Mesoblast boss says fears it’s running out of cash should be put to rest after it again raises capital

The biotech says it will survive the costly path to producing its lead medicine as it once again secures capital from large shareholders.

Mesoblast founder and CEO Silviu Itescu says its investors understand the company’s technology. Picture: Aaron Francis

Mesoblast chief executive Silviu Itescu believes the biotech’s ability to raise $US45m ($65m) in fresh capital from its biggest shareholders will put to rest concerns over its long-term viability.

He also said it signals optimism in the potential of its lead drugs as it prepares to resubmit for FDA approval for one of its medicines in coming months.

Mr Itescu, who founded the company and floated it on the ASX in 2004, defended reports Mesoblast had burned through as much as $1bn over two decades in pursuing its most promising drugs — which has been fuelled by a string of capital raisings — saying to bring a single medicine to market cost around $2bn and Mesoblast now had three drugs in advanced phase 3 trials.

It will also now have $US105.5m cash on hand following the latest capital raising in which its largest shareholder M&G Investments put in more money.

It comes as Mesoblast is dealing with the cost of resubmitted approval for its lead drug, remestemcel-L, after it was rejected in the US in 2020.

The latest quarterly cash flow report from Mesoblast for the June quarter showed it had royalty payments of $US2.011m but spent as much as $US13.9m which saw its cash on hand slip to $US60.4m.

Mesoblast chief Silviu Itescu says the new capital puts paid to any concern it’s short on cash..

Mr Itescu said its largest shareholder M&G, which is based in Britain, approached Mesoblast with an offer of a capital injection.

“Our largest investor came to us and said, look, we think your balance sheet needs to be strengthened and we want to increase our ownership,” Mr Itescu said.

“The message is, this capital puts paid to any concern that we’re short on cash and gives us an appropriate runway for the next 18 months at least.

“It allows us to get the (remestemcel-L) product approved and launched and that is really what the objective was.

“All the chatter around (us) running out of cash — forget about it. We are not.”

The raising will take M&G’s stake to almost 15 per cent.

Under the latest capital raising, Mesoblast has received $US45m via the issue of 86.7m fully-paid, ordinary shares in a global private placement led by M&G and strongly supported by its major Australian and American shareholders.

The private placement was made at 75c per share, a 5 per cent discount to the thirty trading-day volume weighted average price.

Shares in Mesoblast fell more than 10 per cent when the company’s stock came out of its trading halt, before closing down 7 per cent at 86c, making it the worst performer on the ASX200 Index on Tuesday.

At its peak more than 10 years ago amid hype around its biotech applications, shares in Mesoblast were more than $9.50 each and the company was valued at around $2.5bn. But a series of setbacks, knock backs from the FDA, volatile market conditions for speculative biotech companies and countless capital raisings have seen the shares retreat strongly and the company now has a market capitalisation of $570m.

In early 2020 it raised $US90m via a placement of 43m shares at a price of $3.20 per share but its shares later plummeted when the FDA knocked back its remestemcel-L medicine which was supported by a US drugs advisory committee but rebuffed by the FDA citing a failure to show key health improvements for some patients in trials.

Mesoblast has always managed to find friendly investors and supporters willing to hand it more cash as it pursues the use of its remestemcel-L medicine for inflammatory diseases in children.

The remestemcel-L trial is under a priority review meaning the FDA must come to a decision within six months.

“So we’re working towards a planned first product launch in the first quarter next year,” Mr Itescu said.

The original rebuff from the FDA had set the company back 18 months, he added.

“We thought we would have the first product approved 18 months ago, part of the volatility in our share price is a reflection of the delay of two years in approval. Our share price was roughly close to $5 two years ago in anticipation of first product approval.

“And biotech and share price volatility go hand in hand. You can’t predict whether the FDA gives you a thumbs up or a thumbs down.”

He said the current “risk off” mentality for investors around the world was making it hard for biotech companies such as Mesoblast, but that its shareholders recognised the strength of the company’s science.