Mesoblast Fails to Meet Primary Endpoint in COVID-19 Trial; Street Sees 29% Upside

Mesoblast, on Friday, reported a failure in achieving the 30-day mortality reduction endpoint during its COVID-19 ARDS (acute respiratory distress syndrome) trial. However, no safety concerns were noted during the trial. Shares plunged 32% in after-hours trading.

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Mesoblast (MESO) is a regenerative medicine company based in Australia.

The trial featured 300 patients, targeting a 43% reduction in mortality at 30 days, for treatment with remestemcel-L in addition to maximal care.

Remestemcel-L is an investigational therapy involving culture-expanded MSCs (Mesenchymal stem cells) derived from the bone marrow of an unrelated donor.

The company disclosed that 223 patients have completed the trial. They will be kept under observation for 60 days to analyze the impact of the treatment on the secondary endpoints. The endpoints include mortality rate without mechanical ventilation, intensive care and hospitalization duration, organ damages, and other requisite evaluations.

The above outcomes will be analyzed by Mesoblast and Novartis (NVS) in order to come to a conclusion regarding the relevance of remestemcel-L in the treatment of non-COVID ARDS.

The stock price has gained 84% year-to-date and is trading at a discount of 36% to its 52-week high. (See MESO stock analysis on TipRanks)

Maxim Group analyst Jason McCarthy reiterated a Buy rating on Mesoblast on Tuesday, with a price target of $18. This target implies that investors could be reaping a 33% gain over the coming 12 months.

McCarthy’s rating was backed by the company’s overall data from the DREAM Phase 3 trial for remestemcel-L in the treatment of heart failure, despite the therapy not meeting the primary endpoint.

From the rest of the Street, the stock scores a cautiously optimistic consensus of a Moderate Buy based on 3 Buys, 1 Hold, and 1 Sell. The average price target of $17.50 implies an upside potential of 29% to current levels.