Upcoming launch on first product approval

Mesoblast 25 January 2016 Update

Mesoblast

Upcoming launch on first product approval

Pipeline update

Pharma & biotech

25 January 2016

Price

A$1.54

Market cap

A$585m

A$1.4/U$

Net cash (US$m) at 30 September 2015

77.8

Shares in issue

380.1m

Free float

66.1%

Code

MSB

Primary exchange

ASX

Secondary exchange (ADR)

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(12.0)

(54.7)

(62.1)

Rel (local)

(8.5)

(51.7)

(58.9)

52-week high/low

A$4.5

A$1.4

Business description

Mesoblast is developing adult stem cell therapies based on its proprietary MPC and culture-expanded MSC platforms. It has multiple late-stage clinical trials across four areas: immunologic/inflammatory (Phase III), spine disease (PhaseI II), cardiovascular (Phase III) and cancer (Phase III).

Next events

Phase II MPC-300-IV top-line cohort 1 rheumatoid arthritis (RA)

Early 2016

Phase III interim safety analysis MSC-150-IM in CHF

Q116

Phase II MPC-300-IV full results including cohort 2 in RA

H116

H115 results

February 2016

Analysts

Katherine Genis

+1 646 653 7026

Dennis Hulme

+61 (0)2 9258 1161

Mesoblast is a research client of Edison Investment Research Limited

As a leader in stem cell technologies, Mesoblast continues to make good pipeline progress, nearing market readiness for its mesenchymal-based treatments in multiple indications. The company has received its first product approval for Temcell in acute graft vs host disease in Japan. Phase III programmes for further lead products in congestive heart failure and lower back pain are moving forward. Following a recent US share offer, the company’s share price has declined dramatically and trades well below our revised fair value calculation of A$7.20 per share (from A$10.93).

Year end

Revenue (US$m)**

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/14

25.1

(75.5)

(23.6)

0.0

N/A

N/A

06/15

32.4

(94.9)

(29.6)

0.0

N/A

N/A

06/16e

22.0

(76.6)

(21.6)

0.0

N/A

N/A

06/17e

23.4

(77.8)

(20.5)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments. **Company has changed reporting currency to US$.

First product launch in acute graft vs host disease

In September Mesoblast received its first product approval for MSC-100-IV in acute graft vs host disease (aGVHD) in Japan. Its partner, JCR Pharmaceuticals, plans to launch in February 2016 under the trademark Temcell. The regulatory nod serves as critical confirmation of the company’s proprietary mesenchymal stem cell (MSC) technology and Temcell will bring in first product revenue through milestones and royalties on sales. In the US Mesoblast targets an NDA submission in paediatrics for approval of MSC-100 in H216 for potential launch in 2017. We forecast peak global sales for MSC-100 in aGVHD to reach $765m, of which $72m is in Japan.

New data point to efficacy in advanced CHF

Mesoblast expects completion of its MPC-150-IM Phase III in congestive heart failure (CHF) in August 2018 with potential for an earlier finish on a recently announced reduced requirement on trial size. Mesoblast also points to a possible early trial stop on overwhelming efficacy (not currently incorporated in our forecasts). Based on Teva’s mid-year 2015 FDA discussions, an additional confirmatory trial will be conducted to support regulatory approval. First interim safety analysis is anticipated in Q116. In the meantime, Phase II data point to efficacy in a subset of patients with more advanced disease.

Valuation: Reduced to A$2.74bn from A$3.68bn

We revise our DCF-based valuation primarily due to a change in rNPV for MPC-150-IM to A$1.52bn from A$2.28bn, as we shave our expected peak penetration rate to 3% from 4% on the back of Phase II data suggesting the treatment had the greatest cardio protective effect in patients with more advanced heart failure. We also push our time to launch out by one year to 2020 in CHF, while incorporating a new company cost-cutting programme, which was announced in December in conjunction with the full year results. Operating cash is to be reduced by 20-25% in the coming quarters, which on our estimates provides sufficient cash through 2017.

IPO in the US as first product nears launch

Mesoblast completed its first public offer in the US on the NASDAQ exchange on 18 November 2015, netting proceeds of US$63.5m (A$86.8m), ~13% of issued share capital. A total of 8.5m American Depositary Shares (ADS) were traded at a price of US$8.00 per ADS (implied ASX share price A$2.20 on FX conversion and a 1:5 ADS share ratio). The offer exceeded the originally targeted sale of 5.7m shares, with pricing pressure on the ADS likely contributing to the increased number of shares in the offer. The listing and simultaneous change to US dollar reporting reflects the company’s increasing portion of expenditure in the US and growing operational focus in the region.

Mesoblast has nine clinical programmes. One of its leads, MSC-100-IV (for aGVHD), is poised to become the first industrially manufactured allogeneic stem cell product launched worldwide, following its recent approval in Japan. The company has six active programmes in Phase III or Phase III ready (two partnered) and three in Phase II studies. Five programmes that are prioritised and funded are recognised as tier one and the rest categorised as tier two.1 MPC-150-IM in chronic heart failure is recruiting two pivotal studies to support regulatory filing in the US, while recruitment is also ongoing for a Phase III programme for MPC-06-ID in chronic discogenic low back pain. The company’s inflammatory programme is also progressing; a Phase IIb/III trial has been finalised in diabetic kidney disease and key data in RA and Crohn’s disease will be reported in the current year.

Tier one products are those with significant mid-term revenue opportunity funded through commercialisation: MPC-150-IM in CHF, MPC-06-ID in low back pain and MSC-100-IV in aGVHD. Tier two have committed funding through to the next inflection point and will advance into tier one on the basis of data, market opportunity or partnering capability. These include MPC-300-IV, which is in Phase II studies in a number of chronic inflammatory conditions, including biologic refractory rheumatoid arthritis and kidney disease.

Forthcoming share price inflection points are as follows:

Phase III interim safety analysis of MSC-150-IM for advanced congestive heart failure in Q116.

Phase II results (six-month) of first cohort of MSC-300-IV in biologic refractory RA by early 2016 (previously late 2015).

Phase II results (six-month) of second cohort of MSC-300-IV in biologic refractory RA in H116 (previously H215).

Launch of Temcell (MSC-100) in Japan in February 2016 by partner JCR for aGVHD.

Exhibit 1: Clinical-stage pipeline (summary)

Product

Indications

Delivery

Status

Next milestones

Cardiovascular

MPC-150-IM/Teva

Advanced and end-stage chronic heart failure

Transendocardial injection

600-pt Phase III study ongoing,
600-pt Phase III confirmatory study ongoing

Q116 IA, Phase III interim safety analysis Class II and III

MPC-25-IC/Teva

Acute cardiac ischemia

Intracoronary infusion

225-pt Phase II study ongoing

2016: Phase II programme update (previously 2015)

Spinal disease

MPC-25-Osteo
MPC-06-ID

Lumbar spinal fusion

Intervertebral injection

Phase III study, subject to partnering

Phase III subject to partnership

Chronic discogenic low back pain

Intradisc injection.

Phase III ongoing

Phase III enrolment complete Q316, interim data in Q416 (previously mid-2016)

Immunologic/inflammatory

MSC-100-IV

Moderate-to-severe Crohn’s disease

IV infusion

330-pt Phase III study

2016: update/decision point (previously 2015)

MPC-300-IV

Diabetic kidney disease

IV injection

Phase 2b/3 trial design ongoing, early access regulatory pathway sought

Clarity on regulatory pathway on encouraging Phase II results

Biologic refractory RA

IV injection

48-pt Phase I/II study ongoing

Top-line six-month results Q116 (previously H215) and full trial results Q216

Oncology

MSC-100-IV/Temcell

Steroid-refractory acute graft versus host disease (aGVHD)

IV infusion

Conditional approval (Canada/NZ). Full approval in Japan (Temcell brand name).
Pivotal 60 patient US open label trial US. Expanded access treatment (US).
US trial in adults w/liver/gut aGVHD

Japanese launch Feb 2016; US BLA submission, paediatric filing possible 2016 supported by Phase III interim analysis Q316 and top-line Q416. Full Phase III results due Q117

MPC-CBE

Bone marrow transplantation

IV infusion

240-pt Phase III study ongoing

H217/H118: headline results

Source: Edison Investment Research

First commercial launch with MSC-100 (JR-031) in Japan

Mesoblast expects its first commercial sales of mesenchymal lineage cell products from the launch of the recently approved MSC-100-IV in Japan in aGVHD. The regulatory green light in Japan is Mesoblast’s first formal product approval and a key milestone for the company, serving as critical confirmation of its proprietary mesenchymal cell technology. JCR plans to launch MSC-100-IV in February 2016 in Japan under the trademark Temcell. In November the company received approval from the Japanese Government’s National Health Insurance for reimbursement of a treatment course to patients at between $113,000 and $170,000, with the price dependent on persistency of symptoms.

aGVHD is a potentially life-threatening complication resulting from allogeneic hematopoietic cell transplantation (HSCT), a procedure most often performed for cancer patients (particularly with leukaemia or lymphoma), but also for certain types of anaemia and immunological disorders. aGVHD can result from the activation of mature donor T-cells, which are co-infused with the HSC transplant (the graft) and attack the patient’s body cells (the host), resulting in cytolytic effects that target several organs including the skin, gut and liver. Immunosuppressive agents, particularly IV steroids, are administered with HSCT, but treatment can be suboptimal and may increase the risk of opportunistic infections and disease relapse. In patients with severe visceral (gut, liver) complications, mortality is c 85%. There are no approved treatment options for steroid refractory patients and off-label options have proved toxic with mixed efficacy. MSC-100's activity against aGVHD, a T-cell mediated disease, is due to the immunomodulatory properties of mesenchymal stem cells.

In Japan, MSC-100-IV is partnered with JCR and was approved for children and adults with aGVHD by the Ministry of Health, Labour and Welfare on 18 September. Approval was made on the basis of Phase II data ahead of legislation enacted in November 2014 by the Japanese government. The new bill (the PMD Act) established a framework for expedited approval of regenerative medical products, creating the considerable opportunity for Mesoblast’s MSC and MPC products on relatively limited (ie Phase II) clinical data.2 On approval, Mesoblast received undisclosed milestone payments from JCR and will receive royalties on sales and other payments at certain sales milestones. JCR is to bear all commercialisation costs.

The PMD Act in Japan enables provisional approval on Phase II trial results (with caveats), allowing up to seven years for further confirmatory safety and efficacy trials in larger populations.

MSC-100-IV is also in development for steroid-refractory aGVHD for paediatric and adults in the US, Europe, New Zealand and Canada. We forecast peak global sales for MSC-100 in aGVHD to reach $765m, of which $72m in Japan. Our forecasts are based on the current number of annual stem cell transplants and a cost per transplant ranging from $75,000 to $200,000 (dependent on the treatment course needed per patient).

Paediatric filing in the US possible in 2016

Mesoblast is now focusing its efforts on an FDA filling for aGVHD in the US. Mesoblast intends to commercialise MSC-100 in aGVHD in the US to a highly targeted physician population. An initial US paediatric filing will be based on data obtained through the US expanded access programme – to date, more than 250 paediatric patients have been treated in the US through expanded access – as well as one additional trial. Data from the initial 160 patients enrolled in the programme showed meaningful survival benefit among responding paediatric bone marrow transplant recipients and recruitment is ongoing for a 60-patient, open-label Phase III registration study in children with steroid refractory aGVHD which, if positive, will support a filing in 2016 in the US for a targeted launch in H217. Given its ultra-orphan status,3 Mesoblast expects to command premium pricing (we model US$250k per treatment in the US based on a traditional US premium to Japan and company guidance). A launch in the US of MSC-100 would make it the first allogeneic stem cell product to market and we believe it would pave the way for other indications using Mesoblast’s proprietary stem cell technologies. The pediatric program in the US should also results in eligibility for the pediatric rare disease voucher program.4 Mesoblast also plans launches of MSC-100 in children with aGVHD in Canada and New Zealand in 2016 following approval in the US.

Ultra-orphan drugs are medicines used to treat exceptionally rare diseases that are chronically debilitating or life-threatening. Low patient numbers make it difficult for pharmaceutical companies to recoup research and development costs, and consequently these medicines are generally expensive on a per-patient basis.

Under this FDA new program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher which can be redeemed to receive a priority review of a subsequent marketing application for a different product.

MPC-150-IM in CHF – Phase III trial size significantly reduced

Mesoblast provided a full update on its Phase III chronic heart failure programme on the back of a meeting between partner Teva and the US FDA in mid-2015, at which time the trial size was reduced from approximately 1,730 patients to 1,165 patients. Subsequently, on 11 January, the company announced that the size of the Phase III trial would again be substantially reduced following additional discussions between partner Teva and the US FDA. Optimisation of the trial now includes a reduction in patient size from 1,165 to ~600. As previously noted, this trial is enriched for patients with advanced heart failure, based on inclusion criteria of either high NT-proBNP levels or heart failure hospitalisation in the past nine months. The Phase III trial design focuses on those patients at high risk of recurrent HF-MACE (adverse cardiac events), large baseline LVESV (left ventrical end systolic volume) and high prior rates of HF-MACE. Mesoblast management believes the trial could be discontinued early on ‘overwhelming efficacy’ following testing for superiority at the interim analysis. Based on the mid-year FDA discussions, an additional confirmatory trial with ~600 patients is also underway in parallel with the Phase III study. Recurrent HF-MACE as a primary endpoint for the two trials was chosen on the back of encouraging analysis of the previous Phase II study showing patients treated with MPC-150-IM had no HF-MACE over 36 months of follow-up vs the control group with 11 recurrent MF-MACE.

Two interim analyses of the initial Phase III study are planned for safety and/or efficacy. While completion is expected in the second half of 2018, Mesoblast management comments that the reduction in trial size could shorten the time to trial completion. However, we err on the side of caution and our timing for forecast launch in CHF remains early 2019. Complete enrolment is underway with an interim analysis after 50% occurrence of HF-MACE events. An interim safety analysis is anticipated in Q116 with a second analysis for futility/overwhelming efficacy in Q117 (after 50% occurrence of HF-MACE events).

In September Mesoblast also announced additional Phase II results, which showed MPC-150-IM had the greatest cardioprotective effect in patients with advanced heart failure, ie patients with baseline LVESV >100ml, or rapidly deteriorating CHF patients with a high rate of adverse outcomes.

CHF is a common condition which, despite treatment advances, is still associated with poor prognosis. About half of CHF patients die within five years of diagnosis. Heart failure occurs when the failing heart cannot pump enough blood and oxygen to support other organs. According to statistics provided by the American Heart Association, 5.1 million people in the US are diagnosed with CHF (2% of the population). While progress has been made in treatment, there is high overall annual mortality (5-20%), particularly in patients with severe (NYHA Class IV5) symptoms. Current state-of-the-art treatment for advanced systolic heart failure includes a combination of medical and device therapy. Renin-angiotensin-aldosterone (RAAS) blockers (along with beta blockers) are the key pharmacological therapies, as they improve mortality, heart function, heart failure symptoms and exercise tolerance. Devices are increasingly used in mild-to-severe (NYHA II-IV) CHF. Implantable cardioverter-defibrillators (ICDs) decrease mortality, and the addition of cardiac resynchronisation therapy (CRT) to optimal medical therapy improves symptoms and mortality.

  New York Heart Association (NYHA) classification assesses the severity of functional limitations and correlates fairly well with prognosis. NYHA classification (and % of patients at each stage): I – asymptomatic: no symptom limitation with ordinary activity (35%), II – mild: ordinary activity somewhat limited by dyspnoea (35%), III – moderate: exercise limited by dyspnoea with moderate workload (25%), IV – severe: dyspnoea at rest or with limited exertion (5%).

Exhibit 2: Phase III programme

Details

Design

Multi-centre, randomised (1:1), double-blind, placebo-controlled trial to evaluate MPC-150-IM in c 600 subjects with CHF. Primary endpoint is HF-MACE, with secondary efficacy measures of heart function and exercise capacity. Two interim efficacy and/or safety analyses: first analysis (not futility) after c 18 months will assess various safety parameters to determine the risk/benefit ratio; second analysis on HF-MACE endpoint after c 30 months on futility/overwhelming efficacy, at which time we expect majority (>60% ) of patients to be recruited and c 40% of expected HF-MACE events. A second confirmatory trial to recruit 500 patients in an identical patient population using recurrent HF-MACE as the primary endpoint.

Primary endpoint

Same as Phase II: time-to-event analysis of HF-MACE (includes cardiac death, resuscitated cardiac death, or non-fatal decompensated heart failure events). Study is powered to show a 25% relative reduction in primary endpoint (HF-MACE) for Revascor vs control – assumes c 20% event rate in controls and c 15% event rate on Revascor. Recurrent HF-MACE primary endpoint for confirmatory study.

Patient population

NYHA Class II and III systolic heart failure (LVEF≤40%) of ischaemic or non-ischaemic origin enriched with patients with advanced heart failure.

Territories

Initial recruitment in the US, with follow-on European enrolment.

Source: Mesoblast, Edison Investment Research

MPC-150-IM is also under investigation in end-stage Class IV heart failure (c 10% of heart failure patients) through a clinical trial programme sponsored and funded by the National Institutes of Health (NIH) and co-ordinated by NIH-funded Cardiothoracic Surgical Trials Network (CTSN). Full trial results are expected in H216. Additionally, a 225-patient Phase II safety study in acute myocardial infarction (AMI) is currently ongoing with MPC-150. The trial recruits patients undergoing a stent procedure two to 12 hours after onset of symptoms and the primary endpoint of the study is the frequency of major adverse cardiac events (MACE) at 24 months.

Exhibit 3 shows the competing stem cell and gene therapies in late-stage trials for CHF.

Exhibit 3: Selected stem cell and gene therapies in Phase II or III trials for CHF

Company

Product

Therapy class

Status

Target CHF patients

Notes

Mesoblast Teva

Revascor

Stem cell (allogeneic)

Phase III

Ischaemic and non-ischaemic, NYHA II or III, LVEF<40

Allogeneic (bone marrow-derived) mesenchymal precursor cells (MPC). Phase III readout August 2018 (potentially earlier).

Cardio3

C-Cure

Stem cell (autologous)

240-pt Phase III

Ischaemic, NYHA II to IV, LVEF<30%

Autologous (bone marrow-derived) cardiopoietic mesenchymal stem cells. Expected Phase III readout April 2016.

Bioheart

MyoCell

Stem cell (autologous)

170-pt Phase II/III

Ischaemic (post-AMI), NYHA II to IV, LVEF<35%

Autologous (skeletal muscle-derived) myoblasts. Expected Phase II/III estimated completion February 2017.

Celladon

Mydicar

Gene therapy

200-pt Phase IIb

Ischaemic or non-ischaemic, NHYA II to IV, LVEF<35%

Gene transfer using a viral vector (AAV1) to deliver the SERCA2a gene. Expected Phase IIb readout in Q116.

Vericel

Ixmyelocel

Stem cell (autologous)

108-pt Phase IIb
(ixCELL-DCM)

Ischaemic, NYHA III or IV, LVEF<35%

Autologous (bone marrow-derived) CD90+ mesenchymal cells and CD14+ monocytes. Data in Q116.

Source: Edison Investment Research, Clinicaltrials.gov

Valuation

We reduce our valuation for Mesoblast to A$2.74bn from A$3.68bn (to A$7.20/share basic from A$10.93, or to A$7.07/share fully diluted from A$10.74). Our per-share value declines disproportionately on the increase in total shares from the recent share issue in the US. The breakdown of contribution to the rNPV is shown below (Exhibit 4).

The change to our valuation is primarily due to a change in rNPV for MPC-150-IM to A$1.52bn from A$2.28bn as we shave our expected peak penetration rate in the US/EU to 3% from 4% on the back of Phase II data suggesting the treatment had the greatest cardio protective effect in patients with more advanced heart failure. Pending an update in 2016 on the Phase II programme for MPC-25-IC in acute myocardial infarction, we lower our probability of success to 20% from 25%, hence the rNPV reduces to A$235m from A$292m. We adjust our rNPV for JCR-031 in Japan slightly (to A$65m from $76m) as we move our price per treatment in Japan to US$150k from US$200k on recently announced reimbursement rates, while increasing the probability of success to 100% from 80% on the back of the recent product approval. Given little visibility on the company’s clinical programme in bone marrow transplantation, we reduce our probability of success to 20% from 40% for this tier two treatment.

The strength of the US vs the Australian dollar allows for a slight upward value increase, as do changes to our near-term forecast related to the company’s recently announced cost savings programme. We also adjust our valuation on a drawdown in cash since our last note, which is offset about equally by the proceeds from its NASDAQ listing.

Mesoblast’s share price recently fell following the company’s US fund-raise and ADS NASDAQ listing as investors have been mindful of the inherent risks associated with its ongoing pivotal programme in CHF and the added costs of an additional confirmatory trial in CHF. However, the company’s pipeline continues to make traction, with a first product approval in aGVHD in the coming months and progression of two treatments into large Phase III trials. Our current fair value calculation points to considerable upside on the current share price (A$1.54) and we expect renewed interest in the shares on forthcoming price catalysts including launch and first sales of JCR-031 in Japan (February 2016), interim analysis of the current Phase III trial in CHF (Q116) and top-line Phase II data in cohort 1 for MPC-300-IV in rheumatoid arthritis (Q116).

Exhibit 4: Valuation

Product

Therapeutic area

Indication

rNPV
(A$m)

rNPV/share
(A$)

Probability of
success (%)

Launch (FY)

Peak sales
(US$m)

 

MPC-150-IM/Teva

Cardiovascular

Congestive heart failure (CHF)

1,523.8

4.01

50%

2019

2,137

MPC-25-IC/Teva

Cardiovascular

Acute myocardial infarction (AMI)

234.9

0.62

20%

2019

966

MPC-06-ID

Spine disease

Intevertebral disc repair

570.9

1.50

50%

2018

1,648

MPC-25-Osteo

Spine disease

Posterior lumbar fusion

144.8

0.38

25%

2019

772

MSC-100-IV

Oncology

Acute graft versus host disease (aGVHD)

250.5

0.66

60%

2016/2017

693

JR-031

Oncology

Acute graft versus host disease (aGVHD)

65.3

0.17

100%

2015

72

MPC-300-IV

Immunologic/
Inflammatory

Diabetic nephropathy

157.9

0.42

20%

2020

1,633

MPC-300-IV

Immunologic/
Inflammatory

Rheumatoid arthritis

62.2

0.16

10%

2020

1,350

MSC-100-IV

Immunologic/
Inflammatory

Crohn's disease (US)

89.1

0.23

30%

2017

755

MPC-CBE/Teva

Oncology

Bone marrow transplantation

46.9

0.12

20%

2019

220

R&D expenses

(343.5)

(0.90)

Manufacturing expenses

(89.2)

(0.23)

G&A expenses

(146.8)

(0.39)

 

Estimated net cash at 31 December 2015

168.0

0.44

 

Total

 

 

2,735

7.20

Basic

 

 

 

 

 

2,831

7.11

Diluted

 

 

Source: Edison Investment Research

Financials

Mesoblast changed its reporting currency to US$ ahead of its IPO in the US in 2015.

In conjunction with its Q1 earnings call in mid-December, the company announced a cost management effort whereby a 20-25% reduction in operating cash burn is targeted over the next three quarters (Q215-Q415), compared with the last two quarters (Q116: US$28.1m and Q415: US$27.3m) to extend the company’s cash runway and achieve next value inflection points for its tier one product portfolio. In Q116, ending on 30 September 2015, the company reported a loss after income tax of $13.2m, a reduction of 15% from the $15.5m reported in Q115. Management and administration costs of $5.5m declined 20% quarter-on-quarter on cost-cutting and currency fluctuations, while 14% lower R&D expenses of $11.1m resulted from reduced expenses on tier one products and product support costs. R&D primarily reflected the company’s development costs for later-stage programmes in aGVHD (MSC-100) and low back pain (MPC-06) and the cost of employees supporting the MPC and MPS product platforms. Development costs related to MPC-150 (CHF) are predominantly funded by collaborators Teva and the NIH. Our forecasts are adjusted on the new cost-cutting measures.

Following its US listing and fund-raise, we estimate that the company held approximately US$120m (A$168m) in cash at 31 December 2015 which, on its current cash use, should be sufficient to finance operations through 2017, while faster uptake than expected on the launch of MSC-100 (aGVHD) in Japan (2016) could extend this runway. Thereafter, its burgeoning late-stage pipeline will require funds – ideally through partnerships, or alternatively through internal financing. We note that in mid-October Mesoblast extended its agreement with Celgene Corporation (signed in April 2015) by six months for right of first refusal (ROFR) to Mesoblast’s MPC products in aGVHD, certain oncologic conditions, inflammatory bowel disease and organ transplant rejection).

Exhibit 5: Financial summary

US$'000s

2014

2015

2016e

2017e

30-June

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

25,123

32,403

21,963

23,350

Cost of Sales

0

0

0

0

Gross Profit

25,123

32,403

21,963

23,350

R&D Expenses

(50,929)

(62,649)

(51,999)

(53,559)

SG&A Expenses

(24,403)

(29,636)

(23,709)

(24,420)

EBITDA

 

 

(83,916)

(99,001)

(81,028)

(80,412)

Operating Profit (before amort and except)

 

 

(83,916)

(99,001)

(81,028)

(80,412)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Share-based payments

0

0

0

0

Operating Profit

(83,916)

(99,001)

(81,028)

(80,412)

Net Interest

8,386

4,070

4,428

2,635

Profit Before Tax (norm)

 

 

(75,530)

(94,931)

(76,600)

(77,777)

Profit Before Tax (FRS 3)

 

 

(75,530)

(94,931)

(76,600)

(77,777)

Tax

(4)

0

0

0

Profit After Tax (norm)

(75,534)

(94,931)

(76,600)

(77,777)

Profit After Tax (FRS 3)

(75,534)

(94,931)

(76,600)

(77,777)

Average Number of Shares Outstanding (m)

319.5

320.9

355.4

380.1

EPS - normalised (c)

 

 

(23.64)

(29.59)

(21.55)

(20.46)

EPS - normalised fully diluted (c)

 

 

(22.76)

(28.48)

(20.82)

(19.82)

EPS - (IFRS) (c)

 

 

(23.64)

(29.59)

(21.55)

(20.46)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

655,222

659,306

660,306

661,306

Intangible Assets

648,005

650,241

650,241

650,241

Tangible Assets

4,411

4,398

5,398

6,398

Investments

2,806

4,667

4,667

4,667

Current Assets

 

 

191,931

122,460

103,618

24,841

Stocks

0

0

0

0

Debtors

5,744

3,972

8,000

8,000

Cash

185,003

110,701

87,831

9,054

Other

1,184

7,787

7,787

7,787

Current Liabilities

 

 

(40,199)

(48,407)

(40,342)

(40,342)

Creditors

(34,525)

(43,246)

(38,504)

(38,504)

Deferred revenue

(5,674)

(5,161)

(1,838)

(1,838)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(268,395)

(265,372)

(259,387)

(257,537)

Deferred revenue

(37,508)

(22,505)

(18,500)

(16,650)

Other long term liabilities

(230,887)

(242,867)

(240,887)

(240,887)

Net Assets

 

 

538,559

467,987

464,195

388,268

CASH FLOW

Operating Cash Flow

 

 

(86,515)

(104,079)

(89,798)

(80,412)

Net Interest

11,609

3,043

4,428

2,635

Tax

0

0

0

0

Capex

(1,712)

(2,204)

(1,000)

(1,000)

Acquisitions/disposals

0

0

0

0

Financing

2,196

45,852

63,500

0

Dividends

0

0

0

0

Other

(36,490)

(2,860)

0

0

Net Cash Flow

(110,912)

(60,248)

(22,870)

(78,777)

Opening net debt/(cash)

 

 

(292,449)

(185,003)

(110,701)

(87,831)

HP finance leases initiated

0

0

0

0

Other

3,466

(14,054)

0

0

Closing net debt/(cash)

 

 

(185,003)

(110,701)

(87,831)

(9,054)

Source: Company accounts, Edison Investment Research. Note: Company has changed its reporting currency to US$.

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