Mesoblast (MSB) Advanced heart failure patients are the optimal target population for MSB’s MPCs. Buy, Speculative. Previous close $3.16. Valuation $9.01 (Bell Potter
Additional analysis of Phase II CHF trial demonstrates significant benefit of MPCs in advanced heart failure patients The announcement today gives details on a new post-hoc analysis with 30 patients of MSB’s completed Phase II trial in heart failure. MSB first alluded to this data in its FY15 results presentation in August. The presentation of this analysis at the annual scientific meeting of the Heart Failure Society of America, gives more details on it.
Key highlights:
· Recall that as part of Teva’s agreement with the FDA regarding the accelerated path to market for MPC-150-IM CHF product, Teva has to run a second confirmatory 500 patient trial in parallel to the currently ongoing 1,165 patient Phase III CHF trial. This confirmatory trial will use recurrent HF-MACE as its primary endpoint.
· The use of recurrent HF-MACE as a primary endpoint in the confirmatory study is supported by the new analysis of the completed Phase 2 trial reported today. This analysis has shown that advanced heart failure patients treated with MPC-150-IM had no HF-MACE over 36 months of follow-up, compared with 11 recurrent HF-MACE in the control group (p<0.001, log rank test).
· The analysis demonstrates that MSB’s MPCs have the greatest cardioprotective effect in those patients which have advanced heart failure and therefore these patients forms the most appropriate target population for MSB’s MPCs. It was observed that this sub-group of patients in the Phase II trial were rapidly deteriorating and were also experiencing a high rate of adverse outcomes.
· This in turn supports Teva/MSB’s strategy to enrich their current ongoing 1,165 patient Phase III CHF trial with advanced heart failure patients who are at high risk of recurrent HF-MACE (Heart failure related major adverse cardiovascular event) and are therefore most likely to respond to MPC-150-IM.
· Teva’s enrolment criteria to screen patients in the Phase III CHF trial include a) those that have high baseline levels of NT-proBNP levels which is a biomarker predictive of poor clinical outcomes and b) those that have had a heart failure related hospitalization within the last 9 months which is known to be predictive of high mortality rates and/or rehospitalization.
· MSB believes that the above two inclusion criteria used in its Phase III trial is likely to result in a majority of the enrolled patients in the trial having high rates of MACE and advanced heart failure.
Our comments:
· We believe that the additional analysis of the Phase II CHF trial confirms that the appropriate target population for MSB’s MPCs are those with advanced heart failure and it also supports the use of recurrent HF-MACE as a primary endpoint in the 500 patient confirmatory study.In our view, it provides the context for Teva’s proposal to the FDA and its subsequent agreement with the FDA on the accelerated pathway for the CHF program announced last month.
· We note that the announcementdoes not imply that MSB’s MPCs will not work in early stage heart failure patients. Advanced heart failure patients are the sickest patients and if a therapy works in the sickest patients there is no reason to believe it will not work in patients who are relatively less sicker and therefore should be easier to treat. 3 year follow up from the Phase II trial on all patients given the 150m MPC dose has already shown 0% HF-MACE in patients on 150 million MPC dose vs. 33% seen in the control group.
· However, it does imply that the patients that are most likely to respond to MPCs or patients likely to benefit from MPCs the most are those with advanced heart failure. The advanced patient population (accounts for ~25% of the CHF population) has the highest unmet need and continues to be at a high risk of repeated hospitalizations and mortality despite existing standard of care drug treatments.Targeting this patient population will also allow a high price point for MSB’s MPC-150-IM product.
· We also note that the ongoing Phase III CHF trial is using a time to first event analysis of HF-MACE as the primary endpoint. It also allows for interim analysis when 50% of HF-MACE have occurred to test for superiority and possible allow early stoppage of the trial. We note that an advanced heart failure patient is likely to have more number of events than an early stage patient, MSB is likely to require less number of patients to meet its event driven end-point and the trial is likely to take less time to reach the 50% HF-MACE point for interim analysis.Hence, for Teva this strategy to enrich the Phase III trial with advanced heart failure patients is likely to pay off by way of a smaller and faster trial.
· To conclude, we are mystified to see the drop in the stock price of MSB today at the back of an announcement that we clearly view as positive and hardly a surprise since MSB first alluded to it last month.
Maintain Buy and Valuation of $9.01 We retain Buy and our DCF valuation of $9.01/sh. Key catalysts include results from Phase II trial for RA (end CY15), interim analysis from Phase III CHF trial in CY1Q16, potential deal in next 12 months on low back pain and diabetic kidney disease assets.
Disclosure: Bell Potter Securities acted as lead manager in a capital raising in May 2010 and in March 2013 ..........................Cheers Vin
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Recommendation:
Buy, Speculative
Previous Close:
$3.16
Valuation:
$9.01
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