Mesoblast stem cell R&D spend triples

Mesoblast (ASX:MSB) has reinvested a sizeable chunk of the revenues from its licensing deal with Cephalon into boosting research and development efforts for its adult stem cell technology, bumping up total expenses by more than $58 million in FY12.

The company reported expenses of $87 million, up from $28.6 million in FY11. Manufacturing costs rose due to increased production to support clinical trials, and research and development spend more than tripled to $36.9 million.

Mesoblast reported a loss before tax for the year of $48.7 million, which compares to a pre-tax profit of $92.4 million in FY11.

However, Mesoblast is in a strong position to absorb the rising costs; it ended the financial year with total funds of $206.7 million.

Total revenue for FY12 also nearly doubled to $38.1 million, as the company booked a full year of revenue from the US$130 million upfront payment received in its game-changing licensing and development deal with US pharmaceutical giant Cephalon.

During the financial year, Mesoblast completed 18-month follow up for a phase II trial of Revascor, a potential OTC stem cell preventative treatment for heart failure, commenced another phase II heart failure trial with partner Teva and laid the regulatory groundwork for a phase III trial.

The company also commenced a phase II trial for the treatment of Type 2 diabetes, after achieving strong results in pre-clinical trials.

Mesoblast (ASX:MSB) shares were trading level at $6.44 as of 4:30pm on Wednesday.