Mesoblast Company Update - Webcast and Forward Thoughts, page-10

The following is my opinion of where things lie. I post this to start a discussion on the likely paths forward, I have no doubt I am wrong on many points and would like to hear how others view the points that I make. No-one should use the following to make investment decisions without conducting their own research.

OK, so where are we now?

Acute Steroid Refractory Graft versus Host Disease in Infants
The CRL requires at least 1 more trial, double blinded, in adults and/or children before the FDA will approve (assuming demonstrated efficacy).SI & team are trying to arrange a Type A meeting with the FDA in 30 days (this is the normal timeframe for getting a meeting with them).

The FDA may not accept a meeting, or it might - they are under no duty to accept it.

The best case result for the meeting would be restricted approval to children below 12 only with the most acute form of the disease and commitment to a full double-blinded trial (with design input from the FDA) within 12 months.

I think the FDA will hold fast and not change their decision (see below)- the immediate aftermath being it sucks to be a child with acute steroid refractory GVHD because they will no longer have free of cost access to Ryoncil with MSB picking up the tab.

For MSB this is a setback as this was deemed to be the "easy" path for a stem cell treatment to be approved by the FDA because of unmet need, disastrous prognosis (death within 28-100 days) and no safety issues.

Why did the FDA make this decision?
Osiris ran a double blinded trial that did not meet their end goals in 2010 - this was for Prochymal. They did however have some statistically significant improvement for liver and intestinal tract but no overall mortality improvement over steroids. This clinical trial was for adults.A decent summary can be found here:Nature Paper

MSB bought the Osiris technology (with some trailing royalties) and tried to improve it based on a better understanding of the way stem cells work. This is what SI tried to explain to the FDA at the ODAC panel meeting.MSB then conducted a single arm trial among 55 children the results of which they presented on Feb 2018
MSB trial results

This showed a strong overall response in 69% of versus a historical response rate of 45% after 28 days.More importantly, durability was shown with 22% mortality after 100 days versus a historical rate of ~70% after 100 days.While this was very encouraging the n-count was small (55) and the measure of severity was subjective (i.e. if a hospital routinely over rates the severity then you get skewed results because outcomes are very much dependent on initial severity of disease - a double-blind placebo trial would wash much of this away because the overscored severity would also improve the placebo arm scores).

A wider analysis of 241 patients under the EAP (ages 2 months to 17 years) showed that if patients responded to treatment with Remestemcel-L at day 28 their 100 day survival rate was 82%.

Overall the FDA was unconvinced and in their briefing document stated "it is unclear how to interpret the results of one statistically-positive single-arm trial ina landscape of multiple negative clinical trials, including several randomized, controlled trials that failed to show a treatment effect"

So in the end it really boiled down to a single-arm trial success not being able to counter a number of prior double-blinded placebo controlled trials that showed no statistical effect.SI's description of improved an improved mechanism of action and usage of markers to deliver consistent potency as an explanation of the better outcome were not convincing enough when in fact the FDA was actually concerned with the establishment of actual efficacy in the first place.

So on balance the FDA's decision is sensible from a statistical/clinical trial basis - the new trial results are just not robust enough to outweigh the older poor trial results and MSB can't prove that they have significantly changed the potency/consistency to account for a large uptick in efficacy given that no-one really understands the complexities of the mechanism of action.

MSB is unlikely to be in a position to supply any additional information that wasn't presented in August, so their only lever to change the decision is to bang on about the fact that there are no negatives (beyond money being spent by insurance companies as opposed to MSB) to treating these children while an adult trial is being run - if it works it continues to save lives if it doesn't then the trial will show this. I don't think this will sway the FDA.

So as I said, it sucks to be a child with steroid refractory GvHD since I can't see MSB wanting to continue to supply Ryoncil at a no cost basis to every child with this disease in the US.

Does MSB want to continue chasing SR-GvHD in adults?
he market size is significantly higher than the infant disease and has fewer ethical barriers to a double-blind placebo controlled trial. However it will cost tens of millions of dollars and MSB may well have a number of larger opportunities that are already at stage 3, so maybe MSB's medium term interests lie elsewhere.

One question that has been nagging at me for some time is why statistical data from Japan/Temcell wasn't highlighted in presentations. Although these are not trials and we may not service a large enough percentage of the market to eliminate the subjective diagnosis element of single-arm statistical analysis, I would have thought that if overall outcomes in Japan were significantly better than the US (excluding Ryoncil recipients), that this would have had a real chance of demonstrating real-world efficacy with a larger n-count than earlier trial data.

Covid/ARDS
Everything I have read seems to point to a particularly good chance that Ryoncil will have strong efficacy in treating the cytokine storm that is a major cause of death for Covid and influenza/pneumonia. The fact that the DSMB recommended continuation means they are seeing clear efficacy. Other stem cell based approaches such as UAECell19 which uses autologous stem cells to dose hospitalised patients shows a decrease in hospital stay from 22 days to 6 shows that stem cells provide a clear benefit, given that they've dosed 2000 patients, it's unlikely to be a statistical blip.
UAE results

The US currently has 14,000 people in a serious or critical condition. new cases continue to hover around 40,000 per day. Under current arrangements MSB were saying that they could produce 10,000 doses in the next 6 months. Clearly this is inadequate to deal with the number of serious cases that the US would produce over a 6 month period, let alone an expansion to other Covid hotspots.So my current thinking is that the Stage 3 clinical trial readout for Covid will be positive and will lead to a real change of course for MSB which may mean that GvHD loses focus. Attention will turn to massively increasing production to meet ongoing Covid-19 demand. Since the trial was designed in collaboration with the FDA, meeting the endpoints for efficacy will lead to a fairly rushed approval.

Hopefully we can have a mature discussion of these points and avoid the baiting and up/down ramping that have infected the other threads. I am still long term positive for this company with a clear eye towards what a positive Covid/ARDS readout would mean in the shorter term. I'm looking forward to hearing the thoughts of others ...