Ann: Mesoblast to Evaluate Remestemcel-L in COVID-19 Lung Disease, page-125

BELL POTTER UPDATE - 11th March 2020

HEALTHCARE

Mesoblast (MSB)

MSB to tackle coronavirus lungdisease

Remestemcel-L – A pipeline in itself

MSB’s remestemcel-L is awaiting FDA approvaland gearing up for launch in US for paediatric SR-aGvHD. The product howeverrepresents a pipeline in itself with MSB and/or its partner JCR exploring itsuse in multiple additional indications (chronic GvHD, HIE, EpidermolysisBullosa etc.). MSB will now also develop the product for treatment of acuterespiratory distress syndrome (ARDS), a lung disease caused by coronavirus(COVID-19) in the US, AU, China and EU, linked to high mortality rates (~50%)in infected patients. MSB is in active discussions with various stakeholders(regulatory authorities, health organisations etc.) to expedite this process.US FDA is already speeding the process of IND review (which otherwise takes 30days) for COVID-19 clinical trials, as seen with the rapid review of IND forGilead’s anti-viral drug remdesivir. MSB can also leverage the extensive safetydata from its GvHD program. We expect MSB to make its therapy available foremergency use initially. Clinical trials are likely to be of short duration(given hospitalised ICU patients with high mortality risk). MSB’s patents coveruse of MSCs for patients with ARDS.

The use of the product in ARDS is supported byrecent results from an investigator initiated trial in China which reportedthat allogeneic MSCs cured or significantly improved functional outcomes in all7 treated patients with severe COVID-19 pneumonia. Importantly 2-4 days aftertreatment all patients were symptom free. Additional support is provided by apost-hoc analyses of a 60-patient COPD study, which showed that remestemcel-Linfusions significantly improved pulmonary function in patients with elevatedinflammatory biomarkers (the same biomarkers that are also elevated in COVID-19infected patients).

With 3 late stage assets approaching keyinflexion points and a strong balance sheet, we believe CY20 could be atransformational year for MSB. US approval and launch of Ryoncil forpaediatric SR-aGvHD in 2HCY20, will mark the beginning of significant recurringrevenues for the company. Other key inflexion points for the stock will beTop-line results from 2 key Phase 3 trials in mid-CY20- Revascor’s Phase 3trial in advanced CHF patients and Phase 3 low back pain trial ongoing in theUS. MSB remains in our Top-picks for the year. No changes to earnings. Ourvaluation for MSB is unchanged at A$5.15/sh. We retain Buy (spec.).

Disclosure: Bell Potter Securities acted as leadmanager for MSB’s A$75m capital raise in Oct’19 and received fees for thatservice.

1		Recommendation:	Buy, Speculative	Previous close:	.81	Valuation:	.15