Mesoblast Limited

Grunenthal and Mesoblast enter a strategic partnership: Mesoblast Limited (ASX: MSB) is a world leader in developing innovative cellular medicines. The market capitalisation of the company stood at A$887.61 million as on 11 September 2019. Grünenthal, a global leader in pain management, and Mesoblast, a world leader in allogeneic cellular medicines for inflammatory diseases,have entered into a strategic partnership to develop and commercialise MPC-06-ID, a Phase III allogeneic cell therapy candidate for the treatment of chronic low back pain due to degenerative disc disease in patients who have exhausted conservative treatment options. Under this partnership, Grünenthalwill have exclusive commercialisation rights to MPC-06-ID for Europe and Latin America.

Mesoblast will getup to US$150 million in upfront and milestone payments prior to the product launch,and further commercialisation milestone payments. Mesoblast will also receive tiered double-digit royalties on product sales.

The field force has around 1,600 people across Europe, Latin America, and the US. This partnership provides funding for Phase 3 trial in Europe, reducing Mesoblast cash outflow.

Market opportunity for MPC-06-ID: There are over 7 million patients that are estimated to suffer from CLBP (Chronic Low Back Pain) due to degenerative disc disease (DDD) in each of the US and E.U.5. MPC-06-ID development program has targeted over 3.2 million patients in the US and 4 million in E.U.5 with moderate to severe disease.


Prevalence of Chronic Lower Back Pain (millions) (Source: Company Reports)

Outlook for FY2020:The company is anticipating the completion of BLA filing for remestemcel-L in the treatment of steroid refractory aGVHD (Acute Graft Versus Host Disease) in children. The Phase-3 events-driven trial in advanced heart failure will complete when sufficient primary endpoints have been accrued, likely by the end of CY19.

Stock performance:On the stock’s performance front, it produced returns of 24.48% and 20.27% in the time period of five days and one month, respectively. Currently, the stock is trading above the average of 52-week high and low levels of $2.470 and $1.015, respectively. Hence, considering the aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current price of A$1.900 per share (up 6.742% on 11 September 2019).
 

Mayne Pharma Group Limited

Mayne Pharma Announces PBS Listing Of KAPANOL^®: Mayne Pharma Group Limited (ASX: MYX) develops, manufactures and markets branded and generic pharmaceutical products globally. Mayne Pharma Group Limited also provides contract development and manufacturing services to more than 100 clients worldwide. The market capitalisation of the company stood at A$759.81 million as on 11 September 2019.

The Pharmaceutical Benefits Scheme (PBS) has approved the reimbursement of KAPANOL^® low dose sustained-release 10mg and 20mg morphine capsules for the treatment of chronic breathlessness in palliative care patients with advanced disease. The clinical studies undertaken by Palliative Care Clinical Studies Collaborative (PaCCSC), have shown the use of KAPANOL in severe chronic breathlessness can reduce this debilitating symptom in patients with advanced disease.

FY19 Results Review: The company’s reported sales stood at A$525.2 million, down by 1% from FY18. Reported Gross profit increased by 13% on a YoY basis led by strong growth in Speciality Brands Divisions (SBD) and the reduction of one-offs which impacted the prior period. The company’s reported EBITDA was A$111.6 million, down by 4% due to greater investment in brand R&D and commercial infrastructure for Specialty Brands. The following picture provides an idea of the key financial numbers:


Financial Highlights (Source: Company Reports)

Financial Position of the Company: The company has net operating cashflow of $106.6 million down by 12% as compared to the previous year. The company has a net debt of $280.4 million, which is declined by $18.0 million during 2HFY19, cash on hand of $89.0 million, with a leverage of 2.0x and shareholders’ funds of approximately $1.0 billion. 

What to Expect from MYX Moving Forward: The Company is targeting 8 new product launches by the end of CY20 with the market value amounting to US$1.4 billion according to IQVIA, of which 2 are already approved. Additionally, several initiatives at the company’s manufacturing sites in Greenville as well as Salisbury are anticipated to drive greater operational efficiencies and the improved financial performance throughout FY 2020 and beyond.

Stock Performance: The company also expects to further optimise the cost base via reducing the operating expenses through more controlled spending as well as realising significant cost savings from the product transfers in house or to the new contract manufacturers.
 
On the stock’s performance front, it has given the returns of 10.34% and -1.03% in the time period of five days and one month, respectively. Based on mixed scenario, we have a wait and watch stance on the stock at the current market price of $0.510 per share (up 6.25% on 11 September 2019).  

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