Cephalon, Mesoblast in stem cell development deal

Dugmaker Cephalon Inc plans to acquire a stake in Australian biotechnology company Mesoblast Ltd as well as rights to develop its adult stem cell treatments for degenerative conditions of the cardiovascular and central nervous systems.

The news sent shares of Mesoblast up 27 percent on the Australian Stock Exchange early Wednesday.

Under the deal, Cephalon will pay Mesoblast $130 million upfront and another $220 million to acquire a nearly 20 percent stake in the Australian company, they said in a statement.

Cephalon will have worldwide rights to specific products based on Mesoblast’s adult stem cell technology platform.

Adult stem cells, as opposed to the more controversial embryonic stem cells, have a limited ability to form new types of cells and tissues.

The companies said total regulatory milestone payments to Mesoblast could reach $1.7 billion, assuming that the agreement results in commercial treatments for conditions including congestive heart failure, acute myocardial infarction, Parkinson’s disease, and Alzheimer’s disease.

Mesoblast will be responsible for conducting and financing certain Phase IIa clinical trials and commercial supply of the products. Cephalon will be responsible for later-stage clinical trials and commercialization of the products.

Cephalon paid a 31 percent premium on Mesoblast’s closing price on Tuesday.

Mesoblast shares rose as high as $4.45 Australian, before trading up 27 percent at A$4.23 early Wednesday. Cephalon rose 0.3 percent to close at $65.67 on Nasdaq.

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(Reuters)