MSB (ASX) MSB trading

Originally posted by ecoool2 ↑

With respect (honestly) I don't think moving forwards now on RA and diabetes would make any lasting positive difference to the share price and may even hurt it if it increases cash fears.

RA and diabetes aren't in most analyst valuations, or are so heavily discounted they have no real value. Analysts currently value the company at 3x the current share price without these products. Analysts have plenty of ability to increase this valuation by tinkering with their probability discounts and the interest rate in their NPV estimates, just using the Tier 1 products.

They are deliberately holding their valuations at "conservative" levels because they just look silly putting in a much higher valuation. So adding new products won't change that - the analysts won't value them (and they can argue the cash flows are years away and the probability of success is low - that's what they are already arguing - some implicitly, some explicitly).

MSB is traded like a speculative stock because it is still burning cash. That will remain the case until we can clearly see deadline on more cash going out than coming in.

While we are still in cash burn mode we are subject to attacks by shorters and selling by people who have just made a quick profit on the latest share price spike after an announcement.

The longer term value of the company and even the 12-month price targets of $6 don't matter to these sellers as they aren't convinced the company will be around for the longer term (and they don't really care).

I think a slowly rising share price is far preferable to spikes and falls on announcements- but you can't always get want you want (thanks Mick). An announcement on a new initiative on RA or diabetes might give the price a short term sugar hit (!) but the shorts would move in again and knock it back down, and commercializations would be years away - cash burn would increase - keeping us in the volatile and speculative zone.

It would be a different story if someone else funded the trials. Maybe one of the Asian countries who fund a "clever country" type programme, where there is a growing diabetes problem, and where they are trying to corner the market in emerging technologies.

SI has predicted that the rate of cash burn will fall, and hopefully he can give us some more guidance at the next quarterly conference call which should come a couple of days after the Nov 11 heart conference.

Cash would be dramatically increased by a big upfront payment by a pharma partner. And the probability of a partner would be increased by great results in the NIH trial. So even though LVAD is less than 10% of the valuation of the company, it has a far greater importance in terms of confidence (in all our products, but definitely for the bigger stage 2-3 heart trial) and in the probability of gaining a partner in the near term.

There are also 6 milestone payments to come from Tasly - I suspect they could add up to a very large sum which could completely put MSB's cash situation in the past - but we need guidance on their size, timing and trigger points.

I also think that cash flow coming in from aGVHD will start in the Dec half of next year (2019) and ramp up through 2020. By 2021 we should be self-sustaining from a cash point of view, earning profits and have a share price of $8-12 at that point (according to my reading of the Oppenheimer estimates and if all goes well).

2018 has been an excellent year for MSB. The maturation of well targeted trials which serve niche markets with high death rates and no competing products has put us in a great position. We have a diversified group of product candidates which is enough to cover us if one of them disappoints, and it will be possible to extend them into new areas once they are established (adult aGVHD, CHF outside of LVAD etc). Cash has been managed prudently without having to have more dilutive rights issues and share issues to partners have been done at a premium. Very disciplined progress.

2019 is full of promise- but we will probably need more cash by the September quarter if no partnering deal is done (maybe offset by Tasly milestones and reduced cash burn).

Once we have stabilized the cash position, there will be huge upside from the tier 2 products and we can look at them then - but priority number 1 is to stay alive - otherwise someone else will reap the benefits.

Hopefully that time frame is short, but let's not jump the gun - Mesoblast has so much short term upside that it would be silly to blow it

Expand

Great insight Ecoool, but I believe you are starting at a low valuation of the company that has come about from manipulation of the sector.
The 5 year rout of the stem cell sector has lowered expectations of share price increase.

Reality is Mesoblast has a good chance at 4 billion in sales in 4 years and being cash flow positive in 16 months.
Big pharma knows the value here and has kept share price low to force a good deal or cheap buyout.
The risk reward here is off the chart.
Keytruda and Juno were bought out for 11 billion and they didnt have anything near the value of Mesoblast.
Good luck fellow dreamers and visionaries

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(20min delay)
Last $1.35		Change 0.105(8.43%)		Mkt cap ! $1.541B

Open	High	Low	Value	Volume
$1.27	$1.40	$1.27	$16.46M	12.22M

Great insight Ecoool, but I believe you are starting at a low...

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