Shares of biotech company Mesoblast Limited (NASDAQ: MESO) tank on Friday after the company released disappointing news regarding the clinical trials of their COVID-19 treatment. As of 3:30 pm EST, the stock was down 33% sad for the day. And it has now fallen nearly 54% from 52-week highs back in August.
Remestemcel-L is a Mesoblast solution to severe respiratory distress syndrome (ARDS), a potentially fatal outcome of the coronavirus. Mesoblast had previously been involved Novartis to bring remestemcel-L to market. However, in today ‘s news, the Data Safety Review Board said that while there are no safety concerns with the treatment, it is not far from getting to the main end point (the level of success you wanting). While Mesoblast and Novartis can complete the trial with the 223 patients already enrolled to collect more data, it will not expand trials to 300 as originally planned.
This is the second time this week that Mesoblast ‘s test failed its main finish point, causing the stock to fall 20% on Tuesday. Revascor (rexlemestrocel-L), another cell therapy developed by Mesoblast, also failed late-stage clinical trials.
This is the risk that investors take on with biotech stocks like Mesoblast. The company has more than doubled revenue in 2020, which is encouraging. But at just $ 31.5 million in revenue so far in 2020, it would certainly benefit from being more successful in tier three tests. To that end, it has yet another late option designed to treat local inflammatory diseases. And just one successful test at a late stage could mean the big difference for Mesoblast.
If you still believe in Mesoblast cell therapy technology, there is nothing wrong with investing even though it is risky. That said, it’s important for investors to have a portfolio of stock that includes some much safer options.