Tag: Motley Fool

At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) is on course to give back some of yesterday’s gains. The benchmark index is currently down 0.1% to 6,651.3 points.

Here’s what has been happening on the market today:

APRA removes dividend restrictions.

Shareholders of Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks were given a lift today after APRA revealed that it will no longer hold banks to a minimum level of earnings retention. This means the big four will be able to pay out as much as their earnings to shareholders as they see fit. Though, APRA has requested the banks be vigilant with their dividend payments.

Iron ore price pulls back.

BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) shares have come under pressure today and are weighing on the ASX 200. Investors have been selling their shares after the price of iron ore pulled back during overnight trade. According to CommSec, the spot iron ore price dropped approximately 3.9% to US$154.50 a tonne.

Zip signs Harvey Norman partnership.

The Zip Co Ltd (ASX: Z1P) share price is pushing higher today after announcing a partnership with the franchisees of Harvey Norman Holdings Limited (ASX: HVN) and its subsidiaries Domayne and Joyce Mayne. The partnership will see the retailers offer their customers the ability to pay with Zip’s BNPL payment solutions.

Best and worst ASX 200 performers.

The Reliance Worldwide Corporation Ltd (ASX: RWC) share price has been the best performer on the ASX 200 on Tuesday with a 3.5% gain. This is despite there being no news out of the plumbing parts company. The worst performer has been the Mesoblast limited (ASX: MSB) share price with a 12% decline following the release of disappointing trial results.

More reading

• Why Althea, Altium, Fortescue, & Retail Food Group are dropping lower
• What would more stimulus mean for ASX 200 shares?
• APRA removes dividend restrictions for the banks
• Why the Mesoblast (ASX:MSB) share price is sinking 11% lower
• Zip (ASX:Z1P) share price rises on Harvey Norman (ASX:HVN) partnership

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited and ZIPCOLTD FPO. The Motley Fool Australia has recommended Reliance Worldwide Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It has been a disappointing day of trade for the S&P/ASX 200 Index (ASX: XJO) on Tuesday. In late morning trade the benchmark index is down 0.35% to 6,636.4 points.

Four shares that have fallen more than most today are listed below. Here’s why they are dropping lower:

Althea Group Holdings Ltd (ASX: AGH)

The Althea share price is down 7% to 45.5 cents after completing a capital raising. The cannabis company has raised $6 million through an institutional placement at a 10.2% discount of 44 cents per share. It will now seek to raise a further $3 million via a share purchase plan. The proceeds will be used to accelerate its growth strategy.

Altium Limited (ASX: ALU)

The Altium share price has fallen 4% to $34.50. This follows its decision to offload its TASKING business for US$110 million on Monday in order to focus on its Altium 365 platform. This morning analysts at UBS retained their neutral rating and $36.00 price target on its shares following the news.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is down 3.5% to $21.39. Investors have been selling the iron ore producer’s shares after the price of the steel making ingredient pulled back overnight. According to CommSec, the spot iron ore price dropped a sizeable 3.9% to US$154.50 a tonne. However, despite this decline, it is still up materially over the last few weeks.

Retail Food Group Limited (ASX: RFG)

The Retail Food Group share price has crashed 23% lower to 7 cents. The catalyst for this was news that the ACCC has commenced proceedings in the Federal Court against Retail Food Group and five of its related entities. The ACCC alleges the food and beverage franchise company engaged in unconscionable conduct and made false or misleading representations in its dealings with franchisees. This is in breach of the Australian Consumer Law.

More reading

• Why the Afterpay (ASX:APT) share price is not the only rising star this year
• Is the Altium (ASX:ALU) share price in the buy zone?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises on Monday
• ASX 200 up 0.55%: Altium update, Afterpay jumps, NAB given ACCC approval

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The oil industry is in the fight of its life. It’s in the midst of another difficult downturn, the second in the past five years. However, this one seems different as the COVID-19 pandemic has caused so much demand destruction that the oil industry might never recover its former peak. That’s mainly because renewable energy hasn’t skipped a beat during the pandemic, as it has taken advantage of this downturn to grab even more market share.

Because of that, the oil industry’s future has dimmed considerably over the past year. That’s why it might be time for investors to forget about buying oil stocks and instead concentrate their efforts on the renewable energy industry.

Polar opposite outlooks

Earlier this year, oil giant BP (NYSE: BP) unveiled its latest long-term energy market outlook. The company painted a bleak picture. It sees fossil fuels losing market share to renewables even in its best-case scenario where governments don’t enact legislation that further accelerates the transition to renewables. In its business-as-usual view, fossil fuels will account for less than 70% of the total share of primary energy by 2050, down from 85% this year. Meanwhile, under two other scenarios (rapid and net-zero), that number would decline to 40% and slightly more than 20%, respectively, by 2050.

The main reason fossil fuels will be losing ground is that they can’t compete with renewables, which are cleaner and increasingly cheaper. Onshore wind is already less expensive than using combined-cycle gas turbines to generate electricity. Meanwhile, solar is on track to become the lowest-cost form of bulk power within the next few years.

Leading renewable energy project developers including Brookfield Renewable Partners (NYSE: BEP)(NYSE: BEPC) and NextEra Energy (NYSE: NEE) are seeing an acceleration in opportunities to invest in new renewable energy projects. For example, Brookfield Renewable anticipates growing its earnings per share at an 11% to 16% annual rate through at least 2025, powered in part by its extensive development project pipeline. Meanwhile, NextEra recently boosted its 2021 earnings growth outlook and extended its guidance through 2023 because of all the growth it sees ahead from renewables. 

Contrast those views with the outlooks of most oil companies. For example, Chevron (NYSE: CVX) recently lowered its long-term investment guidance range from a range of $19 billion to $22 billion per year through 2025 to a range of $14 billion to $16 billion annually. Meanwhile, ExxonMobil (NYSE: XOM) recently cut $10 billion per year out of its long-term spending plan, bringing its new budget range down to $20 billion to $25 billion annually through 2025. Because of these reduced spending levels, most oil companies won’t grow very much, if at all, in the coming years.

If you can’t beat ’em, join ’em

Given that dire outlook for the oil patch, BP plans to transition away from fossil fuels over the next several years. The company intends to cut back its investments in fossil fuels and redirect that capital toward low-carbon projects. As a result, the company anticipates that its oil-equivalent production will decline by 40% over the next decade. Meanwhile, the company expects to grow its low-carbon businesses, such as renewables and bioenergy, tenfold during that timeframe.

Several other energy companies are making similar moves. For example, Total (NYSE: TOT) plans to de-emphasize oil, as it sees oil products sales falling 30% over the next decade. It plans to steadily replace oil by focusing on gases (including liquefied natural gas) and electrons (by growing into a world leader in renewable energy).

Meanwhile, Enbridge (NYSE: ENB) and Equinor (NYSE: EQNR) are developing offshore wind projects as they begin to slowly transition away from their current oil focus. Even Chevron is starting to move away from oil. It plans to invest more than $300 million in 2021 to advance the energy transition. 

The choice seems clear

It’s becoming increasingly likely that global oil consumption has peaked. the industry seems to be heading toward a decline over the next several decades, which could be quite steep. Thus, there’s limited upside for oil stocks.

Contrast that view with renewable energy, which is on track for accelerated growth over the next decade as costs continue to come down. Companies focused on this industry have the potential to generate strong growth and high investment returns. That’s why it makes more sense to forget about oil stocks and focus on the brighter future in renewables.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• What would more stimulus mean for ASX 200 shares?
• Forget gold: I’d buy today’s top stock picks to get rich and retire early
• Amaysim (ASX: AYS) announces takeover as it prepares to delist
• APRA removes dividend restrictions for the banks
• ANZ (ASX:ANZ) share price dips following joint-venture agreement

Matthew DiLallo owns shares of Brookfield Renewable Inc., Brookfield Renewable Partners L.P., Enbridge, and NextEra Energy. The Motley Fool Australia’s parent company owns shares of and recommends Enbridge. The Motley Fool Australia’s parent company recommends NextEra Energy. 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 Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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With a very strong quarter almost under its belt, the S&P/ASX 200 Index (ASX: XJO) appears to be flying home towards Christmas.

Just yesterday we saw the likes of Afterpay Ltd (ASX: APT), Wesfarmers Ltd (ASX: WES) and Xero Limited (ASX: XRO) hit new record highs.

But according to at least one major bank, more government stimulus could be on the way in the next few years. What would that mean for Aussie investors and their favourite ASX 200 shares?

What more stimulus could mean for ASX 200 shares

According to an article in the Australian Financial Review (AFR), Westpac Banking Corp (ASX: WBC) chief economist Bill Evans thinks there could be more stimulus ahead.

Westpac expects the Reserve Bank to spend $300 billion over the remainder of 2020, as well as throughout 2021 and 2022, via large-scale bond purchases.

That means more money flowing around the economy that needs to find a home. Economists are also holding out for the Mid-Year Economic and Fiscal Outlook on Thursday for further evidence of a strong economic recovery.

Surging iron ore prices and optimism regarding COVID-19 vaccine rollouts have propelled ASX 200 shares to one of their best quarters in the last two decades.

In fact, the benchmark index is up more than 14% since the end of September thanks to strong share price gains from the likes of Afterpay and Wesfarmers.

What do fundies think of the proposed stimulus?

Chief investment officer at Vertium Asset Management Jason Teh was quoted as saying “momentum is strong”.

Mr Teh noted the strong performance from the banks in recent months but is not looking to buy in right now.

However, according to the AFR, Macquarie Group Ltd (ASX: MQG) equity strategists are reportedly reducing exposure to stocks that benefit from low yields such as gold and growth shares.

Foolish takeaway

ASX 200 shares like Afterpay have been propelled higher in 2020 but, if these stimulus reports are anything to go by, it seems there is still plenty for investors to be optimistic about as we head into the new year.

More reading

• Why the Afterpay (ASX:APT) share price is not the only rising star this year
• These are 8 of the best performing ASX healthcare shares of 2020 so far
• 5 things to watch on the ASX 200 on Tuesday
• Why ASX oil stocks could replace the ASX tech boom in 2021
• ASX 200 rises on Monday

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The idea of buying today’s top stock picks may lack appeal to some investors. The 2020 stock market crash could be fresh in their minds, while an uncertain economic outlook may hold back the performance of many sectors.

As such, they may determine that buying physical gold or a gold ETF is a better idea. However, low valuations on offer across the stock market and a likely economic recovery mean that stocks could outperform gold in the long run.

The impact of an improving economic outlook on today’s top stocks

Today’s top stock picks are likely to include those companies that have solid financial positions, wide economic moats and that trade at low prices. Looking ahead, they could experience improving operating conditions in the coming years.

Certainly, the world economy may yet face more challenges in 2021 after what has been a tough 2020. However, it has always returned to positive GDP growth following even its greatest challenges. Therefore, the prospects for a wide range of companies could improve significantly in the coming years. This may lead to higher profit growth that allows them to command premium valuations.

Furthermore, the stock market could be positively impacted by policies followed in many countries across the world. For example, monetary policy has become increasingly accommodative this year in response to a weak economic outlook. This could strengthen the prospects for a number of industries and may have a positive impact on asset prices over the long run.

Potential challenges for gold

An improving economic outlook may be good news for today’s top stock picks. However, it could mean the gold price comes under a degree of pressure. Investors have historically bought gold based on a weak economic outlook. Should global GDP growth prospects improve, demand for gold could fall. This may lead to a less attractive performance from the precious metal in the coming years.

Furthermore, many of today’s most attractive stocks trade at low prices. Investor sentiment has yet to recover across all industries following the stock market crash. By contrast, the gold price has reached a record high in recent months. This suggests that it may offer a far narrower margin of safety than is the case for many shares. The end result could be more limited gains over the coming years than are achievable from buying today’s top stocks.

Of course, if a gold miner offers a wide margin of safety at the present time then it could prove to be attractive as part of a diverse portfolio of today’s top stocks. However, buying physical gold or a gold ETF may be a relatively unattractive option compared to a portfolio of equities.

Building a retirement portfolio

Many investors in today’s top stocks are likely to have a long time horizon until they retire. Therefore, they are likely to benefit from a return to strong growth for the world economy and global stock markets. As such, building a portfolio of shares could be a better idea than buying gold. Their low valuations and likely recovery potential mean that they could produce a larger retirement portfolio in the long run.

More reading

• What would more stimulus mean for ASX 200 shares?
• Amaysim (ASX: AYS) announces takeover as it prepares to delist
• APRA removes dividend restrictions for the banks
• ANZ (ASX:ANZ) share price dips following joint-venture agreement
• Cochlear (ASX:COH) share price edges higher despite losing US patent dispute appeal

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Amaysim Australia Ltd (ASX: AYS) and the WAM Capital Limited (ASX: WAM) share prices will be ones to watch this morning as details emerge of a takeover bid. Both companies announced an deal for WAM to acquire all of Amaysim’s ordinary shares, subject to the sale of Amaysim’s mobile business to Optus.

The Amaysim share price closed at 73 cents yesterday and is up 2.4% to 76 cents at the time of trading, while WAM closed at $2.25 and is trading flat at the same price today. 

Details of the takeover bid

Amaysim shareholders will have the choice of accepting the offer in cash, scrip, or a combination of both.

The cash offer stands at 69.5 cents per Amaysim share. The scrip meanwhile, is for 1 new WAM share for every 2.7 Amaysim shares, representing a value of 8.33 cents.

As mentioned, this offer is subject to the sale of Amaysim’s mobile business to Optus, which was announced on 2 November and is expected to be completed shortly after 1 February 2021.

WAM management says the scrip offer will benefit its shareholders with shares issued at a premium to the underlying net tangible assets (NTA), which are accretive to WAM’s pre-tax NTA.

Amaysim Management meanwhile, says that its shareholders would receive distributions of approximately 69.5 cents per share from this deal and the Optus sale, after transaction costs.

The Amaysim’s board has recommended that all of its shareholders accept the offer from WAM.

Why is Amaysim selling itself

Amaysim is Australia’s leading low-cost mobile network reseller, known as the mobile virtual network operators (MVNO). It has 1.19 million subscribers or about 35% of Australia’s MVNO market.

The company’s 10-year wholesale contract is due to expire in June 2022, which prompted the company to put itself in the market.

In November,  Optus offered $250 million to Amaysim’s shareholders to purchase its mobile business. The proposal was submitted to the ACCC for review, and has been given the green light by the competition watchdog.

However,  analysts believe that the proposal from Optus is unorthodox – as it wants to only buy the 1.19 million Amaysim customers and not take over the entire mobile business. This means that Amaysim management must use about $100 million of the proceeds to wind up the company, leaving shareholders with only $150 million from that transaction.

Amaysim shareholders are due to vote on the Optus deal in January 2021.

About the WAM share price and the Amaysim share price

The WAM share price has come back full circle, back to where it started at the beginning of January after losing 35% of its value in March and dropping to its 52-week low of $1.465.

Meanwhile, the Amaysim share price has gained almost 90% on a year-to-date basis.

More reading

• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Is the Bapcor (ASX:BAP) share price a buy?
• Wilson Asset Management thinks these 2 ASX shares are a buy
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Motley Fool contributor Eddy Sunarto 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 Bruce Jackson.

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It has been a subdued day of trade for the big four banks on Tuesday despite some very positive industry news.

At the time of writing, Australia and New Zealand Banking GrpLtd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) shares are trading flat, whereas National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) shares are trading slightly lower.

What was announced?

This morning the Australian Prudential Regulation Authority (APRA) has provided updated capital management guidance to authorised deposit-taking institutions (ADIs) and insurers.

This replaces its recommendation in July this year for banks to retain at least half of their earnings.

According to the release, from the start of 2021, APRA will no longer hold banks to a minimum level of earnings retention. This means the banks will be able to pay out as much as their earnings to shareholders as they see fit.

Though, it is worth noting that the regulator wants the banks to be vigilant when it comes to dividends.

APRA commented: “Since July, there has been an improvement in the economic outlook, bank capital and provisioning levels have strengthened, and the majority of loans that were previously granted repayment deferral have recommenced repayments. However, a high degree of uncertainty remains in the outlook for the operating environment.”

“In determining the appropriate level of dividends, APRA expects ADIs and insurers to remain vigilant, regularly assess their financial resilience through stress testing, and undertake a rigorous approach to recovery planning. The onus remains on boards to moderate dividend payout ratios to ensure they are sustainable, taking into account the outlook for profitability, capital and the broader environment,” it added.

Extensive stress testing.

APRA made the decision after looking at the results of extensive stress testing since the onset of COVID-19. These tests indicate that Australia’s banking system is strong and could withstand a very severe economic downturn and still continue to support the economy by supplying credit to households and businesses.

The test included a Severe Downside scenario, which involved a 15% fall in gross domestic product (GDP), a rise in unemployment to over 13%, and a fall in national house prices of over 30%.

The result of the Severe Downside scenario was a 5 percentage-point fall in the CET1 capital ratio of the banking system from 11.6% to 6.6%.

However, the regulator notes that this remains well above the 4.5% minimum capital requirement. Furthermore, it does not factor in mitigating actions that would inevitably be undertaken to offset this impact.

APRA’s Chair, Wayne Byres, commented: “A decade-long process of increasing capital levels and bolstering resilience in the banking system has put Australian banks in their current position of strength, allowing the sector to support customers and the broader economy at a time of crisis.”

“The results of APRA’s extensive ADI stress testing provide reassurance that the banking system remains well positioned to absorb the impact of a severe economic shock and retain the capacity to continue supplying credit into the economy,” he added.

More reading

• ANZ (ASX:ANZ) share price dips following joint-venture agreement
• Why ASX oil stocks could replace the ASX tech boom in 2021
• ASX 200 rises on Monday
• ASX stock of the day: Afterpay (ASX:APT) hits yet another new all-time high
• ASX 200 up 0.55%: Altium update, Afterpay jumps, NAB given ACCC approval

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 Bruce Jackson.

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The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price has dipped slightly this morning after the banking giant announced a joint-venture agreement with Worldline.

Worldline is the largest European – and fourth largest in the world – provider of payment services. The company has more than 20,000 employees based in more than 50 countries, offering customers highly-secured transactions on an array of platforms.

The ANZ share price finished from yesterday’s market close at $23.18 and is now trading at $23.15, down 0.13%.

Joint-venture agreement

ANZ today advised it will partner up with Worldline to provide its small business, commercial and instructional customers in Australia with the latest point-of-sale and online payments technology. The new deal will see users be able to process payments that are fast, reliable and more secure than traditional services.

ANZ stated that the new joint venture arrangement will form a -new merchant acquiring group. Under the terms, the bank will hold a 49% interest in the group, with the remaining 51% going to Worldline. The agreed contract will last for an initial 10 years.

As part of the deal, ANZ will exclusively refer new merchants to the group. In return, the joint venture will refer merchants back to the bank’s products including specific financing facilities.

ANZ believes once the transaction is finalised, its level 2 CET1 capital ratio will increase by around 5 basis points.

The formal arrangement is due to be completed sometime late next year, pending regulatory and other approvals.

What did management say?

ANZ group executive of Australia retail and commercial, Mark Hand, welcomed the collaboration, saying:

Receiving fast and secure payments is key to running a successful business, and this partnership will provide our customers with access to some of the most advanced payments technology currently available, as well as future innovations, to improve the speed and security of point-of-sale and online payments.

The partnership also responds to the fast-changing way that consumers want to pay for goods and services, particularly in a post-COVID environment.

Worldline chair and CEO Gilles Grapinet added:

The strategic alliance with ANZ is a landmark transaction for Worldline.

In a rapidly changing industry Worldline will be at ANZ’s side to leverage focused technical capabilities to provide the best customer proposition and user experience across all segments. Our long-term and exclusive joint venture is based on our shared vision to deliver value added merchant acquiring products and services in Australia.

About the ANZ share price

The ANZ share price has been climbing since hitting a multi-decade low of $14.10 in the March coronavirus rout. Its shares are still down 7% since the start of the year.

The company has a market capitalisation of $65.2 billion and a price-to-earnings (P/E) ratio of 14.1.

More reading

• Why ASX oil stocks could replace the ASX tech boom in 2021
• ASX bank shares surge after NAB (ASX:NAB) gets green light to sell MLC
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• 5 things to watch on the ASX 200 next week
• Australia’s money supply rises 12%, but it’s only going to a few

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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The Cochlear Limited (ASX: COH) share price is trading slightly higher on Tuesday despite being dealt a blow in relation to its US patent dispute.

In morning trade, the hearing solutions company’s shares are up slightly to $196.20.

What did Cochlear announce?

This morning Cochlear announced that the United States Supreme Court has denied the company’s petition for a review of the US Federal Circuit’s decision which upheld a judgment of US$280 million in patent infringement damages against Cochlear.

This followed a lawsuit by the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics (AB) which dragged on for several years.

What now?

This is officially the end of the saga and there is no higher power that Cochlear can turn to now.

The good news, though, is that this won’t impact Cochlear’s future results. This is because Cochlear paid the full amount of the US$280 million judgment to AMF and AB in FY 2020.

Furthermore, as the patent at issue in the litigation has now expired, no further infringement damages can accrue, and this judgment will not disrupt Cochlear’s business or customers in the United States.

It is also worth noting that in August Cochlear reached an agreement with AMF and AB regarding the settlement of the two remaining issues in this case. These were AMF’s and AB’s request for prejudgment interest and attorney fees of US$75 million.

The settlement of those claims was contingent upon the outcome of Cochlear’s Supreme Court appeal.

Since Cochlear’s Supreme Court appeal is now finished, the agreed settlement amount that was placed into escrow will be paid to AMF and AB and the settlement will be final.  As with the US$280 million, the payment of this settlement liability was provided for in Cochlear’s FY 2020 financial statements and won’t impact its future financial results.

More reading

• 2 outstanding blue chip ASX shares to buy in 2021
• The two ASX stocks most impacted by the dangerous rise of the Aussie dollar
• 2 ASX 200 healthcare shares that outperformed in November 
• 2 ASX blue chip shares tipped as buys
• Is the Cochlear (ASX:COH) share price a long term market beater?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Mesoblast limited (ASX: MSB) share price has come under pressure on Tuesday after the release of an announcement.

At the time of writing the allogeneic cellular medicines developer’s shares are down 11% to $4.03.

What did Mesoblast announce?

This morning Mesoblast announced the top-line results from the landmark DREAM-HF Phase 3 randomised controlled trial of its allogeneic cell therapy rexlemestrocel-L (REVASCOR) in 537 patients with advanced chronic heart failure.

According to the release, after a 30-month follow-up, patients with advanced chronic heart failure who received a single endomyocardial treatment with rexlemestrocel-L on top of maximal therapies had a 60% reduction in the incidence of heart attacks or strokes and a 60% reduction in death from cardiac causes when treated at an earlier stage in the progressive disease process.

However, despite this reduction in the pre-specified endpoint of cardiac death, there was no reduction in the recurrent non-fatal decompensated heart failure events. This was the trial’s primary endpoint.

Management believes this suggests that rexlemestrocel-L reduces mortality by mechanisms that are distinct from those of existing drugs that reduce hospitalisation rates but do not significantly impact cardiac mortality.

Mesoblast’s Chief Executive, Dr Silviu Itescu, commented: “There is an urgent need for new therapies that can reduce the high death rates in heart failure patients by different modes of action from existing drugs which reduce hospitalization rates but have not significantly reduced mortality rates.”

“The reduction in mortality seen with rexlemestrocel-L in advanced chronic heart failure underlines the power of this technology and the commitment of Mesoblast to address diseases in patients with high unmet need which are refractory to existing therapies,” he added.

What now?

While the primary endpoint may not have been achieved, management still sees potential for the therapy.

Mesoblast’s Chief Medical Officer, Dr Fred Grossman, explained: “We expect the mortality benefit observed in this seminal Phase 3 trial will support a potential path for approval of rexlemestrocel-L in patients with advanced chronic heart failure. We are planning to meet and discuss potential pathways to approval based on mortality reduction with the United States Food and Drug Administration.”

More reading

• These are 8 of the best performing ASX healthcare shares of 2020 so far
• Which shares will benefit from trillions of dollars in new global stimulus?
• Why the Mesoblast (ASX:MSB) share price is charging higher today
• Why Fisher & Paykel Healthcare, Mesoblast, Splitit, & WiseTech are dropping lower
• The Mesoblast (ASX:MSB) share price jumped 33% in November and could go even higher

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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