Mesoblast Ltd (ASX: MSB) shares had a day to remember on Friday.
The biotechnology company's shares finished the week with a gain of almost 35% to $2.41.
Investors were fighting to get hold of its shares after it released sales data for its recently approved Ryoncil stem cell therapy.
This latest gain means that the Mesoblast share price is now up over 100% since this time last year.
But despite this impressive run, one leading broker believes there are more gains to come for investors over the next 12 months.
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Broker tips Mesoblast shares to keep rising
Bell Potter was pleased with Mesoblasts' update, highlighting that its sales were in line with expectations, which bodes well for the future. And while the company is still burning cash, it feels this could come to an end in the near future. It said:
The key statistic from the quarterly cash flow was the US$13.2m in gross sales from Ryoncil for the period 28 March to 30 June which was in line with our expectation. The figure is inclusive of sales to the distributor, nevertheless it represents a reasonable proxy for hospital demand. Operating cash burn for the period was $16.6m inclusive of $1.1m in customer receipts. As revenues grow and receivables are collected in the coming weeks, we expect this cash burn will rapidly head to neutral. Closing cash at 30 June US$161m with net cash of c.$40m.
Overall, Bell Potter believes it was a "pleasing outcome". It adds:
We consider this first quarter of revenues for Ryoncil was a very pleasing outcome, particularly given the standing start, modest preparation time for launch and limited reimbursement coverage throughout the period.
In light of the above, the broker remains very positive on Mesoblast and thinks its shares would be a good pick for investors with a high tolerance for risk.
Big returns ahead
The note reveals that Bell Potter has reaffirmed its speculative buy rating on Mesoblasts' shares with an improved price target of $3.50 (from $3.40).
Based on its current share price of $2.41, this implies potential upside of 45% for investors over the next 12 months.
Commenting on its speculative buy recommendation, the broker said:
We retain our Buy (Speculative) rating. Valuation ↑ $0.10 to $3.50 (NASDAQ US$22.57). The major catalysts include revenue expansion from Ryoncil and the unrecognised value of a likely Accelerated Approval for Revascor in late stage heart failure in CY26. The starters gun has now fired in relation to the right to partner Revascor. We suggest the asking price of US$300m upfront is not unreasonable, particularly when Entresto (Novartis) generates c.US$9.4bn annually in revenues with patent cliff imminent.
