Mesoblast limited (ASX: MSB) share price takes off on rampant speculation

Mesoblast limited (ASX: MSB) is a cash furnace of a company that has racked up accumulated losses of over $500m. According to its website it uses its “mesenchymal lineage cell technology platform” to produce “allogeneic cellular medicines”. These medicines can be used to treat inflammation in diseases that are poorly understood and have no know effective treatment.

On Friday, the company reported that a trial of 12 ventilator-dependent COVID-19 patients saw 10 of those survive after being “treated with two infusions of Mesoblast’s allogeneic cell therapy remestemcel-L”.

The Mesoblast announcement said: “These results contrast with only 9% of ventilator-dependent COVID-19 patients being able to come off
ventilators with standard of care treatment and only 12% survival in ventilator-dependent COVID-19 patients at
two major referral hospital networks in New York during the same time period.”

This is not proof the treatment works, but has justified “the design of the clinical protocol for the randomized, placebo-controlled Phase 2/3 trial of remestemcel-L in ventilator-dependent COVID-19 moderate/severe ARDS patients across North America.”

My question is: when Mesoblast says, “ventilator dependent” do they mean requiring mechanical ventilator or requiring an invasive ventilator? It’s not entirely clear to me. In any event, I’d take the 12% figure quoted with some caution, since other hospital systems seem to be getting better survival rates, even once people are ventilated. It looks to me that the study that this figure was based on is still in progress, given it talks of 72.2% remaining in hospital, with the final outcome unknown.

In any event, Mesoblast shareholders will no doubt be delighted by the strong rise in share price today. And recent speculators trading the stock will be hoping that the narrative that the company can help treat covid-19 captures the imagination of others, and pushes the share price further, so they can sell for a quick profit.

Meanwhile, long term “investors” will be hoping that Mesoblast actually has a treatment for covid-19. I hope they do too, although I wouldn’t bet on it.

Zooming out, even after a 45% rise in the share price this morning, Mesoblast has produced extremely trashy long term returns for long term investors, as the chart below shows.

This is no doubt because the company has never produced revenues of more than $30 million in a single year, over the last decade, but has managed to produce a loss of over $30 million in at least 7 of the last 10 years.

I have no intention on speculating on this stock, and do not own shares in the company, which has a market cap of over $2 billion and seems years away from ever making a profit, assuming it ever does.

I hope Mesoblast really can help people recover from covid-19, and if it really does have a treatment, then shareholders will deserve the gains that may well eventuate. Equally, if it does not have a treatment, shareholders will deserve their losses; such is the nature of punting on high risk cash furnace bio-techs. Good luck, I say!

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