Shares in Melbourne-based biotech Mesoblast (ASX: MSB) almost halved in value today after the company announced its remestemcel-L treatment for COVID-19 patients in acute care had failed to live up to expectations.
Mesoblast shares slumped more than 45 per cent in early trading after revealing trials had failed to show a lower mortality rate for patients in the prescribed 30-day timeframe of treatment. They regained some ground later in the morning to be 33 per cent down on yesterday's close.
Mesoblast shares are now trading below their pre-COVID highs of about $3 achieved in February, with the market effectively wiping any premium the company has gained from the pandemic.
Mesoblast earlier this month was buoyed by the US Food and Drug Administration granting remestemcel-L fast track status to get it to the market sooner.
The company revealed to the market today that a trial of 180 patients was expected to show a 43 per cent reduction in mortality among ventilator-dependent patients in 30 days.
This was based on a pilot data observed at the beginning of the pandemic when mortality rates were much higher.
Since then, the company says new treatment regimens have reduced mortality in ventilated patients and while there are no safety concerns for remestemcel-L, the trial is not expected to meet the 30-day mortality reduction for its planned 300 patient enrolment.
Mesoblast says it will continue its trial to evaluate the 223 patients currently enrolled in the program through 60 days of follow-up to study the potential effects of its treatment.
The group will work with Switzerland-based Novartis to analyse these results and identify any "meaningful clinical outcomes that may guide decisions on the development program for remestemcel-L in non-COVID acute respiratory distress syndrome".
The outcome is a major blow to Mesoblast which last month secured an exclusive worldwide licence and collaboration agreement with Novartis to manufacture and commercialise remestemcel-L. That deal involved an upfront payment of US$50 million ($65.5 million) to Mesoblast.
The news is also a blow for investors who took part in a $138 million capital rising by Mesoblast in May.
The shares were issued at $3.20 each to help Mesoblast scale up production of remestemcel-L.
Mesoblast shares hit a low of $2.08 today and were trading at $2.40 before noon (AEDT) with more than $119 million in shares changing hands.
Updated at 12.26pm AEDT on 18 December 2020.