Mesoblast shares dip then flip on $800,000 insider buy

Mesoblast Ltd (ASX: MSB) shares started Tuesday trading in the red before reversing direction amid news of a major company insider purchase.

The Mesoblast share price is $2.81, up 1.08% at the time of writing.

The ASX biotech share is outperforming the S&P/ASX All Ordinaries Index (ASX: XAO), which is up 0.36%.

What's been happening lately?

We have to remember that Mesoblast shares are resettling after a major price spike in late December.

Mesoblast surged 69.2% between 19 December and 2 January after the company announced the long-awaited approval from the United States Food and Drug Administration for its flagship drug, Ryoncil.

Mesoblast hit a four-year high of $3.37 per share on 2 January.

Ryoncil, or remestemcel-L, treats the devastating steroid-refractory acute graft-versus-host disease (SR-aGvHD) in children aged two years and older.

It's a life-threatening condition with a high mortality rate.

Every year in the United States, approximately 10,000 patients undergo an allogeneic bone marrow
transplant. About 1,500 of them are children.

Approximately 50% develop aGvHD, and almost half of those do not respond to the current first-line treatment of steroids.

Mesoblast's astounding share price surge in December led to the biotech topping the 5 best ASX All Ords share list of 2024. Overall, Mesoblast stock skyrocketed by 900% last year.

Therefore, it's not surprising that the Mesoblast share price has corrected since December's extraordinary spike.

A $260 million global private placement completed last week to fund the launch of Ryoncil in the US has also driven Mesoblast shares lower.

This is usual, given a placement means new shares are put into the market, thereby diluting everyone else's stake in the company.

The placement had an offer price of $2.50 per new share. Mesoblast offered the new shares primarily to existing major shareholders in the United States, the United Kingdom and Australia.

The company did not offer an accompanying share purchase plan (SPP) to ordinary retail investors.

Insider takes advantage of weaker share price

The latest official news from Mesoblast is that executive director and chief medical officer Dr Eric Rose has invested more than half a million US dollars of his own money to further invest in the biotech.

Dr Rose acquired 30,310 American Depositary Shares (ADS) on-market on 16 January. Each ADS represents 10 ordinary Mesoblast shares.

He paid US$16.70 per ADS for a total consideration of US$506,214 (A$806,567).

Insider buys are usually inspiring and comforting for existing shareholders. They imply that the insider feels confident in the company's future.

This is a particularly helpful signal now, especially for Mesoblast shareholders who may be regretting not selling at the four-year peak (as if anyone could have picked it!) on 2 January.

Are Mesoblast shares a buy?

For now, John Athanasiou of Red Leaf Securities has a hold rating on Mesoblast shares.

He recommends that existing shareholders and potential investors wait until Ryoncil is commercialised in the US before buying more Mesoblast shares.

On The Bull, Athanasiou said:

Mesoblast is on track for another promising year as it nears commercialising Ryoncil.

We expect this development to boost revenue and market share.

However, given the impressive rally in MSB shares during 2024, we believe it's prudent to wait until Ryoncil is fully commercialised before making new investments.

The post Mesoblast shares dip then flip on $800,000 insider buy appeared first on The Motley Fool Australia.

Motley Fool contributor Bronwyn Allen has positions in Mesoblast. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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