Should I invest $2,000 into Mesoblast shares?

I think Mesoblast Ltd (ASX: MSB) is one of the more interesting healthcare shares on the ASX, although it has also been a challenging investment over the years.

After a long journey developing its treatments, the company is finally generating meaningful revenue from an approved product.

But with Mesoblast shares trading around $1.78, would I invest $2,000 today?

Here's what I think.

What does Mesoblast do?

Mesoblast is a biotechnology company developing cell-based treatments for serious medical conditions.

Its technology uses specialised cells obtained from adult donors, which can be grown in large quantities and prepared for use in different patients.

These cells are designed to help regulate inflammation, potentially offering treatment options for conditions where existing medicines aren't sufficiently effective.

Its first major commercial breakthrough came in December 2024, when the US Food and Drug Administration (FDA) approved Ryoncil.

This treatment is designed for children suffering from steroid-refractory acute graft-versus-host disease.

It's a potentially life-threatening complication of bone marrow transplants, where donated immune cells attack the patient's healthy tissues.

Ryoncil aims to control the resulting inflammation when steroid treatment hasn't worked.

I think securing FDA approval was a significant achievement for Mesoblast, particularly given the difficulties it had experienced getting there.

A long road to commercialisation

Mesoblast spent years developing its technology, investing in clinical trials, and attempting to secure regulatory approval.

Its journey included setbacks in 2020 and 2023, when the FDA requested additional evidence and manufacturing-related information before it would approve Ryoncil.

Those delays were costly and frustrating for shareholders. But the company is now in a much stronger position commercially.

In FY26, its first full financial year of Ryoncil sales, the treatment generated approximately US$115 million in net revenue.

And there are encouraging signs that demand is continuing. In its latest quarterly update, Mesoblast reported Ryoncil revenue of US$28 million, up 44% compared with the prior corresponding period.

I think that demonstrates genuine progress in establishing the treatment in the US healthcare system.

The next opportunity is to expand Ryoncil into additional patient groups, including adults suffering from the same condition.

Mesoblast is also developing treatments for chronic lower back pain and heart failure. If these programmes succeed, they could significantly expand the company's commercial opportunities.

Would I buy Mesoblast shares?

This is where I would be cautious. Although Mesoblast has made considerable progress, it is still working towards sustainable profitability.

The company recorded a US$57.5 million net loss in FY26, and further investment in clinical trials and commercial operations will be required.

Consensus forecasts suggest another loss in FY27, followed by a small profit in FY28. By FY29, analysts are forecasting earnings per share (EPS) of approximately 26.1 cents.

If Mesoblast achieves those expectations, its current share price could eventually look very cheap.

But that is a substantial improvement to deliver in just a few years. Further regulatory delays, disappointing clinical results, or weaker-than-expected sales could significantly change that outlook. There is also the possibility of additional capital being required.

I think those uncertainties make Mesoblast shares difficult to recommend as a straightforward buy.

Foolish takeaway

For now, I would rate Mesoblast shares as a hold.

I like the progress the company has made, particularly its successful launch of Ryoncil, and I think there could be substantial growth ahead.

For investors with a high tolerance for risk and an otherwise balanced portfolio, a $2,000 investment could be worth considering.

But personally, I would prefer to see more evidence of sustainable profitability before becoming more confident in the investment case.

The post Should I invest $2,000 into Mesoblast shares? appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. 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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