MSB Trading - 2020, page-44

In answer to @joeycav11 comment “the stock is worth 100 to 1000x its value in 1 to 5 years or it goes to zero”

Could MSB really be worth zero?

There have been a constant stream of biotech fails which have seen their share prices effectively go to zero – they stagger on in a sort of zombie company realm with market caps less than $10m and searching for brains. Benitec has been falling for 15 years after fails in HIV, Hep C, head and neck cancer etc and now has a market cap under $A10m. Phosphgenics renamed itself Avecho after its former CEO was gaoled ($A6m market cap) and in May last year Actinogen fell 71% to a $A40m market cap when their Alzheimer’s trial didn’t work (later recovering with news of the viability of a stronger dose of Xanamen). And we all saw a massive loss of market cap in MSB when the NIH trial was misreported in late 2018, combining with a 20% fall in the US stockmarket to cause the share price to fall in the MSB price from close to $A2.50 to as low as $A1.00.

That’s why people fear MSB going to zero. However, there is a big difference between these companies and MSB, and MSB has progressed dramatically from its position in 2018 when the NIH trial results were released. MSB has licensed products which are already approved in Japan and Europe and is earning milestone payments and royalty fees. It has also passed the primary endpoint in its aGvHD trial in the US – so it has multiple successes already and failure of one or both of the upcoming heart and back pain trials, while they would be disappointing, don’t spell the end of the company.

So, I really don’t think the MSB share price goes to zero, even if the heart and back pain trials are total fails, which would be totally contrary to results of earlier stage trials. In fact, given how close we are to approval of US paediatric aGvHD, I don’t think there’s much downside at all. Looking at my numbers below, it is pretty easy to say the current share price is supported by the long-term prospects just for products already approved in Japan, Europe and which have already passed phase 3 trials and are about to be approved in the US.

Obviously, there’ll be a knee-jerk reaction if there is a failure of the chronic lower back pain and heart failure trials, but someone would likely swoop in and make a takeover bid if that happens. That was the case with Sirtex – which attracted a $A1.9 billion bid after trials failed to achieve their primary endpoint and dosage sales growth fell dramatically, the company reported net losses and write downs as well as a plethora of other problems (see below).

MSB already has royalties approaching $US2m per quarter from JCR Pharma for Temcell treating aGvHD in Japan, and this is expected to grow to $US13m pa at the peak in the next few years. This is just for aGvHD in Japan and doesn’t include any other label extensions to a product which is already approved in Japan. Likewise, Takeda (ex TiGenix) has licensed Alofisel to treat fistulae associated with Crohn’s disease and has already received approval from the European Commission – there are royalties (10% on an estimated $US250m of global sales starting in 2022) and another €10m in milestones yet to receive. At present MSB has a positive net cash position, even after paying off drawn down debt. So, there is a base level of valuation from products already approved which could be worth at least $A1.28 per share (P/E of 23x, which was the takeover multiple of Sirtex less US tax of 21%).

Add a valuation just for the data from trials for aGvHD in the US which has clearly met the primary endpoints of the FDA trial and will have the first lodged BLA for a stem cell product in the US market sometime this month – the long term data and knowledge built up from the phase 1, 2 and 3 trials dating back over 10 years are incredibly valuable, as well as all that has been learned and patented in relation to technology, manufacturing and regulatory submissions. So, the data alone is worth something to other pharma or stem cells companies – it would probably be able to be sold, or someone may take over the shell of the company for the data and may even be able to retain tax losses if they continue in the same business. There was talk of a takeover for CYP of $A200m – a company which has only gone through phase 1 trials in the same sort of product candidates as MSB (mainly aGvHD) – it didn’t come off, but MSB’s data, trials and cash levels are years ahead of approval of CYP’s potential products (which probably in breach of MSB’s patents anyway – so another reason MSB is worth much more than CYP). So, add another 35c to the $A1.00 above and we’re up to $A1.35. There’s no way MSB is worth zero!

If the US FDA approves aGvHD this year (which looks likely) then the potential sales and eventual sales could be $US120m pa (or $A172m) just for children under 12 in the US acute GvHD market, with gross margins eventually around 85% once the 3-D bioreactors and advanced processes are in place (Sirtex’s gross margins were 85%). That’s gross profits of $A146m pa and let’s guess sales costs of $A10m pa and admin costs of a similar amount (especially to a big pharma who already has sales people and admin in place), giving $A126m in pretax profits and net profits of $A100m (at US tax rates). I’m not assuming any interest costs or R&D – just looking at the value to a company taking over this revenue stream. At a 23x P/E, we get a future valuation of $A4.28 per share just from the children’s market, and let’s discount that today’s values at 15% pa for 5 years, giving a value now of $A2.13 on top of the $A1.35 baseline value above for the royalty streams in Japan and Europe and value of the trials data.

There’s obviously huge upside from sticking around long enough to reap the benefits of expanding the aGvHD product into adults and into Europe.

Even if I think the current share price can be justified just from US children’s aGvHD, people would probably panic and sell if the heart and back pain trials fails. But what would they be leaving on the table?

Potentially, total aGvHD adult and paediatric sales could be $US480m in the US market and another $US270m in Europe (MSB has publicly announced it thinks sales revenue potential is $US700m – I think it is closer to $US750m, or over $A1 billion). That could lead to a valuation of over $A10-14 billion or $A20-25 per share! Let’s say it takes 7-10 years to complete trials for adults and build up to peak sales – a price of $A20 in 7 years at a discount rate of 15% is worth $A7.50 now, and a price of $A25 in 10 years is worth $A6.20 now on the same 15% discount rate basis. These are not forecasts, I am just throwing around numbers to show the potential just from aGvHD IF EVERYTHING GOES RIGHT!

Furthermore, look at the $A1.9 billion bid that Sirtex managed to attract after trial results which looked like a fail – ie clinical results which did not meet their primary endpoints (similar to how the NIH trial results affected MSB in 2018) and also after there was a dramatic downgrade to Sirtex’s rate of dose sales growth to as low as 5.4% growth in 2017 (after 16.4% growth in 2016; a fall of 21% in 2017 underlying NPAT to $42.4m – hardly any progress on the $40.3m of two years earlier; a reported net loss driven by asset impairments and restructuring costs; with the former CEO charged with insider trading (due to be sentenced early 2020) and the company was later sued for misleading the market with its sales forecasts and a $280m class action (settled for around $40m). What a clusterf*&%!

Even with all that going on, Sirtex managed to attract a bid of $A1.9 billion. The Sirtex founder argued the takeover price should've been more than $5bn. He said that the technology hasn't been adequately proven due to 12 years of complete mismanagement, poor governance, failing clinical trials etc. Trials were "poorly run and structured despite a $60m investment in them".

Sirtex is not a cure but extends time with family by a few months and improves quality of life for people dying of late-stage liver cancer. There were 12,500 doses worldwide in 2017 (up from 7,300 five years prior).

By contrast, MSB is a cure to several life-threatening conditions and is a major improvement in quality of life and major reduction to health funds in terms of ongoing costs of management, hospitalisations etc.

So, if Sirtex is worth $A1.9 billion, after all of those problems it isn’t hard to see MSB achieving a similar valuation, even if the current phase 3 trials fail to meet their primary endpoints. A $A1.9bn bid for MSB would equate to $A3.53 per share (after an initial fall, such as happened with Sirtex).

Could MSB really be worth $100 to $1,000 as joeycav11 thinks?

I don’t want to be a wet blanket, and I really understand joeycav’s enthusiasm, but it can’t get to those levels in NPV terms using high discount rates.

That doesn’t mean MSB can’t be selling for up to $A1,000 in 30 years – CSL is on the way to doing it - but I would only call that an NPV of $A15.10 in the next year (at a 15% discount rate) or $A3.28 at Bell Potter’s very high discount rate of 21%.

Even using Future Values (not NPVs) I don’t think it is likely to get anywhere near 1000x its current value within 5 years. The current market cap is a bit over $A1 billion. 1000x that is in excess of $A1 trillion. That is $US700 billion and would rank it around the 5^th biggest listed company in the world (not counting Saudi Aramco which only has a tiny percentage listed) –behind Apple ($US1.33 trn), Microsoft ($US1.23 trn), Alphabet ($US944bn) and Amazon ($US$US940bn). At $A1,000 per share, MSB would be bigger than Facebook (only $US600bn), Alibaba at $US569bn and Berkshire Hathaway $US560 bn, and it’s hard to see MSB worth more than these companies within 1-5 years. At $US1,000 per share, MSB would be multiples of the value of the biggest healthcare, pharmaceutical and biotech companies. Johnson & Johnson is currently $US384bn and Proctor and Gamble is $US308bn.

Even a valuation of $A100 per share is a stretch within 5 years. The only way that I think MSB can achieve valuations anywhere near $A100 in that timeframe would be to receive large upfront and milestone payments from partners and then doing a large share buyback before the share price accelerates too far (ie buying as many shares back as quickly and cheaply as possible).

The problem for doing the most efficient buybacks is that every announcement of a large partnership agreement and achievement of milestones pushes the share price higher and makes it difficult to buy as many shares back due to the higher price. Buybacks are usually spread over several months and, in and of themselves, also push the share price higher.

So, if MSB had $A1bn cash today, they could buyback around 90% of the equity (assuming that 90% of holders are prepared to sell at today’s price – which they wouldn’t) – and that would leave around 50m shares on issue, so a valuation of $A5 bn gets you to $A100 per share. This is highly unrealistic. I would guess MSB would have to pay up to $A5 per share to get 90% of the issued share capital ie you’d have to attract everyone to accept including the Prof selling around one-third of his holding– and we know $A5 is too low for that to happen!). If the buyback happened at $A5 per share, $A1bn would then only buy 37% of the stock back, leaving 337m shares on issue – meaning the market cap at $A100 per share would be $A33.7bn – possible, but a stretch (that’s the equivalent of around $A63 per share based on the current 537m issued shares), and remember that the shorts would also be buying back furiously at the same time, which would help the share price rise, but hinder the number of shares which could be bought back.
Remember that the big indications of heart and back pain will not be marketed by MSB, but will be licensed to major pharma companies. It will probably take until 2022 before sales can start – even if there are positive read outs in the first half of 2020 – remember the BLA process for aGvHD has taken 15 months so far, and will take up to another 8 months even with fast track approval (ie up to 60 days for the FDA to inform MSB it has accepted the BLA and up to 6 months to approve under the Fast Track status. These should be maximum time frames, but there’s no guaranteed how long the submission process for back pain and heart will take even if there are great results from the trials. Then maybe allow 3 years for sales to start approaching “peak” levels and you are already 5 years out from today.

Eventually, these revenue streams could be in the $billions (if the trials pan out), and you can probably put a multiple of at least 20x the mature/peak earnings streams (or much higher when the revenue streams are lower but you are in the “growth” phase).

These numbers are far too rubbery to be able to depend on at present, however my current “stretch” target of an NPV of $A20 per share, if everything goes right (which it never does), means the market cap could reach $A11 billion. To get that to $A100 per share through a buyback of $A1bn of shares and 107m shares on issue means MSB would have to buy back 430m shares at around $A2.30 per share. I doubt that would be possible, and that the share price would go well above the $A2.30 level on the first day of such an announcement.

So, that’s why I’ve previously said that the company should be ready to go with a buyback as soon as they do the next major partnering deal. Having large amounts of cash on the balance sheet is totally inefficient and dilutive to ordinary shareholders. The higher the share price when a buyback is done, the less the gearing impact for shareholders.

If MSB wants to advance some of its Tier 2 product candidates and spend money on the trials, it would be better to do a buyback first, then issue capital at much higher prices later to fund such trials – raising money only when it is required – although at that stage it may be much more appropriate to use undrawn debt lines.



How much is MSB worth? Let's have a look at the downside comparisons I believe MSB should be worth more than stocks like Sirtex, TiGenix and Cynata due to the MSB platform technology which has already met primary endpoints in phase 3 trials and been licensed to partners in Japan and Europe. There are several potential product candidates with global markets of millions of people. In many of these diseases, MSB provides a cure or multi-year relief, rather than just a treatment to extend life a few months.

1. 1. Sirtex Downside Comparison
2. The low $A1bn valuation of MSB is bizarre given what Chinese private equity paid for Sirtex in 2019. MSB is earlier stage in terms of sales, but miles ahead in terms of trial results, governance, number of product candidates, and actually provides long-term benefits or complete cure rather than "add a few more months of time with family" in the case of Sirtex. MSB addressable market could eventually be millions of people in terms of heart failure, before considering lower back pain and then second tier indications like rheumatoid arthritis, diabetic necropathy etc. Sirtex is only around 200,000 people. AND MSB HAS MET FDA PRIMARY ENDPOINT IN ITS FIRST COMPLETED PHASE 3 TRIAL (SIRTEX TRIAL FAILED TO MEET THE PRIMARY ENDPOINTS). MSB has invested far more than the $60m that Sirtex invested in trials, and MSB has partners funding some of its trials for free. Tasly is due to fully fund a trial in China for heart, possibly leveraging data from the US trials. Milestone and upfront payments from Grunenthal will more than fund the EU confirmatory trial for back pain.
   MSB’s potential addressable sales in US and EU just from aGvHD are estimated at $US700m. That compares with Sirtex’s total sales in 2017 of $A234m, underlying NPAT of $A42m and reported NPAT of a loss of $26m (after $A90m of impairments offset by $30m of tax adjustments). MSB could end up 3x the size of Sirtex, just from aGvHD sales! Sirtex founder Bruce Gray argued the takeover price of $A1.9bn in 2019 should've been more than $5bn. He says the Sirtex technology hasn't been adequately proven due to 12 years of complete mismanagement, poor governance, failing clinical trials etc. The former CEO was charged with insider trading. Sirtex is not a cure, but extends time with family by a few months and improves quality of life for people dying of late-stage liver cancer. There were 12,500 doses worldwide in 2017 (up from 7,300 five years prior). Bruce Gray also says the Sirtex trials were "poorly run and structured despite a $60m investment in them". CDH Investments (the KKR of China) has paid 23.6x earnings for Sirtex. China is half the world's incidences of liver cancer with 100,000 per year (most of whom can't afford Sirtex treatment, though the number who can afford it are expected to rise 3x by 2022. In contrast, once MSB product candidates pass FDA approved phase 3 trials in the US, health funds will have an incentive to reimburse patients because the funds will save big money on expensive follow up treatment and readmission to hospital. So the MSB market size is many multiples of Sirtex. A similar valuation of $A1.9 bn would price MSB at $A3.54. A $5bn price for MSB is $A9.30.

2. TiGenix downside comparison

The current market cap of MSB is only 30% higher than the $US609m (or $A874m at current AUDUSD) that Takeda paid for TiGenix (announced two years ago)- and the TiGenix portfolio consisted of one smallish indication in Crohn's fistulas (licensed from MSB) and another in phase 1 trial. AGAIN, MSB's VALUATION SEEMS BIZARRELY LOW COMPARED TO THE TiGENIX VALUATION.
As an aside – if TiGenix was worth $A874m two years ago – MSB should be worth $1.155 bn two years later (using a 15% rate of return) – or $A2.15 now – and that should be another indicator of the downside in the unlikely event that the heart failure and back pain trials both fail to meet their primary endpoints (although we all know the initial knee-jerk reaction would be much worse).

How much is MSB worth? Let's have a look at the upside comparisons
1. P/E Valuation for MSB
Put Oppenheimer's 2021 earnings forecast on the same P/E as the Sirtex takeover (ie a P/E of 23.6x) and you get $A10 per MSB Aussie share in Dec 2021. Then discount that back at a rate of 15% pa for 2 years and you get $A7.50 as the current price target (on a takeover basis). That gives a current market cap target of $A4bn for MSB in a takeover - still way below what the founder of Sirtex thinks his stock is worth (at least 20% less). In fact the 2021 price target of $A10 (in calculation above) is close to what he thinks Sirtex is worth. YET MSB IS ALREADY SUCCESSFUL IN PHASE 3 TRIALS, GIVES A LONG-TERM BENEFIT OR A CURE AND HAS A HUGELY BIGGER ADDRESSABLE MARKET - SO SHOULD BE WORTH MUCH MORE THAN SIRTEX ONCE MSB IS IN POSITIVE CASH I discount MSB at 15% pa because that is what I estimate its Weighted Average Cost of Capital is currently. However, as the technology is proved up and de-risked, interest rates will be cheaper and stock volatility will be less and the WACC should approach 10% (or even the 8% WACC of the major US pharma companies). So if you are a believer and want to discount at 10% now, you get a current price target of $A8.30 instead of $A7.10.

2. US Analyst Discounted Cash Flow Valuation

The average US analyst price target is $A4.38 and the range of the main guys is $A2.30 to $6.60.
Bell Potter in Australia has a valuation of $A5.10 and the most recent valuation I have seen is from Edison, dated 3 Jan 2019, with a valuation of $A4.2 billion or $A7.91 per share.
I THINK THE US ANALYSTS WILL UPGRADE THESE PRICE TARGETS AS TIME PASSES, THE COMPANY DERISKS AND THE SHARE PRICE RISES.
Remember that the NPV valuations based on discounted future cash flows increase each year by the discount rate – ie if the Bell Potter valuation should increase by 21% in 12 months’ time as long as their projected future cash flows remain the same – that is because a cash flow of $100 in 12 months is only worth $82.64 today (using a 21% discount rate), but is worth $100 in 12 months when it is received. On top of that huge increase, the probability discount should also be shaved due to an extra 12 months of trial results and therefore greater certainty. As well as the effluxion of time naturally increasing the valuation, analysts will be likely to gradually reduce their DCF rates (of 15-30%) which would also cause big increases to the NPV valuations, I think eventually getting down to 10-12% as MSB derisks and thereby increasing the valuation and price targets. As time goes by and hopefully positive phase 3 trial results confirm earlier phase trials, they are likely to increase the probability of success from as low as 10% for some tier 2 indications. So those indications will multiply many times in value over what is currently in the DCF valuation. And remember, these cash flows are only US, Europe and Japan. THEY DONT YET INCLUDE ANYTHING FOR TASLY OR ANY OTHER PARTNERING DEALS IN KOREA, TAIWAN, ETC. NOR DO THEY INCLUDE ANYTHING FOR CARTHERICS JV, or product extensions into adult GvHD etc. The 12-month price target of $A5.10 by analysts such as Bell Potter could easily continue to rise to $7.50 by the end of 2021, just by moving cash flows 2 years forward in time. Dropping the discount rate towards 15% should raise the target price in excess of $A10 (note that I have assumed here that cash flows are a steady perpetuity – the impact on the rise in the valuation is even higher if the cash flows increase over time, which is expected to be the case for MSB). So, in a couple of years, Bell Potter’s MSB valuation could easily double just by dropping the discount rate to 15% and having two years of time go by. If you drop the discount rate to 10%, you could expect their valuation to rise to over $15 in two years (if their cash flow expectations remain the same). THEN you have further potential to lift values by dropping the probability discounts.
So, there is plenty of opportunity to lift valuations as time goes by.

Here is the valuation table from Edison, just so you can see where the main parts of the valuation come from.
Note the probability discounts of 50% for CLBP and Heart – as these are proved up, they could obviously double their contributions to the NPV, adding $A3.56 billion to the NPV, which is another $6.62 on to the value per share, and taking the total value per share to $A14.53 based on the current 537m shares on issue (or $13.84 fully diluted for options):
View attachment 1918735
3. Upside from partnering deals
The Grünenthal deal is for upfront and milestone payments of $US150m up until product launch, as well as further commercialisation milestone payments. Cumulative Grünenthal milestone payments could exceed $US1bn depending on outcomes of the phase 3 studies and patient adoption. MSB will also receive tiered royalty payments (I’m assuming tiered royalties up to 20% of net sales).
If this deal is replicated with other partners for back pain in the US market, and for Heart Failure in US and another for Heart Failure in Europe, the final potential for 4 partnership deals could be $US600m in upfronts and milestones up to product launch and over $US4 billion in cumulative milestone payments. Royalty payments for back pain could be 20% of over $US1 billion sales in both the US and Europe and HF could be multiples of this. I noted above how conservative I believe the $US1 billion in US CLBP is, and how it would be much too small an amount to make a dent in the opioid crisis.
Every partnering deal would add $A0.40 per share just for the upfront payments (of $US150m) which could conceivably be earned in the first year of the deal. The longer term milestones and royalties add much greater value – with the royalties having by far the greatest potential.
Let’s say MSB eventually receives 20% of the $US6.5 billion in peak sales forecast by Edison for global CLBP and Heart, ie $US1.3 billion in royalty payments pa on these lead products, less tax at 21% and put this on a P/E of 25x (or $US25bn) plus $US4 billion of milestones plus, say, another $US1 billion for Tasly in China. That equals $US30 billion of value from these major partnering deals, or $A43 billion, or $A80 per share – it may take up to 7 years to get to peak sales, so discounted back to today’s NPV is $A30 per share. NB there are currently 536.78m shares on issue and another 24.8m unquoted options and 1.5m performance rights.



Upside from Lead Products
♥ aGvHD >$US700m US/EU market opportunity. Product Remestemcel-L MSCs)

♥​

Advanced Heart Failure “$US multi-billion annual market opportunity in US alone” according to MSB’s website. There are >6.5m patients with heart failure. Approximately 15% have advanced chronic HF and are at high risk of recurrent HF-MACE and TCEs – this high risk group makes up the predominant patient population in the Revascor phase 3 trial. There are >1.3m patients in the US with class 3 chronic heart failure with high rates of morbidity and mortality. Product Revascor (MPCs).In April 2017, the phase 3 trial was successful in a pre-specified futility analysis of the primary efficacy endpoint in the trial’s first 270 patients. On Dec17, 2019 the independent Data Monitoring Committee overseeing the trial held its 10^th and final scheduled meeting and recommended the trial continue as planned. It was also announced that the required number of primary endpoint events had been reached. The trial was designed to accrue more than 531 total primary endpoint events (HF-MACE) based on expected rates of HF-MACE in similarly advanced populations of heart failure patients and on treatment benefits seen with Revascor in earlier phase 2 trial results. The trial is now making final study visits for all surviving patients, with a target of last patient/last visit at the end of January 2020. The DMC reviewed data from the 566 randomised patients, including the trial’s primary and secondary endpoints, and all safety data. The results from this pivotal trial are expected to be read out by mid-2020. Once the last patient has completed their last visit, final data collection and entry processes will be performed, and the database locked. All surviving patients will have been followed for at least 12 months, with a mean follow up period of approximately 30 months.
Edison assumes peak revenue on Heart Failure and LVAD of $US3.2 billion.

♥​

End Stage Heart Failure with LVAD: up to 5000 LVADs implanted per annum in US growing >10% pa; the phase 2 trial showed a single injection of Revascor resulted in a 76% reduction in major GI bleeding events and a 65% reduction in associated hospitalisations. MSB has received RMAT designation from the FDA for these 2 “clinically meaningful endpoints”. Product Revascor (MPCs).

♥​

Chronic Low Back Pain – MSB says “over 3.2m patients and >$US1 billion market opportunity in US alone”. The Grünenthal announcement said over 7 million patients in Europe are thought to suffer from CLBP caused by degenerative disc disease. The phase 3 trial completed enrolment in March Q 2018 – so the 2-year results of this 404-patient trial will be complete in the next 3 months, and we should see readouts by the end of June. Note that the phase 2 trial of 100 patients showed a single injection alleviated pain and improved function for up to 3 years). Product is MPC-06-ID (MPCs)

♥​

Licensed Products:

• Temcell HS Inj for aGvHD – licensed in Japan to JCR Pharmaceuticals (bone marrow MSCs) – royalties could move from $US8m pa now to $US13m pa
• Alofisel for Perianal Fistulae – licensed in Europe (adipose MSCs) – possible royalties of $US25m (10% of global sales of $US250m starting in 2022)
• Tasly partnership with China’s leading cardiovascular company

♥​

Promising emerging pipeline of products and next generation technologies:

• Remestemcel-L for Crohn’s Disease and Osteoarthritis/Cartillage Repair (MSCs)
• MPC-300-IV for Rheumatoid Arthritis and Diabetic Necropathy (MPCs)

Bottom line

♥​

2019 was a great year for MSB, it was number 37 performing stock in the ASX300 for the year, and more than doubled from the low of $1.015 on Xmas Eve 2018. Shareholders are now flocking in to MSB shares – with phenomenal volume (for this time of year) of over 3m shares traded on the ASX on Friday

♥​

Instos have been buying aggressively early in the New Year – which is highly unusual for this time of year but continues the aggressive insto buying post the recent $A75m insto placement and $A46m sell down from Capital

♥​

Despite this strong insto buying, someone is still trying to hold the price down by shooting off small amounts of selling below the day’s VWAP, especially in the final market match at the end of the day

♥​

The price is still set in Australia and the spike in the US last week was possibly an isolated case of short covering in the very thin US market

♥​

Extra positives have occurred since Friday’s trading – Edison have come out with a report valuing MSB at $A7.91 (or $A7.53 fully diluted for paying up options)

♥​

Also, a potential competitor Incyte (INCY) failed in its GVHD trial – showing just how hard it is to treat this ugly disease and just how good MSB’s aGvHD trial results are

♥​

My “stretch” target NPV is $A20 per share, using a 15% discount rate and assuming peak sales can be reached in seven years. The Future Value of that guesstimate could be over $A50, depending on how far out into the future you are talking. A big share buyback could increase these figures dramatically if done quickly at a low price and for a large block of the issued capital. I believe that the Board should already be considering a quick and aggressive buyback in the event of signing a big new partnering deal

♥​

Long term holders have plenty of potential upside, and there is obviously some short-term knee-jerk downside if there is a trial failure. My view is that the upside is multiple of the downside, making this stock a great opportunity on a risk/reward trade-off – the share price could still rise multiples from here, but there is still risk

♥​

NPV’s now of up to $A7.91 per share have much higher Future Values depending on discount rate assumptions and number of year of corporate success (as in the case of CSL), however, I would have to say I am sceptical of both ends of the comment that “the share price can hit 100 to 1000x its value in 1 to 5 years or it goes to zero” – I hope this note shows both the tremendous upside and what I believe to be relatively limited downside – I also hope that @joeycav11 isn’t offended by this response to what I thought was a perfectly valid question of whether the constantly negative posters had led me to be too conservative with my valuation comments and whose questions opened up a lot of issues.