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Research: Healthcare
Mesoblast
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Mesoblast |
CHF Phase III clears interim safety analysis |
Q3 FY16 results and clinical update |
Pharma & biotech |
11 May 2016 |
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Mesoblast is a research client of Edison Investment Research Limited |
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In its Q3 FY16 results presentation Mesoblast revealed the Phase III trial of Revascor in CHF cleared its first interim safety analysis; but, following FDA advice, no information was released on surrogate measures of efficacy. Mesoblast and Teva will update the market on timelines for the CHF Phase III programme later this quarter, while RA and GvHD data are expected next quarter. Mesoblast maintained a reduced cash burn of US$22m in Q3, giving it a cash runway to end FY17 on our estimates. Our valuation is unchanged at A$7.36 per share ahead of the CHF programme update.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
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. The company has changed reporting currency to US dollars.
CHF Phase III clears interim safety hurdle
The data monitoring committee (DMC) reviewed the clinical data on the first 175 patients in the Phase III CHF trial and recommended that the study continue unchanged. Management confirmed that while the DMC had access to surrogate efficacy measures such as diastolic and systolic volume, analysis of these measures was not shared with Mesoblast or partner Teva, in line with FDA guidance. The company had previously raised expectations that information on surrogate efficacy measures could be disclosed at this time.
Timelines for CHF Phase III to be updated this quarter
Mesoblast and Teva will update timelines this quarter for: the interim futility analysis and completion date of the current Phase III CHF trial; for FDA and EMA regulatory submissions; and for the completion of the overall CHF program, including a confirmatory trial. Teva has a contractual right to review its participation at this time, but in our view it would not make sense for Teva to withdraw when it does not have any indication whether the Phase III trial is likely to replicate the impressive reductions in HF-MACE seen in Phase II. Sites in Europe will be initiated this quarter to accelerate recruitment which stands at ~250 of the targeted 600 patients.
Temcell earns first royalties in Japan
Mesoblast booked its first royalty income after licensee JCR Pharmaceuticals launched Temcell for acute graft vs host disease in Japan during the quarter. Temcell is reimbursed at US$130-195k and Mesoblast earns a royalty of 20% plus.
Valuation: Unchanged at A$2.8bn (A$7.36/share)
Cash outflow of US$22.0m in Q3FY16 was in line with the foreshadowed 25% cost reduction. Cash of US$100m on 31 March will fund operations to end FY17 and allow delivery of potential value inflection points including GvHD Phase III results (Q416), back pain phase III interim analysis (Q416) and full RA trial results (Q316).
Exhibit 1: 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 |
(19,521) |
(28,242) |
(23,500) |
(23,500) |
||
Deferred revenue |
(15,004) |
(15,004) |
(15,004) |
(15,004) |
||
Other |
(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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