Analysis is for understanding of potential. No specific buy or sell advice is intended.
Some scenarios relating to COVID ARDS and Non-COVID ARDS in the US.
COVID-19 ARDS
COVID-19 ARDS cases in the US are currently at ~ 53,970 per day after a second wave has kicked in.53,790 new cases per day in US, means 1.64M per month or 4.92M per quarter.
View attachment 2372492Cases in the US are forecast to go up.
View attachment 2372717Furthermore, hospital resource use is trending back to peak levels.
View attachment 2372501Approximately 15% of cases are hospitalised. Approximately 4.9% of hospitalised cases are treated in the ICU. Of these approximately 88% on mechanical ventilation. That works out at over 127,000 ventilator cases per year or approximately 32,000 per quarter (
just in the US).
View attachment 2372744Mortality of patients on ventilators is around 36%.
https://www.medrxiv.org/content/10.1101/2020.04.08.20057794v1.full.pdfSo for COVID ARDS I am assuming 18% of ventilator patients are treated with Remestemcel-l to try and reduce mortality (one analyst is using a lower estimate of 7.5%, however if a single treatment appears that significantly improves probability of survival then surely the treatment would be likely to be used).
Using pricing of USD $75,000 annualised royalty revenue to Mesoblast would be around USD $436M or AUD $600M.
I assume reduction in COVID-19 ICU cases at 50% pa from 2022.
Non-COVID ARDS
Annual incidence of ARDS in the US is 161,942 per year (
https://ardsglobal.org/acute-respiratory-distress-syndrome/ ). 70% of ARDS cases are Moderate or Severe requiring treatment in ICU. 90% of cases are intubated.
Mortality is around 42%.
Let's assume 20% of cases are treated with Remstemcel-L to try and reduce the mortality rate. That would mean around 23,000 cases treated per year. I assume this starts in 2021 and cases grow at 0.6% per year in accordance with population growth.
Other assumptions
- Pricing at USD $75,000 (as per analyst estimates)
- 25% royalty share of revenue to Mesoblast
- Gross margin 80%
- P/E modelled at Pharma industry average but also modelled at high-growth levels typical for new treatments (CUV which is an emerging revenue-generating Biotech is currently running at a P/E of around 70.0, pharma industry average is 22.98). In Biotech revenues can easily grow at greater than 30% p/a when multiple pipelines and expansion into other regions or regional licensing is considered.
- Tax at 30%
- Depreciation and amortisation at 10% of EBITDA
Assuming treatment for both COVID ARDS and ARDS just in the US royalty revenue to Mesoblast would be up to USD $855M by end of 2021. This gives a share price range for MSB of $22.00 to $68.00.
Note also that Mesoblast is carrying a net loss (deficit) USD $470M as at end of the 2018/19 financial year, so this will reduce tax bill in the first year or two.
I haven't modelled other pipelines in the below - aGvHD, CHF, CLBP, etc.
Calculation in the first column is for just the December quarter (assuming rapid approval and rollout for treatment of COVID), however share price estimates adjusted to suit an annualised basis.
As noted above I've assumed treatment penetration of 18% and 20% respectively for COVID ARDS and ARDS, with this values being about half the mortality rate. Given the high mortality rates of these conditions I think this level of treatment is conservative, given few if any treatments are available that can improve patient outcomes.
View attachment 2372840
(20min delay)
