We must explain strategy: Itescu

Mesoblast chief executive Silviu Itescu says his regenerative medicine company should better explain its commercial strategy to the investment community and talk less about the technical details of its technology as it embarks on one of the most critical years in its 15-year history. Mr Itescu, the company’s founder who will give a major presentation today at the JPMorgan Biotech Showcase conference in San Francisco, denied that this year was a do-or-die year for Mesoblast, which is the only Australian-listed company that the nation’s richest man, packaging magnate Anthony Pratt, has a stake in.

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Mr Itescu claimed Mesoblast started the year with the most mature cell therapy product pipeline and technology platform in the regenerative medicine industry. “2019 will be a very important year for Mesoblast. We have a number of substantial deliverables,’’ he told The Australian, noting two of the company’s commercial products had already been approved and marketed by the company’s licensees, JCR Pharmaceuticals in Japan and Takeda Pharmaceutical in Europe, and were earning revenue. Yesterday, Mesoblast announced it had completed “patient recruitment in the events-driven phase 3 trial of its product candidate Revascor” for advanced chronic heart failure, the largest cell therapy trial for the condition. But after investors watched the value of their shares in Mesoblast decline significantly over the final seven weeks of 2018 and the company narrowly avoided a strike against its remuneration report at its annual general meeting, Mr Itescu acknowledged the vote was “a statement from some shareholders that we need to pull up our socks”. “We are taking it on board seriously. We have to listen to our shareholders. We need the support of our Australian shareholders to build a global company,’’ he said. The company’s biggest long-term supporter, billionaire investor Alex Waislitz, whose Thorney Investment Group now owns 6 per cent of Mesoblast after increasing its holding in the final part of last year, said the event that triggered a sharp drop in the share price in early November was symptomatic of a communication problem for the company. Mesoblast shares plunged after the company revealed it had failed to meet the primary end point of a 156-patient, phase-two trial for heart failure patients implanted with a left ventricular assist device. The shares fell from almost $2.20 to below $1.40. After falling to almost $1 in mid-December, they are now trading back above $1.30 — five years ago they were worth $6. “It was consistent with the history of the company, which is to not be able to get their messages through to the investment community in a manner that presents its best foot forward. In the past, the company had over-emphasised the technical side of their results. It hasn’t been able to simplify a lot of its messages into investor-speak,’’ Mr Waislitz told The Australian. Mr Itescu said he took Mr Waislitz’s views, and those of any shareholder, very seriously. “He is a good friend but he is critical where he needs to be critical. We clearly need to explain in a better way about the commercial stage of the company, how far we have come. And less about the technology. Having said that, it becomes more and more complex as you get to the endgame,” he said. “Maybe we haven’t done a sufficiently robust job in getting in front of the investment community and explaining our commercial strategy and commercial plans and we intend to do that over the next 12 months.” He stressed that despite the public perceptions, the company had “not had one failure yet”. “What does that say? It says it is a complex story. The diseases we are targeting are severe diseases where other drugs have chronically failed. It is very difficult and when you see positive results, you need to assess what positive results mean. It is not a straight line,’’ he added. Mr Waislitz said he remained a core believer in Mesoblast and claimed “the risk/reward equation” at the stock’s current value was “quite compelling”, but added that Thorney probably should have pushed harder for the Melbourne-based company to internationalise more. “We probably should have pushed harder for a chairman to be US-based,’’ he said. While Mesoblast chairman Brian Jamieson announced at the AGM that he would leave the company early this year following shareholder pressure for board renewal, two US-based directors, Shawn Cline Tomasello and Joe Swedish, were elected to the board at the meeting. Mr Itescu said Mesoblast was attempting to build itself into a multi-product, global biopharmaceutical company. “The Australian public market doesn’t have a very good understanding — there haven’t been precedents outside CSL — of how you build a global multi-product biopharmaceutical company … Cochlear and Resmed are really one-product companies,’’ he said. Mr Itescu said Anthony Pratt, the brother-in-law of Mr Waislitz, understood the blue-sky potential of Mesoblast. “He is a strong believer in the platform technology, he understands the target markets … If we continue to grow he will continue to be there,’’ he said. “He wants to see us deliver on our promises, that we are a consistent proposition and that we continue to show a resilience. He appreciates, as someone who has built a global business, that it isn’t a straight line.”Mesoblast is dual-listed on the ASX and the Nasdaq in America.