Mesoblast Advances Stem-Cell Drugs As Catalysts Approach

Australian regenerative medicines company Mesoblast is working with its partner Teva to move a stem-cell treatment for congestive heart failure into Phase III clinical studies.

Stem-cell drugs remain on the fringe of drug development, but Australian regenerative medicines company Mesoblast Ltd. and partner Teva Pharmaceutical Industries Ltd. are pushing a potential congestive heart failure candidate, Revascor, into Phase III clinical trials. If the studies are successful, Revascor represents the kind of blockbuster opportunity that could make pharma manufacturers take a harder look at stem cell-base drugs.

Results of the Phase III trial are still years off, but nearer-term, trial approval from FDA and the European Medicines Agency, Teva’s continued support for the Revascor program and Phase II data from other projects are viewed as important momentum-drivers for Mesoblast, a company that catapulted into a leadership position in the stem-cell space after inking a lucrative partnership in 2010.

That partnership was signed with Cephalon Inc., which Teva acquired for $6.8 billion last year (Also see "With Cephalon Deal, Teva Sees Opportunities For Niche Branded Drugs and Drug/Device Combinations" - Pink Sheet, 5 May, 2011.). Mesoblast received $130 million upfront and stands to earn another $1.7 billion in milestone payments under the deal; Cephalon also acquired a 19.9% stake in the company, ownership that since has transferred to Teva (Also see "Cephalon Makes A $130 Mil. Bet On Australian Mesoblast's Stem Cell Technology" - Scrip, 9 Dec, 2010.).

Teva, meanwhile, has undergone a management shakeup since acquiring Cephalon, including the appointment a new CEO, Jeremy Levin, and a new R&D President, Michael Hayden. The new regime has initiated a pipeline review and indicated it will provide an update to investors during a December analyst meeting (Also see "Teva’s New CEO Levin Urges “Fiscal, Strategic Discipline,” Reduces 2012 Guidance" - Pink Sheet, 24 May, 2012.).

While owned by Cephalon, Revascor was deemed a high-priority project with the potential to transform the smaller company. Now, the question is whether Teva will embrace the program as wholeheartedly. Mesoblast CEO Silviu Itescu says he is confident in Teva as a partner following discussions with the Israeli company’s management. “I have no concerns about their internal [pipeline] review,” he said in an interview. “The Mesoblast program has had its own very separate review and has its own timelines, and we expect to be moving forward.”

Together, Mesoblast and Teva have talked with U.S. and European regulators about the design of the Phase III trial and are in the process of finalizing the protocol, he said. The ambition is to initiate the Phase III study by the end of the year and enroll approximately 1,500 to 1,700 patients at high risk for congestive heart failure. The event-driven trial could take three years to complete, but the design calls for an interim analysis that would allow for an earlier look at the data. Under the terms of their agreement, Teva is required to finance the trial.

As a stem-cell therapy, Revascor represents an entirely new approach to treating congestive heart failure. Mesoblast’s stem-cell technology platform is based upon Mesenchymal Precursor Cells (MPCs), which are extracted from the bone marrow of donors and expanded into therapeutic quantities. Thus, they are available as an “off-the-shelf” therapy. Placement of MPCs into the appropriate environment results in the secretion of a number of cytokines or growth factors that ultimately allow the body to initiate the repair of itself, according to the company.

Efficacy Signal In Phase II

Revascor has demonstrated good efficacy in a small, 60-patient Phase II study, although the study wasn’t powered for efficacy. Mesoblast reported the results at the American Heart Association meeting in 2011, demonstrating that over 22 months of mean follow-up, one in 45 patients (2%) who received Revascor died of cardiac causes compared three of 15 (20%) in the control group.

In addition, treatment with MPCs significantly delayed the time to a first Major Cardiac Event, MACE, a composite of cardiac death, heart attack or revascularization procedure, and reduced the overall risk for MACE by 78%. The study evaluated Revascor at three doses. Of those who received the highest dose, none was hospitalized for heart failure or died. The results continued in a follow-up out to 30 months.

“What we have seen is a single injection at the highest dose has completely prevented hospitalization over a two-to-three-year period,” Itescu said. “If we see that sort of an outcome in a Phase III trial – and this is on top of standard therapy – that would be a huge step forward in the treatment of this terrible disease.”

The companies also are looking to develop the drug in other cardiovascular indications, including intracoronary injection for prevention of heart failure after an acute myocardial infarction. A Phase II, placebo-controlled trial is ongoing in 225 patients in Europe and Australia.

Arthritis, Diabetes And Spinal Injury Targeted

Beyond cardiovascular disease, Mesoblast is focusing development of its MPC technology in two areas, an intravenous formulation for a wide variety of inflammatory and immune conditions, and an orthopedic spinal product for bone and cartilage disorders.

The company already is studying the IV formulation in Phase II studies in patients with type II diabetes, while a study in patients with rheumatoid arthritis is expected to begin later this year. In a preclinical RA model in sheep, a single injection with MPCs simultaneously blocked TNF-alpha, interleukin-6 and interleukin-17, inflammatory pathways currently targeted by separate biologic therapies approved for RA.

“If we are able to show the same thing happens in human trials, then I think you have a very different approach where you can show that a single biologic can shut down multiple pathways associated with the disease process and potentially have the ability to induce remission,” said Itescu. “We are not talking about chronic administration, but a one-off. That would allow our product to jump to a first-line therapy ahead of other biologics.”

The bone product also is being tested in an ongoing Phase II trial comparing two doses of allogeneic MPCs in patients completing a lumbar spinal fusion to autograft bone. A second Phase II study is expected to initiate shortly in patients with invertebral disc disease.

Mesoblast expects to partner the IV formula and spinal product after completing Phase IIb, Itescu said. “We may have sufficient cash for a single Phase III if we wanted to run our own, or if the results warranted, we could increase our capital if we wanted to move a single product into Phase III and maintain the full value,” he said. “But in general, I think for these larger programs it makes sense to have a partner on board to share the risk, to share the execution requirements.”

The company has a sufficient cash position, with $206.7 million on hand as of June 30.

Some analysts have grown bullish on Mesoblast as its pipeline advances. In a May 30 research note initiating coverage, Maxim Group analyst Jason Kolbert laid out a case for investing in the company.

“What we see is not only a well-financed company (four years of operating capital at the current burn rate) with multiple late-stage clinical trials in very large indications but also solid science,” he wrote. “Mesoblast may have found the most potent stem cell of them all and subsequently has developed a unique isolation and expansion system that creates a truly homogeneous cell population. This, combined with cost advantages of an allogeneic product, delivers the ‘cells in a bottle’ business model that big pharmaceutical companies seek.”

Drug makers have been wary of investing in the stem-cell area, given controversy from a bioethical standpoint regarding embryonic stem cells and the slow nature of development for such a novel therapeutic approach. The field faced a significant setback last year when one of the pioneers in embryonic stem cell drug research, Geron Corp., announced it was exiting the field after failing to find a partner for its lead program; the company said it would focus on cancer drug development instead (Also see "Geron Restructuring Sours Investors As Company Bets On Cancer" - Pink Sheet, 16 Nov, 2011.).

There was a spot of good news for the field more recently. Osiris Therapeutics Inc. saw the historic approval of the first stem-cell treatment, Prochymal, a treatment for acute graft-versus-host disease in children, approved in Canada (Also see "Osiris Prochymal Gets Green Light In Canada; FDA Filing Is Next" - Pink Sheet, 18 May, 2012.). That product addresses a very niche patient population though and is not expected to be a significant revenue driver. The company also is in the midst of a dispute with its partner, Sanofi, which announced in February it has discontinued development of Prochymal.