Mesoblast [ASX:MSB] Shares Fall 12% On Litigation Update

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Biotech stock Mesoblast [ASX:MSB] plunged 12% on Tuesday after updating the market on a second class action lawsuit lodged against it.

With today’s fall, Mesoblast shares are now down 65% over the past 12 months, hitting a new 52-week low:

ASX:MSB stock prices chart


Mesoblast’s litigation update

On Tuesday, Mesoblast sought to update investors on two of its most recent lawsuits concerning misrepresentation claims served by law firms William Roberts Lawyers and Phi Finney McDonald.

In a statement, Phi Finney McDonald told the Australian Financial Review:

Mesoblast reported the progress of clinical trials in a manner which was likely to mislead the market.

We intend to allege Mesoblast made claims regarding the success of trials that did not compare apples to apples in terms of clinical outcomes.’

The most recent class action lawsuit accuses the medical research company of misleading investors as to the shortcomings of in its Remestemcel-L product’s R-aGVHD disease trails in treating children with COVID-19.

Mesoblast aimed to reassure investors that it will ‘vigorously defend both proceedings’.

The company acknowledged that it recently experienced another litigation of similar assertions, resulting in a $2 million settlement fee, and with no admission of liability.

Mesoblast’s insurer paid the settlement, excluding policy-bound excess.

Preliminary approval for settlement was granted by the courts on 9 April, with a final hearing booked for 15 August.

MSB share price outlook challenging times for laying foundations

Mesoblast has accumulated a loss of US$70 million across the nine months ending in March and US$717.5 million since the company’s start-up.

As investors start to look for companies with reserves of cash and strong balance sheets, Mesoblast’s cash burn is an issue.

Especially since the cash burn is set to continue as Mesoblast must continue to spend on research and development.

With the ASX 200 falling 4.5% on Tuesday alone, now might not look like the most appealing time to be looking to enter the market.

With the latest US inflation data coming in hotter than expected, the markets are forlornly pricing in more aggressive rate hikes by the Federal Reserve.

An aggressive rate hike will likely depress US stock prices further, spilling over into the ASX.

But indiscriminate sell-offs can offer great prices.

Opportunities are still lurking, even in today’s market, if you know where to look.

So where do you look?

Well, our small-cap expert Callum Newman has a strategy for picking-out those ‘left-for-dead’ stocks that are most likely to bounce back.

You can find out how he does it, ‘grave-dancer’ style, here.


Kiryll Prakapenka,

For Money Morning

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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