Mesoblast (ASX:MSB) shares have plunged by a third after the US Food and Drug Administration asked the biotech company to conduct another study of its stem cell treatment for children with a complication from bone marrow transplants.

Given that there’s no treatment available on the market for steroid-refractory acute graft-versus-host disease in children under 12 and that the condition can be life-threatening, Mesoblast says it plans to urgently request a meeting with the FDA to discuss a potential accelerated approval of Ryoncil with a post-approval condition for an additional study.

The meeting is expected to take place within 30 days.

An extended delay would be disastrous for Mesoblast, which lost $108m last year ramping up industrial-scale manufacturing of Ryoncil (remestemcel-L)  and putting a sales team in place.

“We are working tirelessly to bring remestemcel-L to patients with life threatening inflammatory conditions, including SR-aGVHD and COVID-19 ARDS,”  Mesoblast chief executive Dr Silviu Itescu said.

Wednesday was the deadline for the FDA acting on Mesoblast’s application. And the company went into a trading halt on Thursday ahead of the announcement, which it expected to come Monday.

Morgans health care analyst Scott Power said the FDA’s response was “not good news clearly. It also puts uncertainty around other programs.”

Mesoblast is awaiting readouts of its phase-three trials of stem cell treatments to treat lower back pain and heart failure.