Morning, Blasters
Seems I got the announcement of the 45% readout correct to the day! Also glad my technical indicator of Taco resurfacing
did mean good news and an increase in SP. Reminder to please not engage with trolls (the better we perform the more we get), unless they raise genuine concerns. Saves us a lot of reading - though I generally only read comments with 10 or more "thumbs up". I always think back to when a teenager pulled up next to me at a traffic light with a modified race car, very loud, revving his engine. I thought and told myself, in what was also fast car, "you could... But you wouldn't".**
My only [regret] was not buying more shares. I was actually about to buy some on the drive back from picking my wife up from work at the traffic lights, then she told me to put the phone away. It was 1757 (1557 AEST) so by the time we got home it was too late. Good news is I keep reminding her how much $X she cost us so she's making it up in ways $ never can. Win-win.
Intro:I will pen my thoughts today on ASX100 inclusion (I've noted this being briefly discussed), reiterate my views on valuation / share price, Texas as well as a few words on Novartis and our proposed partnership.
Please note I wrote this piece prior to the news yesterday (Fast Track Designation); however, this does not materially impact my notes.
As always, I've tried to provide a balance view on recent events and I suspect some of my points (particularly around ASX100 inclusion, the stagnant share price as well as timeframes) may fall below certain expectations.
ASX100 Inclusion:There's been some discussion we may be included in the ASX100 soon. This view may have come about due to our increasing share price and having a larger market cap than ~5 of the smallest ASX100 businesses.
Let's discuss some of the items assessed for inclusion.
First, you must be well-known to be successful within the ASX100. Mesoblast is not a household name. You may recall from the Fox interview it almost starts with "a lot of you may not have heard of the company called Mesoblast...". However, the partnership with Novartis certainly helps put us on the map "...but I bet you have heard of a company called Novartis". When a company is not well-known, the Management need to put leather to ground around town. Again, we're fortunate and, if successful, "Mesoblast" will be one of the most used names all over the news and across the world. Tick.
Second, you must have a strong Board. Looking at a small subset of our Board, they have experience and have held senior posts with Pfizer, Johnson & Johnson and Roche. These are the world's three largest pharmaceutical companies. We've partnered with the fourth. Further experience with Procter & Gamble, Oxford BioTherapeutics as well as posts such as Chairman or Chief Surgeon at sought-after institutions. This highly experienced and reputable Board is led by Joseph Swedish. If you have not yet researched Swedish, I recommend you do. All this not to mention the Prof and his life's passion / work. Tick.
Third and ultimately, market cap. While we're ~$2.6b and larger than the ~5 smallest companies currently in the ASX100, note there are 30 companies with larger market capitalisations than Mesoblast who are in the ASX200 and
not in the ASX100. Most of these will beat us to the inclusion. No tick - not for March in any case. June, more likely. We'll need to be approximately $16-19 in share price to have be seriously considered for the ASX100. We'll easily reach this target if we have favourable Phase 3 outcomes.
Recent Stagnant Share PriceI disagree with the majority of individuals here who forecast / expect / hope for an increasing share price over the last couple of months (not taking into account the Novartis partnership and Fast Track Designation).
My view (of course, you are free to disregard) has not changed. I have noted on 6 July, 12 August and 6 October that the share price should be between $3.90-$4.30 prior to a definitive read-out. This is based on a [boring, numerical] risk-reward analysis I had conducted earlier on this year. The spikes we had to $5.70 were, in my view, unwarranted. Where we are now is reasonable (my revised band given the Novartis partnership and Fast Track is up to $5 ahead of definitive readouts). The earlier we can be at peace with the share price trading on low volume and not moving up in the absence of announcements, the better off our days will be.
In between announcements, it's the Instos playing with themselves. The way I visualise this is a game of musical chairs - there is a chair for each of the Instos trading (when the music starts). When the music stops (day ends), they
all have a seat to sit on. In the coming days / weeks, the bursts of music (when they "sell" i.e. shares are not held) are getting shorter - and there won't be sufficient seats when the music stops. This is when you should expect significant share price increases. There will be many Instos willing to pay premiums to get a seat, as well as more conservative investors looking for more certainty before investing.
I had provided my "Conservative" vaccine scenario in my last post (17 Nov):
@dontfollowme 1. had a "chuckle" at the $74 forecast and 2. dismissed the analysis for not providing time frames.
1. The $74 forecast is for
illustrative purposes. It's what you may expect if Mesoblast had 100% market share (as identified in that column). Please note a100% market share, in commercial reality, does not exist. Keeping that in mind, which inputs (anything in blue) do you dispute? If you do not, then yes the share prices indicated are achievable; and
2. There is no reason to provide a
date. Analyses are based on events and milestones, not arbitrary dates. The above analysis assumes a successful ARDS trial, scale-up in manufacturing, establishing distribution channels etc. etc. I have no reason, and lack the skill-set (although I got the 45% readout correct to the day!), to say this will be achieved by 27 August, 2021.
Delays:Please! Stop complaining about delays! Good points have already made as to why the delays are reasonable so I will not repeat them; however, there is one point that has not yet been made.
We have a very strict / exclusive exclusion criteria. We are helping the seriously ill. The ones at the end of the road. If these unfortunate individuals die, regardless of whether such deaths are attributable to MSB's product candidates, our ability to gain approval may be adversely impacted. Ultimately, this means a very adverse result for Mesoblast pushing it years back as well as the share price plummeting.
Hopefully keeping this point in mind, the ones complaining about delays will now encourage as much time to be taken as required. It directly impacts your back pocket.
Texas@Beefa9999 is certainly onto something. Well done. I'll try to add a bit of meat on the bones you have identified.
I was in Texas for 3-4 days earlier this year to meet the parents of my then girlfriend. I manage to make some friends (who doesn't like chatting with a Kiwi bloke?!) who I called in relation to the article of Texas Heart Institute participating in the ARDS COVID-19 trial. I spoke with a representative of the THI who provided me some flavour; however, she was under a NDA so of course could not disclose what was not already publicly disclosed. I think she may have let slip more than she should have.
What I can share is it's the 'same trial' but there are 'different parts of the trial' and 'MSB is a sponsor'. You may recall the NIH is who we thought is the sole sponsor.
Most interestingly, she said the THI 'hopes to start this trial in December'.
Are you excited yet?
In our announcement dated 20 November "Novartis intends to initiate a Phase 3 study in non-COVID-19-related ARDS after the anticipated closing of the license agreement and successful completion and outcome of the
current study" (this is also on the Novartis website, italicised emphasis is mine).
Remember Novartis is interested in
all-cause-ARDS. A much bigger market. One may think the THI is on standby (subject to the 60% readout this month, 'hopes to start this trial in December'), with the "different part" being all-cause ARDS and MSB the sponsor acting in Novartis' interests.
Take from these points above what you will. I will not further speculate on it or provide any
advise to ensure no breach of HC's rules.
Novartis and the Novartis PartnershipNovartis is "reimagining medicine". Reimagining is a bit of a buzz word and I've noticed other ASX-listed businesses using it to describe their strategy also. It's still a word I like, it indicates a company's willingness to change its entire approach i.e. stem cells. Novartis is serious about this. Further, one of its six key focus areas is
respiratory infections.
Novartis is "seeking novel therapies against a range of respiratory diseases" where "hundreds of millions of people" may benefit from treatments. Shows what Novartis expects the TAM is. Note respiratory diseases include chronic obstructive pulmonary diseases. One of the causes is an inflammation of the lungs, causing difficulty in breathing. Do we know a business that specialises in lungs and inflammation?
One of the key benefits of this partnership is now Mesoblast's ability to scale up. Novartis "will provide certain support to enable commercial manufacturing scale-up. Novartis has the option, if exercised, to distribute remestemcel-L for GVHD (outside Japan). It's like going shopping and while you're instore, the bank enters and replaces your credit card in your wallet with a DF Royale card and says "Go ahead. I got you, cutie".
The partnership has "an initial focus on the development of the treatment of ARDS,
including (i.e. not limited to) that associated with COVID-19". COVID is only the current hot word. It isn't the most important. Novartis wants ARDS.
All-cause ARDS. The
real market. The
real dollars. This is why, I believe, there may be clinics who are preparing for all-cause ARDS trials, the 'different parts' of the current trial.
Concluding Remarks:@Wilba32, please put me down for $6.88 (I like 8s) for opening price if
supreme efficacy is found. I assume everyone is playing this on the assumption this news breaks before CHF or CLBP (which I do not think will be the case). I also apologise for using the word "gym" in my last post. On that note, I'm off to the gym. Note I think the $6.88 may be 'opening' price - but it will run faster (and longer) than Gump.
**I apologise as the truth of this story does not fit the narrative I was trying to portray; however, I did. And it felt great. But still, please don't engage the trolls!
Kia kaha (
@taylorstjames - thanks for the translation and shout-out)
AM.
(20min delay)