MPC-06-ID Phase 3 results countdown, page-239

G’dayHolders,

Hopingyour all well. Will be right.

Thereis no question the MSB’s Stem cells work.

Allthe best,

Anjo.

Bell Potter update – 1 February 2021

Mesoblast (MSB)

2QFY21 - Key Highlights

Temcellbeat, lower opex, timing of cash from deals delayed

MSB reported US$2.1m(up 5% y/y and ~63% on 1Q21), in royalties on GvHD product

Temcell in 2Q21,which beat our forecast of US$1.7m. Opex (R&D and manufacturing

commercialisationexpense incl. inventory build) for 2QFY21 of US$21.3m, were

materially lower than1QFY21 and our forecast (BPe US$30m).

MSBended 2Q21 with US$77.5m cash, which was materially below BPe

US$133m,dueto timing of cash inflow from Novartis (NVS) and Grunenthal deals

having moved to2HFY21. MSB could receive another US$92.5m though existing

strategicpartnerships and financing facilities over next 12 months, which could extend

its cash runway into2QCY22. The timeline for drawdown of last US$25m tranche from

Hercules Capital hasexpired. MSB has however received an extension on the interest

only period on theexisting debt to loan maturity in Mar’22. Webelieve MSB’s cash

positionis now vulnerable to the continuance of the Grunenthal and Novartis

dealsand the near term cash inflow from them. If either of these deals fall through

and in the absenceof new deals (potentially for CHF), we believe MSB may find its

balance sheet underpressure going into FY22. Forour part we remain optimistic for

the upcoming Phase 3 back pain trial results andsubsequent continuation and

progress of the Grunenthal partnership.We also expect positive resultscould lead to a

US deal for back pain, which could be a source ofnon-dilutive funding in CY21.

Revisions to ourmodel led to a 24% decrease in our FY21 Net loss forecast and a

13% increase in ourFY23 net loss forecast. Changes to our FY22 net loss forecast are

not material. Theearning changes were driven by lower revenue forecasts due to

moving forwardtimelines for future milestones from Grunenthal on the back pain deal

and a shift of opexexpenses from FY21 into FY22 and FY23. Near term earning

adjustments wereoffset by adjusting our DCF for time creep.

Ourvaluation for MSBremains unchanged at A$5.10/sh. We retain Buy (spec.).

Nextcatalysts:

a) Phase3back pain trial results (BPe Feb’21); b) outcome of second FDA meeting todiscuss

potential foraccelerated approval of remestemcel-L for paediatric GvHD expected to

be held in 1QCY21and c) Top-line results from COVID-19 ARDS trial in 1QCY21.

Results especiallydata on secondary endpoints would determine path forward for

remestemcel-Lin non-COVID ARDS and MSB’s partnership with Novartis.