Mesoblast limited (ASX: MSB) posted another big full year loss this morning of $119.4 million as the company continues to blow cash in its quest to become tomorrow's next big winner.
Expenses from continuing operations ballooned out to $161.9 million, compared to $118.1 million over the prior year, while the cash balance fell to $144.1 million as at 30 June 2015.
Despite the losses and relatively meagre revenues the company has a market value around $1.25 billion. This means it is valued not much less than Sirtex Medical Limited (ASX: SRX), which is an up-and-coming healthcare rival that just posted an annual profit of $40.3 million.
Mesoblast is valued so richly as it is supposedly in the process of developing a range of therapies for common diseases and medical complaints, the science being to develop stem cells that regenerate ageing or diseased body parts such as cartilage, bone and muscle.
The business has several Phase III clinical trials in progress aimed at providing the clinical data necessary to win approval to market and sell its treatments. It also has several earlier stage clinical trials in progress and some great expectations remain priced into its $3.60 share price. That's no surprise given the potential addressable market size, but questions remain over whether it's the real deal.
In today's update the company said its Phase III trial on heart failure was progressing well, with the US Food and Drug Administration (FDA) agreeing to changed trial structures that may accelerate the eventual product's pathway to regulatory approval.
The company has two other Phase III trials in progress that are studying treatments for chronic lower back pain and acute graft versus host disease (GvHD).
Given the multiple ongoing trials, research and development expenses blew out to $77.6 million this financial year, while management and administration expenses also jumped to $36.2 million.
Unfortunately for Mesoblast financial year 2015 has been another one characterised by rising costs with little delivery and unsurprisingly the stock is off around 17% over the past year as the market's original enthusiasm starts to wear off.
In today's announcement management has emphasised the progress of its Phase III trial into heart failure and infers that success is not too far away. The business will need to see more concrete progress from this trial in the year ahead then if it is to maintain investor faith.
It still has $144.1 million in cash reserves to fund its expensive research projects, although with $161.9 million in operating expenses last year alone the market will be nervous of the potential for a capital raising.
Over the short term the stock continues to carry a lot of risk over the cash burn and multiple unknowns over the results of clinical trials at different stages of progression. Over the long term it may still be a good opportunity for patient investors, if able to actually deliver on its purported potential.
