Expert Financial Analysis and Reporting

Today’s issue of the Wall Street Journal carries an opinion piece entitled “The Treatment That Could Crush Covid”. The article hypothesizes that living cells which the author calls medicinal signaling cells promise to be an effective treatment for Adult Respiratory Distress Syndrome (ARDS). ARDS is a condition that results from an overreaction of the immune system to an injury to the body. COVID causes severe infections in the lungs that can induce ARDS in many cases. Hospitalization due to COVID very often is the result of ARDS and can lead to death in a high percentage of patients. Johns Hopkins estimates that 170,000 people in the US have died from COVID and worldwide the number is 758,000; the overwhelming majority were likely attributable to ARDS.

The author cites early clinical evidence that cells developed by Mesoblast may be very effective in treating ARDS and sharply reducing the death rate. These cells are progenitor cells derived from mesenchymal stem cells. Mesoblast has a filed a BLA for these same cells (called Ryoncil) in steroid refractory, pediatric graft versus host disease with a PDUFA date of September 30, 2020. The FDA has designated this as a breakthrough therapy. If approved, marketing could begin in late 2020. For more detail on this technology, I would refer you to my June 9, 2020 article Stem Cell Therapy Has Perhaps the Most Potential of All of the New Technologies in Development by Biopharma

Mesoblast is conducting a 300 patient, randomized phase 3 trial in ARDS associated with COVID-19. There should be a first interim look later this year. The author of this article is a founder of Osiris Therapeutics which was sold to Mesoblast. He fails to mention that Athersys with comparable cells is also conducting a 400 patient, randomized phase 3 trial in ARDS associated with COVID-19 that was just started. Again, there should be a first interim look later this year.

Success by Mesoblast or Athersys in their phase 3 trial would obviously be an electric event that based on experience that we have seen with companies involved in COVID vaccines and therapeutics could have a dramatic impact on the stock. The market capitalization of Moderna in early March was about $8 billion. As it became known that it was developing a vaccine for COVID the market capitalization soared to $38 billion and currently is $27 billion. Mesoblast is up $6.00 in pre-market trading to $17.50 which represents a market valuation of $1.9 billion. Athersys as of the time of this writing is unchanged in price and has a market capitalization of $475 million.

The Mesoblast cells (Ryoncil) require cryogenic shipping and Mesoblast is supported by Cryoport. Athersys is also supported by Cryoport.  Success with Ryoncil in ARDS could be dramatic for Cryoport. The scope of this therapy would involve millions of patients worldwide. Currently, Cryoport support of Yescarta and Kymriah involves about 3,000 patients. So, we are talking about potential shipments of Ryoncil that are several logarithms higher.  Cryoport sales in support of Kymriah and Yescarta are projected as about $11 to $12 million. Support of Ryoncil in the event that it is approved for ARDS could be several multiples of this.  A legitimate question is whether they have the resources to handle this.

The full text of the Wall Street Journal opinion piece is reproduced below.

The Treatment That Could Crush Covid

Early trials show signaling cells eliminate the virus, calm the immune response and repair tissue damage.

More than 500 clinical trials are under way world-wide in the race to find an effective treatment for Covid-19. Everybody wants it; nobody has it—yet. But one of the most promising therapies for Covid-19 patients uses “medicinal signaling cells,” or MSCs, which are found on blood vessels throughout the body.

In preliminary studies, these cells cut the death rate significantly, particularly in the sickest patients. With a powerful 1-2-3 punch, these cells eliminate the virus, calm the immune overreaction known as a cytokine storm, and repair damaged lung tissue—a combination offered by no other drug. This type of regenerative medicine could be as revolutionary as Jonas Salk’s polio vaccine.

In one pilot study in March, doctors at Mount Sinai Hospital in New York treated a dozen severely ill Covid-19 patients on ventilators with MSCs. Two infusions modulated their hyperactive immune systems, and 83% of those patients survived. With such promising results, the team at Mount Sinai and the supplier of the cells, Mesoblast Ltd., won Food and Drug Administration clearance and National Institutes of Health funding to conduct a randomized trial on 300 patients. The first patients in the trial received the treatment in early May.

A July 10 article in the Lancet reported on 13 critically ill Covid-19 patients also treated with MSCs. Eleven of the 13 patients lived—an 85% survival rate, which mirrors the results from Mount Sinai. The number of virus-fighting T-cells rose even as inflammation fell, suggesting that these cells can control the immune response as needed. In addition, chest X-rays showed that the drug repaired lung tissue, in some cases within 48 hours.

Healing tissue is essential because the cytokine battle with the Covid-19 virus is so vicious that it punches holes in the delicate lung membranes, allowing the virus to flood into the bloodstream and body cavities. These holes must be repaired, as virus leaks create some of the complications not usually associated with respiratory infections—blood clotting, heart attacks, stroke and multiple organ failure, which cause about 40% of Covid-19-related deaths. Blood-vessel density, and thereby the number of MSCs, decreases as we age, gain weight or develop diseases, which may explain why the elderly and those with chronic health conditions are faring worst.

In other words, this disease appears to be both a respiratory and a vascular infection. That is why the ability to fight infection, control the immune response and repair damaged tissue is such a valuable combination.

How can one drug do all this? MSCs were first identified and named by Prof. Arnold Caplan and colleagues at Case Western Reserve University in Ohio nearly 30 years ago. To translate this discovery into therapies, Mr. Caplan and I in 1993 launched Osiris Therapeutics, Inc. which developed this MSC into the world’s first approved systemically delivered cell therapy. During early years of scientific inquiry, Mr. Caplan and colleagues discovered that MSCs monitor and protect virtually every vessel in our bodies—the 60,000 miles of vessels that transport oxygen, nutrition and waste to and from every one of our cells.

When an MSC detects an infection or an injury to those vessels, it transforms into a factory to recruit and pump out immune-modulating and vessel-repair agents. These cells ameliorate crippling and deadly conditions when traditional chemical or biochemical drugs fail. The number of potential uses is enormous. MSCs are being tested on more than 900 different human ailments. Mr. Caplan describes these cells not as a “wonder drug,” but as a wonder drugstore.

Consider the results from trials conducted by Mesoblast on graft-versus-host Disease. Children with this horrible affliction suffer such a violent immune reaction that the skin and the lining of their intestines peel off. Up to 80% of children die if steroids don’t stop the inflammation. But in one trial, 160 of 239 patients (67%) who didn’t respond to steroids and other treatments survived after infusion with MSCs. Their cytokine storm disappeared. Injured tissues normalized. Based on these results, the FDA agreed to expedite its review and grant a decision by Sept. 30.

This is exactly the type of cell being tested for Covid-19 in the May trial. If the cells perform as they did at Mount Sinai in March and elsewhere, the results should be available before the end of September. A positive finding could help those most at risk of the disease’s worst effects. But the medical community and wider public are largely unaware of the potential for using MSCs to treat Covid.

Amid so much darkness, MSCs are a ray of hope—not only for the most desperate coronavirus patients, but all of us ready to end the pandemic and discover new ways to fix the body’s broken systems.

Mr. Kimberlin is chairman of Spencer Trask & Co. and a co-founder of Osiris Therapeutics, Myriad Genetics and Ciena Corp.