Shares in biotechnology company Mesoblast (MSB) were slammed yesterday after a key research partner walked away from research work underway into a treatment for chronic heart failure. Analysts said it was the second bit of negative news for Mesoblast’s main research program
The shares plunged more than 42% to close at $1.11 after emerging from a lengthy trading halt which also saw release of the the bad news from the research group Israeli pharma giant, Teva Pharmaceutical.
Mesoblast first sought the halt last Wednesday and then extended it on Friday, before coming out of it yesterday with the statement. The suspension and then extension had promised investors to expect the worst and that’s what they got yesterday.
MSB 2Y – Mesoblast shares hit 7-year low
Mesoblast said in a statement to the ASX that Teva, its key US partner, has surrendered all rights to its heart failure treatment. That leaves Meso with the expensive task of finding an estimated $100 million to fund ongoing medical trials before it could be ready for marketing.
The decision also places a question mark over the ownership of around 14% of Mesoblast’s capital which the US company currently holds.
In late 2010, Mesoblast reached a $2 billion agreement with Cephalon to fund its heart failure treatment, along with some other programs, with the incoming partner paying Mesoblast $170 million up front as well as taking that 14% stake in Mesoblast.
But Teva acquired Cephalon in 2011 and is now seeking approval to buy the generic drug portfolio of UK drug group Allegan for $US40 billion.
That requires Teva to sell or quit dozens of new and existing drugs or research programs. On top of this, Teva has to cut borrowings by raising money from selling these drugs or cutting spending – one of which is Mesoblast.
Teva’s decision follows the failure of US biotech major Celgene to exercise a six month option to partner some of Mesoblast’s research program.
Mesoblast said in yesterday’s statement that it plans to complete the Phase 3 heart failure trial within 18 months, and has 30% of the patients recruited. It said it has been has been offered an "equity finance facility" to help pay for the completion of the trials. However, Mesoblast says it will seek a large company partner to help sell the treatment, if it approved by regulators, and has been in talks with potential partners.
"For sales and marketing, we will be partnering with a major cardiovascular company that has an existing sales force and commitment to the heart failure field," Mr Itescu said.
