Mesoblast Limited

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Mesoblast Limited (ASX: MSB) is engaged in the development of regenerative medicine products. The company's portfolio of Phase III comprises remestemcel-L, which is used for the treatment of pediatric steroid-refractory acute graft versus host disease (SR-aGVHD).

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~34.18% of the total shareholding. M & G Investment Management Ltd. [Activist] and Itescu (Silviu) are holding a maximum stake in the company at ~12.64% and ~9.36%, respectively.

1.4 Key Metrics: The fixed asset turnover ratio in FY22 was around 0.92, which increased from 0.67x in FY21. Further, the asset-to-equity ratio improved in FY22, which was around 1.33x compared to the industry median of 1.39x. Below is captured the trend of total revenue and selling general & administration expenses:

Section 2: Business Updates and Financial Highlights

2.1 Business Updates:

2.2 Results Highlights of 1QFY23:  Remestemcel-L has been provided with Fast Track Designation and BLA Priority Review from FDA. The company is working towards the potential US approval for remestemcel-L and is expected to launch its first product in 1HCY23.

2.3 Operating Cash Flow Update: The company recorded USD 92mn in net operating cash burn on a rolling basis from December 2020 to September 2021, whereas from December 2021 to September 2022, the net operating cash burn declined to USD 62mn.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Per Share Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is November 23^rd, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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