Here are Macquarie's views on the announcement for all you lovely people:
Mesoblast
Heart failure now easier to self fund
Event
MSB has announced that it has reduced the size of its heart failure (CHF)
study from 1,165 patients to approximately 600 patients.
Impact
Requirement to undertake two studies means CHF remains many years
away: The study was originally designed to recruit 1,730 patients. This
announcement is that two studies will now be done, each with ~600 patients,
with the second study running in parallel. Given (i) MSB's well documented
funding challenges and (ii) Teva's funding commitment being contingent on an
upcoming interim analysis (of the first 120-150 patients), we do not anticipate
that the second study will begin any time soon and remain of our view that the
earliest likely approval is 2021. See here for further analysis.
More pressing issues approaching, namely the interim analysis of first
~150 patients: In January 2011 MSB stated it "shall now look to progress
clinical development of Revascor™ for the treatment of CHF towards a Phase
3/pivotal trial". Some five years later we are still awaiting the results of an
interim analysis of the first 120-150 patients, which are due 1QCY16. Partner
Teva has committed to fund the study up until this interim analysis; however,
we see risk that it chooses not to fund the study beyond this point.
Smaller study will be easier for MSB to fund alone: All things being equal,
smaller studies need to show greater benefit than larger studies in order to
provide the same level of confidence that an observed effect is real rather
than due to randomness. On the flipside, smaller studies are cheaper to fund.
So whilst the exact reasoning for reducing the study remains unclear, we note
that if Teva does indeed choose not to continue funding the study, MSB is
now in a better position to be able to complete the study itself.
High risk remains given failed earlier study: Given MSB's preceding CHF
phase II study was small (15 patients were given MPC-150) and missed all its
pre-defined efficacy end-points, we believe the ongoing CHF study remains
very high risk, in whatever format. And whilst MSB's statement in its press
release that none of 15 patients in the earlier study experienced a cardiac
event is correct, we highlight that this metric was post-hoc and of questionable
value in such a small study (as exemplified by the mid-dose cohort in the
study having 33% more cardiac events than the placebo group).
Earnings and target price revision
No change
Price catalyst
12-month price target: A$1.33 based on a Sum of Parts methodology.
Catalyst: 1H16 result in February.
Action and recommendation
Maintain Underperform: MSB faces a number of challenges in the next 12
months, particularly funding its ongoing R&D requirements and the threat that
a major partner fails to renew a funding agreement.
I covered on the basis that there are clearly low expectations for the PIII CHF trial already, given the PII failure. The amended study is cheaper to fund - so net/net, there's not much of delta in this announcement.
Oh well - never wrong for long!
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