Arsanis Inc. has settled a dispute with Austrian research funding agency over funds that were provided for research and development expenditures.

The Vienna-based state agency, Österreichische Forschungsförderungsgesellschaft mbH, or FFG, alleged in the dispute that Arsanis neglected reporting, performance and other obligations related to grants and loans made by FFG between September 2011 and March 2017. Arsanis used the funds for qualifying research and development expenditures.

FFG previously asked Arsanis to repay about €18.1 million.

Arsanis and its units Arsanis GmbH and X4 Pharmaceuticals Inc. have now agreed to repay the outstanding loan principal of €8.5 million along with regular interest within three years. Further, Arsanis will have to maintain a minimum cash balance equal to 70% of the then-outstanding principal amount of the loans with an Austrian bank and also maintain an office in the country.

In exchange, FFG will release the parties of all the obligations and claims effective as of Dec. 31, 2021, after the fulfillment of commitments under the settlement.

Waltham, Mass.-based Arsanis, whose unit is undergoing a merger with X4 Pharmaceuticals, also announced an amendment of the merger agreement due to the settlement. A portion of the expected 2019 repayment to FFG, representing €865,440, would be deducted from Arsanis' net cash at closing of the deal. The previous agreement also excluded about €8.5 million of unpaid FFG loans for deduction from the company's net cash. This figure will now be reduced to approximately €7.6 million due to the €865,440 sum being deducted from Arsanis' net cash.

The amendment would change the merger share exchange ratio to about 0.5632 shares of Arsanis common stock for each share of X4 capital stock. As a result, X4 stockholders would own about 68.5% of the combined company on a pro forma basis, compared to 70% earlier, with Arsanis stockholders owning the remaining 31.5%.