Interesting article which needs to be shared:Summary• . The FDA...

Interesting article which needs to be shared:

Summary•
. The FDA has rejected Mesoblast's cell therapy candidate for pediatric acute graft versus host disease, causing the stock to decline.
• Mesoblast is an old company located in Australia, which may impact its resonance with the FDA.
• The FDA has a bias against cell and other human biologic therapies, making approval for Mesoblast's therapy challenging.

Late in November, Mesoblast (NASDAQ:MESO) filed for orphan drug designation and rare pediatric disease designation for its allogeneic cell therapy Revascor® (rexlemestrocel-L) in the treatment of the congenital heart disease hypoplastic left heart syndrome (HLHS). This is its second cell therapy program, the first being remestemcel-L targeting pediatric acute graft versus host disease (aGVHD), which received a CRL in August. The stock is down 70% since I covered it in late July. If there is a chance of resolution here, the stock may recover. Biotech is going through an extended bust period these days, but that could be a huge opportunity for discerning investors. We just have to grab the right opportunities.
So is Mesoblast an opportunity at these prices? We need to remember that Meso is a 20-year old company which has been around for a long time. The company is located in Australia, not in the United States, and clinical work done down under, even if solid, may not have the same resonance with the FDA. This is critical for MESO investors to remember, right at the top of their list of considerations.
Now, coming to what they have been doing, Meso received a CRL from the FDA two years ago despite getting a 9-1 vote for approval on efficacy from the advisory committee. The FDA does not reject its own advisors’ suggestions lightly. However, we must remember that despite years of clinical work, the only unmodified human cell therapy approved by the FDA is HSCT. [Here’s a list of all cellular and gene therapies approved by the FDA].

The FDA's cell therapy strategy
When I say cell therapy, I mean mainly stem cell therapy. HSCT is an approved therapy for a long time, but other stem cell therapies have not been approved in the US. For example, here's some context:
Until April 2023, 1120 registered clinical trials had been using MSC therapies worldwide, but there are only 12 MSC therapies that have been approved by regulatory agencies for commercialization. Nine of the twelve MSC-approved products are from Asia, with Republic of Korea being the country with the most approved therapies.Again, a reference from Harvard tells us:
Currently, the only stem cell-based treatment that is routinelyreviewed and approved by the U.S. Food and Drug Administration (FDA) is hematopoietic (or blood) stem cell transplantation. It is used to treat patients with cancers and disorders that affect the blood and immune system.These are bone marrow transplants, well established for over 50 years. The FDA's problem is with those types of stem cells which are unproven and may have strong ethical problems. Here's the critical FDA documentoutlining the landscape. As the FDA notes:
Stem cells have been called everything from cure-alls to miracle treatments. But don’t believe the hype. Some unscrupulous providers offer stem cell products that are both unapproved and unproven. So beware of potentially dangerous procedures—and confirm what’s really being offered before you consider any treatment.
The facts: Stem cell therapies may offer the potential to treat diseases or conditions for which few treatments exist. Sometimes called the body’s “master cells,” stem cells are the cells that develop into blood, brain, bones, and all of the body’s organs. They have the potential to repair, restore, replace, and regenerate cells, and could possibly be used to treat many medical conditions and diseases.Things are slowly evolving, however, as we saw in April when the FDA approved Omisirge, an umbilical cord blood derived human allogeneic stem cell product. Omisirge, developed by Gamida Cell, is used to "quicken the recovery of neutrophils (a subset of white blood cells) in the body and reduce the risk of infection" after a HSCT in blood cancer patients. The FDA, despite its concerns with "rogue clinics" in the US trying to fleece gullible customers, is also evolving. In 2017, it created a first guidance draft for overseeing regenerative medicinal applications of stem cells. In 2022, it created stronger enforcement guidance for the same thing, mostly because these rogue clinics boomed when the US paused its stem cell crackdown.
That the FDA has become tougher with its rejections is seen with the very recent rejection of NurOwn, developed by Brainstorm. Of course, this 17-1 vote against approval also highlights one of the major factors behind the FDA's apparent dislike for some of these programs - as the FDA notes in the document cited above, some of them are run by "unscrupulous providers," and their trials, where they exist, are, as the FDA described the program, "scientifically incomplete" and "grossly deficient." These are issues any stem cell company hoping to get US approval will have to face.

Mesoblast's other issues
Meso, though, has other issues. Its second asset, rexlemestrocel-L (REVASCOR®), failed to meet the primary endpoint in a large Phase 3 trial in 537 patients with advanced chronic heart failure. Its venture in covid also did not work out so well. These are things that took the stock down.
I covered Meso in December 2020, almost three years ago, and what is interesting to note is that its pipeline looks the same. By that I mean no new molecules or programs, but more critically, no real development in the existing programs. The only new development was the resubmission of the BLA, but with that too being rejected, they are pretty much back to where they were in 2020 - looking at a bleak future.
3 years ago, the FDA wanted them to conduct “at least one” new trial. This, the company did not do. Instead, they provided new data from their trials, which was long-term survival data through at least four years for children enrolled in a phase 3 trial.
However, this does not address the key concern which the FDA had: homogeneity of these mesenchymal stem cells, or MSCs. As the FDAs own research seems to have shown, there are variances between batches of MSCs, and therefore, while the adcomm voted 9-1 on efficacy, the FDA seems to say that vote was for a specific batch of HSCs. Now they want Meso to prove that the next batch of HSC is equally efficacious.
However, I think with each new FDA recommendation, there seems to be further clarity. The FDA has issued no Form 483, and while it has asked Meso to resolve previous CMC issues, it has generally approved the manufacturing process, and confirmed “that changes implemented appear to improve assay performance relative to the original version of the assay used in the pediatric Phase 3 trial.”
Here’s the summary of the situation from the earnings call:
In August, unfortunately the FDA provided a complete response to our BLA resubmission for the treatment of pediatric GVHD. The basis for this was a requirement the Mesoblast demonstrate that the product used in the Phase 3 trial, which was completed several years ago is similar, closely similar to the product that's intended now for commercial release, as measured by a standardized potency assay.
We believe that we can link the product that was made in the Phase 3 trial to the current commercially risk product through additional work using potency data. The FDA indicates that an additional trial would be needed to establish this link, if the Company is not able to do so via the additional potency assay work that is currently expected to be initiated.
What Meso intends to do now is the following:
To obtain the data required, Mesoblast will conduct a targeted, controlled study in the highest-risk adults with the greatest mortality. This adult study is in line with our overall commercial strategy, which envisioned a sequenced progression from pediatric to adult SR-aGVHD indications. Adults comprise 80% of the SR-aGVHD market….Mesoblast intends to enroll adult patients at highest mortality risk with SR-aGVHD where existing therapy has not improved outcomes and 90-day survival remains as low as 20-30%.1 Mesoblast has generated pilot data through its emergency IND program in adults showing a survival benefit with remestemcel-L in this target population. In line with our overall commercial strategy to expand into the adult SR-aGVHD indication, Mesoblast has already been working with leading investigators at various US centers of excellence to establish the adult follow-on study protocol, potentially utilizing established clinical trials networks. The company will seek alignment with FDA on the trial design for the adult study at a Type A meeting within 45 days.
I have no idea how long such a study will take, but my best guess would be, including regulatory steps and enrollment, maybe another 2 years. The company says it will cost a fraction of a traditional trial by a CRO because it will be conducted by the Blood and Marrow Transplant Clinical Trials Network (BMT CTN), a body responsible for approximately 80% of all US transplants.

Financials
MESO has a market cap of $183mn and a cash balance of $53mn. Last quarter, the net operating cash expenditure was approximately $14mn. Revenues were US$7.5 million for FY2023, compared to US$10.2 million for FY2022. The company has “implemented a cost containment plan to achieve a targeted 23% reduction (US$15 million) in projected FY2024 annual net operating cash spend compared with FY2023, which will be partially offset by investment in our Phase 3 programs for SR-aGVHD and CLBP.” That means, they will have a quarterly opex of approximately $10mn, however, there will be additional expenses for the new trial that is not included in this $10mn figure. Putting it all together, I don’t see a cash runway of more than 3 quarters - not enough time to run the trial, let alone future regulatory steps. Thus, the financial situation is dire.
Risks
Lack of a cash runway long enough for their program is the key risk here. However, despite the FDA’s positive words, approval is also quite risky because the FDA does not approve stem cell therapies easily. In this regard, other countries like Japan work differently, and Meso has a product approved in that country.
Bottomline

While Meso may have a good and useful product, I doubt how easy it will be to get it approved in the US. The FDA has asked for a seemingly difficult conclusion. First, they doubt the homogeneity between the product used earlier, and the one used now. Then, they say that “just one more trial” should convince them. I wonder how many more such trials will be required before Meso gives up. I will watch this stock closely, but have no intention to invest, because I do not like the current stem cell approval environment in the USA.