Broker reveals its expectations for the Mesoblast FDA meeting

It certainly has been an eventful week for the Mesoblast limited (ASX: MSB) share price.

After hitting a record high of $4.88 on Tuesday, the biotechnology company’s shares crashed as low as low as $3.06 on Wednesday.

On Thursday things are looking a lot better, with the Mesoblast share price up 8% to $3.32 in afternoon trade.

Why has the Mesoblast share price been so volatile?

This volatility has been caused by the company’s impending meeting with the Oncologic Drugs Advisory Committee (ODAC) this evening. That meeting is to discuss its remestemcel-L product candidate as a treatment for paediatric steroid-resistance acute graft versus host disease (paediatric SR-aGvHD).

This is a major event as the ODAC is a key player in the regulation of cancer drugs and plays a big role in whether a drug gets approval or not.

Ahead of that meeting the U.S. Food and Drug Administration (FDA) released a briefing document which cast doubts on whether or not it will receive approval from the regulator.

Is it game over?

This morning analysts at Lodge Partners have released a note discussing the FDA’s briefing note and their expectations for the meeting.

It commented: “There will be two sessions to discuss Mesoblast’s cellular therapy during the Oncologic Drugs Advisory Committee (AdCom) Meeting on Thursday, 13 August (US Eastern Time). While this is unusual, we note that where cellular therapies are concerned this seems to be the US Food and Drug Administration’s (FDA) standard practice now.”

This will involve a session on product characterisation in the morning and then a session on clinical trial evidence in the afternoon. And while its briefing notes have been quite harsh, the broker doesn’t appear to believe it is game over just yet.

Lodge Partners notes that the FDA’s issue is that it believes Mesoblast doesn’t have a reliable potency assay. It also goes hard on Mesoblast by raising the failed trials run by remestemcel-L’s previous owner, Osiris Therapeutics, which were negative.

In respect to the latter, the broker believes it should be “possible for Mesoblast to navigate the issues raised by the Osiris’ trials and those surrounding how the company defined the historical controls.”

However, it does have concerns with its product characterisation issues, which it feels the FDA has “something they can hold the company up on, if they want to.” Though, it notes that “Mesoblast has spent USD tens of millions, probably over USD100m, on manufacturing and you would expect them to have gotten it right.“

With any drug, efficacy will remain an incredibly important issue. The ODAC will ultimately be looking at data to see if it supports the efficacy of remestemcel-L in paediatric patients with steroid-refractory aGVHD.

Lodge Partners commented: “Appropriately argued by Mesoblast, we believe the AdCom panel for the clinical evidence session will vote that the available data DOES support the efficacy of remestemcel-L in pediatric patients with steroid-refractory aGVHD.”

Though, it has warned that the FDA could ask Mesoblast to conduct a further clinical trial to prove its efficacy.

Should you invest?

I would suggest investors keep their powder dry until the FDA has made its decision to approve remestemcel-L or not.

While the Mesoblast share price is likely to rocket higher if the ODAC meeting goes well, it could just as easily crash lower if things don’t go in the company’s favour.

More reading

• Down 37% in 2 days! Is the Mesoblast share price a buy?
• Why Mesoblast, Northern Star, SEEK, & WiseTech Global shares are sinking lower
• Is the CSL share price the best ASX biotech buy right now?
• ASX 200 rises 0.5%, Mesoblast plunges
• Mesoblast share price crashes 29% lower on FDA doubts

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.

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