You are assuming that "MSB followers" are taken by surprise on this news, it is not rocket science to understand the rationale on the ASX classifications.
You are welcome to contribute to this thread, however I note that you are one of those who seizes the opportunity to champion your cause by downgrading this company when there is negative news. I am yet to see any positive news from you. If you want to avoid being "scolded" post unbiased comments.
The report below is from Bell Potter, if you care to read. This is an analysis based on facts and thorough research. Maybe you can take take some pointers from this report on how to analyse.
Your final assessment on "silver lining" does not apply to me. I am aware that in this business there are no shortcuts and there are numerous obstacles along the way. I am prepared to wear all of this ,the frustrations and disappointments on this rocky road but know that MSB has good products to offer to the world at large and it is worth the wait to reap the benefits which I believe is not too distant.
FY17 could be a transformational year
Based on the management update today, we believe that FY17 could be a transformational year for MSB for several reasons as discussed below:
Cash management strategy provides breathing space to deliver on key milestones: In the aftermath of Teva handing back the rights to the cardiovascular programme, including the ongoing Phase III CHF programme, MSB has focused its strategy on reducing cash burn in FY17 and directing the savings to fund its CHF programme and other Tier 1 products to their next inflection point. Tier 2 products have been de-prioritised and a standby equity facility (US$90m over 36 months) removes near term financing uncertainty. It also provides time to conclude a strategic partnering deal which in many ways could be truly transformative for the company. As per management guidance, MSB’s existing cash reserves provide cash runway to end of FY17.
FY17 will be first full year of revenues from Temcell in Japan: MSB’s partner JCR Pharmaceuticals launched its acute GvHD product TEMCELL on 24th Feb’ 16. Under the deal remaining is sales milestones (BPe ~US$4m) as well as royalties in the mid 20% range payable by JCR. MSB recorded US$460,000 in first royalty revenues in 2HFY16, based on ~4 months of sale. Royalties jumped in 4QFY16 (US$361,000 vs. US$99,000 in 3QFY16). JCR is paying the royalties to MSB with a lag of one quarter, hence in terms of receiving cash only US$99,000 for 3QFY16 has been received up till now. Although, it is too early to gauge the rate of adoption, the jump in 4Q is encouraging. FY17 will be the first full year of sales from launch and as such good adoption and uptick in revenues for MSB, will not only alleviate cash burn but also set the stage for expectations for the much larger US market.
GvHD product (MSC-100-IV in Ex-Japan markets) is nearing commercialisation (BPe CY18): Enrollment in the 60 patient Phase III registrational trial in paediatric GvHD patients is ongoing. Interim results are expected in 4QCY16 and enrolment is expected to be completed in 1QCY17. We expect Top-line results in 2QCY17. MSB expects to file for approval in the US by mid CY17, positioning it for FDA approval by end of 4QCY17. We estimate that the product could launch in the US in 1HCY18. In parallel MSB is working on aspects of manufacturing in preparation of their BLA filing and commercialisation. MSB intends to have a small sales force and commercialise this product for the US market themselves. If successful, MSB is likely to be eligible for the rare paediatric disease priority review voucher from the FDA.
2 interim analysis from Phase III trials in 1QCY17 could be the trigger for partnering deals: These include interim analysis from the Phase III CHF (congestive heart failure) trial and the Phase III CLBP (Chronic low back pain due to disc degeneration).
CHF trial interim analysis: The second interim read out on futility and possible overwhelming efficacy from the CHF trial (MPC-150-IM) will be released in 1QCY17. The trial as of June 2016, is around 40% recruited (240 of 600 patients). We expect that the interim analysis will be based on 12 month follow up of the majority of the 240 patients already recruited in the trial. Since the trial is blinded, the independent data monitoring committee (DMC) will look at the data on primary end point of the trial and provide their recommendation to MSB based on pre-specified thresholds.
A positive recommendation to continue the trial as per protocol or that it meets the test of overwhelming efficacy at that point will strengthen the partnering prospects of this asset and also allow MSB to make a more prudent decision around continuing to make significant investment in this program. MSB estimates that between now and the futility
interim analysis point in 1QCY17, they will spend ~US$13m on the CHF programme, which is being funded by the savings announced for FY17.
Back Pain trial interim analysis: The first of two planned phase 3 trials for MPC-06-ID is currently enrolling patients across 30 sites in US and Australia. This randomised, double-blinded trial has 3 arms, comparing 6 million MPC dose either alone or with hyaluronic acid (HA) carrier against saline (placebo) control and is expected to recruit ~360 patients. The first interim analysis from this back pain Phase 3 trial will be released in 1QCY17.
MSB has received written guidance from the FDA around the approvable endpoints, the thresholds for each to show benefit and the time points of 12 months and 24 months. We note that recently MSB’s 24 months results from the previous Phase II trial was selected following a peer review for a podium presentation at the annual scientific meeting of the Spine Intervention Society (SIS) and also received the award for the ‘Best Basic Science Abstract’. The positive Phase 2 results displayed overall treatment success of MPC treatment using the end-points being used in Phase 3 and also showed durability of effect. This bodes well for prospects of success in the ongoing Phase 3 trial. In our view, the commercial prospects for MPC-06-ID in back pain is very strong and if comparable results to Phase II are achieved in the Phase III trials, it will leave MSB with a potential blockbuster product with attractive licensing prospects.
MSB continues to be in advanced partnering discussions with major companies for this back pain product. The potential partners include companies with existing presence and distribution capabilities in this space. We are optimistic of a deal materialising in FY17.
24 weeks data from Phase II Rheumatoid Arthritis Trial due in 4QCY16: MSB recently reported impressive Top-line results from its Phase II Rheumatoid Arthritis trial (MPC-300-IV product). We were particularly encouraged to see a dose response clearly with higher dose showing improved outcomes than the lower dose. Importantly consistent benefit with high dose MPC treatment and separation from placebo was seen across multiple efficacy endpoints namely FDA acceptable ACR20/50/70 response criteria, physical function (measured by health assessment questionnaire- disability index –HAQ-DI) and disease activity (DAS28 measurement). Clear separation of benefit of MPC treatment over placebo was seen across all subjects, however this difference was even further augmented in the subgroup who had failed 1-2 biologics, making the results in this sub group even more compelling. While MPC treated patients performed better over placebo on ACR20 response criteria, the difference in benefit was even more profound on the ACR50 and ACR70 response criteria, which clearly suggests that the drug has biological activity. This positive data makes us believe that MPCs are well positioned to be a preferred 1st-line agent in treatment of biologic refractory RA patients.
MSB will look to partner the asset to move the product forward into Phase 3 development. We believe that MSB should be able to attract a strategic partner in the next 12 months to move the program forward. Our belief is based on the strength of the results seen so far, as well as the high interest and licensing/M&A activity seen in this space. RA is a space in which most big and specialty pharma companies are active in. This high interest from multiple parties ensures that the negotiating power of a company such as MSB able to provide strong mid-stage results is high. Most of the deals in this space have been between ~$1bn-$1.5bn and front loaded with upfront payments of ~$100-$175m, with some exceptions having upfront payments as high as $725m. Given the multi-billion dollar market opportunity and threat of biosimilars and upcoming patent expiries of the top selling RA drugs we are not surprised either by the high partnering activity or the high value deals in the space.
MSB will report further 24 weeks data from the trial in 4QCY16, which would give additional insights into the durability of the clinical benefit seen with MPC treatment. If results at 24 weeks are consistent with benefits observed at 12 weeks, it should further enhance the partnering prospects of MPC-300-IV.
Cash injection through a partnering deal in FY17 could provide validation and alleviate cash burn: MSB has explicitly stated that it is in advanced partnering discussions with various parties for its Tier 1 chronic discogenic low back pain product currently in Phase III trial and its MPC-300-IV product targeting inflammatory indications. A partnership in next 4-8 months could lead to substantial cash injection and trigger a re-rating.
MSB Price at posting:
$1.32 Sentiment: Hold Disclosure: Held
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