Mesoblast to Mass-Produce Stem-Cell Drugs in Pact With Lonza

Mesoblast Ltd. (MSB), the world’s largest developer of stem-cell treatments, will form a manufacturing alliance with Lonza Group AG (LONN) as it prepares to mass-produce its regenerative therapies.

Under the agreement, Mesoblast can instruct Basel, Switzerland-based Lonza to build a dedicated manufacturing plant for its products in exchange for buying “agreed quantities” of those items, the companies said in a joint statement today.

Mesoblast’s experimental spinal and heart failure treatments are in the final of three stages of patient studies usually required by regulators. The Melbourne-based company has more than tripled over the past 12 months, making it the best performing stock on Australia’s S&P/ASX 200 Index. Lonza is the world’s biggest maker of drug ingredients and also offers contract manufacturing for pharmaceutical companies.

The agreement with Lonza “increases our confidence that Mesoblast can successfully scale up to commercial-scale stem cell manufacture as it moves to bring products to the market,” said Stuart Roberts, a health-care analyst with Bell Potter Securities Ltd. in Sydney, in a note to clients today. It also “increases the likelihood that higher effective royalties will be achieved over time as the two companies move down the experience curve and thereby improve manufacturing margins.”

Mesoblast gained 2.6 percent to A$7.80 at the 4:10 p.m. close of tradingn in Sydney.

The alliance will guarantee long-term supply of Mesoblast’s products, according to the statement.

“It means that we as a company have taken out the entire risk of the manufacturing by shifting it” to Lonza, Mesoblast Chief Executive Officer Silviu Itescu said in an interview.

Lonza is planning a secondary listing on the Singapore Stock Exchange in the fourth quarter of 2011, the Swiss company said on Sept. 16.

To contact the reporter on this story: Natasha Khan in Hong Kong nkhan51@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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