After hitting levels higher than $3 in early January, shares in Mesoblast Ltd (ASX: MSB) have largely been on the slide, which is creating a buying opportunity, according to the analyst team at Canaccord Genuity.
Mesoblast actually had some good news this week, which we'll get to later, but first, let's look at why the Canaccord team is bullish on the stock.
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Strong product pipeline
The company held a research and development day last week, which the Canaccord team attended.
They said they came away maintaining their buy rating on the stock with a bullish share price target, which we'll get to shortly.
They added:
The R&D Day reiterated Mesoblast's expectations to double its current revenue run-rate of About US$100m for RYONCIL in paediatric aGVHD in the medium term. Ongoing revenue growth efforts for the paediatric population include on-site access to RYONCIL, and progressing the treatment into 1L therapy. We garnered more colour on trial design for RYONCIL's expansion into the adult population…its likely current off-label use in adults suggests to us that uptake will likely be rapid (about US $600m peak sales), should the trial read positive in less than 18 months.
Canaccord said they still had questions about another Mesoblast compound, Revascor, around its regulatory and commercial strategy in heart failure, "mainly related to guiding physicians to understand which patients may benefit (and how the FDA will view this)".
Further down the track, Canaccord said, Mesoblast was also targeting a chronic lower back pain treatment, with clinical trial results and potential approval 12 and 24 months away, respectively.
Canaccord has a price target of $3.23 on Mesoblast shares, which would be a return of 44.2% if achieved.
More good news
The broker's research report was issued before this week's news that Mesoblast had acquired chimeric antigen receptor (CAR) platform technology, which would enable the manufacture of precision-enhanced cell products.
Mesoblast said it "plans to incorporate the engineered CARs to further boost effectiveness of Mesoblast's products, with the goal of enhancing the target specificity and augmenting inherent properties of immunomodulation and tissue regeneration''.
The company added:
Mesoblast's mesenchymal lineage stromal cell (MSC) technology platforms, including the first and only FDA-approved MSC product in the U.S., are designed for the treatment of tissue-specific inflammatory diseases due to their inherent homing capabilities and immunomodulatory properties. The aim of genetically engineering CAR constructs into MSCs is to substantially enhance targeted homing to inflamed tissue resulting in greater potency.
Mesoblast is currently valued at $2.8 billion.
