Mesoblast (ASX:MSB) achieves ASX 200 listing

The Market Herald - June 12

Mesoblast is now joining the big players in the Australian Securities Exchange (ASX). The ASX 200 is comprised of 200 of the largest companies on the ASX and helps measure Australia's equity performance.

The company will join the list on Monday, June 22. But what has it accomplished in the lead up to the listing?

Share price rollercoaster

Before COVID-19, Mesoblast (MSB) started the year off at $3 per share on January 27. Then the virus hit and the company dropped to as low as $1.19 per share on March 19.

However, the company shot up towards the end of March and ended today on $3.60 per share.

The spike means Mesoblast's share price is higher than what it was pre-COVID-19, but why is this?

One of the reasons for the increase could be the announcement of MSB's coronavirus research.

COVID-19 treatment trial

The medtech developer achieved approval to use its cell therapy treatment, the remestemcel-L treatment, on COVID-19 ventilator-dependent patients.

The company saw an 83 per cent survival rate during the treatment of 12 people in a New York hospital.

Following these results, a 300-patient phase three trial with randomised patients who have moderate to severe acute respiratory distress syndrome (ARDS) from COVID-19 were chosen from hospitals across North America.

Analysis of the results is planned and could result in ending the trial early for efficacy or futility. The first interim analysis will take place when 30 per cent of patients reach the primary endpoint.

The complete trial data will take three to four months, meaning Mesoblast could have the results by the end of the year.

Last month, the company raised US$90 million (roughly A$138 million) to manufacture remestemcel-L treatment for COVID-19 patients with respiratory failure.

Lung disease treatment

Remestemcel-L treatment is also being used to help people suffering from lung disease.

Earlier this month, Mesoblast revealed encouraging results from its phase two trial. The company was testing the treatment on patients with chronic obstructive pulmonary disease (COPD).

The trial showed that remestemcel-L was able to improve respiratory and functional outcomes for patients. Patients with the highest levels of C-reactive protein (CRP) were able to walk 55 metres further in a six-minute walk test when compared to those treated with the placebo.

Mesoblast Chief Executive Dr Silviu Itescu said this past quarter has underscored the value of the lead product candidate remestemcel-L.

The future

Mesoblast believes it is in a strong financial position to enter the 2021 financial year.

In May, the company has reported a revenue of US$31.5 million (approximately A$47 million), which is a 113 per cent increase over this time last year. This has left the company with US$60 million (around A$87.33 million) cash in hand.

In September, the company is expecting to receive approval for its Ryoncil treatment, and if this is granted it will launch the drug in the fourth quarter of 2020.

Outlook

The company has told investors it won't fully understand the impact of the virus on its financials until the endpoint becomes clearer.

If the company is successful, the next hurdle will be the overcoming limited manufacturing capabilities, which is why Mesoblast is getting prepared early and explains the recent $138 million capital raise. It is also expecting further funding milestone payments to put more cash in the bank.

However, Mesoblast has warned that the research is expensive and there are risks for investors.

Due to the current economy and the uncertainty around COVID-19, any form of investment can pose a sizable risk. Nevertheless, Mesoblast should be on the watchlist for those looking to add a healthcare stock to their portfolio.