Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Mesoblast Limited 2023 Annual General Meeting. Today's AGM is being recorded. I now invite Mr. Joseph Swedish, Chairman, to begin today's proceedings. Chairman, please proceed. Chairman, you may now proceed.

Good afternoon, ladies and gentlemen. My name is Joseph Swedish, and I am the Non-Executive Chairman of Mesoblast Limited. I'm joining you today from the United States in the State of Arizona, and will be chairing this meeting virtually. It is just past the appointed time, and as we have a quorum present in the room, it is my pleasure to now declare the 2023 Annual General Meeting of Mesoblast Limited formally open and to welcome you on behalf of my fellow directors. We're very pleased you have joined us in person today and welcome the opportunity to update you in person regarding the achievements of the company in the last year and the outlook going forward. In addition to shareholders present in the room, this AGM is being webcast for those who have not been able to attend in person. I welcome the listeners to the webcast. If in the unfortunate situation we experience technical issues that impact the meeting, I will make an assessment of the circumstances and then communicate further with you. If the technical issues are isolated to my own location, then I have nominated Jane Bell to assume the chair and continue the meeting. In the event we take steps to adjourn the meeting, we'll make an announcement to the ASX with all relevant details. Before we proceed with the meeting, there are a couple of housekeeping matters to address. I would appreciate if all mobile phones could be turned to silent mode. In addition, recording devices and cameras must not be used during the meeting. First, I'd like to introduce my fellow directors of Mesoblast. In the room, we have Dr. Silviu Itescu, our Chief Executive; Ms. Jane Bell, Chair of the Audit and Risk Committee and a Non-Executive Director. Joining us via audio conferencing, we have Mr. William Burns, Vice Chair of the Board and Chair of the Nomination and Remuneration Committee; Dr. Eric Rose, our Chief Medical Officer and Executive Director; Mr. Philip Facchina, our Non-Executive Director; along with Dr. Philip Krause, a Non-Executive Director. I'm also pleased to say we have a number of key executives here today. I ask each executive to stand briefly when I introduce them. Ms. Geraldine Storton, Head of Regulatory Affairs and Quality Management; Mr. Paul Simmons, Chief Scientific Adviser; and Mr. Andrew Chaponnel, our Interim Chief Financial Officer. Also with us is Ms. Niva Sivakumar and Mr. Paul Hughes, our joint company secretaries. They will be available to talk to you all through completion of our meeting. In addition, joining us via audio conferencing, we have Mr. Peter Howard, our General Counsel and Corporate Executive. Finally, present today are representatives from the company's auditors, PwC, Mr. [indiscernible], Ms. Aila Kinghorn and Mr. Jon Roberts. I'd now like to outline the order of business that will be undertaken today. First, I will say a few words about the past year for Mesoblast. Dr. Itescu will then provide an update on the operational and strategic developments of the business. Shareholders will have the opportunity to ask Dr. Itescu questions about the business following his presentation. Following his presentation, I will go through some procedural matters before moving to the resolutions outlined in the notice of meeting. Although most of the meeting is formal in nature and restricted to the resolutions detailed in the notice of meeting, we hope that afterwards, those in attendance will join the directors and management present for informal discussions and light refreshments. So I would like to give my Chair Address for the moment and begin by saying good afternoon, shareholders. Welcome to the 2023 Mesoblast Annual General Meeting. It is truly a pleasure to get together with you once again. A huge amount was accomplished during the year despite the disappointment of a further delay in gaining approval for our lead product candidate, RYONCIL in the treatment of children with steroid-refractory acute graft versus host disease, a devastating and life-threatening complication of a bone marrow transplant. The company continues to demonstrate the value of our technology and pipeline across the portfolio with the Board fully supportive of Mesoblast's corporate and commercial strategy, led by our very capable Chief Executive, Dr. Silviu Itescu. The Mesoblast team continues to have very constructive interactions with the United States Food and Drug Administration in regards to RYONCIL for pediatric steroid-refractory acute graft vein host disease, including the recent Type A meeting, and understand the remaining issues that need to be addressed in order to gain FDA approval for RYONCIL as the first allogeneic mesenchymal stromal cell product in the United States. Additional potency assay work is being completed for presentation to the FDA. And last week, we announced an agreement with bone -- excuse me, with Blood and Marrow Transplant Clinical Trials Network to partner on a Phase III pivotal trial of RYONCIL in the treatment of adults with steroid-refractory acute graft vein host disease. Indeed, as evidence for management's continued positive interactions with the FDA, I am pleased to say that FDA granted regenerative medicine advanced therapy designation for our next-generation potential blockbuster product rexlemestrocel for treatment of chronic low back pain associated with disc degeneration. We also filed for orphan drug and rare pediatric disease designations with the FDA for Revascor in the treatment of another devastating illness in children, severe congenital heart disease. The filings were based on results from a trial conducted at a single center in the United States in 19 children and accepted for publication in the Journal of Thoracic and Cardiovascular Surgery Open, which shows that a single administration of Revascor at the time of surgery resulted in a significant increase in the volume of congenitally small left ventricular heart pumping chamber. The Board is in alignment with Chief Executive's outlined strategy for fiscal prudence and targeted reduction in payroll and quarterly spend. The management team has already successfully executed a substantial reduction in spend over the past 2 years, and the Board fully supports the new plan to preserve the company's cash as well as strengthen the balance sheet through a number of planned initiatives. In this regard, I'd like to acknowledge the initiative taken by our Chief Executive and Chief Medical Officer to lead by example and defer the entire fiscal year '23 short-term incentives and voluntarily reduce their base cash payment by 30% in lieu of accepting equity-based incentives. I also thank my fellow directors for agreeing to voluntarily defer 50% cash payment of their director fees and to receive the remaining 50% of their fees in equity-based incentives. In keeping with the Board's stated intention to maintain a program of renewal that generates regular rotation of Board membership, Ms. Jane Bell joined the Board during the 2023 fiscal year. In September 2023, Ms. Bell was appointed Chair of the Mesoblast Board Audit and Risk Committee, a role for which she is exceptionally well qualified to make a substantial contribution. I would like to thank our management team and all of our employees who have put in a huge effort with respect to our FDA interactions and who continue to maintain their tremendous output toward the potential approval of our lead product candidate. Most importantly, I would like to thank our shareholders for their ongoing confidence in and support of Mesoblast as we continue our mission to obtain our first FDA product approval. Thank you, and we'll now move on to the rest of the meeting and return to our agenda. I'm going to turn the meeting over to Silviu Itescu, our CEO, for his remarks.

Thank you very much, Joe. Welcome, everybody to the 2023 Mesoblast Annual General Meeting. Let's go to the next slide, please. Our mission is to bring to market innovative cellular medicines to treat serious and life-threatening inflammatory conditions. Next slide, please. Next slide, please. This slide highlights just some of the investment highlights for the company. We are developing a novel allogeneic platform technology, off-the-shelf cellular medicines based on proprietary mesenchymal stromal cell technology platforms that enable treatment of severe conditions without the need for donor matching or immunosuppression. We have 2 platform technologies, one that we call remestemcel being developed for pediatric and adult steroid-refractory acute graft versus host disease; and the second platform immunoselective cells called rexlemestrocel, being developed for inflammatory back pain and inflammatory heart disease. I'll be talking about each of these in great detail over the next few slides. Next slide, please. Now how do we set corporate level strategic options, how do we evaluate them, and how do we decide what our strategic approach generally is? We could either be developing our various products on our own. We could partner all of our products with various strategic partners, or we could sell assets, either in total or in part. But really, our preferred strategy is to partner some, the most largest indications and the most expensive to develop, and have carve-outs for those indications that we think we can take to market and retain 100% ownership of. And the advantage of this type of a preferred strategy to partner and develop carve-outs is that there are potential immediate financial rewards through partnership, has diminished reduced development and commercial costs if those large indications are partnered, and it allows us to invest our capital in smaller or orphan indications with consequently lower development and commercialization costs, allowing us to attain a higher level of shareholder value and return by demonstrating the range of capabilities of the company. Next slide, please. The tactical execution of our corporate strategy is highlighted schematically on this slide. First of all, the intellectual capital is built on our people and our patents. We have a very sophisticated manufacturing strategy that allows us to develop product delineation and life cycle across all of our product that enables us to delineate, differentiate and control for pricing. We have developed a very mature and very significant clinical pipeline that I'll talk to in more detail. Underpinning all of this, of course, is securing a robust financial base that allows us to then make the choices to either go to market on our own in some indications and leverage the platform for strategic partnerships. And ultimately, in the commercial sphere, it's all about building a strong brand. Next slide, please. So what are the key strategic priorities that have been set for 2024? They are highlighted on this slide. Of course, we continue to seek our first regulatory approval in the U.S. We have work to do with additional potency assay data to prior to the FDA. We will commence an adult trial to complement the successful pediatric study that has already proceeded, and we will continue to seek both pediatric approval and launch whilst we continue to develop the adult indication. We will further advance our MPC therapies, the rexlemestrocel platform, with a second Phase III trial for inflammatory back pain and with further FDA interactions around both the adult program for heart failure with reduced ejection fraction and for congenital heart disease in children. We will continue to optimize and manufacture our products, particularly focusing on moving into 3D bioreactors to support the commercial requirements for the larger indications in adults. We, of course, will continue to strengthen our financial position overall. And the way we're approaching those is through continuing to negotiate through global scale partnerships to fund our clinical programs and build out the enterprise. The objective is to maintain 2 years of cash flow position at minimum, including potentially monetizing certain assets. And finally, we will continue to attract, retain and develop key talents across the enterprise and align and build when needed the capabilities to support commercial launch. Next slide, please. Now to execute on the strategy, I've mentioned intellectual capital. And as such, our global intellectual property estate is second to none. We're the leaders in intellectual property in the mesenchymal stromal cell space with over 1,000 patents and patent applications across all the major jurisdictions. Our patents cover compositions of matter, manufacturing and therapeutic applications of these types of cells. And we have strong global protection in areas of our core commercial focus. Outside of our core areas, we make grant rights to third parties, and we have done so to parties such as Takeda who's developing mesenchymal stromal cell in certain areas that we're not focused on. Next slide, please. We are developing commercial scale manufacturing processes in our facilities. We own our manufacturing processes. We have 2D processes that have already been inspected by the FDA and have successfully been inspected. We're now building out our 3D capability in order to meet the high-volume indications, the yield that will be required for larger adult indications. And more importantly, the reduction in cost of goods that is going to need to be put in place to underpin the appropriate gross margins for these products. Next slide, please. So finally, our technology. And this is really my only scientific slide, and it's really just the schematic representation of a slide we've shown many times in the past. But essentially, both our first- and second-generation platform technologies, remestemcel and rexlemestrocel are built on the back of a cell type that is present in all of us in tiny amounts that we're able to scale up. And these cells have, on their surface, receptors for a range of inflammatory cytokines. Those type of cytokines that are well known to cause cytokine storms in bad inflammatory diseases like you're all familiar with are lung disease, for example. And when these cells, in a concentrated form, are put into an inflammatory organ or state, their receptors are able to be engaged by the inflammatory sea of cytokines, activated, and they initiate a concert that results in orchestration of an anti-inflammatory process that turns off multiple arms of an active immune system. That's really the only way to turn off a very wild immune environment in diseases that cause major refractoriness to other treatments that result in a high level of mortality. Next slide, please. A snapshot of our late-stage clinical pipeline on this slide. As I mentioned, we're focusing on late-stage assets derived from either the remestemcel or the rexlemestrocel platforms. The remestemcel platform is the basis for our pediatric and adult steroid refractory GVHD products. The pediatric is in the midst of its regulatory filing. The adult, I'll talk about it a little bit more, but it's in line to commence a pivotal Phase III trial. Crohn's disease is a further indication that we're focusing on because it very much reflects and is reminiscent of the GVHD involvement, and we've had some very exciting data in Crohn's disease as well. With respect to the second-generation rexlemestrocel programs, those products are in Phase III in both inflammatory back disease and inflammatory heart failure, and I'll talk about those in due course. Next slide, please. So what are our clinical program milestones for the coming 12-month period? And I've divided them into 3 buckets: the RYONCIL, which is the brand name for the remestemcel product for GVHD, has its particular milestones over the next 12 months; then the rexlemestrocel for inflammatory back pain; and Revascor, which is the rexlemestrocel cardiovascular product for its particular indications. And some of these milestones are obviously fairly aggressive, but we're working towards them as we always do, and there's a lot of resources that go behind this snapshot. We are currently finalizing additional potency assay data regarding the commercial inventory to provide to the FDA, and we expect to complete those in the coming first quarter of the coming year. We plan to have a meeting with the FDA regarding the potency assay data for the pediatric BLA in the first quarter, and we expect to complete and submit to the FDA, a protocol for the adult GVHD Phase III trial in partnership with the BMT Clinical Trials Network across the U.S. that we announced recently, all of this to happen in the coming quarter. We expect to commence patient enrollment for the adult trial subsequent to that. With respect to the inflammatory back pain product, we continue to have our start-up activities with investigators, trial sites and contract research organization currently in place, and we expect to be able to sign up the contract with research organization that will run the Phase III program sometime in the first quarter. With respect to the adult program for Revascor, we plan to meet for the FDA under our RMAT to discuss the potential pathway to approval in adults with heart failure with low ejection fraction based on both the LVAD and the DREAM Heart Failure trials and we expect to have a further meeting on the congenital heart disease program that we just announced regarding pediatric patients based on the results of a randomized controlled trial that is scheduled to be published in the coming couple of weeks. That's a busy year ahead of us. Next slide, please. So now let me give you a snapshot of where we are with RYONCIL for pediatric and adult graft versus host disease. Of course, we were disappointed not to have received approval this time around for RYONCIL. Nevertheless, much work went into the BLA process. And I think the team is to be congratulated for the amount of work and the heavy lifting that was performed. During the FDA review period, the FDA acknowledged that the pediatric Phase III trial was an adequate and well-conducted trial and would have been sufficient for approval, but for the lack of a potency assay without variability. We understood that we had high variability, and we spent the better part of the last, say, the last 1.5 years, understanding the root cause of that variability and addressed it. The manufacturing process demonstrated that we have a consistent product throughout, and we have, of course, had a successful FDA inspection of our manufacturing process. The FDA acknowledged that we now have an improved potency assay, which measures an important attribute of the cell [indiscernible] of IL-2 receptor activation on T-cells. And that this improved potency assay is now sufficient to initiate an adult Phase III trial for the adult indication. In parallel, we plan to generate additional data with the original potency assay measuring IL-2 inhibition that was in place in the Phase III trial. And the point about the data that we want to generate is to be able to show the consistency of that assay in measuring the product used in the Phase III trial and the product that's currently in inventory, so that potentially that we can have an early launch and a potential approval even while on the pediatric side of things, even while the adult trial continues to enroll. Next slide, please. Now how do we get approval for the much larger indication of adults, which is about 5x larger than the pediatric indication? Survival in adults with GVHD who failed at least one additional agent and the only approved drug in this disease is ruxolitinib. Survival in patients who failed this is as low as 20% to 30%. And for this patient population, there are no approved therapies. In contrast, in under expanded access program that has continued with our cells, survival is 63% in 71 patients who are adolescents and adults who failed ruxolitinib and other agents, a substantial survival benefit compared to best available therapy. Importantly, the FDA themselves, just now in September, in fact, after our Type A meeting, put our draft guidance to industry that agents to treat GVHD, steroid-refractory GVHD may be approved on the basis of the single-arm trial, just like a single-arm trial that we did in children if there are no approved therapies for that patient population. So we're very encouraged by these guidances that for the first time exist for GVHD therapies. We intend to commence a Phase III trial of RYONCIL in adults and adolescents in this unmet need where there are no approved therapies in partnership with the Blood and Marrow Transplant Clinical Trials Network. This is a network of all the top medical centers across the U.S. They account for about 80% of all U.S. transplants, bone marrow transplants. And their steering committee voted almost unanimously to partner with us in building appropriate protocol and moving forward with the Phase III trial, remembering that this BMT CTN is funded by the National Institutes of Health. And in fact, the incoming Chairman of this BMT CTN was with us at the Type A meeting and presented the data and the lay of the land in this space and the lack of approved therapies in front of the FDA on our behalf. Next slide, please. Now I'll come back to GVHD in a few slides, but now let me move on to some of the other areas that are important to us all, our financials, first of all. Revenue from royalties predominantly on sales of TEMCELL sold in Japan by our licensee were $7.5 million for the year ended June 30. Some of that was impacted by currency. And in fact, adjusting for currency, this is somewhat higher than the $7.5 million, adjusting for yen to U.S. dollar changes. Cash balance at September 30 was $53.2 million, with a net operating cash spend of about $14.2 million for the quarter. We've put in place a plan that focuses on preservation of cash by implementing significant cost containment strategies and enacting substantial payroll reductions. Net operating cash usage over the past 2 years has been reduced by 37%, and we are targeting a further 23% reduction for the fiscal year FY '24. And I understand that some of this will be offset by further investment in our Phase III programs for back pain and GVHD. Importantly, these activities to preserve cash are complemented by initiatives that are currently advanced and underway to increase cash inflows, which, by design, allow us to prudently invest in our programs. We're working and we have very advanced discussions on corporate initiatives to strengthen our balance sheet, including royalty monetization, including strategic partnerships and including access to capital markets. Next slide, please, our back pain products. This impacts over 7 million people in each of the EU5 and the United States. And you would think there's many more, but we're talking about very specifically inflammatory back pain. Our total unmet medical need, and in fact, it's the #1 cause of opioid prescriptions in the U.S., 50% of opioid prescriptions for patients with inflammatory degenerative disc disease. Next slide, please. The program summary. There's a very clear regulatory alignment with the FDA. There's no question of how the FDA is looking at this program and how they want us to get to the end for approval. The FDA has said to us that the primary endpoint of reduction in pain is an approvable endpoint. And as long as we replicate the results that we've already seen in the first Phase III and the second Phase III, that this is an approvable trial for the indication. The FDA has agreed with our plans for 12 months as the primary endpoint of the trial with secondary endpoints being functional improvement and reduction in opioid usage. The product has been manufactured and being tested now so that it can be released for use in this Phase III trial. Potency assays are already in place, and the FDA has seen these potency assays. We also have an RMAT designation, Regenerative Medicine Advanced Therapy designation, which is an acknowledgment by the FDA of both the importance of the unmet need and the strength of the data that they've seen to date, which was the first Phase III trial. Start-up activities for this trial are significantly advanced together with the investigator trial sites and our CRO. Next slide please. The RMAT, as I've said, was based specifically on the presentation of data in the Phase III trial. So the FDA saw the full extent of the data. So the full extent of the pain reduction that was achieved over a 36-month period saw the reduction in opioid usage in the patients in the trial and it was on that basis that the RMAT was granted to us. Next slide, please. And this slide is, I think, probably the most important piece of data that can be pointed to from the study. And it demonstrates 3-year change in pain from baseline in a patient population that has otherwise exhausted all other nonsurgical approaches. If you look at the green line, the green line is a single injection of saline into the intervertebral disc, and it shows, over a 3-year period, a small but noticeable improvement in pain, and one would call this sort of a placebo effect. It's better than placebo, but it's what you would expect from various interventions, including opioids. The line in red, however, shows a very significant and much greater increase in pain reduction, which is maximal at 12 months and is durable for the entire 36 months of follow-up. That difference between the green and the red line is a huge difference that has not been seen with any other kind of therapy. And it's highly significant, and this was in an overall study population of 400 patients. This endpoint of pain reduction was achieved significantly in the entire 400 patient population and was maximal in the group of patients who had pain for less than 5 years' duration. And why that 5-year duration is important is because it indicates that you need to address this problem early, and early meaning really within the first 5 years when there's still very active inflammation when there's ongoing destruction of the disc, but well before there's total destruction and fibrosis and replacement of the disc issue. So we've identified exactly where we should be treating. We should be treating all patients early. And that's the basis of the next study. And we've gone to the FDA and we said, here's where the maximal treatment benefit is. The next -- the pivotal confirmatory study, if you will, will be in 300 patients who meet these criteria who have failed all conservative therapies, including nonsteroidal drugs and opioids and are within 5 years of initial symptoms. Next slide, please. And moving on to our heart failure program, another very large unmet need. It continues to be the #1 killer of men in particular. And despite a whole bunch of new drugs in the field, mortality remains as high as 50% at 5 years after an initial diagnosis. We have very promising data from a randomized controlled study of 569 patients called the DREAM Heart Failure Phase III trial, which demonstrated improved contractility or strength of the left ventricle at 12 months, and that preceded very significant and long-term reduction in heart attacks and strokes and deaths in a study that was followed out for at least 3 years in all patients. So we believe that, that improvement in contractility at 12 months is a potential early surrogate endpoint for survival benefit in this patient population. We know that we're targeting inflammation, and we know that because the maximum benefits in this group was in those patients who had measurable inflammation in their bloodstream by a simple blood test called CRP. And that links this program together with a second program in patients with a device, who have advanced end-stage heart failure, also with inflammation, where we also saw improvement in early contractility and improvement now that we're seeing further follow-up in survival. And that's the basis of talking to the FDA in a follow-up meeting where we intend to put both sets of data before the FDA because it's substantial data. Next slide, please. And this slide sort of speaks to the continuum from on the left-hand side, early-stage heart failure to end-stage heart failure on the right in depth, and we're targeting that continuum to the right of a figure where all drugs have essentially failed and mortality is high. Next slide, please. And I apologize for the busyness of this slide, but essentially, what we're saying here is that we've done 2 large Phase IIb/III trials, the LVAD study of 159 patients and the DREAM Heart Failure study of 537 patients. And what both studies have shown is that in continued patient population, we see in both of them a significant improvement in contractile function of the left ventricle and in both of them, a significant reduction in mortality. And that suggests that an underlying mechanism of action which targets inflammation is able to define a mechanism that results in similar improvement in function and more importantly, in mortality in highest-risk patients with this disease. Next slide. The results of the 560-patient study were published earlier this year in the #1 journal in the cardiovascular field, Journal of the American College of Cardiology, published earlier this year, which in fact showed that we had a 75%, amazing 75% reduction in heart attacks or stroke or death in patients over a minimum median follow-up of 3 years. You can see that in the figure to the right, particularly in patients with evidence of inflammation. So we know exactly where these cells work. We understand the underlying mechanism, and the objective is to replicate these data just like we are aiming to replicate the back pain data. Next slide, please. What we announced yesterday is a further area of focus for the company. And again, just like pediatric graft versus host disease represents a major unmet need in GVHD for remestemcel, congenital heart disease represents a major unmet need for Revascor in children. A couple of years ago, we entered into a partnership with the Boston Children's Hospital, which is the #1 pediatric hospital across the U.S., working with the surgical team that is the best in the world at surgical management of the most serious uncommon of the congenital heart disease is hypoplastic left heart syndrome. This is where a child's heart, and you can see the diagram here, the little LV in red is supposed to be the same size as the purple RV. That's the left ventricle. And you can see these unfortunate children are born with a tiny little left ventricle, which doesn't pump blood. And they're entirely dependent on pumping blood from the right ventricle, in purple, the RV, all the way to not only the lungs, but also to the rest of their body. And what happens is that after several years, the right side of the heart [indiscernible] out effectively, patients are going through a heart failure, and the only options then are surgery or a transplant or potentially death. So this is a devastating complication. The surgical team at Boston Children's Hospital, have developed surgical techniques to create an enlarged left ventricle, but very few children are able to take advantage of that type of surgery. So the point of the study that was initiated 2 years ago, it was a randomized controlled study, 19 patients have been enrolled. The study is now completed. And they either received several injections of 20 million of our Revascor cells into the left ventricle or nothing as a control. And in a paper that's about to be published, and it's now online as a preprint, what they found is that the children who received Revascor had a doubling 12 months in the size of the left ventricle from about 40 milliliters of volume of that little red chamber, it's now doubled to about 80 milliliters in volume, and it's a highly significant difference. And by doubling the size of that little ventricle, it means that the surgeon is able to, with greater confidence, do more of these procedures that creates a left-sided circulation because that increase in size has grown and it means that it can pump more effectively and support the systemic circulation. We're very excited by these data. We filed for pediatric rare disease designation and orphan designation because, of course, it's an orphan disease. But more importantly, I think the fact that this was a randomized controlled trial, the fact that mechanistically, the increase in size of the left ventricle is exactly what one would have expected based on the data that we've seen in adults with the DREAM Heart Failure study in the setting of inflammation, we are very much looking forward to interacting with the FDA and talking about how to proceed in this particularly high unmet need moving forward. Next slide, please. Yes. Let's move to the next slide. So I think moving back to the data that underpin our most advanced program, and that's RYONCIL for GVHD, let me summarize again why we think the data support an early approval in children, and why we think we're confident that we'll see a similar strong data set in adults. The cytokine storm that exists in GVHD is really driven by activated T-cells that are from an unrelated donor bone marrow transplant that sees the recipient as a foreign individual and the bone marrow attacks the individual. The person who gets the bone marrow is usually a child or an adult who's had leukemia, has had treatment with chemotherapy, has had their bone marrow destroyed by the chemotherapy in the process of eliminating cancer. And the bone marrow they receive then is meant to repair and rebuild their immune system. Unfortunately, as I say, the foreign bone marrow sees the host, the recipient, as foreign and attacks through these activated T-cells and cytokines. Next slide, please. It continues to be a very large and substantial unmet need. Pediatric GVHD represents about 20% of the total market. There's about 10,000 allogeneic transplants in the U.S. alone. So there's about 2,000 children, 1,500 to 2,000 children who get an allogeneic transplant, and about 50% of those will get GVHD. And again, 50% of those will be steroid refractory. And there are no drugs that are approved for children. Next slide, please. We've generated data across 3 different trials in children. And I won't go into too much detail about these studies. But what is striking is that when you look at the survival rates, they're very similar in each of these studies. So we see in a first study in what was called Protocol 280, we saw approximately 79% survival in children who received remestemcel versus, in this case, a randomized controlled study, 54% in controls. In our pivotal Phase III trial, which was a single-arm study as agreed to with the FDA, we saw a 74% early survival and when we looked at match controls from an external cohort that matched for disease severity, only 57% had survival. And then we've had a variety of expanded access programs with children who are much sicker and nonetheless, survival in the order of 66% overall and 51% in the sickest of the sick Grade D disease where the expected survival was only 31%. So in a number of different ways and analysis, we see repeatedly high survival with ourselves in children with this disease. Next slide, please. In the only large study of children on the left-hand side from a single center in Minnesota, you can see 128 children with steroid-refractory disease, by 2 years, have a dismal 35% survival compared with on the right-hand side, by 2 years, we see a 51% survival of similarly ill, perhaps more ill children, in that Phase III trial. Next slide. And we published this a while ago now in the past year. Long-term survival data from our Phase III trial demonstrates that on the left-hand side, in the blue column, you can see that the 50-or-so percent survival at 2 years is durable. So year 3, year 4 and beyond that, about the 50% who survive are long-term survivors and are essentially cured of this disease. In contrast, if you see each of 5 other studies in children and adults, by 2 years, survival is a dismal 25% to 38%, and that's despite the best available therapy, including ruxolitinib, the only approved therapy in adults. And there are no studies beyond 2 years that we can find that even report any survival in GVHD disease. So I think having a 50% long-term survival cure rate is a remarkable achievement. Next slide. The pathway to approval in pediatric patients, I talked about it earlier. We have a parallel strategy. One is to talk to the agency about a further trial in adults while we go forward with the existing potency assay that the FDA has already agreed to as being sufficient for the next study. And in parallel, we will continue to seek an earlier approval on the pediatric front based on further potency data that we'll be generating and showing the FDA in due course. Next slide. With respect to the adult program as a stand-alone indication, we will recruit hopefully as fast as possible with the best network across the U.S., who are very keen to execute on this trial. And we're very confident that in an indication, which reflects about 45% of all ruxolitinib patients because that's how many are nonresponders, we're seeing a survival benefit that if we can replicate that in the pivotal trial, we'll have the only product that's available for these unfortunate patients in adults with steroid-refractory GVHD. And I think that might be my last slide. Thank you. Shall we take some questions now? If there are any questions, I'd be very happy to take them. And there are obviously other members of the management team, both here as well as online to address whatever questions you might have.

[indiscernible]. What's your current relationship with Dr. [indiscernible]?

Dr. [indiscernible] has never been other than an employee of a Cleveland Clinic [indiscernible] relationship with Mesoblast. Mesoblast has had a relationship with the Cleveland Clinic, which has performed under certain contractual arrangements, clinical trials for us with our cells for certain protocols in Crohn's and inflammatory bowel disease. Dr. [indiscernible] was a principal investigator at the Cleveland Clinic.

[indiscernible] here. You mentioned that partnering obviously is your preferred strategy at least in terms of one of the products. Can you give us any idea of the level of progress because obviously, the financial position will be greatly enhanced, if you can put together a deal that will give some upfront benefits and also take picture of the other 2 programs?

Yes. Look, one can never predict when a partnership gets signed and delivered. As you know, we've had multiple partnerships along the way. Sometimes they have succeeded. Sometimes they haven't succeeded. It's -- you can't always be 100% aligned with your partners. So we had a fantastic partnership with Cephalon. Cephalon was acquired by another company, Teva but then had very different strategic objectives. So we disengaged from Teva. We then -- we've got an active partnership with Grunenthal for European rights in the back pain space. That's active, and well, we've got partnerships in other jurisdictions, including China. We had a relatively short-lived partnership with Novartis in the area of respiratory disease [indiscernible] during period of time, Novartis decided to move out of that space strategically. So again, you can never predict when exactly these partnerships can be signed up. But suffice to say that we're in quite advanced discussions in both the back pain and the cardiovascular space with potential partners who are well aligned in the space with us and appreciate the data and the opportunities. And I think the further interactions with the FDA progress, the more attractive those discussions. But again, I can't give you -- I can't tell you whether it's next week, 6 months, but they're very advanced. They're in advanced discussions that are active and ongoing.

[indiscernible] here. I just want to know, can you explain in simple terms what's the difference between the new potency assay versus the one that was [indiscernible] and why are you more confident?

So the FDA wanted us to improve the consistency of our potency assay. They wanted to see if that was very consistent and it was reproducible and that every product that was potentially made for commercial release would be measurable as being equally active to the next product. And we improved our potency assay in many respects, and the FDA acknowledged that the assay has moved forward in terms of its ability to be consistent and reproducible, et cetera. And by the way, beneath all this, nobody has ever questioned the product itself because the product manufacturing has been well validated by the FDA and the product is consistent, right? It's having an assay that is always measurable is the question. And so we've improved the assay. And then we've improved it to such an extent that the FDA said, well, this assay is not close -- is not the same assay as the one that was in your Phase III trial, and therefore, needs to be tested again in other trial. And they've said, you can use it to test the product that's going into your adult trial. So they've acknowledged that it's a good assay, it measures the right thing, and it can be used to begin the next trial. What we'd like to now do is to show them that the exact assay that was used to measure the product was successful in the Phase III children's trial and this new assay are very similar, and that the additional data needed to demonstrate that assay in the Phase III trial was also not variable, was also very consistent, we think should be enough to wrap up the entire pediatric Phase III study with an appropriate assay that is consistent to release products for children. So even while we begin another study with an improved assay, we will continue to show them the value of the original assay optimized without variability. It's a complicated scientific description, but I'm trying to make it as simple as possible.

Regarding the assay, is the confirmation that you got a consistent assay the only obstacle to getting pediatric approval?

Well, what is very interesting is that unlike the first CRL where there's a lot of discussion around did we need to have a randomized controlled trial or not. It's very clear that the FDA recognizes that the single-arm study in children was a well-conducted trial, which met its primary endpoint and demonstrated evidence that the product is effective. And what they said was, but for a potency assay that was not variable, that trial would have been considered adequate and well conducted. And so for the pediatric side of things, that's what we need to go back to the FDA and have a further discussion that limits the potency assay and that trial as one package. For the adult indication, of course, we need another study that demonstrates the product is equally effectively in adults. And that product, as I said, is being developed in partnership with the Bone Marrow CTN, the Blood and Marrow CTN in the U.S., and we'll be working with them as we go to the FDA to seek their approval on the trial going forward. So the adult indication requires, clearly, a second study. In terms of potency assay, we think that we can go back to the FDA and have a robust discussion that the potency assay that was in place in the Phase III is standardized or demonstrated that the product was standardized, and it's good to test product that can be released commercially.

Are [indiscernible] to the under-12 kids for RYONCIL? And if so, [indiscernible]?

You're asking if we still are making available our expanded access product to children under 12. The short answer is, yes, of course, we are. We can't just stop. The product is, in our view, highly effective, in the physician's view, highly effective, demonstrating that when being given unapproved drugs, and there's a whole bunch of unapproved drugs that are out there, once they cycle through those, these poor children are being referred to us from across the U.S. Quite a lot of children, I mean I've shown you some of the data. It's not possible for us to withhold that medication. It's also not possible to sell it at the commercial prices. We could get reimbursement for cost of goods, for example. There are issues with seeking reimbursement for cost of goods. And in fact, what that does, it creates or what you don't want to have is a reference pricing problem. So for the time being, we're being -- we're working with physicians, and we are making that product available. But I think that's a whole lot of discussion and we're having that with the FDA as well, how can they expect us to continue to make it available and yet withhold it commercially. And I think there are ethical issues, I expect that we'll be having more of those conversations over the coming months.

The FDA has repeatedly indicated that they wanted a placebo-controlled trial as a standard of evidence, yet even for the adult trial, we're persisting with a single-arm study. Is -- what's the rationale behind that?

Well, we're not persisting with a single-arm study. I think the [indiscernible] what the protocol is going to be, it's going to be the FDA, right? I think this is an open question until we sit down with the FDA and put in front of them the exact protocol, right? I think it's important, first of all, at the outset to say that in September, literally 2 months ago, after our Type A meeting, the FDA put out their first draft guidance to developers of drugs for steroid refractory graft-versus-host disease. And this was a joint communication by [indiscernible] who we work with, the Biologics Group; and [indiscernible]. And for the first time, the explicit guidance is that for any indication in GVHD for which there is no approved drug, a single-arm trial may be sufficient. For an indication where there is an approved drug, you need to do a randomized controlled trial. So the only approved drug in GVHD is ruxolitinib, Jakafi right? And if one were to go head-to-head against Jakafi in the same patient indication, meaning first-line after steroids in adults, for example, you'd have to do a randomized control trial. For a population where Jakafi has failed, which is our target population, which is where 45%, 50% of Jakafi patients failed and then they have nothing, for that population is where the discussion with the FDA needs to go, and I think we had a very interesting Type A meeting where the FDA was open to either a randomized controlled trial or a single-arm trial in that patient population and have left it to us to come back and talk about potency assays and characterization of the product that has been the pivotal component of which way to go. But your point is that at this point, I think the discussion with the agency in the first quarter is going to be critical to exactly which way we go. With respect to the pediatric population, it's clear that a single-arm study, well conducted and well performed, was sufficient and is sufficient for pediatric approval if the product had a potency assay that was measurable. And the FDA, in our recent meeting, Type A meeting, and in the written communication, have acknowledged that, they've acknowledged that now twice, both in the CRL and in the Type A meeting response to us. And so that's a parallel strategy for us as to how we go back and present them with additional potency assay data from -- explicitly from product used in the Phase III trial to show that we're confident that product is well standardized with the potency assay and that is not variable. And I think that discussion still has to be had in the first quarter as to the totality of that data. But I think you want to separate pediatric from adults, and you want to separate an indication in GVHD where there's an approved drug or there isn't one. Does that address the question? Okay. Thank you very much. Appreciate your attention.

Thank you, Silviu. We appreciate hearing the overview on the significant progress our business has made over this past year and the exciting milestones coming up for this 2024 fiscal year. So again, thank you for those remarks and a thorough discussion regarding the performance of the year. I would now like to outline to you the procedural matters that we'll be dealing with for the rest of the meeting. On your arrival, you were given an admission card. Persons holding either a yellow or blue admission card are entitled to speak at the meeting. If you have a question or a comment, please raise your hand, and at the appropriate time, I will invite you to speak. If you are invited to speak, a Mesoblast staff member will pass one of the roving microphones to you. Before you ask your question or make your comment, please hold up your admission card and state your name, and whether you are here as a shareholder, a proxy, attorney or corporate representative. Please address all questions to me as Chair, and I will then answer or redirect them as necessary. Only persons holding a yellow admission card can vote at this meeting. Persons holding a red admission card are visitors to the meeting and are not entitled to speak or vote. I will put each of the resolutions to a poll separately and will provide an opportunity for questions on each one from those holding yellow or blue admission cards. We're now going to move to the resolutions. I can confirm the notice of meeting was sent to all registered members, the company's directors and the company's auditors in accordance with the company's constitution and the Corporations Act. In addition, a copy of the meeting notice has been lodged with the ASX. I will take the notice of meeting dated 30 October 2023 as having been read. I direct that a poll be taken on all items of business today. The poll will be held at the end of each resolution. Before a vote is taken, I will inform the meeting of how many proxy votes have been received as indicated in the notice of meeting. I will be voting all undirected proxies given to the Chair of the meeting in favor of all resolutions considered at this meeting. So the poll procedure. For the administration of the poll, I appoint Jim Kompogiorgas of Link Market Services Limited, the company's share registrar, who has examined and prepared summaries of the proxy forms received, to act as returning officer and to conduct the poll. When you registered your attendance at the meeting, voting shareholders, attorneys, corporate representatives and proxy holders were given a yellow admittance card. On this card, you will find a series of boxes for voting. Please indicate on your card how you wish to vote by ticking or marking the appropriate square. You must either vote for or against or abstain boxes for your vote to count. You should vote on all items set out on the yellow voting card. Please also note, if you are a proxy holder, attorney or corporate representative, and your appointor has directed how you should vote on any item, you must follow that direction. Once you have finished marking your card after the completion of all items of business at this meeting, please place it in one of the ballot boxes at an exit. If there are any aspects regarding the voting on which you are uncertain, please don't hesitate to ask one of the share registry staff. The results of the poll will be made available later today and will be released to the market via the ASX website and will also be made available on our company website. I'll now move to each of the items of business separately, and we will provide an opportunity for questions on each item. So the company's annual report includes the financial statements and the directors' declaration, the directors' report and the auditor's report for year ended 30 June 2023. I will take these reports as read. While no resolution is required in relation to the financial statements and reports, shareholders, their corporate representatives, attorneys or their proxies are entitled today to ask questions of the directors or the auditor in relation to these reports. I ask that any questions concerning the remuneration report be raised during the next agenda item. Questions may also be asked of the auditor concerning the conduct of the audit, preparation and content of the auditor's report, accounting policies adopted by the company and the independence of the auditor in carrying out the audit. I now invite shareholders to ask questions on this item of business. Paul, are there any questions in the room?

Chair, there are no questions in the room.

Thank you. The next item deals with the adoption of the remuneration report. The Board submits its 2023 remuneration report to shareholders for your consideration and approval. The Corporations Act requires companies to put to shareholders a nonbinding resolution to enable shareholders to voice their opinion on matters included in the remuneration report. I now invite shareholders to ask any questions on this item of business. Paul, are there any questions in the room?

Yes, we have a question in the room.

I'm a shareholder. My name is Brad. I invested in this company in 2020, 3 years ago. My average price was around $4 a share. It's now worth $0.40. Now what you described in your presentation, fantastic, ticks everything, a lot of progress, a lot of positive feedback, but that's not what's being shown in the share price. So my question, remuneration. Everybody always [indiscernible] for more options, more salary. I understand you're taking a reduction, but in lieu of experts down the track, which is fine, but I just find that I've invested in about 9 different companies and all executives are taking huge salaries and not producing much and the share price is getting smashed, and specifically, it's in the biotech field. In other areas, it's quite strong. So all I'm tabling is I've been here -- I've been supporting you. I haven't sold one share in 3 years. I've only accumulated to try and average mine down, but I'm still way off the mark. So I can probably speak on behalf of a lot of other shareholders, I'd like to get some positive feedback on where the share price may go in the short term to medium term, if that's possible.

Yes. Thank you for the question. First of all, let me thank you for your continuing support of the company. And I'm hopeful that the presentation, our CEO provided today gives you some outlook that hopefully is pointing to the company being directionally headed to a good place. I think that I should underscore that the Board obviously is intimately and deeply engaged in remuneration considerations. With us today is Mr. Bill Burns, William Burns, who is Chair of our Remuneration and Nominating Committee. And I think he and maybe myself as well as the CEO can respond to you. I'm going to turn the question to Bill and see if there's something he'd like to add that might be responsive to the question.

Brad, I hope that you can hear me.

Yes.

Thanks very much for the question. And clearly, this is a very sharp focus for all of us. What I can assure you of is that virtually since before you bought your shares in 2020, the senior management team have had no increase in base salary. The options we've benchmarked against Australian companies and U.S. companies, they're not going up in volume. So therefore, the value is what it is. And so like yourself, the senior executives and the people in the company and the share option schemes, they're not benefiting either. So we're all acutely aware that the way forward for, as I'm sure your experience tells you with other biotech companies, is in unlocking and getting the registration with the Food and Drug Administration for the excellent products and the first of which will be pediatric graft versus host disease, and that's where the focus is. And I think Silviu and the management team are to be commended for their straightforwardness and for accepting the conditions as they are. And as we go forward, as you will have seen today, the CEO and the Chief Medical Officer are taking a 30% cut deferred in their salaries. And the Board is also cutting -- we've taken a deferment of 50%. These are ways in which we can show solidarity to all shareholders, make sure that we're conserving the cash to unlock the value by getting registration. And that's what we're doing. So thank you for bearing with us, and let's wish the management team every continuing success in their negotiations with the FDA.

Thank you, Bill. Appreciate that report and summarization of the tremendous work that has been in play now for quite a period of time as we strive to hit our strategies with respect to adoption of these incredibly beneficial treatments that are in hand and hopefully, we'll get approval in the not-too-distant future. Let me just pause there. Paul, are there any other questions in the room?

Chair, there are no further questions on this item.

Very good. Thank you. I'd like to now turn to proxy votes, and proxy votes received for item 2 are displayed on the screen. I now propose item 2 as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

I'm now turning to the amendment to the constitution. The next move to the discussion of item 3 concerning the adoption of certain amendments to the company's constitution. This is a special resolution and requires the approval of 75% of the votes cast by shareholders, proxies, attorneys or corporate representatives present and eligible to vote at this meeting. I now invite shareholders to ask any questions on this item. Paul, are there any questions in the room?

Chair, there are no questions on this item.

Very good. Thank you. I'd now like to turn to proxy votes which have been received for this item and are displayed on the screen. I now propose item 3 as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card and then we will move on to the next resolution. [Voting]

Okay. The next item deals with the reelection of Mr. Philip Facchina as a director. We now move to that discussion of that reelection. Items 4A and 4B involve the reelection actually of 2 directors, namely Mr. Philip Facchina and Mr. William Burns who are retiring in accordance with the company's constitution. Both are eligible and wish to offer themselves for reelection. The Board recommends that shareholders vote in favor of the reelection of each of these candidates. Both are eligible and wish to offer themselves. Therefore, each candidate has not participated in the Board resolution relating to their own candidacy. I will now deal with each resolution separately. Item 4A deals with the reelection of Mr. Philip Facchina. I now invite shareholders to ask any questions on this item. Paul, are there any questions in the room?

Chair, there are no questions on this item.

Okay. Very good. The next deal is with proxy votes. Proxy votes received for this item are displayed on the screen. I now propose item 4A as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card and then we will move on to the next resolution. [Voting]

The next resolution deals with the reelection of Mr. William Burns as a director. I now invite shareholders to ask any questions on this item. Paul, are there any questions in the room?

Chair, there are no questions on this item.

Very good. Thank you, Paul. Proxy votes received for this item are displayed on the screen. I now propose 4B as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

The next resolution deals with the approval of proposed issue of options to our Chief Executive Officer, Dr. Silviu Itescu. Item 5A concerns the proposed issue of options to Dr. Itescu in connection with the long-term incentive component of his remuneration for the 2024 fiscal year. I now invite shareholders to ask any questions on this item. Paul, any questions in the room?

Chair, there are no questions on this item.

Thank you. In that regard, proxy votes received for this item are displayed on the screen. I now propose 5A as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

Our next resolution deals with the approval of proposed issue of options to CEO, Dr. Itescu in lieu of 30% of base salary. We next move to that discussion by inviting shareholders to ask any questions on this item. Paul, are there questions?

No questions on this item.

Very good. Proxy votes received for this item are displayed on the screen. I now propose 5B as set out in the notice of meeting and put the resolution to a vote by poll. I'll pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

The next resolution deals with the approval of proposed issuance of options to the Chief Medical Officer, Dr. Eric Rose, which is item 6. Item 6A concerns the issuance of options to Dr. Rose in connection with the long-term incentive component of his remuneration for the 2024 fiscal year. I now invite shareholders to ask any questions on this item. Paul, are there questions?

Chair, there are no questions on this item.

Thank you. Proxy votes received for this item are displayed on the screen. I now propose item 6A as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

The next resolution deals with item 6B, which is the approval of proposed issuance of options to the Chief Medical Officer, Dr. Rose, in lieu of the 30% of base salary. This relates to the issuance of options for the 12 months from September 1, 2023, to 30 August 2024. I now invite shareholders to ask any questions on this item. Paul, are there any questions?

Chair, there are no questions on this item.

Thank you. So proxy votes received for this item are displayed on the screen. I now propose item 6B as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on this item on the yellow voting card, and then we'll move on to the next resolution. [Voting]

The next resolution relates to the approval of the proposed issuance of options to the non-executive directors. And the following directors, non-executive directors are in that class. Mr. William M. Burns, Ms. Jane C. Bell and Mr. Philip J. Facchina; and myself, Joseph Swedish, in lieu of 50% of the directors' fees for the 12 months from August 1, 2023, to July 31, 2024. I now invite shareholders to ask any questions on this item. Paul, are there any questions?

Chair, there are no questions on this item.

Thank you. Proxy votes received for this item are displayed on the screen. I now propose Item 7 as set out in the notice of meeting and put the resolution to a vote by poll. I will pause to allow you to complete your vote on these items on the yellow voting card, and then we will move on to the next resolution. [Voting]

The next resolution deals with the approval of proposed issuance of options to the Director, Dr. Philip Krause, which would be part of his consultancy fees. I now invite shareholders to ask any questions on this item. Paul, are there any questions?

Chair, there are no questions on this item.

Thank you. Proxy votes received for this item are displayed on the screen. I now propose item 8 as set out in the notice of meeting and put the resolution to a vote by poll. I'll pause to allow you to complete your vote on this item on the yellow voting card, and then we will move on to the next resolution. [Voting]

The next resolution is item 9, which is ratification of issuance of securities to existing major shareholders, which deals with our successful placement to major shareholders earlier this year. I now invite shareholders to ask questions on this item. Paul, are there any questions?

Chair, there are no questions on this item.

Thank you very much. Proxy votes received for this item 9 are displayed on the screen. I now propose item 9 as set out in the notice of meeting and put the resolution to a vote by poll. I'll pause to allow you to complete your vote on this item on the yellow voting card. [Voting]

Ladies and gentlemen, that concludes the formal business of this meeting. I'd like to remind you that if you're intending to vote on the formal business of the meeting, you should complete your yellow voting card on all items of business and place it in one of the ballot boxes now. As I mentioned earlier, the results of the voting at this Annual General Meeting will be released to the ASX once the votes have been counted. I invite everyone attending the AGM in person to please stay, enjoy light refreshments and take the opportunity to discuss with directors and management present the operations and activities of the company. Thank you for your attendance and contribution today. We appreciate your ongoing support and loyalty and look forward to a rewarding year ahead. Thank you very much. Have a good day.