The Mesoblast limited (ASX: MSB) share price could be heading higher from here according to one Australian broker.
A note out of Lodge Partners reveals that it believes Mesoblast shares are still a strong buy despite being up 85% since the start of the year.
Why is Lodge Partners bullish on Mesoblast?
According to the note, the broker is bullish on the global leader in allogeneic cellular medicines for inflammatory diseases due to the potential of its Ryoncil (remestemcel-L) product candidate.
In August Mesoblast will be having an advisory committee (AdCom) meeting with the Oncologic Drugs Advisory Committee (ODAC) to discuss Ryoncil's use as a treatment for paediatric steroid-resistance acute graft versus host disease (paediatric SR-aGvHD).
Lodge Partners notes that the ODAC is the US Food and Drug Administration's (FDA) key player in the regulation of cancer drugs. It plays a big role on whether a cancer drug gets approved or not.
The broker appears confident that the AdCom will run smoothly. So much so, it gives the company a 95% probability of receiving FDA approval further down the line.
Though, the broker has warned that a lot can happen between now and gaining FDA approval, so it could be a bumpy ride.
It explained: "One thing to keep mind, the AdCom votes on exactly what is before it. It may not like one aspect of the drug in question. If that aspect can be ameliorated by a simple labelling change, the change will be made, and the drug allowed through, even if the AdCom originally voted "no". The same can happen on the FDA's end."
"The point, being there is a lot that can happen between the AdCom vote and the FDA's final decision. Therefore, it is not uncommon for the FDA to approve drugs an AdCom has said no to and vice versa," the broker added.
Nevertheless, the broker is confident that a positive result is coming and has suggested investors buy shares.
It concluded: "The path to approval for Ryoncil is now set. It just needs to get to the finish line. We have no doubt it will get there. Strong Buy maintained."
