China's Innovative Medical cancels Pluristem investment

Yaky Yanay Photo: Eyal Yizhar

Pluristem blamed Chinese foreign current regulations, but the Chinese company said it was dissatisfied with the results of due diligence.

Stem cell company Pluristem Therapeutics Ltd. (Nasdaq:PSTI; TASE: PLTR) today announced that Chinese company Innovative Medical, which was to have invested $30 million in Pluristem, had withdrawn from the deal. A delay in completing the deal, signed in October, was reported in December. Pluristem's announcement yesterday followed the closing of trading in the US, and the share price plunged 5.3% in off-floor trading, pushing Pluristem's market cap down to NIS 430 million.

In both its postponement announcement in December and its current announcement, Pluristem said that the reason for the postponement (now a cancelation) was changes in Chinese regulation pertaining to the removal of capital from China. In its December postponement announcement, Innovative Medical said that the reason was difficulty in completing due diligence within a short time and macroeconomic factors in the international market. In its current cancelation announcement, Innovative Medical said that it had decided to withdraw from the deal after completing due diligence.

Pluristem co-CEO Yaky Yanay said, "Pluristem's announcement also stated that no solution for the restrictions on taking foreign currency out of China were expected in the near future, so we saw no point in leaving the agreement open. They very much like the technology, and invested quite a bit in due diligence. The door is always open if Chinese regulation changes, but it does not appear that this is the direction at the moment."

Innovative Medical was to have invested in Pluristem shares at a 15% premium on the market price. The company market cap at the time was NIS 476 million, 10% more than the current market cap. Following the report of the deal, the company's market cap crossed the NIS 500 million threshold.

Advanced trial for blood vessel treatment

Pluristem had $34 million in cash as of the end of the first quarter of 2017. It burned $13 million in the nine months preceding this report (for historic reasons, Pluristem's reporting year begins in the third quarter of the year).

A month ago, Pluristem began a Phase III trial of its treatment for blood vessels in the limbs, which it is conducting independently. Interim results are expected within two years, and full results within three years. Trials of this type are usually the biggest expense for a company like Pluristem, and can amount to tens of millions of dollars (the company received an $8 million grant from the European Union to finance the trial).

In January, Pluristem reported recruitment of the last patient for a clinical trial it is conducting with its South Korean partner for the use of stem cells in the treatment of Critical Limb Ischemia (CLI), which causes an intermittent limp. Results are expected in 2018.

Published by Globes [online], Israel Business News - www.globes-online.com - on June 22, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Yaky Yanay Photo: Eyal Yizhar
Yaky Yanay Photo: Eyal Yizhar
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