Because of Covid-19 and all the talk around fast-tracking vaccine approvals, many people are more aware that getting a drug approved can be a long journey.
Burman Invest’s Julia Lee is a big fan of Mesoblast (MSB) , an Australian-based regenerative medicine company that researches and develops treatments for inflammatory ailments, cardiovascular disease and back pain.
In September 2020, Julia said in an interview with Peter on his TV show on YouTube [1] that she believed Mesoblast was reaching the point of moving from consuming huge amounts of capital to generating revenue.
“It’s a long road for a biotech product to hit commercialisation,” Julia said. “For Mesoblast, many of its products have completed most of the hard work and there are a number of company changing catalysts over the next 6-12 months,” she added.
One expected event was the Food & Drug Administration approving the commercial use of a drug to treat steroid refractory acute graft versus host disease (aGVHD), which is a common complication of allogeneic hematopoietic stem cell transplantation (alloHCT), occurring in 30% to 50% of patients, with 14% to 36% developing severe aGVHD.
If given the green light, Mesoblast would have been the first allogenic stem cell product to be approved in the US and the company could start commercialisation and revenue generation. The FDA’s decision was due on 30 September.
“When it comes to investing, it’s all about having a view and probability that the view will turn out.
With MSB, the nearest term catalyst was the FDA decision on 30 September. Based on the Oncology committee vote 9 to 1 in favour, we viewed the probability of success high,” Julia said.
Unfortunately that wasn’t the case.
“Perhaps because it is a new area (stem cells), the FDA was looking for more robust evidence before approval. This means for the use of Ryoncil in paediatric Acute Graft versus Host, there’s a delay to commercialisation. I’d say commercialisation in the US would now be 2021-2023, depending on the FDA’s actions rather than the initial estimate at the end of 2020,” she added.
In last week’s October webinar for this Report [2], one attendee asked our trio of Peter (Switzer), Paul (Rickard) and James (Dunn) about the future of Mesoblast.
“They didn’t get the approval they were hoping for and its share price fell 34% in reaction to this news,” Paul said.
Mesoblast’s share price peaked in August at around $5.22 on the prospect of FDA approval but when blocked, this highly speculative stock came off the boil and is now $3.36. Like Julia, Peter is a fan, and invested in the biotech after the disappointing news.
“The only thing that worried me was the Oncology Review a couple of weeks ago, where 10 oncologists looked at the product in question that needed FDA approval. And nine out of 10 said, ‘Yes, go ahead. It’s good.’ One didn’t. Then the FDA said there was an issue that Mesoblast had to deal with first.”
“I bought Mesoblast. Somewhere down the track, this company’s going to do OK. I see it as a buying opportunity. For years, I’ve listened to Julia tell me how good the stock is, and I’ve never been able to buy at the right time so I bought when it fell so much in reaction to the FDA not giving approval,” Peter said.
James also sees reasons to be interested in the stock.
“This drug is aimed at the graft-v-host disease in children and there’s no other treatment for it. They’re in the box seat. It’s important to reiterate, as Peter said, that the FDA’s not saying, “Your drug does not work.” They are requesting another trial, which Mesoblast does not want to do. They believe that the data’s conclusive. But they have been told by the ultimate authority to go back and do some more work. And they will have to do that,” he said.
“It’s important though that we talk about the stock market and the FDA. They’re two different things. The stock market has dropped the stock like a hot potato. But the stock market’s not the ultimate arbiter of success of a treatment. The FDA will be. And it’s not a welcome thing for Mesoblast at all. But it’s important that they’re aiming their drug at something that doesn’t have a treatment,” James added.
Julia still keeps the faith on Mesoblast.
“Outside of Acute Graft-v-Host, there are a number of catalysts in the next six months including Ryoncil in Covid-19 ARDs, Phase 3 for lower back pain and Phase 3 for chronic heart failure. The last two would be looking for partnership opportunities as a catalyst as well as results of phase 3. 30 September FDA was disappointing but it doesn’t wipe out the MSB story and upcoming catalysts. It does delay the commercialisation of Ryoncil for Acute Graft versus Host in US.
Looking at its chart, Paul then commented. “I’m not a technician but $3 looks like quite a reasonable support area. Maybe it’s worth a small investment,” he said.
Source: Google
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