Mesoblast shoots for the starsTom Richardson and
Carrie LaFrenzAug 24, 2020 – 12.00am
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Mesoblast has long been one of the sharemarket's most polarising companies. Now it faces a momentous month awaiting results from trials of a potentially life-saving treatment for COVID-19.
The Melbourne-based biotech is also hopeful of a regulatory breakthrough in the US which could see its treatment for a life-threatening inflammatory condition in children approved by the US Food and Drug Administration (FDA).
Biotech Daily founder David Langsam says "if" is a big word in biotech, with Mesoblast facing several imminent inflection points.
According to experts and analysts, Mesoblast may be close to transforming itself from a speculative biotech research company into a credible operating business.
"Mesoblast's stem cells are derived from bone marrow," said David Langsam, the editor of Biotech Daily. "The early idea was that the cells could be turned into any body part, depending on how the cells are treated."
According to Mr Langsam the idea of using stem cells to regenerate body parts has been around for decades, but one of the original sources was human embryos, which created ethical issues.
Mesoblast uses mesenchymal adult stem cells (MLCs) to assist the body’s repair and regenerative process due to disease or injury by releasing proteins and other cell-signalling molecules, which in turn reduce inflammation and begin the job of repair.
Mr Langsam said Mesoblast has raised at least $591 million from investors buying into its seductive story since 2009. However, the investment returned a loss of $79 million on sales and one-off royalty payments of $35 million last financial year.
COVID-19 treatmentOver the past year, its shares have more than tripled to $5.13 – for a market value of around $3 billion. Lately, the surge has been sparked by a trial of an intravenous stem cell treatment for acute respiratory distress syndrome in ventilator-reliant COVID-19 hospital patients.
Mesoblast's initial trial results on 12 patients showed 75 per cent of those treated came off ventilator support, typically within 10 days, compared to only 9 per cent for standard treatments.
On the basis of the results, Mesoblast received US regulatory approval to conduct a study on 300 ventilator-dependent patients, with interim results due possibly at the "tail end of August" according to Corporate Connect biotech analyst Marc Sinatra.
"Let's say they hit the ball out of the park," Mr Sinatra said of the upcoming results. "It'll be going straight to the FDA for an accelerated approval. They did it for Remdesivir in a couple of weeks, so if they really wanted to, they could do it that quick.
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"Probably in terms of sheer numbers, the stumbling block then would be Mesoblast manufacturing the millions of doses required."
Mr Sinatra, who has covered ASX and Nasdaq-listed Mesoblast for more than a decade, makes it clear that the COVID-19 results, due out soon, are only interim.
"We should see the results of the first 90 patients to have completed the study. There are two more interims scheduled before we see the final results, which last I heard would probably come in around the end of November, early December."
"It would be a big ask for the drug to return a statistically significant result on just the first 90 patients through. Investors should be happy with a trend toward improved survival remestemcel-L at the first interim analysis, which improves with each analysis thereafter.
"The point is that investors may be setting themselves up for disappointment if they expect it to be all over and done with this first readout. It would be nice if it were to happen, but it's generally not the way things go with clinical trials."
FDA approvalEven if Mesoblast's COVID-19 trials disappoint, its infant transplant rejection therapy is on the brink of securing the first approval from the US healthcare regulator to market an allogenic stem-cell-based therapy.
At an
August 13 FDA advisory committee meeting, an expert panel of clinicians voted nine to one in favour of the clinical efficacy of Mesoblast's treatment for acute-Graft Host Versus Disease (aGVHD) in children.
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Mr Sinatra estimated Mesoblast could charge more than $US275,000 ($385,000) a child for a course if the drug is approved by a September 30 deadline. The analyst also warned that up to one in five treatments that receive favourable votes from an FDA advisory panel still get rejected for final commercial approval.
Other catalystsAccording to Mr Langsam, Mesoblast has two other Phase 3 clinical trials, for back pain and heart failure treatments, due to give crucial clinical read-outs by the end of October.
"The top-line read-out for the 566 patient randomised controlled trial of Revascor for heart failure is a critical inflection point for Mesoblast," Mr Langsam said. "And that is expected just before the 404 patient phase 3 trial for chronic back pain.
So, all those inflection points in two months makes this an exciting year. If the heart and back pain MPC trials go well that will really be a big proof-of-concept for Mesoblast.
"The company has been working for about 20 years on the MPCs and if the cells can be used in diverse settings then there is no reason they can’t be used for other indications."
Analysts at Bell Potter have hiked their valuation on Mesoblast shares to $7.30 in anticipation of FDA approval and more positive trial results in 2020.
Substantial risks remain around trial failures, cash burn and more disappointment, but while 2020 has proven an
annus horribilis for much of the business world it could be company-defining for Mesoblast.
(20min delay)