Mesoblast Ltd
ASX:MSB
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Mesoblast Ltd
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Hello, and welcome to Mesoblast's financial update and operational highlights webcast for the first half year and second quarter ended December 31, 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 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 filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. In addition, any forward-looking statements that represent the company's views only as of the date 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 over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.
Thank you, operator. Good morning, good afternoon. We'll be today talking about the operational and financial highlights for the first half year ended December 31, 2018. If you could go to Slide 4, please. Mesoblast has an innovative technology platform with a well-characterized multi-model mechanism of action, underpinned by an extensive global intellectual property estate. We have a late-stage pipeline with an upcoming BLA submission for our first product in the U.S. for steroid-refractory acute graft versus host disease, that's expected to be the first approved allogeneic cell therapy product in the U.S. In addition, we've got 2 blockbuster product candidates that have both completed Phase III trial enrollment, our large heart failure trial and our back pain trial. We've also have in place a cardiovascular partnership with one of China's premier cardiovascular companies. In terms of commercialization, we are building a focused U.S. sales force for our anticipated graft versus host disease product launch. We have in place industrial scale manufacturing to meet our commercial demand for each of our product candidates. Our licensees in Japan and Europe have the first and only approved allogeneic cell therapy products and we intend to do the same in the United States. And as you will hear later from our CFO, Josh Muntner, we have increasing revenues and milestone payments that we are very pleased about.On the next page are our corporate highlights for the year. We are very proud of the achievements we have accomplished in the past 6 months. In terms of remestemcel-L for steroid-refractory acute graft versus host disease, on the back half of that terrific Phase III results in children with graft versus host disease where we saw significant benefits in survival through 6 months, at least. We held 2 successful end-of-phase meetings with the FDA, which covered both our clinical and our manufacturing aspects of our upcoming BLA filing. We have now a scheduled meeting with the FDA in April and we are on track to subsequently initiate the filing. We are in parallel building out an efficient and a very targeted sales force for our first U.S. product launch. Now for our cardiovascular product, Revascor, in the treatment of both advanced and end-stage heart failure patients. Our important Phase III trial in chronic heart failure patients completed enrollment, with a total of 566 patients randomized. This trial will complete when sufficient primary endpoint events have accrued, which we expect to be within the next 12 months. The first joint steering committee meeting was held between ourselves and our partner in China, Tasly. The outcome and objective of the meeting now was that Tasly initiated clinical study in China using very similar endpoints and targeting very similar patient population as in our North American Phase III trial and they're expected to meet with the Chinese regulators in the near term. The NIH-sponsored 159-patient trial Revascor in the sickest of patients, those with end-stage heart failure with an artificial heart left ventricular assist device, we were pleased achieved a 76% reduction in major gastrointestinal bleeding events and a 65% reduction in associated hospitalizations. These are very clinically meaningful outcomes. And, in fact, in earlier meetings with the FDA, we received specific guidance that this was a potentially approvable endpoint, given the meaningful outcome in this patient population and could support product registration. We also achieved a number of important corporate highlights in the half year. On the financial side, we have a very strengthened cash position for both corporate transactions and strategic financing. And we now have $92 million pro forma cash on hand, as of December 31. We completed the transaction with Tasly to establish a cardiovascular partnership in China and received upfront $40 million. We currently are ramping up manufacturing investment in preparation for registration and launch of remestemcel-L and we continue to see increased product royalties from licensees. With respect to our Board of Directors, we have initiated a structured succession plan to bring important complementary skills, particularly in the U.S. We have proven FDA product approval capabilities, commercial launch expertise, reimbursement and health system expertise and extensive global transactional records on the board. Our management has been expanded to support the commercial launch plans of the company. We have a commercial leadership with proven track record to roll out products and a launch team and we have operational leadership to drive product life cycle management, manufacturing and regulatory interactions. With that as background, I'd like to introduce our Chief Financial Officer, Josh Muntner, who will now take you through the financials. Josh?
Thank you, Silviu, and thank you, everyone, for joining the call today. This is an exciting time for Mesoblast. And as Silviu mentioned, we have a number of upcoming catalysts, most notably our BLA filing for remestemcel-L, which we believe has the potential to meaningfully impact pediatric patients suffering from steroid-refractory acute GVHD. Turning now to our financial information found on Slide 8. We ended the first half of fiscal 2019 with $77 million of balance sheet cash as of December 31, 2018. After that date, we received approximately $15 million in January 2019 from Hercules after having successfully achieved a clinically meaningful milestone of reduction in major GI bleeding events and related hospitalizations in the U.S. NIH-sponsored trial of our investigational product for Revascor in end-phase heart failure patients with LVADs. Our reported cash plus the additional $15 million brings our cash position to a healthy $92 million on a pro forma basis. We feel comfortable that this enhanced cash position is sufficient to allow us to meet several upcoming milestones. Now looking at first half of 2019 financial results, we turn to Slide 9. We saw a significant reduction in operating net cash outflows in the 6 months ended December 31, 2018 compared to the prior period. This was largely due to an increase in milestone payments from our licensees, Takeda and Tasly. We also saw significant increase in financing net cash inflows. This was due to cash received in our strategic financing transactions with Novaquest and Tasly. Turning to Slide 10, we will now review our revenue. Total revenues were $13.5 million for the 6 months ended December 31, 2018 compared to $14.6 million for the prior year period. In the current period, our milestone revenue included $10 million from our partnering transaction with Tasly. The prior period included $11.8 million of milestone revenue from our licensing transaction with TiGenix, now a subsidiary of Takeda. Our commercialization revenue is comprised of royalties from JCR. We saw 43% growth in royalty revenue in the 6 months ended December 31, 2018 versus the prior year's 6-month period. We continue to be pleased with the sales growth of TEMCELL for acute GVHD in Japan. On Slide 11, I'll now walk through the remainder of the P&L line items. You will notice for the first 6 months of fiscal 2019, we incurred an after-tax loss of $44 million as compared to a gain in the prior year period. Some notable elements that contributed to our loss in the current period include an $8 million increase in manufacturing spend related to ongoing activities in preparation for filing the BLA for remestemcel-L. We've also recognized $5 million of interest expense related to our Hercules and Novaquest facilities that we didn't have in the prior year 6-month period. Other drivers of the differences in our after-tax loss plus profits between the 2 periods include 2 large noncash, nonrecurring items that provided benefit in the prior year period. One was a large onetime noncash income tax benefit due to changes in U.S. tax laws in 2017. The other was a onetime noncash gain due to a revaluation of our contingent consideration based on a reduction in expected future payments that we owe to a third party. This will conclude our financials. We believe we have a strong financial position and are well positioned to execute on our upcoming milestones. For further information on financial results, please see our recently filed reports with the SEC or on our website. I'd like to hand the call back to you now, Silviu.
Thanks, Josh. We will turn to Slide 13. This is a slide of our pipeline. As you can see, we have 2 products already in commercial phase, our products in Japan marketed by our partner, JCR, TEMCELL for acute graft versus host disease and the product in Europe marketed by our licensee, Takeda, Alofisel for perianal fistula. I'll be focusing now on our pipeline products in Phase III, the 3 products below remestemcel-L for acute graft versus host disease, having completed Phase III in the U.S.; Revascor, having completed enrollment of a Phase III in North America for heart failure and MPC-06-ID having completed enrollment in its Phase III for chronic lower back pain in North America.Slide 14. Acute graft versus host disease is a life-threatening devastating complication that occurs in about 50% of patients, who receive an allogeneic bone marrow transplant. In those who failed to respond to steroids, the mortality rate can be as high as 95%. There are no approved treatments outside of Japan, where the only approved treatment there is TEMCELL by our licensee, JCR. There are more than 30,000 allogeneic bone marrow transplants performed globally and those numbers are growing. And the incidence of GVHD, due to certain immuno-oncology products, is also likely to grow and increase over time. Based on the pricing and adoption rates of TEMCELL in Japan, we are confident that we understand the market opportunity well, particularly in the United States and we believe that the opportunity before us represents as much as a $700 million market opportunity across the U.S. and Europe. Our commercial strategy overview on Slide 15. As I'm saying TEMCELL sales experience in Japan continues to help inform our commercial strategy for the U.S. in terms of market adoption and ongoing post-marketing follow-up. We have a fast-track designation that provides eligibility for FDA priority review. We have a commercial strategy in place for product launch and we're building out an efficient and a targeted sales force. As mentioned, we expect that the Biologics License Application is on track for filing in early 2019. We'll move to Slide 16. This is the landscape of heart failure. Revascor is targeting those patients with progressive heart failure, despite existing maximal standard of care. What we show here on the left is Class I and over about a 10- to 15-year period patients inevitably progress through the Class IV on the right. For early-stage disease, patients are well treated with a range of generic drugs and, more recently, the new branded product -- combination products, sacubitril/valsartan. However, inevitably over time, patient's progress to Class III, Class IV heart failure, those are stages of disease where despite maximal existing therapy, patients have recurrent high rates of hospitalizations and ultimately high mortality rates that, in many ways, resemble the mortality rates seen with malignancies. This is exactly where Revascor has the ability to create a market for itself and where there are no competitors if we're successful. More than 8 million patients with chronic heart failure are expected to have the disease by 2030 in the U.S.A. alone. This is a tremendous epidemic and a major unmet medical need. The sickest 15% to 20% represent our target market population, Class III, Class IV disease where there is a high burden of disease with recurrent hospitalizations and a mortality rate that is as high as perhaps 20% over a 2-year period in Class III disease to as high as 50% in 12 months in end-stage heart failure disease. We believe that if successful, we have a multibillion-dollar market opportunity in the U.S. alone for this product candidate. What's the status of our program? Slide 18. The events-driven Phase III trial has completed enrollment of 566 patients. All patients have been randomized 1 to 1 to either control or sham and the trial is being conducted across 55 sites in North America. The objective of the trial is to see whether a single dose of Revascor reduces the recurrent heart failure-related hospitalizations and reduces death. The primary endpoint is an innovative endpoint that measures not just the first hospitalization, but all hospitalizations. So we will be able to, if successful, not only demonstrate evidence of efficacy, but we will have pharmaco-economic support for reducing disease burden and that is very important today in being able to get appropriate reimbursement from the health economic authorities. Now importantly, we're confident that the 566 patients will be sufficient to give us a signal and an outcome of efficacy if Revascor is successful based on the total number of events being accrued. And I say that because we now know that we were successful in identifying the right patients for this trial. We've selected those patients with certain criteria to be patients with severe disease at high risk of recurrent hospitalizations and death, precisely the target patient population who are in Phase II demonstrated the fastest progression and where a single dose of Revascor as the dose being tested in Phase III was most effective. The trial will complete when we have achieved the prespecified targeted number of primary events, which is likely to be within the next 12 months. Now on Slide 19, we move to the opportunity for early market entry using Revascor in patients with end-stage heart failure being kept alive by an artificial heart left-ventricular assist device. This target population today represents about 4,500 to 5,500 patients with end-stage disease, who receive LVADs. In the U.S. alone, as many as 60,000 patients a year could receive an LVAD, but currently, majority don’t. And one of the important reasons for that is that there continues to be a significant morbidity associated with this procedure. And in fact, the most important nonsurgical complication in these patients is life-threatening recurrent gastrointestinal bleeding. We believe that if successful in this patient population in reducing this most important nonsurgical outcome, then we have the ability to enter this target market and build up a presence in the field.Slide 20 provides you with the important clinical data that were presented by the independent investigators from the NIH in 2 trials. On the left-hand side of the slide, you see the data from a 30-patient pilot study, published several years ago. On the right-hand side, you see the data that was recently presented at the American Heart Association in a 159-patient study, both of these trials were 2 to 1 randomized, double-blinded, placebo-controlled and both funded and conducted by totally independent NIH investigators. What is really remarkable about these 2 trials is almost identical outcomes, almost identical confirmatory outcomes between these 2 trials. As you can see, by Kaplan-Meier statistics on the left-hand side, the -- a single injection of MPCs in a pilot study reduced bleeding events over 6 months from 40% to 10%; and on the right-hand side, reduced major bleeding events from 33% to 17%. And if you look at the table below that, the rate of major GI bleeding events over 6 months in the 2 trials were reduced by a single injection of MPCs by 70% in the pilot trial and by 76% in the recently reported 159-patient trial. These results on a statistical basis are not by chance.In addition, in the 150-patient trial, beyond just simply reducing the number of GI bleeding events, the hospitalization rate from these events was reduced by 65% as you can see. And that has a major readthrough into both pharmaco-economics for this patient population as well as the endpoint on recurrent hospitalizations in the 566-patient trial in patients with Class IIb/III heart failure disease because the underlying ideology of GI bleeding and hospitalization, we believe is similar between the 2 trials and relates to abnormally functioning blood vessels in patients with ischemic heart failure disease. Now these results are particularly important given the fact on Slide 22 that we have what's called a Regenerative Medicine Advanced Therapy Designation from the FDA for this exact indication in patients with end-stage disease and LVADs. We received exclusive guidance from the FDA several months ago that, in fact, major gastrointestinal bleeding in these patients is a clinically meaningful outcome and can be used as an endpoint to support product approval by the FDA. The benefits of having an RMAT designation are that we can engage with the FDA on a frequent basis. We're eligible for priority review and eligible for accelerated approval if the data are deemed sufficiently important. We intend to meet with the FDA in the first half of this year to, in fact, discuss the pathway to filing for a BLA application for Revascor for this indication.Moving on to Slide 23. I'd like to talk about our last, but by no means least, a very important program of MPC-06-ID, intradiscally administered for chronic lower back pain due to disc degeneration. This program has taken on a lot more importance in the past couple of years given the tremendous opioid epidemic that is now ongoing in the Western world. In fact, 50% of prescription opioids are being used for patients with severe debilitating chronic low back pain and, obviously, that is the major driver of the problem where there is a high frequency of fatalities due to accidental overdosing in these very unfortunate patients. There was a major drive and push by the FDA to support and identify novel therapies that are nonopioids for this very devastating patient population. We have identified these patients as being potentially particularly responsive to our therapy based on the underlying mechanism of action of our cells as anti-inflammatory agents where inflammation in the disc is a major driver of the chronic pain. And we have targeted a very large segment of the patient population where we believe, if we are successful, again, this represents a multi-billion-dollar opportunity for Mesoblast in the U.S. alone.Slide 24 summarizes the postop Phase II data that we previously presented, and I think it's very important to just review again. On the left-hand panel, you see the impact of a single dose of MPCs in Phase II versus saline controls at 12 months. And what you see that in a composite endpoint with a very high bar of having a patient required to have at least a 50% reduction in pain at 12 months and a 15-point improvement in function at 12 months with no concomitant interventions. These are endpoints that are typically used in an artificial disc replacement or in a surgical intervention, very high bar, much higher than drug trials typically target. What we saw was a very significant threefold increase in those who responded to this -- using this composite to a single injection of our cells at 12 months versus the placebo group. Even -- as important or perhaps more important on the right-hand side, you can see that the effect was durable through 24 months. And these data provided the target endpoints for our active Phase III trial 404 patients 2 to 1 randomized completed enrollment a year ago, with all patients set to complete the 12-month assessment for safety and efficacy in the first half of this year.Moving on to the last slide. These are our key milestones that we expect to be presenting. Remestemcel-L for acute graft versus host disease has already successfully met its efficacy and safety endpoints through at least 6 months. On the basis of that, we will be initiating a BLA filing for marketing authorization following the FDA meeting scheduled for April. And we will in parallel be building out an efficient and a targeted sales force for product launch. With respect to Revascor, the Phase III events-driven trial in North America for advanced heart failure completed its 566-patient enrollment and continues to accrue primary event endpoints with a likely completion within 12 months. Our partner, Tasly, plans to have a meeting with the National Medical Product Administration of China in the first half to discuss the regulatory approval pathway for the product in China. And both us and Tasly will be using our respective clinical trial data in support of our regulatory submissions. Mesoblast additionally plans to meet with the FDA in the first half to discuss the pathway for approval of Revascor for reduction of GI bleeding in patients with LVADs. With respect to our third Phase III asset for chronic low back pain, Phase III trial completed enrollment in the first quarter of last year. All patients will have completed their 12-month assessment for safety and efficacy shortly. In addition, we continue to work to establish additional global and regional strategic and commercial licensing arrangements for each of these products. Thank you, and I think, we would like to open for questions.
[Operator Instructions] Your first question comes from Mark Breidenbach from Oppenheimer.
Congrats on getting the Phase III trial enrolled, that's -- it's a big milestone for you guys. So my first question is just a little bit on the size of the Phase III, 566 patients was a little bit less than the original guidance of 600 patients. Would you say that this has no impact whatsoever on the number of events that are required to trigger primary analysis say, if I remember correctly, we're looking for 540 events, and is this number more or less unchanged with the enrollment cap at 566?
Yes. The key point about the total number of patients is, what kind of patients are we enrolling? First of all, the primary endpoint of this trial is a very innovative endpoint. It's called a joint frailty model. Typically, this is an endpoint that's used in cancer patients. It measures total disease burden. The primary endpoint is looking at reduction in hospitalizations over time and it uses mortality as a factor in consideration. And so there is a primary endpoint, which is total event burden and there is a key secondary endpoint, which is a time, traditional time to first event on mortality, if you like, thermal cardiac events, mortality or transplants or progression to an LVAD. And the fact that the primary endpoint measures all heart failure events, not just the first, means that we were able to reduce the total number of patients enrolled in the trial per se. In other words, the primary endpoint has a lot more power to it. In addition to that, we specifically enriched the patients at highest risk for recurrent hospitalizations. And we did that by requiring patients to had a recent hospitalization or a very high level of biomarker called N-T pro-BNP, both of those are known predictors of high levels of hospitalizations. And having done that, we now know that the demographics of the patient population, in a blinded way, reflects more than 80% to 85% of the patients, those very patients who in Phase II had very severe disease, had very fast progression and where ourselves gave us the greatest benefit. So it allows us to then -- to have a Phase III trial with a high degree of events and where we think we are appropriately powered for maximal treatment benefit from a single dose. That gives us great confidence. And that's the rationale for why we think 566 patients was enough because we can see the trajectory, we understand how many events have been accrued and we can map out the time line.
Okay. And just to be clear, the 540 events, that's still the – is that – that [indiscernible] number hasn't changed, correct?
That's correct. That's right.
Okay, okay. Just a second question on the Phase IIb results in end-stage heart failure. I'm, of course, wondering if there has been any update or guidance on plans for publication of the full dataset when we might get a chance to look at all the secondary endpoints from that trial?
Look, I'm not aware. I think the NIH Group is planning to publish several publications, both on the weaning data as well as on the gastrointestinal bleeding data, which was obviously the most important of the secondary endpoints. So I don't have any more timing on either of those for you, but I know that they're actively putting together management.
Okay. Fair enough. One, on the planned a 12-month assessment of safety and efficacy for the chronic lower back pain trial. If I'm remembering correctly, the FDA wants 24 months' worth of data from this trial. I'm just wondering, how the 12-month assessment is going to work? Is they're going to be a subset of patients unblinded as this data actually going to be presented and announced anywhere? Or this is going to be sort of silently done in the background without unblinding?
Well, I think the -- those discussions are ongoing with the FDA. And I think the FDA primarily wanted a risk-benefit analysis through 24 months, which comprises safety as much as it does efficacy. And I think, we will be updating the market in due course in consideration of those ongoing discussion. I will say, however, that, that with most drug trials for pain, the endpoints that most drug trials take as primary endpoints are usually pain-only rather than pain-end function as a composite and are usually of the order of around 4 months of follow up. So we will have extensive durable data in discussions with the FDA beyond just pain, pain function and key secondary endpoints that are relevant obviously to patient well-being outcomes and health economics.
Okay. Just a final one for me. Can you give us a little more color on the size and deployment strategy of the sales force that you guys are building for remestemcel-L?
50% of all transplants are done in about 15 sites. So it's not a lot of sites across the U.S. that need to be managed closely. In addition to that, we've had an ongoing EAP program across the U.S. Most investigators in our last Phase III trial were also investigators in the EAP program. So our product is well known. It's well handled. It's stocked in many sites. And so I don't think we will need more than a 12-or-so people on the ground to manage this process. I think it gives us the opportunity actually to build a small, but very targeted sales force with MSLs for this product launch, but to be in place potentially for additional biologics capabilities.
Okay. That's very useful color. Actually, if I can just flip one very quick last one in. I still see the rheumatoid arthritis program in your pipeline, but we haven't heard anything about it for a while. Is it safe to assume in 2019, we're mostly just going to be waiting for a potential partner to continue development of this one?
Look I think, first of all, we'll be updating on further data readout. Those patients still being followed up long term. So there is a number of outcomes to review in that program. I think it's clear that we achieved some very important primary and secondary endpoints in that trial. It should move into a Phase IIb perhaps in the depth of program of dose escalation in terms of demonstrating the optimal dose or regimen for potential remission induction, that's where the program needs to move next. And I think that either it is partnered with a major player in this space or if we partner cardiovascular or back pain, we will obviously free-up resources to move that program ourselves to the next phase. So I think either of those 2 would likely to see RA moving to a larger program over the next, let's say 6 months.
Your next question comes from Jason McCarthy from Maxim Group.
Congratulations on the progress. So first off, for the ongoing Phase III in heart failure, what sort of a difference would you need to see between the foreseeable group and the treatment group to bring it to regulators? And then also, if you could give us a few examples of what kind of cardiac events you'd be looking at? And then just how common these would be the SoC population.
Yes. So the primary endpoint is a reduction in heart failure-related hospitalizations that require inpatient admission and treatment, let's say, with intravenous diuretics and the like, right, so serious events. Now the endpoint is a cumulative event, the total number of events per patient, and there is a mathematical analysis that correlates mortality with hospitalizations. Obviously, if a patient dies early, he doesn't have hospitalizations over the next 12 months, right? So early death is a bad correlate in the primary endpoint for example, so even though the primary endpoints relates to total heart failure burden per patient, death is calculated in the overall event rate. These patients have on average, let's say -- they're so sick that they have 1 to 2 of these hospitalizations per year. So these are not infrequent, these are pretty frequent events. And so if we see a reduction of the order of 20% to 30%, that's going to be meaningful reduction in hospitalization events between the 2 groups. Now more important than that even is do we reduce mortality? It's -- it is time to first event analysis on mortality on terminal events typically requires much larger number of patients than we're enrolling here. And that's why it's not the primary endpoint of this trial. But it's a key secondary endpoint. And if we have a real treatment benefit of the order that we saw in Phase II, we're going to see a significant reduction in mortality as well. It is unlikely that we would -- that we will win on the primary endpoint and not be at least shying a substantial trend on reduction in mortality as the key secondary endpoint because the 2 go together and the second has an impact on the first. And that's exactly what you want to see. So the question to me, I guess, is what outcomes do I expect to see and what kind of outcomes would allow us to have an approvable endpoint? I think we have to meet the primary endpoints. And if we meet the primary and the secondary endpoint, obviously both of those together would put a strong case towards approval. I think, if we don't meet the primary endpoint, but we have a strong outcome on mortality, there's precedent with beta-blockers, for example, where confirmatory trials on mortality benefit have resulted in heart failure approval. And so I think, we have multiple shots on goal here. The point is that this is a very sick patient population with high rate of events despite maximal standard of care. Despite maximal standard of care, you expect to see high rate of hospitalizations than a mortality rate that approximates 20% -- 20% to 30% over a 2.5-year period mortality progression to transplants or LVADs. Those are very large event rates for a population that's maximally treated. So it gives us a lot of room for and a lot of scope for success.
Right. That's very helpful. And then just as a quick follow-up, could you actually discuss some of the clinically important differences between the Class IV population that we saw in the previous Phase IIb and the ongoing Class II/III population?
Yes. I mean, you can't compare the 2, right? The end-stage heart failure patients, they're not Class IV, they are end stage. Those patients are dead without having a device implanted. So they have a nonfunctional heart, right? The dream was -- or the hope that the investigators had is that perhaps our stem cells would rejuvenate the heart sufficiently that they can get rid of their LVAD. That was a very, very long shot for these very big dilated end-stage fibrotic hearts. Now when you put an LVAD into these patients, the inflammation that is core to progressive heart failure is amplified manyfold, manyfold. And that inflammation that is primarily in the heart, because that's where the LVAD is sitting, results in further aggravation of vascular abnormalities, both in the heart and the periphery. And the bleeding is a manifestation of the vascular abnormality in the gut that these patients get from amplified inflammation in the heart. So when you put our cells in, the fact that we have such a dramatic reduction in bleeding implies a dramatic effect on vascular dysfunction, which we knew that our cells can do based on preclinical large animal studies. What we didn't know was that we would have such a dramatic effect on the bleeding complication of this event. And how does that read through to the 566-patient trial? Well, vascular dysfunction, endothelial dysfunction is fundamental to Class III heart failure. It is probably the principal cause of heart failure, both in the heart and in the muscles, and it's probably the principal cause for the functional incapacity of these patients. The limitation on 6-minute walk, the shortness of breath and the like is as a result of poor blood flow to the end organs that results from endothelial dysfunction. And so if you can -- if we can reverse that in end-stage heart failure patients, that has a tremendous readthrough into the Class III population, the majority of whom have ischemic heart failure and look like demographically like those sort of patients, who had progressed to end-stage heart failure and were responsive to our cells. So that's the way I would look at that LVAD study. Love to have learned from it, a lot of readthrough into the Class III population and the ability through identifying a clinical outcome that we can help gives us the potential for an early market entry of the product.
Your next question comes from Tanu Jain from Bell Potter Securities.
Just a few from me. Just on your China trial, given that you're planning to design it similar to the one you've just completed enrollment for in the U.S., do you think the FDA might consider that as a second confirmatory trial?
Yes. That's a really, really insightful question, Tanu. So our objective in working with our partner, Tasly, will be to establish a global trial, not just China, but also EU and some U.S. sites. So yes, that's exactly the intention is to have this second trial to potentially be our confirmatory second trial in parallel with our U.S. trial. To do that, it would have to have some U.S. representation and we would, of course, like to have EU representation.
Great. And then just in the 566-patient trial, would you have any idea of what the mix would have been between the Class II and the Class III patients that have been enrolled?
Yes. It's about 60% Class IIIs and about 40%, what I call, Class IIbs, which are not -- which are advanced heart failure Class II who are on their way to being Class III. So it's specifically been enriched for the Class IIIs and we now know the kind of demographic baseline factors that are predictable recurrent hospitalizations and that's in a blinded way.
Right. So given the Class IIIs are majority, do you think the potential of getting more number of events becomes higher?
Yes, yes. So we have enriched for majority being Class IIIs, but maybe it's closer to 65% Class IIIs, and even the IIs, IIbs who are in -- both the IIIs and IIbs have -- 80% of the patients have very big dilated left ventricle systolic volume of more than 100, which is more than 3 standard deviations above normal. That's a well established published predictor of recurrent hospitalizations and deaths. And so through our original criteria, we've ended up with the majority being Class IIIs and the vast majority having big dilated left ventricles with a high rate of events and it's those patients with dilated left ventricles who responded greatest in Phase II to our 150-IM MPC dose in terms of protection against something like a 70% progression to hospitalization or death over 3 years.
Right. So you are saying that we're likely to get the events within the next 12 month. So from that point of view, is there any chance that we might see some top line results on this calendar year? Or you think it's more likely to be in the next calendar year?
Look, I think it's too early to predict. The event rate is continuously increasing and accelerating because of the stage of disease and progressive nature of the condition. And well, I guess, we can update the market during the next quarter, but it's essentially the collection of events is moving sort of in a J-curve hockey stick kind of way. So hard to predict really.
Okay. And just a last one for me. Just on the TiGenix Takeda product, Alofisel, would you have any idea as to how the sales there are going? And how many months? Remind me, have they actually launched in the market with?
Tanu, it's Josh. Takeda has introduced the product in a limited way in some select European countries, but has not achieved -- they've been introducing it without real pricing attached to it. And so they have not had significant sales to report to us and we don't have significant royalty to report at this time. But it's just being launched over the course over the last month -- the last months of the prior quarter.
Yes, I think -- Josh, if I could add to that. I think, they're currently using it under an EAP, whilst they're negotiating with various jurisdictions appropriate pricing.
[Operator Instructions] Your next question comes from David Langsam from Biotech Daily.
Just 3 very brief questions, 2 for Silviu and 1 for Josh. At the very beginning, Silviu, you said that approval of remestemcel-L was already the first, if I'm wrong correct me. First, allogeneic biological in Japan and Europe and if approved in America, it will be the same there, was that the correct expression?
The product in Japan based on the same technology that remestemcel-L is being developed for in the U.S. is called TEMCELL. So it has a brand name called TEMCELL in Japan. It's being marketed and sold by our licensee, JCR Pharma. It certainly is, to my knowledge, still the only fully approved cell therapy product in Japan and it will certainly be the first. There are a couple of products that have received conditional approval, but other than this one, none have got full approval. Full approval requires Phase III evidence. In Japan, the partnership with JCR has recently been expanded to include also the use of TEMCELL for epidermolysis bullosa, which is an orphan indication. We -- under our arrangement, we will get royalties also on sales for that product and there'll be a data sharing relationship so that we can use those data for plans to expand applications in the U.S. beyond GVHD to epidermolysis bullosa. With respect to the product under license to Takeda, that product is called Alofisel. It is the first approved allogeneic mesenchymal in each product in Europe and is again licensed through our underlying technology. As Josh just stated, whilst Takeda has marketing approval, they are not yet making it commercially available until they get pricing agreements in various jurisdictions. It is available in the limited nature right now through an EAP program. Does that -- now in terms of the U.S., we will be launching remestemcel-L, is a generic name. We haven't yet decided definitively on a tradename. We will let you know once we have a tradename agreed on. The initial indication was pediatric graft versus host disease, we will seek to expand it to adult graft versus host disease. We have a life cycle plan to expand to chronic GVHD, and, of course, we have other indications for which remestemcel-L will be additionally developed, including as I've just mentioned, epidermolysis bullosa and potentially Crohn's disease.
To clarify my question, basically the same therapy is the first and only approved in Japan, Europe and hopefully in the U.S., as my first allogeneic stem cell therapy.
That's correct.
Right. Second question for you is on the lower back pain trial results, exceptionally good comparing MPCs to saline. Has the FDA made any noises about other comparisons with, for example, weight loss in corticosteroids seem to also be very useful for lower back pain. Or is it simply going to be MPCs versus saline as they measure?
So there are no randomized placebo-controlled trials that I'm aware of at all that corticosteroids have any benefit on chronic lower back pain other than in the setting of an acute inflammatory discitis or compression of the sciatic nerve. So for these patients who have pain that's median of 7 to 10 years, right, this is severe debilitating degenerative disc disease and chronic pain for which 50% of patients are on chronic opioids. Steroids don't have any benefit, not as weight loss. This is now a disease caused by severe progressive inflammation in the disc. The inflammation is due to the destructive and the inflammation results in chronic further destruction of what's going on in disc space. Our cells, a single injection of cells switches off the key drivers of the inflammation. And it appears that the inflammation is turned off for as long as 12 to 24 months because we're seeing dramatic reductions. The reduction will be for that long. The FDA reviewed our Phase II trial of 100 patients. We had -- in addition to saline, we also had hyaluronic acid as one of the control arms and the FDA was very comfortable, that hyaluronic acid had no benefit over saline and therefore, saline was the appropriate control in the Phase III.
And the final question is for Josh. In the Appendix 4C filed on the 31st of January, the company said they had USD 28.5 million in total revenue. And in the figures in the H1 report today, there's $13.5 million, $10 million and $3.2 million, adding up to $26.7 million. I know it's only a couple of million out, but I was wondering if you could explain the revenue, the totaled to $28.5 million in the Appendix 4C?
Actually, we don't have the 4C in front of me at this moment. I will try to pull it up.
I did write to the company at the time asking for detail.
We have Andrew Chaponnel here in the office. Andrew is our Head of Finance. Can you address the question?
Yes, David. So your questions pertaining to the cash report. The Appendix 4C, the cash report. Can you restate your question?
On the 31st of January, when the 4C was filed, it said received from customers $28.5 million. I wrote to the company at the time asking for clarification of what that revenue comprised. Today, you've explained that $13.5 million is from TEMCELL and then there is a further $10 million and the $3.2 million, adding up to $26.7 million. So there is about $1.8 million missing, and I do appreciate it's a very small amount, but I wouldn't mind getting the facts correct.
Okay. We will have to come back to you. It's timing. I mean, the 4C is looking at cash that's received, which is received up to 30 to 60 days later and the revenues in the current period so that the timing is [indiscernible].
That's okay. That explains it. That's fine.
Your next question comes from RK Swayampakula from H.C. Wainwright.
A lot of my questions have been already answered. A really quick one. On the remestemcel-L filing for the steroid-refractory GVHD, you stated that you're planning to meet with the FDA in April of 2019. So what sort of clarifications are you trying to seek in that particular meeting? And what would be the time line for filing the BLA post that?
Look, this is very much an administrative meeting. The key meetings were held in November. We had 2 Type C meetings, 1 on manufacturing and 1 on clinical. So I think the key questions were addressed during those meetings. This is very much administrative, and I would expect that shortly thereafter we'll be filing.
Okay. And then on the reaction in GI bleeding question for patients with LVADs. What sort of discussion points would you have with the FDA, especially when FDA had given you the RMAT designation on the GI bleeding reduction as the criterion? I'm just trying to understand, how the discussion could go? And what's the impact of that discussion you could face?
Sure. So the RMAT was given on the basis of the preliminary data from the pilot trial, which in 30 patients demonstrated the data I showed you earlier, reduction in GI bleeding and related hospitalization. That -- the RMAT then required us to complete a larger confirmatory randomized placebo-controlled trial to see whether or not that endpoint was again successfully met. Well, we've just done that in the 159-patient trial. And so the next level of discussions will be to lay out the data in the 159-patient trial to demonstrate how close these data are to the original pilot data. And the discussion will really focus around the ultraorphan nature of the disease, the patient population, the unmet need and what is required to get this product into the marketplace as quickly as possible to meet the needs of these patients. I know that the NIH and the investigators are very keen to provide whatever support is needed to the FDA in confirmatory studies, post-marketing, et cetera, et cetera.
If the FDA decides for you folks to go do a larger study to prove that as the endpoint, what kind of a setback, and I don't like to say setback, but what kind of an impact would you have on your program? And how do you see that in terms of development strategy itself?
I don't see that as any setback at all. I expect that the FDA one way or the other will expect an additional trial, whether it's pre-approval or post-approval and it won't be any larger. It will be no larger. In fact, it's likely to be smaller than the trial that was just done. And that's because we're clearly -- for this endpoint, we're clearly well powered. This was a 2 to 1 randomization. If we were to do a 1 to 1 randomization, we'd probably need 30% less patients. So the FDA, I certainly believe, we'll expect a further trial in the same patient population, the same dose, with, I would think something like a 6-month endpoint. The question is whether -- is under what scenario? And I would expect that the NIH investigators would totally run that trial again. I don't see any -- this is an area that provides us with an opportunity for an early market entry and that's the way we look at it. The big opportunity -- the market opportunity is 10x bigger for our Class III heart failure program, and that's the one that we're completely focused on in terms of our future revenue potential.
Thank you. That brings us to the end of today's call. I'll now hand back to Dr. Itescu for closing remarks.
I want to thank everybody for being on this call. We're very excited by the corporate milestones we've delivered and we see the next 6 months as being, perhaps, the most exciting in the company's history. Thank you very much, and we look forward to speaking with you all shortly again.
That concludes your conference for today. Thank you for participating. You may now disconnect.