After going through the announcements of today, I am of the view that time is running out for MSB. There are two main reasons for this:
1. They need to get either one or more of their products approved by the end of this calendar year as the window of opportunity is fast closing on them.
2. Their debt amount is growing every quarter and they face the possibility of anyone of their debtors requesting for immediate payment.
At the moment, their revenue stream is limited to the $2M per quarter which they receive from JCR royalties. I do not see any milestone payments from Tasly or Grunenthal over the next six months. The cash injection from SurgCenter of $158.3M was timely and this has given them a life line for a short while. Novartis has not been required to make any payments as yet and no one can say when that is forthcoming as we do not know what triggers off the payment of $50M.
Of the products developed, I would say that Ryoncil has the best chance of approval and management has to really get their act together to finalise their negotiations with the FDA and get this treatment approved by the end of this year or earlier.
In regard to CLBP, it is now regarded as a pain reliever rather than what was meant to be both as a reliever and an improvement of function. Unfortunately the results for improvement for functionality were not significant and meeting half of the endpoints reduces its benefits.
In regard to Remestemcel L in ARDS due to Covid-19, it did not significantly reduce overall mortality, but reduced mortality and ventilator free days through 60 days in patients over 65 years. This is not a very promising result and the current focus on all countries is to get the vaccines provided to the 7.9 Billion people residing on this planet. I guess the current manufacturers of vaccines must be jumping for joy having had half baked products approved and counting the bumper profits being made.
That leaves us with CHF, where Mesoblast reckons that “the observed reduction in mortality and morbidity in the CHF Phase 3 trial” potentially will lead to steps in the in the path of approval. This is left to be seen.
On the surface its financial position seems to be reasonable with cash at the end of March quarter being $158.3M. Cash outflow per quarter is say $26M , which means that it has cash to see it through for about 6 quarters. Unfortunately, this is not the case. It has debts of $92.5M being Hercules and Nova Quest, which loaned them $80M in total and this has grown to the current value. If both these companies recall the loan, there is very little cash left to operate. The following narrative was obtained from the Form 6-K report:
“Our loan facilities with Hercules and Nova Quest contain a number of covenants that impose operating restrictions on us, which may restrict our ability to respond to changes in our business or take specified actions. The Group has an operating objective to at all times maintain unrestricted cash reserves in excess of six months liquidity. This objective aligns with our loan and security agreement with Hercules where we are obliged to maintain certain levels of cash in the United States, and a minimum unrestricted cash balance equal to the lessor of: four months liquidity (defined as the prior four calendar months net cash outflows in operating activities and investing activities, excluding amounts for extraordinary, non-recurring, not regularly scheduled or onetime proceeds and amounts) plus any balance of accounts payable not paid after the 120th day following the invoice date for such accounts payable; and the outstanding loan balance.“
I am quite sure that Hercules will be watching very carefully the cash position of MSB and if there are no signs of a revenue stream to service its financial obligations, they will ask for their pound of flesh.I do hope that MSB for the sake of its shareholders have something up their sleeves which will turn things around failing which shareholders have to make provision of 100% impairment, their cost of the shares in their Balance Sheet, if MSB cannot meet their financial obligations. This is the worst case scenario.I am not giving financial advice and this is my opinion.
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