EP Vantage interview – Mesoblast shows backbone in drive for orthopaedic partnership

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The stem cell developer Mesoblast has spent the past couple of years at the centre of a maelstrom of enthusiasm that cynics might say is out of all proportion to its achievements. Now, with its one-size-fits-all stem cell technology having shown promise in a phase II trial in spinal fusion, and talks with potential partners progressing, Mesoblast is standing tall.

The company’s CEO, Silviu Itescu, tells EP Vantage that the trial’s success brings the company closer to providing the first available alternative to spinal surgery, and “it will allow us to find strategic partners in the orthopaedic space”. But with the Melbourne firm yet to bring any of its programmes to market, can Australia’s second-most valuable pharma company justify its sky-high market valuation?

Less risk

In the 24-patient phase II trial, the company’s mesenchymal precursor cells (MPCs) were compared with autografted bone harvested from patients' hips – the only approved treatment for lumbar spinal fusion via the posterior approach.

In practice, another treatment is often used: Medtronic’s InFuse, a graft composed of a factor that stimulates bone growth. InFuse is approved only for the anterior approach as it is associated with ectopic bone formation.

Mesoblast’s technology – known in the spinal context as NeoFuse – does not carry these risks, the company believes. “Our product was as good as autograft,” Mr Itescu says, “without the risks associated with harvesting but also without the risks of ectopic bone formation. We would simply need to do a phase III trial now, and demonstrate non-inferiority to autograft, to get FDA approval.”

In the trial, 25 million mesenchymal precursor cells (MPCs) were injected into eight patients and 75 million into another eight. The remaining eight patients were treated with autografting.

A year later, fusion was achieved in 85.7% of patients in the 25 million cell dose group compared with 75% in the autograft group, meaning that the trial hit its primary endpoint of non-inferiority. Strangely, only 62.5% in the 75 million cell group were successfully treated, but with such small numbers of patients some variability is to be expected.

A good, strong partner

The company can now move forward clinically – a pivotal US phase III trial of NeoFuse in around 400 fusion patients is expected to kick off by the end of the year – and on the strategic front. It is wasting no time in seeking a partner, and with another spinal project ongoing Mr Itescu is confident that Mesoblast can find a suitable collaborator, though he is “not at liberty to say” which companies it is courting.

"The orthopaedic markets are very tough to enter. We want to leverage the sales and marketing and distribution capabilities of a company already in this space,” he says.

The orthopaedic space is one of the few areas not covered by Mesoblast’s main partnership. The company forged an agreement with Cephalon two years ago covering cardiac, neurological and cancer indications (Cephalon closes the blast doors for a rocketing stem cell deal, December 8, 2010). This was the start of a meteoric rise in Mesoblast’s share price, which saw it treble to reach an all-time high of A$9.67 on October 21, 2011.

Teva acquired Cephalon in October 2011, and has been unravelling some of the partnerships Cephalon had formed; moreover, a new CEO was appointed last May. But Mesoblast insists that its pact is secure. “I think we’ve got a good partner with Teva,” Mr Itescu says. “They recently outlined their strategic focus and confirmed the strength of the partnership with Mesoblast. Our phase III programme in congestive heart failure is moving forward and is expected to enrol in 2013.”

He adds: “We’ve got to know the new management team very well. I agree we’re a little different from what they do, but I think they’re comfortable with the data they’ve seen. Providing that the data continues to be positive, I’m comfortable that they will continue to be a good strong partner.”

Value for money

The company has an enterprise value of US$1.7bn – extraordinarily high for a business whose first product is not expected to reach market until 2016. Mr Itescu, though, says that it is not so strange.

“When the US market is solid, this kind of valuation is very typical for biotech companies on their way to having phase III approvals and the beginning of revenues. If just one or two of our products succeed, the market for each one of them is in the order of $1bn plus.

“Our heart failure product, for example, is a multibillion dollar product if it works, and as for our spinal fusion product, the existing market for that today is $800m a year in the US alone and could grow substantially if you had a safe effective product.”

So far the MPC technology has progressed nicely, particularly in the cardiovascular arena (EP Vantage Interview – Heart disease a fertile field for Mesoblast, September 07, 2011). But phase III trials are a different prospect to phase II, and until the results of pivotal trials are in the technology remains unproven. One failure here could undermine the confidence in Mesoblast’s entire platform for good.

Trial  Trial ID
Phase II trial of NeoFuse in lumbar interbody fusion NCT00996073

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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