Shares in the Aussie biotech company Mesoblast limited (ASX: MSB) continue to fall. In fact, the Mesoblast share price is down 37.0% since Monday's close to $3.07 per share.
It's not unusual to see big valuation swings in the biotech space. But at what point does Mesoblast go from a falling knife to a screaming buy?
Why is the Mesoblast share price falling?
A major catalyst for the share price fall has been a report from the United States Food and Drug Administration (FDA).
The US regulator questioned the effectiveness of Mesoblast's remestemcel-L as a treatment for paediatric patients with steroid-resistant acute graft versus host disease.
The FDA noted concerns over the treatment's clinical performance ahead of Mesoblast's meeting with the Oncologic Drugs Advisory Committee (ODAC).
That spooked investors on Tuesday with the Mesoblast share price falling 31.0% lower in one day. That momentum continued on Wednesday as the biotech share slumped a further 8.6% lower.
That means the Mesoblast share price is now down 37.1% since Monday's close. It can be a dangerous game to buy a share in freefall, but how does the Mesoblast equation stack up?
Is Mesoblast in the buy zone yet?
Investors appear to be pricing in a rejection from the ODAC in tomorrow's meeting. Given the scepticism expressed by the US FDA, I think that's probably a fair view to take.
However, I think Mesoblast still has a portfolio of promising candidates. The company is exploring remestemcel-L as a treatment for coronavirus-induced acute respiratory distress syndrome.
The company's Revascor and MPC-06-ID are also Phase 3 candidates for treating advanced chronic heart failure and degenerative back disc disease, respectively.
I think the Mesoblast share price will continue to be volatile. That's partly the nature of the game with these make or break, R&D-heavy companies.
However, I still believe there is long-term potential for Mesoblast. Of course, this setback does lower the short-term intrinsic value.
With its extensive pipeline and track record of success though, I think the Mesoblast share price could be a buy at $3.07 per share.
Are there other ASX biotech shares to buy?
If you're looking for other ASX biotech shares to buy right now, the Polynovo Ltd (ASX: PNV) share price is another strong candidate.
Polynovo's NovoSorb BTM product continues to kick goals and the biotech group is looking to expand its application.
