Cell Therapy News/Articles, page-17265

Hi All,

Key takeaways from Bell Potter, some we knew already, some provide a bit more detail:

aGvHD in Paeds:

• Potency assay for T-Cell activation was in place during manufacturing for Phase 3 and has been in place since.
• This demonstrates the consistency of the product, although there was a period after the Phase 3 trial where the assay was too variable. However, this seems to be a problem with the performance of the assay, not the consistency of the product, as it seems the assay was performed on inventory again and illustrated consistency.
• Additional potency assay (I don't believe it was specified, might be proprietary), which was also in place during the Phase 3 trial, is being added to the batch release criteria. MSB currently using this assay on all current inventory to demonstrate that the cells in the Phase 3 trial have the same profile as the cells in inventory.

• No change in the manufacturing process over the whole period.
• Together, it seems MSB believes that the FDA will deem this sufficient for resubmission if the above is adequately demonstrated.
• Expected to have this data within 2 months.
• A meeting with the FDA will be had prior to any resubmission.

aGvHD in Adults:

• Starting "imminently"
• Long-term survival in adults from the EAP supported the adult trial phase 3.
• Expected recruitment to be completed before EoCY24.
• 28-day follow-up for the primary endpoint.
• Potential for Europe to be added to the trial to support approval in both jurisdictions.

CLBP:

• Forecast recruitment period of 9 months.
• Potency assays in place.

CHF:

• MSB is still stating that they plan to meet with the FDA soon to discuss the pathway to approval.
• No additional information regarding partnering, although I would expect that the first we hear of anything would be following the signing of an actual agreement. You never disclose anything until it's legally binding. An oversimplification of this is a process that can look like this:

1. Approach
2. Relationship build
3. Initial non-confidential DD
4. Initial non-confidential discussions
5. Mutual NDA put in place
6. Confidential DD and subsequent discussions
7. Expression of interest
8. Negotiation and clarification
9. (At some point here you play each other off against other bidders)
10. Initiation of a term sheet
11. Development of the terms
12. Agreement of the terms
13. Execution of the agreement

MSB has been around the block. They will have completed 1 through 6 at a minimum with anyone who is strategically beneficial and will listen. They already will have relationships with all relevant major players where MSB are within scope. But the later part of this process still often takes months.

IBD:

• No mention

Cash:

• No additional information on plans for finance, just that spending has been greatly reduced.

OPINION: I believe that MSB's strategy will be to hold off until they have delivered the assays to the FDA and been given the green light. Then MSB is in a better position for either (1) a capital raise or (2) a partnership with equity arrangement. Alternatively, it could allow MSB to draw down more (3) debt. So long as they have a worst-case-scenario fallback plan, it makes sense to wait to see your hand before you play it.

There is a (4) option for the really really optimistic - because I'm sure that's gone as great for you as it has for me so far:

• MSB completes 2nd potency assay and demonstrates consistency between the Phase 3 cells and the inventory cells
• MSB presents to FDA within 2 months
• FDA agree that the data is sufficient
• FDA provides some sort of expedited review, considering they have (theoretically) said it is safe, efficacious, and manufactured well. Perhaps an accelerated approval after the initiation of the Phase 3 adult trial with conditional approval pending the meeting of the primary endpoint.
• MSB secures reimbursement pretty much immediately (it's possible, it was already in insurers' books back in 2020).
• THEN every 50 patients MSB treats earns US$23.75m assuming a comparable reimbursement to Kymriah (US$475k per therapy).
• With 1500-2000 paediatric SR-aGvHD cases per year in the states, and 80% of them being handled by the institute that MSB has a great relationship with, which has been a part of the EAP, treating 100 or over patients in the first year is super realistic.
• The question is, how realistic is the initial bit?
• ^^^^ This has always been a path that the FDA could have taken, and haven't. I strongly believe they should have, because MSB would have been on their best behaviour during the trial and ensured a very potent and consistent product within the trial to meet the requirements of their conditional approval. But they didn't. So up to you how likely you think this is.

The bets here are:

1. That the FDA finally are satisfied with the product's consistency as demonstrated through both potency assays.
2. That MSB can reach an arrangement with prospective partners for one of their portfolio items.
3. That wherever MSB sources capital from, it happens in a way that is not destructively dilutive.

The risk profile of the company shouldn't be as high as it is on paper. 4+ blockbuster Phase 3 assets and a Phase 2 asset in IBD, valued at US$191m?!

Compare that to IMU which has 2 Phase 2 assets, and 3 Phase 1 assets, and is valued at US$480m.

To put that in perspective: as @otherperspective said, Roivant sold their Phase 2 IBD asset to Roche for US$7.1b. Additionally, Prometheus Biosciences was acquired by Merck for US$10.3b and their lead asset was a Phase 2 IBD therapeutic. Our valuation is pricing in that MSCs are a 'wild west' currently from a regulatory, margin, and reimbursement perspective, which people don't know what to do with.

Put your chips where you want em, stick to your investment risk profile and philosophy, and see how the cards fall.

Not investment advice.

Cheers,
Gang gang