Mesoblast warns it needs more cash as losses deepen, shares tumble

Mesoblast shares have tumbled nearly 14 per cent as the biotech company warned its losses would increase for the foreseeable future.

Mesoblast CEO Silviu Itescu is holding onto hope the US Food and Drug Administration will grant its marquee drug emergency use authorisation. Picture: Aaron Francis/The Australian

Stem cell-focused biotech Mesoblast has warned of more investor pain, forecasting increasing operating losses for the “foreseeable future” after its marquee treatment has so far failed to clear the powerful US Food and Drug Administration’s high hurdles.

The company is holding onto the hope that the FDA will approve its treatment, remestemcel-L for use on ventilator-dependent Covid-19 patients after its full-year loss deepened more than 26 per cent.

But it said more trials were needed to satisfy the FDA, and it needed more cash to meet its goals, which it may be forced to abandon if it cannot raise the required capital.

Investors were quick to dump stock in the company, with its shares diving nearly 14 per cent to $1.71 Tuesday afternoon - extending losses in the past year to 68 per cent - in sign their patience is wearing thin.

A year ago, Mesoblast’s rememstemcel-L look set to propel the company to riches after showing promise on ventilator-dependent Covid-19 patients. The world was sweating on effective coronavirus treatments for the worst affected patients in the pandemic and Mesoblast appeared to be in the box seat with a prime solution.

But regulator hurdles from the FDA scuttled the company’s plans - at least for the short-term - fueling a 77 per cent collapse in full-year revenue to $US7.46m ($A10.22m). Meanwhile its loss blew out from $US77.8m to $US98.8m.

Mesoblast has now warned that it needs “substantial additional financing to achieve our goals”.

“Failure to obtain this necessary capital or establish and maintain strategic partnerships to provide funding support for our development programs could force us to delay, limit, reduce or terminate our product development or commercialisation efforts,” Mesoblast said in a statement to the ASX.

“Our operations have consumed substantial amounts of cash since inception. As of June 30, 2021, our cash and cash equivalents were $US136.9m. We expect to continue to incur significant expenses and increase our cumulative operating losses for the foreseeable future in connection with our planned research, development and product commercialisation efforts.”

Mesoblast chief executive Silviu Itescu attempted to soothe investors, declaring that the “our most recent meeting with the FDA has provided clarity on the pathway to emergency use authorisation” for treatment on Covid-19 patients.

“During this calendar year we made significant progress in both regulatory and clinical outcomes for our lead product candidate, remestemcel-L, after experiencing a disappointing set-back last year,” Dr Itescu said.

“Mesoblast met with the United States Food and Drug Administration in regard to potential emergency use authorisation (EUA) for remestemcel-L in the treatment of ventilator-dependent patients with moderate or severe acute respiratory distress syndrome (ARDS) due to Covid-19.

“The FDA advised Mesoblast that an additional clinical study in Covid ARDS would be required which, if statistically positive, could provide a dataset in conjunction with the recently completed 222 patient clinical study that might be sufficient to support an EUA.

“FDA indicated that potency assays must be established and agreed prior to commencement of the proposed phase three clinical trial. Mesoblast intends to meet with FDA’s Office of Tissue and Advanced Therapies in Q4 CY21 to address potency assays for remestemcel-L in relation to SR-aGvHD, attributes which we believe to be also relevant to Covid ARDS.”