Ann: FDA Accepts Mesoblast's BLA Resubmission for Remestemcel-L, page-883

One of the leading royalty companies in the field is Royalty Pharma, I know one of the directors so got a few insights over the years. They work with big pharma as well as small to mid-cap biotech.

While Royalty Pharma initially built its business on acquiring existing royalty streams from approved products, a significant part of its ongoing business is buying "synthetic" royalties from late stage clinical programs - ie paying to buy a fixed percentage of projected sales, similar to the well established practice of factoring debts.

One interesting, not immediately obvious aspect is that Royalty Pharma uses significant debt funding, up to 50%. It can do this because its portfolio of marketed blockbuster drugs provides a secure revenue stream. The result of this is that it effectively enables small to mid-cap biotechs to access the massive bond markets which they would not otherwise be able to do.

A potentially complicating factor for MSB in selling forward its royalties is that all its patents are pledged to Oaktree - while not impossible it would require some difficult drafting and may discourage the larger royalty companies. Also the NovaQuest agreement already effectively assigns a percentage of Remestemcel sales to repay the loan.