Phi Finney McDonald (PFM) has today proposed to commence a shareholder class action against listed biotech Mesoblast (ASX: MSB) following the dramatic collapse in the company’s share price back in 2020.
The firm alleges Mesoblast engaged in misleading or deceptive conduct by misrepresenting the efficacy of its proposed stem cell-based treatment Remestemcel-L (R-L), which at the time was pitched for use in patients suffering from COVID-19 and steroid refractory acute Graft versus Host Disease (SR-aGVHD).
Funded by Omni Bridgeway, the proposed class action arises from statements made by MSB regarding the potential application of its R-L product.
PFM says shareholders were impacted on 11 August 2020, when shares fell by approximately 31 per cent after the US Food and Drug Administration (FDA) released information about its assessment of R-L for SR-aGVHD.
The law firm also notes how MSB’s shares fell by approximately 36 per cent on 18 December 2020, after the FDA’s Data Safety Monitoring Board had advised the Phase 3 COVID-19 acute respiratory distress syndrome trial for the use of R-L was not likely to meet its mortality reduction endpoint.
At the time, shares collapsed to below pre-COVID highs of $3 per share, with the market effectively wiping any premium the company achieved from the pandemic.
PFM says the proposed claim will allege that Mesoblast engaged in misleading or deceptive conduct and breached its continuous disclosure obligations throughout the claim period (22 February 2018 and 17 December 2020) by:
- Misrepresenting the efficacy and potential benefit of treating patients with R-L;
- Misrepresenting the significance of trial results, including the relevance of earlier studies, post hoc analysis and data collated for controls and contrast;
- Not disclosing to the market material information, including the deficiencies in study design and statistics presented; and
- Not disclosing all information required for investors to be able to reasonably assess the likelihood of whether R-L would be shown to be effective in treating SR-aGHVD or COVID-19 ARDS, and then be commercialised on that basis
“As a result of the above conduct, Mesoblast’s security price was artificially inflated and that investors suffered loss and damage by the acquisition of Mesoblast shares and ADRs at inflated prices,” PFM said.
Business News Australia approached Mesoblast for comment but the Melbourne-based company declined to make a statement.
Shares in MSB are down 0.87 per cent to $1.14 per share at 11.20am AEDT.
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