Mesoblast Limited

 

MSB Details
 
MSB Expands EAP in the U.S: Mesoblast Limited (ASX: MSB) is a biotechnology company in the area of adult stem cell technology. As on 6 July 2020, the market capitalization of the company stood at ~$1.97 billion. Recently, the company stated that it has taken initiatives to expand access protocol (EAP) in the United States for the utilisation of allogeneic mesenchymal stem cell (MSC) product candidate remestemcel-L, in order to treat COVID-19 infected children with cardiovascular and other problems of the multisystem inflammatory syndrome (MIS-C).
 
Phase 2 Trial Results: MSB recently stated that patients with chronic obstructive pulmonary disease (COPD) and a higher state of inflammation have been dosed with Mesoblast’s mesenchymal stem cell (MSC) product remestemcel-L and resulted in better respiratory and functional outcomes.
 
Key Operational Highlights for the Nine Months Ended March 31, 2020: During the period, the company reported revenues of US$31.5 million, soaring 113% on the pcp. The company witnessed a 81% growth in royalty revenues and a 127% increase in milestone revenues. In the same time span, the company reported cash in hand of US$60.1 million. MSB continued to prepare for the potential approval and commercial launch of RYONCIL in the US. The company remains on track for a Phase 3 randomized controlled trial in the United States to provide data from the utilisation of remestemcel-L in COVID-19 infected patients.
 
 

Key Highlights (Source: Company Reports)
 
Growth Impetus: The company’s businesses including wholesale, distribution and retail healthcare activities are performing a vital role in ensuring a stable and continuous supply of healthcare, medical and pharma goods, as they are classified as essential services. This apart, EBO is taking necessary measures to ensure the health & safety of its employees & clients, during this crisis.
 
Key Risks: On the flip side, stiff competition in the market and changes in government policies remains a headwind. Further, pricing pressure in the competitive Australian market and lower investment in generating working capital requirement adds to the woes.
 
Stock Recommendation: As per ASX, the stock of MSB gave a return of 57.48% in the last six months and a return of 150.56% in the past three months. The stock is currently trading above the average of its 52-week trading range of $1.020 and $4.45. During Dec’20, debt to equity multiple of the company stood at 0.19x, as compared to the industry median of 0.24x. On the valuation front, the stock is trading at a P/BV multiple of 2.5x as compared to the industry average (Healthcare) of 4.0x on TTM (Trailing Twelve Months) basis. Considering the above factors and current trading levels, we recommend a ‘Hold’ rating on the stock at the current market price of $3.75, up by 11.276% on 6 July 2020 owing  to the news related to the initiatives taken to expand access protocol (EAP) in the United States for compassionate use of remestemcel-L in the treatment of COVID-19 infected children. 


MSB Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 
 
 

Neurotech International Limited 
 
 

NTI Details
 
NTI Secures Global Rights to Treat Neurological Disorder: NTI Neurotech International Limited (ASX: NTI) is involved in the development of wearable neurotechnology devices to assist with neurological conditions like autism. On  3 July 2020, the company stated that it has obtained an option to buy a global licence to utilise proprietary cannabis strains from Dolce Cann Global Pty Ltd (‘Dolce’) for medicinal use in curing neurological ailments, which includes autism, epilepsy and ADHD.
 
Quarterly Update for the Period Ended 31 March 2020: The company recently updated the market with the quarterly report for the period ended 31 March 2020. During the quarter, NTI continued to develop the commercialisation of Mente, engaging with partners on territory development as well as the necessary regulatory approvals. During the quarter, Mente was added to the UK’s National Autistic Society’s ‘Autism Services Directory. Cash balance of the company as at 31 March 2020 stood at around $33K. Net cash used in operating activities for the quarter, came in at $154K,after making major payments for staff costs and administration and corporate costs of $71K and $98K, respectively.
 

Cash Flow Statement (Source: Company Reports)
 
Future Growth Prospects: Neurotech remains committed to the development of Mente. The Board of the company is reviewing the options for it to continue the development of Mente, including accessing enough funding in a suitably attractive form to shareholders to finance the continued development.
 
Key Risks: The company’s financial instruments comprise mainly of receivables, payables, bank loans and overdrafts, finance leases, loans from related parties, cash, and short-term deposits. The main risks PBP is exposed to through its financial instruments are foreign currency risk, interest rate risk, liquidity risk and credit risk. The company has a debt-loaded balance sheet. As of December 2019, total debt was ~$0.35 million while cash and cash equivalents were ~$0.19 million
 
Stock Recommendation: As per ASX, the stock of NTI gave a return of 116.67% in the last one month and a return of 225% in the past three months. The stock is currently trading below the average of its 52-week trading range of $0.003 and $0.03. The key consideration of the company is to maximise the value of its assets, and specifically its Mente assets for the benefit of its shareholders. NTI assumed a new strategy for US market entry with a focus on delivering Mente using partnerships with certified clinicians. On the valuation front, the stock is trading at an EV/Sales multiple of 24.4x as compared to the industry average (Healthcare Equipment & Supplies) of 22.3x on TTM (Trailing Twelve Months) basis. Thus, considering the current trading levels, price movement in the recent past, business developments, and valuation on TTM basis, we have a watch stance on the stock at the current market price of $0.011 per share, down 15.385% on 6 July 2020.

 
NTI Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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