The Mesoblast limited (ASX: MSB) share price was one of the best performers on the ASX 200 in November.
The biotechnology company's shares raced a massive 33% higher over the month.
Why did the Mesoblast share price zoom higher in November?
The catalyst for the strong gain by the Mesoblast share price in November was the announcement of a major deal with pharma giant Novartis.
That deal has seen Novartis sign an exclusive worldwide license and collaboration agreement for the development, manufacture, and commercialisation of Mesoblast's mesenchymal stromal cell (MSC) product remestemcel-L for the treatment of COVID-19 Acute Respiratory Distress Syndrome (ARDS).
According to the release, Novartis will pay US$50 million upfront and then upwards of US$1.25 billion in milestone payments.
This news went down very well with analysts at Bell Potter. They described it as a "fantastic deal" for Mesoblast. Furthermore, they like that it provides greater certainty in relation to the manufacturing and commercialisation of the product for COVID-19 ARDS.
Can the Mesoblast share price go higher?
This month, Bell Potter has looked closer at the deal and adjusted its price target accordingly.
The broker has a (speculative) buy rating and $7.40 price target on the company's shares. This is up from $7.00 previously and compares to its last close price of $4.43.
According to the note, Bell Potter has lifted its FY 2021 earnings forecasts to reflect the deal.
It commented: "Over the next 12 months we expect MSB to receive US$32.5m in milestones from partner Grunenthal for back pain product and US$105m from partner NVS for successful results from Phase 3 trial and approval for COVID-19 ARDS for remestemcel-L. In addition, US$35m is available to MSB on its existing debt facilities, which provides a runway to at least year end FY22."
What else did it say?
There are also a number of catalysts on the horizon which it feels could take its shares higher.
"Phase 3 COVID-19 ARDS trial has surpassed recruitment of 180 patients required for third and final interim analysis, which we expect to be completed by mid-Dec'20. The trial is now expected to complete recruitment in early 1QCY21, with results later in 1QCY21. Results from both Phase 3 back pain and heart failure trials are expected in Dec'20, which we expect will be key catalysts for the stock, given these indications account for the majority of our valuation for MSB," it concluded.
