Ann: DSMB Recommends Continuation of Phase 3 COVID-19 Trial, page-249

This is a solid announcement and validation for our trial among the over-hyped COVID-19 treatment space. My investment rational in Mesoblast hasn't changed. I consider them to have enormous potential, both with their therapeutic platform technology and the potential for the share price to rise.

The market was always going to be disappointed if Mesoblast did not achieve 'overwhelming efficacy' and stop the trial early - that's an unfortunate downside of hope. There's nothing wrong with that, it's human nature. Quite frankly, it was damn exciting and if rem-L did achieve overwhelmingly efficacy... well I would've had a slightly different weekend. I think it's good to cheer your investments home, especially in the case of Mesoblast which is quite obviously doing some good in the world.

Regarding the announcement and some of the noise. I also think it's healthy to take a step back and re-assess everything with a clear brain during times of intensity, because we can all get carried away. It was unlikely to see overwhelming efficacy at 30%. The drug trials that I have found that were stopped for early efficacy were usually metastatic late stage cancer trials (COU-302 trial, ALSYMPCA trial) and these were much larger trials (n =1000) with much longer treatment follow-ups. My point being that it was a big ask to observe robust outer-worldly efficacy data with only 90 patients, rem-L would have been classified a blockbuster drug. My emphasis is on robust because with the Bayesian probability style interim analysis, there will be high uncertainty margins in the modelling analysis, due to the smaller sample size. We will have more certainty in the treatment effect at the later interim analysis.

As we can't see the data from the interim analysis, we have to make some rational assumptions. I'm of the view that it's much more likely than not that the DSMB saw signs of efficacy than no signs at all. For a trial to stop for futility, the therapeutic must be clearly worse compared to the comparator, through a worse safety profile (more adverse events) or it isn't as effective. A trial can also stop for futility if the analysis reveals that if the study were to continue, it is unlikely that an important effect would be seen (low change of rejecting null hypothesis). In short, if rem-L had no positive treatment effect and the mortality rates between the two groups were the same or thereabouts, the DSMB may have recommended to stop the trial. So I believe that there were positive signs of efficacy, the magnitude of effect is anyone's guess.

Tying this into tangible thoughts about investing, I ask myself this: what is the probability of rem-L being approved for COVID-ARDS? And my answer is pretty high. Yes, it's vague but it's pointless putting a number to it. We have a promising results from an EAP, a great safety profile, an entire drug application already written for sr-GVHD that is only missing the COVID efficacy data (this means the quality of the submission will be high and the speed of the submission to the FDA will be fast), we have a desperate unmet need and we have a large continuing trial of at least 135 patients.

The ONLY thing missing is positive efficacy data. And I doubt the market will mind if it's really good efficacy data or just good. Nor the income stream of Mesoblast. The trial results will push rem-L across the approval line. Then once reimbursed, the sheer demand and Mesoblast's manufacturing capacity will be the new things to consider.

So to answer your question... this is intrinsically a positive announcement but the market expectation inevitably pushed the SP down + hot money. This announcement was the best possible outcome, second to a blockbuster announcement that would've blown the roof off (we've gotta dare to dream). I don't pay much attention to the price because I'm long and will continue to be for a long time based on my foundational conclusions in the company. In saying that, the FDA will likely approve sr-GVHD this month, and if we see positive data from the COVID trial we have an expedited pathway to approval. This means two revenue streams opening, GVHD extremely soon and COVID later in the year. And voila, this will be reflected in the share price.