Ann: Novartis and Mesoblast Remestemcel-L Collaboration, page-145

Hey Team,

Let's break down what this slide actually means:


It's important to know where your risks lie when you invest in any company. In brief, let me summarise some of MSBs here.

1. Sufficient demonstrated efficacy in X indication (This case ARDS)
2. How will they go about distribution once efficacy is demonstrated and generate a revenue stream? Revenue is not generally immediate
3. How can we be sure that the company will receive the income they expect? (It's a pandemic with a massive unmet medical need and incredible economic impact - so we can be pretty damn sure the market is justified, but I've included this for completeness).
4. Do they have sufficient cash runway to do what they want to before they get the major revenue streams?
5. Do they have the infrastructure to actually scale and supply the product to realise the true value of the market?

Let us take a look at what this single slide addresses for those risks.

1. Novartis is a big boi player. Their validation process of science and market are not mediocre and so they have enough of a belief this should work to put their money and time on the line. This gives us further validation that the science and mechanism behind Remestemcel-L in ARDS is sound and would be expected to work in theory.
2. Before they sell a single therapy for ARDS, MSB is able to receive up to US$505. This risk is therefore mitigated as this more than bridges the gap
3. US$750 million in milestone payments and tiered double-digit royalties give us a lot of comfort (if it didn't exist already) that revenue streams from ARDS will be significant.
4. $50 million upfront no questions asks gives MSB that little bit more runway to do what they need to do and have a bit more freedom without the need of capital raises. Also - "Novartis will fully fund global clinical development for all-cause ARDS". This would have been a MASSIVE cost liability for MSB to undertake, now they don't need to worry about it and can just reap the rewards of any positive results down the track. A free global phase III trial? Yes please.
5. Now DO NOT UNDERESTIMATE THIS. A cellular therapy has not been produced on the scale this has the potential to be ever before. MSB's last capital raise was primarily to increase manufacturing and scalability of Remestemcel-L to be able to make a dent in the demands for supply. This is NO LONGER MSB'S RESPONSIBILITY. That cost and responsibility will now be worn by someone else - a massive de-risk.

If we think holistically about what makes a stock successful. Do revenues outweigh expenditures and liabilities? Novartis just provided a lot of revenue potential and removed a huge amount of potential expenditures and liabilities. Big partnership deal.

In my view, this has massively derisked the company - all hinging on positive results which are expected due to preclinical and clinical data. See my old post: https://hotcopper.com.au/threads/msb-trading-2020.5158541/page-18657?post_id=45739722

This is, of course, all my opinion and not investment advice. I am merely expressing comfort over this slide.

Super positive, look forward to February.

Gang gang