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Research: Healthcare
Mesoblast
Written by
Mesoblast |
Impressive signs of efficacy in rheumatoid arthritis |
Clinical results |
Pharma & biotech |
18 February 2016 |
Share price performance
Business description
Next events
Analysts
Mesoblast is a research client of Edison Investment Research Limited |
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Mesoblast has reported impressive efficacy data from the first cohort of the Phase II trial of its mesenchymal precursor cell (MPC) product in rheumatoid arthritis (RA), ahead of full results due in Q316. Key catalysts next quarter will be the first interim analysis from the pivotal MPC-150-IM heart failure trial, together with an update to trial timelines following the halving of the trial to 600 patients. The launch of Temcell in Japan for graft vs host disease this quarter will bring a royalty stream from partner JCR Pharmaceuticals. We lift our valuation to A$7.36 per share (from A$7.20).
Year end |
Revenue (US$m) |
PBT* (US$m) |
EPS* (c) |
DPS (c) |
P/E (x) |
Yield (%) |
06/14 |
25.1 |
(75.5) |
(23.6) |
0.0 |
N/A |
N/A |
06/15 |
32.4 |
(94.9) |
(29.6) |
0.0 |
N/A |
N/A |
06/16e |
22.0 |
(76.6) |
(21.6) |
0.0 |
N/A |
N/A |
06/17e |
23.4 |
(77.8) |
(20.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments. Note: company has changed reporting currency to US$.
Impressive signs of efficacy from RA first cohort
Mesoblast announced impressive early results from the first cohort of its Phase II trial of MPC-300-IV MPC therapy in RA patients who are refractory to biologics such as TNF alpha. Patients treated with 1m cells/kg showed ACR20 responses in 47% of MPC-treated patients vs 25% on placebo, ACR70 response in 27% vs 0% on placebo, and remission at 12 weeks (DAS28/CRP<2.6) of 20% vs 0% on placebo. These data represent impressive efficacy in refractory patients: they are comparable to response rates seen to TNF alpha biologics in first-line therapy, and better than the approved JAK inhibitor Xeljanz in comparable biologic refractory patients (ACR70 in 10-14% of patients). No statistical analysis was presented. Final results of the trial including the high dose cohort (2m cells/kg) are due in Q316.
First interim analysis of CHF trial in Q216
The interim safety analysis for the pivotal CHF trial, which is due in Q216, will also assess responses in surrogate measures of efficacy such as systolic and diastolic volumes as indicators of the effects of the MPCs on the heart. The FDA has previously agreed that the primary endpoint can be changed to the rate of recurrent HF MACE (adverse events, previously time to first MACE event). The higher number of expected recurrent HF-MACE events has allowed the trial to be reduced from 1,165 to 600 patients without any loss of statistical power. Updated timelines for the revised trial, including the timing of the interim analysis of the primary efficacy endpoint, will be disclosed in Q216 in conjunction with partner Teva.
Valuation: Lifted to A$2.8bn (A$7.36/sh) from A$2.7bn
Cash outflow of US$19.8m in Q216 was 25% below preceding quarters, in line with foreshadowed cost reductions. Cash of US$120.8m on 31 December will fund operations to end FY17 and allow Mesoblast to deliver potential value inflection points including GvHD Phase III results (Q416), back pain Phase III interim analysis (Q416) and full results in the RA trial (Q316). We increase our DCF-based valuation to A$2.8bn (vs A$2.7bn) due to a higher probability of success in RA (20% vs 10%).
Financial Summary
Exhibit 1: Financial summary
US$000s |
2014 |
2015 |
2016e |
2017e |
||
Year-end 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: Edison Investment Research, company accounts
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