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Why did Mesoblast and Cover-More sink?

Jun 14, 2016 | Team Kalkine
Why did Mesoblast and Cover-More sink?

Mesoblast limited



MSB Details
  • Teva withdrew partnerships with the group: Mesoblast limited (ASX: MSB) plunged over 42% on June 14, 2016 as Teva reported that they would withdraw their partnership with the group and quit their financial consideration for the group’s potential blockbuster candidate in cardiovascular portfolio-MPC-150-IM for heart failure. MSB’s US partner, Teva gave up all rights to its heart failure treatment and the decision seems to raise a concern regarding a tranche of about 16% of Mesoblast’s capital that Teva owns. On the other hand, the group regained worldwide rights to cardiovascular field for its cell therapy platform while an Independent Data Monitoring Committee recommended their ongoing 600-patient heart failure trial without modification after clinical data review of first 175 patients. MSB intends to finish the Phase 3 heart failure trial and accordingly finished 40% recruitments in eighteen months. MSB got FDA approval to use its heart failure program for second catheter delivery system which would lead to a faster recruitment and enable a commercial distribution channel. The group also eyes for a possible early revenue opportunity via Japan conditional approval.
  • Recommendation: We give a “Hold” recommendation on the stock at the current price of $1.11
 
Cover-More Group Ltd



CVO Details
  • Global initiatives to maintain growth track: Cover-More Group Ltd (ASX: CVO) stock fell over 6.8% on June 14, 2016 even though there is no specific update from the group. However, the possible impact on the stock is due to the current uncertainty in the market over Brexit outcome and FOMC meeting. On the other hand, the group delivered a decent third quarter update, with group’s gross sales rising 4.8% with Insurance Australia increasing by 6%. Asia gross sales improved by 12.1% while India gross sales surged over 31.3% as compared to the same period of last year. Medical Assistance business is also returning to growth and rose over 5.1% against prior corresponding period (pcp) driven by employee assistance business penetration from recent contract wins. The group’s discussion with GLA were on track and estimates a decrease in volatility to be in effect from July 2016 from the pricing mechanism. The group started trading in US market and its initial contract would generate over A$30 million of gross sales. CVO already corrected over 31.8% during this year to date (as of June 10, 2016) opening an entry opportunity to bargain investors.
  • Recommendation: We give a “Buy” rating on the dividend yield stock at the current price of $1.38
 

CVO strategy (Source: Company Reports)
 
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