Shares of Mesoblast, an Australian biopharmaceutical company, tumbled over 65% during premarket trading on Friday following a setback in its quest for U.S. Food and Drug Administration (FDA) approval for its drug to treat graft-versus-host disease.
The company had applied for FDA approval of its drug remestemcel-L to treat steroid-refractory acute graft-versus-host disease in children. However, Mesoblast recently disclosed that it received a complete response letter from the FDA, indicating that the application will not be approved in its current form.
In response, the FDA has requested additional data to support marketing approval. As a result, Mesoblast plans to conduct a controlled study targeting the highest-risk adult patients with the highest mortality rates. This study aligns with the company's commercial strategy, which aims to progress from pediatric to adult indications. Notably, adults make up 80% of the market for this particular indication.
This setback is not the first for Mesoblast. In 2020, the FDA rejected the company's initial application despite a favorable recommendation from an FDA advisory committee. The FDA typically follows the advice provided by these committees. Mesoblast then resubmitted its application earlier this year with additional requested information, which was accepted by the FDA in March with a target action date set for August 2.
Following the news of the FDA's decision, trading in Mesoblast's American depositary shares was halted until after the FDA announcement. When trading resumed, the shares fell by 61% to $1.56. The company's Australia-listed shares also plummeted by 57% and closed at 47 Australian cents.