Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Hello, and welcome to the corporate update from Mesoblast. An announcement has been lodged with the ASX and also available on the home and investor pages at www.mesoblast.com. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, let me remind you that during today's conference, the company will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning the 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 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 turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Dr. Itescu, please go ahead.

Thank you, and thank you all for joining us on this call today. With me is Dr. Fred Grossman, our Chief Medical Officer. As you've seen from our press release, we have received a complete response letter from the FDA for our investigational product RYONCIL (remestemcel-L) for the treatment of steroid-refractory acute graft-versus-host disease in children. Despite an overwhelming 9:1 vote of the FDA's ODAC panel and the available data support the efficacy of remestemcel in pediatric patients with steroid-refractory acute graft-versus-host disease, the FDA determined that an additional randomized controlled trial in children or adults is needed for approval. Given the very high mortality in children with this disease and the absence of any approved treatments in children under 12, we will request urgently a Type A meeting within 30 days where we will discuss a potential accelerated approval with a commitment post-approval for a confirmatory trial. We are confident in this approach, given the strength of the ODAC vote. Also announced today is that we are set for the second interim analysis of the Phase III trial of remestemcel in COVID-19 ARDS patients. We've surpassed the necessary number of patients for that second interim analysis, and we expect to release the results of that in early November. Body of evidence around the use of remestemcel-L in inflammatory indications with high mortality risk continues to build. Our randomized controlled Phase III trial evaluating remestemcel and up to 300 patients with ARDS is well underway. The inflammatory condition that affects ARDS patients with COVID-19 has a similar mechanism of action as the cytokine storm in steroid-refractory graft-versus-host disease. And we will continue to build the clinical data that supports evidence of efficacy of remestemcel in these life-threatening inflammatory conditions. Thank you for joining this call. And operator, we'll now take questions.

[Operator Instructions] Our first question is from the line of Tanushree Jain at Bell Potter Securities.

A really disappointing outcome today, I'm surprised. The FDA looks like they've totally ignored their own advisory committee with the 9:1 vote. A couple of questions for you, Silviu. One, I think the announcement also mentioned further about providing a scientific rationale to demonstrate the relationship of potency measurements of the product's biologic activity. Can you throw some more light on that aspect? And secondly, you just mentioned about the Type A meeting to discuss a potential accelerated approval with a post-approval study. Can you clarify exactly what you're proposing to the FDA? And what kind of a post-approval study are we looking at? Does that include children? Or would it still be what we had expected, just adults?

Thank you, Tanu. So we -- at the ODAC panel meeting, we, in fact, initiated a discussion around what type of post-approval trial might look like in adults with steroid-refractory graft-versus-host disease. And we have a protocol design that is well underway comparing high-risk adults against -- with remestemcel against standard of care. The randomized controlled trial is well powered for an outcome measurement that we've been proposing to the FDA. Perhaps Dr. Grossman, would you like to comment on that a bit further?

Yes. And I think as Dr. Itescu mentioned, this is going to be a comparative study of remestemcel versus standard of care. And we'll be using an end point that certainly takes into consideration survival because survival is really the primary end point that we're focusing on.

Thanks, Fred. I might address the second question that you asked, Tanu, which was questions around scientific rationale for specific potency assays. And as again, we discussed at the recent ODAC meeting, the mechanism of action by which the cells work to reduce inflammatory activation in various diseases involves multiple pathways. The strength of the technology is, in fact, the multiple pathways that the cells are able to modulate to reduce severe inflammatory disease. And understanding those pathways and the mechanisms involved continue to be an important objective that we are in complete agreement with the FDA on, and we will continue to refine our assays to relate them to clinical outcomes in both GVHD as well as in COVID-19 ARDS. The type of abnormal cytokine production in COVID-19 ARDS, this has been now quite clearly defined in large prospective studies. Those are the type of biomarkers that we will be evaluating in our current ongoing randomized controlled trials. And we will seek to demonstrate that we can reduce those abnormal biomarkers in parallel with the characteristics of the product in vitro. Those are major objectives as we try to relate product biologic characteristics with clinical outcomes.

Right. So if I'm clear, so I mean, basically, the complete response, that is telling you that the FDA wants you to do this randomized study before approval, not as a post-approval study. So you're going to propose still to the FDA to give you approval for pediatric and still meet the adult trial as post-approval. Is that what you're expecting?

We expect to have discussion around accelerated approval on the basis of the existing data with commitments for a post-approval, randomized controlled trial in adults, predominantly, that supports -- continues to support the evidence of efficacy of the product in this high-risk patient population as was discussed and voted on by the ODAC panel.

Okay. And how long will this proposed trial take approximately to complete?

We will be discussing with the agency an accelerated approval. That is -- we're talking about in the -- before completion of such a trial. So the 2 are unrelated. That's precisely why we're having a Type A meeting within the next 30 days to have agreements on the potential pathway to accelerate approval before any other trial gets performed.

And so just with the COVID-19 trial, given we potentially could have that completed in December and results in first quarter '21, I guess, given the situation, that potentially could become, like, the first label or first approval for the product. I mean how do you see that as a possibility?

Well, that is where the largest unmet need is today, of course. The pandemic is not going away anytime soon. In fact, as we can all see, second wave numbers are increasing all over the United States and Europe right now. And the #1 cause of mortality of this dreadful disease is acute respiratory distress syndrome and an overactive immune system that is destroying the lung whilst trying to battle this virus. The randomized controlled trial of up to 300 patients has been done in conjunction with the FDA and with the full agreement that it's appropriately powered to potentially meet an approvable end point should we show a reduction in mortality, along the lines that we showed in the pilot study several months ago. The potential pathway for approval is under an experimental use authorization, which is specifically designed to fast-track product that has benefit in diseases of major national importance such as this pandemic. And that's certainly our plan, and it's what we are very much focusing on as we speak.

The next question is from the line of Kennen MacKay at RBC Capital Markets.

Condolences on the CRL and the decision here. Just wondering, as it relates to feedback from the FDA, as it relates to the tie between efficacy and outcomes or manufacturing and outcomes, one of the lines in your press release mentioned additional data needed behind the mechanisms here. I was wondering if you could elaborate on that a little bit and potentially what that would imply as it relates to end points in a Phase III trial.

Sure. They don't relate to end points. So the end points are very clear. We met the primary end point of a GVHD trial of day 28 overall response. We've demonstrated substantial benefits for these children who have high risk of mortality, and we've seen a very good survival in the Phase III trial. What the FDA is looking for is continued understanding of how the product characteristics in vitro allow us to predict patient outcome using biomarkers like peripheral blood tests, specific tests. And those are ongoing assays that will continue to be refined and identified in all of our trials of the product, irrespective of the disease. And in particular, in the COVID-19 Phase III trial of up to 300 patients, we are collecting blood samples in a very orderly manner. And we are examining a wide range of biomarkers, which are known to be significantly impacted by the COVID-19 virus and the immune system's response to that virus. And those biomarkers, we will be evaluating to see whether our treatment impacts and reduces those inflammatory biomarkers, which will have a direct correlation with the biologic properties of our products. And so this is the natural way by which novel technologies evolve and the way mechanism of action get clarified. But in terms of the primary and secondary end points, those are well defined, well understood, and they relate to the disease process itself. I'd like to add something. I just want to add something. Condolences are not necessary. We're focused on getting our treatments to patients in need. And in this case, patients of COVID ARDS as well as GVHD. We're confident moving forward in our plans to bring both of those to the market, of course, with COVID pending the outcome of the COVID trial and with GVHD pending the discussions with the FDA. And we're confident that we'll find -- we'll have an accelerated path forward for that.

And maybe just a follow-up. Thank you for that explanation. Silviu, maybe just on sort of linking the relationship between the potency measurements and the sort of biologic activity, you certainly talked about COVID-19 ARDS quite a bit and some of those assays. But what about in steroid-refractory acute GVHD? Are there some additional assays for measurements that can be done there? And sort of what are those?

We talked about some of those at the recent ODAC meeting. And those assays are very similar in both COVID-19 and in GVHD. They relate to measurements of the ability of T cells to be activated or macrophages to be activated or be switched off. So they're related to factors that our cells make that control the overactive elements of the immune system.

Okay. And certainly looking forward to a very catalyst-rich Q4 here.

Thank you.

Our next question is from the line of Louise Chen from Cantor.

So I had a few. First one is, what do you expect this additional trial to look like? I know it was already asked, but I just wanted to see maybe if you could provide more color here. And then as you were speaking to the FDA on your submission for BLA, what was their view on the approval for pediatric and adults? How is that trending? And then last question we get asked a lot here is on your manufacturing. Has it been inspected? How has that been prepared? I know you're potentially having supply also already in place with one of your partners, but I'm just curious, from your own side, the manufacturing, how has that gone?

That's a lot of questions, Louise. I'm trying to -- look, in terms of manufacturing, we're very comfortable with manufacturing. We've got a lot of inventory built. And we have the release criteria, and the various assays have been generally agreed to with the FDA. And we're very comfortable that we have a well-manufactured product that's under good control. The question around the additional study in adults with GVHD, we touched on that at the ODAC panel. Fred touched on that a little bit a moment ago when he talked about that in greater detail. The objective has always been to extend any approval from the pediatric group to also include adults with steroid-refractory GVHD and in particular, the adults with the most severe forms, Class III/IV CD disease, where existing therapies really don't work very well, where mortality remains very high. And that will be the target population that we will be focusing on in the adult study, randomized, controlled against approved than the standard of care because those therapies out there not only do not adequately treat or address the high mortality in these adults, but they also have a high degree of safety concerns. And as you heard at the ODAC panel, the FDA did not have any safety concerns regarding remestemcel. And that's also important to consider. Many complete response letters relate to adverse events and safety concerns. That is not the case here. There were no safety issues. The issue in hand was that the single trial in children was an open-label trial with no control arm, and that's because the physicians do not want to enroll a pediatric study and have children exposed to unapproved drugs in a control arm. So it's really not feasible to do a randomized controlled study in children. It is feasible in adults. And we are precisely proposing doing that study in adults after potentially receiving an accelerated approval. Fred, would you like to add anything to that?

Yes. This is a study that we've discussed with expert advisory board, with experts in adult GVHD. This is powered to detect the difference between remestemcel and standard of care, taking advantage of our existing data and what we know about remestemcel, which has very substantial efficacy and safety, particularly around survival and durability of response. We'll be discussing this in detail with the FDA so that we plan to move forward rapidly.

Our next question is from the line of Jeffrey Cohen at Ladenburg Thalmann & Co.

So a few questions. So firstly -- and I think this all refers to GVHD. So firstly, is the FDA required to accept your Type A request? And would you expect that to occur within 30 days?

We expect to have that within 30 days. That's correct. Yes.

Okay. And they -- are they required to accept the request on behalf of the company?

We believe so.

Okay. Got it. And then it sounds like what you're saying is -- what you've spoken about previously is adult study to follow up. It looks like the commentary in the press release from the agency talks about children and/or adults. Should we assume that at the moment, your plan is to proceed with what you had previously discussed with them as far as an adult-only study?

Yes. I think we plan to move forward with an adult-only study because, as Silviu mentioned before, it's very difficult to do a study in children, especially with this level of severity. So we are focusing on an adult study. And if positive, we assume that we would move forward with indications in both children and adults. There's an unmet need here in both of those populations. And so we move forward in those areas.

Okay. Which kind of leads me to my third and final question. So the FDA is, I guess, based on your commentary, they're under the belief that they or you or someone could justify doing a control arm with a pediatric population and/or an adult population.

Well, as you would have heard at the ODAC panel, the principal investigator of the open-label pediatric study, Professor Kurtzberg, was adamant that it is not feasible to execute a randomized controlled trial in children. Despite the tremendous unmet need and the dismal, very dismal prognosis in these children, with nothing approved under the age of 12, it is not feasible. And so that's why we are confident in our discussions with the FDA around an accelerated approval, providing that we commit to a post-approval clinical trial in adults that is randomized and controlled.

I am afraid that the last question we have time for today is from the line of RK of HCW.

And I know it's disheartening, but I also see that you're hopeful and want to move forward, which is excellent. And so regarding getting back to the FDA and trying to have a conversation with them to convert this into an accelerated approval, just trying to understand, has this happened before? Because we have certainly had companies go to court with FDA, but I'm just trying to understand what is the advice you're getting from your experts regarding trying to convince them to change their decision.

There are many examples. Many, many examples. This is a process. This is simply the beginning of a process of a dialogue and a discussion. And this is a natural course event. That's why Type A meetings are there. And we'll have that discussion 30 days from now. The data and the results and the decision of the experts on the ODAC panel are clear, overwhelmingly positive. And it's really about coming to agreement on how to best use those data and make the product available to children who need it whilst, at the same time, providing the additional data in adults that gives the FDA further, further information on the effectiveness of the product in totality. And again, it's very important that we continue to focus as well on the adult trial in COVID-19 ARDS, which is a well-powered and well-designed randomized controlled trial in up to 300 patients, which, if positive, will provide further evidence of the strength of this technology in severe inflammatory conditions. That trial is enrolling and we'll -- we expect that it will complete enrollment by the end of this year with the overall primary end point of day 30.

Yes. And I would just note that it's not disheartening. It's disheartening to children, we'll just have to wait a little bit longer for this potential treatment. And so we're viewing this as a bit of a short delay before we can move this forward. So that's the disheartening part. We are not disheartened. We're confident moving forward.

One other additional thing that FDA identified was trying to come up with an assay to demonstrate potency measurements in relationship to the biologic activity. Do you think you would have that assay ready by the time you get in front of the FDA for the Type A meeting so that you can convince them that you have one of their requirements?

No, no, no. We already have these assays. But what the FDA would like us to continue to do is to relate the in vitro assays to in vivo clinical outcomes. And we are doing that in all of our studies, particularly in the COVID-19 ARDS trial. So it is -- the objective is to continue to collect biomarker, in vivo biomarker data that explains the assays that are already in place.

And that was the final question for today. So can I please pass it back to you for any closing comments at this stage?

Sure. Thank you very much. And as Fred has said several times, we are continuing to work with the FDA closely and with the investigators and with patients to bring this very important anti-inflammatory product to market. Children with steroid-refractory GVHD under the age of 12 have a high mortality and have nothing approved. And the data provides evidence of strength and efficacy of the product in that patient population. We will be meeting with the FDA shortly to explore an accelerated approval pathway for these children. And in addition, we will be continuing to build the evidence in randomized controlled studies in GVHD as well as in the much larger opportunity and concern around COVID-19 ARDS as that trial meets its next interim analysis result and moves to completion by the end of this year. Thank you, everybody. We appreciate you joining us this morning.