Mesoblast is tantalisingly close to the finishing line with its BLA resubmission for steroid refractory acute GVHD….but without appropriate cash it was fast becoming uninvestable. Anyone following the fate of Gamida Cell’s recent fund raise will know how brutal capital markets can be in extorting a heavy price from companies who seek capital during bear market conditions...almost regardless of their prospects. Trapped in the twighlight zone, having passed Day 60 (Refusal to file risk )...then Day 74 of its submission and with the PDUFA date of the 2nd August fast approaching ..things are just about to get very interesting for shareholders. Based on normal periods of notice I would anticipate the Pre Approval Inspection (PAI) inspection to be conducted in Singapore in coming weeks. Mesoblast must be very close to also receiving more formalised feedback on the full review process…whether it be in the form of the FDA Mid Cycle Communication …which occurs about 2 weeks after the mid cycle meeting…or from other discussions around potential labelling or the need for REMS or any additional PMR or PMC (post marketing requirements or commitments).
Any potholes encountered during the FDA formal review process will need to be communicated immediately to the market ……including delays arising from, say a FDA 483 Inspection Report for the PAI, which might push back approval timelines by months if the FDA Inspection Team are so minded. Personally , I remain highly confident that Mesoblast will gain approval a little earlier than the PDUFA date, but that is not the point. The Board of Directors have a fiduciary duty not to gamble the fate of the Company by allowing it to be attacked by shorters should any delays manifest themselves. It is certainly prudent to make sure that MSB always maintains a cash balance equivalent to 12 months expected forward cash burn. All shareholders should want the pivotal CLBP phase 3 trial to start enrolling, but some seem oblivious to the cash cost of paying Contract Research Organisations to conduct one on their behalf !
So Mesoblast continues to frustrate us with another raise…but let me be clear……..few institutions want to second guess the FDA’s deliberations and are waiting on the sidelines ….but post any approval for Ryoncil, I believe the outlook for the share price will change materially and decisively. Firstly, i believe that any approval will trigger large milestone payments from the likes of Novaquest & Oaktree which will leave the Company flush with more capital . Secondly, the prospects of selling the European rights for sr AGVHD will be a walk in the park post approval . I also believe analysts have materially misjudged gross margins on the first few years of sales of Ryoncil as inventory write downs should allow rapid cash recovery from existing stocks. Thirdly, i consider the potency assay for GVHD will be also relevant to the pathophysiology of Crohn’s and UC ..as already evidenced by Takeda/ Alofisel . This should allow opportunities to fastrack SNDAs for refractory patients suffering from these conditions post results of phase 2 studies.
I could go on…but hopefully you all get the message. Owing to delays in the submitting their BLA , Mesoblast was running on fumes. Much of that delay can be placed at the door of a pretty incompetent understaffed and overwhelmed FDA, who prevaricated over what was actually required for approval . The 28 day endpoints used in Phase 3 trials for aGVHD were supposed to accurately correlate with longer term survival and they chided Mesoblast for the null hypothesis benchmarks used even though there was an appreciable lack of comparable data for paediatric patients. We now know from four year mortality data provided by the International Bone Marrow Transplant Register that the FDA have not covered themselves with glory. Ryoncil , despite being trialed on largely high grade severity patients, has shown mortality data unmatched by any of its peers. I believe that when a P3 trial for sr aGVHD is inevitably conducted in adults against Best available Therapy the scale of FDA incompetence will finally be obvious to all.
As regards this latest placement …the capital markets are not functioning as they should …institutions appear fickle and selective but still prepared to scalp heavily discounted biotech issuance ..often demanding matching options or warrants for their participation . Silviu finds himself in the invidious position of probably having to fill the orders of shorters who have spent the last 3 months destroying any recovery in the Mesoblast share price. The stench of market manipulation surrounds us but we will have to grin and bear it as a “necessary evil” whilst we stay focused on hopefully bringing the Company over the finish line…where we should all be handsomely rewarded ! OP
Please do not rely on the facts or opinions expressed in the above post when making an investment decision.
MSB Price at posting:
87.0¢ Sentiment: Buy Disclosure: Held
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