Ann: Novartis and Mesoblast Remestemcel-L Collaboration, page-282

This is one of the best announcements I have seen from this company so far. It addresses so many 'going concerns'

Cash summary

• 50 million USD upfront payment the day it's closed.
• Half a billion USD for pre-commercialization milestones. It's reasonable to assume at least half - 250 million would be based on successful COVID trial and some kind of FDA approval - expected within the next 6 months.
• Up to 750 million USD in sales milestones
• Double digit royalties on Remestemcel-L sales - This could be MASSIVE
• Another USD $50 million for the successful 3D bioreactor demonstration, with Novartis to flip the bill to construct any 3D bioreactors !

R&D benefits

• Novartis responsible for any capex to meet capacity increases ( Ie 3d Bioreactor development and implementation )
• Novartis and Mesoblast will work together to develop appropriate critical quality attributes that meet U.S. Food and Drug Administration requirements for remestemcel-L in advance of initiation of the Phase III study in non-COVID-19-related ARDS. - I read that as immediately, since the phase 3 study is commencing immediately following a successful ARDS study. So we have the 3rd largest pharma company on earth now aiding us to use best practice to get these assays nailed down......This is massive, if we make progress in this field - particularly towards identifying the molecules that are released, potentially in the future the cells can be farmed to release the molecules ( exosomes ) which mesoblast have also patented, which can be administered instead of the cells being administered to release the molecules.

Risks

• The biggest risk here is the possibility that the ARDS trial may fail, in which case all of the above except the initial $50 million , and possibly the $50 million for bioreactor demonstration would be lost.

Partnership Benefit

• Looking at the wording in the announcement MSB is essentially using Novartis for CAPEX , for their world wide distribution channels and for some of their quality control IP. Novartis is also funding the next ARDS trial, but mesoblast has the option to split funding and share profit 50/50 from any further trials like Sepsis maybe. Seeing Mesoblast is responsible for manufacturing the product, thinking back to some of the Lonza agreements, I see a potential world where Lonza is paid to develop a 3D bioreactor lab in the USA, which mesoblast then acquires under the 2 year purchase agreement - by which time the Bioreactor technology should be proven, allowing MSB to focus on manufacturing and development further.

Absolutely massive potential all boiling down to the success of this phase 3 ARDS trial.

Go the 'Blaster !