“Exactly, if it succeeds it will have a market cap in the billions.The Edison valuation could come to fruition at any time with a partnership deal”.
Looks like we can all get carried away. This was a Hot Copper post made by Lawyer Trader on the 15 January 2020 regarding another speculative stock. Perhaps he thinks Edison are a reputable research house whose opinion should be quoted ? Somewhat ironic, that Edison on the 4th Jan 2020 published their view that “fair value’ for Mesoblast right now is A$7.91 against a current share price of A$2.54. In fact the share price currently is way below the analysts consensus with maybe the notable exception of Morningstar. https://www.edisongroup.com/publication/moving-closer-to-key-catalysts/25896 Lets all calm down and remember that accusations of ramping, constitute an accusation of the serious offence of market abuse. If i was @ecoool2 , I would feel pretty aggrieved, since he has gone to so much trouble to explain how using risked probability assessments combined with sky high discount rates is actually illogical and unfair. I totally agree with him. Similarly, @LawyerTrader has every right to express a view that if a stock rises extremely quickly it can be the result of irrational exuberance and such moves can result in sudden share price corrections or “pullbacks”....but to call someone out for optimism, when you have done exactly the same thing a few days earlier is a bit rich ! Furthermore, many of you who have invested over many years will be aware of the existence of “black swan” events which can destroy the best laid out investment hypothesis.
I have learnt about “black swan” events from personal experience. I remember once investing in a technology company which after 5 years of trials and research was in pole position to win a substantial and prestigious US military contract which would have validated the technology as first in class. The barriers to entry were huge..i could not see any way that the Company could fail as it was the preferred technology of all the main contractors bidding on the contract....until the arrival of Pres Obama and the financial crisis. In a desperate desire to cut back on virtually all immediate spending he cancelled the entire military programme. The US government than proceeded to bail out selective business such as Mr Elon Musk’s and the car companies and banks... while others were less fortunate. Indeed, a seasoned investor will have to balance risks and be aware that some companies play fast close to the wire while others are far more observant of the rules. Who said life was fair ?
A sample selection of some of my favourite investment mantras..you may note note that some appear contradictory.. but the important thing is to consider them.
1)Do not invest more money than you are prepared to lose. 2)Do not put all your eggs in one basket..but running a concentrated risk portfolio may be fine if you constantly reappraise risks (SWOT analysis) 3)Use leverage at your peril. The shorters invariably try to smash prices in the risky stocks to take out stop losses. 4)Black swans exist, so keep a percentage of your portfolio in cash to profit from sudden general market meltdowns over geopolitical or economic risks such as moving into a severe recession, war or terrorists acts but also events like the SARS virus, Ebola, volcanoes eruptions , earthquakes,etc. The whole point about black swan events is that they are normally things you would never anticipate happening but just do. 5)Momentum is your friend..but only follow the crowd if you can leave the performance just before the end. Leave something for the next guy. 6) alternatively....Have the courage of your convictions..but only bet against the crowd if you really understand the risks ! 7)Find business leaders who are “lucky generals” 8)Shorters are parasites for whom the ends normally justify the means..but be objective as to why they are shorting ! 9)Only hold shares if you believe in the competence and trustworthiness of the management ..fraud is more common than most realise. 10) Life is not fair...when circumstances change , the first cut is the cheapest. 11)Every investment opportunity is different...but many companies in a sector underperform and overperform at the same time. 12) Asset allocation as opposed to stock performance in the main determinant of of performance in a balanced portfolio 13) Never wrong to take a profit 14) Run your profits and cut your losses.
I would strongly recommend that all potential investors read through the risk factors shown in the latest 6k listed from page 56 onwards . The link is found on the Mesoblast website in an announcement dated 26th November 2019. If you can invest in any company after reading that document your must have a strong constitution. The risk warnings in a US filing are completely over the top and are there to protect the directors from being sued for non disclosure of potential risks..however remote. Examples of risks have included , failure to enrol enough patients for an ongoing clinical trial or even the risk that those patients enrolled would abide by the terms and conditions of their trial or fail to complete it...or whether the Data Monitoring Controller would be obliged to stop a trial for adverse events, etc., etc.,. Well in the case of heart failure, the first phase 3 trial has now reached its final non fatal MACE and we will have trial completion when the last patient is interviewed this month. We now know that the DMC did not have to stop the trial for adverse events and within months we will be able to judge the efficacy of our therapy........the result is binary, in that we will either meet our primary or secondary endpoints or we will not ! This is where the calculation of risk versus reward makes Mesoblast look so attractive. There still remain many challenges ahead..like for example the difficulty of manufacturing many billions of cells using FBS which is an expensive culture medium whose pricing has shown great volatility. Don’t worry Silviu already has the answer but i just want to illustrate there are risks that most investors never consider.
I have examined so many risk factors relating to Mesoblast to reduce my chances of a failed investment . It is extremely time consuming , It is difficult to lay out clearly in a public forum why i believe Mesoblast has superior technology to competitors. I have undertaken extensive research into production methods, IP protection, amplification technologies and most importantly competition. Let’s not forget that a competing product has the ability to affect not just sales, but pricing power. If you are the only approved therapy for an ultra orphan indication such as steroid refractory aGVHD you can make some serious money.In the last year Entresto (Novartis ) itacitinib (Incyte) ,Invokana (J&J), etc., etc., could all have achieved greater efficacy in their respective chosen areas of therapy...but no one has delivered the knock out punch. Mesoblast is the first to market with a unique and patented mechanism of action. Over the course of my research, i think i have found some very overvalued stocks on the ASX and NASDAQ who have underestimated their time to market, or have overstated their IP protection. Please do not ask me which ones because i do not want hate mail from the usual suspects. Mesoblast’s own route to market has a chequered past, with timelines moving out many years and needing to borrow money at punitive rates which is often a sign of financial distress. The point is that through a great deal of skill and judgement ...and a reasonable dose of good fortune, Silviu has navigated his way through several minefields and we have now arrived at an inflexion point. Maybe he is destined to be one of my lucky generals ?
As the AMRN (Nasdaq`) share price has shown, it is the clinical data from cardiovascular outcome studies which are particularly price sensitive... rising tenfold in a very short space of time post publication of their trial results before plateauing. Many here are quick to criticise Lia for having all her eggs in one basket and I would almost certainly agree..but lets remember most fund managers are simply active fund managers being paid to slightly deviate a little from the tracker funds. Consider that nearly the whole performance of the US market in 2018 was attributable to just 6 stocks as detailed in the link below.
Ironically, the more diversified your portfolio becomes the more likely it will be very difficult to outperform...but there is a lot to be said for wealth preservation !
Mesoblast is currently valued at less than U$1bn . We are all waiting to hear if two of the largest causes of hospitalisation and medical expense in the Western World can be successfully treated using their stem cells. Several top analysts have commented that these targeted markets are worth billions of sales each year and big biotech shares in Australia can be valued up to 5 Times prospective sales. So if you believe that just one of their major trial results will be successful, you will come to the logical conclusion we have enormous upside from here. Alternatively, you make take the view that only GVHD will work Jason Kolbert at Dawson James’s appears to believe that Remestemcel-L was probably worth close to the current market cap of Mesoblast on it own .... puts the risk reward into perspective ! https://biotuesdays.com/2019/12/19/dawson-james-starts-mesoblast-at-buy-pt-14/ There is still risk and there will always be risks...but i still felt the need to buy an other 50000 odd Shares last Friday. I believe Ecoool2 ‘s assessment is right on the money. I would go further and say it is ridiculous to use a 30% discount rate post any FDA approvals , it would then be easy for the Company to sign up distribution partners . A global partner which would significantly lower their cost of capital immediately. The same would apply if they decided to sell forward their revenue streams to the likes of a Royalty Pharma .
We have a wonderful spirit on this board. Please everyone post their concerns and objections but not in a way that is discourteous or offensive to others. I remember being moderated the once for suggesting that a particular poster had an ulterior motive for posting in a particular way. I had to chuckle to myself when he finally admitted to shorting the stock on several occasions in a recent post...not that the moderator will be sending me an apology !
Good luck to all !
MSB Price at posting:
$2.53 Sentiment: Buy Disclosure: Held
(20min delay)
