Mesoblast Limited (ASX: MSB), the global leader in developing innovative cell-based medicines, announced an update on its operational highlights and consolidated financial results for first quarter of FY2018 wherein the group emphasized on the cash reserves of US$62.9 million with a 2.3% lowering of cash outflows from operating activities for the quarter against first quarter of FY2017.

Significant drop in net loss: The key thing in the result was to note the significant 57% (US$13.0 million) drop in the loss before income tax for the first quarter of FY2018, compared with the first quarter of FY2017, at the back of non-cash items which did not affect cash reserves. The net loss attributable to ordinary shareholders was US$7.0 million against US$19.8 million for the first quarter of FY2017.

While group’s manufacturing expenses dropped by 73% at the back of reduced manufacturing activity given sufficient quantities of clinical grade product available for all ongoing clinical trials, and management and administration expenses were down by US$0.4 million (8%) with reduction in corporate overhead expenses; the Research and Development expenses were up by US$1.4 million, i.e., 10% as the group proceeded for Tier 1 clinical programs.

The group has benefitted from the revenues from royalties on sales of TEMCELL® HS Inj. in Japan by JCR Pharmaceuticals Co. Ltd., that surged up 178% to US$0.6 million in the first quarter of FY2018. Further, a milestone revenue of US$0.5 million on the cumulative sales of TEMCELL was recognized.
 

Result Overview (Source: Company Reports)
 
Cash position: MSB now reported for cash reserves of US$62.9 million including the cash inflows from its entitlement offer and has an equity facility for up to A$120 million/US$90 million for use over the next two years.

Expects to benefit from Regulatory Events: The group expects to leverage earlier market entry at the back of opportunities from the United States 21^st Century Cures Act with support coming in from its cumulative clinical results and Phase 3 product candidates for acute graft versus host disease (aGVHD), chronic heart failure, and chronic low back pain. The 2018 milestones reflect to include enrolment completion in Q4 CY2017 in the Phase 3 trial for MSC-100-IV in children with aGVHD, the trial’s 28-day primary endpoint data in Q1 CY2018 and the 100-day survival result in Q2 CY2018, enrolment completion in Q1 CY2018 in the Phase 3 trial for MPC-06-ID for chronic low back pain, the 6-month primary endpoint in Q1 CY2018 for the fully-enrolled Phase 3 trial evaluating MPC-150-IM in NYHA Class IV patients with advanced heart failure followed by study results, and completion of enrolment in 2H CY2018 in the Phase 3 trial evaluating MPC-150-IM in NYHA Class III patients with advanced heart failure.

MSB also aims to thrive for exploring partnership opportunities for its four Tier 1 product candidates for leveraging short and long-term outcomes and better shareholder value.
The result overall looked to be an improved one while the market seems to have shown an adverse reaction considering expectations on the capital position and concerns on further equity raising, with the stock plunging about 9% on November 15, 2017. Given the performance improvement and milestones charted, we maintain a “Speculative Buy” at the current price of $1.27

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