Cell therapy company Mesoblast (ASX:MSB) has struck a deal with two major investors that could deliver up to US$50 million (A$76.8 million) in new funding, strengthening its balance sheet and supporting its clinical pipeline.
The company has entered into convertible note subscription agreements with Gregory George and William Gueck, principals of SurgCenter and existing Mesoblast shareholders. The funding, available at Mesoblast’s discretion pending shareholder approval, is intended to repay or reduce secured debt and provide additional working capital.
Chief executive Silviu Itescu said the deal demonstrated continued backing from the company’s largest investors. We appreciate the ongoing support from our major shareholders in ensuring that the Company can optimise its capital structure and support our ongoing pipeline growth opportunities,” he said.
Under the terms, Mesoblast may issue the unsecured notes in tranches of US$10 million, with a maturity date of five years after the first issuance unless redeemed or converted earlier. The notes carry a 5 per cent annual coupon on their face value.
The investors have the option to convert the notes into fully paid ordinary shares or American Depositary Receipts (ADRs) at US$16.25 per ADR, equivalent to A$2.50 per ASX-listed share. That represents a 126 per cent premium to Mesoblast’s last closing price on Nasdaq and a 29% premium to its ASX close.
As part of the arrangement, the investors will receive a US$100,000 commitment fee and, subject to shareholder approval, warrants over two million ordinary shares (200,000 ADRs). Should Mesoblast exercise its option to draw down the funding, the investors will also receive warrants over an additional three million shares (300,000 ADRs). The warrants will have the same exercise price as the notes and mature four years after issuance.
The conversion price includes standard adjustment mechanisms to account for future share issues, capital reductions, consolidations, or other corporate actions.
The agreements provide Mesoblast with a flexible funding option as it continues to advance its pipeline of allogeneic cellular medicines for inflammatory diseases, with shareholder approval expected to be sought at the upcoming Annual General Meeting.