Osiris Therapeutics, Inc. (NASDAQ: OSIR), announced today that it has entered into an agreement with a wholly-owned subsidiary of Mesoblast Limited (ASX:MSB; USOTC:MBLTY) for the sale of Osiris’ culture-expanded mesenchymal stem cell (ceMSC) business, including Prochymal, in a transaction worth up to $100 million in initial consideration and milestone payments. Additionally, Osiris will receive royalty payments on sales of Prochymal and other products utilizing the acquired ceMSC technology.
Summary of the Transaction
- Mesoblast has acquired the assets related to Osiris’ ceMSC business.
- Osiris will receive $50 million in consideration for closing and delivery of its ceMSC assets.
- Osiris is eligible to receive up to an additional $50 million in payments upon Mesoblast achieving certain clinical and regulatory milestones.
- Mesoblast will assume all future development costs for the ceMSC business.
- Osiris will receive single to low double-digit royalties on product sales derived from the ceMSC technology.
- Osiris and Mesoblast have entered into a separate services agreement for continued product advancement and to ensure a seamless transition.
- Osiris has retained a license to all transferred intellectual property necessary to run its other businesses.
- For Osiris, the transaction results in pro forma cash, investments and receivables of approximately $82 million.
“With this transaction, we will focus our business on those areas that are of greatest commercial value to Osiris moving forward,” said Peter Friedli, Chairman of Osiris Therapeutics. “Furthermore, we have substantially strengthened our balance sheet, reduced R&D expense and preserved future value from Prochymal through a series of milestone and royalty payments.”
Osiris expects to record the closing and asset transfer consideration of $51 million in the fourth quarter of fiscal 2013. The company has previously expensed the research and development costs of its ceMSC business as incurred, therefore most of the consideration will be recognized as a gain on the sale of the business segment. For the preceding 12 months, Osiris incurred $12.5 million in Prochymal-related expenses, which may be eliminated going forward.