BELL POTTER LIFTS VALUATION BY 22% TO $7.30
Mesoblast (MSB)Ryoncil speeds towards US approval with 9-1 Panel Vote
Last week FDA’s Oncology Drugs Advisory Committee met to discuss the BLA application for Ryoncil for paediatric SR-aGvHD. We are pleased to report that despite the bearish FDA documents released earlier, after a whole day of intense discussions and deliberations, the panel voted overwhelmingly in favour (9-1) that the available data support the efficacy of Ryoncil in paediatric SR-aGVHD. Panel was swayed by the robust treatment effect seen in MSB’s Phase 3 trial, compelling biomarker data, lack of safety issues and the unmet medical need. While they acknowledged the limitation of a single arm, non-randomised trial as potentially giving rise to bias, they concluded that a randomised control trial was not practical in paediatric SR-aGvHD patients. On manufacturing FDA and panel acknowledged that the process is complicated, it’s not perfect, but state of art as of today and continued learning and patient experience will help in making this perfect in future.
Too soon to celebrate – we don’t think soThis is a great way to kick off a catalyst rich period for MSB in our view. We note that FDA usually follows the recommendation of its advisory panels when the vote is strong or unanimous. The strong vote by the panel has paved the way for Ryoncil to become the first FDA-approved allogeneic stem cell product. In our view, MSB and the FDA will discuss requirements around a post market study in adults, which the FDA is likely to want a commitment to. We expect the agency to grant an accelerated approval to Ryoncil for paediatric SR-aGvHD ahead of
the 30th Sep. PDUFA date.
Valuation lifted to $7.30/sh, Retain Buy (spec)Revisions to our model led to a 19% increase in our FY21 NPAT and a large decrease in our FY22 Net loss est. driven by an increase in our revenue forecasts (increase in POS of Ryoncil for paediatric SR-aGvHD to 100%, and increase in remestemcel-L COVID-19 ARDS revenues due to increase in est. COVID-19 confirmed cases in US during our forecast period). There was no change to our FY20 est. Near term earning changes, adjusting our DCF for time creep and reducing our WACC to 18% (was 19%), has led to a ~22% lift in our valuation to A$7.30/sh (was A$6.00/sh). MSB remains our Top Pick for the year with several other near term catalysts.
Disclosure: Bell Potter Securities acted as lead manager for MSB’s A$75m capital raise in Oct’19 and A$138m capital raise in May’20 and received fees for that service. Recommendation:Buy, Speculative Previous close:$4.91Valuation:$7.30 (was $6.00)Tanushree JainAnalyst, Healthcare & BiotechDirect
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