Mesoblast posts $US23.1m 3Q loss: Operational spending slashed

Mesoblast was up 1.02% at the open today after the mid-cap biotechnology company reported a third quarter FY22 -US$23.1m (-$32.15m) loss, compared to its -US$26.5m loss for the same period last year.

While total revenue was up 5% from the comparative quarter last year to $US2m, over the nine-month period ended March 31, 2022, revenues increased 46%, to $US8m, compared with $US5.5m in the previous period.

Despite the myriad of issues confronting the company, what the market clearly found favour with this morning was efforts to substantially cut operational spending.

To the uninitiated Mesoblast is a global leader in allogeneic cellular medicines for inflammatory diseases.

Financial highlights for the quarter included:

• Net cash usage reported for operating activities was reduced by 40%

• Net cash usage reported for operating activities, excluding inventory for the planned remestemcel-L product launch, was reduced by 50%

• Cash on hand at the end of the quarter was US$76.8m

• An additional US$40m is available to be drawn down from existing financing facilities

• R&D expenses reduced by 34%

Operational Highlights for Remestemcel-L

Assuming Mesoblast receives FDA approval, the company expects to recognise the US$29.7m balance of remestemcel-L pre-launch inventory, and the balance of any further production completed at that time.

Management notes the recent completion of a successful mock pre-approval inspection of its GMP manufacturing facility and process.

Mesoblast will provide these new data to FDA and address all chemistry, manufacturing and controls (CMC) outstanding items as required for the planned BLA resubmission in the coming quarter.

If the resubmission is accepted, CBER will consider the adequacy of the clinical data in the context of the related CMC issues.

Class-actions

Down -48.70% over the last 12 months, the share price dipped late May on revelations that the company is on the receiving end of yet another class-action lawsuit.

It’s understood a shareholder is suing the company for allegedly misleading the market about its remestemcel-L product.

The company resolved a similar suit in the US for US$2m without admitting liability in April, with the company’s insurer covering the cost of the settlement.

Previous actions claimed Mesoblast didn’t inform investors about adverse aspects of particular remestemcel-L trials.

In light of these actions, the FDA is understood to have demanded a further controlled study of the drug before it could be given the green light to treat acute graft versus host disease in children.

Consensus on Mesoblast is Strong buy.

Based on Morningstar’s fair value of $1.95, the stock appears to be undervalued.

Mesoblast share price over 12 months.