Mesoblast share price crashes 58% after FDA blow

This biotech is having one of the worst days in its history. But why?

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The Mesoblast Ltd (ASX: MSB) share price has returned from its trading halt and crashed deep into the red.

In morning trade, the biotechnology company's shares are down 58% to 45.5 cents.

Why is the Mesoblast share price crashing?

Investors have been hitting the sell button in a panic this morning after the company failed to receive US Food and Drug Administration (FDA) approval for its stem cell therapy, remestemcel-L.

According to the release, the US FDA will require more data to support marketing approval for remestemcel-L for the treatment of paediatric steroid-refractory acute graft versus host disease (SR-aGVHD).

This is a bitter blow for the company, which has been fighting hard to get the treatment approved for several years. Each time it gets within a whisker of approval, it has fallen just short.

What now?

Mesoblast advised that to obtain the data required, it will conduct a targeted, controlled study in the highest-risk adults with the greatest mortality.

Interestingly, this is something the US FDA had requested before, but Mesoblast chose a different path. In October 2020, the company stated that "the FDA recommended that Mesoblast conduct at least one additional randomized, controlled study in adults and/or children to provide further evidence of the effectiveness of remestemcel-L for SR-aGVHD."

The release notes that this adult study is in line with its overall commercial strategy, which envisioned a sequenced progression from paediatric to adult SR-aGVHD indications. The company will seek alignment with the US FDA on the trial design for the adult study at a Type A meeting within 45 days.

Mesoblast's chief executive, Silviu Itescu, remains optimistic that it is only a matter of time before remestemcel-L will be approved. He said:

FDA's inspection of our manufacturing process resulted in no observed concerns, the Agency raised no safety issues across more than 1300 patients who have received remestemcel-L to date, and acknowledged improvements to our potency assay. We remain steadfast in making remestemcel-L available to both children and adults suffering from this devastating disease, and have received substantial clarity in how to bring this much-needed product to these patients.

However, despite these comforting words, judging by the Mesoblast share price weakness today, some investors aren't sticking around for the ride. Particularly given how difficult it is to predict just how much longer the ride will last and at what cost.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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