Mesoblast Downgraded To Neutral, Target Price Cut In Half

Credit Suisse analysts downgraded Mesoblast limited MESO to Neutral from Outperform. The brokerage also slashed its price target to $5 from $10.

Following the news about a Teva partnership, analysts said, "We are moving to the sidelines and downgrading Mesoblast shares to Neutral from Outperform…..We think that with time Mesoblast will be able to find a new partner for this program, but it could take some time and we are cautious. We have lowered our probability of success in the chronic heart failure program from 40% to 25% and increased spending on the trials."

Credit Suisse said they were maintaining the same market opportunity and terms they assumed for the Teva deal. The brokerage would become more positive on shares when they could see partnerships and get closer to important data readouts that serve as value inflection points.

The analysts viewed Mesoblast trading halt is fairly normal practice in Australia until greater visibility could be offered. As US analysts, "We have never really seen such a long halt in astock, so we asked management. According to mgmt., the 10-day trading halt is a mechanism that they have at their disposal to make sure investors don't trade without full information," the analysts said in a note.

The brokerage also believes it enabled them to do three key tactical things: 1) complete their conversations with Teva, 2) evaluate their resources to complete the trials for approval in heart failure, and 3) make sure they have the financial resources available to execute the trial.