Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Welcome to Edison Open House Global Healthcare 2022. In this session, we are focusing on the work of Mesoblast, an Australian cellular medicine company, and we have Silviu Itescu, it's CEO, with us.

Silviu, hello. And can you tell us what does Mesoblast do?

Thanks for having me. Mesoblast is developing a variety of therapies based on off-the-shelf cellular medicines that are able to sense inflammation and can be used to turn off damaging inflammation in some very, very serious diseases. The key element here is that the cells can be used off-the-shelf, they're sourced from healthy young donors, they're batched, they're expanded, and they're released we're using very strict criteria so that every vial is the same as the same release criteria, and we're able to ensure that the potency of each product meets prespecified regulatory requirements so that when we use them in inflammatory conditions, they generate the appropriate results, batch to batch.

Now at the heart of your approach on Mesenchymal Stem Cells. Can you explain what they are, and why they're central to what you do.

Certainly. So these are very, very rare cells that are found in the bone marrows of healthy people. And what they do, what they function as is they have various receptors on their surface so that when you put them into the middle of a severe inflammatory condition, they are activated by the inflammatory cytokines. When activated, they then release counter-inflammatory, anti-inflammatory factors that turn off the damaging immune cells that are destroying the tissues where the cells are finding themselves. And so they're exquisitely responsive to the inflammatory environment and they're able to turn it off. And when the inflammatory environment is entailed, the cells have done their job, and they no longer secrete the factors. So they respond and they know how to turn themselves off. And the fact that they're anti-inflammatory means they're also able to protect themselves and cloud themselves in such a way they're not recognized as foreign and therefore, do not induce an immune response to themselves. Therefore, it enables us to develop these off-the-shelf therapies from one donor to treat literally thousands of unrelated recipients.

So that makes this approach very suitable for some particularly intractable and difficult conditions graft versus host disease, for instance and chronic back pain. Tell me a bit more about the areas that you're investigating and where you are with the trials?

Well, graft versus host is a particularly devastating condition. -- both in adults, but especially in children, we're talking about people who have an underlying leukemia that gets treated with chemotherapy, extensively cured of the underlying disease and then the bone marrow is replaced in a bone marrow transplant. And unfortunately, in that scenario, the foreign bone marrow attacks the body, and causes this devastating disease, there's up to 90% lethal. And despite therapies that are out there today, particularly in children where there's nothing approved for children under 12, this condition approaches 90% mortality. Our cells injected intravenously in these very, very sick children twice a week for 4 weeks, resulting in substantial induction of remissions and an overall survival long-term curative outcomes that make a major difference in the lives of, of course, these children and their families. We've completed a Phase III trial. We've completed multiple trials in addition to the Phase III trial, and before the FDA with a submission to hopefully get an approval for this as being the first indication in the U.S. market for an approved therapy for children with graft versus host disease.

That's one really intractable condition that you're considering, but another one is chronic back pain.

Yes. So chronic back pain is -- can be caused by a number of different etiologies, but probably the most serious and common is inflammatory degenerative disc disease, which affects so many of us, as many as 3 to 4 million people across the European Union and another 3 to 4 million across the U.S. And really, despite the fact that there are nonsteroidal anti-inflammatory drugs, and steroids. The only thing that potentially makes a real difference in the lives of these people is opioids. And in the U.S., in particular, opioid prescriptions account for chronic low back pain due to inflammatory back disease, accounts for 50% of opioid prescriptions. And as we all know, the opioid epidemic in the U.S. is a major, major health hazard and cause of overdosing. A single injection of our cells into the disc space that turned down the severe inflammation appears to be a very potent analgesic with substantial reduction in pain for up to 3 years now from one injection. And the reduction in pain that we're seeing is to such an extended to such a degree that we're seeing as many as 40% of the patients who are on opioids at baseline, either substantially reduce their opioid usage or actually come off opioids altogether. As many as 50% of patients in our Phase III trial through 24-months had no pain whatsoever despite starting the trial with moderate-to-severe chronic low back bundles incapacitating. So we're very excited by the opportunity to treat this refractory disease with a single injection. And again, we've completed one Phase III trial, and we've had terrific interactions with the FDA recently about what a confirmatory study would look like with a view to potential approval.

And it has been done, of course, that physicians are looking for alternatives to opioids because they're very concerned about prescribing them in the first place is such a degree of concern about them at the moment. Now what are the steps that you're taking to take forward, both those programs? You mentioned a couple of things, but what's going to happen, for instance, in the next year?

Well, graft versus host disease, we are before the FDA will be hopefully hearing positive news from their review of our data and dossiers over the next -- over the coming months. With -- we will be preparing to interface with the FDA and potentially have our first product approved later this year. With respect to the back pain program, we have a partnership in Europe with Europe's top pain company, Grünenthal. In the U.S., we own all the rights, and we will be taking this forward ourselves, and retaining the full market opportunity in the U.S. market, which is a huge opportunity for us. Our third program is severe inflammatory heart failure. And we're very excited about some of the Phase III data that we've generated there where we've seen as much as a 50% reduction in heart attacks and deaths from severe inflammation associated with diabetes and ischemic heart disease. That's a program that we will be working together with potential strategic partners to bring to market over the coming years. And we've had very exciting discussions with the FDA, again, in that particular space. So there's a lot of news flow in the coming months, particularly as we continue to interact with FDA on our first products for the U.S. market.

And heart failure, of course, a growing market, I mean the absolute pandemic of heart failure coming towards us. We've saved people from heart attacks by better treatment, but actually heart failure still remains an enormous problem.

What's the #1 killer of people in the Western world, and as many as 6 to 7 million people in the U.S. alone suffer with severe heart failure. And this is the drugs that are out of today symptomatically improved patients, reduce shortness of breath, stay at a hospital oftentimes, but do not really have a material impact on the severe mortality as many as 50% of patients with advanced heart failure die within 5 years. It's as bad as many cancers, and that's where we think we've got a unique mechanism of action, the inflammatory, the modulator of inflammation that we think is responsible for reduction in mortality that we've seen to date.

So you've got an extraordinarily exciting year coming up. I was to get off whether you've got anything else that investors should look out for this year because that's an enormous amount in itself.

Well, there is one other area, and that is -- we continue to target the most severe inflammation in -- in COVID disease, which is acute respiratory distress syndrome. We have had a study that demonstrated as much as a 46% reduction in mortality in younger patients. Who now account for a large number of the hospitalizations through Omicron and Delta. And we're working together with our partners as we prepare for a potential pivotal trial to meet the emergency use authorization potentially that the FDA has identified as a potential for us.

Well, that is some year coming up. Silviu, it's been such a pleasure talking to you. Thank you so much.

Thank you very much for your time. We're excited.