Is Mesoblast (MSB) a buy now?
Hi James and the team, Would you please provide an update to your opinion on MSB and what would your buy price & PT?
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Answer
Hi David,
The biotech space is not one we venture into often simply because their earnings are extremely hard to predict and outcomes can often be binary. For subscribers not familiar with Mesoblast, it is a pioneer in cell therapy, bringing the first FDA-approved mesenchymal stromal cell drug to market. It aims to treat severe inflammatory conditions like GVHD, heart failure, and chronic pain using advanced, donor‑derived regenerative medicines.
The stock surged higher last week after reporting strong initial sales of its cell therapy, Ryoncil, its first commercial product since the company was founded two decades ago. The release of sales data for Ryoncil was the first evidence that Mesoblast will be able to generate revenue from the product.
- The company reported $US13.2 million in gross revenue from Ryconcil sales since its launch on March 28 through until June 30.
Importantly, CEO Silviu Itescu said the US government agency that administers the Medicare and Medicaid programs had agreed to cover the cell therapy from July 1, which will broaden the number of patients the expensive treatment will be available to.
MSB has raised more than $1 billion since it listed on the ASX in 2004. As with the shares of many biotech companies, its stock has been on a roller-coaster over the past two decades but finally the rubbers hitting the road. MSB is also working to commercialise its second and third products, Rexlemestrocel to treat chronic lower back pain and Revascor to treat heart diseases, which it claims may have the potential to earn billions of dollars.
- As far as biotech’s go this $3.3bn business now looks to have turned the corner. If investing, we would have to utilise some technicals to control the risk/reward – we like MSB around $2.50, with stops under $1.90 with a break of its 2025 high the first target. That said, we are unlikely to own it.
