MESOBLAST LTD — Capital/Financing Update 2018

Oct 11, 2018

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MESOBLAST AND TASLY PHARMACEUTICAL GROUP COMPLETE TRANSACTION FOR STRATEGIC CARDIOVASCULAR PARTNERSHIP IN CHINA

New York, USA, and Melbourne, Australia; October 12, 2018: Mesoblast Limited (ASX: MSB; Nasdaq: MESO) today announced completion of the transaction with Tasly Pharmaceutical Group to establish a strategic partnership in China for Mesoblast’s allogeneic mesenchymal precursor cell (MPC) product candidates MPC-150-IM for heart failure and MPC-25-IC for heart attacks.

Mesoblast has received US$40 million (AUD$57 million) from Tasly, comprising an upfront technology access fee of US$20 million and an equity purchase of US$20 million for which Mesoblast Limited has issued 14,464,259 fully paid ordinary shares to Tasly.

As consideration, Tasly has received exclusive rights and will fund all development, manufacturing and commercialization activities in China for MPC-150-IM for the treatment and prevention of chronic heart failure and MPC-25-IC for the prevention and treatment of acute myocardial infarction. Mesoblast will receive US$25 million on achievement of product regulatory approvals in China, double-digit escalating royalties on net product sales, and six additional escalating milestone payments upon the product candidates reaching certain sales thresholds.

Mesoblast and Tasly will establish a joint steering committee, with equal representation from both parties, to oversee, review and co-ordinate the development, manufacturing and commercialization activities for the cardiovascular product candidates in China. The parties, through the joint steering committee, plan to expedite development and commercialization of these cardiovascular product candidates by leveraging each other’s clinical trial results in China, and the United States and other major jurisdictions respectively to support their respective regulatory submissions for MPC-150-IM and MPC-25-IC.

Chairman of Tasly Pharmaceutical Group Mr Yan Kaijing said: "We believe Mesoblast’s cellular medicine technology platform is poised to transform cardiovascular care in China. This is why Tasly has made this strategic investment and long-term partnership with the premier global cellular medicine company.”

Mesoblast Chief Executive Dr Silviu Itescu stated: “We are very excited to be partnering with Tasly, one of the largest pharmaceutical companies in China, the world’s fastest growing biopharmaceutical and healthcare market.”

About Tasly Pharmaceutical Group

Tasly Pharmaceutical Group (SHA: 600535) is one of the largest pharmaceutical companies in China with more than 20 years of operational history. Its business focuses on R&D, manufacturing and commercialization of innovative modern traditional Chinese medicine, biologics and chemical drugs in the therapeutic areas of cardiology, metabolism and oncology. Tasly has the only marketed biological product for cardiovascular diseases approved in China. It has one of the largest pharmaceutical sales and marketing teams, including 809 offices established in 29 regions covering all the main therapeutic areas, and a vast distribution network across approximately 20,000 hospitals in China. At 2017, its total annual revenues exceeded US$2.5 billion.

About Mesoblast

Mesoblast Limited (ASX: MSB; Nasdaq: MESO) is a world leader in developing allogeneic (off-theshelf) cellular medicines. The Company has leveraged its proprietary technology platform to establish a broad portfolio of late-stage product candidates with three product candidates in Phase 3 trials –

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acute graft versus host disease, chronic heart failure and chronic low back pain due to degenerative disc disease. Through a proprietary process, Mesoblast selects rare mesenchymal lineage precursor and stem cells from the bone marrow of healthy adults and creates master cell banks, which can be industrially expanded to produce thousands of doses from each donor that meet stringent release criteria, have lot to lot consistency, and can be used off-the-shelf without the need for tissue matching. Mesoblast has facilities in Melbourne, New York, Singapore and Texas and is listed on the Australian Securities Exchange (MSB) and on the Nasdaq (MESO). www.mesoblast.com

Forward-Looking Statements

This announcement includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forwardlooking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other applicable federal securities laws. Forward- looking statements include, but are not limited to, statements about: the potential benefits of this alliance and the parties’ ability to maintain the alliance; the parties’ ability to advance product candidates into, enroll and successfully complete, clinical studies, advance their manufacturing capabilities, and obtain regulatory filings and approvals. There are many uncertainties and risks that may cause our actual results, performance or achievements to be materially different from those which may be expressed or implied by such statements, and accordingly, you should not place undue reliance on these forward-looking statements. We do not undertake any obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

For further information, please contact:

Julie Meldrum Corporate Communications T: +61 3 9639 6036 E: julie.meldrum@mesoblast.com

Schond Greenway Investor Relations T: +1 212 880 2060 E: schond.greenway@mesoblast.com

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Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

MESOBLAST LTD

ABN

68 109 431 870

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of +securities issued or to Ordinary shares. be issued 2 Number of[+] securities issued or 14,726,259 ordinary shares. to be issued (if known) or maximum number which may be issued 3 Principal terms of the 14,726,259 ordinary shares (fully paid) as per +securities (e.g. if options, the company’s constitution. Of this amount, exercise price and expiry date; if 14,464,259 shares are to be held in voluntary partly paid +securities, the escrow until 12 October 2019. amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

• See chapter 19 for defined terms.

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4 Do the+securities rank equally in all respects from the+issue date with an existing+class of quoted+securities? If the additional+securities do not rank equally, please state: • the date from which they do • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets)	Yes
	14,464,259 ordinary shares issued for consideration of US$20,000,000. 50,000 ordinary shares issued upon the exercise of options in accordance with the Company’s Employee Share Option Plan for consideration of A$65,500. 212,000 ordinary shares issued upon the exercise of options in accordance with the Company’s Employee Share Option Plan for consideration of A$252,280.
	14,464,259 ordinary shares issued to the Tasly Pharmaceutical Group in connection with the closing of the strategic alliance for the development, manufacture and commercialization in China of Mesoblast’s allogeneic mesenchymal precursor cell product candidates MPC-150-IM for the treatment or prevention of chronic heart failure and MPC- 25-IC for the treatment or prevention of acute myocardial infarction, as per the ASX announcement on 17 July 2018. 262,000 ordinary shares (fully paid) issued upon the exercise of options in accordance with the Company’s Employee Share Option Plan.

• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

6a Is the entity an+eligible entity that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i 6b The date the security holder resolution under rule 7.1A was passed 6c Number of+securities issued without security holder approval under rule 7.1 6d Number of+securities issued with security holder approval under rule 7.1A 6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements	No
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable

• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B. 8 Number and +class of all +securities quoted on ASX (_including_the +securities in section 2 if applicable)	Date Registered 12 October 2018 28 September 2018 20 July 2018 Total	Number of ordinary shares issued 14,464,259 212,000 50,000 14,726,259
	Number	+Class
	497,365,913	Ordinary shares

• See chapter 19 for defined terms.

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9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	Number	+Class
	23,029,000 (688,334 options have been cancelled since last Appendix 3B) 1,500,000	Unquoted options Incentive rights
	All ordinary shares rank equally and participate in the right to dividends equally.

Part 2 - Pro rata issue

11 Is security holder approval required? 12 Is the issue renounceable or non- renounceable? 13 Ratio in which the+securities will be offered 14 +Class of+securities to which the offer relates 15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations	Not applicable
	Not applicable Not applicable Not applicable Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable

• See chapter 19 for defined terms.

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20 Names of any underwriters 21 Amount of any underwriting fee or commission 22 Names of any brokers to the issue 23 Fee or commission payable to the broker to the issue 24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders 25 If the issue is contingent on security holders’ approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do security holders sell their entitlements_in full_through a broker? 31 How do security holders sell_part_ of their entitlements through a broker and accept for the balance?	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Not applicable

• See chapter 19 for defined terms.

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• 32 How do security holders dispose of their entitlements (except by sale through a broker)?

Not applicable

• 33 +Issue date

Not applicable

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of[+] securities ( tick one )

• (a) +Securities described in Part 1

• (b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

• 1 - 1,000

• 1,001 - 5,000

• 5,001 - 10,000

• 10,001 - 100,000

• 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

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Entities that have ticked box 34(b)

ntities that have ticked box 34(b)
38 Number of+securities for which +quotation is sought 39 +Class of+securities for which quotation is sought 40 Do the+securities rank equally in all respects from the+issue date with an existing+class of quoted +securities? If the additional+securities do not rank equally, please state: • the date from which they do • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another+security, clearly identify that other+security) 42 Number and +class of all +securities quoted on ASX (_including_the+securities in clause 38)	Not applicable
	Not applicable
	Not applicable
	Not applicable
	Number	+Class
	Not applicable	Not applicable

• See chapter 19 for defined terms.

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Quotation agreement

1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted +quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

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Sign here: ............................................................ ~~(Director/~~ Company secretary)

Date: 12 Oct 2018

Charlie Harrison

Print name:

.........................................................

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• See chapter 19 for defined terms.

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Appendix 3B New issue announcement

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

Insert number of fully paid[+] ordinary securities on issue 12 months before the 470,601,826 + issue date or date of agreement to issue Add the following: 15 December 2017: 255,912 (exercise of • Number of fully paid[+] ordinary securities options) issued in that 12 month period under an 6 March 2018: 25,000 (exercise of options) exception in rule 7.2 6 March 2018: 8,333 (exercise of options) • Number of fully paid[+] ordinary securities 20 July 2018: 50,000 (exercise of options) issued in that 12 month period with shareholder approval 28 September 2018: 212,000 (exercise of options)

• Number of partly paid[+] ordinary securities that became fully paid in that 12 month period

Note:

• Include only ordinary securities here – other classes of equity securities cannot be added

• Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

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----- Start of picture text -----

• It may be useful to set out issues of
securities on different dates as separate
line items
Subtract the number of fully paid [+] ordinary
securities cancelled during that 12 month
period
“A” 471,153,071
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• See chapter 19 for defined terms.

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Step 2: Calculate 15% of “A”

Step 2: Calculate 15% of “A”	Step 2: Calculate 15% of “A”
“B”	0.15 [Note: this value cannot be changed]
Multiply“A” by 0.15	70,672,961
Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used
Insertnumber of+equity securities issued or agreed to be issued in that 12 month period_not counting_those issued: • Under an exception in rule 7.2 • Under rule 7.1A • With security holder approval under rule 7.1 or rule 7.4 Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items	19 January 2018: 1,500,000 incentive rights 19 January 2018: 2,381,150 ordinary shares 15 May 2018: 892,857 ordinary shares 10 July 2018: 8,474,576 ordinary shares 12 October 2018: 14,464,259 ordinary shares
“C”	27,712,842
Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1
“A” x 0.15 Note: number must be same as shown in Step 2	70,672,961
Subtract“C” Note: number must be same as shown in Step 3	27,712,842
Total[“A” x 0.15] – “C”	42,960,119 [Note: this is the remaining placement capacity under rule 7.1]

• See chapter 19 for defined terms.

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Part 2

Rule 7.1A – Additional placement capacity for eligible entities Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A” Not applicable Note: number must be same as shown in Step 1 of Part 1 Step 2: Calculate 10% of “A” “D” 0.10 Note: this value cannot be changed Multiply “A” by 0.10 Not applicable

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of[+] equity securities issued Not applicable or agreed to be issued in that 12 month period under rule 7.1A

Notes:

• This applies to equity securities – not just ordinary securities

• • Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

• • Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

• • It may be useful to set out issues of securities on different dates as separate line items

“E” Not applicable

• See chapter 19 for defined terms.

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Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A	Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A
“A” x 0.10 Note: number must be same as shown in Step 2	Not applicable
Subtract“E” Note: number must be same as shown in Step 3	Not applicable
Total[“A” x 0.10] – “E”	Not applicable Note: this is the remaining placement capacity under rule 7.1A

• See chapter 19 for defined terms.

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