Cell Therapy News/Articles, page-116

Update from Ladenberg Thalman:

We encourage investors to revisit MESO ahead of the upcoming U.S. Phase III readout from MESO’s aGvHD program, which we expect in late February or early March. We would view 30% 28-day ORR as adequate to file for approval and expect results on key secondary endpoint of 100-day survival (expected in 2Q18) to correlate with ORR. Our upbeat outlook is based on results from 241 pediatrics enrolled onto Protocol 275, an expanded access study of remestemcel-L for steroid refractory aGVHD. This cohort demonstrated 65% 28-day ORR. Importantly, in a subset of the expanded access cohort that had same enrollment profile as the Phase III population (i.e., patients who received prior steroids only) ORR was 81%. We have long viewed aGvHD program as an important component of the maturing MESO story given significant unmet need and potential for rapid commercial adoption among a concentrated population of pediatric hematologists practicing at large transplant centers. Our model calls for MESO to partner the program in exchange for 25% economics based on expectations for a pre-data term sheet. However, given 1) any potential partnership is now likely to be signed post-data and 2) management has a more fully articulated strategy for expanding use into adult aGvHD and potentially chronic GvHD, in our view, there could be upside to our partnering economic assumptions. We will revisit our assumption following presentation of topline data. Reiterate Buy rating and $13.25 PT.

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Column 1 0 We encourage investors to revisit MESO ahead of the upcoming U.S. Phase III readout from MESO’s aGvHD program, which we expect in late February or early March. We would view 30% 28-day ORR as adequate to file for approval and expect results on key secondary endpoint of 100-day survival (expected in 2Q18) to correlate with ORR. Our upbeat outlook is based on results from 241 pediatrics enrolled onto Protocol 275, an expanded access study of remestemcel-L for steroid refractory aGVHD. This cohort demonstrated 65% 28-day ORR. Importantly, in a subset of the expanded access cohort that had same enrollment profile as the Phase III population (i.e., patients who received prior steroids only) ORR was 81%. We have long viewed aGvHD program as an important component of the maturing MESO story given significant unmet need and potential for rapid commercial adoption among a concentrated population of pediatric hematologists practicing at large transplant centers. Our model calls for MESO to partner the program in exchange for 25% economics based on expectations for a pre-data term sheet. However, given 1) any potential partnership is now likely to be signed post-data and 2) management has a more fully articulated strategy for expanding use into adult aGvHD and potentially chronic GvHD, in our view, there could be upside to our partnering economic assumptions. We will revisit our assumption following presentation of topline data. Reiterate Buy rating and $13.25 PT. aGvHD Phase III Data Offers Near Term Catalyst: We expect MESO to present topline data from the 60-patient open-label Phase III pediatric aGvHD program around the timing of BMT Tandem meeting February 21-25 (but not at the meeting). We would expect topline analysis to include 28-day ORR primary endpoint. 100-day survival data are expected in 2Q18. We believe the program serves a significant unmet need in steroid refractory pediatric cases with $100M+ U.S. opportunity. 30% 28-Day ORR Should Be Clinically Significant for aGvHD Study: In our view, any pediatric GvHD product with modest positive ORR at lower bound of a confidence interval would likely be adopted by most pediatric hematologists. As such, we believe a 30% ORR, which should translate to a positive benefit at the lower bound of a confidence interval for most study populations, will be adequate for approval. Additionally, we are comfortable ORR can serve as a robust surrogate endpoint for 100-day survival and durable complete response. · Protocol 275 Supports ORR of 81% in Phase III Population: At BMT 2016 MESO presented results from all 241 patients enrolled onto Protocol 275, an expanded access program evaluating twice-weekly remestemcel-L infusions at 2 million MSC/kg for 4 weeks. The study enrolled at 50 transplant centers across North America and Europe. Patients with PR or MR and no safety issues related to initial doses at day 28 were eligible for an additional 4 weekly infusions. At day 28, the 241-patient ORR was 65%. Importantly, of the 36 patients who received steroids only (i.e., Phase III population), ORR of 81% was significantly greater than ORR of 62% among the 200 subjects who received additional second-line agents prior to remestemcel-L (p=0.035). ORR was 73%, 67%, and 61% for patients with baseline aGvHD of Grade B, C, and D, respectively. By organ, ORR was 68% for skin, 65% for GI tract, and 62% for liver. Across 2,434 infusions, remestemcel-L was well tolerated. · We provide detailed overview of aGvHD program on P 2. Risks These risk factors (regulatory, competition, reimbursement, currency, international supply chain, financing, partnership, and higher taxes possible) do not constitute all the potential risks of investing in the subject company’s shares. Investors should refer to the company’s SEC filings including the most recent forms 10-K and 10-Q for further details on the risks associated with an investment in the subject company’s shares.

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