Tracking Valuations, page-5

DYOR. Not advice. Ensure you make your own decisions.
No specific buy or sell recommendation or advice is intended.
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Here's an attempt at a consolidated valuation model that provides risk-adjusted and unrisked valuations of a number of pathways in a consolidated model.

Targets:

• Risk-adjusted value @ $8.85 for Adult GVHD, Pediatric GVHD and COVID ARDS
  (potential future target for this group @ $17)
• Adding in General ARDS, Advanced Heart Failure and Chronic Low Back Pain I get $132 as an unrisked valuation, however these additional pathways require further effort for clinical trials and to complete commercialisation. Launch date for Heart Failure and Chronic Low Back plane estimated by Edison to be within approximately 3 years.
• Trials have not yet been planned for the general form of ARDS, however the expectation seems to be that if the treatment is successful for COVID ARDS then the treatment will also suit ARDS.

Note on valuations:

• Some assumptions derived from Mesoblast (https://www.asx.com.au/asxpdf/20200227/pdf/44fhr4k6rk34pv.pdf ) or Edison Estimates ( https://www.edisongroup.com/wp-content/uploads/2019/10/Mesoblast-Increasingly-positive-on-aGvHD.pdf )
• I've used conservative assumptions for share issue, P/E and After Tax Profit Margin
• To keep calculations simple, valuation method is based on calculating potential revenue and then NPAT using an assumed after-tax profit margin (13.8%)

Assumptions:

General:

• Share Issue
  • Fully-diluted share issue ~569M
  • Allowance for additional dilution up to 10% this is just to make the estimate conservative. I expect that if the ARDS COVID trial is successful, MSB will have royalty or sales revenue from the treatment for COVID or down-payments for a licensing deal.
  • Therefore estimated future share issue 625M
• P/E
  • at 22.48 (source http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html )
  • Note - CSL is trading at a P/E of 47.1
• Pharma / Biotech Industry Net or After-tax Profit Margin
  • at 13.8%
    (source https://pubmed.ncbi.nlm.nih.gov/32125401/ )
• Exchange rate $0.64

Pediatric & Adult GVHD:

• Price at USD $285K
• MSB estimate opportunity at USD $700M
• Assume 20% of cases Pediatric and 80% of cases Adult

COVID ARDS

• 67,000 patient population ( sourced from Bell-Potter / Eureka Reports )
• Price at USD $75,000 with 30% royalty to Mesoblast ( Bell-potter assumption )

ARDS

• This is the general form of ARDS
• I'm assuming price at USD $75,000 with MSB receiving full revenue ( assumption is the IP belongs to Mesoblast so they will get the bulk of the revenue ), COVID providing a fast-track way to market albeit with some additional clinical trials or perhaps by extension
• Extrapolated data from https://ardsglobal.org/acute-respiratory-distress-syndrome/
• From tally of approximately 2.3M I calculated approximately 328,000 cases in US and Top 5 Europe, with 70% of these moderate or severe, that's ~ 230,000 cases
• Assumption is 50% treated ( i.e. ~ 115,000 ), estimates are for US & Europe Top 5 ( so there is additional upside from Rest of World )

Advanced Heart Failure & Chronic Low Back Pain

• Revenue assumptions are derived from Pages 16 and 17 of their research report ( https://www.edisongroup.com/wp-content/uploads/2019/10/Mesoblast-Increasingly-positive-on-aGvHD.pdf )

Valuation Model



ARDS Worksheet

Incidence data from https://ardsglobal.org/acute-respiratory-distress-syndrome/

Valuation is for US and Europe Top 5 only
( so there is additional upside for rest of world, this could be based on licensing / royalty model applied to regions individually )