It seems 2021 continues to be a tough year for the ever-volatile Mesoblast Ltd [ASX:MSB]
Thankfully though, today has brought some relief to shareholders. The MSB share price is up 7.38% at time of writing, bucking a fortnight of downward share price momentum.
That’s all thanks to some good news from the company today.
Not only releasing some great trial data, but also a better quarterly update. Signs that perhaps improvement is being made when it comes to their operational capabilities.
Let’s take a closer look…
Reduced mortality rates and reduced spending
First up, let’s talk about Mesoblast’s stem cell therapy (remestemcel-L) for COVID-19.
As management reports, the 60-day results for their randomised trial is in. Showcasing that their treatment has the ability to produce better mortality rates for patients under the age of 65. With a 46% reduction in the mortality rate after the 60-day period.
As CEO Silviu Itescu notes, this result could potentially provide a valuable solution for a vital cohort of victims:
‘Reduction in mortality in mechanically ventilated patients under 65 years old remains a critical unmet need since as many as 72% of currently hospitalized patients across the US with COVID-19 are in the age category.
‘This is similar to other causes of viral ARDS such as influenza where 70-80% of patients in intensive care units are under 65. The reduction in mortality seen with remestemcel-L in this age group highlights the potential to make a meaningful difference in the treatment of diseases of excessive inflammation.’
So with any luck, Mesoblast may be able to quickly turn this stem cell solution into a money maker.
However, whether this will be possible at all is up in the air. Because as Mesoblast note, these results are part of a trial that was effectively called off before it could be concluded. Meaning that this data, while positive, may not secure them pathway to commercialisation they desire.
At the very least though, the initial collaboration agreement between Mesoblast and Novartis is still intact. Meaning there is a chance, even if it is slight, that some good can come of these results.
And beyond COVID-19, the potential for an ARDS solution could present a long-term market.
Moving onto the quarterly results now, and it is also a mixed bag.
The good news is that Mesoblast’s costs were down slightly for the quarter. Totaling US$25.8 million, which is also a slight improvement over their year-to-date average of US$28.65 million.
On top of that, they have a very healthy cash balance of US$158.2 million. Which was largely thanks to the US$110 million lifeline it secured at the beginning of March.
As for revenues though, well it wasn’t a great quarter.
Royalties from TEMCELL sales totaled just US$1.9 million, falling slightly from the US$2 million quarter-on-quarter. And while that helped lift year-to-date receipts to US$4.1 million, it’s clear that Mesoblast is in dire need of new revenue streams.
And for that reason, investors will certainly be looking for good news in future.
What’s next for Mesoblast share price?
Looking ahead, it’s clear that Mesoblast aren’t ready to give up on remestemcell-L’s potential for treating COVID-19 patients. Whether regulators or commercial partners will see it that way though, is another matter entirely.
So, it is hard to gauge whether these ambitions and positive results will actually lead anywhere.
Clearly though, at least from today’s update, there is some potential in this stem cell treatment.
This is simply the nature of biotechnology stocks though. Most of which are subject to extreme volatility due to the largely zero-sum nature of clinical trials.
That’s why it is a sector that is only worth investing in if you’re willing to put in the hard work. Spending time ensuring that your due diligence is airtight.
But, for small-cap stocks that are easier to evaluate, and perhaps even a little overlooked, we can name a few. In fact, I already have in our latest report. Earmarking four relatively undervalued picks that are worth checking out today.
For more info, and the names of those four stocks, click here.
For Money Morning