Mesoblast (ASX:MSB) share price drops following third quarter update

It was an eventful but cash-burning quarter for Mesoblast…

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The Mesoblast limited (ASX: MSB) share price is under pressure on Thursday following the release of its third quarter update.

In early trade, the allogeneic cellular medicines company’s shares are down 2.5% to $1.87.

How did Mesoblast perform in the third quarter?

For the three months ended 31 March, Mesoblast reported revenue of US$1.9 million. This was down 84% on the prior corresponding period due to significant one-off milestone revenue a year earlier. This means that year to date revenue now stands at US$5.46 million, down almost 83% on the same period last year.

This ultimately led to Mesoblast reporting a loss after tax of US$26.5 million for the quarter, which brought its financial year to date loss to US$76.75 million.

Fortunately, Mesoblast was able to raise US$110 million via a private placement in March. As a result, it was able to absorb these losses and finished the period with a cash balance of US$158.3 million. Management believes this is sufficient to meet its short-term goals, commitments, and ongoing operations during the next twelve months.

What else happened during the quarter?

Mesoblast was very busy during the quarter with its remestemcel-L therapy. It is seeking to use remestemcel-L to treat steroid-refractory acute graft versus host disease (SR-aGVHD) in children, and COVID-19 ARDS in adults. It is also seeking to gain approval to treat chronic low back pain with rexlemestrocel-L.

In respect to SR-aGVHD in children, Mesoblast continues to be in discussion with the United States Food & Drug Administration (FDA) through a well-established regulatory process. This may include a resubmission with a six-month review with the aim of achieving approval.

As for COVID-19 ARDS in adults, results from the randomised controlled trial of remestemcel-L in ventilator-dependent COVID19 patients with moderate/severe acute respiratory distress syndrome (ARDS) indicated that in the pre-specified population under 65 years old (n=123), those who received remestemcel-L had a significantly reduced mortality through to 60 days.

However, the trial was halted after the third interim analysis and 222 enrolled patients since the 30-day primary endpoint would not be attained. Management notes that in patients under 65 years, the benefit was further increased when remestemcel-L was used with dexamethasone as part of standard of care.

The trial also indicated that the mortality reduction by remestemcel-L in those under 65 years was accompanied by increased days alive off mechanical ventilation and reduced days in hospital

Finally, its rexlemestrocel-L trial in the treatment of chronic low back pain indicated that a single injection of rexlemestrocel-L plus a hyaluronic acid carrier may provide at least two years of pain reduction, with opioid sparing activity in patients using opioids at baseline.

Mesoblast’s Chief Executive, Silviu Itescu, commented: “We are pleased with the recent clinical outcomes regarding our lead product candidate remestemcel-L and continue to progress our regulatory discussions with the aim of achieving approval. Our focus and top priority remains on successfully bringing remestemcel-L to children with the devastating complication of steroid-refractory acute graft versus host disease and adults fighting COVID-19 acute respiratory distress syndrome.”

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James Mickleboro does not own Mesoblast shares. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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