Investors' register disapproval in cancelled Novartis agreement with Mesoblast

Swiss-based pharmaceutical giant Novartis has terminated an agreement with Mesoblast (ASX: MSB) to develop a covid treatment.

Mesoblast has not yet provided a reason for Novartis’ termination. 

Both companies joined forces in November 2020 to develop Mesoblast’s mesenchymal stromal cell (MSC) product remestemcel-L.

The initial focus was on treating acute respiratory distress syndrome (ARDS), plus difficulties associated with covid.

Prior to this morning’s termination announcement, Mesoblast entered a trading halt. 

After trading resumed, investors registered their distaste, plunging the share price -22.6% upon opening. 

At the time of writing, Mesoblast has recovered slightly, rising to sit -15.5% below yesterday’s closing price. 

What’s next for Mesoblast?

In today’s announcement, the company told investors Mesoblast “remains highly focused on executing on our short term objective to bring remestemcel-L to market for patients with acute respiratory distress syndrome (ARDS) due to covid.”

While remestemcel-L missed the primary endpoint in the company’s covid ARDS trial, Mesoblast considers the observed mortality reduction strong enough to pursue an emergency use authorisation (EUA).

The company is preparing to initiate a Phase 3 trial that may support this EUA.

Throughout the covid pandemic, countries have had mixed responses to EUA pathways. 

While several countries (including the US, Canada, and the UK) used EUAs to make vaccines available quickly, Australia did not.