Finally, the theme has moved on to REVENUE and people are concerned that insurers will balk at reimbursement costs and the MSB rocket ship will splutter as it tries to escape the shorter orbit and return to earth. Well welcome to nuanced pricing differentials. Please humour me for a few minutes by reading some of the links and slides below.
What label should Ryoncil be seeking for paediatric steroid refractory acute graft versus host disease ?
Well to answer that we have to consider :
Q Where do we have superior efficacy compared to the only approved second line therapy namely Incyte’s Ruxolitinib ?
A . I believe in all treatments grades 2-4 areas, other than, Grade 2 skin only , I believe Ryoncil has far superior efficacy as judged by duration of response and long term mortality.
Q. Is it worth lowering our price to compete in Grade 2 with our lower toxicity profile ?
Grade 2 skin only, is treated very effectively with Ruxolitinib and there are also other refractory options such as ECP (see stats below for an idea of ECPefficacy) . Note that ECP shows far less effectiveness in Grade 3/4 so is not a threat to us.
So hopefully by now the penny is dropping. Even if we were restricting ourselves to just the GVHD market, the exclusion of Grade 2 skin only for just the 12-17 year olds may mean Mesoblast has to sacrifice potentially 60-65 patients of the near 400 paediatric patient group aged between 2 months to 17 years inclusive because pricing levels would not reflect well in cost benefit studies. In one of his last conference calls Silviu explicitly said that using Ryoncil would reduce hospitalisation costs by an average $1m…but that does NOT take in to account the life saved and the corresponding QALY calculation.In fact for children who are refractory to all treatment options, which sadly still include 30% of non responders to even Ryoncil , the costs rise to in excess of US $2m .
Please note that the above statistics were from 2018 , which were complied by Eric Strati (Mesoblast) and Purple Squirrel Economics were peer reviewed and presented at the appropriate conferences . These cost averages may well have increased in the last four years in line with inflation ?
Now, here is the real number cruncher for Mesoblast management .
Q. How will pricing for an orphan designation affect the revenues for off label use ?
At last, the US$100bn question !
A. Enormously. Of course it is absolutely paramount to set reference pricing, both realistically ( so that insurers can justify the cost ) of treating sr aGVHD
…but in order to ensure that billions of dollars over the next few years will be made from off label sales, the reference pricing should be high enough that pre approval use for other indications using smaller doses, have to pay a sensible commercial threshold which also reflects the limited amounts of inventory available. It simply makes no sense at all to prejudice these sales over 60 or so low risk patients.
In positioning Ryoncil as effectively a third or treatment refractory option, the insurers can do the maths , work out the additional QALY / EVLYG
All the signs are pointing to very aggressive reference pricing . Piper Sandler , in a note dated 6th Feb 2025 are now suggesting a treatment price as high as US$1.5m for Ryoncil but have low initial patient numbers pencilled in , negligible off label use, even for adult sr aGVHD , where they assume initial demand is directed towards a third line treatment option clinical trial for Rux refractory patients and then apply savage discount rates of 30% out for many years out completely understating revenues that I believe the stock market will put on astronomical multiples as a first in class leading therapy with an IP moat and 30+? indications available for label expansion, including three (CHF. CLBP, ARDS) of the big ten in terms of hospitalisation costs.
Personally, I would first like to see average levels of discounts given in relation to standard list prices shown in pricing compendium. The largest potential payer,Medicaid, will be crucial in this respect and is likely to account for 35-45% of sales ? and influence other insurers linked to their decisions. Either way, if Piper Sandler are correct, Ryoncil will most likely become a blockbuster therapy because off label use will be very rewarding. Believe me , that is an understatement ….and this extra demand is not reflected in their 12 month price target of US$24 . I believe even Molly will be exposed as a pessimist when the label extension opportunities are addressed ! Only joking Molly. That’s all for now ! OP
Please do not rely on the facts or opinions expressed in the above post when making an investment decision .
MSB Price at posting:
$2.80 Sentiment: Buy Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
In fact for children who are refractory to all treatment options, which sadly still include 30% of non responders to even Ryoncil , the costs rise to in excess of US $2m .
(20min delay)