This was published 7 years ago
Local stem cell biotech Mesoblast wins key US investor backing
By Brian Robins
Out-of-favour stem cell company Mesoblast has won significant backing for its technology from major US drug group Mallinckrodt Pharmaceutical, which has taken an option over two key products under development as well as snapping up a 5 per cent stake in the Australian company.
The US company has up to nine months now to finalise development and commercialisation agreements for the two products, which treat chronic low back pain and acute graft versus host disease, a condition which can occur following transplants.
Mesoblast shares jumped as much as 7 per cent after the announcement of the deal.Credit: David Wicks
Melbourne-based Mesoblast has patient trials for both products underway, with the results expected to assist in potential commercialisation opportunities.
Along with the $29.6 million raised by selling the stake to the US company if the deal is finalised, the agreement will free Mesoblast from the need for ongoing development and marketing spending on these products, providing it with ongoing royalty payments from potential sales.
Mesoblast founder Silviu Itescu has achieved new validation of his group's stem cell technology.Credit: Josh Robenstone
The share sale at $1.4761¢ apiece is at a premium to Mesoblast's closing share price on Thursday of $1.405c. The stock rallied on Friday on the news, trading up 4.6 per cent at $1.47 by late morning.
"The market sucks, biotech is getting creamed so for Mesoblast to do this deal now, giving up nothing, just an optional right, is a good deal," said Jason Kolbert, a US-based analyst with Maxim Group who is a long term follower of Mesoblast.
"It signifies third party validation for its technology platform, which is very very important. Mallinckrodt has taken an option, a right of first refusal over these products. Plus [Mesoblast] has raised funds without a discount."
Mesoblast's share price has been under pressure over the past few years as its aggressive research and development program burned through cash and earlier deals with other US drug companies such as Teva and Celgene failed to live up to expectations.
As a result, in mid 2016 the company turned to some of Melbourne's high net worth families who have agreed to invest up to $120 millions.
Mesoblast upset its investors mid-year when it lost the backing of Israeli drugmaker Teva, which had been backing a pivotal heart trial for Mesoblast. The separation triggered a near halving of its share price. This trial, a phase 3 trial, is due to run until the end of 2017, costing as much as $US40 million.