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Impressive signs of efficacy in rheumatoid arthritis

Update | Pharmaceuticals & healthcare | 18 Feb 2016

Mesoblast has reported impressive efficacy data from the first cohort of the Phase II trial of its mesenchymal precursor cell (MPC) product in rheumatoid arthritis (RA), ahead of full results due in Q316. Key catalysts next quarter will be the first interim analysis from the pivotal MPC-150-IM heart failure trial, together with an update to trial timelines following the halving of the trial to 600 patients. The launch of Temcell in Japan for graft vs host disease this quarter will bring a royalty stream from partner JCR Pharmaceuticals. We lift our valuation to A$7.36 per share (from A$7.20).


Teva returns rights to cardiovascular programme

Outlook | Pharmaceuticals & healthcare | 08 Jul 2016

Teva has relinquished all rights to cardiovascular applications of Mesoblast's mesenchymal precursor cell (MPC) technology, as it focuses on its core CNS and respiratory interests. Mesoblast will seek a new partner with a cardiovascular focus at the appropriate time. It has entered an A$120m (~US$90m) equity finance facility with Kentgrove Capital to fund the ongoing Phase III CHF trial and a 600-patient confirmatory trial (estimated cost ~US$90m), and has brought forward the interim futility analysis to Q117. We have revised our development timelines and lower our valuation to A$1.8bn from A$2.8bn (A$4.67 from A$7.36 per share).


Waiting for readouts

Update | Pharmaceuticals & healthcare | 07 Nov 2017

Mesoblast is entering a period of top-line readouts. This note focuses on two possible value events in 2018 in graft vs host disease and in Class IV heart failure. In addition, the critical Phase III heart failure (HF) trial could complete enrolment in H218; the trial readout depends on the number and timing of clinical events but will probably not be before H219. The lower back pain trial plans to complete enrolment by the end of 2017 with a two-year endpoint. Mesoblast had effective cash of US$84.0m on 30 June.


Confident management

Update | Pharmaceuticals & healthcare | 07 Jun 2017

Mesoblast has raised cash and cleared an interim futility analysis of its Phase III heart failure (HF) trial, will complete enrolment in H218 vs H217. In 2017, Mesoblast expects data from a Phase III trial in paediatric graft vs host disease (GvHD) by H217. An NIH-funded Phase IIb in end-stage HF may be reported by NIH in Q417. Mallinckrodt has an option until the end of Q3 to in-license the GvHD and the Phase III in chronic low-back pain (full enrolment expected in H217). Our indicative valuation is unchanged at A$1.72bn (A$4.02 per share) as we await these potential catalysts.


Funding to deliver key data in 2017

Update | Pharmaceuticals & healthcare | 05 Apr 2017

Mesoblast has raised US$40m (gross) through a placement of 26.25m shares at A$2.00/share. The cash enables continued funding of the key MPC-150-IM Phase III heart failure (HF) study where an interim futility analysis is underway. We expect Q4 data from the Phase III in paediatric graft vs host disease (GvHD); Mallinckrodt has an option on partnering GvHD. Other projects can also be funded. Also in H2, top-line data from the NIH-funded Phase IIb study in end-stage HF with an LVAD may be reported. The indicative value has been increased to A$1.72bn from A$1.67bn to reflect reduced potential FY18 cash needs. The indicative value per share drops to A$4.02 from A$4.16 due to the increased dilution.


Continued positive RA responses

Update | Pharmaceuticals & healthcare | 28 Feb 2017

Statistically significant area under the curve analysis from Mesoblast’s Phase II stem cell product in refractory rheumatoid arthritis (RA) shows that the week 12 positive responses are maintained for 39 weeks. This suggests that the indication could progress into pivotal studies and may attract potential partners. We have increased the RA probability to 35% (formerly 20%). Mesoblast has entered a nine-month exclusive negotiation with Mallinckrodt (for an A$29.6m investment) on chronic low-back pain and graft vs host disease in transplantation. We have increased our indicative value for Mesoblast to A$1.67bn (A$4.16/share) from A$1.47bn.


Tightening focus to extend runway

Update | Pharmaceuticals & healthcare | 21 Sep 2016

Mesoblast cut its cash burn by 15% in FY16 to US$90m, and guided for a further ~25% reduction in FY17, which will give it headroom to fund the Phase III heart failure (HF) trial that Teva relinquished in June. It has ~12 months of cash runway plus a US$90m equity finance facility, which will give a further 12 months' runway. It expects to report interim analyses of three Phase III programmes by end Q117, including the HF trial. We lower our valuation ahead of these potential catalysts to A$1.5bn from A$1.8bn (A$3.84 per share from A$4.67), due to lower forecast uptake in HF and removal of two low-priority tier two programmes.


CHF Phase III clears interim safety analysis

Update | Pharmaceuticals & healthcare | 11 May 2016

In its Q3 FY16 results presentation Mesoblast revealed the Phase III trial of Revascor in CHF cleared its first interim safety analysis; but, following FDA advice, no information was released on surrogate measures of efficacy. Mesoblast and Teva will update the market on timelines for the CHF Phase III programme later this quarter, while RA and GvHD data are expected next quarter. Mesoblast maintained a reduced cash burn of US$22m in Q3, giving it a cash runway to end FY17 on our estimates. Our valuation is unchanged at A$7.36 per share ahead of the CHF programme update.


Upcoming launch on first product approval

Update | Pharmaceuticals & healthcare | 25 Jan 2016

As a leader in stem cell technologies, Mesoblast continues to make good pipeline progress, nearing market readiness for its mesenchymal-based treatments in multiple indications. The company has received its first product approval for Temcell in acute graft vs host disease in Japan. Phase III programmes for further lead products in congestive heart failure and lower back pain are moving forward. Following a recent US share offer, the company's share price has declined dramatically and trades well below our revised fair value calculation of A$7.20 per share (from A$10.93).


Headway on positive developments

Update | Pharmaceuticals & healthcare | 23 Jul 2015

Mesoblast is steadily advancing its pipeline, presenting positive Phase II data at the American Diabetes Association in June for MPC-300-IV in moderate-to-severe diabetic nephropathy. The company is seeking an accelerated regulatory path on findings in a large patient population with little alternative for treatment. The recent agreement with Celgene, which entailed a net A$58.5m equity purchase in return for first right of refusal on products in certain disease areas, provides Mesoblast with a capital injection and potential development/commercialisation partner. Meanwhile, an imminent regulatory decision in Japan for MSC-100-IV in acute graft vs host disease (aGvHD) could prove a significant share price catalyst. If approved, MSC-100-IV would be Mesoblast's first product to market.


Late stage springing forward

Update | Pharmaceuticals & healthcare | 30 Mar 2015

Mesoblast's late-stage product pipeline is burgeoning. We expect a regulatory decision for its first product, MSC-100-IV in acute graft vs host disease (aGvHD) in Japan in mid-2015 following its filing last October, which would serve as critical confirmation of the company's proprietary mesenchymal stem cell (MSC) technology. Two further products, MPC-150 in CHF and MPC-100-IV have entered pivotal Phase III trials over the past year. We increase our valuation of the company to A$3.41bn from A$3.16bn or A$10.51 per basic share from A$9.51 per basic share, representing significant upside to the current share price.


Pipeline progress

Update | Pharmaceuticals & healthcare | 30 Oct 2014

Mesoblast's product pipeline continues to mature as key milestones are met. The filing of MSC-100-IV in graft vs host disease (GvHD) in Japan in early October marks its first product submission. Phase III trials started early this year for MPC-150-IM in congestive heart failure (CHF), while Phase III trials for MPV-06-ID in low back pain are expected to start by the end of 2014 following a productive meeting mid-year with the FDA. Mesoblast recently announced a new tiered product structure, whereby resources are being funnelled into its key late-stage products. We value Mesoblast at A$3.16bn (A$9.31/diluted share), more than twice its current share price.