William Blair initiated research coverage of Mesoblast Limited (MESO $3.03). Mesoblast is an Australia-based biotechnology company focused on the development of allogeneic mesenchymal lineage cells for the treatment of severe and life-threatening inflammatory diseases. The company has several programs in late-stage clinical development and its products are approved and commercialized by strategic commercial partners in Japan and Europe, providing Mesoblast with supplemental revenue in the form of royalties on net sales.

Analyst Sami Corwin said, “Mesoblast’s lead product, remestemcel-L, has shown transformative efficacy in pediatric steroid-refractory acute graft-versus-host disease, wherein there are no approved therapies for children under the age of 12. The Phase III trial compared favorably with a natural history study, and based on the substantial additional data produced since the company’s previous biologics license application (BLA) submission and subsequent complete response letter from the FDA, including clinical data supporting the long-term survival benefit associated with remestemcel-L and additional potency assay data correlating the in vitro immunomodulatory activity of remestemcel-L to in vivo biomarker changes and clinical outcomes in treated patients, and the previous positive vote by the FDA’s ODAC, we believe the company’s recent BLA resubmission is significantly de-risked, setting the program up for potential approval in 2023.”

Dr. Corwin continued, “In a Phase III trial of Mesoblast’s product rexlemestrocel-L+ hyaluronic acid, for the treatment of chronic lower back pain (CLBP) associated with degenerative disc disease (DDD), treatment not only significantly reduced back pain in a subset of patients compared to placebo, but also significantly increased the likelihood of those patients to discontinue opioid use. Mesoblast plans to initiate a Phase III trial in a subset of DDD CLBP patients and is evaluating strategic options to fund the trial and U.S. commercialization. The announcement of a licensing or royalty agreement could be a catalyst for the stock as it would allow the trial to commence, providing clarity on a potential timeline to BLA. In addition, the company has generated encouraging clinical data in chronic heart failure with reduced ejection fraction and acute respiratory distress syndrome, and continued development of these programs via an industry partnership could provide additional value to Mesoblast.”

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