Mesoblast Stuns Market With US$350 MillionUp-front Deal(Now...

Mesoblast Stuns Market With US$350 Million
Up-front Deal
(Now That?s More Like It Cephalon!)
Who would have thought that title for the biggest deal in Australian biotech would last
for such a short time. Two weeks after Acrux secured a US$87 million milestone payment
for the approval of its transdermal testosterone product, Axiron, Mesoblast has stunned
the market with multi-product deal with Cephalon for the commercialisation of its adult
stem cell platform. It is one of the largest Phase II stage biotech deals ever completed,
with a total potential deal value of $2.05 billion.
Deal Terms
Upfront
Under the terms of the deal, Cephalon will pay Mesoblast US$130 million as an upfront
payment. The first US$100 million of that is expected to be received a few days after the
deal was announced. The US$30 million balance will be received after shareholder approval
is received for the equity investment Cephalon will also make in Mesoblast. The
challenge for Mesoblast will be to spread its revenue with future costs so that it does not
pay tax on revenue that will be going towards product development.
Equity Investment
Cephalon will make a US$220 million equity investment in Mesoblast at $4.35 per share.
Around half will be acquired as new equity in Mesoblast and half has been acquired from
existing shareholders. Cephalon will own 19.9% of the merged Mesoblast-Angioblast
Systems entity with around 270 million shares that will be on issue.
The exact number of shares that will be on issue after the merger is completed is still
unknown, with some Angioblast shareholders still to decide over the next 10 days whether
to take some of their shares in cash (at $1.70 per share) or in equity. Under the terms of the
Mesoblast-Angioblast merger, shareholders in Angioblast were entitled to take payment
in Mesoblast shares, or 85% MSB shares and 15% cash, to allow for payment of tax
obligations. It is likely those shareholders will now elect to take payment in MSB shares
given the strong run in the stock since the merger was announced.
Royalty and Product Application Rights
The alliance with Cephalon includes use of Mesoblast?s adult stem cell technology for
the treatment of congestive Heart failure, heart attack, Parkinson?s disease, Alzheimer?s
disease and for use in bone marrow transplantation on a worldwide exclusive basis. The
deal does not include the areas of orthopedics, diabetes, eye diseases and immune based
inflammatory diseases (such as arthritis).
Mesoblast will maintain manufacturing rights and will enjoy a ?significant? component of
product sales, by effectively selling the manufactured product to Cephalon.
?Mesoblast Stuns Market With US$350 Million
Up-front Deal
(Now That?s More Like It Cephalon!)
Who would have thought that title for the biggest deal in Australian biotech would last
for such a short time. Two weeks after Acrux secured a US$87 million milestone payment
for the approval of its transdermal testosterone product, Axiron, Mesoblast has stunned
the market with multi-product deal with Cephalon for the commercialisation of its adult
stem cell platform. It is one of the largest Phase II stage biotech deals ever completed,
with a total potential deal value of $2.05 billion.
Deal Terms
Upfront
Under the terms of the deal, Cephalon will pay Mesoblast US$130 million as an upfront
payment. The first US$100 million of that is expected to be received a few days after the
deal was announced. The US$30 million balance will be received after shareholder approval
is received for the equity investment Cephalon will also make in Mesoblast. The
challenge for Mesoblast will be to spread its revenue with future costs so that it does not
pay tax on revenue that will be going towards product development.
Equity Investment
Cephalon will make a US$220 million equity investment in Mesoblast at $4.35 per share.
Around half will be acquired as new equity in Mesoblast and half has been acquired from
existing shareholders. Cephalon will own 19.9% of the merged Mesoblast-Angioblast
Systems entity with around 270 million shares that will be on issue.
The exact number of shares that will be on issue after the merger is completed is still
unknown, with some Angioblast shareholders still to decide over the next 10 days whether
to take some of their shares in cash (at $1.70 per share) or in equity. Under the terms of the
Mesoblast-Angioblast merger, shareholders in Angioblast were entitled to take payment
in Mesoblast shares, or 85% MSB shares and 15% cash, to allow for payment of tax
obligations. It is likely those shareholders will now elect to take payment in MSB shares
given the strong run in the stock since the merger was announced.
Royalty and Product Application Rights
The alliance with Cephalon includes use of Mesoblast?s adult stem cell technology for
the treatment of congestive Heart failure, heart attack, Parkinson?s disease, Alzheimer?s
disease and for use in bone marrow transplantation on a worldwide exclusive basis. The
deal does not include the areas of orthopedics, diabetes, eye diseases and immune based
inflammatory diseases (such as arthritis).
Mesoblast will maintain manufacturing rights and will enjoy a ?significant? component of
product sales, by effectively selling the manufactured product to Cephalon.
? Cheers VIN