This unfortunately was absolutely necessary for MSB.
You need to go back to the Hercules loan agreement and the two amendments to it (these can be accessed in redacted form on the US SEC website). The current Amortization Date is 1 April 2021, and loan repayments commence one day before that, in March (ie next month). Further extensions of this date are dependent on certain redacted conditions.
So what might those conditions be? A hint is given in the first amendment, where a definition of remestemcel in GvHD is added, along with some extra conditions for the extension. It is thus reasonable to assume that any further extension is dependent on some form of approval for remestemcel in GvHD - and that has not occurred. We may therefore assume repayments commence next month.
Several issues flow from this:
- required disclosure of the significant current liabilities in the half year accounts (coincidentally due today!)
- likely breach of the cash covenants on the Hercules loan
- significant cash flow issues
Given that the CRL was received in October, MSB would have known for some time that further extensions of the Hercules loan would not be available. They would have explored several options, including renegotiating the loan and a traditional capital raise from institutions such as M&G who have supported them in the past (taking out a new loan would be effectively impossible given that substantially all of MSB's assets are already pledged to Hercules). It would appear that neither approach was successful - I suspect M&G is looking to exit in any case.
We know it's not a partnership but rather an "investor". It is possible (but unlikely) it is one of the funds established by big pharma companies to invest in early stage science (MSB is supposedly well beyond that point).
Given that MSB (for the reasons above) desperately needs cash, and that it has taken a long while to bring a deal to the table, we can expect that the terms will be ugly indeed! The industry "investors" are not known for their benevolence!!
BTW - the fact that MSB sees the need to urgently raise cash says to me Novartis is expected to walk and that there is no other partnership deal on the horizon.
(20min delay)