Mesoblast shares have hit a 10-month high after the Melbourne biotech company partnered with a German pharmaceutical giant to commercialise its stem cell-based treatment for chronic lower back pain.
ASX-listed Mesoblast, which had just $US16.7 million ($A23.3 million) in revenue last year, said it could conceivably realise as much as $US1 billion ($A1.49 billion) from the deal if the treatment is successful.
At 1229 AEST, Mesoblast shares were up 18.2 per cent at $A1.72.
Under the agreement, pharma giant Grunenthal will have exclusive commercial rights to sell the back pain treatment in Europe and Latin America.
In return Mesoblast will receive up to $US150 million in up-front payments, with milestone payments that could exceed $US1 billion depending on the final outcome of studies and patient adoption, as well as double-digital royalties on product sales.
Known as MPC-06-ID, the back pain treatment is being studied in a phase III (large-scale) clinical trial in the United States scheduled for completion next year and Mesoblast chief executive Silviu Itescu said it could help millions.
Some 10 to 15 per cent of adults in developed countries have chronic lower back pain, he said.
"This is a tremendous health care burden in the industrialised world," he said.
MPC-06-ID is a treatment derived bone marrow harvested from healthy volunteers, with the stem cells then processed and expanded in a laboratory.
Six million stem cells are then injected into the degenerated disc in the patient's spine to reduce inflammation and encourage it to regenerate.
In an earlier trial involving 100 patients, 47 per cent of those who received the stem-cell injection showed a significant reduction in pain 12 months later, three times as many those who had just received a saline injection.
Three years after the injections those who got MPC-06-ID were still faring better, on average, than those who got the saline treatment.
Dr Itescu said that MPC-06-ID had the potential of becoming a "first line therapy" for patients with moderate to severe chronic back pain from a degenerative disc.
Half of all opioid prescriptions are for lower back pain, and some patients even resort to invasive surgeries like spinal fusion as a last resort, Mesoblast said.
All of the 404 patients in the new clinical trial have completed at least 12 months of safety and follow-up care, with researchers waiting to see how they fare at the 24-month mark next year.
Mesoblast said the results of that study and another one are expected to support both US and European regulatory approvals.
Dr Itescu said Mesoblast was excited to be partnering with Grunenthal, which specialises in pain medication and has over 5,500 employees worldwide.
"Cell-based therapies offer a novel approach in pain management," Grunenthal chief executive Gabriel Baertschi said.
"They can potentially deliver meaningful lasting improvement to patients beyond symptomatic treatment by maintaining or even restoring physiological function.
"This is an important next step in working towards our vision of a world free of pain."