Mesoblast (MESO) - 2023 Q1 - Quarterly Report

Executive Summary & Operational Highlights Mesoblast's CEO highlighted FY2022 as transformational with planned BLA resubmission for remestemcel-L and significant progress in rexlemestrocel-L development, alongside a 35% reduction in net operating spend and a strong cash position CEO's Message Dr. Silviu Itescu, CEO, highlighted FY2022 as a transformational year, focusing on the planned BLA resubmission for remestemcel-L in pediatric SR-aGVHD, validation of its potency assay, and the significant unmet need for this therapy. He also noted the 36% increase in TEMCELL® HS Inj. royalties and the pivotal stage of rexlemestrocel-L development for HFrEF and CLBP, with planned FDA meetings and trial commencements - BLA resubmission for remestemcel-L in children with steroid-refractory acute graft versus host disease (SR-aGVHD) is planned for this quarter, with validated key potency assay addressing prior FDA concerns[4] - Royalty income from sales of TEMCELL® HS Inj. in Japan increased 36% on a constant currency basis to almost US$10 million, indicating continued physician adoption[4] - Rexlemestrocel-L is at a pivotal stage for chronic heart failure with reduced ejection fraction (HFrEF) and chronic low back pain (CLBP), with planned FDA meetings for marketing approval pathways and pivotal trial commencement[4] Key Financial & Operational Highlights Mesoblast reported a cash position of US$60.4 million at June 30, 2022, with a pro-forma US$105.5 million after a private placement. The company achieved a 35% reduction in net operating spend and is progressing with key regulatory milestones for its product candidates, including BLA resubmission for remestemcel-L and FDA clearance for rexlemestrocel-L trials Cash-on-hand (June 30, 2022) | Metric | Amount (US$M) | | :--- | :--- | | Cash-on-hand (June 30, 2022) | 60.4 | | Pro-forma cash (after Aug 2022 private placement) | 105.5 | | Additional funds available from existing facilities | Up to 40.0 | - Net operating spend for the 12 months ended June FY2022 was US$65.8 million, representing a 35% reduction compared to the prior year, reflecting a continued focus on cost control[5] - BLA resubmission for remestemcel-L in children with SR-aGVHD is expected this quarter, with potential US approval in Q1 CY2023[5] - FDA clearance is anticipated by year-end 2022 to commence a pivotal study for potential marketing approval of rexlemestrocel-L in chronic lower back pain due to degenerative disc disease[5] Product Pipeline & Near-Term Milestones Mesoblast provided updates on its product pipeline, including significant progress towards BLA resubmission for remestemcel-L in SR-aGVHD and positive Phase 3 data for rexlemestrocel-L in HFrEF and CLBP, with planned FDA meetings and trial commencements Remestemcel-L Development Mesoblast provided updates on remestemcel-L's development across multiple indications, including significant progress towards BLA resubmission for SR-aGVHD, potential collaboration for ARDS, and promising early results in IBD Steroid-refractory acute graft versus host disease (SR-aGVHD) The BLA resubmission for remestemcel-L in children with SR-aGVHD is expected by the end of Q3 CY2022, with FDA indicating a reasonable approach to CMC items. The company has optimized and validated its potency assay, confirmed by data from an expanded access program, and affirmed manufacturing site readiness - BLA resubmission to FDA for remestemcel-L in children with SR-aGVHD is expected by the end of Q3 CY2022, with potential US approval in Q1 CY2023[7] - FDA has indicated that Mesoblast's approach to address outstanding Chemistry, Manufacturing, and Controls (CMC) items is reasonable[7] - Development and validation work on the potency assay has been completed, and data from an expanded access program (241 children) confirm its ability to measure product activity relevant to survival outcomes[7] Acute respiratory distress syndrome (ARDS) Mesoblast is working under an MOU with Vanderbilt University Medical Center to potentially collaborate on a second COVID-19 ARDS trial. This collaboration aims to design and execute a trial protocol to confirm the previously observed reduction in mortality in COVID-19 ARDS patients under 65 years of age - Mesoblast is working under a Memorandum of Understanding (MOU) with Vanderbilt University Medical Center for a potential collaboration on a second COVID-19 ARDS trial[7] - The collaboration aims to jointly develop a trial protocol to confirm the observed reduction in mortality in COVID-19 ARDS patients under 65 years of age[7] Inflammatory bowel disease (IBD) An investigator-initiated randomized, controlled study of remestemcel-L delivered endoscopically is underway for patients with medically refractory ulcerative colitis or Crohn's colitis. The initial 12-patient cohort demonstrated rapid mucosal healing and disease remission compared to placebo - An investigator-initiated randomized, controlled study of remestemcel-L for medically refractory ulcerative colitis or Crohn's colitis is underway[7] - The first 12-patient cohort showed rapid mucosal healing and disease remission compared to placebo in refractory patients[7] Rexlemestrocel-L Development Updates on rexlemestrocel-L include positive Phase 3 data for HFrEF, showing LVEF improvement as a potential surrogate endpoint for MACE reduction, and alignment with the FDA on key metrics for a pivotal Phase 3 study in CLBP Chronic heart failure with reduced ejection fraction (HFrEF) Recent Phase 3 trial data for rexlemestrocel-L in HFrEF patients showed a single intervention improved left ventricular ejection fraction (LVEF) at 12 months, which preceded a long-term reduction in major adverse cardiovascular events (MACE). Mesoblast plans to meet with the FDA under its RMAT designation to discuss these data and a common mechanism of action - Phase 3 trial data (565 patients) showed a single intervention with rexlemestrocel-L improves left ventricular ejection fraction (LVEF) at 12 months, preceding long-term reduction in major adverse cardiovascular events (MACE)[7] - LVEF improvement at 12 months may be an appropriate early surrogate endpoint for long-term reduction in MACE[7] - Mesoblast intends to meet with FDA next quarter under its RMAT designation to discuss data and evidence of a common mechanism of action across the broader HFrEF spectrum, including LVAD patients[8] Chronic low back pain associated with degenerative disc disease (CLBP) Mesoblast has gained alignment with the FDA on key metrics for a pivotal Phase 3 study in CLBP patients, aiming to replicate previous significant pain reduction. The primary endpoint for this trial will be a 12-month reduction in pain, with FDA clearance to commence expected by year-end 2022 - Mesoblast gained alignment with the FDA on key metrics for a pivotal Phase 3 study in patients with CLBP, seeking to replicate significant pain reduction seen in the first Phase 3 trial[13] - The pivotal trial will have a 12-month reduction in pain as its primary endpoint[13] - The Company plans to have clearance from the FDA by year-end 2022 to commence the pivotal trial[13] Financial Results (FY2022) Mesoblast reported a 37% increase in total revenue for FY2022, driven by royalties and milestone revenue, alongside a 35% reduction in net operating spend and a pro-forma cash position of US$105.5 million Revenue and Profitability Mesoblast reported a 37% increase in total revenue for FY2022, driven by growth in royalties from TEMCELL® and milestone revenue. The company also reduced its net loss after tax and improved basic losses per share compared to the prior fiscal year Total Revenue | Metric | FY2022 (US$M) | FY2021 (US$M) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 10.2 | 7.5 | 37% | | Royalties from TEMCELL® HS Inj. | 8.7 | 7.2 (est.) | 21% (36% constant currency) | | Milestone revenue (Takeda) | 1.2 | — | N/A | Loss After Tax and EPS | Metric | FY2022 (US$M) | FY2021 (US$M) | Change (%) | | :--- | :--- | :--- | :--- | | Loss after tax | (91.3) | (98.8) | (7.6%) | | Basic losses per share (US cents) | (14.08) | (16.33) | 13.8% | Operating Expenses Mesoblast significantly reduced its net cash usage for operating activities by 35% in FY2022. This reduction was primarily driven by decreased Research & Development, Manufacturing commercialization, and Management and Administration expenses, reflecting completed clinical trial activities and cost control efforts - Net cash usage for operating activities for the 12 months ended June FY2022 was US$65.8 million, a 35% reduction relative to the comparative 12 months[13] Operating Expenses | Expense Category | FY2022 (US$M) | FY2021 (US$M) | Change (%) | | :--- | :--- | :--- | :--- | | Research & Development | 32.8 | 53.0 | (38%) | | Manufacturing commercialization | 30.8 | 32.7 | (6%) | | Management and Administration | 27.2 | 30.9 | (12%) | - Reduction in R&D expenses was due to the completion of clinical trial activities for COVID-19 ARDS, CLBP, and CHF product candidates[13] Cash Position and Financing As of June 30, 2022, Mesoblast held US$60.4 million in cash, which increased to a pro-forma US$105.5 million after a subsequent private placement. The company also has access to additional financing facilities and reported an increase in finance costs for borrowing arrangements Cash and Cash Equivalents | Metric | June 30, 2022 (US$M) | June 30, 2021 (US$M) | | :--- | :--- | :--- | | Cash-on-hand | 60.4 | 136.9 | | Pro-forma (after Aug 2022 private placement) | 105.5 | N/A | - The Company has access to up to an additional US$40 million from existing financing facilities, subject to certain milestones[13] Finance Costs | Metric | FY2022 (US$M) | FY2021 (US$M) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 17.3 | 10.7 | 61.7% | About Mesoblast Mesoblast is a global leader in allogeneic cellular medicines, leveraging proprietary technology for late-stage product candidates and holding extensive global intellectual property Company Overview Mesoblast is a global leader in allogeneic cellular medicines, utilizing its proprietary mesenchymal lineage cell therapy technology to develop late-stage product candidates for severe inflammatory conditions. The company holds extensive global intellectual property, with products commercialized in Japan and Europe by licensees, and maintains operations in Australia, the United States, and Singapore - Mesoblast is a world leader in developing allogeneic (off-the-shelf) cellular medicines for severe and life-threatening inflammatory conditions[14] - The Company leverages its proprietary mesenchymal lineage cell therapy technology platform to establish a broad portfolio of late-stage product candidates[14] - Mesoblast possesses a strong and extensive global intellectual property portfolio with protection extending through to at least 2041 in all major markets[15] - Product candidates include remestemcel-L (for SR-aGVHD, IBD, ARDS) and rexlemestrocel-L (for advanced chronic heart failure and chronic low back pain), with two products commercialized in Japan and Europe by licensees[16] Financial Statements This section presents Mesoblast's detailed financial statements for FY2022, including income, comprehensive income, balance sheet, and cash flow statements, providing a comprehensive view of its financial performance and position Consolidated Income Statement The Consolidated Income Statement provides a detailed breakdown of Mesoblast's revenues, operating expenses, and net loss for the fiscal years ended June 30, 2022, and 2021, highlighting changes in profitability and cost structures | (in U.S. dollars, in thousands, except per share amount) | Year Ended June 30, 2022 | Year Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | 10,214 | 7,456 | | Research & development | (32,815) | (53,012) | | Manufacturing commercialization | (30,757) | (32,719) | | Management and administration | (27,210) | (30,867) | | Fair value remeasurement of contingent consideration | 913 | 18,687 | | Fair value remeasurement of warrant liability | 5,896 | — | | Other operating income and expenses | (539) | 1,539 | | Finance costs | (17,288) | (10,714) | | Loss before income tax | (91,586) | (99,630) | | Income tax benefit/(expense) | 239 | 819 | | Loss attributable to the owners of Mesoblast Limited | (91,347) | (98,811) | | Basic - losses per share (Cents) | (14.08) | (16.33) | | Diluted - losses per share (Cents) | (14.08) | (16.33) | Consolidated Statement of Comprehensive Income This statement presents the total comprehensive loss for Mesoblast, including the net loss for the period and other comprehensive income or loss items that may or may not be reclassified to profit and loss, such as exchange differences and fair value adjustments | (in U.S. dollars, in thousands) | Year Ended June 30, 2022 | Year Ended June 30, 2021 | | :--- | :--- | :--- | | Loss for the period | (91,347) | (98,811) | | Other comprehensive (loss)/income | | Items that may be reclassified to profit and loss | | Exchange differences on translation of foreign operations | 91 | (1,524) | | Items that will not be reclassified to profit and loss | | Financial assets at fair value through other comprehensive income | (322) | 209 | | Other comprehensive (loss)/income for the period, net of tax | (231) | (1,315) | | Total comprehensive losses attributable to the owners of Mesoblast Limited | (91,578) | (100,126) | Consolidated Balance Sheet The Consolidated Balance Sheet provides a snapshot of Mesoblast's financial position as of June 30, 2022, and 2021, detailing its assets, liabilities, and equity, reflecting changes in cash, borrowings, and intangible assets | (in U.S. dollars, in thousands) | As of June 30, 2022 | As of June 30, 2021 | | :--- | :--- | :--- | | Assets | | Current Assets | | Cash & cash equivalents | 60,447 | 136,881 | | Trade & other receivables | 4,403 | 4,842 | | Prepayments | 4,987 | 6,504 | | Total Current Assets | 69,837 | 148,227 | | Non-Current Assets | | Property, plant and equipment | 2,045 | 3,021 | | Right-of-use assets | 7,920 | 9,119 | | Financial assets at fair value through other comprehensive income | 1,758 | 2,080 | | Other non-current assets | 1,930 | 1,724 | | Intangible assets | 578,652 | 580,546 | | Total Non-Current Assets | 592,305 | 596,490 | | Total Assets | 662,142 | 744,717 | | Liabilities | | Current Liabilities | | Trade and other payables | 23,079 | 19,598 | | Provisions | 17,906 | 18,710 | | Borrowings | 5,017 | 53,200 | | Lease liabilities | 3,186 | 2,765 | | Warrant liability | 2,185 | — | | Total Current Liabilities | 51,373 | 94,273 | | Non-Current Liabilities | | Provisions | 12,523 | 17,017 | | Borrowings | 91,617 | 41,045 | | Lease liabilities | 7,085 | 8,485 | | Deferred consideration | 2,500 | 2,500 | | Total Non-Current Liabilities | 113,725 | 69,047 | | Total Liabilities | 165,098 | 163,320 | | Net Assets | 497,044 | 581,397 | | Equity | | Issued Capital | 1,165,309 | 1,163,153 | | Reserves | 70,651 | 65,813 | | (Accumulated losses)/retained earnings | (738,916) | (647,569) | | Total Equity | 497,044 | 581,397 | Consolidated Statement of Cash Flows The Consolidated Statement of Cash Flows details the cash inflows and outflows from operating, investing, and financing activities for Mesoblast for the fiscal years ended June 30, 2022, and 2021, illustrating the company's liquidity and funding sources | (in U.S. dollars, in thousands) | Year Ended June 30, 2022 | Year Ended June 30, 2021 | | :--- | :--- | :--- | | Cash flows from operating activities | | Commercialization revenue received | 9,980 | 6,121 | | Upfront and milestone payments received | — | — | | Government grants and tax incentives received | 24 | 68 | | Payments to suppliers and employees | (75,769) | (106,920) | | Interest received | 7 | 17 | | Income taxes paid | (24) | (35) | | Net cash (outflows) in operating activities | (65,782) | (100,749) | | Cash flows from investing activities | | Investment in fixed assets | (157) | (1,647) | | Payments for contingent consideration | — | — | | Payments for licenses | (75) | — | | Net cash (outflows) in investing activities | (232) | (1,647) | | Cash flows from financing activities | | Proceeds from borrowings | 51,919 | — | | Repayment of borrowings | (55,458) | — | | Payment of transaction costs from borrowings | (5,527) | (13) | | Interest and other costs of finance paid | (6,084) | (5,932) | | Proceeds from issue of shares | 209 | 106,268 | | Proceeds from issue of warrants | 8,081 | 12,969 | | Payments for share issue costs | (222) | (1,827) | | Payments for lease liabilities | (2,788) | (2,931) | | Net cash (outflows)/inflows by financing activities | (9,870) | 108,534 | | Net (decrease)/increase in cash and cash equivalents | (75,884) | 6,138 | | Cash and cash equivalents at beginning of period | 136,881 | 129,328 | | FX (loss)/gain on the translation of foreign bank accounts | (550) | 1,415 | | Cash and cash equivalents at end of period | 60,447 | 136,881 | Additional Information This section includes important disclaimers regarding forward-looking statements and provides essential contact information for corporate, investor, and media inquiries Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing that future events or financial performance involve known and unknown risks and uncertainties. It advises readers not to place undue reliance on these statements and notes that actual results may differ materially - The press release includes forward-looking statements subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[17] - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially and adversely[17] - Mesoblast does not undertake any obligations to publicly update or revise any forward-looking statements[17] Contact Information This section provides contact details for corporate communications, investors, and media inquiries, including phone numbers and email addresses for relevant personnel - Contact information for Corporate Communications/Investors (Paul Hughes) and Media (Grant Titmus, Tali Mackay) is provided[20]