Mesoblast raises an extra $60.5m, still has Alex Waislitz’s support who concedes it’s been a ‘long journey’
Mesoblast has convinced long-suffering shareholders to plough an extra $US40m ($60.5m) into the stem cell biotech as it awaits a decision on its marquee therapy from the US Food and Drug Administration.
The Melbourne-headquartered company completed a private placement, priced at 85c a share, tapping primarily its existing shareholders, including billionaire investor Alex Waislitz.
Mesoblast’s shares dived more than 11.6 per cent to 88c on Wednesday. It follows the company raising $US110m from investors in March 2021.
Chief executive Silviu Itescu said the proceeds of the latest raising would be used to commercialise its flagship drug, remestemcel-L, to treat children with acute versus host disease (aGVHD). The FDA is set to decide on the drug within the next four months.
There is currently no treatment available for the life-threatening complication from a bone-marrow transplant, while the approved therapy for adults does not improve life expectancy.
It is the second time that the company has applied for FDA approval. The first time resulted in the regulator requesting more information from Mesoblast, knocking its shares from a six year-high of $5.22.
Dr Itescu submitted a fresh application to the FDA earlier this year after combing through more than 100,000 pages of clinical trial data and is confident that it has now satisfied the agency that remestemcel-L is safe and effective.
“We appreciate the strong support from our major shareholders as we look forward to commercialising our platform technology and bringing the first FDA approved treatment to children with life-threatening SR-aGVHD,” Dr Itescu said.
Mr Waislitz, who owns more than 4 per cent of Mesoblast – mostly via his private investment vehicle – was confident that the company’s technology could be applied to other debilitating conditions.
We remain supportive of Mesoblast notwithstanding that it has been a long journey for both the company and its shareholders,” Mr Waislitz said.
“Stem cell and regenerative therapies have the potential to revolutionise medicine, and Meso is a recognised leader in the field.
“If they can achieve FDA approval for their comparatively niche GVHD product this time around, then it augurs very well for the other products in their pipeline such as cardio and lower back pain treatments which would have huge global applications.”
In February, the FDA granted Mesoblast accelerated approval for its opioid-free treatment for chronic low back pain.
But since then, almost $240m has been wiped off its market value. After trading largely sideways for the past month, its shares lost more than 10c after the company announced a voluntary trading halt late last week, before revealing the private placement on Wednesday, which comprised about 10 per cent of its issued capital.
The company has included a going concern notice in several of its last accounts. It held total cash reserves of $US67.6m as of December 31, 2022.
The group continues its focus on maintaining tight control of net cash usage for operating activities, which were $30.7m for the six months ended December 31, 2022, a reduction of 16 per cent compared to the prior period,” Mesoblast said in its half-yearly report in February.
“As the group prepares for a potential first product approval by the United States Food and Drug Administration and in line with its commercial launch plans, additional inflows from strategic partnerships, product specific financing, capital markets and existing loan arrangements will be required to meet the Group’s projected expenditure consistent with its business strategy over the next 12 months.
“As a result of these matters, there is material uncertainty related to events or conditions that may cast significant doubt – or raise substantial doubt as contemplated by Public Company Accounting Oversight Board standards – on the group’s ability to continue as a going concern and, therefore, that the group may be unable to realise its assets and discharge its liabilities in the normal course of business.”
It comes as Mesoblast has been on a rollercoaster ride with US regulators. In August 2020, the US Oncologic Drugs Advisory Committee (ODAC) voted nine to one in favour of the remestemcel-L therapy for acute graft versus host disease.
But 12 months later, the FDA recommended that Mesoblast conduct at least one additional randomised, controlled study in adults and/or children to provide further evidence of the effectiveness of remestemcel-L for aGVHD, sending the company’s shares into a nosedive.
Mesoblast has since provided new phase three clinical data – the final step before regulatory approval and commercialisation – which shows that remestemcel-L remains effective at least four years after initial treatment, improving life expectancy rates.
Overall survival rates in phase three trials showed those who were treated with remestemcel-L were 63 per cent after one year, 51 per cent at two years, and 49 per cent at four years.
Dr Itescu said this compares with survival rates for the only FDA-approved drug, ruxolitinib – which can only be used on adults – of 40-49 per cent after one year of treatment and 25-38 per cent at two years.
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