Mesoblast Ltd
ASX:MSB
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Mesoblast Ltd
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[Call Starts Abruptly] Thank you very much, operator. Good afternoon, good morning to everybody. Thank you for joining us on the operational highlights and financial results for the second quarter fiscal year 2023.
If we could go to Slide 4, please. On the call with me today is Andrew Chaponnel, our Interim CFO; and Dr. Eric Rose, our Chief Medical Officer. Slide 4 is a snapshot of the investment highlights for the company. We have a novel allogeneic cell therapy platform that allows us to develop off-the-shelf allogeneic medicines based on our proprietary mesenchymal stromal cell platforms to treat patients with severe inflammatory conditions without the need for donor matching or immunosuppression. A lead product candidate is remestemcel for steroid-refractory acute graft versus host disease in children. The remestemcel BLA was resubmitted to the FDA in January 31 of this year.
Rexlemestrocel, our second lead product, is being developed for two indications: chronic low back pain; and heart failure with reduced ejection fraction. For chronic low back pain, first Phase 3 trial has been completed. And RMAT was granted by the FDA during this quarter and the program is progressing towards initiation of a second pivotal Phase 3 trial commencing midyear. Rexlemestrocel for heart failure with reduced ejection fraction has also completed a first Phase 3, and we’ve had RMAT previously granted by the FDA for patients with end-stage heart failure with an LVAD implanted. And today, I can announce that the Phase 3 trial DREAM heart failure for rexlemestrocel in patients with Class 2/3 disease, has been published in the Premier Cardiovascular Journal, Journal of the American College of Cardiology.
In terms of finances, we’ve got an annualized revenue of approximately $7.6 million from royalties on sales of our mesenchymal stromal cells products. We have $67.6 million in cash and up to an additional $40 million from existing financing facilities subject to certain milestones.
Let’s go to the next slide, Slide 5, please. This slide shows a snapshot of our late-stage clinical pipeline. I’ve just talked to the lead indications for remestemcel and GVHD, rexlemestrocel in chronic discogenic back pain and heart failure with reduced ejection fraction, and there are several other indications for remestemcel that we are pursuing, including acute respiratory distress syndrome and inflammatory bowel disease, those are with clinical collaborations and investigator initiated studies.
Next slide, please. Our proprietary stromal cell technology platform allows us to have very well-defined stromal cells with well-characterized mechanisms of action, potency assays, batch-to-batch consistency and reproducibility. Our capability to manufacture these cells allow us for scalable production and off-the-shelf therapeutics. And we have a very strong IP estate that underpins compositions of matter, methods of manufacturing and indications.
Next slide, please. Now, I’d like to move to our financial results, and Andrew Chaponnel will take you through these. If we can go to Slide 8, please.
Thanks, Silviu. The financial highlights for the second quarter are on Slide 8. So revenues from royalties on sales of TEMCELL in Japan by our licensee were $1.9 million for the second quarter ended December 31, 2022. On a constant currency basis, sales for the quarter ended December 31, 2022, were $2.1 million compared with $2.3 million for the quarter ended December 31, 2021.
Net cash usage for operating activities in the second quarter FY 2023 were $16.5 million. This represented a 9% reduction of $1.7 million on the second quarter FY 2022 and a 46% reduction of $14.1 million on the second quarter FY 2021. At December 31, 2022, cash on hand was $67.6 million with up to an additional $40 million may be drawn from existing financing facilities subject to achieving certain milestones.
Turning to the next slide, I’ll take you through the components of our improved loss before tax for the quarter. Our revenues are predominantly from royalties on sales in Japan by our licensee. Our R&D expenditure was reduced by $2.5 million or 25% down to $7.7 million for the quarter ended December 31, 2022. Our R&D expenses primarily supported preparations for remestemcel BLA resubmission and preparations for pivotal studies for rexlemestrocel as clinical trial activities have reduced.
Continued investment in manufacturing activities to support the potential commercial launch of GVHD. On FDA approval, $30.4 million of remestemcel prelaunch inventory will be recognized on the balance sheet. In relation to finance costs, they include $5 million of noncash expenditure for the quarter ended December 31, 2022, comprising accrued interest and borrowing costs.
Now, I’d like to turn the call back to Silviu.
Thanks, Andrew. If we could now go to Slide 11. The remainder of the slides will focus on operational activities for our lead indications. Slide 11 demonstrates the unmet need for children with steroid-refractory acute graft versus host disease. This is a devastating complication of an allogeneic bone marrow transplant and is associated with mortality rates as high as 90%. Approximately 1,500 children in the U.S. alone undergo an allogeneic bone marrow transplant. And as many as 50% will get steroid refractory – will get acute growth versus host disease, of whom 50% will respond and the rest will not respond.
Go to Slide 12. The new data that were the comprised BLA resubmission, are outlined on this slide. We’ve generated new data that shows remestemcel’s treatment benefit in high-risk disease activity and survival. In propensity matched studies of children in the previously completed Phase 3 trial and in controls, stratified by validated biomarkers for high-risk disease. We’ve presented data on new long-term survival outcomes of the children who were enrolled in the Phase 3 trial showing durability of treatment effect for at least four years.
We’ve generated new analyses of data from the Phase 3 trial and from the Expanded Access Program, showing the validated potency assay in place during the Phase 3 trial actually reflects the primary mechanism of action of remestemcel in children with steroid-refractory GVHD and correlates with the product in vivo bioactivity and predicts overall survival outcomes. Finally, we’ve also presented in the BLA new data showing that the validated potency assay now has low variability and can adequately demonstrate manufacturing consistency and reproducibility.
Next slide, please. In an investigator-initiated study, at Mount Sinai in New York, the use of validated biomarkers for assessment of treatment effect in severe steroid-refractory GVHD children demonstrated that remestemcel treatment resulted in significantly greater day 28 overall responses on the left-hand slide and day 180 survival on the right-hand slide in those children who were matched for biomarkers for the highest risk of disease. The biomarker that was used here is called MAP. MAP score above 0.29 is a validated biomarker for very severe disease and in fact, appears to be more sensitive in identifying severe disease patients than its clinical severity score that has otherwise been used previously.
We can go to the next slide. This is a Kaplan-Meier analysis of children in the Phase 3 trial, GVHD001. And in children with – treated with best available therapy in the MAGIC database. The children were matched on the basis of clinical grades as well as on the objective biomarker score of MAP greater than 0.29. In this highest risk category of patients, you can see a very significant improvement in overall survival through six months in those who received remestemcel in blue compared to those who have received maximal available standard of care in red.
Next slide, Slide 15. This slide is a summation of the three trials performed to date and the short-term survival benefit of remestemcel and in matched controls where available. In a randomized controlled trial in protocol 280 from some years ago, children who received remestemcel had 79% day 100 survival compared with children who received the best available care.
In our open-label Phase 3 trial study 001, 89% who had severe Grade C/D disease, day 100 survival was 74% compared to 57% in propensity-matched children from the MAGIC cohort, match for the same inclusion criteria as the children in 001. In the larger Expanded Access Protocol with children received remestemcel salvage therapy, day 100 survival was 66%. And of course, we had no controls overall for this whole study. However, in an earlier analysis with CIBMTR database just in Grade D patients, there was a 51% day 100 survival compared to 31% survival in children with Grade D disease treated with best available therapy.
If we can go to the next slide, data that we recently published and presented at the Tandem Meeting demonstrated survival out to four years now in children from the GVHD001 study. And in this table, we show the one-year, two-year, three-year and four-year survival, in blue, of children from this study and highlighted as well our long-term survival outcomes in various studies in the literature.
MacMillan et al is a study exclusively in children. Only 22% of whom had Grade 3/4 disease, and it’s a single-center experience through two years. The other four studies are all in adults. As you can see, the one year survival in – of our children from the 001 study was 63%, which was substantially higher than the one year survival in each of the published literature studies. And similarly, with the two year survival being 51% relative to the studies that have been published in children and adults. After two years, we see stable, long-term survival for at least four years of those who were alive at two years, continue to maintain long-term survival.
Next slide, please. This Slide 17 shows side-by-side the published data from MacMillan et al on the left-hand side in children with steroid-refractory acute GVHD treated with best available therapy, demonstrating an overall survival of just 35% through two years. In comparison, you can see that the two-year survival of children treated with remestemcel steroid refractory disease, had 51% survival through two years.
Next slide. Now let’s move on to rexlemestrocel. This is being developed for both chronic low back pain due to inflammatory degenerative disc disease and for low ejection fraction heart failure. In terms of the CLBP program, go to Slide 19, this continues to be, of course, a very large unmet need with as many as seven million patients in – across the U.S. and an additional number in the EU.5 being refractory to maximal available therapy and potentially benefiting from this type of an approach.
Slide 20 now shows the patient journey from conservative therapy to potentially opioid analgesics to interventional therapy. And really, it’s – the target population for us are those that fail conservative treatments. And the objective, of course, is to avoid opioids and to avoid interventional therapeutics.
Next slide. Page 21. We were very pleased last month to be notified that we’ve received Regenerative Medicine Advanced Therapy designation for rexlemestrocel in the treatment of chronic discogenic low back pain. The benefit of RMAT designation is that it provides all the benefits of breakthrough and fast track designations including the rolling review and eligibility for priority review on filing of the biologics license application and is specific for cell and gene therapies as opposed to small molecules.
The RMAT was based on the data in the Phase 3 trial that was provided to the FDA. And the key elements of that Phase 3 trial without a single injection of rexlemestrocel together with hyaluronic acid carrier into the lumbar disc causing pain, resulted in significant reduction in pain relative to saline controls at both 12 months and 24 months across the entire study population of 404 patients. The pain reduction was maintained through at least 36 months and was also seen in the subset of patients using opioids at baseline, 168 patients with the rexlemestrocel group having substantially greater reduction at all time points compared with saline controls.
Importantly, among patients on opioids at baseline despite instructions to maintain existing therapies throughout the trial, by 36 months, 28% were able to come off opioids compared with only 8% of saline treated controls. We hope to be able to demonstrate this as an objective in the next study.
Next slide, please. Slide 22, on further analysis of the pain data, we saw that the maximal reduction in pain in this Phase 3 trial was in those patients who had duration of pain for less than the median for the whole study, which was 68 months. And you can see here that the very significant reduction in pain from baseline by the cells together with the HA carrier at each of 12, 18, 24 and 36 months in red compared to the saline treatment controls in green.
Next slide. So on that basis, we’ve had discussions with the FDA and have alignment on what the pivotal Phase 3 study would look like. It would seek to replicate the data. I’ve just shown you, aiming to reduce pain at 12 months as a primary endpoint in patients with duration of pain for less than five years. The RMAT designation for this program means that we’ll be able to have frequent interactions and further input from the FDA, and we expect to commence this pivotal trial by middle of this calendar year.
Next slide. Our rexlemestrocel is also being developed for the large unmet need of patients with chronic heart failure and reduced ejection fraction. Slide 25, the unmet need continues to be very large despite a number of new medications that have been approved for patients with heart failure, mortality continues to be very high and approaches 50% at five years, at least 75% after initial hospitalization. Patients with heart failure are also at high risk of recurrent major adverse events, including heart attacks and strokes and those both contribute to mortality as well as contribute to progressive worsening heart failure. This is where the largest unmet need continues to be.
Next slide. And in terms of the patient journey, we believe that a single intervention with our therapy can provide a substantial difference in the natural history of this disease all the way from Class II to Class III to end-stage heart failure patients. And we have data that has addressed these diverse patient populations.
Move on to Slide 27. Today, we are very pleased that the outcomes of the DREAM heart failure trial, double-blind, randomized, controlled in 537 patients who received rexlemestrocel or sham and will follow for over 30 months was published in the premier cardiovascular Journal, Journal of the American College of Cardiology. This is the largest cell therapy trial that’s ever been performed, and certainly the longest follow-up in any study using cell therapy.
The key findings that were published showed that the rexlemestrocel treated patients demonstrated improvement in left ventricular ejection fraction at 12 months to a far greater extent than the placebo patients and the maximum benefit and strengthening of the left ventricle is measured by ejection fraction was seen in patients with active inflammation.
Secondly, rexlemestrocel reduced the risk of a heart attack or stroke by 57% in all treated patients and by 75% in patients with inflammation. Thirdly, rexlemestrocel reduced the risk for time to first major adverse cardiac event defined as cardiovascular death or heart attack or stroke by 28% in all patients over the 30-month mean period of follow-up and by 37% in patients with inflammation. And it’s important to note that these large reductions in major risks come on top of maximal standard therapy that all patients were offered both in the treatment and control arms. We’re very excited by these data and they certainly support the potential efficacy of this therapeutic that’s changing the natural history of this disease.
Next slide. So the significant need is clearly there in terms of mortality and major adverse events. The data that just been published demonstrate the potential of this approach, particularly, mechanistically linking improvement in left ventricular strength at 12 months by ejection fraction with the long-term major outcomes.
Inflammation appears to be the major determinant of response to our therapy as would be expected with an immunomodulatory therapy. And we expect to be meeting with the FDA over the next quarter in order to discuss pathway forward towards marketing approval under the existing RMAT designation.
And on that note, I think I’ll thank you for listening to us, and open it up to questions.
Thank you. [Operator Instructions] Your first question comes from Edward Tenthoff with Piper Sandler.
Thank you very much. Thanks for the – update and congrats on all the progress recently. I want to get a better understanding with respect to the recommission of BMI [ph], when can we expect a response by the FDA. And would you anticipate an advisory committee? Thank you so very much.
Thank you. Look, the FDA is working toward to their own timelines, obviously. The COVID pandemic has made things difficult that clearly stretched. But we’ve had dialogue interactions and questions and responses, and it’s an active process. And we’re pleased with where we are in terms of the process itself under the existing fast track designation; there is a requirement for a six-month maximum review period from the date of filing. And we do not expect that there will be another panel review.
Since we’ve already had a panel, the first time around, and you may recall that there was a 9:1 vote in favor of approval by the experts who are selected as part of that panel. But we’ll certainly update the market in due course.
Awesome. And then I was pleased to see the DREAM study get published. What are expectations and plans for rexlemestrocel in heart failure, either in terms of partnering and/or initiating a pivotal trial after discussions with the regulatory agencies? Thank you.
Now that the randomized controlled study has been published in a major peer-reviewed journal, it’s – it provides a sort of validation in both our discussions with the agency as well as with strategic partners. We do have an RMAT for the sickest, most severe patients with heart failure, those on an LVAD. And I would expect that we will continue to have those discussions with the FDA around the most direct path for the product towards approval, either in a high risk, a very high-risk segment or in the broader Class II/III population.
Great. Excellent. Thanks.
Your next question comes from Chen Louise with Cantor.
This is Wayne for Louise. Thanks for taking my questions and congratulations on all success this quarter. So the first question I had for you was that I know there has been a lot of focus on the BLA resubmission and it’s probably too early to draw any conclusions.
But how should we think about the pricing and peak sales potential for remestemcel in aGVHD? And then my second question is for the modeling purpose, how should we think about the OpEx in the third and fourth quarter and then in 2024? Thank you.
Yes. I think, look, it’s probably a little bit early to talk about pricing and reimbursement. I think you can imagine there’s a lot of activity by the company in interfacing with key opinion leaders, with payers with other stakeholders as we move forward. But I think it’s reasonable to think about CAR-T cell therapies for similar patient populations, such as children with ALL as an appropriate comparator just given the complexity of the disease that we’re treating with the complexity of the technology. Sorry, would you mind repeating the second question?
Second question is on the OpEx. So how should we think about the OpEx for the third quarter and fourth quarter, given – I think you mentioned – yes.
Yes. No, look, I think we’re very careful in how we’re managing our expenses. I think we are stage gating our spend and ramp-up in terms of commercialization step by step, as you would expect us to do. But I think, in general, we think that our quarterly spend has been relatively stable for the past six to 12 months. And I would expect that we continue to be in the same sort of OpEx.
Your next question comes from Swayampakula Ramakanth from HCW.
Thank you. This is RK from H.C. Wainwright. A couple of quick questions. On the GVHD study, when you showed us some data, you were using MAP as a biomarker. And in your conversations with the FDA, do they also see this as a validated biomarker? I’m just trying to get a feel for that.
And also on Slide 16, when you’re comparing patients as Group C and D from your setting, is that same as Group 3 and 4? I’m just trying to understand why is it kind of named differently?
Yes. The clinical scaling – there are two major clinical grading scores. There’s the CIBMTR grading score. This is related to Slide 16 question. CIBMTR grading score is grades B, C and D, whereas the Glucksberg clinical score is Grades 2, 3 and 4, but they effectively represent the same degrees of severity. So I think that’s important to note.
The MAP score is a very well validated and extensively published biomarker that appears to be more sensitive to identifying those patients at highest risk for non-response and death than is either the CIBMTR or the Glucksberg clinical scale. And that’s the reason that it’s being used by investigators and in various trials to provide an objective measure of disease severity. The problem with the clinical grading score is, of course, it has the potential for bias by individual investigators and hospitals that have different kind of standard of care, for example.
But if you use a biomarker like the MAP score, which has been validated in both predominantly in adults with severe disease, but to a lesser extent, also in children, it takes out the potential bias from clinical observation.
Thank you. And then on the rexlemestrocel for the chronic back pain. I know you gave us some idea of how the second Phase 3 is going to look at – look like. But in terms of the patient population, so when we are thinking about patients who have less than five years of back pain. What sort of a population are we thinking about? And I’m just trying to make sure that anybody who has less than five years is there – is eligible for getting into your trial.
Yes. So the patient enrollment criteria are patients who have moderate to severe discogenic pain with radiographic evidence of a principal lesion, let’s say, MRI showing the degeneration of a lead disc L4-L5 or L5-S1, et cetera and at least six months of unremitting pain that has not responded to conservative therapy, including opioids.
Now the patients who fall in that category within, say the first five years have active inflammation, immune mediated inflammation and pain that is very much out of proportion to the radiographic degeneration or functional disability. So that’s why we think that ourselves as best suited to be used in that first five year window when there’s active inflammation where we can actually interrupt the inflammatory cycle and prevent the natural history of destruction and ultimately, fibrous replacement of the disk.
Perfect. Thank you very much.
That brings us to the end of today’s call. I’ll now hand back to Dr. Itescu for closing remarks.
Thank you, everybody for joining us today. We’re very excited about the progress across each of our major lead indications, graft versus host disease, back pain and heart failure, and we look forward to updating you all very shortly on continued progress. Thank you.