PERTH, Australia – Mesoblast Ltd. inked an exclusive global licensing deal with Novartis AG for the development, manufacture and commercialization of Mesoblast’s mesenchymal stromal cell (MSC) product remestemcel-L, with an initial focus on acute respiratory distress syndrome (ARDS), including that associated with COVID-19, just six weeks after the FDA issued a complete response letter (CRL) for the therapy as a treatment for steroid-refractory acute graft-vs.-host disease (GVHD).

Novartis is paying Melbourne-based Mesoblast $50 million up front ($25 million in cash and a $25 million equity investment) with the potential for $505 million pre-commercialization milestones for ARDS indications and an additional $750 million post-commercialization via sales milestones and tiered double-digit royalties.

“What is really important here is the commitment to build out a respiratory franchise. Six months ago, we had no focus on respiratory, and now it’s the major focus of the company,” Mesoblast CEO Silviu Itescu told BioWorld. “The deal unlocks a pulmonary franchise that we’ve never had. Secondly, it has multiple new indications that we will work through together. We have the right to co-fund and co-development and co-commercialize together, so the value is tremendous with a partner that is investing in the platform.”

Silviu Itescu, CEO, Mesoblast 11-20

Itescu said that Novartis was an ideal partner for Mesoblast because it’s a major player in the respiratory space and the cellular therapy space. If commercialized, remestemcel-L would be Novartis’ first cell therapy in the respiratory space.

“The demonstrated ability of Novartis to rapidly move from clinical to commercial scale with cell-based therapies will play a role in the successful development and potential commercialization of remestemcel-L, as will the nearly two decades of experience Novartis has in delivering first-in-class products that address areas of unmet respiratory need.

“Our collaboration with Novartis will help ensure that remestemcel-L could become available to the many patients suffering from ARDS, the principal cause of mortality in COVID-19 infection.”

ARDS studies

Remestemcel-L is currently being studied in COVID-19-related ARDS in an ongoing 300-patient phase III trial evaluating whether remestemcel-L can reduce the high mortality in COVID-19 patients with moderate to severe ARDS.

The phase II/III trial was initiated after promising results were seen with remestemcel-L under an emergency compassionate use protocol in COVID-19 ARDS at Mount Sinai Hospital in New York, where nine of 12 (75%) ventilator-dependent patients were able to come off ventilators within 10 days.

After two prior interim analyses reviewing safety and efficacy data, the trial’s independent data safety monitoring board recommended that the trial continue, and trial enrollment has now surpassed 180 patients.

“If our COVID ARDS trial succeeds, Novartis will be our commercial partner, both in terms of manufacturing support and in distribution. There are substantial milestone payments near term and mid-term that are linked to deliverables in this COVID-19 trial with potential emergency use authorization from the FDA, scale up and launch,” Itescu said.

Novartis intends to initiate a phase III study in non-COVID-19-related ARDS after the successful completion and outcome of the current COVID-19 ARDS study.

“Beyond that, as partners we’re going forward in other indications for remestemcel-L, where we can co-invest and share on a 50-50 profit basis. That’s something where we’ll sit down and figure out what areas we want to do that with,” he added.

Terms of the deal

Mesoblast will retain full rights and economics for remestemcel-L for GVHD, and Novartis has an option to become the commercial distributor outside of Japan.

Novartis will fully fund global clinical development for all-cause ARDS and potentially other respiratory indications. Mesoblast will be responsible for clinical and commercial manufacturing, and Novartis will purchase commercial product under agreed pricing terms. In May, Mesoblast raised $90 million to scale up manufacturing of remestemcel-L.

In addition, Novartis will reimburse Mesoblast up to $50 million on the achievement of certain milestones related to the successful implementation of its next-generation manufacturing processes using its 3D bioreactors.

Novartis will be responsible for any capital expenditure required to meet increased capacity requirements for manufacturing remestemcel-L.

“We believe that Novartis is uniquely placed to advance this important potential new therapy,” said Novartis Chief Medical Officer John Tsai.

“Novartis is committed to, and has demonstrated success with, cell-based therapies and transforming care for a spectrum of respiratory diseases. This makes remestemcel-L an important addition to our pipeline. It has the potential to be the first treatment for the most critically ill ARDS patients, and it provides us with an opportunity to apply years of specialized experience directly to the work of saving lives,” said Tsai, who is also Novartis’ head of Global Drug Development

FDA type A meeting for GVHD

During a Nov. 20 conference call with analysts, Itescu revealed that Mesoblast held a Nov. 17 type A meeting with the FDA to discuss the review of its BLA for remestemcel-L in pediatric GVHD and a potential pathway for accelerated approval with a post-approval requirement to conduct an additional randomized controlled study in patients 12 years and older.

Mesoblast received a complete response from the FDA last month even though approval was highly anticipated after the FDA’s Oncologic Drugs Advisory Committee (ODAC) voted 9:1 that remestemcel-L showed evidence of efficacy as a treatment for steroid-refractory acute GVHD in children. Remestemcel-L would be the first FDA-approved GVHD treatment for children younger than 12 and the first MSC product approved in the U.S.

In the CRL, the FDA recommended that Mesoblast conduct at least one additional randomized, controlled study in adults and/or children to provide further evidence of the effectiveness of remestemcel-L for SR-aGVHD.

“At the current time it appears that the FDA review team will not agree to accelerated approval. However, the definitive outcome of the type A meeting will not be known until Mesoblast receives the formal minutes which are expected within 30 days of the meeting.

“If the current review team does not agree to accelerated approval, Mesoblast will request a further type A meeting to initiate the well-established FDA dispute resolution pathway,” the CEO said, adding that, “Novartis is fully aware of our strategy there.”

Under terms of the license and collaboration agreement, Novartis has an option to become the commercial distributor for remestemcel-L in SR-aGVHD outside of Japan.

Mesoblast shares on the Australian Securities Exchange (ASX:MSB) made slight gains, increasing to AU$3.64 (US$2.65) per share by market close Nov. 20. On Nasdaq, shares gained 18% in premarket trading at $13.95 each.

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