Mesoblast Limited

MSB Details

Secured a New US$90 million Facility: Mesoblast Limited (ASX: MSB) is involved in the development of innovative cell-based medicines and seeks to offer treatments for cardiovascular illness, inflammatory ailments, and back pain. On 22 November 2021, MSB notified that it has refinanced its existing senior debt facility with a new US$90 million five-year facility provided by funds managed by Oaktree Capital Management, L.P. MSB has already drawn the first tranche of US$60 million and is planning to repay the outstanding balance of the existing senior debt facility with Hercules Capital, Inc.

September Quarter 2021 Result Highlights:

• Revenue Update: For the quarter ending 30 September 2021, the company reported revenues from TEMCELL® HS Inj. royalties in Japan of US$2.4 million, up 90% on pcp.
• Operating Cash Outflow Update: Net operating cash outflow for the September quarter stood at US$19.6 million. 50% of the cash outflow was used for manufacturing scale-up, lifecycle management of the remestemcel-L platform and for regulatory approvals.
• Collaboration Agreement with Novartis: Over the quarter, MSB entered into a license and collaboration agreement with Novartis for the development, manufacture, and commercialization of remestemcel-L.

FY21 Result Highlights:

• Decline in Revenue: For FY21, the company reported total revenues of US$7.5 million, as compared to US$32.2 million reported in the year-ago period.
• Rise in Losses: Loss after tax for the period came in at US$98.8 million, as compared to a loss of US$77.9 million reported in the year-ago period.

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

Key Risks:

• Foreign Currency Risk: A substantial portion of the company’s operating expenses are denominated in U.S. dollars and its main currency requirements are U.S. dollars, Australian dollars, and Singapore dollars, exposing the company to the risks related to the fluctuations in the foreign currency exchange rates.
• Unfavorable Global Economic Conditions: The company is exposed to the risk related to the unfavorable global economic or political conditions, which could adversely affect the company’s business, financial condition, or results of its operations.

Outlook: In December 2021 quarter, MSB expects to receive feedback from the FDA on the potential pathways to US regulatory approval for its rexlemestrocel-L technology platform. Looking ahead, the company is focused on the commencement of the next Phase 3 trial for acute respiratory distress syndrome (ARDS) associated with COVID-19 pandemic. 

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

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. S

Stock Recommendation: Over the last three months, the stock has been corrected by 13.17% and is trading lower than the average 52-weeks’ price level band of $1.5 - $5.05. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). The company can trade at a slight discount to its peers, considering the uncertainty surrounding the COVID-19 pandemic and associated key risks with the business. For the valuation purpose, peers such as Telix Pharmaceuticals Ltd (ASX: TLX), Oncosil Medical Ltd (ASX: OSL), Paradigm Biopharmaceuticals Ltd (ASX: PAR), etc., have been considered. Considering the company’s rise in revenues from TEMCELL® HS Inj. Royalties during September quarter, rising cash balance, modest outlook, valuation, and key associated risks, we give a “Speculative Buy” rating on the stock at the closing price of $1.68, down by ~2.326% as on 22 November 2021.

MSB Daily Technical Chart, Data Source: REFINITIV

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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