a pledge of all of the Company’s holdings of the Subsidiary’s capital stock.

The Loan Agreement contains certain customary affirmative covenants, including those relating to: use of proceeds; maintenance of books and records; financial reporting and notification; compliance with laws; and protection of Company intellectual property. The Loan Agreement also contains certain customary negative covenants, barring the Subsidiary from: certain fundamental transactions; issuing dividends and distributions; incurring additional indebtedness outside of the ordinary course of business; engaging in any business activity other than related to the License Agreement; and permitting any additional liens on the collateral provided to Lender under the Loan Agreement.

The Loan Agreement contains customary defined events of default, upon which any outstanding principal and unpaid interest shall be immediately due and payable by the Subsidiary. These include: failure to pay any principal or interest when due; any uncured breach of a representation, warranty or covenant; any uncured failure to perform or observe covenants; any uncured cross default under a material contract; any uncured breach of the Company’s representations, warranties or covenants under its Contribution and Servicing Agreement with the Subsidiary; any termination of the License Agreement; and certain bankruptcy or insolvency events.

The foregoing description of the terms of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement, a copy of which the Company intends to file with the Securities and Exchange Commission as an exhibit to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information in Item 1.01 above is incorporated by reference into this Item 2.03.

About PARATEK PHARMACEUTICALS, INC. (NASDAQ:PRTK)

Paratek Pharmaceuticals, Inc. (Paratek), formerly Transcept Pharmaceuticals, Inc. is a pharmaceutical company focused on the development and commercialization of antibacterial therapeutics based upon tetracycline chemistry. Paratek’s antibacterial product candidates are omadacycline and sarecycline. Omadacycline is a broad-spectrum antibiotic for use as an empiric monotherapy for community-acquired bacterial infections, such as acute bacterial skin and skin structure infections (ABSSSI), community-acquired bacterial pneumonia (CABP) and urinary tract infections (UTI). The Company’s sarecycline is a Phase III antibacterial product candidate and was previously known as WC3035. Sarecycline is designed for use in the treatment of acne and rosacea. The Company’s other product candidates are tetracycline-derived, molecular entities and are designed to utilize the recognized immune-modulation, anti-inflammatory and other beneficial properties of the tetracycline class.

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