DYOR. Not advice.
No specific buy or sell recommendation or advice is given. Analysis is highly-speculative.
I've created some scenarios that speculate on the potential for COVID-19 Acute Respiratory Distress Syndrome (ARDS) and longer-term for treatment of ARDS.
Estimates are for US-only and hence
exclude rest of world ...
General Assumptions- No further dilution. Assumption is that governments would provide cash in the form of a short-term loan to help fund the ramp-up activities for Mesoblast.
- Currently fully-diluted share issue is ~ 568M shares.
- Industry average Net Profit Margin 13.8% ( source https://pubmed.ncbi.nlm.nih.gov/32125401/ ).
- Industry average P/E 22.8 ( source http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html ).
- Current exchange rate $0.65
- Bell Potter in their estimate arrived at pricing of USD $75,000 for an ARDS treatment. Essentially fewer doses than for treating aGVHD.
- Each MESO American Depository Share (ADS) on the NASDAQ is for 5 MSB shares. I used the current exchange rate for the conversion ( does not allow for arbitrage ).
I used industry-average Net Profit Margin and P/E as I wanted the scenarios to be conservative.
COVID-19 ARDS Scenarios (US-Only)I had previously looked at a scenario with a 30% revenue share but wanted to explore scenarios where Mesoblast gets a larger share of the revenue.
I used the following approach and assumptions for the revenue model:
- Bell Potter forecast that 67,000 patients with COVID-19 ARDS would be treated.
- Bell Potter assumed 30% share of revenue, however I wanted to model a range of scenarios from 25% to 100% of revenue ( after-all it is Mesoblast’s technology and they have the patents, so this puts them in a strong commercial position ).
The
figures are for US only and it is important to remember that even if there are less than 67,000 cases treated in the US, if successful the treatment will be rolled out elsewhere (Europe, Asia, etc, etc).
View attachment 2150974There's also the potential that the treatment is supplied under compassionate use ( perhaps up to a capped number of cases ) or a government-directed production initiative is used to get through the worst of the COVID-19 pandemic ( perhaps 6-9 months ).
Of the two scenarios though the following has the much, much greater potential ...
Non-COVID ARDS Scenarios (US-Only)In this scenario after treatment of COVID-19, Real World Evidence (RWE) [1] from treatment of COVID-19 ARDS is used to fast-track the treatment for Acute Lung Injury, perhaps with support of further trials.
The estimated annual incidence of Acute Lung Injury in the US is 190,600 cases [2].
[1]
https://www.fda.gov/media/120060/download[2]
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6880255/I used the following approach and assumptions for the revenue model:
- Scenarios from 50% to 80% of ARDS cases treated with Mesoblast’s MSCs. It is an acute life-threatening condition with mortality of 38.5%. It’s not just about saving lives though. It’s also about providing a treatment likely to help mitigate long-term damage to the lungs.
- Mesoblast partnering for the US but taking a 90% share of the revenue. It’s the longer-term opportunity for Mesoblast and it is their technology and patents and hence they have a strong commercial position.
View attachment 2150983
(20min delay)
