Pluristem PSTI Stock News

Pluristem Therapeutics Inc. (NASDAQ: PSTI) is having a strong start to the trading session this morning, following up on the strong gains that we saw from the stock yesterday. Today’s rally is ultimately the result of a non-dilutive financing announcement. Here’s what’s going on:

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PSTI Stock Pops On Non-Dilutive Funding For COVID0-19 Efforts

In the press release, Pluristem Therapeutics said that the European Investment Bank has approved €50 million in non-dilutive financing. The financing is being provided to support the company’s research and development in the EU with regard to advancement of its regenerative cell therapy platform.

The funds will also assist in bringing pipeline products to market. PSTI said that there will be a special focus on the clinical development of PLX cells as a potential treatment for patients with COVID-19 related complications.

The first tranche of financing will be €20 million. The rest of the funding will be provided in two separate tranches based upon clinical, regulatory and scaling up milestones.

In the release, PSTI said that the financing is backed by a guarantee from the European Fund for Strategic Investments, under which the EIB and the European Commission are working together to boost Europe’s economic competitiveness.

The funds involved in this agreement are unsecured. The funding will be payable to the EIB in a single payment following five years from the disbursement of the first and second tranches. In addition, two annual payments starting on the fourth year from disbursement of the third tranche will be made by the company. Each tranche involved in the financing will have an interest rate of between 3% and 4%.

Pluristem Therapeutics also said that the EIB will be entitled to receive royalties on future revenues starting in 2024 and lasting for 7 years. These royalties will be paid at rates ranging from 0.2% to 2.3%. Importantly, royalties will be pro-rated to the amounts that the company received from the financing.

In a statement, Yaky Yanay, President and CEO at PSTI, had the following to offer:

We are extremely honored to have been selected by the EIB for this prestigious financing. We believe that this financing will allow us to significantly advance the clinical development of our lead product candidates, which if successful we expect will improve the quality of life for millions of patients around the world. Having established research partnerships with leading European institutions such as Charité University of Medicine Berlin, BIH Center for Regenerative Therapy (BCRT) and the Berlin Center for Advanced Therapies (BeCAT), as well as formed a subsidiary in Berlin, we understand the importance of having a physical presence in key markets. As we move forward into a multinational clinical trial for PLX cells to treat patients suffering from complications associated with COVID-19, we expect this EIB financing will accelerate our path to approval and to making a potentially effective COVID-19 treatment available worldwide.

Why The News Is Exciting Investors

Ultimately, investors are excited for good reason here. First and foremost, access to up to €50 million is a big deal. In USD, that figure works out to be about $54 million. For a company with a market cap of under $200 million, that’s a lot of funding to work with.

However, the excitement in PSTI goes beyond that. The truth of the matter is that it costs millions upon millions of dollars to develop therapeutic options. Because these options must be approved by regulatory authorities before hitting the market, many companies working to develop new drugs are essentially working on debt.

In general, when a company in the position of PSTI needs funding, they launch an offering in which new shares are issued and existing shares are diluted. That’s not happening here. With the entire transaction being non-dilutive, investors don’t have to fear losing value when the investor decides to pull the rug so to speak. Essentially, this is one of the best types of transactions that we see in this space and it gives the company a long financial runway to make it to and past key catalysts ahead.

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