Shares in Mesoblast Limited (ASX: MSB) have soared more than 30% in just over 24 hours following yesterday’s announcement of a strategic partnership with a German pharmaceutical business.

Who Is Mesoblast?

Mesoblast is a leader provider of allogeneic (off the shelf) cellular medicines. It owns a portfolio of late-stage product candidates with three product candidates in Phase 3 trials, being acute graft versus host disease, chronic heart failure and chronic low back pain due to degenerative disc disease. The company has facilities in Melbourne, New York, Singapore and Texas and is listed on both the ASX and the NASDAQ.

Strategic Partnership

Before the market opened yesterday, Mesoblast released a statement to the ASX saying that it had agreed to a funding source and a strategic partnership with German pharmaceutical company Grünenthal.

The reason investors have gotten excited is that if the back pain treatment can be successfully commercialised, and if Mesoblast can meet its ambitious sales targets, then it stands to earn up to $1 billion in royalty payments.

The purpose of the partnership with Grünenthal is to develop and commercialise a drug for the treatment of chronic low back pain due to degenerative disc disease.

Should You Jump On The Rising Share Price?

After releasing the news before the market opened yesterday, Mesoblast shares finished the day 22.3% higher and has climbed a further 9% to lunchtime today.

Although it might be tempting to jump on for fear of missing out, I would caution against buying in. Mesoblast, like many companies in the biotech space, has a great story and looks perpetually promising but has delivered very little in way of profits.

That is not to say I don’t think Mesoblast can succeed, I just happen to think there are many lower risk options available on the ASX that have a proven product or service which provides for much greater earnings visibility.



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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Luke has no financial interest in any companies mentioned.