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Why Mesoblast limited (ASX:MSB) shares could rocket higher today

The Mesoblast limited (ASX: MSB) share price is likely to be amongst the best performers on the market on Wednesday following the release of a positive announcement after the market closed on Tuesday.

In overnight trade the innovative cell-based medicines developer’s US-listed shares rocketed 12.5% higher on the news.

What happened?

Yesterday afternoon Mesoblast announced that it has entered into a strategic alliance with China’s Tasly Pharmaceutical Group for its MPC-150-IM and MPC-25-IC product candidates in China.

Tasly Pharmaceutical Group, one of China’s largest pharmaceutical companies, will receive exclusive rights and fund all development, manufacturing, and commercialisation activities in China for the product candidates.

Furthermore, Tasly will pay the company a US$20 million upfront technology access fee and a further US$20 million through an equity purchase in Mesoblast at $1.86 per share. Mesoblast’s share price last closed at $1.60.

The company will also receive US$25 million on product regulatory approvals in China and double-digit escalating royalties on net product sales.

The transaction is subject to governmental approvals from the People’s Republic of China.

What are these product candidates?

Both MPC-150-IM and MPC-25-IC are allogeneic (off the shelf) mesenchymal precursor cell (MPC) product candidates.

MPC-150-IM is designed for the treatment or prevention of chronic heart failure and MPC-25-IC is designed for the treatment or prevention of acute myocardial infarction.

Should you invest?

This is undoubtedly a positive development for Mesoblast and I’m not at all surprised to see its US-listed shares surge higher on the news.

Tasly clearly sees a lot of promise in the candidates and must be reasonably confident that they will end up coming to market. This could make Mesoblast worth a closer look.

However, it is worth remembering that the biotech space is a high risk part of the market and largely unsuitable for investors with a low tolerance for risk.

In addition to Mesoblast, I think investors ought to look at Cynata Therapeutics Ltd (ASX: CYP) and CSL Limited (ASX: CSL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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