Is the Mesoblast (ASX: MSB) share price still good value?

The Mesoblast limited (ASX: MSB) share price has rocketed to a new 52-week high but I won’t join investors in betting on the biotech stock.

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The Mesoblast limited (ASX: MSB) share price rocketed 12.0% higher to lead the S&P/ASX 200 Index (ASX: XJO) winners in yesterday’s trade.

Shares in the Aussie biotech company were in high demand and trading at a new 52-week high despite no new announcements on the ASX. So, what’s driving the Mesoblast share price higher right now and should we all be jumping on board?

Why the Mesoblast share price is on the move

Once again it’s anticipation surrounding a big announcement that is pushing the Aussie biotech’s value higher.

Mesoblast’s value surged last month after meetings with the US Oncologic Drugs Advisory Committee (ODAC) as well the US Food and Drug Administration (FDA).

The FDA is set to review the use of Mesoblast’s remestemcel-L treatment, known as RYONCIL, for acute graft versus host disease on Wednesday.

Investors are clearly banking on that being a positive result after ODAC’s recommendation last month.

Following yesterday’s move, the Mesoblast share price has now rocketed 169.3% this year to $5.50 per share.

Is it still good value at $5.50 per share?

I think the value-add is a little more questionable at the current Mesoblast share price.

It’s easy to get caught up in the hype and momentum behind a top ASX share. That’s especially the case in the biotech space in the current environment.

I think the investment proposition at this point is really about the growth story rather than the fundamentals. The FDA approval would be a huge boost for the company’s sales prospects in the United States.

Strong earnings could help underpin the Mesoblast share price valuation at $3.2 billion. That’s a very high multiple given the biotech company recently reported a full-year US$77.9 million loss.

Mesoblast could still be a participant in the coronavirus race. The company is looking at the possibility of treating COVID-19-induced acute respiratory distress syndrome. 

If you’re big on the healthcare and biotech sectors in early 2021 then Mesoblast could still be a good buy.

Foolish takeaway

The Mesoblast share price has been surging in 2020 but I think it’s bit too hot for my liking.

The FDA meeting has big implications for its potential sales but I don’t think I’ll be betting on the outcome of that decision by buying any time soon.

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Motley Fool contributor Ken Hall 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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