Mesoblast (MSB) Partnering prospects for RA product significantly increase at the back of compelling 9 month data from RA trial
Results suggest MPC-300-IV is safe and shows durable clinical benefit in RA MSB has reported additional 39 weeks data from its ongoing Phase II trial with MPC-300-IV in 48 patients with biologic refractory rheumatoid arthritis (RA). Data builds on the impressive clinical benefit seen with the drug at 12 weeks and provide proof of concept. Longer term data on safety and tolerability continue to be positive, with no drug-related serious adverse events (SAEs). We are pleased that the favourable safety profile of MPC-300-IV observed at 12 weeks has been maintained out to 39 weeks. Importantly, MSB also reported data on secondary measures of clinical efficacy, which continue to be positive and show that the clinical benefit seen with MPC-300-IV is durable and sustained out to 39 weeks. This positive data bolsters our confidence in the positioning of MPC-300-IV as a preferred 1st-line biologic agent in treatment of biologic refractory RA patients.
Key highlights from the result
The key point is that the data released today shows that the clinical benefit observed at 12 weeks with MPC-300-IV (single dose) is durable and sustained out to 39 weeks.
No serious adverse events at either the low dose or the high dose at 39 weeks. Adverse events (AEs) were similar between the drug treated groups and the placebo (control) group.The AEs did not display dose-dependent or time-dependent trends, were not significant and did not lead to discontinuation of treatment.
Both doses of MPC outperformed placebo across multiple efficacy endpoints namely FDA acceptable ACR20/50/70 response criteria, median ACR-N analysis, physical function (measured by health assessment questionnaire-disability index –HAQ-DI) and the composite measurement of disease activity (DAS28 measurement). This consistent pattern of outperformance over placebo across multiple endpoints further supports the robustness of the benefit seen with MPC-300-IV.
The high (2 million MPC/kg) dose showed the earliest and most sustained treatment benefit as identified using continuous variables ACR-N, HAQ-DI and DAS-28 in line with FDA guidance. The dose dependent relation in efficacy identified gives MSB the rationale to consider exploring an even higher dose in a Phase 3 registrational trial. The fact that there was no dose-dependent trend seen in safety also makes it possible for MSB to consider it.
Clear separation of benefit of MPC treatment over placebo was seen across all subjects (patients who failed 1-2 biologics and also those who failed more than 2 biologics), however this difference was even further augmented in the subgroup who had failed 1-2 biologics, making the results in this sub group even more compelling. This observation is consistent with the 12 week data and further points to MPC’s being more effective the earlier a biologic refractory patient is treated with it and supports MPC-300-IV’s positioning as a preferred 1st-line biologic agent in treatment of biologic refractory RA patients.
MPC-300-IV performed better than key competitors specifically on measures of low disease activity In the biologic refractory RA population, we see key potential competitors for MPC-300-IV as the oral JAK inhibitors and Rituxan. Albeit the small numbers in MSB’s trials versus the large Phase 2 & 3 trials undertaken on these competing drugs, we believe a comparison of data specifically on the low disease activity score of DAS28-CRP <3.2 show that the MPC-300-IV performed better. The goal of therapy in biologic refractory RA patients is to achieve early and sustained low disease activity which correlates with prevention of structural joint damage in RA, we are encouraged by MSB’s performance on the low disease activity measures.
In the biologic refractory RA population, we see key potential competitors for MPC-300-IV as the oral JAK inhibitors (Pfizer’s Xeljanz, Eli Lilly’s Barictinib and Abbvie’s ABT-494). Baricitinib is the newest JAK inhibitor to enter the market, while Abbvie’s ABT-494 is currently in Phase 3 trials. Albeit the small numbers in MSB’s trials versus the large Phase 2 & 3 trials undertaken on these competing drugs, we believe a comparison of data specifically on the low disease activity score of DAS28-CRP <3.2 show that the MPC-300-IV performed better. To illustrate, we use baricitinib (high dose 4mg) the newly approved drug which showed DAS28-CRP<3.2 of 33% at week 24 vs. 50% 2M/kg MPC (all) and 67% 2M/kg MPC (1-2 biologics subgroup) at week 39. The mean change in DAS-28 for baricitinib was -1.8 at week 24 vs -2.2 2M/kg MPC (all) and –2.7 2M/kg MPC (1-2 biologics subgroup) at week 39. We note that the MPCs also were better than barictinib based on the proportion of patients achieving both ACR 20 response (minimum bar to get FDA approval) and the ACR 70 response (higher bar and more clinically meaningful).
In the biologic refractory RA population, the other key product used extensively is Roche/Biogen Idec’s Rituxan (rituximab). We believe MPC-300-IV also performed better than Rituxan on DAS28-CRP <3.2. In its Phase 3 trial, Rituxan showed DAS28-CRP<3.2 of 15% at week 24 vs. 50% 2M/kg MPC (all) and 67% 2M/kg MPC (1-2 biologics subgroup) at week 39. The mean change in DAS-28 for Rituxan was -1.9 at week 24 vs -2.2 2M/kg MPC (all) and –2.7 2M/kg MPC (1-2 biologics subgroup) at week 39. We note that the MPCs also were better than Rituxan based on the proportion of patients achieving ACR 70 response.
Partnering prospects enhanced The benefits seen in this small trial now need to be similarly replicated in larger registration trials (Phase 3). We understand that MSB is already in discussions with potential partners. In parallel with these discussions MSB is likely to engage with the FDA on understanding the path forward for Phase 3. The recent legislation in the US called the 21st Century Cures Act has provided an expedited pathway for approval of regenerative medicines in the US.
Biologic refractory (those who have had an inadequate response to or are intolerant to 1 or more TNF-alpha inhibitors) are the most challenging RA patient population and represent high unmet need. MSB estimates that ~one third of RA patients are biologic refractory and in need of effective treatment. What physicians are looking for is a drug which is efficacious, has durable benefit but is also safer than current drugs in this biologic refractory population, given current treatment modalities in this setting (such as the JAK inhibitors) are limited by risk of opportunistic infections and malignancies. Based on the strong data we have seen to date and the favourable safety profile of MPC-300-IV, we believe it could fill this unmet need. Given the unmet need in biologic refractory RA population and the seriousness of the disease, there are reasonable grounds to believe that MSB’s MPC-300-IV for RA may be granted the designation of ‘regenerative advanced therapy’.
We believe that MSB should be able to attract a strategic partner in the near term to move the program forward.Our belief is based on a) the strength of the results seen so far which provide proof of concept and show that not only does MSB’s product have compelling clinical benefit but also that those benefits are durable and sustained, b) the possibility of an expedited approval pathway for this product if designated as ‘ regenerative advanced therapy’ and c) the high interest and licensing/M&A activity seen in this space.
RA is a space which most big and specialty pharma companies are active in. The RA treatment market is estimated to grow to $22.5bn by 2025. Key players in this space include Abbvie, Roche, Pfizer, Eli Lilly, Amgen to name a few. This high interest from multiple parties ensures that the negotiating power of a company such as MSB able to provide strong mid-stage results is high. Most of the deals in this space have been between ~$1bn-$1.5bn and front loaded with upfront payments of ~$100-$175m, with some exceptions having upfront payments as high as $725m. Given the multi-billion dollar market opportunity and threat of biosimilars and upcoming patent expiries of the top selling RA drugs we are not surprised either by the high partnering activity nor the high value deals in the space.
To conclude, this positive data read out makes us believe that MPC-300-IV is well positioned to be a preferred 1st-line biologic agent in treatment of biologic refractory RA patients and we expect to see increased partnering interest for the asset, which has also in the past showed positive results from a proof of concept trial in diabetic kidney disease and has the potential in future to be applicable across other autoimmune disorders.
Retain Buy and Valuation of $3.01 We retain Buy and Valuation of A$3.01/sh. Mesoblast (MSB) remains one of our Top 3 stock picks for 2017. We continue to expect interest in cell therapies to increase going forward at the back of the recent expedited pathway in US for regenerative medicines, which also bodes well for MSB’s outlook. Following the agreement with Mallinckrodt in December 2016 for the back pain and GvHD products, we also believe the likelihood of a licensing and commercial deal in 2017 has increased. A deal would not only serve to ameliorate MSB’s cash burn but also provide external validation from a commercial partner. Next catalysts: a) 1H17 results expected later this month, b) interim analysis from Phase 3 CHF trial in 1QCY17 and b) interim analysis from Phase 3 back pain trial and/or conclusion of ongoing negotiations with Mallinckrodt on the program.
Disclosure: Bell Potter Securities acted as lead manager in a capital raising in May 2010 and in March 2013 and in a selldown of stock in December 2010 and received fees for that service.
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