Mesoblast Limited (ASX: MSB) is considered a global leader in developing innovative cell-based medicines. The company has leveraged its proprietary technology platform, which is based on specialized cells known as mesenchymal lineage adult stem cells (MLC) to establish a broad portfolio of late stage product candidates. Each MLC-derived product candidate has distinct technical characteristics, target indications, individual reimbursement strategy, separate commercialization potential, and provides unique partnering opportunities for the company.
 
It has been noted that MSB stock rallied 9.9% on April 10, 2017 with a 107.7% gain witnessed in last six months (as at April 07, 2017). Let us consider the reasons that might have supported the group for this stock rebound from position witnessed last year.
 
Successful interim results for MPC-150-IM
MSB has reported for a successful Phase 3 trial of its allogeneic mesenchymal precursor cell (MPC) product candidate MPC-150-IM in patients with moderate to advanced chronic heart failure (CHF) in the pre-specified interim futility analysis of the efficacy endpoint in the trial’s first 270 patients. The trial is expected to have a total of about 600 patients, and based on interim analysis results, the trial’s Independent Data Monitoring Committee (IDMC) stated for having no safety concerns relating to MPC-150-IM.
 
FDA clearance for heart disease trial is a big positive
As indicated above, Mesoblast’s product MPC-150-IM is currently being evaluated in a Phase-3 trial with 600 patients for Class II/III chronic heart failure (CHF) and in a United States National Institutes of Health (NIH) funded Phase 2b trial of 159 patients with NYHA Class IV CHF. These advanced programs and the new study in children are built on a foundation of scientific data and prior clinical trial results which support the potential for Mesoblast’s immunoselected and culture expanded MPCs (Mesenchymal precursor cells) to release an array of biomolecules following intramyocardial administration that act to both dampen damaging inflammatory processes and initiate reparative processes in the failing heart through new blood vessel formation, cardiac muscle cell growth, and reduction in fibrosis and scar.The group reported that the United States Food and Drug Administration (FDA) has cleared the commencement of a 24-patient trial combining Mesoblast’s proprietary allogeneic MPCs with corrective heart surgery in children under the age of 5 with hypoplastic left heart syndrome (HLHS). The trial is sponsored and funded by the Boston Children’s Hospital.
 
First Allogeneic Cell Therapy Product Launched in Japan by JCR Pharmaceuticals Co. Ltd
Mesoblast has been developing MSC-100-IV for the treatment of aGVHD (acute graft versus host disease) following an allogeneic bone marrow transplant (BMT). aGVHD is a disease in patients who have received a BMT, wherein donor cells may attack the recipient and which will lead to aGVHD, resulting in activation of pro-inflammatory T-cells and tissue damage in the skin, gut and liver which is often fatal. In FY16, Mesoblast Licensee, JCR Pharmaceuticals Co. Ltd, launched mesenchymal stem cell product for the treatment of aGVHD in children and adults in Japan.TEMCELL (TEMCELL is a therapeutic product for the treatment of aGVHD) is the first allogeneic cell therapy to be fully approved in Japan. As per the agreement with JCR, Mesoblast is entitled to receive royalties and other payments at predefined thresholds of cumulative net sales.
 
Further trial to get a product approval for MSC-100-IV in the US
To support filing of a biologic license application (BLA) to the United States Food and Drug Administration for regulatory approval, Mesoblast had reported for conducting a 60-patient, open label Phase 3 trial using MSC-100-IV as front-line therapy in children with steroid-refractory aGVHD. After filing a BLA for pediatric approval of MSC-100-IV, Mesoblast plans to conduct a further trial to support a product approval of its cell therapy in adults with gastrointestinal or liver aGVHD, the patient groups who have the highest mortality risk. Further, FDA has granted fast track designation for the above.
 

Milestones for 2017 (Source: Company Reports)
 
Commercial opportunity for MPC-06-ID
MPC-06-ID is a Phase-3 proprietary product being evaluated for the treatment of CLBP (Chronic Low Back Pain) caused by degenerative disc disease (DDD). MPC-06-ID is being developed to target the population of patients suffering from moderate to severe CLBP due to moderately degenerated discs. All therapies for progressive, severe pain due to degenerating intervertebral discs treat the symptoms of the disease, but are not disease-modifying and thus do not address the underlying cause of the disease. This provides a significant commercial opportunity for MSB in the treatment of CLBP as its product has been said to have the ability to reverse, halt or slow the progression of the disease and improve physical function.MSB has been negotiating with Mallinckrodt Pharmaceuticals for a commercial and development partnership for MPC-06-ID in the treatment or prevention of CLBP.
 
Opportunities for MPC-300-IV
Products such as MPC-300-IV also are expected to lay some more growth prospects for the group. The target area for said product entails biologic-refractory rheumatoid arthritis, and major advances in the treatment of RA (Rheumatoid Arthritis) using biologic agents have resulted in about US$15 billion global market in 2015, which has been projected to grow to over $18 billion by 2024.
 
Financials
As at December 31, 2016, the group reported for cash reserves of US$55.6 million after adjusting for the committed capital of US$21.7 million from the equity purchase agreement with Mallinckrodt Pharmaceuticals. The group had lately received A$3.7 million from the Australian Government for Research & Development (R&D) activities conducted during FY 2016, under the Government’s R&D Tax Incentive Program. On the other hand, revenues dropped $3.4 million to $0.6 million for the second quarter of FY2017 compared with $4.0 million for the second quarter of FY2016, owing to a decrease in a non-cash item. This non-cash item was deferred revenue related to the MPC-150-IM product.
 
Overall, the ongoing progress of product trials and other growth opportunities are driving the stock higher, which is now trading at its 52-week high price (as on close of trading on April 10, 2017).It will be prudent to wait and watch out for further trial outcomes and group’s efforts in terms of targeting a greater market share.

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