In the yin-yang world of biotechnology investing good news can result in strange effects as share prices fall despite companies' progressing further down the path to commercial success.
Indeed the scientists and investors at Mesoblast limited (ASX: MSB) might be cursing their yin-yang after the stock collapsed in half, despite the business raising around $80 million on the NASDAQ recently to help fund its commercial aspirations.
A NASDAQ listing was once thought of as a land of milk and honey for Australian tech startups, but Mesoblast has proven the opposite, although it does still have several brokers and an evangelical following of retail shareholders who still believe in the potential of the company's technology.
In fact broker Bell Potter is retaining a $4.50 price target on the stock, which suggests a 200% upside from here, or a tripling in value from today's price of $1.50.
Elsewhere (lesser known) Melbourne-based broker Lodge Partners Research has described it as a VERY STRONG BUY stating that the company now has US$136 million cash on its balance sheet to help fund it through many "value creating and potentially cash-generating events".
While analysts at US broker Ladenburg Thalmann have slapped a US$17.25 price target on the US scrip that currently sells for US$5.96, again suggesting a 200% upside or tripling in price for believers in the company's commercial potential.
For now it seems Mesoblast is facing a loss of investor confidence given its steep cash burn rate and calamitous Nasdaq-listing that has resulted in substantial dilution for existing holders. Moreover, questions remain over management's decision making in structuring a Nasdaq-listing that is unlikely to find itself in an MBA student's textbook on how to successfully raise capital.
Another biotech junior to have struggled recently due to a high cash burn and lack of revenues is Ademdus Ltd (ASX: AHZ). It has been attempting to sell its surgical heart patch named Cardiocel, although it has also been forced to repeatedly raise capital as sales did not hit the levels that investors perhaps initially expected.
