Mesoblast (ASX: MSB) (NASDAQ: MESO) was on our portfolio since May. However, volume started to climb higher this week as an advisory committee voted in favour of Mesoblasts pediatric drug remestemcel-L (Rynocil). The positive catalyst triggered a Mesoblast buying party on the ASX and the NASDAQ. For now, investors are optimistic about Mesoblast’s medium-long term future. However, the sentiment come Monday is uncertain. Some investors expect the biotech company to keep on rising next week. Whereas the bears forecast a Mesoblast sell-off next week.
Table of contents 1. Why did Mesoblast soar this week? 2. Update on the COVID-19 trial timeline. 3. Is Mesoblast now a good investment?
Why is Mesoblast rise 50% on Friday
Mesoblast traded like a rollercoaster this week. The week started bearish as the FDA expressed concerns around the effectiveness of Mesoblasts remestemcel-L in treating acute graft versus host disease (aGvHD). FDA apprehension saw investors sell Mesoblast ahead of its meeting with the Oncologic Drugs Advisory Committee (ODAC). Consequently, Mesoblast fell 37% to $3.06. However, at the $3 range, Mesoblast reached capitulation, meaning all sellers had left the party leaving only buyers to drive up the price.
However, the real buying began when the ODAC unexpectedly voted in favour of Rynocil. The ODAC agreed that Mesoblast’s data indicated remestemcel-L could be an effective treatment for aGvHD. Ultimately driving a 50% rally at the bell on Friday.
However, YIG would like to point out that the recommendations of the ODAC are not binding. The FDA could still turn down Remestemcel-l. Thus, the ODAC’s suggestions must be convincing. Because the FDA will make the final decision on remestemcel-l on the 30th of September, and if they are not convinced, they can still deny Mesoblast despite Friday’s outcome.
Mesoblasts COVID-19 trial update
Mesoblast is no one-trick pony. The biotech has a robust clinical pipeline that covers aGvHD, chronic heart failure, degenerative back disc disease, and more recently, COVID-19. Mesoblast’s COVID-19 treatment is acting like a magnet to the wallets of investors. Especially as Mesoblast reported an 83% survival rate for 12 patients who underwent the COVID-19 treatment.
Mesoblast is set to release interim analysis of its COVID-19 trial in early September. The report will likely assess the recovery in COVID-19 patients so far and the related side effects, with a judgement deciding whether the trial can continue. Thus, the COVID-19 hype should see investors pile in on the expectation of positive interim results (opinion, not advice).
Is Mesoblast a good investment now?
Before I begin, I am obliged to remind our viewers that this is not advice but rather investment commentary from extensive research
Short answer: Waiting for new resistance, support levels and then riding the COVID-19 anticipation holds the most weight (opinion not advice)
Mesoblast will become more volatile from here on out. Allowing investors to capture massive upswings in the stock. However, volatility will increase your risk to major sell-offs, and Mesoblast is known for short-term cliff edges.
Despite volatility increasing the underlying sentiment towards Mesoblast should remain bullish. Mainly because of the upcoming catalysts, which, if positive, should elevate Mesoblast to all-time highs.(opinion not advice) Investors will likely view leading up to the COVID-19 trial results, Chronic back pain, and FDA aGvHD decision with optimism. Because humans are wishful thinkers. Thus, riding the anticipation of catalysts, like what some investors did till Friday, holds more weight than trying to day-trade the biotech.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.