As mesenchymal stem cell (MSC) transplantation has yet to deliver a commercial product, it takes a certain amount of chutzpah to forge a $1.7 billion deal around the approach. In early December, Frazer, Pennsylvania–based Cephalon made an up-front payment of $130 million to Melbourne, Australia–based Mesoblast to develop and commercialize adult mesenchymal precursor cell therapies for a multitude of disorders, ranging from congestive heart failure and neurodegenerative diseases to cancer. The collaboration will provide funding for Mesoblast to run a phase 2a trial; Cephalon will oversee phase 2b and 3 trials if the MSC therapy is taken forward and retain global commercialization rights. Cephalon has also paid $220 million for a 19.99% equity stake and a seat on the board of Mesoblast. In its due diligence process, Cephalon had access by a confidential agreement to data from a randomized placebo-controlled phase 2 congestive heart failure trial of 60 patients who had received injections of Revascor, Cephalon's adult allogeneic off-the-shelf MSC therapy. The product, delivered through a catheter to the ischemic myocardium, reduced the overall monthly rate of major adverse cardiac events by 84% compared with controls. “We had a great deal of difficulty in explaining that data away,” says new Cephalon CEO Kevin Buchi. “It had a placebo, and all the endpoints seemed to be moving in the same direction,” he says.

Cephalon's $350 million cash investment, with milestone payments potentially adding up to $1.7 billion, is certainly substantial for an early-stage platform, but one specialty pharma analyst, who wants to remain anonymous, calls it a “smallish transaction” that won't really produce any meaningful phase 3 data until some years away. Venture capitalist and managing partner Daphne Zohar of Boston-based PureTech Ventures also stops short of saying the deal is too rich. “But the up-front payment is higher than most we're seeing,” she says. “Most recent deals are structured as earnouts that are more backloaded, but Cephalon must have thought it was worth it.”

The big question is whether Mesoblast's phase 2 efficacy data will translate to larger trials. Another company, Osiris Therapeutics of Columbia, Maryland, also had compelling phase 2 efficacy data for its MSC therapy, Prochymal, in severe refractory graft-versus-host disease (GvHD), but failed to translate that efficacy into phase 3. In 2009, on the basis of the phase 2 data, Genzyme of Cambridge, Massachusetts, struck a deal with the Maryland biotech, paying $130 million up-front for rights to Osiris' MSC products: Prochymal for GvHD and Crohn's disease, and Chondrogen for knee cartilage repair (Nat. Biotechnol. 27, 966–967, 2009). It should be noted, however, that although Osiris' and Mesoblast's products are both MSC therapies, the target indications and heterogeneity of the clinical populations studied are different. The methods of preparation for the two companies' products are also different: Osiris' cells are prepared by density gradient separation of bone marrow mononuclear cells and then purified on the basis of the (>90%) presence of CD73, CD90 and CD105 markers and absence of CD34, CD45, CD14 and CD3 markers (The Lancet 371, 1553–1554, 2008). Mesoblast's MSCs are CD34+CD117+ cells obtained by sorting granulocyte colony stimulating factor-mobilized bone marrow–derived cells (Nat. Med. 7, 430–436, 2001).

If the Mesoblast cell therapy does show efficacy in large-scale trials, the market opportunity with congestive-heart failure alone is substantial, with 1.1 million hospitalizations and 300,000 deaths each year in the US alone and as many as 20 million patients globally. “We're a pharmaceutical company, and we didn't spend a whole lot of time focusing on the fact that this was a stem cell technology, per se”, says Buchi. “We focused on the fact that it's a manufactured, off-the-shelf product, and from our perspective it feels very much like a biologic that can be stocked in a cath lab and used for patients as needed by the physician. GM