The below is from Ecool2 -posted back in August 2020. (his last post) Since we are at the pointy end of CLBP, Heart Failure & ARDS. Something to reflect back on.
3. Other Blockbusters could increase Valuations to $A10-20 without Covid-19
Recent updates suggest slight delays to other blockbuster readouts - but weren't changed to 4th Quarter, just indicated a bit behind the AdCom and the early Sep Covid-19 readout. Heart Failure and Chronic Lower Back Pain appear to still be likely to read out in the 3rd quarter (just because they weren't updated to 4th quarter). In years to come, I don't think anyone will quibble that an estimate of "mid-year" was too far out if results are read out in September - particularly in the middle of the world's worst health crisis since the 1918 Spanish 'Flu and the US hospital system in chaos. Those two blockbusters could easily increase analysts' valuations to the $A10 to $A20 range with lowered POS discounts and the high possibility of a US partner for back pain and US and EU partners for Heart Failure. These partnership deals could each generate a $US100m up-front payment, even though Covid-19 ARDS is centre stage at present.
4. Covid-19 ARDS looks spectacular to me - both likelihood of success and manufacturing potential
Covid-19 ARDS and ARDS from other sources are a spectacular opportunity if they come off, and are in now way priced into MSB share price (well maybe 1% of the potential). I have spoken to doctors and trial experts. When we run through the numbers of what is required under the MSB Covid-19 ARDS Bayesian Analysis, sceptical doctors tell me it just might work! Just to be clear, I believe a 40% assumed mortality rate in the control group and 20% in the Rem-L group means the FDA expects to be able to approve if the numbers are better than this on 300 in the trial - ie a difference between the 2 groups of 150 each of 20% or 30,000 people (60,000 die in control group and 30,000 die in the MSB group). I think it is quite possible that we will get close to this figure in the first 90,000 if the control group continue to die at rates of 60% or more (27,000 dead) and the MSB group has a very low number of deaths. I am allowing for improved Standard of Care since the initial mortality figures in NY hospitals were reported at well over 80% - that improved SoC should improve the outcomes in both groups, and could mean that the mortality in the stem cell group is close to zero (vs 12% in the original EAP). The researchers would then have to look at the probability of reaching a difference between the two groups of 30,000 by the end of the trial, given that they may already have a difference of 27,000 from the first 90,000 patients. I'd say that would be a pretty good chance, though I'm not party to the stats which have been set. So, if that's the case, they would stop the trial in early Sep, and try to give everyone the cells, rather than consigning the control group to a high death rate. Of course, many of the controls won't survive even if given the cells late due to all the damage done to other organs (heart and lungs in particular) - and those that do survive will have a lower quality of life. The doctor in Sydney who was only 50 and a top-level cyclist now can no longer drive nor cycle - a massive loss of lifestyle for a fit and relatively young man at the forefront of the crisis who was just doing his job. I wish our cells could be made available to everyone with moderate to severe ARDS as quickly as possible. To this end, I have been doing more work on the availability of cells from MSB's prospective upgrades to manufacturing, and I included a number of speculative calculations in my last note - this is a major change - analysts don't yet have these upgrades to yields, number of cells possible to manufacture and big drop in manufacturing costs. I think it is quite possible that MSB will be able to produce 25,000 treatments by the end of the March quarter 2021 and rising to 100,000 treatments pa by Dec 2021. Then they can survey the requirements and decide if more manufacturing is required, but I think it will be as they begin to expand into non-Covid ARDS. Eventually, if this all works, I can see MSB providing a steady state 200,000 treatments per year for non-Covid and Covid-19 ARDS combined. At a price of $US70k per treatment, that could generate royalties in three years of $US4.2 billion pa and net profits (after US tax) of $A4.66 billion - put that on a P/E of 30 and that's a $A140 billion company - or $A224 per share in 3 years - you should then discount that back to today's value at whatever rate you think appropriate to give a valuation today - let's say 15%, giving a value now of around $A150 - just for ARDS.
MSB Price at posting:
$2.46 Sentiment: Buy Disclosure: Held
(20min delay)