Mattress Liquidators has turned Entero Therapeutics white as a sheet. The creditor ordered Entero to repay its loan, prompting the biotech to lay off staff from the CEO down and race to find a way out of its predicament.
In March, Entero, then called First Wave BioPharma, acquired ImmunogenX. The takeover gave Entero control of a phase 3-ready celiac disease drug candidate but also saddled it with debt. ImmunogenX had a $7.5 million credit facility with Mattress. The loan agreement had an October maturity date but was changed in conjunction with the merger to delay the repayment date to September 2025.
However, Mattress informed Entero last week of loan default events including ImmunogenX “suffering an adverse change in its financial condition which would reasonably be expected to have a material adverse effect.” Mattress demanded immediate payment of Entero’s obligations, which total almost $7 million.
The demand, which Entero disclosed publicly on Wednesday, presented a problem for a biotech that had $3.4 million in cash and cash equivalents at the end of March. Entero responded with sweeping changes to the organization.
Entero is laying off all nonessential employees, vacating its office in Boca Raton, Florida and pausing all nonessential R&D activities. CEO James Sapirstein is among the employees leaving Entero, although he has secured a $400-an-hour consulting deal. President Jack Syage is also leaving the company.
The credit agreement gives Entero 30 days, plus a possible 30-day extension, to resolve the events that prompted the loan default notice. The biotech is exploring all options, including raising capital, restructuring the debt and identifying strategic alternatives.