The Mesoblast limited (ASX: MSB) share price has been the worst performer on the S&P/ASX 200 Index (ASX: XJO) by some distance on Tuesday.
In afternoon trade the biotechnology company's shares are down 26% to $3.62.
At one stage, the Mesoblast share price was down as much as 29% to $3.46.
Why is the Mesoblast share price crashing lower?
Investors have been hitting the sell button in a panic on Tuesday after the U.S. Food and Drug Administration (FDA) released a briefing document ahead of Mesoblast's meeting with the Oncologic Drugs Advisory Committee (ODAC) on Thursday evening.
This meeting is in relation to its remestemcel-L product candidate as a treatment for paediatric steroid-resistance acute graft versus host disease (paediatric SR-aGvHD).
The ODAC is a key player in the regulation of cancer drugs and plays a big role in whether a drug gets approval or not.
Unfortunately for Mesoblast, the FDA's briefing document appears to have cast doubts on whether or not it will receive approval from the regulator.
What did the briefing document say?
According to the briefing, the FDA has concerns about the clinical performance of the drug product (DP).
It stated: "[The] FDA's position is that the product attributes the Applicant has identified as related to potency and activity, however, do not have a demonstrated relationship to the clinical performance of specific DP lots, and that the product's proposed immunomodulatory mechanism of action has not been demonstrated in vivo in study subjects receiving remestemcel-L."
"Without a demonstrated relationship with clinical effectiveness and/or in vivo potency/activity, controlling these CQAs [critical quality attributes] may not be sufficient to ensure the manufacturing process consistently produces remestemcel-L lots of acceptable quality," it added.
Before adding: "We ask the committee to consider the product attributes identified by the Applicant as CQAs and discuss whether they are adequate to ensure that the manufacturing process will continue to produce lots of consistent quality."
The FDA also wants the committee to "discuss other product characteristics not previously identified as CQAs for remestemcel-L that might provide more meaningful measures of product quality and potency and therefore provide better assurance of product quality from lot-to-lot."
Mesoblast is due to meet with the committee overnight on Thursday, which may mean an update is available Friday morning in Australia. Shareholders will no doubt be waiting nervously until then.
