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Mesoblast reports positive trial results

Shares in Mesoblast  (ASX: MSB) were amongst the best performers on Wednesday, gaining 5.59% after the company announced positive interim results in its Phase 2 trial for spinal disc repair.

As a developer and manufacturer of biological therapies in the growing regenerative medicine industry, Mesoblast utilises stem cells for the treatment and potential cure for human diseases and conditions. The company’s focus is to apply its adult-derived Mesenchymal Precursor Cells (MPC) product on treating diabetes, cardiovascular conditions, inflammation in the lungs and joints as well as cartilage degeneration.

Currently, the company is developing a further product to treat degenerative spinal disc injuries – targeting the US market estimated to be worth in excess of $800 million. This market is made up of over 6 million patients who have been experiencing chronic back-pain for a period of three or more months.

The interim phase 2 trial for the product was conducted when 50% of the selected patients had completed six months of follow-up. The results from this were very pleasing, with “significantly greater reduction in low back pain and improvement in function” in 71% of patients who received a safe and effective low dosage MPC injection – compared to a mere 20% and 30% of patients who felt positive effects from receiving hyaluronic acid and saline injections.

Results for the full phase 2 trial are expected to be released in the third quarter of 2013. Should final results be consistent with the interim results, Mesoblast will continue on with the Phase 3 trial, which would attract further share gains.

Over the last 12 months, Mesoblast shareholders have experienced rollercoaster-like effects with a very volatile share performance. Currently valued at $5.86, shares have lost over 21% for the year. This drop can partially be attributed to the company’s $150 million capital raising in February, with funds to be used towards phase 3 of the trial should Mesoblast choose to go forth with it.

Foolish takeaway

In an expanding industry, a number of companies present as great future prospects. Companies such as Sirtex Medical (ASX: SRX) and Acrux  (ASX: ACR) have provided shareholders with significant results on the back of successful trials and promising products. However, it is important to remember that the nature of the industry is risky. Should a trial fail to meet expectations or required standards, significant losses can also be realised – as was the case when Pharmaxis  (ASX: PXS) received a negative recommendation on its Bronchitol product for cystic fibrosis in the US.

Whilst investors should not rely upon the data provided by the interim analysis, they certainly provide positive signs that phase 3 of the trial will proceed. Should the product receive approval from the US Food and Drug Administration, shareholders are set to benefit greatly.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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