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FDA rejection cranks pressure on Mesoblast
Tom Richardson Markets reporter and commentator
Oct 7, 2020 – 3.48pm
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Management at Mesoblast insist its treatment for acute-Graft Versus Host Disease (a-GVHD) in children still has a chance of regulatory approval in the US this year. Shares plunged 37 per cent last Wednesday after Mesoblast reported US healthcare regulator, the Food and Drug Administration (FDA), had demanded it complete a further randomised controlled study in adults and/or children to provide more evidence of the treatment's effectiveness. Biotech Daily founder David Langsam says "if" is a big word in biotech, with Mesoblast facing several imminent inflection points. The news shocked shareholders and analysts who were confident the FDA would approve the intravenously-infused Ryoncil Remestemcel-L treatment on the basis an FDA oncologic drugs advisory committee (ODAC) had voted nine-to-one in favour of the drug's efficacy given existing data.
"The FDA is extremely rigorous on drugs that go into bodies," said David Langsam, founder of Biotech Daily. "They're much easier on diagnostics and devices that don't go into the body. So if you come up with new software for X-rays, that's fine, you'll sail through." Related Quotes
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Mesoblast acquired the Ryoncil drug to treat a-GVHD when it bought Nasdaq-listed Osiris Therapeutics' entire mesenchymal stem cell business in 2013 in a deal worth up to $US100 million ($140 million) in cash, stock, and milestone payments. The same drug is being trialled on ventilator-dependent patients suffering from COVID-19 acute respiratory distress syndrome (ARDS). Mr Langsam said the views of the ODAC's one dissenting voter, Christian Hinrichs, had swayed the regulator to reject the application. "Now Osiris ran randomised control trials that showed very little benefit above placebo and that's what was criticised by the one guy who spoke out against." Mesoblast conducted an additional trial to Osiris, but it didn't contain a placebo group to compare results to. "Really the gold standard for testing any drug is large randomised control trials," Mr Langsam said. "There's a world of difference between an open-label trial and a placebo controlled trial," he continued. "[Mesoblast chief executive Silviu Itescu] is correct to say 50 per cent of kids do die if they get GVHD. He got it down to 25 per cent died, so that's a valid comparison, but it's not a large randomised control trial – the FDA is extremely nervous about everything."
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High-risk stakes
Mesoblast's CEO told an analyst call on October 2 it planned to seek a type A meeting with the FDA within 30 days to persuade it to change its verdict. "We expect to have a discussion around accelerated approval on the basis of the existing data," Dr Itescu said. "With commitments for a post-approval randomised control trial in adults predominantly." Broker Bell Potter said under the accelerated pathway scenario Mesoblast could still get Ryoncil approved within three to six months. Under another scenario, Mesoblast could get Ryoncil approved to treat COVID-19 ARDS under emergency use authorisation rules. The broker suggests more data from the COVID-19 trial may make the FDA more receptive to approving Ryoncil for a-GVHD. In this scenario, it expects approval in financial 2022.
And under a final scenario, Mesoblast must conduct a further a-GVHD trial in adults, which takes 12 months to complete from the middle of 2021. Assuming success, Mesoblast could gain approval to treat a-GVHD in children and adults by financial 2024. Mesoblast has argued that conducting an additional placebo-based trial in children is not possible for medical and other reasons.
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According to Mr Langsam, it's still possible Mesoblast obtains a conditional FDA approval for children, with the requirement for a post-approval trial in adults. "Second guessing the FDA is a mistake, as everyone barracking for Mesoblast found out just because there was a 9-1 vote at ODAC." Mesoblast chief executive Silviu Itescu said it'll seek discussions with the FDA over its decision. Arsineh HouspianMesoblast's annual report to June 30 reveals it's accumulated losses of $US548.8 million since inception, with a reliance on investors to fund its cash-burning clinical trials and operating expenses. It has never generated revenue from product sales, other than licensing sales. The report also reveals it expected expenses and cumulative losses to increase (before the FDA rejection) as it funds other trials in financial 2021. As at June 30, it had $US129.3 million in cash on hand and gross debt of $US89.5 million, according to Bell Potter. Some of its borrowings are linked to expected future contractual cashflows from sales of Ryoncil. The biotech labelled a speculative "buy" on Tuesday by sell-side supporter Bell Potter is also set to provide readouts in 2020 for clinical trials using its own stem cells (rather than Osiris') for the treatment of back pain and heart failure.
Tom Richardson reports and comments on investment markets. Connect with Tom on Twitter. Email Tom at tom.richardson@copyright link
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