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Strategic Alliance, Cephalon (CEPH) and Mesoblast (ASX: MSB)

Mesoblast Limited (ASX:MSB) have entered into a strategic alliance with Cephalon (NASDAQ:CEPH) to develop and commercialize novel adult Mesenchymal Precursor Stem Cell (NYSE:MPC) therapeutics for degenerative conditions of the cardiovascular and central nervous systems.
  • MSB to receive upfront payment of US$130 M (US$30 M upon shareholder approval), up to $1.7 B in milestone payments, and an equity investment by CEPH of 19.99%,
  • These conditions include Congestive Heart Failure, Acute Myocardial Infarction, Parkinson’s disease and Alzheimer’s disease,
  • The alliance also extends to products for augmenting hematopoietic stem cell transplantation in cancer patients.

Under the terms of the Development and Commercialization Agreement between the companies, in exchange for exclusive world-wide rights to commercialize specific products based on MSB’s proprietary adult stem cell technology platform:

  • CEPH will make an upfront payment to MSB totaling US$130M  (US$30 million upon MSB’s shareholder approval) and regulatory milestone payments of up to US$1.7B;
  • MSB will be responsible for the conduct and expenses of certain Phase IIa clinical trials and commercial supply of the products;
  • CEPH will be responsible for the conduct and expenses of all Phase IIb and III clinical trials and subsequent commercialization of the products;
  • MSB will retain all manufacturing rights and will share significantly in the net product sales.

In addition, under the terms of a Stock Purchase Agreement and a Subscription Deed:

  • CEPH will make an equity investment to purchase a 19.99% stake in MSB at A$4.35 per share, totaling approximately US$220M;
  • This price represents a 45% premium to the last 30 days’ volume weighted average price for MSB’s shares;
  • CEPH has entered into a standstill agreement to limit its investment to 19.99% of MSB’s common stock for the next 12 months with a right to maintain its equity stake on a top up basis, subject to the Australian Securities Exchange rules;
  •  CEPH’s Chief Operating Officer J. Kevin Buchi will join the Mesoblast Board of Directors, effective immediately.