$CYTX $NBS $ATHX $PSTI MAXIM Legislation in Japan Passes represents
a best-case scenario !!!
We have reviewed a press release from Mesoblast that gave us insight into
new Japanese legislation (PMD Act). We paraphrase the data from Mesoblast,
emphasizing the data is from Mesoblast and not based on our own independent
second source:
• Conditional product approvals will be based on existing Phase II trial results
demonstrating probable efficacy and safety with bridging studies in Japanese
patients.
• Conditional approvals will allow sales of each product candidate for up to 7
years.
• Conditionally approved products will be covered by health insurance.
• Conditional approvals will cover allogeneic cell therapy product candidates
manufactured under GMP outside of Japan; and full approval is expected to
require further confirmation of safety and efficacy in a larger population.
Conclusion: We believe the legislation (as stated from Mesoblast) represents
a best-case scenario for companies like Mesoblast, Pluristem, and Athersys
(allogeneic players), as well as autologous companies like Cytori and others
(Cesca and NeoStem).
Details
Japan represents a strategic milestone for Mesoblast. We believe that
regulations are being proposed to allow a new and rapid clinical pathway for cell
therapy companies to enter the Japanese marketplace. Through the acquisition of
Prochymal, Mesoblast now has access to an experienced cell therapy partner “on
the ground” in Japan—a partner that has now filed the country’s first cell therapy
product. We see great strategic value in this news.
Mesoblast plans a product registration filing with the United States Food and
Drug Administration (FDA) for its allogeneic MSC product in children with steroidrefractory
acute GVHD in 2016. Additionally, Mesoblast remains on track for
commercial launch of its allogeneic MSC product in Canada and New Zealand in
2016 in children with GVHD.

New Legislation in Japan – What Is It?
The following article has been paraphrased from a piece published in ACCESS Wire, March 3, 2014:
Japan, like the rest of the world, is experiencing an aging population that will create challenges for its national healthcare system. According to
analysis by the Ministry of Health Labor and Welfare (MHLW) in Japan, the percentage of the population that is over the age of 65 is expected to
nearly double in the coming years. Given that the aging segment of the population requires greater healthcare resources and that this shift will
place substantial pressure on the national healthcare system in Japan, it is understandable that the trend has received considerable attention
from policy makers.
As demand for healthcare resources continues to escalate, over the past several years the political leadership in Japan and the MHLW have
given consideration to areas of technology that may enable more effective treatments, while also reducing overall healthcare costs and the
economic impact on society. Traditional medical approaches have thus far had limited impact in many diseases that become more prevalent in
an aging population, and have failed to address a range of areas that represent substantial unmet medical needs that impose a high social
burden, as well as enormous direct and indirect costs to society.
New technologies could change that, and the MHLW is committed to promoting the development of new approaches that could provide more
effective solutions for conditions like stroke, heart disease, and a range of other areas. One area in particular, regenerative medicine, may have
a dramatic impact. However, despite some exciting technological achievements in recent years, there has been only modest clinical trial
activity in Japan over the past decade. This has threatened to impede the development and delivery of new therapies into the Japanese
healthcare system.
Last year, policy makers announced an important new initiative that could change all that. Last spring, the MHLW and PMDA (the equivalent of
the U.S. FDA in Japan) announced the concept of a new framework designed to dramatically accelerate the development of new regenerative
medicine therapies that could help address areas of significant unmet medical need. In November 2013, the National Diet passed the
legislation that revised Japan's Pharmaceutical Affairs Law and also established the new Regenerative Medicine Law that could help
establish Japan as a global leader in regenerative medicine in the years ahead. This important legislation was passed with the primary goal
of expediting the development path and commercialization of regenerative medicine therapies, while continuing to ensure and protect patient
safety. The legislation passed with overwhelming support in both the lower and upper houses of the Diet.
The rest of the world is watching and should be cheering the visionary move. In a recent keynote speech at the World Economic Forum in
Davos, Switzerland, Prime Minister Shinzo Abe reiterated Japan's national commitment to leadership in regenerative medicine, saying, "We will
make it possible to generate cells (i.e. cell based medicines) at private sector factories." Clearly Japan is looking to benefit from the
initiative in terms of helping its citizens obtain access to better medicines, but also because of the economic development activity it might drive.
Historically, Japan has not been typically viewed as sitting at the forefront of innovation, particularly in biotechnology; they are, however, a
country that has shown an acute ability to research, optimize and effectively industrialize emerging technologies. That dynamic in the area of
biotechnology is changing, though, fueled in part by the national interest resulting from the paradigm bending discovery of 2012 Nobel Prize cowinner
Shinya Yamanaka that had a positive impact on the country's psyche. Addressing the thorny ethical issues surrounding embryonic
stem cells, Yamanaka and his colleagues ascertained, then demonstrated that induced pluripotent stem cells (iPSC's) could be derived from
normal adult cells, potentially eliminating the need to harvest embryonic tissue, representing a truly landmark breakthrough in the field.

Japan's new Regenerative Medicine Law serves to shepherd new cell therapies and assumes a range of such technologies, including iPSCbased
approaches. This new framework could create a more efficient path for medicines to reach patients and the market. In the broadest view,
the Regenerative Medicine Law realigns the thinking and process of clinical trials for stem cell technologies. Currently, most developed countr ies
are quite rigid in requiring three stages of clinical trials, including lengthy mid- and late-stage trials before new therapies are even considered for
approval. With that structure, it's common for a drug to take a decade to reach commercialization. Japan's new policy requires an early stage
clinical trial (call it a Phase I or small Phase II) at the minimum to confirm safety of the therapy and provide some plausible evidence of efficacy.
Rather than requiring that the therapy then be evaluated in subsequent trials before making it available to patients, Japan's new law will allow
for a "conditional approval," enabling the product to be brought to market and to obtain reimbursement in an accelerated manner.

Conditional approval by no means implies that the regulatory approval process is over. It simply allows the therapy to be made available to patients earlier
in the process, and for the sponsor company to begin commercialization and obtain reimbursement. Following conditional approval, the sponsor
company will continue to monitor and evaluate the clinical performance of the therapy for additional safety and efficacy data. Upon completion of the
necessary post-conditional approval studies, the owner may file for a final approval in a manner similar to the traditional approval pathway.
Which companies may benefit from this new regulatory framework? There are several logical possibilities. To identify the potential winners, it helps to know
where the largest areas of significant unmet medical need are in Japan and which companies might be well positioned to address them. Second, it's worth
examining which regenerative medicine companies are already active in Japan, as that may provide such companies with something of an advantage.

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