Omega Therapeutics, Inc. (NASDAQ:OMGA), a biotech firm, disclosed on January 17, 2025, that it received a notice of default from Banc of California (NYSE:BANC) concerning a loan agreement dated March 9, 2018. The bank claims the company has experienced material adverse changes, including issues with cash runway, funding opportunities, solvency, pre-clinical programs, stock price, and corporate governance.
According to the notice, these alleged defaults have led Banc of California to demand immediate repayment of all outstanding obligations under the loan agreement. The bank also applied $14.7 million of the company's deposits towards the loan balance.
Omega Therapeutics has contested the default notice, asserting that it has not breached the agreement, maintained minimum cash balances, and fulfilled its financial obligations on time. The company disagrees with the bank's interpretation of the loan covenants, particularly regarding stock price and corporate governance.
As a response, Omega Therapeutics has communicated with Banc of California to resolve the issue, while keeping open the option for legal or regulatory action. The company's position is that it is not in default and that the bank's acceleration of the debt was unwarranted.
This development comes amid the company's ongoing challenges, as outlined in their recent financial disclosures, which highlighted the risks associated with their novel biotech products, ongoing losses, and the need for substantial additional funding. The company's filings also express concerns about its ability to continue as a going concern.
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