Mesoblast is that rarest of beasts, a ground-breaking Australian biotech company with a solid international profile. It is developing a range of treatments using stem cell technologies that can be applied in regenerative medicine. Target applications include bone, cartilage and vertebral disc regeneration along with cardiac and vascular disease treatments.
As this week's chart, produced by Robert Brain, a director with the Australian Technical Analysts Association shows, Mesoblast has been on a wild ride in recent years. It's also a seeming favourite of day traders who bounce the price around as if it were a basketball.
Back in mid-2011 the price reached an all-time high of $10.04 after spending six months between $7.50 and $9.50. Once the heights were scaled sellers stepped in, pushing the price down 34 per cent to $6.64 in November 2011. Over the next four months to March 2012 the buyers came back and attempted to better $8.
Ultimately they were unsuccessful and the stock then fluctuated wildly within a falling range. It became, Brain observes, "a day traders' toy" as they bought near the bottom of its range and sold near the top.
The stock bottomed three times in five months at between $5.10 and $5.14 till early this year and a new formation was emerging.
The peaks between February and August were consistently lower while the troughs grew higher creating congestion on the chart. This pattern is known as a Descending Triangle and indicates a growing consensus on value between buyers and sellers. That pattern now appears broken, with a rising price trend line since September indicating that Mesoblast might be about to go for a run.
However, investors should be warned that the red horizontal resistance lines on the chart have been created by previous peaks. Investors who bought at these levels and sat on losses may be tempted to sell when these peaks are regained so any upward move could experience serious turbulence in coming months.
If you buy on the fundamentals then Mesoblast may not be the stock for you. Earnings per share and cashflows are negative and are expected to be for the next two years. Last year's loss was $61 million.
But if you're prepared to buy the potential, chairman Brian Jamieson says you could be well placed. A recent $170 million global capital raising gives the company $315 million to fund ongoing development. Smart money in the form of Alex Waislitz's Thorney Holdings is on the share register and founder and leading shareholder Silviu Itescu's stake is currently worth around $430 million.
This column is not investment advice. firstname.lastname@example.org. ataa.com.au
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