Mesoblast (ASX:MSB) share price crawls higher on Q1 trading update

The Mesoblast share price is in the green today as investors respond positively to the company’s latest update.

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The Mesoblast Ltd (ASX: MSB) share price is inching higher to start off the session today and is now trading at $1.74. That’s up 1.75%.

The regenerative medicine company’s shares are on the move after it reported its results for the first quarter ended September 30, 2021.

Here are the key takeouts from Mesoblast’s Q1 trading update.

Mesoblast share price gains on revenue and cash growth

Key investment highlights for the quarter include:

  • Total Revenue was US$3.6 million for the first quarter FY2022, a year on year increase of US$2.3 million
  • Net operating cash usage was US$19.6 million for the quarter, a reduction of US$8.6 million on the year prior
  • Research and Development expenses reduced by US$10.0 million, or 52%, for the Q1 FY22 from US$19.3 million for Q1 FY21
  • Manufacturing expense reduced by 37%, down from US$11.9 million for the first Q1 FY21
  • Loss after tax improved to US$22.6 million, a US$1.9 million improvement year on year
  • The net loss attributable to ordinary shareholders was 3.49 US cents per share, compared with 4.21 US cents the same time last year.

What happened in Q1 FY22 for Mesoblast?

The company achieved several progress points this quarter. Total revenue for Q1 was US$3.6 million, an increase of US$2.3 million on Q1 FY21.

The boost in revenue was largely driven by growth in royalties and a US$1.2 million milestone payment regarding the Alofisel product’s manufacture and marketing in Japan.

In addition, royalty income from its Temcell HS segment in Japan was US$2.4 million, an increase of 22% on the previous quarter, and of 90% on Q1 FY21.

To secure cash, Mesoblast successfully entered into the refinancing and expansion of a senior debt facility with Oaktree Capital Management.

The new US$90 million, 5-year secured facility has a 3-year interest-only period and matures in November 2026.

As a result of the new debt, and other borrowing arrangements, finance costs were US$3.6 million for the quarter, compared to US$2.9 million for the year prior.

Even still, net cash operating usage was US$19.6 million for the quarter, a reduction of US$8.6 million year on year. As a result, the company’s after-tax loss improved by US$1.9 million on the same period in FY21 to US$22.6 million.

Mesoblast also made progress on developing its drug candidates this quarter. The company is in talks with the US Federal Drug Administration (FDA) on how to get its rexlemestrocel-L candidate approved for use in “heart failure patients at high risk of cardiovascular mortality, heart attacks or strokes”.

Manufacturing expense also reduced by 37% to US$7.5 million due to a reduction in “process development activities”. During the quarter, Mesoblast also continued to build its “pre-launch inventory levels of remestemcel-L to support the long-term commercial supply for SR-aGVHD and COVID ARDS”.

What did management say?

Speaking on the announcement, Mesoblasts’s CEO Silviu Itescu said:

We are pleased to have entered into a strategic financing partnership with leading global investment management firm Oaktree Capital as we focus on bringing our first product to the US market and in line with our commercial growth strategy over the next five years.

In the past 12 months, the Mesoblast share price has lost more than 61%, falling 22% this year to date.

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The author Zach Bristow has no positions in any of the stocks mentioned. 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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