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Why the Mesoblast share price is going nuts today

The Mesoblast limited (ASX: MSB) share price is up 17% to $1.70 today after the regenerative medicine business announced it has agreed a funding source and ‘strategic partnership” with German pharmaceutical business Grünenthal.

It’s not hard to see why investors are bidding the stock higher today given that Mesoblast reports the deal could see it earn up to a $1 billion in royalty payments if its degenerative back pain treatment is successfully commercialised and sales targets met. 

The working partnership agreed is to “develop and commercialise MPC-06-ID, a Phase III allogeneic cell therapy candidate for the treatment of chronic low back pain due to degenerative disc disease in patients who have exhausted conservative treatment options.”

Moreover, “Mesoblast will receive up to US$150 million in upfront and milestone payments prior to product launch, as well as further commercialisation milestone payments. These payments include commitments up to US$45 million within the first year comprising US$15 million on signing, US$20 million on receiving regulatory approval to begin a confirmatory Phase III trial in Europe, and US$10 million on certain clinical and manufacturing outcomes.”

While all this sounds exciting it will mean nothing if the targets are not met and it’s fair to say Mesoblast has been long on promise, but short on delivery for a long time. 

Other speccy biotech stocks currently exciting punters include Paradigm Ltd (ASX: PAR) and Next Science Ltd (ASX: NXS).

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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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