Mesoblast Limited

MSB Details

REMESTEMCEL-L improves survival rate: Mesoblast Limited (ASX: MSB) is a biotechnology company that develops and commercialises allogeneic cellular medicines in the US, Australia, Singapore, the UK, and Switzerland. Recently, the company has announced the latest results of the highest mortality of 64% survival when treated with remestemcel-L for children with steroid-refractory acute graft versus host disease (SRaGVHD).

FY21 Financial highlights-

• The company has posted revenue’s US$7.45 million in FY21, compared to US$32.15 million on a pcp basis.
• It has recorded a total current asset of US$148.22 million as of 30 June 2021, an increase from US$136.54 as of 30 June 2020.
• The company has reported an increase in net loss after tax of US$98.81 million against US$77.94 million in FY20, impacted due to the rise in operational cost.
• The cash position of the company stood at US$136.9 million as of 30 June 2021 vs US$129.32 million as of 30 June 2020.

Cash and Cash Equivalent Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Financial Risk- The company is exposed to financial risk due to increased operational costs such as manufacturing, management, and administrative expenses.
• Commercialisation Risk- The company requires regulatory and marketing approval to launch and commercialise the product; any delays might impact its operations.

Outlook:

• The management expects to recognise US$21.9 million of remestemcel-L pre-launch inventory post-FDA approval.
• The company expects to receive feedback from the FDA and progress towards US regulatory approval in patients with chronic low back pain due to degenerative disc disease.
• The company continues to maintain collaboration and strategic partnerships with third parties to develop and commercialise the product, which might drive growth, going forward.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MSB is currently trading below its average 52-weeks' levels of $1.500-$5.050. The stock of MSB gave a negative return of ~4.98% in the past one month and a negative return of ~32.21% in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales multiple, considering the increase in marketing expenses, rise in current borrowings etc. For the purpose of valuation, peers such as AVITA Medical Inc (ASX: AVH), Clinuvel Pharmaceuticals Ltd (ASX: CUV), and others have been considered. Considering the current trading levels, indicative upside in valuation, strategic collaboration, increase in reserves, decent cash balance, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.605, as on 27 October 2021, 11:45 AM (GMT+10), Sydney, Eastern Australia.

MSB Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:  

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.