Melbourne, Sep 1, 2008 (ABN Newswire) - Mesoblast Limited's (ASX:MSB)(OTC:MBLTY) product has statistically significant higher fusion rates in anterior cervical interbody operations compared to a competitor. We believe the competitor's FY08 cervical fusion sales were cA$325m, but has recently been forced to exit the market.
Mesoblast (MSB.AX): FY08: spinal shock
Long term (12 months): Buy
Target price: A$1.50 (from A$1.30)
Reason: Change of target price
FY08 result - higher-than-expected interest income
MSB posted an NPAT of -A$10.1m for FY08, with a loss below our forecast of -A$10.4m due to higher-than-expected interest income. We believe MSB has sufficient cash (A$14.1m in FY08) to fund its clinical programme for the next one to two years.
A new cervical spine opportunity
Major recent news relates to a new indication for MSB's osteoinductive adult mesenchymal precursor cells (MPCs). MSB recently issued data showing that MSB's MPCs achieved a statistically significant improvement in cervical fusion rates compared to Medtronic's osteoconductive bulking agent (MasterGraft Granules). Given the recent issues with Medtronic's osteoinductive Recombinant Human Bone Morphogenic protein (rhBMP) product (also used in cervical fusion operations) we believe a significant opportunity exists with MSB's MPCs being potentially useful over the medium term in anterior cervical interbody fusion operations.
MSB's MPCs may address the gap in the market for cervical fusion
In July 2008, the US FDA issued a statement that the safety and effectiveness of rhBMP in the cervical spine had not been demonstrated and these products were not approved by FDA for this use. We believe the anterior interbody cervical spine fusion market for BMPs is worth cUS$325m. As a result of the FDA decision, we believe there is currently no synthetic bone graft approved for anterior interbody cervical spine fusions. Medium-term, MSB's MPCs may address this gap in the market.
Buy rating maintained, target price A$1.50
The major changes to our forecasts have been: 1) we believe MSB will get its product to market in FY11 (previously 2HFY10) - hence we believe MSB will not be cash flow positive until FY11; and 2) given the anterior cervical interbody fusion opportunity, we believe initial sales of MSB's cells will be greater, and have updated our forecasts accordingly. As a result of changes to forecasts, our DCF valuation and 12-month target price have increased by 15.4% to A$1.50 per share.
To view the full report, please visit:
http://mesoblast.com.au/investor_analysis.php
Mesoblast (MSB.AX): FY08: spinal shock
Long term (12 months): Buy
Target price: A$1.50 (from A$1.30)
Reason: Change of target price
FY08 result - higher-than-expected interest income
MSB posted an NPAT of -A$10.1m for FY08, with a loss below our forecast of -A$10.4m due to higher-than-expected interest income. We believe MSB has sufficient cash (A$14.1m in FY08) to fund its clinical programme for the next one to two years.
A new cervical spine opportunity
Major recent news relates to a new indication for MSB's osteoinductive adult mesenchymal precursor cells (MPCs). MSB recently issued data showing that MSB's MPCs achieved a statistically significant improvement in cervical fusion rates compared to Medtronic's osteoconductive bulking agent (MasterGraft Granules). Given the recent issues with Medtronic's osteoinductive Recombinant Human Bone Morphogenic protein (rhBMP) product (also used in cervical fusion operations) we believe a significant opportunity exists with MSB's MPCs being potentially useful over the medium term in anterior cervical interbody fusion operations.
MSB's MPCs may address the gap in the market for cervical fusion
In July 2008, the US FDA issued a statement that the safety and effectiveness of rhBMP in the cervical spine had not been demonstrated and these products were not approved by FDA for this use. We believe the anterior interbody cervical spine fusion market for BMPs is worth cUS$325m. As a result of the FDA decision, we believe there is currently no synthetic bone graft approved for anterior interbody cervical spine fusions. Medium-term, MSB's MPCs may address this gap in the market.
Buy rating maintained, target price A$1.50
The major changes to our forecasts have been: 1) we believe MSB will get its product to market in FY11 (previously 2HFY10) - hence we believe MSB will not be cash flow positive until FY11; and 2) given the anterior cervical interbody fusion opportunity, we believe initial sales of MSB's cells will be greater, and have updated our forecasts accordingly. As a result of changes to forecasts, our DCF valuation and 12-month target price have increased by 15.4% to A$1.50 per share.
To view the full report, please visit:
http://mesoblast.com.au/investor_analysis.php
About Mesoblast Limited
Mesoblast Limited (ASX:MSB) (USOTC:MBLTY) is committed to the development of novel treatments for orthopaedic conditions, including the rapid commercialisation of a unique adult stem cell technology aimed at the regeneration and repair of bone and cartilage. Our focus is to progress through clinical trials and international regulatory processes necessary to commercialise the technology in as short a timeframe as possible. Mesoblast has the worldwide exclusive rights for a series of patents and technologies developed over more than 10 years relating to the identification, extraction and culture of adult Mesenchymal Precursor Cells (MPCs). The Company has acquired 38.4% of Angioblast Systems Inc., an American company developing the platform MPC technology for the treatment of cardiac, vascular and eye diseases including repair and regeneration of blood vessels and heart muscle. Mesoblast and Angioblast are jointly funding and progressing the core technology. Mesoblast's strategy is to maximise shareholder value through both corporate partnerships and the rapid and successful completion of clinical milestones.
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