In a Jan. 28 research note, analyst Jason Kolbert reported that Dawson James Securities increased its target price on Mesoblast Ltd. (MESO:NASDAQ; MSB:ASX) to $15 per share from $14 because 2020 should be "a year of pivotal data and other catalysts" for the biotech. Mesoblast is currently trading at around $9.64.
Kolbert summarized the highlights of Mesoblast as an investment.
First, Mesoblast is nearing commercialization as it has three therapeutics in Phase 3. For one, a commercial rollout could take place in the U.S. this year of the company's remestemcel-L for pediatric, steroid-refractory acute graft versus host disease. The U.S. Food and Drug Administration (FDA) is currently reviewing the related biologics license application. "Success in graft versus host disease alone, in our opinion, supports the current valuation of the company," commented Kolbert.
Second, Mesoblast's regenerative medicines advantage the biotech because the "safety profile of both allogeneic (other people's) cells and autologous (your own cells) has been very well understood and established." With other cell and gene therapy medications, one must weigh their efficacy and sustainability against the adverse effects. "Mesoblast has established a strong clinical record with a series of Phase 1, Phase 2 and now pivotal trials that has demonstrated the safety profile and which address blockbuster markets such as heart failure," Kolbert wrote.
Third, heart failure, one of the indications Mesoblast is pursing, is a "blockbuster opportunity," indicated Kolbert. Mesoblast is almost done with its Phase 3 trial of Revascor in heart failure; patients should complete their last study visit this January or February. In the U.S. alone, advanced- and end-stage heart failure affects more than 8 million people. Advanced-stage heart disease accounts for more than two-thirds of all domestic hospital expenditures and costs the healthcare system about $115 billion annually.
Fourth, Mesoblast is developing a treatment, MPC-06-ID, for chronic low back pain caused by disc degeneration. Instead of steroids, cells are injected into the intravertebral space, which thereby address the underlying cause of the pain and the resulting inflammation.
Fifth, Mesoblast is working on "the Achilles heel of cell therapy," which is manufacturing, Kolbert relayed. The biotech, together with Lonza, is developing and honing an optimized process, "tightly controlling the doublings and number of passages, without compromising cell integrity."
Kolbert concluded, "Add it up: the low risk of adverse events, the ability to manufacture millions of doses and the unmet medical needs in blockbuster market opportunities such as heart failure and degenerative disc disease," noted Kolbert. "We could see an industry shift as regenerative medicine is recognized."
Dawson James has a Buy rating on Mesoblast.[NLINSERT]
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