Mesoblast (ASX:MSB): Which direction will this rollercoaster of a $3bn biotech company go next?

Biotech company Mesoblast (ASX:MSB) is the ultimate definition of a rollercoaster company. As of October 7, 2025, it is capped at $3.2bn, which makes it the third largest ‘biotech’ behind CSL and Telix (note: we’re just talking biotechs, not healthcare stocks more broadly – although if you include all healthcare stocks, MSB still makes the top 10 out of 140 or so ASX healthcare stocks). And the company has created ~$1bn in shareholder value since April – not by accident, all because of the successful launch of Ryoncil.

Let’s look at this company’s story and where it could be headed next.

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The story of Mesoblast (ASX:MSB)

Mesoblast’s specialty is stem cell therapy, something you’re probably heard of due to hype about their potential to cure conditions for which there are few to no cures, such as Parkinson’s, heart disease and stroke.

Stem cells are basically the body’s cell-creating factories. As a particular organ or tissue loses cells through normal day-to-day living or injury, stem cells move to the site and differentiate into the more specialised cells that are needed.

Around 2001, stem cells were controversial because the assumption was that the best kind of stem cells for use as regenerative therapies were embryonic, meaning harvested from human embryos. Then companies like Mesoblast emerged with data showing that adult stem cells could serve just as well and the field moved out of the public consciousness for a while as companies developed aspirational products by running clinical studies and pursuing regulatory approval.

The basis of Mesoblast’s products are Mesenchymal Stem Cells (MSCs), that originate from human bone marrow. From around 2009, Mesoblast was able to show clinically that its MSCs were therapeutically useful in conditions including Crohn’s disease and heart failure, and that they work in part by damping down excessive inflammation in the body.

Remestemcel-L

Its flagship treatment is Remestemcel-L. which it has sought to gain approval for primarily for Graft vs Host disease. Graft vs Host is a condition impacting recipients of (stem cell-based) bone marrow transplants where the body rejects transplants (in other words, recognises them as foreign and attacks them). This leads to impacts severe enough to cause death and the only ‘treatment’ is steroids. The product range also includes TEMCELL, a product sold in Japan which derives royalty revenue for the company.

For many biotechs their issue is obtaining data that’ll get regulators to approve the product, and commercial partners to be barging down the doors to sign licensing issues. In the case of Mesoblast, the issue hasn’t necessarily been the data, but getting regulators on the side. In October 2020, Remestemcel-L (also known as Ryoncil) was rejected not because the data was good (it was), but the agency wanted more of it in order to have more confidence that the treatment effect was real. And in August 2023, the FDA issued a ‘complete response’ letter in response to another application.

Mesoblast has just kept on getting data, not just for Graft versus Host, but others too, such as Inflammatory Bowel Disorder and chronic low back pain. One rare failure came from a 537-patient heart trial in 2020, although a follow-up study had better results. What can you do but keep running trials? And to fund it, the company has kept raising hundreds of millions of dollars. Investors have kept putting their money in, given the potential commercial opportunity.

The breakthrough finally came, but now what?

In December 2024, Ryoncil finally received FDA approval, making it the first MSC therapy approved in the US. It was based on data showing an overall response rate of 70% and a complete response rate of 30%. Shares rallied significantly in the lead-up to the approval and in the month since.

However, shares have halved between then and April 2025. January’s capital raise (of US$160m/A$260m) obviously diluted shareholder value. Granted, there was legitimate concern over Trump’s tariffs amongst all investors, including healthcare stocks. MSB has told investors it shouldn’t face tariffs because its stem cells come from US donors, although it has only said it ‘believes’ that it should not be subject to tariffs. The company has also been also seeking approval for Revascor for heart failure.

More breakthroughs in the last 6 months

April 2025 was a turning point. The company announced that Ryoncil was now available for purchase in the USA, that the first 3 paediatric patients would receive it that very week, and that mandatory private insurance coverage will begin on July 1, 2025. As well as this, the company was added to the ASX 200 in mid-March, triggering mandatory institutional buying.

In May, Mesoblast announced it received seven years of orphan-drug exclusive approval from the FDA. The regulatory will not approve any other MSC product for SR-aGvHD for that entire time period. Mesoblast closed FY25 with US$17.2m in revenue, up 191% from the year priod, US$13.2m of which came from Ryoncil despite it only being weeks since it was launched.

Investors were told there was a lot to look forward to with a US$1bn market for Ryoncil against GvHD with further larger markets for biologic-refractory inflammatory bowel disease and heart failure with reduced ejection fraction, as well as chronic lower back pain (CLBP). But the latter could be targeted with Rexlemestrocel-L instead, which is in Phase 3 for that indication. As for HFrEF, there could be accelerated approval with Revascor.

Mesoblast’s most recent update came earlier this week when it announced gross revenue of US$21.9m for Q3 of CY25, up 66% from the prior quarter. And best of all, all of Mesoblast’s products manufactured in the US were confirmed to be not subject to tariffs. It was not just the exemption that was good news, but also the clarity…something that so many of MSB’s biotech peers do not have.

Conclusion

With the green light finally secured, and cash flows coming in, Mesoblast investors are set for good times in the months ahead. Of course, nothing is guaranteed and long-term investors would be all too aware given past setbacks. But still, this is among the safer biotech stocks available to investors right now.