Ann: Annual Financial Results Presentation, page-33

4^th September 2019

Mesoblast (MSB) Catalysts abound for MSB in FY20

FY19 underlying Net loss close to in-line

Underlying Net loss of US$98.8m(up 50% y/y) was 2% lower than our forecast loss of US$101m. Revenue wasin-line. Opex was 6% lower driven by lower than expected R&D costs, but wasoffset by higher interest expense and non-cash expense adjustments. Temcell(GvHD product) royalty revenues from Japan grew 37% over pcp to US$5m and4QFY19 was its strongest quarter to date. MSB reduced its operating cash flowsby 23% in FY19 vs. pcp. Cash of US$50.4m provides runway into 1QCY20, withanother US$35m available through existing financing agreements. MSB has alsoentered into a Subscription Commitment Letter for US$15 million, exercisable byend CY19, with its largest institutional shareholder M&G. MSB alsoconfirmed that it remains in advanced negotiations with potential commercialpartners.

Catalysts abound, incl.commercial product launch in US

We see a series of milestoneevents ahead for MSB, achievement of which could drive a significant re-ratingfor the stock. Completion of US BLA filing for Remestemcel-L for steroidrefractory aGvHD in children is expected in 4QCY19, with potential approval in1HCY20. Temcell’s experience in Japan have important read throughs for the USmarket (see our detailed note here). At peak penetration of 50% we forecastin-market sales in US at US$117m (more than 2x BPe for Temcell’s in-marketsales in Japan at peak). MSB will initiate a Phase 3 confirmatory trial forRevascor in LVAD patients with end stage HF (with reduction of mucosal bleedingas primary endpoint) through InCHOIR in 4QCY19. Top line results from Phase 3advanced HF trial with Revascor is due in early CY20 (accrual and validation ofall events for primary endpoint expected by end CY19). Top-line results fromPhase 3 back pain trial is due by mid-CY20.

Retain Buy (spec) andValuation of $4.13

Revisions to our model haveled to a decrease in our Net Loss forecasts for FY20 by 28% and for FY21 by 8%,driven by reduced opex forecasts and recognition of US$10m deferred revenuefrom Tasly in FY20. Near term earning adjustments and rolling forward of ourDCF model, were offset by the dilutive impact of a potential placement toM&G in 4QCY19 and longer term impact of pushing launch timelines forRevascor by a year. Our valuation for MSB remains unchanged at A$4.13/sh.