Valuations of Stem Cell Companies1. Century Therapeutics (Nasdaq: IPSC) just listed in the past few days and the market cap is now $US1.4 bn ($A1.85 bn), around 30% bigger than the MESO market cap $US1.09 bn ($A1.41 bn in the Aussie market). It is possible that the IPSC share price is high because only they only issued 12.1m in the recent IPO of the total 54.8m shares on issue. Cancer treatments, particularly CAR-T have been trendy and highly sought-after darlings, although that has fallen away in the past year as many high flying biotechs sold off.Century (IPSC) is developing off-the-shelf cell therapies using adult stem cells to develop curative cell therapy products for cancer that we believe will allow us to overcome the limitations of first-generation cell therapies. Their genetically engineered, iPSC-derived iNK and iT cell products are designed to specifically target hematologic and solid tumor cancers.Interestingly, Novartis was the first biotech to have an FDA-approved CAR T-cell therapy with Kymriah. It is possible that NVS are interested in some of MSB’s stem cell manufacturing patents to aid in their production of Kymriah. It is also known that some CAR-T therapies show neurologic toxicities and cytokine release syndrome, a response to the activation and proliferation of CAR T-cells – perhaps the MSB cells could be useful in combination to treat cytokine storms, perhaps this is another reason NVS are talking to Mesoblast?Gilead Sciences (GILD) is a major player in CAR T-cell therapy, thanks to its subsidiary Kite Pharma, which it purchased for $11.9 billion in 2017. Kite has two FDA approved CAR-T cell therapies approved. Allogene Therapeutics ALLO had a huge price rise in 2020 (up to $US55) but has since fallen to $US23.50 (market cap now $US3.4 bn), is looking at ways to deliver off-the-shelf CAR T-cell therapies, using T-cells from healthy donors and altering them to reduce autoimmune responses so they might be safe and adaptable to any patient with a particular type of cancer.The Mesoblast current market cap is still tiny relative to these companies – some of which are still just in early stage clinical trials.2. CYP “takeover bid” at $2.There is ongoing discussion regarding the supposed Sumitomo takeover bid for CYP. This is important to MSB as CYP promotes itself as a competitor which has credibility due to Sumitomo’s “bid” and it was recently referred to on the CYP conference call (which raises some doubts in my mind as to CYP management’s credibility).Cynata issued the following on 17 October 2019:“Cynata Therapeutics Limited (ASX: CYP), a clinical-stage biotechnology company specialising in cell therapeutics, announces that it has been unable to reach agreement on terms to its satisfaction of a potential acquisition by Sumitomo Dainippon Pharma Co., Ltd (“Sumitomo”) and accordingly the parties have withdrawn from those discussions. As announced to ASX on 19 July and 24 July 2019, Cynata received an indicative, non-binding and conditional proposal from Sumitomo on 20 June 2019 regarding a possible acquisition of all of the shares in Cynata at a price of $2.00 per share in cash by way of a scheme of arrangement.”I would note that they call it a POSSIBLE acquisition, saying it is an INDICATIVE, NON-BINDING and CONDITIONAL PROPOSAL. That is NOT a takeover bid. Nothing was ever put to shareholders, there was no Scheme Booklet (required by law), no ASIC review nor court approval (required by law), no resolution passed by shareholders at a meeting (required by law), no firm price that would be capable of acceptance – just a vague and conditional “proposal”.Sumitomo basically said we’ll have a look at it, and if we decide to make a bid it would be at $2, however we have a number of questions which need to be answered before you can consider this a bid. They obviously didn’t like the answer to the questions, or thought upon reflection that $2 was too much. Nothing was ever put to shareholders. If management really did receive a scheme of arrangement bid at a premium $2 price and didn’t put it to shareholders then they have a lot of questions to answer. And even if CYP management thought $2 was too low to put to shareholders, Sumitomo always had (and still do have) the option of making an on-market or off-market bid – and at present a $2 bid would be highly likely to succeed, being 3.7 times the current share price (typical takeover premiums are 1.4 times the share price).3. MSB Valuation:My downside valuation of MSB is $A2 to $A3 based on kids aGvHD likely approval.My upside valuation is $A90 if the FDA approves Covid-19 ARDS and Novartis funds the manufacturing scale up to 100,000 patients per year.These are not price targets - the price can trade above or below valuations - I add to holdings below the bottom end of the range and I am a seller above the top end. If ARDS is not approved, my top end pulls back to $A20 if heart and CLBP are approved by FDA. Not advice.
MSB Price at posting:
$2.18 Sentiment: Buy Disclosure: Held
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