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Australian biotechnology company Mesoblast (ASX: MSB) will receive a boost to its cash reserves after bagging $138 million from a US-based investor group.
It comes after the company's auditor PwC warned the group would be unable to continue as a "going concern" if it failed to complete the private placement.
The raise, led by SurgCentre Development, will see MSB issue 60 million shares in a private placement at $2.30 per share, a 6.5 per cent discount to the price at close of trading on 25 February.
Based on the placement, pro-forma cash-on-hand at December 31, 2020, would be approximately $241 million.
The investors also received warrants to acquire a further 15 million shares for $2.88 per share, a 25 per cent premium to the placement price, which may raise an additional $43.2 million.
"We are pleased to receive a strategic investment from the principals of SurgCentre Development, one of the largest private operators of ambulatory surgical centres in the US specialising in spine, orthopaedic and total joint procedures," CEO Dr Silviu Itescu said.
"We expect the deep healthcare knowledge and expertise of this investor group will be of great benefit to the company.
"The network and infrastructure of surgeons and ambulatory centres operated by SurgCentre may provide unique synergies to facilitate development and market access for rexlemestrocel, if approved, in patients with lower back pain."
Mesoblast intends to use the funds for operational and regulatory initiatives, investment in commercial supply of remestemcel-L ahead of potential approval for graft versus host disease, advancing manufacture of rexlemestrocel-L, and working capital.
The raise comes after a review of the company's interim results which showed net cash outflows of $78 million.
"Material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern," auditor PwC said.
"The ability of the group to continue as a going concern and realise its assets and discharge its liabilities in the normal course of business are dependent on cash inflows from successfully completing the private placement."
Mesoblast posted an after-tax loss of $33.2 million for 1H FY21.
The raise comes after a rollercoaster year for Mesoblast, which rode high on optimism for its proposed COVID-19 treatment and crashed in late-2020 when the trial failed to meet the mark set by the US Food and Drug Administration (FDA).
However, investors have been cautiously optimistic about the company's latest back pain treatment trial after MSB showed its stem cell treatment was "safe, durable, and effective".
Following that announcement, shares in MSB ticked slightly higher to $2.60 per share. However, the company's share price is still significantly below the highs seen during the worst of the pandemic when its proposed COVID-19 was still on the table.
The raise mirrors another capital injection completed by MSB in May last year worth $138 million.
Shares in MSB are down 2.03 per cent to $2.41 per share at 10.49am AEDT.
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