Mesoblast is an Australian biotech company listed on the Australian Stock Exchange (MSB). I invested in this company some time ago, because I believe in the technology and its potential. Over the last three years I have been on a rollercoaster as I have watched the share price go up and down. On Friday, 4th August, I watched the price drop close to 60% as the FDA put up yet another barrier to getting one of their products to market. So I thought I would share my experience with this company in my share market investing journey.
My investment
I purchased a small amount of shares in early June, 2020, at a price of 3.48 per share. I didn’t put too much in. A calculated gamble you might say. A short time later I was feeling pretty good!
What had started at 3.48 had spiked up into the $5 range after some good news.
Good Times, Bad Times
But let’s take a look at what has happened since. As you can see, it’s been a long and slippery downhill slope since then and not much joy. It seems like the FDA keep dangling the carrot. As soon as Mesoblast get close, they pull it a bit further away. It would be super easy for their friends and family to short this stock!
You can see above that the arse dropped out of it from 5.08 to 3.19, before it spiked again. Another atomic drop followed. This time 4.60 to 2.17. These are both drops that occurred over 1 or 2 days. So, you don’t really seem them coming. You just have to grit your teeth, hang in there and accept it.
After the Rain Comes the Hail
As I write this, the stock suffered another atomic drop last Friday. The FDA decided yet another patient trial was required. When the stock was halted during the week pending an announcement, I really got my hopes up that this time they would finally get some good news. But not to be.
The share price tumbled by almost 60% during the day.
Personal Learnings
The one true takeaway for me is that investing in companies that do medical research (or any type of research) can be pretty risky. It takes such a long time for research to have any sort of commercial payoff. You are at the mercy of the market, financiers and government departments who approve this research. So for something like this, you need to realize that potentially everything you put in can disappear. You should not put in more than you are prepared to lose!
In future I would be loath to invest in companies like this until I feel they are closer to getting approvals for their products. Because it takes a lot of time for something nice to happen. In the meantime, you watch your investment go up and down (and down) drastically, amongst long periods of flatlining. It’s impossible to predict whether events will be positive or negative, so you have to have a lot of nerve to keep holding the stock. And being a company with potential, there are no dividends to offset all the inevitable disappointments.
I think in future if I have a little bit of money to gamble with, then I would probably look at keeping my money in my pocket and pouncing on bad news and the atomic drops in companies like this. Make some small (fun) profits on the recoveries made after those atomic drops!
Mesoblast’s Future
I believe in the technology and the guy driving the company. The research they are doing and the potential products could have a massive impact on health. Dr Silviu Itescu has poured his heart and soul into this, and it’s clear he has an unwavering belief in the power of mesenchymal lineage stem cells. These cells are powerful. They are critical to helping inflammation, tissue repair, modulating the bodies immune response and blood vessel function and regeneration.
Mesoblast have a range of potential products that can be game-changers for things like:
- Graft vs Host syndrome — for things like rejection of bone marrow transplants. Many kids either die or get very sick from this rejection. There is no proper treatment for this.
- Chronic lower back pain — usurping the current opioid band-aid.
- Inflammatory Bowel Diseases — things like Crohn’s and Colitis. These are miserable afflictions with no really good alternative treatments.
- ARDS — Acute Respiratory Distress Syndrome (often triggered by COVID 19)
- Cardio Vascular Disease and Issues — We all know someone affected by heart issues.
The market for these therapies is huge, as is their impact. I will still be in for the ride when it happens.
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