Do you still think Mesoblast will be the next CSL?, page-76

May I wish fellow shareholders a very Happy and Prosperous New Year.

So lets recap on the events of 2020... Have Mesoblast management and shareholders just been “schooled” ? I think in relation to the choice of primary endpoints, the critics may have a valid case...but hindsight is a wonderful and insightful thing. Isn’t it ironic, that had we maintained the ratio of phase 2 to phase 3 we had enrolled at the time the interim futility test was conducted ...we may well have passed the primary endpoint with flying colours. That being said we would probably have had to wait another year or enrolled even more patients to statistically power this event driven trial to completion . We may also have passed had we chosen gold standard endpoints of mortality or MACE events..but no one was expecting such spectacular results and you would normally have to enrol ten times more patients to power clinical trials which have used these endpoints historically.The latest butch catchphrase, “schooled” implies that seemingly educated supporters (aka “ true believers” of a biblical cult the fable goes ) of Mesoblast have had no idea what they were doing and are now at the receiving end of a right shafting on the value of their investment . Hard to disagree if you consider the short term price as a surrogate endpoint (sic). Feisty downrampers can hardly contain their collective,orchestrated joy and in true Christmas spirit, they have gloated at the misfortune of others, by spamming the threads relentlessly over the Christmas period, hoping to frighten all and sundry, into selling their holdings. No doubt the resultant share price fall might eventually trigger the stop losses of even the diehards ...and then they will buy back. The short position in the US is close to 3% of the total share capital and represents almost 25% of the total ADS outstanding !

Combine that with the Aussie short, that is almost 13% outstanding ! The aggression shown by shorters in trying to stop positive momentum building post good news announcements or interfering with closing prices has sadly been a feature of this stock for many years.

I still believe the investment case for Mesoblast remains intact, but every shareholder should be comfortable with their risk parameters and should not rely on any of my conjectures when making investment decisions. Despite the added short term uncertainties from missing two successive primary endpoints, all is certainly not lost. We will have to wait a few more months for the full dataset / peer review of each set of phase three results , to determine if we have to apply the KY liberally or dust off the video clips of various rocket propelled devices to post on Hot Copper. Most importantly , we await subsequent discussions with the FDA, to determine if there are any pathways to accelerated approvals or if we just continue with a second phase three trial. Just to be clear, a second RCT for Revascor was already assumed by most analysts... but this time the market opportunity if we can target Grade 2B patients, has grown fourfold to previous expectations , according to Silviu Itescu. Oh , did I mention that we impact cardiac mortality and reduce myocardial infarction and strokes by 60% in Class 2 patients of both ischemic and non ischemic etiologies. That suggests a treatment effect in treating both pulmonary and cerebrovascular disease...the latter coming as a big unexpected bonus, which most people have overlooked in their remarkable scramble to exit positions.

This whole primary endpoint malarkey needs a more sophisticated review process from where I am standing . The FDA has the ability to show flexibility in approvals when mortality is the key secondary endpoint ..so lets hope this time it uses a little more ingenuity in saving lives. It certainly has just applied some sensible rulings to both Entresto for use in preserved ejection fraction patients and BioCardia in allowing replacement endpoints to be used for its clinical trial. Mesoblasts position may be somewhat handicapped by the limited size of their 206 Grade 2 populated base of patients but “three point MACE” efficacy was observed for all patients, regardless of NYHA classification, so that really would be a cop out.

The shorters’ want to represent the failure to meet primary endpoints from the two latest phase 3 trials ,as a sort of “Emperors new clothes” moment,where we all wake up, in the nude and find our private’s mightily exposed to both ridicule and the elements. I believe that the forthcoming publication of full clinical trial datasets will show great shareholder value has been created. How we will exploit that value will be determined both by the response of the FDA and the reaction of potential industry partners.

One problem for Mesoblast is that many milestone payments have doubtless been linked to meeting primary endpoints and/or FDA approvals ...and the failure to achieve them will result in lower cash inflows...I cannot elaborate any further, because the Company is not transparent with regards to these conditional payments,as they are presumably commercially sensitive. In the absence of these milestones being reached, priorities might have to reevaluated, budgets pruned, etc until a further source of funding is identified...that being said:

If you seriously think that Mesoblast will be unable to find a partner to fund and reimburse past costs for its CHF treatment ...i think you are delusional. The headline Revascor results are simply unbelievable ...”a potential new paradigm in the treatment of CHF” as Silviu Itescu has rightly commented

This is where the shorters’ argument falls to pieces in my opinion. Of course I would like to see the full phase three clinical trial results first, before “locking in” my view ...but just consider what has just been confirmed in a rigorous randomised controlled study. Mesoblast originally hoped to achieve some improvement in mortality but decided to use recurrent hospitalisation as the primary endpoint, to show efficacy as a surrogate endpoint for mortality. Other posters have already commented that the real justification for using patient enrichment (acute cases with disproportionately high number of hospitalised events) was to allow a smaller number of patients to power the trial to equal effect. But, in fine Mesoblast tradition , we had to be the Company which has to turn conventional wisdom on its head. As we now know, the number of recurrent hospitalisations is NOT associated with subsequent mortality. The Revascor headline results, might presumably result in some superb secondary endpoint data..such as quality of life indications ...you can hardly have a great 6 minute walk test when you have just had a MI or stroke. Furthermore, delaying by at least 3-4 years,progression ,from late phase 2 to Grade 3 CHF,disease represents a massive cost saving totally justifying the likely cost of the therapy ($50-60K ?)

Some of the previously supportive posters on this thread, have suddenly cast doubt on the pharmacoeconomic benefit/cost justification for our therapy ...so let me address this point now with reference to an abstract from the following link

https://www.faron.com/patients-and-physicians/information-ards

“The burden of ARDS

What are the costs and outcomes of ARDS?

ARDS is a devastating condition with a profound impact on individuals, families, caregivers and the entire society. ARDS is associated with a long initial ICU stay and hospitalization leading to muscle wasting and cognitive impairment. This causes significant direct costs from the initial hospitalization as well as long term disability and loss in quality of life making treating ARDS efficiently a public health priority.

The average length of stay in the ICU because of ARDS is 25 days, and the average length of hospitalization is 47 days. It is estimated that ARDS accounts for 3.6 million hospital days each year in the USA. Over 100,000 patients each year will survive ARDS in the USA and present prolonged morbidity and costs. After a year from surviving the disease only 49% of patients can return to work. The average annual loss in earnings of an ARDS patient is $27,000. An average of 13% of ARDS patients will need permanent renal replacement therapy, i.e. dialysis. The annual cost of dialysis is $89,000/patient. Thus, out of 100,000 surviving patients 13,000 will need dialysis and form a cost of $1.16 billion each year. This cost accumulates each year with an additional 13,000 new cases of dialysis and a cost of $1.16 billion (company estimate).“

The above link shows that when you factor in mortality, average length of stay in ICU, rehabilitation costs, the significant percentage of patients readmitted within 30 days , the cost of kidney dialysis, rehabilitation of long Covid fibrosis etc etc, that our mesenchymal treatment Remestemcel , (if shown to be as efficacious as the Mount Sinai pilot suggests) , would easily represent a tremendous payback against likely treatment cost for Covid ARDS.

Similarly, with CHF lets look at the cost/effectiveness justification for the gold standard treatment Entresto, as calculated by Swiss Medical Weekly, bearing in mind that the savings detailed in the article would likely be higher in the US.

https://smw.ch/article/doi/smw.2017.14533

Now compare the conclusion of the Entresto review, with the likely benefit of what Revascor would be likely to achieve. Remember, based on a subset analysis of the HYHA Grade 2 patients in the Phase 3 trial, Revascor would be delaying progress to Grade 3 CHF with material associated treatment costs and hospitalisations for at least 3-4 years assuming only ONE DOSE.

“CONCLUSION

The treatment of HFrEF patients with sacubitril/valsartan versus enalapril is cost effective, if a willingness-to-pay threshold of CHF 50 000 per QALY gained ratio is assumed.”

A more recent article provides an even greater level of detail on the savings provided by Entresto which has been the only treatment in almost the last 20 years to make any meaningful inroads into reducing mortality rates and hospitalisations

https://www.primetherapeutics.com/en/news/pressreleases/2020/release-2020-amcp-entresto.html

Last year most commentators, including myself, thought approval of steroid refractory acute GVHD was a slam dunk. When the briefing pack came out before the ODAC meeting...we knew that we had a fight on our hands. It certainly sounded as though our review team leader at CEBR had not got their heads around the mechanism of action for MSCs.

That does not surprise me . For example, each treatment response is to a large extent unique. Bone marrow mesenchymal cells have several toll like receptors which respond proportionately to the activated level of cytokines present in the local micro environment . Each type of toll like receptor responds to different stimuli...eg TLR3 and TLR4 responds to T cells etc., The reason I make this point is that dosing is a function, not just of the efficacy of our cells ...but also the state of the patients innate immune system response So surprise surprise, when our cells our administered to a patient whose innate immune system is so compromised that the inflammatory response is more muted,or more aggressive, a bespoke response is forthcoming. That is one of several reasons why there are responders and non responders in the sr AGVHD population to our treatment (and everyone else’s) .

I would postulate that the same issue might also apply more recently, to the older subset of patients receiving Remestemcel in the Covid ARDS phase 3 trial...although age and the corresponding level of innate immunity would not have been the only contributing factor. There appears to have been a time delay in administering our mesenchymal cells because more effective treatment protocols have now been recently adopted ... ARDS patients arriving into ICU, are now generally treated, first by non intubated high flow oxygen delivery (where possible) combined with new antibody treatments, anti virals, convalescent plasma etc, which has lowered overall mortality .. Mesoblast may now have been enrolling the much smaller group of “ non responder” cases, who by now have often progressed to multi organ failure and substantial fibrosis... making our intubated therapy far less efficacious. In addition the patients immune system has become refractory to virtually all therapies.

Shareholders in another ASX quoted cell therapy Company might ponder that, even if you produce unlimited numbers of identicial induced pluripotent cells, clinical responses in vivo, may still be reliant to a large degree, on the condition of the individual patients immune system ..sometimes irrespective of cell potency . Ironically, if you want to pursue an allogenic donor source, having a less heterogeneous donor mix in diverse human populations such as the US (versus Japan) may have certain advantages dependent when allowing for genetic profiling....but i digress. I also believe that Mesoblast’s cells may be more efficacious if they formulate a higher dose to be given to the non responder...which might help compensate for the deficit in the patients immune response..but that remains pure speculation on my part .

https://www.researchgate.net/profile/Veronica_Santarlasci/publication/5882663_Toll-Like_Receptors_3_and_4_Are_Expressed_by_Human_Bone_Marrow-Derived_Mesenchymal_Stem_Cells_and_Can_Inhibit_Their_T-Cell_Modulatory_Activity_by_Impairing_Notch_Signaling/links/542929340cf238c6ea7d0cb5/Toll-Like-Receptors-3-and-4-Are-Expressed-by-Human-Bone-Marrow-Derived-Mesenchymal-Stem-Cells-and-Can-Inhibit-Their-T-Cell-Modulatory-Activity-by-Impairing-Notch-Signaling.pdf

https://www.intechopen.com/books/immunoregulatory-aspects-of-immunotherapy/toll-like-receptors-the-key-of-immunotherapy-in-mscs

Certain negative posters also like to emphasise the manufacturing challenges with our MSCs . There are well known limits to cell reproducibility and proliferation and hence more limited heterogeneity ...but the BLA submission and the GVHD001 results themselves showed remarkable consistency and reproducibility. Many people fail to appreciate that one individual donor can provide over a thousand doses for certain treatments..without needing to go beyond five “ passages” . The obvious solution for the FDA is to set minimum required standards, or quality potency attributes. I believe that this hurdle can be agreed to the FDA’s satisfaction ...and it is a necessary step in maintaining high standards of product consistency which is a great barrier to entry. Just as important as the QPA is the role of SDF which plays a crucial role in the homing capabilities of stem cells...but that never seems to warrant much attention.


https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0184595

Regardless of the validation of both the Magic Consortium’s retrospective analysis and the expert opinion of THIER OWN EXPERT ODAC panel, the current review team at CEBR dug their heels in. I understand that for the first time since 2006 the FDA has ignored its own panel of experts. This would be hilarious were the implications not so serious.

The cogent analysis of @DeputyDawg certainly tallies with my understanding of regulatory events. In my limited experience talking to Mesoblast, they have always come across as a Company which has appeared to respectfully want to comply with all the requirements of its regulator...I believe they submitted the results of a comparatively large EAP programme for sr aGVHD and the then CEBR review team reportedly approved the single arm trial design that was meant to represent the final stage in the approval pathway ....(which they completed in good faith) if it confirmed the same level of efficacy as shown by the EAP. At some point in the last few years the lead reviewer moved to another department...apparently she then presided over the approval decision for Jakafi ! She was, I am led to believe , replaced by a new lead reviewer who wanted to do things a different way. Fair enough...but i think it is incumbent on the FDA to provide a consistent and reliable approach to its decision making process...Sounds very unprofessional to me....unforgivable when you are talking about an unmet need in an orphan designation.

APPEAL TO THE MESOBLAST BOARD.

Please provide more professional presentations. Understanding Mesenchymal cell therapy is complicated. As an investor, I find it hard to believe that there has still not been a Capital Markets Day presentation where shareholders can receive a far more comprehensive review of the science and explanation of the clinical study results. The cash flow position of the Company is also worth more than a cursory five minutes monologue every quarter. This should be available on playback so all potential investors can bring themselves up to speed regardless of time difference . Secondly, I understand that ASX requirements do not allow for a “corporate broker” who should be there to advise the Company and stimulate/facilitate new investor interest. I would like to believe that Mesoblast’s failure to make it into the annual revision of the Nasdaq Biotech index in December 2020, would most likely had been avoided if the Company has a proper professional advisor.

https://www.globenewswire.com/news-release/2020/12/12/2144097/0/en/Annual-Changes-to-the-Nasdaq-Biotechnology-Index.html

A decent corporate advisory broker also theoretically holds the board to account by conveying the concerns of the larger shareholders (to the senior non exec or their equivalent ) Their input is particularly important in awkward times when expectations are not met, or the company is vulnerable to opportunistic bids or bear raids . They also are able to ensure that compensation packages and option awards follow best practice. Frankly, the ASX appears to me more like the Wild West compared to the customary procedures of other stock exchanges. No offence to my Aussie friends ! Nonetheless, I believe a reasonable number of non Aussie institutions have been building up new positions recently (still non disclosable so I guess we will have to wait for their identities) ..but many more are said to be waiting on the sidelines awaiting confirmation of just how good these heart results really are. They may be arriving to the party late, but seem to have timed their entry-point to perfection, as the market still appears in denial. The most likely scenario I see going forward :

A beauty parade is conducted in the next three months of all serious players in the cardiovascular treatment space...the company selected by Mesoblast agrees to enter into a multi billion partnership/distribution agreement to jointly exploit Revascor and agrees to finance a further 3 year RCT phase 3 trial for 500-2000 odd patients”. I would also expect any upfronts to include a contribution to past costs of clinical trials to date.

Near term, there is also a reasonable chance of a successful dispute resolution appeal on Ryoncil at the next Type A meeting which should be heard around March/April 2021. Mesoblast has a very strong case in my opinion ..but time will tell.

Whilst i am expecting a good Phase 3 result for chronic lower back pain ...I have to agree with many others, that delays in announcing results have not exactly proved auspicious in the past...so I am sitting on the fence, anticipating another failed primary endpoint but hoping for a very late Christmas present instead ...for a trial which finished back in March /April ! Come on Mesoblast.

Frankly, I appreciate the caveats provided by “forward looking statements” when the Company gives us guidance in good faith ..I also realise that we receive, by virtue of our dual listing, a very constant stream of investor updates , but I am not pleased with the unrealistic timescales we have consistently been provided with in relation to clinical trial results. I think Silviu works unbelievable hours. He is an irreplaceable talisman but these issues need to be addressed to improve investor confidence...he deserves our support right now.

A failed back pain trial may send us down further ....but I am pretty confident that will be very short lived.

Remember, Revascor is in my opinion, a massive company maker on it’s own !

So to is Covid ARDS and non Covid ARDS . Come to think of it , a treatment for refractory Crohns Colitis and Ulcerative Colitis are not exactly small opportunities either ! Sigh !

Please do not rely on any opinions or facts represented in the above post when making an investment decision . OP