G’day All. BP update. 2nd December 2020 Tanushree JainAnalyst,...

G’day All.

BP update.

2^nd December 2020

Tanushree Jain

Analyst, Healthcare& Biotech
Bell Potter Securities Limited

Mesoblast(MSB) has announced today that the US FDA has granted fast Track designationfor remestemcel-L for the treatment of COVID-19 ARDS (Acute respiratoryDistress Syndrome), based on the positive data from the pilot study underemergency compassionate use at Mt Sinai hospital conducted in March/April’20.

Under FastTrack, remestemcel-L will be eligible for certain benefits which would shortenthe FDA review time. These include priority review (which shortens the reviewtime to 6 months vs. standard 10 months) and a rolling BLA submission andreview process (which enables MSB to submit sections of the BLA when completedrather than waiting for all sections to complete).

Implicationsfor MSB – BP view

We notethat MSB will be applying for an EUA (Emergency Use Authorization) to the FDAfor initial approval of remestemcel-L for COVID-19 ARDS subject to positiveresults from the ongoing 300 patients Phase 3 trial which is now ~two-thirds enrolledand has passed two interim analyses by the independent Data Safety MonitoringBoard (DSMB). A third interim analysis when 180 patients have completed 30 dayfollow up is expected later this month, with completion of enrollment andTop-line results from the trial expected in 1QCY21.

However, aswe have seen with Gilead’s remdesivir which was the first drug to be grantedEUA for COVID-19, FDA expects companies in parallel to the EUA process to filea BLA to obtain subsequent full approval for the drug. The Fast Trackdesignation granted by the FDA today will help in accelerating the subsequentBLA process for remestemcel-L for COVID-19 ARDS. Hence, we view the grant ofthis designation by the FDA as very encouraging.

We alsonote that remestemcel-L for COVID-19 ARDS is now partnered with Novartis in aworldwide licensing deal. We estimate that US$105m of thepre-commercialization milestones under the deal are linked to positive resultsand subsequent EUA approval by the FDA for remestemcel-L for COVID-19 ARDSwhich we expect to be received by MSB if everything goes to plan in 1HCY21.

No changeto our estimates. We retain Buy (spec.) and $7.40/sh valuation on MSB.