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Is the Mesoblast limited share price about to blast off?

Regenerative medicine hopeful Mesoblast limited (ASX: MSB) reported to the market this morning that it had completed “Successful Interim Analysis in Phase 3 Heart Failure Trial”.

Specifically, “the Phase 3 trial… was successful in the pre-specified interim futility analysis of the efficacy endpoint in the trial’s first 270 patients.” The Independent Data Monitoring Committee (IDMC) stated that they had no safety concerns and recommended that the trial proceed as planned.

Excellent. I love a good futility analysis of the efficacy endpoint, and it is good to know that the treatment won’t kill the patients.

So…?

In plain English, this means simply that the interim results from the first 270 patients have been examined. So far, the trial is not ‘futile’ – which is to say, it is not obviously a waste of time and that there is a ‘reasonable’ chance of a positive outcome. That is a necessary check to make from a research standpoint, but in a practical sense, shareholders already knew this from the Phase 2 results, which were positive and resulted in the treatment advancing to Phase 3 trials.

I would not get unduly excited at this point. This is a ‘blind’ trial, which is to say that Mesoblast itself has not seen the interim results. The company has no idea whether the trial will be successful, although a recommendation from an independent expert to continue the research is encouraging. Mesoblast will now recruit another 330 patients to meet its planned complement of 600, and the trial itself will run until February 2018, with study completion in February 2019.

The bottom line

Mesoblast is a good example of why I encourage readers to be wary of biotech stocks. That is not a stab against the company, which does good research and has a promising product in a growing market. It is simply a reflection that unless you are willing to learn about the jargon and the science behind the trial, you are at a significant disadvantage.

As to whether the company itself is a buy, well, it is loss-making and I will be waiting to see how the company’s cash at bank and expenditure looks in August before considering a purchase.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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