Mesoblast Limited (ASX: MSB) shares have surged more than 30% in the past month. Despite this, I believe the Mesoblast share price is poised to go higher. Around nine years ago, the company was part of the S&P/ASX 200 Index (INDEXASX: XJO) and was trading around $9 with a market capitalisation of $2.5 billion at its peak.
Since then, the Mesoblast share price has struggled to gain any traction and was eventually dropped out of the Index. However, since late-March, the Mesoblast share price has surged more than 314% on the back of a potential treatment for COVID-19, which has seen the company re-join the ASX 200 Index. So, is Mesoblast finally going to become a biotech giant and is now the time to invest?
What is fuelling the Mesoblast share price?
Mesoblast is a world leader in developing regenerative medicines for inflammatory diseases. The company made headlines in April after it announced promising results for its Remestemcel-L (Ryonsil) treatment for COVID-19.
According to Mesoblast, Ryonsil is design to counteract the inflammatory process induced by COVID-19 by neutralising inflammation. The product is currently undergoing Phase 3 trials in the United States on COVID-19 patients with acute respiratory distress syndrome.
Ryoncil is already in a number of other clinical trials targeted at reducing inflammatory conditions in patients with steroid-refractory acute graft versus host disease (SR-aGVHD).
What is the outlook for Mesoblast?
There are two important catalysts in the near future that could send the Mesoblast share price soaring. The first is the interim analysis of Ryoncil's Phase 3 trials in ventilator dependent COVID-19 patients. The Data Safety Monitoring Board (DSMB) has set a date in early September to review the data and will inform Mesoblast on whether further trials should proceed.
The second catalyst is closer and pertains to Ryoncil's use in treating children with SR-aGVHD. The company is scheduled to meet with the US Food and Drug Administration (FDA) on 13 August. I'll be keeping a close eye on the Mesoblast share price at this time.
Should you buy?
Mesoblast released its activities report for the fourth quarter in late July. This saw the company end the quarter with US$129.3 million in cash and net operating cashflow of US$2 million. Mesoblast completed a US$90 million capital raising in May and is well positioned to scale-up manufacturing of its products.
Despite the catalysts that could send the Mesoblast share price soaring, I don't think it would be prudent to jump ahead and buy shares in the company hoping for positive results. Although there may be promising data, investors need to factor in the risk that Mesoblast's clinical trials fail to reach their endpoint. However, if the company achieves regulatory approval and can manufacture its products at a cost-effective price, it could become a biotech giant.
