Mesoblast Ltd

ASX:MSB

Earnings Call Transcript 2019-Q1

[Operator]

Hello, and welcome to Mesoblast's financial update and operational highlights webcast for the 3 months ended September 30, 2018. An announcement and slide presentation have been lodged with the ASX. These materials will also be available on the investor page at www.mesoblast.com. [Operator Instructions] As a reminder, this conference call is being recorded.Before we begin, let me remind you that during today's conference call, the company will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's announcement and the company's filing with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. In addition, any forward-looking statements represent the company's views only as of the data of this webcast and should not be relied upon as representing the company's views of any subsequent date. The company specifically disclaims any obligations to update such statements.With that, I would now like to hand the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

[Silviu Itescu]

Thank you very much. Good morning, and good afternoon to the operational highlights and financial results for the quarter ended September 30 2018.If we could move straight to Slide 4, please. Mesoblast has a disruptive technology platform which is based on immuno-selected cellular medicines that are well-characterized with respect to both the sales and the mechanisms of action. We have an extensive and robust IP estate, and we target refractory disease states. We've got industrialized scalable manufacturing processes that allowed us to develop off-the-shelf delineated products with batch-to-batch consistency and reproducibility. And we're very mature now with multiple revenue-generating products and Phase III assets that I'll be telling you more about.On Slide 5, I think the importance of understanding that the immuno-selected STRO-1, STRO-3 mesenchymal precursor cell represents the earliest precursor in the mesenchymal lineage and gives us the ability to work with the homogeneous populations of cells that have got well-characterized receptors, surface phenotypes and mechanisms of action. Importantly to understanding the mechanism of action is that the receptors on this surface respond to a number of pro-inflammatory cytokines that are present in diseased tissues, resulting in the cells being activated and releasing a variety of biomolecules responsible for immunomodulation and tissue repair. So inflammation is core to the mechanism of action of our cells.Slide 6 speaks to the commercial translation capabilities at technologies positioned for scalable and industrialized manufacturing, who are able to produce the anticipated commercial quantities of sales necessary to achieve the numbers of products for patients in large volume diseases, such as heart failure. And we have proprietary methods for scalability, including media formulations and bioreactive technologies.As I mentioned earlier, on Slide 7, our global IP estate provides substantial competitive advantages. It covers compositions of matter, manufacturing and therapeutic applications of our cells, and allows us to protect our commercial interest for those products that are core to our business interests and it also provides us with the opportunity to work with partners where we can provide our technology as licenses in areas that are not necessarily core to our interests.Slide 8 speaks to our pipeline. And as you can see, it's a rapidly maturing pipeline. The first 2 products relate to the first 2 products approved in Japan and in Europe for industrialized allogeneic mesenchymal lineage products, in Japan for acute graft-versus-host disease and in Europe for perianal fistulae. In Japan, that product has already being sold over the last 2 years by our licensee JCR Pharmaceuticals. And in Europe, the product for perianal fistula has been approved and is in the process of launch by a commercialization partner Takeda. As you can see below, is our advanced pipeline of product in Phase III and in Phase II. We have 3 assets that are currently in Phase III, a product for acute graft versus host disease that has completed Phase III successfully and is in the process of being prepared for a BLA filing next year. Our product MPC-150-IM for both advanced and end-stage heart failure that I'll be talking more about today, in China that product has been partnered with the Tasly Pharmaceutical Group. And our third Phase III asset is our MPC-06-ID product for chronic low back pain also has completed the Phase III trial.Our recently announced partnership with Tasly focuses on cardiovascular disease in China. We received $40 million on closing. We will receive further cash on regulatory approvals in China as well as double-digit escalating royalties on net product sales, together with escalating milestone payments on reaching certain sales targets in China. We will be meeting with our partner in the short term to work out the specifics of the program in China, the pathway towards Chinese regulatory approvals, and we'll be updating the market in due course.Now I'd like to turn the presentation over to our Chief Financial Officer, Josh Muntner, who will take you through the next few slides. Josh?

[Josh Muntner, Chief Financial Officer]

Thanks, Silviu. Turning now to the financial slides. We're pleased to report a substantial increase in revenue and a strong cash position. Starting with revenue, as shown on Slide 11. Total revenue for our first quarter for our fiscal year 2019 was $11.6 million, a $10 million increase over the first quarter in the prior year. Revenue included royalties from JCR Pharmaceuticals on sales of TEMCELL for GVHD in Japan. We recorded $1 million of such royalties, up 66% from the prior year's Q1 period.We also recognized milestone payments during the period. Specifically, we recognized $10 million of milestone revenue from our strategic cardiovascular partnership with Tasly for China. Finally, we received $0.5 million milestone payment from JCR based on TEMCELL achieving a certain amount of cumulative sales. JCR's ability to continue to grow TEMCELL should bode well for the commercial potential of our late-stage GVHD product.Turning to Slide 12, we can look at the remainder of the income statement. While our loss after tax is larger than the amount we reported in Q1 2018, one of the primary drivers of this increase relates to a noncash difference in the remeasurement of our contingent consideration between the 2 quarters. In the earlier period, we remeasured this contingent consideration, creating a noncash benefit to Mesoblast. There is no such meaningful change in remeasurement in the recent quarter. For further details, please refer to our current financial statements found in our Form 6-K filing.Also during the quarter, operating expenses increased, including R&D as we continue to make progress in our late-stage clinical trials, manufacturing due to precommercial activities related to our GVHD product. And finally, we recorded finance cost during the quarter related to our interest expense on our credit facilities.Slide 13 shows our cash flows for the quarter. Our cash used in the quarter was largely similar to the cash used in Q1 of the prior year. The cash -- our cash position is shown on Slide 14. We completed the quarter with just over $55 million of cash. Since the end of the quarter, we received $40 million from Tasly, $20 million as an upfront technology access fee and $20 million as an equity investment. When taking together, our pro forma cash position as of September 30, 2018, is $95 million. In addition to this cash, an additional $50 million may be available under existing arrangements with Hercules and NovaQuest.To sum up, we're proud of the quarter's financial performance and the steps we've taken to strengthen the balance sheet to achieve our upcoming milestones.I'd like to hand the presentation back to Silviu now.

[Silviu Itescu]

Thank you, Josh. Would like to turn now to operations. If you could turn to Slide 17, please.The market opportunity for acute graft-versus-host disease. This a life-threatening complication that occurs in about 50% of patients receiving an allogeneic bone marrow transplant. Mortality rates in those who do not respond to steroids can be as high as 95%, and there are no approved treatments for steroid-refractory graft-versus-host disease outside of Japan, where our licensee has been very successful in penetrating the addressable market. There are about 30,000 allogeneic bone marrow transplants performed globally, of which about 20% are in children, and we have learned much from the success of our licensees' access to the Japanese market where the product TEMCELL is reimbursed for up to $195,000 per patient. On that basis, we believe that the market opportunity in the U.S. and EU is substantial for our product candidate.So what is the operational update for this product on Slide 18? The Phase III trial evaluated remestemcel-L in 55 children to improve overall response rate and survival. 89% of the children had the most severe form of the disease, grade C/D disease, typically associated with mortality of up to 95%. The study successfully met the primary endpoint of improved overall response, highly significant, demonstrated a day 100 overall survival of 75%, with 87% survival in those who are early responders. And that response rate was maintained at 79% through day 180. The remestemcel-L infusions were well tolerated. These findings were very consistent with previous results in 241 steroid-refractory children with the disease under an Expanded Access Program, who also had failed to respond to multiple biologic agents. Remember that in this trial, biologic agents were not co-administered.Slide 19. Identifies the pathway to market for this product. Preparations are underway for a biological license application or BLA filing. We intend to have several meetings with the FDA and be in position to file for approval sometime during the first quarter of '19. We have a Fast Track designation already, and that allows eligibility for priority review and a rolling BLA filing review process.From a commercial perspective, we will be parallel tracking, planning for pricing, reimbursement and product launch and we have learned much from our partner's ability to sell TEMCELL in Japan and that is informing much of our commercial strategy in the U.S.. Rapid adoption within 2 years of launch has been demonstrated and there is continued growth in royalty income through sales in Japan, which make us feel that this is a terrific opportunity for Mesoblast in the U.S. and Europe markets.Now let's move on to our heart failure program.Slide 21 shows the patient journey over the years from early-stage heart failure to end-stage heart failure. There were many as 8 million patients in the U.S. alone with chronic heart failure, and these patients progress over time to Class III and Class IV or advanced and end-stage. Our product candidate, MPC-150-IM, has been specifically developed to target those patients in those advanced forms of disease in Class III, Class IV and end-stage. Those patients have very few, if any, alternatives and they failed all drug therapy to get through to that point in time.So let's talk about our opportunity in end-stage heart failure patients with left ventricular assist devices or LVADs. In the U.S. alone, there are about 250,000 to 300,000 patients annually who suffer from advanced disease or Class IIIB/IV disease. 50,000 of these patients are in end-stage and they have at least -- they have a 50% mortality in the absence of getting a heart transplant, which was only available in about 2,000 patients, or in the absence of getting an artificial heart or an LVAD. LVADs in fact have improved survival, but mobility remains very high with patients having at least 2 hospitalizations annually. The #1 cause of hospitalizations in these patients is gastrointestinal bleeding. Such device-related hospitalizations, on average, cost about $46,000 per patient, per hospitalization. So we believe that a treatment that will improve the outcomes of these patients, keep them out of hospitals and reduce morbidity has substantial market opportunity.Slide 23 is a summary slide from the official interagency registry for mechanically assisted circulation or Intermacs, which shows you the lead causes of hospitalizations in these patients. The #1 cause by far is major bleeding events and predominantly in that is gastrointestinal bleeding.Now the reason for gastrointestinal bleeding being a major cause of hospitalization in these patients is identified in Slide 24. Heart failure generally is associated with significant inflammation. When a patient is given an LVAD, the inflammation in the heart is substantially increased because of the nature of the foreign body being the LVAD. That significant increase in inflammation doesn't happen just in the heart, but also happens in the rest of the body and involves the vasculature in various organs. In the gastrointestinal tract, the inflammatory response result in abnormal blood vessels that don't behave normally, are very thin and tend to bleed very easily. These patients are also on anticoagulants permanently because of the nature of the artificial heart. That combination of abnormal blood vessels in the gut from inflammation and anticoagulation result in a high frequency of severe gastrointestinal bleeding and hospitalizations. We believe that a therapy that targets the central nature of inflammation in the heart, in the setting of that implantation, will have a benefit not only in the heart itself, but in the vasculature in the gastrointestinal tract. So we -- this was tested in a post hoc analysis of a 30-patient trial performed several years ago in collaboration with the National Institutes of Health. Slide 25 demonstrates in those 30 patients, 20 of whom received 1 injection intramyocardial MPCs, 10 of whom received a sham control. And what you see here is a significant reduction in the proportion of patients undergoing major gastrointestinal bleeding and hospitalizations. The majority of these events in the control population occurred within the first 100 days, and they were significantly reduced in the MPC-treated patients.In addition, there was overall reduction through 6 months of hospitalizations, and the rate of bleeding was significantly reduced.On the basis of these and other preliminary data from this part of the study, we submitted a -- we submitted for approval under the 21st Century Cures Act in October last year for the regenerative medicine advanced therapy designation. This is a new path for approval of cellular medicines which are intended to treated modified or reverse or even cure a serious or life-threatening disease or condition. We were fortunate to receive the RMAT designation for the product in treating complications of patients with LVADs, and the designation was based on the part of data. The key benefits of this designation are very similar to breakthrough designation in that they include potential eligibility for priority review and accelerated approval, potential to utilize surrogate data endpoints for accelerated approval and potential to utilize patient registry data as sources of real-world evidence for post-approval studies.So together with our partners at the NIH, a second study commenced after the first part of study. And the second study was in 159 patients, 2 to 1 randomized to either cells or sham in patients with end-stage heart failure and an LVAD placement.Let's turn to Slide 27. Here you can see now prospectively defined endpoints of bleeding was significantly achieved in this trial. In the Kaplan-Meier analysis on the right, you see again a significant reduction of about 75% in overall incidence of bleeding episodes relating to hospitalization in the cell treated compared to the control patients.On the left-hand side, you see the overall rate of major GI bleeding was reduced by approximately fourfold in the MPC-treated patients compared to controls over the 6 months period of follow-up.On Slide 28, you see that causes of -- all causes of hospitalizations in these patients. And importantly, hospitalizations from GI bleeding was significantly reduced by about threefold in the MPC treated patients compared to the controls. Whilst overall, all hospitalizations were numerically decreased in the cell treated patients, they were not significantly decreased, and that's because other causes of hospitalizations, such as infections, device malfunction, neurologic dysfunction, all of which are related to the device itself, obviously would not be expected to be impacted by our cells.But when we looked on Slide 29 at the trials' primary endpoint of temporary weaning. Temporary weaning meaning over a 20-minute period if the LVAD is turned down -- not off, but turned down, is the patient able to tolerate? What you see, in fact, is that cell treated patients were not significantly better than controls overall. However, what is clear is the control rate of weaning, somewhere between 59% and 66%, was about 3x higher than was seen in controls in the pilot study. What that implies is that the patient populations that were recruited were not the same. And in fact, we know that there was an overrepresentation in this trial of bridge to transplant patients relative to the pilot trial. Those patients in general are about a decade younger than destination therapy patients, are more robust and presumably somewhat easier to wean.Nonetheless, if we go to Slide 30. When patients were stratified on the basis of prespecified major subgroups, what we saw was that the ischemic heart failure population, which is predominantly older, predominantly gets a destination therapy device for permanent implant, we saw that in this patient population, cell therapy, our cell therapy significantly increased the proportion of patients who were successfully weaned. And indeed, the control patients here had a much lower weaning rate than control patients who had bridge to transplants, indicating that these are the hardest to treat patients. And it is the same patient population that predominated in the pilot trial where the MPC therapy was successful overall.Most importantly, this patient population, ischemic heart failure, is the predominant patient population that's represented in our ongoing 600 patients Phase III trial that is 85% already enrolled. And on that basis, we feel that this is a very important signal that we've seen in this particular trial.So if we go to Slide 31, the conclusions of this trial. The results of which were recently presented at the American Heart Association are as follows. The trial succeeded in achieving the clinically meaningful outcome of a reduction in gastrointestinal bleeding and related hospitalizations. The results confirm the previous pilot trial, which also demonstrated significant reduction in GI bleeding and hospitalizations in these cell treated patients. The pilot trial results had formed the basis for the FDA RMAT designation, which was granted to us in December 2017.And recall that the RMAT designation aims to expedite the development of regenerative therapies intended for the treatment of serious and life-threatening conditions. The company, as a result, intends to meet with the FDA during the first half of this coming year 2019 to provide full study data and discuss the pathway to a potential BLA filing using reduction in GI bleeding and related hospitalizations as an approvable regulatory endpoint.While the trial did not meet the overall primary endpoint of temporary weaning, MPC-150-IM treatment did significantly improve weaning in the 44% of patients who had chronic ischemic heart failure. These patients very closely resemble the majority of the patients enrolled in the ongoing Phase III trial of approximately 600 patients with moderate and advanced heart failure.Now let's move on to the third of our Phase III programs.MPC-150-IM for moderate and advanced heart failure market. this is a much bigger market, of course, than end-stage heart failure. Majority of these patients die within 5 years despite having access to all other approved drugs. The greatest need is in Class III heart failure where the event rate is highest, and we believe this is a tremendous opportunity for the company and everything that we have learned to date gives us great confidence in this target opportunity. Where are we with our Phase III program in advanced heart failure patients?More than 85% of the patients enrolled in this trial have been achieved. Recall that this is an events-driven trial overall. And whilst we target about 600 patients, more important is obtaining the total number of events that the FDA deems appropriate. A prespecified interim futility analysis of the trial's efficacy primary endpoint in the first 270 patients was successfully achieved in April 2017. And as recently as last month, 2018, the data monitoring committee reviewed all of the -- reviewed safety and efficacy data in this trial and recommended continuation of the trial without modification, having seen the data from the first 526 randomized patients, and that includes the primary and secondary endpoints of major hospitalizations, terminal cardiac events and all safety data.As I said earlier, using all of the information we have to date, we'll be meeting with Tasly in short order to plan and map out what a Phase III program in China would look like using a very similar patient population as this is in our current Phase III trial. And our plan is to leverage U.S. and global Phase III trial results, including trials that we will be performing with Tasly for global regulatory submissions.Now I'd like to move to Slide 35, which is our final product in Phase III, MPC-06-ID, being developed for chronic low back pain due to degenerative disc disease. And this program takes on even greater emphasis now given the opioid crisis that is evolving before us. The burden of illness is substantial, as we're all familiar with, and particularly this is in relatively young patients in their 40s and 50s who have a significant impact on their work abilities. There were minimal treatment options for patients who failed conservative therapy. And today, opioids or surgery represent the only alternatives. The unmet need is great, and we believe that if we're successful, this represents a substantial multibillion-dollar opportunity.Our Phase III study completed enrollment in March this year. Over 400 patients were enrolled across 48 sites, predominantly in U.S. as well as Australia. Patients were randomized to receive either saline or 6 million cells with hyaluronic acid as the formation was in Phase II or 6 million cells without hyaluronic acid to demonstrate whether or not the additive is necessary or not. The primary efficacy composite is looking to achieve a durable improvement in pain and function without any additional intervention, and we'll be updating the market in due course.Finally, I'd like to go to Slide 38, which speaks to the upcoming corporate milestones. For our product for graft-versus-host disease, I've mentioned earlier, we've successfully met all of our clinical endpoints that were required for FDA filing. We will be having, as I mentioned, additional meetings and pre-BLA confirmatory meetings with the FDA and have a plan in place for a filing during the first quarter of '19. With respect to our product for advanced and end-stage heart failure, MPC-150-IM, we've talked about the data results as presented at the American Heart Association for end-stage heart failure patients, and the events-driven trial continues to enroll -- coming to completion in relatively short order. The back pain program we've talked about, we've completed nondilutive transactions for commercialization of remestemcel-L, which has strengthened our balance sheet. We've established regional strategic partnership with Tasly on cardiovascular asset, and we are working significantly to enter into additional global partnerships for our back pain and cardiovascular assets, in particular.And with that note, I think I'd like to open this to any questions you may have. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Mark Breidenbach with Oppenheimer.

[Mark Alan Breidenbach, Executive Director & Senior Analyst]

Just 2 quick ones from me. With regard to enrollment in the Phase III heart failure trial, it sounds like we're getting really close to completion of enrollment. Is it too early to project when top line data will be available from the study?

[Silviu Itescu]

Remember, it's an events-driven trial. So there is a minimum number of events that the FDA requires the trial to achieve. It's not so much total number of patients, it's how many events occur. And of course, it is a therapeutic benefit in those events rates will be somewhat slower than would be seen normally. We need to review the total number of events and be able to update the market in due course. But we're certainly very close to achieving the prespecified minimum number of patients.

[Mark Alan Breidenbach, Executive Director & Senior Analyst]

Okay, and with regards to product registration in Class IV heart failure. Let's assume that the FDA goes along with an accelerated approval pathway with GI bleed as a surrogate endpoint. What do you imagine they would ask for as a confirmatory trial following an initial approval?

[Silviu Itescu]

Yes. Mark, first of all, GI bleeding and hospitalization is not a surrogate endpoint. It is a key clinically meaningful endpoint that the FDA has identified as very important and a major unmet need in these patients. And so the real question is whether we have sufficient data in 2 trials that have been confirmatory of each other. One with a post hoc analysis, the 30-patient study. And one with a prespecified analysis and 159 patients. We will be sitting down with the FDA and have exactly that discussion with the full data set in front of us. I think the key elements here are that, it is a major unmet need, it's probably the #1 cause of morbidity in this patient population. The patient population per se is an orphan one, and so it is not easy to reproduce these large trials in such an orphan population. And the results have been very confirmatory and very similar in nature. And so I think that will be the argument. The question then will become what kind of -- if we're fortunate enough to have a positive outcome from discussion with the FDA, what kind of postmarketing obligations would we have. It could very well be another confirmatory study or it could be a registry study. And those are all options under the RMAT designation.

[Operator]

Your next question comes from Jeffrey Cohen with Ladenburg Thalmann.

[Jeffrey Scott Cohen, Managing Director of Equity Research]

Just a couple, if I may. So firstly, Josh. Could you clarify the $10 million recognized this quarter from Tasly? So the total was $20 million in the form of cash plus $20 million in the form of equity, and could you clarify the price in time with the equity and also was the $10 million represented in first half of the cash portion?

[Josh Muntner, Chief Financial Officer]

Sure. So the $10 million is representative of a portion of that upfront milestone payment. The rest will be recognized over time. And the $20 million of equity that came in, I believe the price is $1.86. We'd had it in the deck, but we pulled it out of the deck just to try to simplify things. I'm pretty sure it was $1.86.

[Jeffrey Scott Cohen, Managing Director of Equity Research]

The additional shares are represented in this quarter?

[Josh Muntner, Chief Financial Officer]

We can provide the share count immediately after the call. I believe it's in the 6-K that's filed as well.

[Jeffrey Scott Cohen, Managing Director of Equity Research]

Okay, got it. And Silviu, can we talk a little bit about lower back pain. So with the MPC trial. So could you talk about, just hypothesize with us as far as a natural practice for degenerative disc disease. How do you proceed this reading out as far as real world and treatment paradigms prior to or after or in combo with artificial discs?

[Silviu Itescu]

Sure. Thanks for asking that question. The target patient population is very different from patients who require an artificial disc. We're at the other end of the extreme. So entry criteria into this Phase III trial required patients to have severe pain, have failed conservative therapy, including steroid injection. But have no more than 30% loss in disc height by X-ray. Now as you know, an artificial disc requires much more severe structural loss. So artificial disc or spinal fusion, for example, are offered at the other extreme, the end stage. We're positioning this product in the much earlier framework. And in fact, we would like to see this product used before anybody offers opioids to patients. That's where I think it's going to fit. And if you look at our Phase II data, as many as 50% of patients who get a single injection into the intervertebral disc have no pain for up to 2 years. That kind of durability in pain is -- really has never been seen with any other kind of treatment. When we're talking about the effect of opioids or nonsteroidal drugs, they're reported in the terms of 3 to 4 months of follow-up at best and the levels of improvement in pain are fairly modest. Certainly nowhere near the level of pain improvement that we see with a single injection of our cells. So if we're successful in this Phase III program, we have the chance to position in the patient journey relatively early, ahead of opioids and well ahead of any artificial devices or other such technologies.

[Jeffrey Scott Cohen, Managing Director of Equity Research]

Okay. Is there some imaging being done along with trial that may give some clues or suggestions as far as if the disc is actually being regenerated over time throughout the 24-month period?

[Silviu Itescu]

Yes. So we're certainly getting MRIs and X-rays in the Phase II trial. We saw evidence that over a 3-year period there was a stabilization, if you will, less of a decline in X-ray disc height loss in the cell treated than the saline controls. We hope to see the same pattern in this Phase III program. I would say that, as you know, MRI is not a validated technology here. We probably got one of the largest databases of the natural history over a 3-year period of what the discs look like in these patients. And remember that these patients have relatively early disc degeneration. What I can tell you is that, in control patients over a 3-year period, MRIs don't seem to change much. So whether we see a substantial difference by MRI, I don't know, but X-ray disc height is certainly something that I hope to see a difference in. In addition to that, I think what is notable is a severe degree of pain despite the relatively moderate degree of structural disease, which goes to the heart of the mechanism of action. Why do such patients have such severe pain? Most likely because they have severe inflammation in the middle of their disc. The inflammatory process in the disc activates nerves, activates blood vessels, and that results in acceleration and prolongation of the severity of pain. And what we have seen in Phase II over III is quite a dramatic and durable reduction in pain even without the terrible structural deformity that didn't exist in these patients in the first place. So fundamental to where I think the cells are working is by switching off severe inflammation and having an effect on the effect of pain for a prolonged period.

[Operator]

Your next question comes from Tanushree Jain with Bell Securities.

[Tanushree Jain, Healthcare and Biotech Analyst]

Josh, a quick one for you first. You were supposed to receive a EUR 5 million payment from Takeda. Is that still slated for this half?

[Josh Muntner, Chief Financial Officer]

It's expected in December.

[Tanushree Jain, Healthcare and Biotech Analyst]

In December?

[Josh Muntner, Chief Financial Officer]

[ No later than ] December, yes.

[Tanushree Jain, Healthcare and Biotech Analyst]

Yes. So you, just on GVHD, could you talk a little bit about the label expansion with the adult subset who are at liver and gut disease, and what's the plan there? What are the timelines then? What do you expect would be the natural course to develop the product order for that?

[Silviu Itescu]

So obviously the definitive trial design requires agreement with the FDA, and those are part of the discussions that we'll be having this month and next month as part of the overall pediatric approval process. But you are quite right. We plan to be targeting the high-risk adult population, meaning steroid-refractory with predominantly liver and gut disease. One thought process is an open-label registry study.

[Operator]

[Operator Instructions] Your next question comes from Jason McCarthy with Maxim Group.

[Michael Okunewitch, Equity Research Associate]

It's Michael Okunewitch on for Jason. So I figured some discussion of the MPC-06 could be topical considering the 2018 FDA meeting on analgesic drugs is occurring today. In the briefing documents that actually focused on opioid-sparing and replacing analgesics, but one of the key concerns was undermanagement of pain as a result. So what I was wondering, could MPC-06 potentially enable the use of these less effective opioid-sparing painkillers while managing pain to the same or even greater degree? And then do you think considering that, regulators may take a more positive view, especially when lower back pain is responsible for so many opioid prescriptions?

[Silviu Itescu]

So thanks for that question. And I think I totally agree with you. The kind of pain management that we're seeing with a single injection of our cells is quite -- it's very impressive, actually. And I think that the question is where this treatment will be positioned overall in the armamentarium. Obviously, opioid-sparing agents of the non-steroidal class or other novel classes would be cheaper and would be used earlier. I think that we would see our cells as being used initially in those who failed, those kind of more conservative approaches. And then you'd have our cells as the next in line as an opioid-sparing agent with potency. And I think that if there are additional agents that are approved orally as opioid-sparing agents, then I could imagine combinations of those together with our cells to really enable complete avoidance of opioids.

[Michael Okunewitch, Equity Research Associate]

And then just -- do you think you could give us an update as to that trial and help us understand the timelines considering that next March, all the patients will have been enrolled for 12 months?

[Silviu Itescu]

Yes. Absolutely. Look, we are having ongoing dialogue with the FDA around precisely this, how much data, how long a follow-up do we need, particularly given the new environment with the opioid crisis. And I think, I have to be frank, this is an evolving discussion. And I'd like to, sort of, leave it there. We will update the market when we have further clarity from the FDA.

[Operator]

That brings us to the end of today's call. I'll now hand back to Dr. Itescu for closing remarks.

[Silviu Itescu]

I'd like to thank everybody for being on this call, and we thank you all.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now disconnect.