Mesoblast share price lifts 5% despite hefty loss

Shares in the biotech company are in the green this morning amid a substantial loss in the company's FY22 results.

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Key points

  • The Mesoblast share price is rising this morning amid the company reporting increased revenue but another net loss
  • Despite reducing operational expenses, the biotech company continues to burn cash
  • However, management is buoyed by recent developments and the long pipeline ahead

The Mesoblast Limited (ASX: MSB) share price is trading higher on Wednesday morning after the ASX-listed biotech company reported its FY22 results.

Mesoblast shares opened at 80 cents each this morning. They're currently at trading at 82.75 cents a share, 5.41% higher than yesterday's closing price of 78.5 cents a share.

Let's take a look at the Mesoblast FY22 results.

What did Mesoblast report?

Mesoblast reported the following key highlights for FY22:

  • Revenue jumped 37% from US$7.5 million in FY21 to US$10.2 million
  • Net loss after tax of US$91.3 million, an improvement on US$98.8 million for FY21
  • Cash balance of US$60.4 million

The lift in revenue came from an increase in royalties of US$2.7 million along with a US$1.2 million milestone payment from Takeda. This followed Takeda receiving approval to manufacture and market Alofisel in Japan for treatment of perianal fistulas in Crohn's Disease.

The amount of cash burned across operational expenses was reduced in FY22. Research and development expenses fell 38% to US$32.8 million due to the completion of clinical trial recruitment and data analysis for COVID-19 ARDS, CLBP, and CHF product candidates.

Mesoblast also achieved manufacturing efficiencies as costs went down from US$32.7 million in FY21 to US$30.8 million in FY22. A fall in employee compensation costs contributed to an improvement in management and administration expenses. They were down by 12%.

As of FY22, Mesoblast has US$17.3 million in finance cost which includes cash interest paid of US$6.1 million.

Earlier this month, the company also announced it had completed a $65 million capital raise.

Management enthused by the latest developments

Mesoblast is striving to be the global leader in developing regenerative medicine products.

In the latest quarter for the calendar year 2023, Mesoblast has resubmitted its BLA application for remestemcel-L in children with SR-aGVHD.

In relation to rexlemestrocel-L, Mesoblast plans to gain FDA clearance by the end of this year to commence an important study for potential marketing approval of this drug in managing chronic lower back pain due to degenerative disc disease.

The list of pipeline activities remains long as Mesoblast continues to make progress in taking the necessary steps to prove the validity and effectiveness of resmestemcel-L across steroid-refractory acute graft versus host disease, respiratory distress syndrome, and inflammatory bowel disease.

A number of clinical trials are being planned to test rexlemestrocel-L in addressing chronic heart failure and chronic low back pain associated with degenerative disc disease.

What did management say?

Commenting on the FY22 results, Mesoblast chief executive Dr Silviu Itescu said the following:

I am pleased to report that calendar year 2022 is shaping up to be a transformational year for the Company. We are working towards the planned resubmission of the Biologics License Application (BLA) this quarter for remestemcel-L in children with steroid-refractory acute graft versus host disease (SR-aGVHD) and believe we have addressed the issues that were raised in the Complete Response Letter from the United States Food and Drug Administration (US FDA). Specifically, we have validated our key potency assay which has been in place throughout the extensive development phase of remestemcel-L and which reflects the mechanism of action by which remestemcel-L treatment results in a remarkable survival benefit in the most severely compromised children with SR-aGVHD.

Our immunoselected next generation product, rexlemestrocel-L, is also at a pivotal stage in its development for patients with severe inflammation at high risk for death or other major adverse cardiac events (MACE) from chronic heart failure with reduced ejection fraction (HFrEF), and in patients with unremitting chronic low back pain from degenerative disc disease (CLBP). We have seen that rexlemestrocel-L improves left ventricular systolic function and subsequently reduces MACE events across high-risk HFrEF populations. Consequently, we plan to meet next quarter with FDA under our existing RMAT designation re a potential marketing approval pathway for rexlemestrocel-L in highrisk patients with HFrEF and inflammation.

Mesoblast share price snapshot

In the past year, the Mesoblast share price has fallen by 51% and dropped 28% in the last six months. In contrast, the S&P/ASX 200 Index (ASX: XJO) has declined by 7% in the last twelve months and around 1% across the past six months.

Mesoblast has a current market capitalisation of around $597 million.

The challenging aspect of biotech companies like Mesoblast is the ability to determine the likelihood of success in clinical trials. The Mesoblast share price may be worth monitoring if regenerative medicine falls within your expertise.

Motley Fool contributor Raymond Jang has no position 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 Scott Phillips.

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