Spinal franchise

So the science is proven, the business model is in place, and now for clinical trials. Preclinical trials have been ongoing for a number of years but now the company is moving into the big time.

It has two Phase IIa trials starting in the US in spinal fusion and cardiovascular disease, has completed some pilot studies in humans in long bone fractures and early stage intervertebral disc cartilage, and is completing large animal studies in knee cartilage and osteoarthritis.

The New York trial is of an allogeneic product for patients with severe intervertebral disc disease requiring spinal fusion. It is taking place at the specialist orthopaedic Hospital for Special Surgery in New York, led by an orthopaedic surgeon, Dr Joseph Lane.

"Once we get started properly in that trial we'll spread it out to get multiple centres involved," Itescu says. "That trial is to show that we are as good as autograft, which requires a second operation. And 30 to 40 per cent of people who have that procedure have worse pain for the rest of their lives than they ever had in their back, so if you have a drug that you can put in there that can create as good a fusion, then you have a product."

Allied to this trial is a preclinical trial for repair and regeneration of vertebral disc cartilage, which is taking place at the IMVS in Adelaide, led by Associate Professor Robert Moore, who is head of the Adelaide Centre for Spinal Research.

"The idea is to build a whole spinal franchise," Itescu says. "With early disc disease, all they can do is take anti-inflammatory drugs, which cause ulcers and don't work very well. So if you have the ability to actually repair the disc ...

"We have embarked on a study in sheep where you actually replace the cells in the existing disc, and we are looking at a three-month study to see if you can increase the disc height.

Of great interest are Mesoblast's early trials in repairing and regenerating meniscus cartilage in the knee. This is not just aimed at the odd football player who tears his knee cartilage, however: it is the osteoarthritis arena that is most exciting.

Preclinical trials in sheep, led by Professor Rick Read at Murdoch University, of allogeneic cells to treat osteoarthritis of the knee have shown very promising results indeed.

"We did [this trial] primarily for osteoarthritis, although we didn't want to emphasise that because we thought it would be a harder ask," Itescu says. "If we had a result with osteoarthritis, we'd have a blockbuster, and we have good data now that I'm very happy about."

The results showed that joint cartilage in osteoarthritic knees had significantly greater thickness, reduced breakdown and greater biomechanical strength three months after injection into the knee than did control joints receiving injections of hyaluronic acid.

Mesoblast is currently designing further trials for this application and is extremely hopeful of its potential, as osteoarthritis is at least as great a commercial opportunity as bone repair.

The company has also completed a pilot clinical trial of autologous stem cells at The Royal Melbourne Hospital for non-healing, long bone fractures, led by Dr Richard De Steiger. This showed that each of the first five patients followed up have demonstrated complete bony union.

Hearts and deals

While it is Angioblast rather than Mesoblast that runs the cardiovascular sphere, Mesoblast recently completed a pilot clinical trial at John Hunter Hospital in Newcastle, under the supervision of interventional cardiologist and Hunter Medical Research Institute researcher Dr Suku Thambar. This was also a trial of an autologous product, although Angioblast's bigger Phase IIa in Texas will be with allogeneic cells.

The Hunter pilot trial, which recorded no adverse events from the cells after six months and showed significant improvement in either symptoms of heart failure or in heart function in six patients with severe coronary artery disease and heart muscle damaged, used the platform adult stem cell technology that will be used in Texas to deliver the cultured stems cells via a new generation of cardiac catheters produced by Johnson & Johnson companies Cordis Corporation and Biosense Webster.

Both Mesoblast and Angioblast work closely with manufacturers such as Cordis and Biosense, as well as the likes of Medtronic, which makes the biomedical support matrix used for delivery of the cells in orthopaedic applications, Itescu is not yet committing himself or the company to exclusive deals with medical device companies, or big pharma for that matter. He is holding his horses for the next 12 months or so as the trials move through the Phase I and II processes and then he'll have a bit more to show the big boys.

"The question is, when do you do the right deal?" he says. "Historically, Australian companies, because they have been low in cash, have done licensing deals far too early. The earlier you do a deal, the worse the terms are going to be. The more results you get, the better the deal.

"You may never want to do a deal but in fact optimally, we don't want to be in the business of funding Phase III trials. Each Phase III is going to cost $50 million plus. The ideal time to do a deal is at the end of Phase II, when you have results to show the thing works, and then you bring in a partner and they pay for it and become your distributor. And that is what we are aiming for.

"We are only starting Phase II now so really we have a 12 to 18-month window to execute those kinds of transactions. To see us as a good company you wouldn't want to see us doing a deal now - you'd want us to get some data and then look over the next 12 to 18 months to do the right deals.

"Another question is, can we do some type of earlier, collaborative deals that allow us to get our feet in the water with one or more potential partners but that don't lock us up. That is what we are intending to do in the short term.

"In 18 months, I think we will have had one or more serious co-development deals with one or more pharma or device companies, or one or more applications that we may hold because we see the value in that, or we may have undertaken one or more M&A transactions. There's no preference for me - they are all very possible. Things are looking very good, however. Our progress has certainly exceeded our expectations from two and a half years ago."