I think you give them too much credit. MSB trades like an out of the money option, with the premium determined by the likelihood and closeness of an announcement and the future profits that announcement may generate for the company and when those profits may accrue.
If the chance of an announcement is close to the current date and the future profit is an imminent partnering deal with a big upfront payment, the share price leaps - just like the price of an option leaps in the same circumstances. That is why the percentage gains are so dramatic when good announcements are made.
If the likelihood of an announcement is some months away and it is only an interim read-out of data from a trial, with no change to the likelihood of short term monetary value and a long time until approval and commercialisation, then the option premium slowly erodes and takes the stock back to a base value based on the amount someone may pay for the intellectual capital, the suite of patents and the sunk value of the trial results and data derived which meets FDA requirements depending on the phase of the trial.
The debate between the shorters and the believers is usually heated as they believe they are influencing the value of this option - but they aren't! Firstly because there is very little content in most of the posts, secondly because most professional investors don't read Hot Copper, thirdly because they don't influence the timing or likelihood of announcements and the timing or likelihood of the partnering deals and long term profits of the company and how quickly these profits are achieved.
At present we are in a period where there is some hope, but no great expectation, of an imminent partnering deal and no expectation of an imminent trial result which will greatly impact the view of future profits of the company - so the share price is gently deflating like the premium of a call option as time passes.
When the expectation of a partnering deal was higher back in February, the share price went over $2 and if a deal were done now it would probably go higher - depending on $ value of the deal and the scope of indications partnered. That's where the opportunity comes in - options are mispriced if there is a big skew in the payoff. In the case of MSB, the skew comes from the likelihood that the upside is far greater than the downside. The downside is the "strike price"or the base value of the company - which should be significantly higher than the price Takeda bid for TiGenix (you work it out for yourselves). The upside is the various "discounted" valuations from major insto investors, brokers and investment banks - and those valuations have the potential to rise significantly over time as the company is derisked and we are closer to trial results for some of the phase 2 indications (some of which are discounted by 80% in the broker valuations).
The 100 day readout on aGVHD is due soon (100 days is up, but there will be proper analysis done and sometimes these things are released at conferences etc) and it will probably be positive, and may even be better than the dramatic 28 day readout - but the primary endpoint was the 28 day data and so the 100 day data shouldn't affect the share price much unless it makes a partnering deal more likely. The company has plenty of runway before needing more capital next year - and that capital will probably be debt, not equity (from the SI comments at the Vatican conference) - of course being able to raise debt capital requires convincing the lenders that the company has long term value and the ability to repay! The company is using this runway to solidify its trial results and to try to strike the best deal possible - so even if it delays the timing of any deal, it increases the $ value by more than the cost of the delay- which increases the value of our option! The company has been upfront about this in its cashflow statements, conference calls etc and there is capital being invested in this space by big pharmas and biotechs - and MSB has a product which has met its primary endpoint set by the FDA in a phase 3 trial - so a partnership is not a pipedream.
None of this can be influenced by chatter on HotCopper - ignore anything except those things which will concretely change the date and size of future cashflows. Gratuitous opinions, feelings, and arguing over historical events with other companies don't change the valuation characteristics of MSB. As I've said before, there is much more upside than downside in this stock, but the downside risk means it doesn't suit everyone's risk profile - that's partly why there's a debate I suppose - however, for those who think they will have plenty of time to get in (either long or covering a short) - think again - this thing trades like a leveraged out of the money option, and if they do a partnering deal with a big upfront payment, you won't have an opportunity to get in for anything like the current share price.
MSB Price at posting:
$1.47 Sentiment: Buy Disclosure: Held
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