Hello Australia, Continuing with Part 2 of our discussion begun yesterday, again the purpose of this thread is to look at some of the deeper, longer-term competitive and regulatory forces that might shape Mesoblast value and our interest as investors. Plate tectonic forces, if I may borrow a concept suggested by @dplane. Thanks to everyone who made comments, very interesting. Yesterday, I started a primer on the FDA for those who might not be so familiar with American bureaucracy and how stem cells are regulated. I introduced a letter by lawyer A Rahman Ford concerned about those regulations and discussed how the technological advances in stem cell treatments in particular led the FDA to take a fresh look at its regulations governing biologicals, ie HCT/P, which are Human Cells, Tissues and cell/tissue-derived Products.
So, in November/December 2017 the FDA issued updated "Guidance" to help Biotech companies, doctors and even FDA staff get a handle on whether certain products might qualify for an "HCT/P exemption". A lot rides on the availability of such an exemption - namely whether expensive time-consuming clinical trials must be done to test the product for safety and efficacy - and many companies and consumers walked away unhappy. Unhappy to this day, hence the letter from Mr. Ford.
Let's dig in and try to understand what the FDA is saying. The document begins, "We, FDA, are providing you, doctors...", "We, FDA, are providing you, Mesoblast investors, with our current thinking..." Yesterday I said a transfusion of stem cells, MSC's, is very similar to a blood transfusion. We take cells from one human and drip them into another human via a plastic tube and an IV catheter. This is generally done in a hospital where there are safeguards. The cells in a blood transfusion might stay in the recipient a couple of months, the cells in an MSC transfusion perhaps a week. Both appear safe when proper controls are set up, what could possibly be wrong? Why is the FDA so concerned about stem cells? Let's start by listing the reasons a doctor might order a blood transfusion. Certainly if the patient is bleeding heavily, that's obvious. Anything else? Maybe if the patient has symptoms from a severe anemia... say an anemia from iron deficiency... or Vitamin B12 deficiency... or chemotherapy... or a bone marrow disease... or a host of other causes of anemia. Anything else?... without searching nothing else readily comes to my mind. How about MSC's? There we're talking about using them to treat a very serious condition called Graft vs. Host Disease. Anything else? How about an intestinal condition called Crohn's disease... or a pulmonary condition called Adult Respiratory Distress Syndrome related to Corona virus... or not related to Corona virus... or a rare genetic condition called Epidermolysis Bullosa that leads to life-long blistering, peeling and fragile skin. ..or Cytokine Storm Syndrome that might occur as a side-effect of treatment with CAR-T cells used to treat cancer patients... or maybe some other inflammatory conditions or rare genetic conditions we haven't thought of yet...
So, even if you're not a medical person there should be some things that stand out in the second list. If you think about it the cells of a blood transfusion are being used to replace the same red cells and white cells the patient has lost either due to bleeding or anemia. With the MSC's the cells are not really replacing cells the patient has lost... they're being used to treat conditions that we might normally treat with a small molecule medication. In fact, we start with powerful steroids in GvHD, and bring in the MSC's when those fail and the patient is deemed "steroid resistant". We start with hydroxychloroquine... or remdesivir... or Actemra.... or...Xpovio... or leronlimab... or SRNE's "cure" for Covid-19 and we bring in the MSC's when all of those fail (which they all will in some cases). And when we use MSC's to treat EB again we're using them like a medication or a drug to calm a condition and not as a replacement for the patient's skin cells.
So, the FDA introduced the concept of "homologous use". That's something that sets stem cells apart. A heart transplant is actually more like a blood transfusion than is a stem cell transfusion. A heart transplant is replacing the patient's cells, here an entire organ of cells, with similar cells that do the same "homologous" function. The first bone marrow transplant is a homologous replacement for the child's bone marrow that has been destroyed by leukemia and chemotherapy. And the FDA is ok with a doctor using his or her considered judgement in ordering up a blood transfusion or a bone marrow transplant or even a heart transplant. But for a transfusion of MSC's that are being used like a medication, the FDA remembers the bedrock of its foundation. A small child cries with fever in the middle of the night. Concerned parents call the trusted family doctor... if they have a phone. Otherwise the older brother is sent to fetch him. He arrives in his Model A Ford and examines the child. Maybe little Joan has an ear infection or impetigo or maybe just a virus. The doctor using his judgement and considered opinion opens his black bag that has a new corked flask of antibiotic labeled "Elixir". He knows the alcohol will sedate her and allow everyone to get a night's sleep as the antibiotic kicks in and the child is hopefully cured. But a horribly different outcome occurs. Everyone in that scene has acted in good faith, the child, the parents, the doctor... but many lives are broken. And @dplane's "nanny state" is born.
"We the People*... ", the famous opening line of the US Constitution becomes "We, FDA, are providing You the People our current thinking..." in matters concerning marketing and commerce in medications intended to treat illness. A doctor's considered opinion no longer holds sway.
In fact, the FDA had already made its decision on stem cells long before 2107. As early as 1998. But in 2014-17 the agency went through a formal process to clarify it and explain it... to give "our current thinking". And they clarified one OTHER hurdle that has to be cleared in order for a biological to get an exemption, namely "minimal manipulation". They asked the question, "how does a preparation of stem cells arrive at having such strong therapeutic potency?" The answer: the cells have been "manipulated" by human intervention. A special type of cell, 1 in a million, has been separated out, placed into a cell culture medium outside the body, encouraged to divide into millions of progeny cells that are perhaps engineered through processes such as "ex-vivo fucosylation" or who knows what other process... This goes far beyond placing a unit of cells in a centrifuge, which might still be considered "minimal manipulation". The "minimal manipulation" standard creates an especially high hurdle in orthopedics. People like Mr. Ford want a doctor to be able to take a small piece of cartilage and grow it into a large piece of cartilage for transplant back into the same person. That sounds like "homologous use". Yes, says the FDA, but it goes far beyond "minimal manipulation".
As I said, companies were and are upset by this. And some companies lost exemptions or were forced to stop marketing products that generated significant sales. An example is a company in Georgia named MiMedx (MDXG, Market cap $390M). They have a product called Amniofix which is prepared by taking placental tissue and radiating and dehydrating it to kill all its cells (Purion process). The tissue is then ground into a fine powder, which a doctor can suspend in saline for injection into the lower back, neck, or knees. It is also injected into soft tissues to treat plantar fasciitis. Dermatologists were giving multiple injections into the scalps of young female patients to give more bountiful, glossy hair or to treat acne scars. Some of these cosmetic treatments were even provided at health spas by "nurses". You can see that this product violated "homologous use" and "minimal manipulation" guidelines. At the time I accused the company of quackery based on its marketing video which hinted at weight reduction and improved sexual performance. MiMedx is now putting Amniofix through clinical trials, while depending on wound care products to keep the company going until trials are complete. MiMedx is a potential competitor to Mesoblast for CLBP and knee applications. However, I'll be surprised if their acellular product - said to attract a patient's own stem cells to areas needing repair "like a magnet" and to give "remarkable" results - ever gets approval. But let's see what the trials show.
Another potential competitor in the ortho space is Vericel (VCEL, market cap $680M). This is a much more serious competitor than MDXG and is instructive. They have an autologous product for knee cartilage repair, called MACI, already approved by the FDA (take note Mr. Ford). The technology involves inserting an arthroscope into the patient's knee joint (under surgical anesthesia) and extracting a small biopsy of cartilage. The cartilage is sent to Vericel, which using techniques far beyond minimal manipulation, transforms it into a larger piece of cartilage on a scaffold for transplant back into the patient's knee a few weeks down the road. So, NOTE WELL: this is where battle lines will form in orthopedic applications. Companies like Vericel offer "autologous" solutions to joint repair. Your own cells but the disadvantage is two operations are required, one to extract the cells for expansion, one to transplant them back in. Mesoblast will be offering an "allogenic" solution. MPC cells from a donor, but available "off-the-shelf" so only one procedure required immediately when needed. In the years ahead of us, I believe many stem cell wars will be fought out in the clinic on that battle line: autologous vs allogenic. It's why I asked about the status of the press release from 2013 announcing a partnership. The same battle will probably emerge on the CAR-T front... autologous already approved, vs allogenic off-the-shelf.
So, with all that as a background, let's take a quick look at Mr Ford's letter and dispense with it. He mentions FDA authorization of the leading stem cell companies, including Mesoblast, to conduct trials in C-19, then makes this unfounded statement:"A stem cell reformation of sorts is underway at the FDA due to the coronavirus pandemic."
Based on what I've written does anyone see a "reformation" in terms of FDA approval standards?? Authorizations to conduct trials are being done for many different therapeutics. But don't mix authorization to run a trial with approval of a therapeutic. Since there is no evidence for a "reformation", the lines evoking Martin Luther become nonsensical. He talks about, "Americanssuffering... for a seeming eternity" ... and "waiting for the FDA to abandon its rigid, doctrinaire, one-size-fits-all approach to medical care in favor of more flexible, forward-thinking and tailored treatments." Yes, it's possible some like him are waiting. He then says "C-19 has forced the FDA's hand". I see no evidence for that. He says, "The FDA's current push for stem cell innovation..." Note that the FDA does not "push" for innovation. Innovation comes from sponsors like Mesoblast outside the FDA. Likewise, the FDA does not "pursue stem cell therapy" or any therapy for that matter. Again, that's the job of innovators like Mesoblast, the FDA only regulates. After all this Mr Ford finally gets to the crux of his argument and note well what he says: " Nowit is time to RELAX FDA regulations onthe use of our own stem cells. Devolve regulatory authority to the STATES and their oversight, and let PHYSICIANS and patients decidewhen stem cell therapies are appropriate." Emphasis added by me. So he's asking that stem cell regulation be returned to individual states where physician licensure is controlled. To understand the USA well, understand that there are constant ongoing legal battles like this over "states rights' ", the rights of individual states to control what happens inside their borders. We had a civil war over that very issue in the 1860's... our "Brexit" was resolved in a different manner than Europe's, again that's meant to be a historical statement, not political. In any event I trust that after reading what I've written you'll agree the FDA is not going to be ceding power on its jurisdiction anytime soon. And that Mr. Ford's letter needs a careful re-write if not a filing in the trash can. Not posting on the MSB board.
So, I think I'll talk about the swamp tomorrow. Thanks to @chucke, many errors when I re-read the post, we both know they're there...
@dplane, the FDA now has its own stem cell lab, trust they're catching up to or like you say even leading the science. The quackery problem arises in the US when small clinics circumvent FDA guidelines or set up shop in the Caribbean to give injections for indications not tested. It's a problem.
@ddwn, I agree with the moat, keep it wide and deep. That comes in part from tough FDA standards
@Lopez, agreed, I'm invested in MESO because I see nothing but first class performance.
@RickyH, sad, I didn't know that. Thalidomide has therapeutic properties, just can't be used during pregnancy. Thanks for the info.
@Barman76, Agreed, the bar has to be kept high for all the FOLLOWERS.
@Joneing Panda, good luck with your studies.... it's a federal agency, they're not always known for their web sites (though I think the SEC's is pretty good).
@Bazsa, My impression is they set a minimum number of total injected cases for any therapy, especially those first-in-class. Looking for safety signals. The "pivotal" designation on a study is important.
Nice move up today for MESO, Great things ahead, good luck to all. Left-e
*The full opening line of the US Constitution:
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
(20min delay)