Turn Therapeutics draws $7 million from $25 million secured loan with Avenue

Turn Therapeutics, a Westlake Village, California company, signed a loan and security agreement on March 23, 2026, with Avenue Venture Opportunities Fund II, L.P. The lender acts as administrative agent, collateral agent and lender. The agreement makes term loans of up to $25.0 million available to Turn and its subsidiary Turn Consumer LLC, which is also a borrower. The first $7.0 million was to be funded within one business day of the closing. Turn's 10-Q says it was funded on March 24, 2026. Only that first tranche is committed at closing.

The tranches

The second tranche is up to $8.0 million, available between September 1, 2026 and March 31, 2027, if Turn meets specified clinical and financing milestones. The 10-Q describes those milestones as dosing the first patients in a Phase 3 trial of onychomycosis, raising $10.0 million of equity, and positive data from the ongoing Phase 2 study of GX-03 in moderate-to-severe atopic dermatitis.

The supplement to the agreement words the Phase 3 condition differently. It refers to dosing the first patient in a phase 3 study of moderate-to-severe eczema, or to FDA breakthrough designation or accelerated approval for GX-03. The two descriptions do not match, and the filings do not explain the difference.

A discretionary third tranche of up to $10.0 million could be funded between January 1, 2027 and June 30, 2028. The lender is not committed to it. Funding requires that Turn has drawn all of Tranche 2, meets further milestones, and receives approval from each lender's investment committee in its sole discretion. The supplement says no fees attach to that tranche until it is committed.

Interest, security and fees

The loans bear interest at the greater of the prime rate plus 5.50% or 12.25% a year. They are secured by all of the company's assets, including intellectual property, subject to agreed exceptions. The loans mature on October 1, 2029.

At closing, Turn paid a commitment fee of $150,000 and issued 342,857 shares of common stock to the lender at no cost. The lender can convert up to $2,000,000 of principal into common stock at 80% of the trading price on the conversion date, and that amount rises by $1,000,000 when Tranche 2 is drawn. The lender may also invest up to $1.0 million in Turn's equity financings on the same terms as other investors.

Prepayment fees run from 3.0% of the amount prepaid down to 1.0%, depending on timing. The supplement sets a further prepayment charge of 1.00% after the second anniversary of closing. A final payment of 3.75% of the amount funded is due at maturity or on payoff, according to the 10-Q.

What the filings do not say

The 8-K does not name a placement agent, underwriter or financial advisor for the loan, and it names no counsel. Avenue is the only lender it names.

The loan is expensive. Its floor rate is 12.25% before any prepayment fee, and the principal is secured against the whole company. Turn has only $7.0 million committed until the milestones are met. The company's ability to earn the next $8.0 million rests on clinical data it has not yet reported and on $10.0 million of equity it has not yet raised, according to the 10-Q.

Turn has described its platform as PermaFusion, which it says is designed to enhance drug performance. Its lead drug, GX-03, is in a Phase 2 study for atopic dermatitis. The filings do not say when that study will report.

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