Shares in medical research specialist Mesoblast plunged 42 per cent on Tuesday on concerns about the stem cell therapy company's future after drugs giant Teva Pharmaceutical ended a long-standing research partnership.
Mesoblast said on Tuesday it has regained worldwide rights to its experimental therapy for advanced chronic heart failure at no cost as a result of Teva ending its involvement in a phase three trial.
With Teva out of the picture, Mesoblast said it has secured a new equity finance facility to meet the remaining funding requirements for its stem cell-based heart failure treatment program.
But details about the new funding and dilutionary impact on existing shareholders were scarce, which unnerved investors, Bell Potter analyst Tanushree Jain said.
Ms Jain was "disappointed and surprised" with Teva's decision, given its repeated commitments in the past.
Mesoblast shares closed 81 cents lower, or 42 per cent, to $1.11, in a sharply lower Australian market.
Mesoblast chief executive Silviu Itescu said Teva's decision was for strategic reasons, adding that the company isn't in the cardiovascular space.
"Teva as a commercial partner had an obligation to build our sales, marketing and distribution well beyond clinical development," Dr Itescu told AAP.
"And for a company that's not in the cardiovascular space that's a big investment to make, particularly at a time when they're in the midst of an acquisition of another generics rival.
Teva - the world's biggest generic medicines producer - is close to wrapping up its $US40.5 billion acquisition of Allergan's generics business and is under pressure to cut costs.
Teva - which holds a 14 per cent stake in Mesoblast due to its acquisition of Cephalon in 2011 - hasn't publicly commented on its decision.
Dr Itescu said Mesoblast is talking to several global cardiovascular companies about taking over from Teva and he hopes to have a new partner locked in within the next couple of months.
Dr Itescu was tight-lipped on the details of Mesoblast's new funding arrangements, saying further details will be released in due course.
"The most important thing going forward is that we have a funding facility in place to support the program," he said.
"And we would expect that having discussions with a number of major cardiovascular companies, a new partner will support the program with non-dilutive capital, and we'll never have to use the facility."
Mesoblast plans to complete the Phase 3 heart failure treatment trial within 18 months, and has almost 40 per cent of patients recruited.
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