• ASX small cap biotech Mesoblast (ASX:MSB) awaiting US green light
  • Decision handed down on September 30
  • Bell Direct sets target 50 per cent above current price

It’s crunch time for Australia’s second-biggest biotechnology company.

The US Food and Drug Administration has a deadline of September 30 to rule on approving Mesoblast (ASX:MSB)‘s stem cell treatment Ryoncil (remestemcel-L) for children suffering a life-threatening complication of bone marrow transplants.

On August 13, the FDA’s Oncologic Drugs Advisory Committee voted 9-1 in favour of approving the drug for pediatric patients suffering from steroid-refractory acute graft-versus-host disease (GVHD).

But the advisory committee’s vote is non-binding, and one study last year found that in 376 voting meets from 2008 through 2015, the FDA ignored the advisory’s committee recommendation 22 per cent of the time.

There’s an enormous amount at stake for Mesoblast, which has already been building inventory and put a sales team in place to quickly begin commercialisation if approval is granted.

There’s more than 2,000 allogeneic bone marrow transplants in the US each year, and about half of all recipients end up developing GVHD, which occurs when the donor white blood cells see the host body’s cells as foreign and attack them.

With no approved treatment for steroid-refractory acute GVHD  available in the US for children under 12, Mesoblast’s treatment is expected to cost hundreds of thousands of dollars.

The company reported a loss of US$77.9 million ($107.6 million) in the 12 months to June 30 as it geared up for the launch.

$7.30 price target

“I think the odds are definitely in their favour,” said Bell Direct analyst Jessica Amir.

“But it’s really hard to judge.”

Looking at the company’s share price, it doesn’t seem as if FDA approval has been priced in, she said.

Bell Direct has one of the most bullish price targets of any Australian brokerage on MSB – $7.30, up around 50 per cent from what MSB shares were trading at Friday.

FDA approval would “definitely be a game-changer,” Amir said.

Two Phase 3 readouts coming

Mesoblast has several other irons in the fire as well.

Readouts for two phase 3 clinical trials involving the company’s Revascor drug candidate are expected in the fourth quarter.

The cell therapy is being tested in 566 patients for chronic heart failure, and in 404 patients for chronic low back pain.

Mesoblast is also testing Ryoncil to treat respiratory distress caused by COVID-19.