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Key points
- Mesoblast shares finished higher today after the release of the company's quarterly update
- The company saw a 7% gain in royalty income from the same time last year
- It also secured a new debt facility of US$90 million from Oaktree Capital
- Mesoblast is also meeting with the US FDA to progress approval of its lead drug candidates
Shares in regenerative medicine company Mesoblast Limited (ASX: MSB) shot 3.21% higher today. They finished the session at $1.125 apiece after peaking at $1.15 earlier in the day.
The Mesoblast share price caught bids today following the release of the company's operational and financial activity report for the second quarter ended 31 December 2021.
Mesoblast share price surges on royalty gain, FDA clearance
The company outlined several investment highlights for the quarter, including:
- Revenues were US$3.5 million – including US$2.3 million from TEMCELL HS royalties on sales for SR-aGvHD in Japan
- All up, royalties were 7% higher year on year
- Net cash usage of US$19.8 million in the quarter, a year on year reduction of 38%
- Refinancing of senior secured debt – a new US$90 million 5-year facility provided by Oaktree Capital Management
- Cash on hand at the end of the quarter was US$94.8 million.
What else happened this quarter for Mesoblast?
Most of the operational updates from Mesoblast this quarter were around the potential resubmission of the Biologics License Application (BLA) for the company's remestemcel-L therapy.
The BLA submission will be used to investigate remestemcel-L in the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD). This is a potentially life-threatening complication of an allogeneic bone marrow transplant.
Mesoblast says it's also held a meeting with the US Food and Drug Administration (FDA)'s Office of Tissues and Advanced Therapies (OTAT) division to address items identified in a complete response letter (CRL) for the compound.
A CRL is issued by the FDA when it asks for more information on new drug applications. Its queries can cover the compounds themselves to the manufacturing facility where the drugs are set to be made.
Mesobolast received its CRL regarding the advancement of remestemcel-L in October of 2020. Back then, the "the FDA recommended that Mesoblast conduct at least one additional randomized, controlled study in adults and/or children to provide further evidence of the effectiveness of remestemcel-L for SR-aGVHD".
In essence, Mesoblast must establish the relevance of the compound's immunomodulatory activity to a set of clinical outcomes to move forward, according to the company's report today.
Previous studies on the drug, published in the Journal of Bone Marrow Transplantation, showed remestemcel-L treatment was associated with a "64% survival in children with biomarker levels predictive for highest mortality [of SR-aGVHD] compared with only 10% survival in controls treated with other available therapies".
Aside from that, the FDA also confirmed that two primary outcome measures that Mesoblast has chosen for its upcoming studies are "clinically meaningful endpoint[s]" to observe the efficacy of rexlemestrocel-L.
Mesoblast will also conduct successive studies on the drug for treating lumbar disc pain and in reducing cardiovascular mortality.
What's next for Mesoblast?
The company didn't provide any specific sales or earnings guidance for final quarters of FY22.
However, it noted it has completed a refinancing of its senior secured debt facility recently. It has now secured a new US$90 million facility that will mature in 5 years, provided by fund manager Oaktree Capital Management, L.P.
It is also preparing to file a formal submission to the FDA of the "detailed analyses of outcomes in high-risk [heart failure and low ejection fraction] HFrEF patients with diabetes and/or myocardial ischemia" to identify a pathway to approval for rexlemestrocel-L.
With respect to its dealings with the FDA, Mesoblast will provide updated data and "address all other outstanding items as required for resubmission of the BLA".
Mesoblast share price snapshot
In the last 12 months, the Mesoblast share price has slipped almost 53% into the red. This year to date, it is down 20%.
Over the previous month of trading, the company's shares are 18% lower.
The chart below show's Mesoblast's (blue) 12 month underperformance relative to the S&P/ASX Small Ordinaries index (ASX: XSO) and the S&P/ASX 200 Index (ASX: XJO).
