Mesoblast (ASX:MSB) - Managing Director and CEO, Silviu Itescu (centre).
Managing Director and CEO, Silviu Itescu (centre).
Source: Mesoblast
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  • Mesoblast (MSB) has turned to a U.S. investment group to raise $138 million through a crucial private placement
  • The drugmaker is placing 60 million shares to the private investor at $2.30 each — a 6.5 per cent discount to Mesoblast’s last closing price
  • The investor also has the right to buy an extra 15 million shares at $2.88 each to raise another $43.2 million at any point until March 15, 2028
  • Today’s placement is crucial for Mesoblast given the company’s auditor, PricewaterhouseCoopers (PwC), said Mesoblast needed an extra influx of cash to keep operating
  • Mesoblast’s last half-year report highlighted net outflows of $60.1 million and an 82 per cent drop in revenue — causing concerns for PwC that the company was running low on cash
  • Now, with the proceeds from the private placement, Mesoblast now has a healthy US$187.5 million (around A$241) million worth of cash on hand
  • After dipping in early action today, Mesoblast shares have since recovered to trade 1.63 per cent higher at $2.49 per share this morning

Mesoblast (MSB) has turned to a U.S. investment group to raise $138 million through a crucial private placement.

The stem cell–based medicine maker is placing 60 million shares to the private investor at $2.30 each, which represents a 6.5 per cent discount to Mesoblast’s last closing price of $2.46 per share on Thursday, February 25.

On top of this, the investment group has also been given the right to buy an extra 15 million shares at $2.88 per share to raise an extra $43.2 million at any point until March 15, 2028.

A crucial cap raise

The private placement is particularly important in light of Mesoblast’s latest half-yearly report. In the report, independent auditor PricewaterhouseCoopers (PwC) said Mesoblast needed an extra influx of cash to continue operating.

“The ability of the group to continue as a going concern and realise its assets and discharge its liabilities in the normal course of businesses are dependent on cash inflows from successfully completing the private placement, as well as from existing strategic and financing partnerships,” PwC said.

This came after Mesoblast’s revenue fell 82 per cent to US$3.55 million (around A$4.6 million) with operating outflows of $60.1 million for the six months to December 31, 2020.

Bolstered cash balance

With the proceeds from the private placement, Mesoblast now has around US$187.5 million (around A$241 million) worth of cash on hand — enough to keep trialling some key anti-inflammatory drugs.

Mesoblast CEO Dr Silviu Itescu said today’s capital raise comes from the leaders of SurgCenter Development, which is a private U.S.-based operator of ambulatory surgical centres.

“We expect the deep healthcare knowledge and expertise of this investor group will be of great benefit to the company,” Dr Silviu said.

“The network and infrastructure of surgeons and ambulatory centres operated by SurgCentre may provide unique synergies to facilitate development and market access for rexlemestrocel, if approved, in patients with chronic lower back pain.”

Rexlemestrocel-L is a drug candidate currently being trialled for treating heart failure and chronic back pain.

Mesoblast plans to use the funds from the private placement to stay financially healthy while pursuing late-stage meetings with the U.S. Food and Drug Administration (FDA) later this year.

At the same time, some of the funds will be invested into the commercial supply of Mesoblast’s remestemcel-L treatment ahead of potential approval for treating acute graft versus host disease in children and advancing the drug to meet commercial objectives for chronic heart failure and back pain.

Shares in Mesoblast dipped in early action today but quickly recovered to trade above the grey line. At 11:05 am AEDT, Mesoblast shares are trading 1.63 per cent higher at $2.49 per share.

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