From The Age this morning:

• Coronavirus pandemic

'Not for the faint-hearted': COVID crisis brings boom time for biotechs

By Emma Koehn

August 15, 2020

By Emma Koehn August 15, 2020
For our free coronavirus pandemic coverage, learn more here.

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Mesoblast boss and major shareholder Silviu Itescu won’t be the only one breathing easier now that the ASX-listed biotech’s flagship treatment has managed to get the green light from the US regulator’s advisory committee.

It was a close run thing by all accounts and for Itescu and investors in Mesoblast a no vote would have seen a decade’s worth of work come to a standstill.

For his part, Itescu says he wasn’t quite as spooked as investors by signs the US Food and Drug Administration's drug advisory council was going to put Mesoblast’s treatment under severe scrutiny.

The coronavirus has thrust relatively obscure companies into the spotlight and turned some into multibillion-dollar businesses.Credit:Michele Mossop

“We have been very well prepared for this meeting, we have known what the issues are and we’ve known what the answers are,” he says.

Mesoblast’s stock, which plunged more than 30 per cent in a single session ahead of the USFDA meeting, roared back to life on Friday, up over 40 per cent.

The company had been talking up hopes that its flagship product, remestemcel-L, used to treat acute graft-versus-host disease in children, a severe immune response which can occur after a bone marrow transplant, could also be used for respiratory distress caused by COVID-19. The link with COVID-19 may have played a part in raising the stakes for investors prior to the US hearing.

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The vote by the advisory council on Friday morning Australian time means experts believe remestemcel-L is effective for graft-versus-host disease. This paves the way for the FDA to approve the treatment for use in the US for this illness, which would be a regulatory first. The FDA will make a final decision by September 30.

Mesoblast chief executive and major shareholder Silviu Itescu is back in front of potential investors. Credit:Josh Robenstone

The rollercoaster three days for Mesoblast is a salutary lesson in how quickly the ground can shift under the feet of biotech companies and their backers. Even before this week’s gyrations, Mesoblast’s share price has bounced around this year, from as low as $1.02 to as high as $4.87 over the last six months.

Itescu says he hasn’t been paying much attention to the share price. It’s not a bad idea, especially when it comes to the biotech sector, where high risk, high reward is par for the course and regulators can make or break a company.

“I mean, volatility is just other people’s perception of risk," he says.

Long time Mesoblast backer and executive chairman of Thorney Investment Group Alex Waislitz says the opportunities offered by Mesoblast have never been in doubt but adds that putting money in biotechs isn’t for those looking for a sure bet.

"It leaves itself open for a lot of volatility. You need to have a long-term perspective on it — you need to have the capacity to deal with the long time between announcements and trials," he says.

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"It's not for the faint-hearted."

A COVID-19 launch pad

The coronavirus pandemic has fuelled extraordinary volatility in the markets but the fight against the virus has also thrust relatively obscure companies into the spotlight and turned some into multibillion-dollar businesses.

The biotech sector, which includes diagnostics, novel drug development and medical devices, is big business. The top 10 healthcare companies on the ASX are worth more than $200 billion alone.

'If you can make substantial differences to patients and their outcomes, you have the ability to create a new industry.'

Silviu Itescu, Mesoblast chief executive

Australia is renowned for its cutting edge research, and its largest life sciences companies such as CSL and ResMed have grown into multibillion-dollar exports with sustained share price growth.

Beyond these household names, there are more than 80 listed smaller pharmaceutical and medical device companies working, often under the radar, to turn brand new therapies into reality.

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And there are big rewards on offer for investors but as Itescu says, the sector also presents significant risks. "Investors should understand that biotech is a highly regulated field — it requires patience, diligence and ultimately you’re in the hands of regulators.

“Having said that, there’s got to be more of an understanding of the hurdles but also the rewards, if the tech works and it’s patented and has an exclusive area of focus, really if you can make substantial differences to patients and their outcomes, you have the ability to create a new industry,” Itescu says.

While the sector hasn’t traditionally been on the radar of many investors, experts say the pandemic has generated awareness of the role of drug and treatment supply chains, which has in turn led to money flowing into the sector.

Atomo Diagnostics' experience since listing on the ASX in April illustrates the new-found enthusiasm of investors in punting on stocks involved in testing, treating and eradicating COVID-19.

Atomo Diagnostics founder Dr John Kelly. Credit:Kate Geraghty

The rapid diagnostic testing startup pitched itself to the market with a test for HIV but quickly shifted its focus to developing a COVID-19 test. Atomo's rapid antibody test was approved by the Therapeutic Goods Administration last week, launching it into the Australian market. As the pandemic put biotech companies front and centre, its share price jumped. Sitting at 38¢ on Friday, the business is trading 90 per cent above its initial public offer price.

Managing director John Kelly says the swift pivot has served the company well and while investor interest in biotechs is welcome, it’s what happens once the virus is contained that will be crucial for the sector.

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