Controversial biotech Mesoblast (ASX:MSB) is getting a sorely needed cash infusion.

The money-guzzling Melbourne company announced on Tuesday it had entered into a $US110 million ($138 million) private placement from a strategic US investor group that will put it on a much firmer financial footing.

Australia’s second-biggest listed life sciences company had to include a warning about “material uncertainty that may cast significant doubt on our ability to continue to continue as a going concern” in its latest financial report last week given the state of its finances.

MSB had $US60.1 million in net cash outflows from operations in the six months to December 31, and $US77.5 million in cash and cash equivalents.

It also had $US90.7 million in debt, some of which Mesoblast is paying 15 per cent interest on.

The company was left in this somewhat precarious financial state after the US Food and Drug Administration in October ignored the advice of its own independent advisors and declined to approve Mesoblast’s stem cell treatment for children suffering from complications following a bone marrow transplant, instead asking for another study.

In anticipation of approval — which was never guaranteed — Mesoblast had ramped up industrial-scale manufacturing of the stem cell treatment, known as remestemcel-L, and put a sales team in place.

Mesoblast placement details

The placement is for $2.30 a share, a 6.5 per cent discount from MSB’s last closing price. The investors also receive warrants to acquire up to 15 million shares at $2.88 a share, a 25 per cent premium, on or before 15 March 2028.

The funds are from the principals of SurgCenter Development, one of the largest private operators of ambulatory surgical centres in the US, specialising in spine, orthopaedic and total joint procedures.

Mesoblast CEO Dr Silviu Itescu said that if the company’s rexlemestrocel treatment is approved in patients with chronic lower back pain, SurgCenter’s network and infrastructure of surgeons and ambulatory centres may provide “unique synergies to facilitate development and market access” for the stem cell injection.

At 11.26am, Mesoblast shares were down 0.8 per cent to $2.44.