MSB Trading 2021 - paradigm shift, page-16

Happy new year MSB followers. It's a new year and a fresh start.

As some of the other threads have already descended into nastiness so I'll avoid them for now.

Here are my latest thoughts for the month ahead.

Happy New Year?

January looms as a crucial month for the near-term prospects of Australian biotech, Mesoblast.

December saw the company’s treatments fail to meet primary endpoints in both its Chronic Heart Failure (CHF) and COVID-19 Acute Respiratory Distress Syndrome (C19 ARDS) phase 3 trials.

These failures, along with an earlier failure to be granted FDA marketing approval for its graft versus host disease treatment (GVHD), has seen the share price tumble.

First Up

The first full trading week of the new year will likely see Mesoblast’s overdue readout of its phase 3 trial into chronic lower back pain.

Lower back pain is a notoriously difficult to treat/monitor condition and the primary endpoint will be difficult to hit. Though a confirmatory trial would still be required, a strong result in this trial would lead to a strong bounce in the share price.

Company Update

Though a brief update will accompany the CLBP result, a comprehensive company update is likely later in the month. Probable discussion points are:

• The final outcome of the FDA appeals process for GVHD
• Redundancies, if the appeal fails
• Cost-cutting initiatives to preserve cash
• Commentary on the path forward for CHF
• Commentary on any potential partnerships
• A list of priorities for the year ahead
• Possibly some board/management changes

Novartis

Late January may be a little early for a decision from Novartis on whether they will continue their partnership with Mesoblast into “all-cause” ARDS and other respiratory conditions.

Terms in the original agreement appear to give Novartis the right to withdraw from the deal if the C19 ARDS trial failed.

Though it’s too early to draw final conclusions, the failure to meet the trial's primary endpoint would make management and shareholders nervous.

On the other hand, if Novartis reaffirm the deal, a significant financial burden will be lifted from Mesoblast, ultimately underpinning the near-term future of the company.