##{"id":58916,"date":"2011-09-29T10:11:34","date_gmt":"2011-09-29T00:11:34","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/09\/29\/news-flow-for-mesoblast-remains-positive\/"},"modified":"2011-09-29T10:11:34","modified_gmt":"2011-09-29T00:11:34","slug":"news-flow-for-mesoblast-remains-positive","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/09\/29\/news-flow-for-mesoblast-remains-positive\/","title":{"rendered":"News Flow For Mesoblast Remains Positive"},"content":{"rendered":"

\n\t– Mesoblast<\/span> has announced a new heart attack trial
\n\t– Manufacturing alliance also announced
\n\t– Both announcements are positives according to Bell Potter
\n\t– Significant upside potential in Mesoblast<\/span> at current levels
\n\t– Bell Potter retains a Buy rating<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tBack in August Bell Potter wrote glowingly of the prospects of stem cell technology group Mesoblast<\/span> ((MSB<\/span>)), suggesting the Mesenchymal<\/span> Precursor Cell (MPC<\/span>) technology being developed had significant potential (see: Mesoblast's<\/span> Upside Significant, FNArena<\/span>, 25\/8\/11).<\/p>\n

\n\tSince then there has only been good news from Mesoblast<\/span>, as Bell Potter notes a new trial to test whether MPCs<\/span> can repair heart muscle damage post a heart attack was announced earlier this month. The 225 patient Phase II trial will test whether using MPCs<\/span> soon after an attack can lower the subsequent incidence of heart failure. Pre-clinical data appear encouraging.<\/p>\n

\n\tAssuming the trial is successful, the potential market is very large notes Bell Potter, as in the US alone there are around 700,000 heart attacks annually and a similar number of heart failures. Estimates suggest around one-third of heart attack patients move onto heart failure, so the test will see if MPCs<\/span> may be able to reduce this number.<\/p>\n

\n\tAs well, Mesoblast<\/span> has this week announced a global manufacturing alliance with Lonza<\/span>, a Swiss contract manufacturer of biological products. The deal will see Lonza<\/span> become the supplier of stem cells to Mesoblast<\/span>, with the company also eventually setting up a purpose-built stem cell manufacturing facility Mesoblast<\/span> will have the option to buy.<\/p>\n

\n\tIn Bell Potter's view, the deal should give the market greater confidence Mesoblast<\/span> will successfully scale up to a commercial level of stem cell manufacturing. The fact Mesoblast<\/span> will have control of this manufacturing process is a potential source of massive upside notes Bell Potter, as it is conservatively valued as being equal to a 20-30% royalty on the licensee's average selling price.<\/p>\n

\n\tThe agreement with Lonza<\/span> follows on from the partnering deal Mesoblast<\/span> struck late last year with US pharmaceutical company Cephalon<\/span>. The Cephalon<\/span> deal saw that company take a 19.99% stake in Mesoblast<\/span>, as well as partnering in the development of heart failure, heart attack and bone marrow transplant applications of MPC<\/span> technology. Cephalon<\/span> will also provide funding for programs related to Alzheimer's and Parkinson's disease.<\/p>\n

\n\tNot only was the Cephalon<\/span> deal the first instance of an established pharma<\/span> company committing resources to stem cell development, it also de-risked Mesoblast<\/span> by providing funding for development programs. Cephalon<\/span> has since been acquired by Teva<\/span> but this is a positive in the view of Bell Potter as Teva<\/span> has a history of generating growth through branded innovator drugs.<\/p>\n

\n\tIn total Mesoblast<\/span> is currently either conducting or moving towards Phase II and III trials in eight different applications, most of them related to cardiovascular and orthopaedic<\/span> issues. Results to date have generally been positive and Bell Potter expects other potential applications for MPCs<\/span> will emerge.<\/p>\n

\n\tOne advantage for Mesoblast<\/span> is the path to market for MPCs<\/span> is fast, as the FDA in the US requires only one Phase II and one pivotal trial before approving a stem cell therapy. This suggests it may be only a relatively short time before Mesoblast<\/span> begins to yield commercial revenues.<\/p>\n

\n\tAs further successful trial data emerge Bell Potter sees scope for Mesoblast<\/span> to be a candidate for merger and acquisition activity, as Big Pharma<\/span> is likely to be attracted to the long-dated patent protection Mesoblast<\/span> enjoys. Any acquisition would also give the buyer first mover advantage, as Mesoblast<\/span> is ahead of the pack in terms of trials of its MPC<\/span> technology.<\/p>\n

\n\tAll of this implies value for Mesoblast<\/span> shares, as Bell Potter's analysis has generated a base case valuation for the stock of $11.14 and a more optimistic valuation of $21.59. Price target has been set around the middle of this range at $16.00 and a Buy rating retained. In Bell Potter's view, Mesoblast<\/span> is undervalued on the potential heart application for MPCs<\/span> alone.<\/p>\n

\n\tShares in Mesoblast<\/span> have traded inside a range of $2.29 to $9.95 over the past year. <\/p>\n

\n\tNone of the eight brokers making up the FNArena<\/span> database offer coverage of Mesoblast<\/span> despite a market capitalisation<\/span> for the company of a little more than $2 billion.<\/p>\n

\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"