Mesoblast (ASX: MSB) (NASDAQ: MESO) shares are down 56% in Australia. We should expect MESO stock to follow as the premarket opens in an hour at our pixel time. It’s even possible that the first few, in those opening minutes, will be able to go short at the overnight price before everyone wakes up. It’ll only be in small volumes, we’re sure, but price movements do happen because someone is trading, they don’t just change all by themselves. The market makers tend not to be quite up and about by 4 am EST, those first few trades are often done by the ‘bots. It’s worth having a look to see at least, whether it’s possible to get some MESO away before the market wakes up to what has happened to the MSB stock price.
As to what did happen at Mesoblast: “Melbourne, Australia; August 4 and New York, USA; August 3, 2023: Mesoblast Limited (ASX:MSB; Nasdaq:MESO), global leader in allogeneic cellular medicines for inflammatory diseases, today announced that the US Food and Drug Administration (FDA) has provided a complete response to its Biologics License Application (BLA) resubmission for remestemcel-L for the treatment of pediatric steroid-refractory acute graft versus host disease (SR-aGVHD) and requires more data to support marketing approval. To obtain the data required, Mesoblast will conduct a targeted, controlled study in the highest-risk adults with the greatest mortality. This adult study is in line with our overall commercial strategy, which envisioned a sequenced progression from pediatric to adult SR-aGVHD indications. Adults comprise 80% of the SR-aGVHD market.”
Effectively, the FDA has insisted that it doesn’t - not yet at least - believe that the drug or treatment actually works as yet.
Mesoblast share price from Google Finance
Now of course Mesoblast’s announcement says that their strategy already encompasses this idea, that they’re going to get onto the tests right now and so on. But then corporate announcements always do try to put a gloss on bad news. On the other hand This is not a complete rejection, there is still the opportunity to allay those concerns and possibly - possibly- still gain marketing approval. Given that the problem being addressed - graft or transplant rejection - is such a serious one there might still be value here.
For us as traders the message is that sometimes there do still exist arbitrages across markets and time zones. We’ve seen this before, an Australian stock has a shocker and the first few trades - and we do mean just the first few, fractions after 4 am - manage to get through at something close to the overnight price before the market adjusts to the new information.