MESOBLAST LTD.
GVHD KOL Takeaways: Potential Upside to Dosing/Price Assumptions; Reiterate Buy
MESO (NASDAQ)
Company & Market Data
Closing Price (as of 12/07/2015): $6.09
Rating: BUY
Price Target: $17.25
52 Week Range: $5.54 - $18.44
Shares Outstanding (MM): 76
Market Capitalization (MM): $463
Cash (MM): AUD144.1
Fiscal Year End: Jun
Estimates
EPS 2015A 2016E 2017E
H1
AUD(0.78) AUD(0.85) AUD(0.99)
H2
AUD(1.08) AUD(0.95) AUD(1.07)
Full Year
AUD(1.86) AUD(1.84) AUD(2.06)
Revenue (MM)
AUD39.3 AUD26.3 AUD8.0
Mesoblast is developing therapeutics and medical
devices based on its mesenchymal precursor
stem cell platform. The company is headquartered
in Melbourne, Australia with clinical and
regulatory teams in New York and commercial
scale manufacturing capacity in Singapore. The
company is currently enrolling a Phase III study
for its heart failure program and a Phase III study
evaluating MPCs for treatment of lower back pain.
The company is in Phase II for diabetes and
rheumatoid arthritis. Commercial rights for the
cardiovascular franchise are controlled by Teva.
Worldwide manufacturing will be provided through
Lonza.
On 12/7/15, we hosted a KOL discussion at the American Society of Hematology (ASH)
meeting with Duke University Professor, Joanne Kurtzberg, to discuss the outlook of
acute graft-versus-host disease (aGVHD) therapies and potential outlook for MESO's
remestemcel-L program for the treatment of steroid refractory pediatric aGVHD. Among
the takeaways from Dr. Kurtzberg's talk were; 1) point estimate ORR greater than 30%
at 28 days would be clinically relevant due to limited treatment options, 2) responder
may benefit from additional dosing beyond 8 weeks defined in the Phase III protocol,
and 3) expectation that product will be used off label in adult patients. Additionally, Dr.
Kurtzberg noted the Phase III entry criteria are generally compatible with her clinical
practice and the 160-patient expanded access program that demonstrated a 64% ORR.
If the Phase III study demonstrates a comparable ORR, in our view, there may be an
opportunity to file a BLA based on an interim analysis of approximately 30 patients,
expected in 2H16. Lastly, Dr. Kurtzberg was not aware of any other products in late
stage development for pediatric steroid refractory aGVHD and suggested the product
may enjoy significant uptake at the roughly 60 centers that treat nearly all pediatric
aGVHD cases in the U.S. We reiterate our Buy rating and $17.50 PT.
•
What's New? We hosted Duke University Professor, Joanne Kurtzberg, a KOL
in pediatric hematology, for a discussion on current treatment options for steroid
refractory pediatric aGvHD and the outlook for new therapies, including MESO's
MSC-based program.
•
30% 28-Day ORR Would be Clinically Significant: Dr. Kurtzberg noted that given
the absence of effective treatments and 1-year survival as low as 10%-15% for
pediatric aGVHD patients, any product with modest positive ORR at lower bound
of a confidence interval would likely be adopted by most pediatric hematologists. In
her view, a 30% ORR should translate to a positive benefit at the lower bound of
a confidence interval for most study populations. Additionally, she was comfortable
ORR can serve as a robust surrogate endpoint for 100-day survival and durable
complete response.
•
Potential Benefit Beyond 12-Dose Regimen: We were very intrigued to learn of
Dr. Kurtzberg's experience in the expanded access program of offering additional
doses of MSCs beyond week 8 to cement a durable complete response in
patients demonstrating robust but incomplete response to therapy. Specifically, she
described the potential benefit of a "tapering" dose in responders to every other
week and then to once monthly. While we are not aware of any published data on
dosing beyond 8 weeks, in the expanded access program patients treated with 4
additional weekly doses following an initial regimen of twice weekly dosing for 4
weeks demonstrated numerically better ORR and survival, which suggests longer
duration of treatment may be beneficial for early responders. If this finding is adopted
in clinical practice, there may be upside to our U.S. revenue-per-patient estimate
of $300,000.
•
Potential Off Label Use in Adult aGVHD: While Dr. Kurtzberg's practice is focused
on pediatric patients, she noted the treatment options for steroid refractory adult
aGVHD are equally limited. As such, based on the large pediatric dataset from the
expanded access program, in her view, remestemcel-L will be used off label in adult
patients if the product is approved in the U.S.
•
All $ in Australian Dollars unless noted; U.S. dollar notation (US$)
(20min delay)