Why the Mesoblast share price is diving 18% after an FDA win

The Mesoblast Ltd (ASX: MSB) share price is taking a nosedive today.

Shares in the S&P/ASX 300 Index (ASX: XKO) clinical-stage biotechnology company closed yesterday trading for $3.05. In late morning trade on Friday, shares are changing hands for $2.49 apiece, down 18.4%.

For some context, the ASX 300 is down 0.9% at this same time.

So, why is the Mesoblast share price tumbling just one day after announcing a major US Food and Drug Administration (FDA) success?

What's going on with the Mesoblast share price today?

Well, it looks like investors aren't favouring their sell buttons today despite yesterday's big FDA news, but rather because of it.

With no fresh news out from the ASX biotech stock today, we can only conclude that the selling action pressuring the Mesoblast share price is being driven by some healthy profit-taking.

You see, investors reacted quite exuberantly to yesterday's news that the FDA had approved the company's Ryoncil (remestemcel-L) product as the first mesenchymal stromal cell (MSC) therapy in the United States.

So, what is Ryoncil?

As the Motley Fool reported on Thursday:

Ryoncil is the only MSC therapy approved in the U.S. for any indication, and the only approved therapy for steroid-refractory acute graft versus host disease (SR-aGvHD) in children 2 months and older, including adolescents and teenagers. It is a life-threatening condition with high mortality rates.

Just how exuberantly did investors react?

Following Thursday's release of the FDA announcement, investors sent the Mesoblast share price blasting off to close the day at an eye-popping 54.0%.

Yep, that's no typo.

After this kind of massive intraday gain, for a company with a market cap of at least $3 billion, it's not uncommon to see investors take some gains off the table.

What now?

Despite today's sizeable retrace, I don't expect you'll hear any stockholders complaining about Mesoblast stock's performance in 2024.

Year to date, shares in the ASX 300 biotech are up – wait for it – 703% at the time of writing.

As for what's ahead for the Mesoblast share price in 2025, the company could get another boost if it gains FDA approval for some of its other late-stage treatments.

Mesoblast CEO Silviu Itescu commented:

With Ryoncil approval by FDA, Mesoblast has demonstrated the ability to bring the first MSC product to market.

We will continue to work closely with FDA to obtain approval of our other late-stage products, including Revascor for cardiovascular diseases and rexlemestrocel-L for inflammatory pain indications, as well as expanding the indications for Ryoncil in both children and adults with inflammatory conditions.

The post Why the Mesoblast share price is diving 18% after an FDA win appeared first on The Motley Fool Australia.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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