Over the last week I sent the latest Stuart Roberts report to a few friends, former colleagues and relatives. And then met with all of them individually and had a good chat about it. Funny how some very smart guys simply just don't get it or are not even open to getting their heads around it . For some it's just such a foreign topic, it's all too hard. And then there's those who completely understand it and potentially where this is heading, especially with Fujifilm already on the hook, but as far as investment timing goes, they would prefer to wait for confirmation of a successful trial or 2 or 3 trials, even if that means paying a much higher price for entry.
I can imagine Ross, Stewart and Paul must get a similar response from many brokers, investors and whomever else they speak to. And for this reason I wouldn't be surprised if they have purposely taken an almost low key approach to promoting the story so far. Why blow the trumpet without results to back it up and when nobody is listening??
But perhaps that is all about to change , and hence the release of SR latest report, just to get some interest building prior to the first data on GvHd coming in a matter of months.
And from a potential licensor of Cymerus viewpoint, and the multiple shots on goal strategy, the same thing, no one wants to put their hand up and pay a chunky upfront license fee for an as yet untested product. Especially a Big Pharma who has a big reputation at stake. For some a reputation that’s to hard to even put a dollar value on. So why risk it? However, I'm sure many are watching and waiting for results. Of the 600 MSC clinical trials happening out there, how many of these would be prepared to run with Cymerus for future testing on different diseases if they knew that it has already had proven success in GvHd and already ticks all the boxes required by the FDA and so on?
Or to put it another way, why would any of them continue trialling with cells derived from the almost obsolete method of bone marrow or adipose tissue donation? It defies logic you would continue down that path riddled with question marks and inefficiency once a superior method has proven safety and efficacy in human trials, and the manufacture of cells is proven consistent, pure, potent and unlimited.( Is this the reason Mesoblast has seen its shareprice slump in recent years? )
On this basis it would be very encouraging to see within the 3-6 months following a successful GvHd trial outcome how many takers are ready to sign up for a Cymerus license for testing on other diseases. Let's hope it's AT LEAST 2 or 3 which may prompt Fuji to pull the trigger on an outright purchase to protect their dream of becoming the worlds leader in regenerative medicine.
And even if Fuji doesn’t pounce, at least we will get other companies funding future trials. A license fee upfront, milestone payments, and all costs met paving the way for new products to market. Not such a bad thing.
Getting back to the SR report, there is something worth mentioning. Kind of just joining the dots and coming to a possible conclusion that he doesn’t quite spell out. He argues in the next few years stem cells will be bigger than monoclonal antibodies have become over the past decade or so, and even calls it the Revolution. Fair enough. He mentions (on p.24, footnote#91) five of the top 20 bestselling worldwide drugs, all monoclonal antibodies.
Here is a bit more info to put these medicines and therefore the potential size of stem cell medications into some context of dollar value if stem cells are indeed the next big medical revolution.
Humira, Abbvie, $16 billion ,immunology, arthritis, Crohn's
Rituxan, Roche, $8.5 billion, leukaemia, blood cancers, Arthritis
Remicade, J&J , $8.3 billion, Arthritis, Crohn's
Herceptin, Roche, $6.8 billion, breast cancer
Avastin, Roche, $6.7billion, various cancer types, glioblastoma, AMD. **
Just 5 monoclonal antibody drugs with combined total sales for 2016 of US$ 45 billion!
( And by the way , Humira came off patent in 2016, Remicade and Rituxan will come off patent in 2018. Meaning that generic or biosimilar products will come on market at a fraction of price.Humira costs US$3100 per month, already an Indian generic replacement is available for $200.)
Additionally , one that is not mentioned by Roberts but relevant to Cynata’s hopes, the Asthma and COPD drug, Advair, GlaxoSmithKline, $4.3 billion , at number 15 on sales chart 2016)
What will the Big Pharma companies like Roche, J&J , Abbvie, Glaxo and others be doing in the near term to protect their market share? What do they have in their pipeline of new drugs that will be tomorrow's blockbuster sellers like these mentioned above? Do they all look backwards to what was big ten years ago, or do some dare to look forwards to introducing future medications?
Are they going to allow a relative newcomer like Fujifilm to enter the market and potentially own all the rights to the manufacturing patent, Cymerus, that could be used to target multiple diseases with off the shelf stem cell products? Maybe, maybe not, who knows, but for sure, there are massive amounts at stake! If Roberts is right about a stem cell Revolution, there could be a huge shake up of the "who's who " of the Global Top 20 Big Pharma companies in the next ten years.
Which begs the question, if a stem cell cure for any deadly disease can match the annual sales for any one of these monoclonal antibody drugs mentioned, what is this worth to Cynata?? What is it worth if Fujifilm or other licensees can capture this kind of marketshare and similar annual sales for 3 or 4 deadly diseases ??
A simple calculation using a 10% royalty on annual sales of US$8 billion for one disease , equates to US $800 million, or A$1 billion.
Multiply that by 3 successful disease targets: A$3 billion in royalties to Cynata. That’s recurring royalties year after year after year after year.
This all starts to make the CYP price target of $2 look just a little cheap and ordinary. A $200 million market cap for future recurring royalties of potentially hundreds of millions?? That’s not the way things get valued on Wall Street!
In the context of what’s already out there, the current size of the market, the success to date of MSC trials using first generation cell sourcing/ manufacturing methods and the fact that NO OTHER COMPANY CAN MANUFACTURE MSC’s in unlimited quantities from a single donor cell there is a lot to be excited about. And of course this all hinges on the successful outcome of the current GvHd trial.
First patient dosed must now have just passed the 80 day mark. Potential updates to the market coming in the next two to three months on the response of the first eight patients. Six to twelve months from now we could be on the verge of entering new trials funded by licensees for asthma, lung fibrosis, glioblastoma or other diseases. Or we could already be sold to Fujifilm for a song, let’s hope not.
Proven safety and efficacy is a bright green light to all those fence sitters out there wanting confirmation on the big question “But does it really work in humans?” , and very serious decision time for the Big Pharma companies who have been watching and waiting, already knowing in theory that it works but wanting everything completely signed off and certified before they put their name to it.
And if these cells are really the best available, with the most scaleable production method, and without competition, then why not dare to think big – What’s the company going to be worth if these cells can make their way into the leading treatments for ten or more deadly diseases, just as antibodies have done?
(20min delay)