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Regenerative Medicine Specialist Mesoblast Lands $174.6M

By Nuala Moran
Staff Writer

LONDON – Mesoblast Ltd. has raised A$170 million (US$174.6 million) in a private placing, bringing total cash reserves for the stem cell specialist to A$332 million and providing funding for a Phase III trial in treating degenerating spinal discs.

The shares will be issued at A$6.30, a 2.2 percent discount to the closing price of A$6.44 the day before the private placing was announced on March 6. The new shares represent less than 15 percent of the shares in issue so shareholder approval was not required for the placement, which attracted new investors, including institutional investors in the UK.

The placement stands neck-and-neck with the top private financings of public companies in 2013 to date, with Ironwood Pharmaceuticals Inc. and OPKO Health Inc., slightly in the lead, each having raised $175 million.

Other sizeable funding rounds were closed by Pacira Pharmaceuticals Inc. at $110 million and e-Therapeutics plc at $62.66 million.

The new money allows Melbourne, Australia-based Mesoblast to keep its wholly owned programs at arm's length from partner Teva Pharmaceutical Industry Ltd. The two are jointly developing Mesoblast's mesenchymal precursor cells (MPCs) to treat cardiovascular diseases, with a Phase III trial in congestive heart failure due to get under way in the U.S. and Europe later this year.

Chief Executive Silviu Itescu said he was pleased to have attracted new global investors. Armed with the new funds he intends, "to drive our independent programs to commercial outcomes."

In addition to the Phase III spinal trial, in which MPCs will be used to promote bone growth and so fuse vertebra together, Mesoblast will devote the new funds to Phase II trials to expand the possible indications for intravenously administered MPC cells to treat inflammatory disorders. Here the company is targeting diabetes, rheumatoid arthritis and inflammatory lung diseases, including asthma and pulmonary fibrosis.

It is also planned to invest money in optimizing manufacturing processes and to build inventory of the off-the-shelf product.

The company has a facility in the U.S., and last month received FDA approval to use MPCs manufactured at a Lonza facility in Singapore for Phase III trials, ensuring security of supply.

The funding allows Mesoblast to significantly broaden its clinical trial program. In January the company received FDA approval for a Phase II trial of its allogeneic, MPCs in patients with active rheumatoid arthritis (RA). The trial will be a randomized, double-blind placebo-controlled dose escalation study to evaluate the safety, tolerability and effectiveness of a single intravenous infusion of two MPC dose levels over an initial period of three months in patients who have had poor or incomplete responses to TNF-alpha inhibitors.

In an animal model of RA, MPC treatment significantly decreases the T cell and monocyte-derived inflammatory cytokines TNF-alpha, IL-6 and IL-17 in diseased joints, reducing tissue pathology.

Mesoblast said that mode of action provides the rationale for development of MPCs both in patients with incomplete responses to TNF-alpha inhibitors and as a first-line biopharmaceutical treatment in those not responding to conventional small-molecule antirheumatic agents. A European Phase II trial of MPCs as a first-line biologic treatment for active rheumatoid arthritis is planned to start in the first half of 2013 to assess if this plays out in the clinic.

In Type II diabetes a Phase II trial currently in progress is testing MPCs in 60 patients with early disease who are not adequately maintained on oral glucose-reducing agents.

The patients are being evaluated over 12 weeks for effectiveness of a single intravenous dose of MPCs in controlling C-reactive protein and blood glucose. The trial will provide the basis for evaluating MPCs in more advanced diabetes, to target complications including renal failure and cardiovascular disease.

In addition, Mesoblast is planning a Phase II trial in the second half of 2013 to evaluate whether a single intravenous MPC injection can stabilize or reverse end-stage kidney disease in diabetics.

In congestive heart failure, Mesoblast said it expects to start the Phase III trial in collaboration with Teva before the end of the year, once the trial design is agreed on with the FDA and the European Medicines Agency.

Over a mean follow-up period that is now approaching three years, none of the patients in the Phase II trial who received the highest dose of MPCs have had to be hospitalized as a result of decompensated heart failure, and there have been no cardiac-related deaths.