Unfortunately for MSB, the latest announcement was unable to provide the much needed boost to the share price. After yesterday's jump, today it has closed down 6.4%, wiping most of yesterday's gain.
Maybe people are realising that the result of this trial had been widely known for more than a year now and so far no partner has come knocking on MSB's door. Anyone has the right to make his/her own judgement on this. Personally, I'm not optimistic that a partner will turn up to take this program to Phase 3 trial.
In financial year 2016, MSB took an impairment charge of US$61.9 million relating to MPC-MICRO-IO (Phase 2A) and MPC-CBE (Phase 3). MSB had no choice but to suspend these tier-2 products because it had to preserve valuable cash for its Tier-1 products.
People need to prepare for the possibility of further impairments of other Tier-2 products or even some of the Tier-1 products.
Although this accounting charge is non-cash in nature and doesn't affect MSB's current liquidity, its implication is still quite serious. It basically means that the money that MSB has put into these programs over the past few years is unlikely to generate any kind of returns in the foreseeable future.
After this impairment, MSB still carries about $427 million worth of "In-process R&D", with the bulk of it being in Cardiovascular products.
This means that the CHF product candidate is very crucial to MSB's survival. If the upcoming result of the Interim Analysis CHF Phase 3 trial in Q1-2017 is anything less than a definite positive, the market might not like it and MSB as a company might struggle to continue as a going concern.
When Teva's exit from CHF program was announced on 1 July 2016, some holders applauded this development and these are some of the reasons put forward:
- Teva was never compatible and now MSB can find a more suitable partner.
- Teva had funded the bulk of the program so far and now MSB can retain 100% of the right without having to pay Teva.
- Now with Teva gone, big pharmas will be fighting with each other to become MSB's new partner.
It's been more than 3 months now, and there is still no announcement on a new partner, instead we get old announcements being rehashed or no-news being announced (Bill Burns after becoming a non-exec director for 2.5 years, will now start working to secure a partner).
As of June 2016, MSB only managed to recruit 40% of the already reduced trial size of 600 patients. It still needs to spend a lot of money to see this trial to completion.
Some might think that shorters will not open new positions at these low prices. However, as time goes by and no new partner is announced, MSB's financial situation actually gets more and more dire. Under this circumstances, starting a short trade at $1.17 might actually be safer (to the shorters) and has higher probability of being profitable than when MSB still had $200 million in the bank and the share price was still trading at $4.
These are some of the things that people need to seriously consider when deciding whether or not to continue holding or to top up at these seemingly low prices.
MSB Price at posting:
$1.17 Sentiment: Sell Disclosure: Not Held
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