Mesoblast’s Strong Quarter Results Failed To Lift The Share Price

Mesoblast Limited (ASX:MSB) presented its financial and operating metrics for the first quarter ended on September 30, 2018 on November 16, 2018, i.e. today.

MSB reported an increase of US$10.5m in revenues up to US$11.6 million for the first quarter FY2019, compared with US$1.2 million for the first quarter FY2018. Growth in revenues was contributed by the sales of TEMCELL and royalties posting an increment of 66% for the first quarter FY2019 in comparison to the first quarter FY2018. Strategic cardiovascular partnership with Tasly in China contributed revenues of US$10m. Investment in Tier 1 clinical programs resulted in the increase of r&d (research and development) expenses, which grew by 20% up to US$18.5m for the first quarter FY2019 from US$15.4m in FY2018. Filing of the Biologics License Application (BLA) for MSC100-IV and the cost associated with the license fee impacted the overall manufacturing expenses reporting an increment of US$3.4m to US$4.3m for the first quarter FY2019 from US$0.9m for the first quarter FY2018. Loan and security agreements with Hercules Capital entered on March 2018 and with NovaQuest Capital in June 2018 resulted in an interest expenses of US$2.6m in first quarter of FY2019.

The first quarter FY2019 reported the net loss attributable to the ordinary shareholders at US$19.5m or 4.07 cents loss per share as compared to US$7.0m for the first quarter of FY2018. Operating cash outflows reduced by 4% to US$0.8m in FY2019 as compared with the first quarter FY2018. As on September 30, 2018, proforma cash was reported at US$95.1m, which included cash reported on the balance sheet at US$55.1m and US$40m received from Tasly Pharmaceutical Group in October 2018 and an additional US$50m from the existing agreements with Hercules capital and NovaQuest. 12% rise in the manufacturing expenses up to US$5.6m for the first quarter FY2019, from US$5.0 m for the first quarter FY2018 was mainly due to an increase in professional and legal fee associated with the cardiovascular partnership with Tasly.

The company has recently presented the Phase 2 trial results conducted on 159 patients. The test was performed for the evaluation of MPC-150-IM used for the treatment of end stage heart failure patients implanted with a left ventricular assist device. Positive outcomes from the trial succeeded in achieving the clinically meaningful outcome of the reduction in gastrointestinal bleeding and its related hospitalizations. The results from Phase 2 trial further confirmed the previous pilot trial which has also recorded significant reduction in gastrointestinal bleeding and related hospitalization in MPC-150-IM. However, the trial did not meet the overall primary endpoint of temporary weaning, and treatment with MPC-150-IM showed significant weaning improvement in around 44% of the patients suffering with chronic ischemic heart failure.

Phase 3 trial for remestemce-L used for the treatment of steroid-refractory acute Graft Versus Host Disease (aGVHD) found in children showed strong survival results.

The company is preparing for a pre-BLA meeting to initiate the process of filing of a marketing authorization of this product in the United States. In line with this, the company intends to meet with the FDA in 1H CY2019 to provide full study data and discuss in detail the pathway to BLA filing using reduction in GI bleeding and associated hospitalizations as an approvable regulatory endpoint.

Despite the above financial and operating performance, the share price inched lower at the levels of $1.38, down 2.8% on November 16, 2018.

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