No­var­tis bags Mesoblast's stem cell ther­a­py for ARDS, in­clud­ing in Covid-19, in a deal worth up to $1.2B+

No­var­tis has li­censed a new stem cell ther­a­py from Mesoblast, just weeks af­ter the FDA re­ject­ed the Aus­tralian biotech’s pitch for an ap­proval on a sep­a­rate in­di­ca­tion.

The Swiss phar­ma an­nounced Thurs­day af­ter­noon it is part­ner­ing with Mesoblast $MESO to de­vel­op remestem­cel-L for the treat­ment of acute res­pi­ra­to­ry dis­tress syn­drome, in­clud­ing ARDS re­lat­ed to Covid-19. As part of the deal, No­var­tis will shell out $25 mil­lion in up­front cash and take a $25 mil­lion stake in the biotech, while of­fer­ing up to $1.255 bil­lion in po­ten­tial mile­stone pay­ments.

Mesoblast in­vestors em­braced the news, send­ing shares up 11% on the Aus­tralian stock ex­change Fri­day. The com­pa­ny’s stock was al­so up rough­ly 17% on the Nas­daq be­fore Fri­day’s open­ing bell.

The mile­stone pay­ments are split as such, per Mesoblast: $505 mil­lion will be avail­able pre-com­mer­cial­iza­tion, with an ad­di­tion­al $750 mil­lion set aside for hit­ting cer­tain sales tar­gets and dou­ble-dig­it roy­al­ties.

Remestem­cel-L, or Ry­on­cil, acts as an an­ti-in­flam­ma­to­ry and con­sists of cul­ture-ex­pand­ed mes­enchy­mal stem cells de­rived from a bone mar­row donor. Cur­rent­ly, the drug is be­ing eval­u­at­ed in a Phase III study for Covid-19-re­lat­ed ARDS with 300 pa­tients, and the first cut of da­ta is ex­pect­ed in ear­ly 2021.

Should that out­come prove suc­cess­ful, No­var­tis will launch a Phase III in non-Covid ARDS af­ter the deal clos­es. The com­pa­nies high­light­ed No­var­tis’ abil­i­ty to rapid­ly scale up cell-based ther­a­pies from the clin­ic to the com­mer­cial phase as a mo­ti­va­tor for the col­lab­o­ra­tion.

The drug had been ex­am­ined in a small com­pas­sion­ate use pro­gram for Covid-19 ARDS back in March, which in­clud­ed 12 pa­tients re­quir­ing ven­ti­la­tors. Remestem­cel-L treat­ment demon­strat­ed an 83% sur­vival rate in that pro­gram and was the ba­sis for the on­go­ing Phase III.

Thurs­day’s deal comes less than two months af­ter the FDA is­sued a CRL for remestem­cel-L in Mesoblast’s pe­di­atric acute graft-ver­sus-host dis­ease pro­gram. The re­jec­tion, which de­nied the com­pa­ny an ac­cel­er­at­ed ap­proval, came af­ter an ODAC ad­comm in Au­gust vot­ed 9 to 1 in fa­vor of ap­proval as pan­el mem­bers strug­gled to en­vi­sion what a piv­otal tri­al might look like.

Dur­ing both the ad­comm and in their CRL, reg­u­la­tors took is­sue with Mesoblast’s study de­sign giv­en that the com­pa­ny sub­mit­ted its ap­pli­ca­tion on the ba­sis of one, sin­gle-arm and open-la­bel tri­al. In the study, Remestem­cel-L demon­strat­ed a sta­tis­ti­cal­ly sig­nif­i­cant ben­e­fit in its pri­ma­ry end­point against the his­tor­i­cal con­trol rate.

But be­cause many par­ents and pe­di­a­tri­cians are re­luc­tant to risk putting chil­dren in­to the place­bo arm of a ran­dom­ized study, Mesoblast ar­gued that key opin­ion lead­ers said an ad­di­tion­al study was not fea­si­ble. The ve­to came de­spite the FDA ap­prov­ing a sim­i­lar drug — In­cyte and No­var­tis’ Jakafi — based on one sin­gle-arm tri­al, some­thing for which ODAC mem­bers chas­tised the FDA.

Ear­li­er this week, Mesoblast met with the agency for its Type A meet­ing, and the com­pa­ny re­port­ed in its third quar­ter earn­ings that it does not ex­pect the FDA to re­verse its de­ci­sion for ac­cel­er­at­ed ap­proval. Mesoblast is still wait­ing to re­ceive fi­nal meet­ing min­utes to know whether that’s in­deed the case. The CRL set back po­ten­tial ap­proval in GvHD from 2021 to 2024, per an­a­lysts.

Biogen CEO Michel Vounatsos (via Getty Images)

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Jason Kelly, Ginkgo Bioworks CEO (Kyle Grillot/Bloomberg via Getty Images)

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John Maraganore, Alnylam CEO (Scott Eisen/Bloomberg via Getty Images)

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Ramy Farid, Schrödinger CEO (Schrödinger)

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Leonard Schleifer, Regeneron CEO (Andrew Harnik/AP)

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