Why Mesoblast Stock Is Plunging After Q4 Earnings Report?

Mesoblast Limited (NASDAQ: MESO) shares dived on Tuesday as the FDA raised more questions around its flagship drug candidate, and its annual loss widened. 

What Happened: In the June quarter, Mesoblast met FDA on potential regulatory approval of remestemcel-L, used to treat acute graft versus host disease (SR-aGVHD) in children and treat acute respiratory distress syndrome (ARDS) in adults with COVID-19.

Mesoblast experienced a setback last October when the FDA asked it to provide more data on the treatment before it could secure approvals. The FDA now indicated that the potency assay must be established and agreed to before starting the proposed Phase 3 trial for remestemcel-L.

The agency has concerns and wants Mesoblast to prove that it can improve the potency consistency when manufacturing different batches of the drug. CEO Silviu Itescu said Mesoblast plans to meet with the FDA’s Office of Tissue and Advanced Therapies Q4 of 2021 to address outstanding chemistry, manufacturing, and controls (potency assays) for remestemcel-L.

Why It Matters: Mesoblast posted revenue of $7.5 million, down 77% Y/Y. It posted a wider net loss of $98.8 million compared to $77.9 million. 

Cash on hand was $136.9 million, but Mesoblast admitted it would need more money soon to meet its debt obligations and continue as a going concern.

Mesoblast expects to incur “significant expenses and increase our cumulative operating losses for the foreseeable future” with planned research, development, and product commercialization efforts. The Company added that it could further increase its costs if it were to experience any delays – including a clinical hold on its development program, failed studies, or other regulatory challenges that require follow-up of existing studies.

See the Annual Filing here.

Related content: Benzinga's Full FDA Calendar.

Price Action: MESO shares are down 9.49% at $6.63 during the market session on the last check Tuesday.