Clinical Program Highlights: Mesoblast limited (ASX: MSB) recently reported that its allogeneic mesenchymal stem cell-based regenerative medicine product JR-031, developed by the group’s Japanese partner JCR Pharmaceuticals, was suggested for approval on Sep 2nd at a meeting organized by the Committee on Regenerative Medicine Products and Biological Technology of Pharmaceutical Affairs and Food Sanitation Council of the Japan Ministry of Health, Labor and Welfare. JCR is confident to receive the marketing approval for JR-031 in the near future. Subsequently investors were happy to see this update from the group and accordingly the shares surged by 7.7% on Sep 4. Meanwhile, Mesoblast is also recruiting at North American sites for developing MPC-150-IM - Chronic Heart Failure, as it expects an early completion of the ongoing Phase 3 trial on the back of FDA’s acceptance of demonstration. Even the MPC-06-ID - Chronic Discogenic Low Back Pain (CDLBP) program is recruiting across North American sites and MSB got positive feedback from discussions with the European Medicines Agency (to expand in European sites). Accelerated USA approval was also clarified through the FDA and an open-label of Phase 3 study of over 60 children is been actively recruited in the USA.
Pipeline Programs (Source: Company Reports)
Targeting Inflammatory Portfolio: Mesoblast is developing mesenchymal lineage adult stem cells product candidates to target the diabetic kidney disease, biologic refractory rheumatoid arthritis and biologic refractory crohn’s disease. The group shifted MPC-300-IV to its Tier 1 product portfolio on the back of its positive clinical results for patients with diabetic kidney disease. The Phase 2 trial in the diabetic kidney diseases finished the enrollment with results showing preservation or improvement in renal function over at least 24 weeks. As per the Biologic refractory Rheumatoid Arthritis (RA) highlights, first cohort of a 48-patient Phase 2 trial for patients with biologic refractory rheumatoid arthritis has finished enrollment. The second cohort is pursuing recruiting across multiple sites in the United States. The biologic refractory Crohn’s disease study is also ongoing.
Rising expanses to fund clinical trials: Mesoblast limited reported a loss after tax of $119.4 million for the fiscal year of 2015, as compared to $81.0 million in the fiscal year of 2014, due to rise in expenses from continuing operations by $43.8 million to $161.9 million in FY15 as compared to $118.1 million in FY14. MSB reported a cash reserves of $144.1 million as at June 2015 while net cash consumption during the period decreased to $52.2 million during the year, against $118.9 million in FY14. The group has invested over $15.3 million for initiating two of its Tier 1 Phase 3 programs in last year. MSB also increased its research and development expenditure by 40% for its Phase 3 pipeline. The USD denominated content has increased to 80% from 74%, and the group estimates this increase further. Mesoblast would be reporting in USD from next fiscal year. Meanwhile, Investing Cash Outflows decreased to $5.6 million in FY15, as compared to $40.8 million in FY14. Financing Cash Inflows rose to $58.5 million during the fiscal year due to equity investments. MSB maintains minimum 12 months of cash on hand, to maintain liquidity in case of immediate expansion.
Expenses from continuing operations (Source: Company Reports)
Solid development opportunity: The Phase 3 clinical program for MPC-150-IM CHF is ongoing, while Phase 3 trial interim analysis was completed. The group is expanding Phase 3 program to Europe and other jurisdictions as well. MPC-06-ID CDLBP program is also increasing sites to include Europe and Australia. Meanwhile, the group is targeting the regulatory approval for children and adults in Japan for its MSC-100-IV/JR-031 GVHD. Mesoblast has conducted an Open label Phase 3 study, wherein over 60 children were fully enrolled. The results of this program would support for the Biologics License Application to the United States Food and Drug Administration for pediatric product registration. With regards to the MLC Inflammatory Portfolio, the group finalized the design for its Diabetic kidney disease Phase 2b/3 program. Mesoblast would review the Biologic-refractory Rheumatoid Arthritis Phase 2 topline data and Biologic-refractory Crohn’s disease interim data. The firm is also developing its PAI readiness capability to receive regulatory approval for its Tier 1 products. The group is seeking for strategic partnerships for commercializing its products in various jurisdictions
Mesoblast Daily Chart (source - Company Reports)
Stock Performance: Mesoblast stock has been under pressure this year, with the stock falling more than 24.2% year to date (as of Sep 4). However the recent progress with JCR on its allogeneic mesenchymal stem cell-based regenerative medicine product JR-031 would add support to the stock further in the coming months. Moreover, the group was also positive on its progress of its Phase III trial into heart failure. On the other hand, the stock has short term risks like rising expenses to fund its clinical trials and the success rate of its clinical trials at different stages. However, we believe that MSB is an attractive investment opportunity given its huge potential, and accordingly give a “BUY” recommendation at the current stock price of $3.33
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