Investment Summary. MESO is trading -22% AMC following the release of briefing materials today (8/10) by the FDA ahead of the scheduled AdCom for MESO's Ryoncil on 8/13 (link to all materials here). As a reminder, the AdCom will include a session on product characterization (AM session; draft questions and briefing document here and here), and a session on clinical evidence (PM session; draft questions and briefing document here and here). We think that the main concern is whether or not MESO needs to perform more clinical work/studies for an approval on its upcoming PDUFA date of 9/30. After reviewing the briefing materials, we think this concern is valid, but we believe that MESO has: 1) the necessary data in place to address the FDA's concerns regarding product quality, manufacturing and processes, and 2) the clinical data needed to support approval for Ryoncil as a treatment in children with steroid-refractory acute graft versus host disease (SR-aGVHD). We think that Ryoncil could still be approved on its PDUFA date: 1) if MESO is able to make convincing arguments that address the AdCom's concerns, and 2) depending on how urgently the AdCom feels there is a need for something to treat pediatric SR-aGVHD. ·AM Session focuses on the product attributes of Ryoncil and their relation to product quality and effectiveness. We expect the morning AdCom session to be of considerable focus on 8/13. As noted in the briefing document: "Considering the available data, FDA’s position is that while the CQAs [critical quality attributes] identified by [Mesoblast] and controlled in the product by in vitro lot release assays may have some value in assuring a consistent manufacturing process, these CQAs do not have a demonstrated relationship with clinical potency, and may therefore not by themselves ensure adequate control of clinical effectiveness of individual lots of product." The AM session will address whether the AdCom believes that the product quality attributes measured for Ryoncil are adequate to ensure that the key qualities of the drug product are maintained consistently from lot to lot, and includes a discussion of other possible product quality attributes that could be used to better assure continued product quality. We believe that MESO has the necessary data in place to address any FDA concerns regarding product quality, manufacturing and processes. MESO has potency assays and experience from clinical trials to correlate this potency to measurable clinical outcomes. The manufacturing process of CAR-T therapy, which is autologous, is more likely to lead to heterogeneous cells rather than the manufacturing process for MSCs. NVS (NC) had experience from 250 patients by the time it received approval from the FDA, while MESO has clinical data from three studies which covered over 300 pediatric patients with aGvHD, as well as safety information across several hundred more patients in different indications, which provides it more experience with the cells. ·PM Session contains no surprises, in our view; we continue to believe Ryoncil's efficacy data warrants approval in SR-aGVHD in children. As expected, based on the briefing materials, safety will not be a focus at all in the AdCom for Ryoncil. The session will look at whether the totality of evidence supports a conclusion that Ryoncil is effective for treatment of SR-aGVHD in pediatric patients. In addition to looking at the adequacy of the design of Protocol MSB-GVHD001, we would note that today's materials also include data from Protocol 275 and subgroup analysis of Protocol 280. We have previously underscored the possibility that the FDA would consider additional supportive data for Ryoncil, and we think the inclusion of this data in the briefing documents further supports the clinical effectiveness of Ryoncil. As we also expected, one question included in the documents is on whether an additional trial may be required for approval in pediatric SR-aGVHD. We continue to believe that an additional trial will not be needed for pediatric approval, though we think a post-market study/more work may be needed for an approval in adults. ·After reviewing the briefing materials we continue to expect Ryoncil to be approved for pediatric patients. We think MESO will be able to address the concerns that were raised in the briefing materials. The topics of discussion were already anticipated by the company, and MESO has been preparing for the AdCom. Since there are no safety issues and no alternative treatments for children with SR-aGVHD, we think the unmet need will drive the FDA to approve Ryoncil. If approved, Ryoncil will be the first allogeneic stem cell product to be launched into the U.S. market. We would also note that the FDA has approved CAR T therapies that have more safety and manufacturing issues than Ryoncil. Finally, in the PM briefing document the FDA did note that is "has considered single-arm trials to support a marketing approval in instances where there are no available therapies that would be considered standard of care, where the effect of response is presumed to be attributable to the investigational product."
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