Mesoblast (MESO) - 2023 Q4 - Annual Report

Introduction & Company Overview Mesoblast's mission, late-stage pipeline, and investment highlights cover its cell therapy platform and financial position Cautionary Note Regarding Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, advising readers not to unduly rely on them as the company is not obligated to update them - The presentation contains forward-looking statements regarding future events and financial performance, which involve known and unknown risks and uncertainties[5] - Readers should not place undue reliance on these statements, and the company is not obligated to publicly update or revise any forward-looking statements[5] Our Mission Mesoblast's mission is to commercialize innovative cellular therapies for serious and life-threatening illnesses - Mesoblast is committed to commercializing innovative cellular therapies for serious and life-threatening illnesses[6] Late-Stage Clinical Pipeline Mesoblast's late-stage pipeline leverages its allogeneic mesenchymal stromal cell platform, with Remestemcel-L and Rexlemestrocel-L in Phase 3 or regulatory filing stages, supported by licensing agreements | Product | Indication | Phase 3 | Regulatory Filing | | :--- | :--- | :--- | :--- | | Remestemcel-L | Pediatric SR-aGVHD | | >> | | Remestemcel-L | Adult SR-aGVHD | >> | | | Rexlemestrocel-L | CLBP | >> | | | Rexlemestrocel-L | HFrEF | >> | | - JCR Pharmaceuticals Co., Ltd. holds rights to develop mesenchymal stromal cells (MSCs) in certain fields for the Japanese market, including Graft vs Host Disease and hypoxic ischemic encephalopathy (HIE)[7] - Grünenthal has an exclusive license for rexlemestrocel-L for chronic low back pain in Europe and Latin America/Caribbean, while Tasly Pharmaceuticals holds exclusive rights for rexlemestrocel-L for chronic heart failure in China[8] Investment Highlights Key investment highlights include Mesoblast's allogeneic cell therapy platform, lead products Remestemcel-L and Rexlemestrocel-L in advanced clinical stages, and a financial position with US$7.5 million revenue and US$71.3 million cash-on-hand - Mesoblast is developing off-the-shelf, allogeneic cellular medicines based on proprietary mesenchymal stromal cell (MSC) technology platforms, eliminating the need for donor matching or immunosuppression[10] - Remestemcel-L is the lead indication for children with steroid-refractory acute graft versus host disease (SR-aGVHD), with an upcoming Type A meeting with the FDA to discuss product approval strategy[10] - Rexlemestrocel-L has completed its first Phase 3 trial for discogenic chronic low back pain (CLBP) and for heart failure with reduced ejection fraction (HFrEF) in Class II/III patients, with RMAT granted by FDA for end-stage HFrEF patients[10] | Metric | Value (US$) | | :--- | :--- | | Last 12 months revenue | 7.5 million | | Cash-on-hand (June 30, 2023) | 71.3 million | Remestemcel-L for Steroid-Refractory Acute Graft Versus Host Disease (SR-aGVHD) Remestemcel-L's regulatory status and clinical data for pediatric and adult SR-aGVHD are detailed, showing improved survival potential Regulatory Status for Pediatric SR-aGVHD The FDA issued a complete response for remestemcel-L's pediatric SR-aGVHD BLA, prompting Mesoblast to schedule a Type A meeting to discuss additional potency assay and adult clinical data - FDA provided a complete response to the BLA for remestemcel-L for pediatric SR-aGVHD, requiring demonstration of product similarity between trial and commercial product[12] - FDA indicated an additional clinical trial would be needed, but Mesoblast proposes providing additional potency assay data to establish the link[12] - A Type A meeting with FDA is scheduled for mid-September to discuss providing additional potency assay data and new clinical trial data in adults, which could support the pediatric indication[12] Regulatory Status for Adult SR-aGVHD Mesoblast plans a controlled study for adult SR-aGVHD, a larger market, following promising 63% 100-day survival rates in compassionate access patients, with discussions ongoing with BM CTN - Mesoblast intends to conduct a targeted, controlled study in adults with high mortality risk SR-aGVHD, a market approximately 5-fold larger than children, as part of its commercial strategy[14] - 100-day survival was 63% after remestemcel-L treatment under compassionate access in 71 patients aged 12 and older with SR-aGVHD who failed at least one additional agent, compared to 20-30% for those failing agents like ruxolitinib[14] - Mesoblast is in discussions with world-leading investigators at the Blood and Marrow Transplant Clinical Trials Network (BM CTN) to conduct this clinical trial, with costs expected to be covered by planned spending[14] Acute Graft Versus Host Disease (aGVHD) Overview Acute GVHD is a severe, often fatal complication of bone marrow transplants, with SR-aGVHD having high mortality and limited treatment options, especially for children in the US - Acute GVHD is a life-threatening complication occurring in ~50% of patients receiving allogeneic BMTs, primarily affecting skin, GI tract, and liver[26] - Steroid-refractory aGVHD is associated with mortality rates as high as 90% and significant extended hospital stay costs[26] - There is only one approved treatment for steroid-refractory disease and no approved treatment in the US for children under 12 years old; Mesoblast's licensee has the only product approval for SR-aGVHD in Japan for both children and adults[26] Remestemcel-L for Children with SR-aGVHD Remestemcel-L shows improved early and durable survival in children with SR-aGVHD, with 100-day survival rates of 66-79% and 49% survival at 3-4 years | Remestemcel-L Protocol | Remestemcel-L Day 100 Survival | Matched Controls Day 100 Survival | | :--- | :--- | :--- | | Pediatric Subset of Protocol 280 (P3, n=27) | 79% | 54% | | Study 001 (P3, n=54) | 74% | 57% | | Expanded Access Protocol (EAP275, n=241) | 66% | na | | EAP275 (Grade D subset, n=51) | 51% | 31% | | Study | Year 1 Survival | Year 2 Survival | Year 3 Survival | Year 4 Survival | | :--- | :--- | :--- | :--- | :--- | | GVHD001 (Children) | 63% | 51% | 49% | 49% | Remestemcel-L for Adults with SR-aGVHD Mesoblast plans to expand Remestemcel-L to adult SR-aGVHD patients, a larger market, citing 63% 100-day survival in compassionate care, significantly exceeding standard treatments - The commercial strategy is to progress Remestemcel-L to adults who have failed steroids and a first-line agent, including ruxolitinib, as this market opportunity is approximately five times larger than the pediatric one[29] - Survival in adults with SR-aGVHD who have failed at least one additional agent, such as ruxolitinib, is 20-30% by 100 days, whereas 100-day survival was 63% after remestemcel-L treatment under compassionate care in similar patients[29] - Mesoblast is in discussions with world-leading investigators at the Blood and Marrow Transplant Clinical Trials Network (BM CTN) to conduct a clinical trial in adults, with the costs expected to be covered by planned spending[29] Rexlemestrocel-L for Chronic Low Back Pain Due to Degenerative Disc Disease (CLBP) Rexlemestrocel-L's development for CLBP is detailed, including regulatory status, Phase 3 outcomes, and its potential for this unmet medical need Chronic Low Back Pain Due to Degenerative Disc Disease (CLBP) Overview CLBP from degenerative disc disease is a major cause of disability and opioid use, with Rexlemestrocel-L offering a new therapeutic option for over 7 million patients in the U.S. and E.U - Back pain causes more disability than any other condition, inflicting substantial direct and indirect costs on the healthcare system, including excessive use of opioids[31] - Minimal treatment options exist for CLBP patients who fail conservative therapy, with 50% of opioid prescriptions being for CLBP[31] - Over 7 million patients are estimated to suffer from CLBP due to degenerative disc disease (DDD) in the U.S. and E.U., representing a significant market opportunity[31] Rexlemestrocel-L / CLBP - Program Summary Mesoblast has FDA alignment for a pivotal Phase 3 CLBP study of Rexlemestrocel-L, targeting pain reduction, functional improvement, and reduced opioid use, with manufacturing in place - Mesoblast gained alignment with the FDA on the appropriate pivotal Phase 3 study, with mean pain reduction at 12 months as the primary endpoint[33] - The product has been manufactured for use in the pivotal Phase 3 study, and potency assays are in place for product release[33] - The program seeks to replicate the significant reduction in pain seen at 12 and 24 months in the first Phase 3 trial, with functional improvement and reduction in opioid use as secondary endpoints[33] RMAT Designation and Phase 3 Trial Outcomes Rexlemestrocel-L received FDA RMAT designation for CLBP, with Phase 3 trials showing significant and sustained pain reduction, especially in opioid users, and a notable reduction in opioid dependence - Rexlemestrocel-L received Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA for CLBP, providing all the benefits of Breakthrough and Fast Track designations[35] - A single injection of rexlemestrocel-L+HA into the lumbar disc resulted in significant reduction in pain compared with saline control at 12 and 24 months across all subjects (n=404)[35] - Among patients on opioids at baseline, 28% who received rexlemestrocel-L+HA were not taking an opioid at 36 months, compared with 8% of saline-treated controls[35] - The greatest pain reduction was observed in the pre-specified population of subjects with CLBP duration shorter than the baseline study median of 68 months (n=202), with significantly greater reduction over 36 months compared with saline controls[36] Rexlemestrocel-L for Chronic Heart Failure with Reduced Ejection Fraction (HFrEF) Rexlemestrocel-L's HFrEF development, clinical results, and potential to improve vascular function and reduce MACE are presented Rexlemestrocel-L / HFrEF - Program Summary Rexlemestrocel-L is developed for HFrEF, addressing a critical unmet need, with DREAM-HF Phase 3 data showing improved LVEF and reduced MACE, especially in inflamed patients - Cardiovascular disease remains the leading cause of death in the US, and Chronic Heart Failure (CHF) is a progressive disease with high mortality[40] - Recent data from the DREAM-HF Phase 3 trial showed improved LVEF at 12 months, preceding long-term reduction in MACE events across all treated patients[40] - Effects on LVEF and MACE outcomes are enhanced in patients with active inflammation, supporting a mechanism of action by which rexlemestrocel-L reverses inflammation-related endothelial dysfunction[40] Patients Experience Progressive Vascular Dysfunction and Heart Rexlemestrocel-L has the potential to improve endothelial dysfunction across HFrEF stages (NYHA Class II-IV), offering a novel therapeutic approach for cardiovascular disease - Rexlemestrocel-L has the potential to improve endothelial dysfunction in patients with NYHA Class II thru IV HFrEF[41] - Mesoblast's development program targets patients across the continuum of cardiovascular disease, from those on traditional early therapies to those with end-stage HFrEF requiring advanced interventions like LVAD or heart transplant[41][42] Randomized Trial of Targeted Transendocardial Mesenchymal Precursor Cell Therapy The DREAM-HF Phase 3 trial showed rexlemestrocel-L improved LVEF and significantly reduced MI, stroke, and MACE risks, particularly in HFrEF patients with active inflammation - Improved LVEF from baseline to 12 months in all patients, with maximal benefit seen in patients with active inflammation[45] - Reduced risk of MI or stroke by 57% in all treated patients, and by 75% in patients with inflammation[45] - Reduced risk for time-to-first Major Adverse Cardiac Event (MACE), defined as cardiovascular death, MI or stroke, by 28% in all patients, and by 37% in patients with inflammation[45] Two Pivotal Studies in Chronic Heart Failure Mesoblast is conducting two pivotal studies for Rexlemestrocel-L in HFrEF, targeting both end-stage and chronic patients, using consistent manufacturing and intra-cardiac administration | Study | Patient Population | Cell Dose | Route of Administration | | :--- | :--- | :--- | :--- | | MPC Study | End-stage chronic HFrEF (NYHA Class IIIB or IV) candidate for LVAD implant | 150 million cells | Epicardial injection | | DREAM-HF Study | Chronic HFrEF (NYHA Class II/III) | Not specified in table | Transendocardial | - Both pivotal studies utilize Mesenchymal Precursor Cells (Rexlemestrocel-L) with defined Cardiac Potency, employing the same facilities and vendors for cell preparation, manufacturing, central storage, and shipping[46] - The development programs assess the impact of intra-cardiac administration of Rexlemestrocel-L across the continuum of disease from mild/moderate to end-stage HFrEF[46] Financial Results and Outlook Mesoblast's financial performance, including revenue, cash usage, and expenditures, is presented alongside its cost containment plan Financial Highlights for the Year Mesoblast reported US$7.5 million in royalty revenue, a 4% reduction in net operating cash usage to US$63.3 million, and US$71.3 million cash-on-hand at June 30, 2023 | Metric | FY2023 (US$ million) | FY2022 (US$ million) | Change | | :--- | :--- | :--- | :--- | | Royalty Revenue | 7.5 | 8.7 | -13.79% | | Net cash usage for operating activities | 63.3 | 65.9 | -4% (reduction) | | Cash-on-hand (June 30, 2023) | 71.3 | | | - Royalty revenue from sales of TEMCELL® HS Inj. in Japan by the licensee was US$8.1 million for FY2023 on a constant currency basis, compared with US$8.7 million for FY2022[16][17] - At June 30, 2023, cash-on-hand was US$71.3 million, with up to an additional US$40 million available from existing financing facilities, subject to certain milestones and extension[16] Reduction in Expenditure on R&D, Improved Loss Before Tax Mesoblast reduced its loss before tax to US$82.1 million, driven by a 17% decrease in R&D and a 10% decrease in manufacturing expenditure, despite a decline in total revenue | Metric | June 30, 2023 (US$m) | June 30, 2022 (US$m) | Change (US$m) | | :--- | :--- | :--- | :--- | | Total Revenue | 7.5 | 10.2 | -2.7 | | Research and development | (27.2) | (32.8) | 5.6 | | Manufacturing | (27.7) | (30.8) | 3.1 | | Management & administration | (25.4) | (27.2) | 1.8 | | Loss before tax | (82.1) | (91.6) | 9.5 | | Loss after tax | (81.9) | (91.4) | 9.5 | - Reduction in R&D expenditure by US$5.6 million (17%) to US$27.2 million, primarily supporting preparations for BLA re-submission and pivotal trials for rexlemestrocel-L[18] - Reduction in Manufacturing expenditure by US$3.1 million (10%) to US$27.7 million, reflecting completion of launch manufacturing activities[19] Cost Containment Plan for Next 12 Months Mesoblast targets a 23% reduction (US$15 million) in FY2024 net operating cash spend to US$48.3 million, achieved through reduced spending and a 40% annualized payroll cut - Targeted 23% reduction (US$15 million) in annual net operating cash spend from US$63.3 million in FY2023 to US$48.3 million in FY2024[21] - This reduction is achieved through decreased spend across research, sales & marketing, commercial, and payroll, partially offset by investment in Phase 3 programs for SR-aGVHD and CLBP[21] - A 40% annualized reduction in payroll by February 2024, including deferred FY23 short-term incentives for all employees, and voluntary salary reductions/deferred cash payments for CEO, CMO, and Non-Executive Directors, who will receive long-term non-cash incentives instead[21] - Shift from quarterly to half-yearly reporting of Financial Statements from FY2024, with continued quarterly cash and operational reports, in line with ASX-listed entities[21]