Mesoblast (MSB) $6.92 Weekend Australian, Page: 32By Tim...

Mesoblast (MSB) $6.92




Weekend Australian, Page: 32
By Tim Boreham
Saturday, 11 February 2012





Mesoblast (MSB) $6.92 LET’S take a break from the PowerPoint-at-lO-paces freneticism of the interim profit season to dwell on life’s bigger issues, such as the diabetes plague affecting at least 400 million people globally.

Mesoblast shares have enjoyed renewed interest after the US Food & Drug Administration cleared its investigational new drug (IND) application for its work on treating type-2 diabetes, currently a $U534 billion-a-year ($31.7bn) global market.

The stem-cell play may have a $1.8bn market cap and no meaningful revenues to date, but has its (sterilised) fingers in so many pies that it’s easy to mount an argument the stock could or should be worth much more.

On the diabetes front, trialling of specially-bred monkeys paves the way for humanoid phase-two testing in what promises to be a quick trial.

Mesoblast’s patents are based on mesenchymal precursor cells (MPCs). In the case of diabetes, it is hoped they will stimulate insulin production and obviate the need for daily jabs under the conventional treatment regime.

Mesoblast’s burgeoning stem-cell franchise includes potential remedies for heart disease, eye disease, orthopaedics (dodgy knees) and spinal fusion. Under its deal with Cephalon (now owned by Teva), Mesoblast receives up to $US1.7bn in milestone payments as its cardiovascular and bone marrow transplant trials gain regulatory approval.

Bell Potter analyst Stuart Roberts prosecutes the case for the buyers, arguing a base-case valuation of $10.91 a share and an optimistic appraisal of $21.60 a share. Deutsche Bank ascribed a "potential value" of $92 a share if absolutely everything goes right. But assuming a realistic chance of success of 9-15 per cent for each treatment, this valuation is risk-adjusted back to $8.20 a share. We affirm Mesoblast as a speculative buy on the probability of at least one or two of the applications attaining commercialisation. ........ Cheers holders and new buyers, This will progress like no other stock has ever achieved on the ASX nice to be holding ..... VIN