At time of writing, the share price of Mesoblast Ltd [ASX:MSB] is up more than 14%, to trade at $3.73.
The MSB share price chart makes for strange reading:
As you can see, it has gapped up on a number of occasions. We take a look at the details of Mesoblast’s latest announcement.
MSB to work with pharma giant on remestemcel-L commercialisation
Here are the key points from the announcement:
- ‘Novartis will make a US$50 million upfront payment including US$25 million in equity.
- ‘From the initiation of a Phase 3 trial in all-cause ARDS, Novartis will fully fund global clinical development for all-cause ARDS and potentially other respiratory indications.
- ‘Mesoblast may receive a total of US$505 million pending achievement of precommercialization milestones for ARDS indications.
- ‘Mesoblast may receive additional payments post-commercialization of up to US$750 million based on achieving certain sales milestones and tiered double-digit royalties on product sales.’
Novartis is a mammoth pharmaceutical company with a market cap north of US$180 billion, so the collaboration with MSB is a significant step forward for MSB’s product.
Their treatment for acute respiratory distress syndrome (ARDS), remestemcel-L, is currently in a Phase 3 trial involving 300 patients with COVID-19-related ARDS.
The Mesoblast share price in context
The strange chart above for the MSB share price makes more sense when you remember that the biotech investment world is particularly difficult to navigate.
Promising treatments sometimes need more data, regulatory bodies can reject products, and no matter how good the product sounds on the surface, things can still go wrong.
Back in October the Australian Financial Review explained the most recent share price plunge (emphasis added):
‘Shares plunged 37 per cent last Wednesday after Mesoblast reported US healthcare regulator, the Food and Drug Administration (FDA), had demanded it complete a further randomised controlled study in adults and/or children to provide more evidence of the treatment’s effectiveness.
‘Biotech Daily founder David Langsam says “if” is a big word in biotech, with Mesoblast facing several imminent inflection points.
‘The news shocked shareholders and analysts who were confident the FDA would approve the intravenously-infused Ryoncil Remestemcel-L treatment on the basis an FDA oncologic drugs advisory committee (ODAC) had voted nine-to-one in favour of the drug’s efficacy given existing data.’
So, more evidence that biotech investments are particularly tricky.
We will cover MSB further when these inflection points arise.
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