Stem cell biotech Mesoblast (ASX:MSB) has slashed its quarterly losses as it cut deals in Japan and China, and stepped up from R&D to partnering on its current treatments.

The September quarter loss was more than three times lower than in the same period last year, hitting $US5.5m ($8.1m) from $US19.5m ($28.8m). Revenue was up 46 per cent to $17m.

Mesoblast, which makes cellular medicines for remestemcel-L for conditions such as acute graft versus host disease (GVHD), advanced heart failure and chronic low back pain due to degenerative disc disease, recognised the change came from two areas.

The company struck a $US150m deal with German pain management company Grnenthal in September which paid out $US15m that month, for a partnership to develop and commercialise an allogeneic stem cell therapy used to treat chronic low back caused by degenerative disc disease.

Royalty revenue on sales of TEMCELL in Japan, for GVHD rose to $US1.9m.

The other side of the story is that R&D costs have plunged by 33 per cent to $12.2m as the costs for phase three clinical trials for advanced heart failure drug Revascor and low back pain drug MPC-06-ID begin to wind down.

The last patient visit for a 24-month follow up in the MPC-06-ID trial will be before June next year, and full primary endpoints or the key outcomes a trial wants to deliver are expected by the end of 2019.

Mesoblast is showing the way for small caps like Cynata (ASX:CYN) which are tackling similar diseases using cellular treatments.

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Health & Biotech: Mesoblast still not in the black, but theyre less in the red than last year - Stockhead