Mesoblast Ltd (ASX: MSB) shares are having a volatile session on Thursday.

At one stage, the biotechnology company's shares were up over 6% to a 52-week high of $1.87.

It has now given back these gains and dropped 6% to $1.65.

Why are Mesoblast shares falling?

Investors were buying and then selling the company's shares today after the allogeneic cellular medicines developer made a major announcement.

According to the release, the United States Food and Drug Administration (FDA) has granted its second generation allogeneic, STRO3-immunoselected, and industrially manufactured stromal cell therapy Revascor Regenerative Medicine Advanced Therapy (RMAT) designation.

This follows the submission of results from a randomised controlled trial in children with hypoplastic left heart syndrome (HLHS).

HLHS is a severe congenital heart disease in which the left side of the heart does not fully develop and effective pumping of oxygenated blood by the left ventricle to the rest of the body is reduced.

Mesoblast notes that without immediate surgery after birth, the prognosis is dismal with HLHS overall being responsible for 25% to 40% of all neonatal cardiac mortality.

Earlier this year, FDA granted Revascor both Rare Pediatric Disease Designation (RPDD) and OrphanDrug Designation (ODD) for treatment of children with HLHS.

What is RMAT designation?

The release notes that RMAT designations aim to expedite the development of regenerative medicine therapies that aim to treat, modify, reverse, or cure a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for the disease or condition.

The company highlights that an RMAT designation for Revascor -L provides all the benefits of Breakthrough and Fast Track designations, including rolling review and eligibility for priority review on filing of a Biologics License Application (BLA).

Furthermore, on FDA approval of a BLA for Revascor for the treatment of HLHS, Mesoblast may be eligible to receive a Priority Review Voucher (PRV). This can be redeemed for any subsequent marketing application or may be sold or transferred to a third party.

PRVs are regularly sold for more than US$100 million.

Commenting on the news, Mesoblast's chief executive Silviu Itescu, revealed that he was pleased with the news. He said:

We appreciate FDA's support in designating REVASCOR both RMAT and RPD status, a recognition of the potential impact of our therapy on the long-term adverse outcomes of these desperately ill children. Under the RMAT designation, we plan to meet with FDA to discuss a potential approval pathway in this indication.

It seems that today has been a case of buy the rumour and sell the news.