A small stem-cell medicine company in Rancho Cordova eventually could surrender control to the Chinese investors who made a critically needed $15 million investment earlier this month.
Cesca Therapeutics Inc. said in a regulatory filing this week that Boyalife Group of China plans “to become a majority shareholder” of the Rancho Cordova company, which has been struggling with cash-flow problems.
However, a change in control isn’t imminent, and Cesca officials said they welcome Boyalife’s investment as a vote of confidence in their company. Cesca develops therapeutic products and storage devices tied to stem-cell medicine.
“Having this longer-term strategic investor in the company will help,” Mike Bruch, chief financial officer of Cesca, said in an interview Wednesday. “It makes it a very good partnering. They’re not looking to come in and dump their investment. … We’re very happy.”
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He said Boyalife has investments in medical companies in China that could provide synergies with Cesca’s business.
Boyalife completed its $15 million investment in mid-February. The deal normally would have required approval of Cesca’s shareholders, but the requirement was waived because any delay “would seriously jeopardize the financial viability of the company,” Cesca announced at the time.
In a filing this week with the Securities and Exchange Commission, Cesca said Boyalife has control of 20 percent of the Rancho Cordova company’s shares. Boyalife also has the right to appoint one member of Cesca’s board of directors.
In addition, Boyalife has been granted warrants to buy enough shares to control approximately 55 percent of Cesca, according to Bruch. Warrants are similar to stock options.
Bruch said Boyalife would have to spend $28.2 million to exercise the warrants, providing additional cash for Cesca. He said the warrants can’t be exercised for at least six months.
Beyond that, Boyalife holds debt that can be converted into enough shares of stock to push the Chinese group’s ownership to more than 68 percent, Bruch said. However, the debt can’t be converted for another three years, he said.
Last week, Cesca reported it lost $623,000 in the quarter ended Dec. 31, considerably less than the $4.4 million it lost a year earlier. Revenue fell to $3.3 million from $4.6 million, however.
The Rancho Cordova company’s shares closed at 23.78 cents, up .09 cents.