Just thought I would post a good story on the Blaster in Bell Potter's latest report of 13 June 2018, to restore some positivity as we move forward.
MESOBLAST{$1.51; -3; -1.95%} BUY (SPECULATIVE THOUGH) GvHD a unique billion dollar global revenue opportunity now in sight My colleague in the UK Phil Beard has a deep understanding of Mesobalst & he did this which I think for any potential investor in Mesobalst must read.. Faster than expected commercial adoption of Temcell in curing Graft vs Host Disease in Japan suggests clearance in the US could ignite a royalty and profit stream from 2019 which would justify at least twice the current valuation. This theme has been picked up by a succession of US brokers in recent weeks whose target prices – on average more than double the current market price suggest its potential multi-billion opportunities in Cardiac and Disc are being carried at negative value. (see below) If the FDA sees 100 day data in GvHD which is imminent , mirroring the results seen in Japan and other studies, Mesoblast could reasonably start preparing for not only not only the first approved cure for a disease which kills scores of young Americans every year but a landmark in regenerative medicine - the first off the shelf stem cell product approved for commercial sale in the US. If as must be reasonably expected the FDA sees a repeat of the Japanese experience in adult GvHD , Mesoblast could have a stranglehold on a global market, which although small in numbers , could generate annual revenues hitting as much as a $A1 billion by 2024. With recruitment for a Phase 3 trials for lower back pain completed , and recruitment for the Phase 3 trial for Class 3 heart failure due to finish enrollment by year end the era of heavy research spending by Mesoblast is close to peaking just as the long awaited revenues start to arrive. The company has US$59 million in cash and has drawn down US$35 million of the US$75 million credit line extended by US specialist healthcare finance group, Hercules, which is being serviced by royalty income from JCR in Japan and TiGenix in Belgium, . The company can further access the balance if certain FDA milestones are reached suggesting growth can be maintained without needing to return to shareholders. Mesoblast's latest revenue statement highlights why a US$100m plus annual revenue opportunity in Its life saving therapy for Graft vs Host disease over the next 18 months is highly achievable. This could set the platform for a business which could sitting over royalties and profit shares of over US$700m in the next five years While the market is within weeks of receiving a continuation of the excellent 28 day results in Phase 3 paediatric trials achieved by its product at 100 days 00dd510d-3a0a-4bd7-ae0e-9023e7c13bcf 6/13/2018 The Coppo Report - 13/06/18
https://copporeport.bellpotter.com.au/Article/425 20/48 the Japanese experience suggests this is realistic The therapy ,TEMCELL manufactured under license by JCR and sold has achieved 50 PC penetration in the Japanese market (adult and children) within two years of its first sale This achievement is made more remarkable not by what some may see as its high cost (150k) but the fact that unlike the US bone marrow transplants are diffused over many treatment centres making marketing tough Graft vs Host disease occurs after a transplant where the donated bone marrow or peripheral blood stem cell views the recipient body as hostile inciting the transplanted bone marrow or cells to attack the body There are 30k transplants annually of which half get GvHd which can vary from mild discomfort to death. There are two of GvHD acute or chronic the former affects 30,000 people globally ( half in the US) mainly in older people The effects which impact half transplant recipients can vary mild discomfort to life threatening. While there is no approved cure in the US or Europe in most cases variations of steroid based therapies have been effective but at the risk of reducing the body's immune system As a result hospital costs can be punitive and in ten per cent of cases where steroids fail (steroid -refractory disease) the chances of survival are minimal Given the FDA has granted the therapy fast track clearance if it satisfied the US data maintains the success seen at 28 days through to 100 and 180 days - in other words replicating the Japanese experience - the product could be commercially available for children next year at a price of US$250,000 It is estimated of 16000 Americans suffer acute GvHD in about 300 children this develops into something more lethal with a further 1200 adults risk a similar outcome There are strong reasons to expect take up in the US to be as least as rapid as in Japan as half the transplants in the US are conducted in 15 centres. Many of the physicians are already acquainted with the product as the product has been available to dangerously Ill young people for a few years So as well as 55 cases trialled by the FDA doctors have the evidence gathered from more than 200 dangerously children in the enhanced access program -many in the US It is always difficult to gauge off label usage ( in this case would it be used as last stage therapy for adults ) but the success in Japan could prompt its application So if we assume by 2020 this is achieving 50% market share of 300 this would suggest revenues of close to 50 million - as the company waits for the FDA to expand its usage to adults and potentially for use in chronic GVHD Given the chance to grab all this sales revenue and the small number of centres needed to be serviced as the system gears up for full clearance MSB might be tempted to eschew the usual milestone/royalty income model to hire a small salesforce . 00dd510d-3a0a-4bd7-ae0e-9023e7c13bcf 6/13/2018 The Coppo Report - 13/06/18
https://copporeport.bellpotter.com.au/Article/425 21/48 Europe , a multi national market while of a similar revenue opportunity and likely to be a year behind the US in the regulatory timetable lends itself to a royalty model A small specialised sales team of say a dozen ,not dissimilar to the approach used by Nanasonics to sell Trophon in the US could easily be accommodated in MSB financial structure There are no other competing therapies on the horizon for what is an attractive albeit small global market suggesting MSB is likely to be sitting on a solid annuity income of tens of millions for the next decade This is before late stage data in Class IV heart disease due in the next quarter as well as results of Phase 3 trials in Class 3 hear disease and degenerative disc - both potential multi billion dollar opportunities.
How should this be valued? Belgian stem cell ,Tegenix , which uses MSB patented technology for a fistulae a small indication of Crohn's disease has been bought by Japanese pharma , Takeda for US$700m Interestingly with pricing in Europe close to being finalised we expect to see royalty income to flow to MSB by early next year and it's hard to believe Takeda's interest will stop at this product ( which may entail further conversations with the Australian patent holder) Sirtex is going off the boards 1.5 billion on annual revenues of 250 million for a second line therapy in liver disease therapy which just on a single selling product brings the MSB value close to our number There is a strong case that even before the massive potential in the upcoming data there is a very strong case to argue even what is before investors in the very near term the stock is massively undervalued. Regenerative medicine is shaping up as a game changing therapy in healthcare and Mesoblast is widely acknowledged as the global leader in the cell therapy industry a point increasingly picked up by US analysts, all bar one, have targets well ahead of those of Australian firms
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