KALA BIO, Inc. announced on January 5, 2026 that it had completed a loan settlement with Oxford Finance, LLC, extinguishing a $10.6 million debt obligation that had been outstanding since the company’s default notice in October 2025. The settlement was achieved after KALA paid a $2 million payment under a Loan Settlement Agreement that was disclosed in a Form 8‑K filed on November 25, 2025. The transaction removes a substantial overhang that had been weighing on the company’s balance sheet and financial flexibility.
The debt settlement follows a series of distress events that began with the failure of the CHASE Phase 2b clinical trial for KPI‑012 in September 2025, which led to the discontinuation of the drug candidate and its MSC‑S platform. The trial failure triggered a “going concern” warning in the company’s Q3 2025 filing and prompted workforce reductions. Oxford Finance subsequently initiated foreclosure proceedings in October 2025, declaring the $29.1 million loan immediately due and payable. The $2 million payment therefore represents an 81 % haircut on the principal and a decisive step toward restoring the company’s financial footing.
Prior to the settlement, KALA had raised $10 million through a registered direct offering in early December 2025 and $6 million via a securities purchase agreement, both aimed at repaying indebtedness and improving liquidity. The company also announced the dismissal of Deloitte & Touche LLP as its independent auditor in a separate filing, underscoring the breadth of the restructuring effort. With the debt extinguished, KALA’s total debt fell from $10.6 million to $8.6 million, and its stockholders’ equity, which had been negative before the settlement, moved toward a positive position, enhancing the company’s ability to fund remaining clinical development and pursue new opportunities.
The settlement’s impact on the balance sheet is significant: the company’s leverage ratio improves, interest expense is reduced, and cash that would have been used to service the debt is now available for pipeline investment. Management highlighted that the transaction removes a “material overhang” that had constrained strategic flexibility, allowing the company to focus on the remaining pipeline and potential new therapeutic areas. The reduction in debt also mitigates the risk of future default and aligns the company’s capital structure with its current cash burn rate.
Market reaction to the settlement was positive, with analysts noting the sharp reduction in leverage and the resolution of the “going concern” issue as key drivers of investor confidence. The settlement was described as a “watershed moment” by CEO David E. Lazar, who emphasized that the company has “removed a substantial overhang that was constraining our strategic flexibility” and expressed confidence in its path forward.
David E. Lazar, CEO and Chairman, said, “The successful completion of the Oxford settlement represents a watershed moment for KALA BIO. By settling the Company’s debt obligations and increasing stockholders’ equity, we have removed a substantial overhang that was constraining our strategic flexibility. We are confident in our path forward.”
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