Why the Mesoblast (ASX:MSB) share price crashed 40% lower in October

The Mesoblast limited (ASX:MSB) share price was out of form and crashed 40% lower in October. Here's why…

| More on:
man bending over to look at red arrow crashing down through the ground

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the worst performers on the S&P/ASX 200 Index (ASX: XJO) in October was the Mesoblast limited (ASX: MSB) share price.

The biotechnology company's shares crashed a massive 39.8% lower over the month. This compares to a 1.9% gain by the benchmark index.

Why did the Mesoblast share price crash lower?

Investors were heading to the exits in their droves last month after its meeting with the United States Food and Drug Administration (FDA) didn't go to plan.

Mesoblast was seeking approval for the use of RYONCIL (remestemcel-L) in treating paediatric patients with steroid-refractory acute graft versus host disease (SR-aGvHD). There is no approved treatment for pediatric SR-aGVHD.

Expectations were high ahead of the meeting with the FDA. This was because prior to the event, the FDA's Oncologic Drugs Advisory Committee had voted overwhelmingly (9 to 1) in favour that the available data supports the efficacy of remestemcel-L in paediatric patients with SR-aGvHD.

However, that one detractor appears to have made all the difference. The FDA wasn't satisfied and has recommended an additional randomised controlled study.

So instead of getting the thumbs up to start commercialising the treatment, Mesoblast is back to square one and will have to undertake another study. This will take both time and of course money.

What now?

Mesoblast has formally requested a Type A meeting with the FDA to discuss a potential accelerated approval of its Biologics License Application for remestemcel-l. This will be with an additional randomised controlled study in patients 12 years and older as a post-approval requirement. It expects this meeting will occur in November.

Mesoblast's CEO, Dr Silviu Itescu, commented: "We are working tirelessly to bring remestemcel-L to patients with life threatening inflammatory conditions, including SR-aGVHD and COVID-19 ARDS."

It certainly will be hoping this goes well for both the company's future and for legal reasons.

Mesoblast was hit with a class action last month from disgruntled shareholders. They allege that management made false or misleading statements to investors and failed to disclose material adverse facts about prior trials of remestemcel-L.

Should you invest?

Although the Mesoblast share price has crashed lower, I would suggest investors stay clear of it until the FDA has made a final decision on remestemcel-L. Until then, I feel the risk/reward on offer with its shares just isn't sufficient.

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. 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.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »