Lets take aGVHD.
The proposed class action covers the period 22 February 2018 to 17 December 2020. So what happened on 22 February 2018?
MSB announced the results from the single arm Phase 3 child aGVHD trial.
MSB stated -
“In the 55 children enrolled in Mesoblast’s open-label Phase 3 trial conducted across 32 sites in the United States, the Day 28 OR rate was 69%, a statistically significant increase compared to the protocol-defined historical control rate of 45% (p=0.0003).”
This was false – there was no “protocol-defined historical control rate”.
And three months later MSB corrected this – the “historical control rate” became a “hypothesized control rate”.
"As previously reported, the open label, single arm Phase 3 trial successfully met its pre-specified primary endpoint of Day 28 overall response rate, which is significantly increased (69%, p=0.0003) in children treated with remestemcel-L compared to the protocol’s defined hypothesized control rate of 45%."
https://www.asx.com.au/asxpdf/20180508/pdf/43tvzwdlxx4pmw.pdfIn June 2018 the “hypothesized control rate” then became a “theoretical control rate”.
“Day 28 Overall Response was significantly greater than theoretical control rate of 45% (p=0.0003)"
https://www.asx.com.au/asxpdf/20180622/pdf/43vz47r2sfpp45.pdfYou might ask isn’t this just semantics. A “historical control rate” is a type of “hypothesized control rate’ which is kind of a “theoretical control rate”.
The difficulty is that the claim of a “historical control rate” implies that it was derived from control group subjects using an accepted and legitimate method – historical group modelling.
The significance of these little innocuous looking wording changes only came home to roost when the FDA released their briefing notes for the AdCom meeting. The FDA had some bad news – there was no historical control group rate:
“The null hypothesis for MSB-GVHD001 is not based on data from a historical control population. In the absence of data from appropriate historical controls, FDA is unable to agree that the proposed null hypothesis is acceptable”.
And without a valid null hypothesis (the control rate) MSB didn’t have a “adequate and well controlled” trial.
But investors did get one little warning along the way.
In October 2019 in the Annual Report buried on page 22 of a 231-page report in a section of template / boiler language MSB snuck this in:
“For example, our Phase 3 study for remestemcel-L, which met the primary clinical endpoint with statistical significance, was conducted as a single-arm study due to the seriousness of the condition, the rapid clinical deterioration of affected patients, the mounting literature suggesting a meaningful treatment effect, and the position in the medical community that a randomized controlled trial was neither feasible nor ethical in this patient population. While we intend to provide the FDA with comparator outcomes from control subjects, it is possible that the FDA may not find the data sufficient for approval.”
Say what? MSB “intend” to provide the FDA with comparator outcomes from control subjects – and this was long after the trial had completed.
It made no sense. Except if you were able to divine the importance of MSB’s fancy footwork back tracking from the original claim of having a historical control rate.
The reality however was that investors had no idea that MSB didn’t have a historical control rate. And they remained clueless, even after reading this obtuse paragraph, that MSB were now being required by the FDA to produce one.
Now lets imagine that the MAGIC study had produced a much higher control rate estimate - say 60% than the 43%. This would have meant that the 69% achieved in the trial would no longer be significant. And so what then?
Two competing control rates for the same trial leading to opposite conclusions. Investors would then have been shocked to learn that according to MSB it was the MAGIC estimate that was to be considered the “independent and unbiased” one.
And so presumably MAGIC would take priority – meaning the trial investors believed had met its primary endpoint hadn’t really (retrospectively).
And to think all this grief could have been avoided if MSB had simply submitted the design of the trial to the FDA for review before they conducted it.
Anyway, this is where I would focus if I were the class action lawyer. The real class action lawyer may have a whole set of different issues that he is targeting.
But to me the design failure around the control estimate is the root cause of the FDA rejection. And MSBs lack of transparency around this meant that investors never had a hope of properly assessing the true risk.
Now whether or not any of this means that MSB breached disclosure laws – well – that’s what the lawyers will argue about.
(20min delay)