Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Hello, and welcome to a corporate update from Mesoblast. An announcement and presentation have been lodged with the ASX and are 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 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 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 like to hand the call over to Dr. Silviu Itescu, Please go ahead.

Thank you very much, and thank you for joining us. Today on the call, we have Dr. Fred Grossman, our Chief Medical Officer; and Josh Muntner, our Chief Financial Officer. We're very excited today to present the top line 60-day results from our randomized controlled trial of remestemcel-L in patients with moderate to severe COVID-19 acute respiratory distress syndrome. Today, we announced the 60-day results from data obtained from 222 ventilator-dependent COVID-19 patients with moderate/severe ARDS. This trial had been halted after the third interim analysis as we previously announced. Remestemcel-L reduced mortality from day 60 by 46% in the pre-specified group below age 65, but not in patient 65 or older. Remestemcel reduced mortality by 75% and increased days alive of mechanical ventilation in those patients under age 65 when combined with dexamethasone, in comparison with controls on dexamethasone. The reduction in mortality in mechanically ventilated patients under 65 remains a critical unmet need since as many as 72% of currently hospitalized patients across the U.S. with COVID-19 are in this age category. This is very similar to what's seen with other causes of viral ARDS, such as influenza, with 70% to 80% of patients in intensive care units are under the age of 65. The reduction in mortality seen with remestemcel-L in this age group highlights the potential to make a meaningful difference in the treatment of diseases of excessive inflammation. The trial enrolled 222 mechanically ventilated patients with COVID-19 who have moderate to severe ARDS across the U.S. Of these, 217 were randomized in a one-to-one fashion and received either standard of care alone or standard of care plus 2 intravenous infusions of remestemcel-L at a dose of 2 million cells per kilogram, 3 to 5 days apart. This is the same dosing regimen that is used over a 4-week period in children with acute steroid-refractory GVHD and is also the same remestemcel dosing regimen used in the earlier compassionate use program, where 11 of 12 patients were younger than 65 and 75% of them successfully came off ventilatory support. During the course of the trial, as the pandemic evolved, numerous changes occurred in the treatment regimes. As a result, the referral pool of patients into the trial became progressively older, with comorbidities and refractory to treatment. The median age in the trial increased substantially from 59 in the first half to 67 in the second half, and this was highly significant. This may have impacted the outcome overall of the trial and the third interim analysis, which resulted in the trial's early conclusion. It is possible that to achieve mortality reduction in patients over 65 with comorbidities will require a different dosing regimen than that which may be effective in patients under 65. Key findings in the trial are that remestemcel reduced mortality by 46% through day 60 in the pre-specified population of 123 treated patients under the age of 65. Remestemcel had similar treatment effects on mortality in these patients who had either moderate ARDS or severe ARDS. And importantly, given that standard of care substantially changed during the conduct of the trial, notably in the use of dexamethasone, which was only used in 2% of patients in the first 50 patients, but in 84% of the subsequent 172 patients, we were able to explore additional analyses of remestemcel treatment in combination with dexamethasone as part of the standard of care. In these exploratory analysis, remestemcel reduced mortality through day 60 by 75% compared to controls in patients under 65 who received dexamethasone as part of their standard of care from 45% mortality rate at day 60 to 14%. Remestemcel also increased days of life on ventilator within 60 days and reduced the time to discharge from initial hospitalization compared to controls in patients under 65 who received dexamethasone. The mortality benefit observed in this ventilator-dependent group of patients younger than 65, particularly when combined with dexamethasone, has the potential to change the treatment regimen in this very critical patient population. And given the continued surge in patients with this condition across the U.S., we plan to meet with the FDA to discuss next steps. With that as a background, I'd like to now open the discussion. And if there are any questions, please address them.

[Operator Instructions] The first question today comes from Louise Chen from Cantor.

Congratulations on the data. So first question I had for you is, how do you see the opportunity for COVID ARDS with vaccination rollout underway? I know there are still a lot of sick people in the hospital. And then how do you look at the opportunity outside the U.S. where COVID is still raging in many parts of the world? And then second question I had was on manufacturing and distribution. If you were granted an Emergency Use Authorization, how will you manufacture and distribute the product? And then maybe last question I had for you was, there have been a lot of failures in the hospital ARDS studies, and you actually have a successful trial here, successful data. So where do you think you would fit into the treatment paradigm if you received Emergency Use Authorization?

Those are critical questions. So I think, first of all, let me address your last question, where do we think we would fit in the treatment paradigm? I agree. There have been many failures of therapies targeting this very, very sick, critical in-hospital population on ventilators. I think what is particularly noteworthy is the complementarity of the effects with what is now standard-of-care dexamethasone and remestemcel-L. And that probably goes to the heart of the mechanism of action with both remestemcel and dexamethasone act to target the inflammatory cytokine process driven by inflammatory macrophages and T cells to a lesser extent. And so mechanistically, there is an understanding of synergy between the 2. And that probably, in part, explains why we're seeing such exciting results on mortality reduction. Midway through this trial, the standard of care changed. And now everybody on mechanical ventilation is treated with dexamethasone, and that's because of large data set from the U.K., the RECOVERY trial, which demonstrated a degree of reduction in mortality overall with dexamethasone. However, the further reduction by 75% when our cells were used in conjunction with dexamethasone suggest that moving forward, if we can confirm the data in a further confirmatory study or through other means, that the cells ought to be used together with dexamethasone as standard when patients who have moderate course of ARDS, which are defined on the basis of severe respiratory dysfunction on ventilators, are put in the ICUs. So I think we're pretty excited, and that would be the -- we would expect that patients would get both therapies prominently. With respect to meeting the potential demand should this product be approved, we have plans for manufacturing scale-up. We have proprietary media that contains recombinant cytokines that enables substantial yield improvements. And potentially, we could move from 2-dimensional to 3-dimensional bio-reactive production. Those plans are all in hand and underway. And really, we are preparing ahead of the curve should we be in a position to launch such a product, particularly in the U.S. I think you make a very good point about the role of vaccine in this space. So the vaccine rollout shown that the overall new infectious cases, particularly in -- across the U.S. and in other jurisdictions like Israel, can be very effective in terms of reducing new cases by as much as potentially 80%. Nonetheless, the continued emergence of variants, particularly from third-world countries, the continued social interactions, particularly in younger people who in the northern summer now will be outdoors and enjoying life, I think means that there will be continued endemic cases of this virus in various pockets. There will be continued surges, resurgences, et cetera. And there will be a steady state of patients who will need ICU care, mechanical ventilation and treatments for the worst outcomes and the highest mortality risks of COVID-19 ARDS. And so we clearly see that this is a potential therapeutic for the steady state, even in the setting of large numbers of patients being vaccinated. We're talking about in the last 12 months in the U.S. alone 560,000 cases of deaths have occurred. Even if 80% reduction in infectivity is a success through vaccination, that still results -- will result in a large number of potential fatalities that could be prevented by the use of remestemcel together with dexamethasone. So we're preparing for that steady-state situation. Influenza ARDS is a parallel scenario where, again, as many as 70,000 patients a year are dying from moderate to severe ARDS. And through a similar mechanism of action, we believe that remestemcel has the potential to be used in that patient population as well. So this is a very important program and opportunity for Mesoblast. And these results indicate that this is a major focus for the company as we move forward and prepare for the manufacturing scale, yield and allocation of product.

The next question comes from Jason Kolbert from Dawson James.

Silviu, Josh, very exciting data. Louise asked some great questions. I'd like to ask you, given the fact that you have such prominent people on your Board like Dr. Eric Rose, who's pretty connected with the United States Government in BARDA and DoD, what kind of discussions have been going on there? How aware is the government of this data?

Well, Jason, I think it's very early days, given that the trial was halted in November in the third interim analysis. And I think we've only just unblinded the data and had an opportunity to see the top-level results. And of course, given the materiality of the mortality reduction that we have observed, it was important that we get this information out there. The objective over the next short period will be, of course, to meet with the FDA to talk at a higher level with governmental agencies. And I guess the real question is going to be how robust are these data and what degree of confirmations need to be observed in order for the next steps to be put in place. I guess, when we talk about BARDA, we talked really about contractual arrangements for manufacturing scaleup. In order to think about those types of things, we have to have our plans in place, and that will require FDA discussions as well as further discussions with our potential strategic partner Novartis.

And given this data and given its demonstrated efficacy in an inflammatory disorder, does data like this support you in the GVHD program?

Yes. Absolutely. It's a great question. We were very careful to use a dosing regimen that had already been established from perspective of efficacy and safety in GVHD, a regimen that in patients who had the most severe inflammatory condition and clinical symptoms required 2 doses a week for 4 weeks. We adjusted that regimen in this disease, which was also extremely inflammatory in nature, is even more acute GVHD. And so our objective was to see whether a lower dose than is used generally into GVHD could be effective in these patients within several days of administration. I think the conclusion we have is that, in those patients with disease limited to the lung and without comorbidities in other organs, that acute administration of 2 doses or 1/4 of the dosing regimen that we use in GVHD, appears to be effective in reducing mortality. In those patients under 65, we have really very limited comorbidities, if any, other than the lung disease. In contrast, it is clear from these data that in the substantially older population with a lot of comorbidities, including renal disease and cancer, which accounted for up to as many as 20% of the older population, in that population, this dosing regimen did not appear to be effective. And of course, we will explore other dosing regimens in those patients over time, including more frequent administration or maybe more prolonged administration along the lines of the regimen that we use in GVHD. But I think the mechanism of action and the safety data and the outcomes are very similar between these populations. And we also look forward to getting a lot of our biomarker data in due course to see whether we see similar biomarker changes as we have seen in GVHD.

Well, and I think you also already answered my next question, which was, when I look at inflammatory disorders, cytokine syndrome, then I see T cell therapy, I see a little bit of an unmet medical need, particularly where there's something benign that's not going to shunt the immune system completely like steroids would. And so I'm just wondering if that's not on the horizon. Just because there's so much big farma, big biotech interest in pioneering T cell therapies, but cytokine syndrome hasn't really been addressed. And I'm wondering if there is a crossover utility here.

Well, the way we look at these cells and the mechanism of action, they are being defined as targeting both T cells and macrophages. And both of those arms of the immune system are critical to the severity of acute graft versus host disease. And macrophage is perhaps even more than T cells to the severity of viral ARDS such as COVID-19. The similarities between the disease, the mechanism which they cause immune activation are close, and we understand -- we believe we understand how these cells control those assets of the immune system. And the selectivity of the controls of the immune system is really what makes the cells much safer than various therapies that non-selectively target either T cells or macrophages or other arms of the immune system without being able to be turned off. And so we're extremely pleased by the safety profile of these cells, whilst at the same time the selective nature of their ability to turn off aspects of the immune system critical to diseases of inflammation involving lungs and other organs like the gut in GVHD.

Thank you for holding this call on short notice. We really appreciate it.

Thank you. Appreciate your support.

This is Dr. Grossman. I was going to add to that question that you asked as well. We're focusing very much on areas of the greatest unmet medical need. And from a development perspective, we're focusing right now on GVHD, on COVID ARDS. We also are working with our potential partners at Novartis. And as you know, we released data on lower back pain and heart failure. So there are numerous areas that we can go into. But at this point, our teams are focusing on moving past key milestones in these indications.

That makes a lot of sense, and focus is something that the industry has lacked. So I can appreciate the importance of the message.

[Operator Instructions] The next question comes from John Hester from Bell Potter.

So Dr. Grossman, sir, would you please recap on the key points from the Novartis deal? And what the start-up will now mean for your negotiations with them? And then I have a follow-up after that as well.

Thanks. Well, we've entered into a strategic collaboration with Novartis. And the details of that are already out in the public domain. That collaborative agreement, license and collaborative agreement covers development manufacturing commercialization of remestemcel, focusing initially on the treatment of acute respiratory distress syndrome, including COVID-19. And the agreement remains subject to closing conditions, including having sufficient time to analyze the results from this trial, top line results of which we've just announced today. But the companies are working closely together to complete analysis of a variety of secondary endpoints, including those in intensive care, other -- and organ damage, potentially recovery and measurement of circulating cytokines and biomarkers. So we expect to be able to update the market in due course, but we look forward to continuing our close collaboration with Novartis.

And you're saying in due course. Is that this calendar year?

Over the next few weeks, we expect.

Okay, okay. And you've alluded to confirmatory studies, but the reality is you've now got data from a 222-patient randomized study. And the time of the GVHD decision from the FDA as they were indicating that they wanted data from a randomized study. To what extent do you think this will go towards satisfying that requirement?

That's a very, very good question. We are in ongoing discussions with the FDA with respect to this very product, remestemcel, and its pathway to approval for children with the most severe forms of acute steroid-refractory GVHD. This trial certainly provides evidence of biologic activity of the product in a randomized controlled trial. Again, it's important to note that the trial was relatively small, and we see a treatment benefit in prespecified population under 65, but not in those older than 65. So there continues to be the requirement for confirmation in more studies. But nevertheless, in this randomized, well-controlled, well-conducted study, we see strong biologic evidence of activity in patients as defined by reduction -- substantial reduction in mortality. Dr. Grossman, would you like to add to that?

No, I think you covered most of the points. I think we're very pleased with the very strong signals that we've seen in this patient group younger than 65, particularly those who are on dexamethasone. I think the GVHD program in and of itself is a separate program. And the discussions with the FDA are moving forward. So we hope to continue that.

And so is your intention now to pursue an Emergency Use Authorization with the FDA?

Look, I think it's still early. We haven't yet completed updated analysis. We -- again, we needed to provide the data to the market as soon as we had sufficient conclusions at hand on the most material finding, which is reduction in mortality. But I think we need to be complete in terms of our analysis of the secondary findings and have a meeting with the FDA to discuss all possible paths going forward. Fred, would you like to add to that?

Yes. I think, as noted, this study was stopped at -- before its completion. And the signal detection work that we've done has revealed something that's very, very important and significant enough to warrant these discussions with the FDA for suitable path forward. There's such a great need, as noted before, for potential therapeutics, particularly those that treat mortality. And as Dr. Itescu mentioned before, there's going to be breakthrough of the virus -- of the vaccine such that patients will wind up in the ICU on ventilator. And at this point, there are no treatments that substantially reduce mortality. So the finding in this signal detection analysis are such that it warrants discussion with the FDA to find a path forward for a potential therapeutic, in particular, and in combination with dexamethasone.

And so view outside of the U.S., I'll assume that mortality rates are probably higher than what they are in the U.S. What about the Europeans? Have they expressed any interest or indeed other regulatory bodies in approaching Mesoblast about potentially approval outside of the U.S.?

So there's no doubt that the data from this randomized control trial will be applicable to submissions both in the U.S. and in Europe and in other jurisdictions. And you're right that the European territories continue to have a terrible plight despite the vaccines. And mortality rates are just horrendous in many countries. And of course, other third-world countries are even worse, including India. So we will no doubt be performing additional studies to confirm precisely what we've seen, the survival benefit in this target population with this dose regimen. I think we need to do that in combination with the only drug out there that has demonstrated any improvement in survival being dexamethasone, potentially other steroids. Having said that, together with our potential strategic partner Novartis, we will be looking very closely at how to make this drug available in the U.S., in Europe, in other jurisdictions. It will require, obviously, scaleup and manufacturing investment. And that will be the focus now of the company as we move forward.

Thank you. 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 having joined us today. These top line results, we think, are very important and require a full understanding by the market, by the regulators and by our strategic partners. And I think we look forward to having the full data analyzed and presented at a later date. Thank you, everybody, for joining us today.