Are Mesoblast shares ready to shoot higher?

Shares in regenerative stem cell medicine business Mesoblast limited (ASX: MSB) are trading flat at $1.42 today after the group revealed its financial results for the quarter ending September 30 2018. Below is a summary of the results with comparisons to relevant prior corresponding periods.

  • Revenue of US$11.6 million, compared to US$1.2 million in prior corresponding quarter (pcq)
  • Loss after tax increased by US$12.5m compared to pcq, in part due to US$10.1 million non-cash adjustment made in pcq
  • Total loss of US$19.5 million recorded for quarter
  • Finance costs for the quarter rose to US$2.6 million
  • Research and development costs for the quarter were US$18.5 million
  • Phase 3 trails to treat chronic lower back pain & heart failure ongoing
  • Completed deal with Tasly to establish cardiovascular partnership in China, which saw it receive US$40 million
  • Has pro forma cash on hand of US$95.1 million, including funds from Tasly

This quarter is reasonably standard for the company in that it burned through a lot of cash conducting multiple clinical trials to try and commercialise its products.

The top line revenue result looks impressive at first glance, but of the US$11.6 million received only US$1 million was from the result of commercialised products. In fact US$10 million of it was received as “milestone revenue” in relation to it agreeing a partnership with Chinese stem cell and healthcare business Tasly.

So far in total Mesoblast has two commercial products approved in Japan and Europe, with three more product candidates in US phase 3 trials. Unfortunately, it’s approved products have not taken in much in the way of revenue as yet.

In fact Mesoblast claims it has the potential to disrupt large amounts of the traditional healthcare markets thanks to its stem cell regeneration treatments, but so far it has delivered little.

It’s also an example of the high costs and risks associated with the biotech space where companies can dramatically plunge after just a single announcement. The likes of Acrux Limited (ASX: ACR) and ResApp Health Ltd (ASX: RAP) are others in the new healthcare space that have disappointed investors.

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