Ann: Annual Financial Results Presentation, page-58

Hello Holders,

Great call today.Exciting times ahead for the company and its various stakeholders.

Was also delighted to seeOP’s post today. Thank you OP.

Here is BP’s latest.

All the best.

Anjo.

Bell Potter Update – Thursday 27^thAugust 2020

Mesoblast (MSB)- FY20Results broadly in-line, Timeline for Phase 3 trial results move to early4QCY20

Outlook

· Results were broadly in-line.

· Timelines for Ryoncil’s expected approval forpaediatric GvHD by 30^th Sep PDUFA date was confirmed. If approvedMSB plans to launch Ryoncil for aGvHD in 4QCY20, which will mark the start ofsignificant recurring revenues for the stock. FDA ODAC committee recently voted9-1 in support of efficacy of the product, MSB now working with FDA towardsconclusion of their review by 30^th Sep. Preparations for launchongoing (inventory build and commercial team in place).

· MSB is also progressing with plans for an adultSR-aGvHD randomised controlled trial in high risk patients where this ishighest unmet need against best available therapy as a post market study.

· Timeline was also confirmed for first interimanalysis on 90 patients from COVID-19 ARDS trial in early September.Independent data monitoring committee could either advise to continue the trialas planned or stop early. All 30 sites are enrolling and despite COVID-19hotspots moving, company believes enrolment is going as expected. The fulltrial i.e. 300 patients is now expected to complete enrolment during 4QCY20(previously was by end Sep’20). MSB is also continuing with manufacturing scaleup.

· EAP program to treat children hospitalised withCOVID-19 who develop MIS-C (Multisystem inflammatory Syndrome), a lifethreatening condition. 50% of patients develop significant cardiovascularcomplications whuch may result in reduced cardiac function. First patient underthis EAP has now been treated and discharged from the hospital. MSB willcontinue to monitor a pilot group of patients under the EAP and we believe ifpositive signals emerge as they did for COVID-19 ARDS, MSB will likely pursueregistrational trial and label expansion of Ryoncil for this condition as well.

· Timelines for release of results from Phase 3back pain and heart failure trials have moved slightly from end Sep’20 toduring 4QCY20. We now expect results in October’20. MSB believes from originaltimelines at start of 2020, COVID-19 pandemic has pushed back timing of resultsby ~1 quarter.

· Balance sheet is strong with US$123.9m cash,with access to additional funding through debt financing and milestones frompartner Grunenthal due over 12 months. Will fund company comfortably throughkey inflexion points over next 12 months and beyond into 1QCY22. Highlikelihood of additional cash injection through strategic partnerships overnext 12 months given two major Phase 3 trials are expected to read out in4QCY20. MSB remains in our Top-picks for the year.

ResultHighlights:

· Underlying Net loss of US$87.4m (down ~12%over pcp) was modestly higher (~4%) than our forecast loss of US$84.1m, drivenby higher manufacturing commercialisation expense in prep for launch of Ryoncilin US, higher net interest expense (albeit a large portion of it is non cash)and lower non cash other income adjustments than our forecast. Investment incommercial readiness for US launch of Ryoncil increased ~US$13.8m over pcp(US$8m for commercial manufacturing activities and US$5m for sales/marketing).

· Revenue of US$31.6m was in- line with ourforecast (BPe US$31.6m). It consisted of US$25m milestone revenue(Grunenthal and Tasly) and US$6.6m from Temcell royalties. Revenue almostdoubled over pcp, driven both by higher royalty revenue from Temcell GvHDproduct in Japan and higher milestone revenue.

· FY20 Temcell royalties were up 32% over pcp.However, Temcell royalties decreased in 4Q20 as we expected on JCRrestricting patient access in April while it increases capex and boostsproduction and more longer term increases manufacturing capacity at itsSheishin Plant to raise the production ~30% over current levels. JCR noted thatdemand for Temcell far outstripped their initial forecasts. For theSheishin plant manufacturing area expansion JCR has allocated 200m yen as capexand expects it to be operational by March 2021. We expect JCR’s in-market salesand royalties to MSB will decline in FY21 (potentially by 30%).

· Operating costs of US$103.4m were close toin-line with our forecasts (BPe US$101.6m) and 9% higher than pcp. R&Dcosts were in-line with BPe, however manufacturing commercialisation expensewas ~US$1.8m higher than our forecast. R&D costs reduced over pcp, howeverwere more than offset by higher manufacturing commercialisation spend ahead ofplanned US launch of Ryoncil for paediatric SR-aGvHD and manufacturing scaleexpansion activities to meet potential demand for COVID-19 ARDS.

· Reported net loss of US$77.9m (down 13%), wasclose to in-line with our forecast (BPe US$76.1m), with the variance fromthe normalised numbers reduced due to higher non-cash income tax benefit ofUS$9.4m.

· Cash at end of FY20 was US$129.3m (in line asreported in the 4c earlier). With additional US$35m available on existingdebt facilities and US$32.5m milestone due from Grunenthal over next 12 months,MSB has cash runway into 1QCY22.

Key stock price catalysts over 12 months:

· FirstInterim analysis from COVID-19 ARDS trial expected in early sep’20. Trialcould continue as planned or be stopped early for overwhelming efficacy.

· Approvalof Ryoncil for paediatric SRaGvHD in US by 30^th Sep’20.Launchin US in 4QCY20.

· Phase3 US trial results for Revascor for advanced heart failure is expected during4QCY20 (BPe Oct’20). Final visits for all surviving patients havebeen completed. Ongoing quality review of all data is being completed at thestudy sites. Positive results are expected to drive partnering and dependenton strength of results (especially mortality benefit), could potentiallysupport accelerated approval in US.

· Phase3 US trial results for MPC-06-ID for chronic low back pain is expected during4QCY20 (BPe Oct’20). Final visits for all patients have beencompleted. Ongoing quality review of all data is being completed at the studysites. Following results from the trial, EMA clearance of trial protocol forPhase 3 chronic low back pain trial in Europe (partnered with Grunenthal) isexpected. This is expected to trigger US$20m milestone from Grunenthal.

Our forecasts,Valuation and recommendation are under review. We currently have a Buy (spec)recommendation with price target of $7.30/sh.

Tanushree Jain

Analyst, Healthcare & Biotech