Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Thank you very much, and welcome, everybody. Good evening, good afternoon. With me today is our Chief Medical Officer, Dr. Eric Rose; and our Chief Commercial Officer, Marcelo Santoro. Today is a wonderful day. It's a great day in the history of Mesoblast, and it's almost to the day, 20 years since the company was listed publicly. Today, our lead product, RYONCIL became the first U.S. FDA-approved mesenchymal stromal cell therapy. It was approved by the FDA for -- it's the first approved product by the FDA for any indication, and it was approved by the FDA, specifically for children aged 2 months and older, including adolescents and teenagers with steroid-refractory acute graft versus host disease, a life-threatening condition with very high mortality rates. We're very pleased that the FDA granted approval of RYONCIL and are really proud of the company's commitment to the GVHD community to have brought this important new treatment to children and families who have no other acceptable options. We've demonstrated now to have the ability to bring with RYONCIL approval by the FDA, the first of our pipeline of mesenchymal lineage products to market, and we will continue to work closely with FDA to further seek to obtain approvals of our other late-stage product candidates as well as expanding the indications for RYONCIL in both children and adults with inflammatory conditions. We expect to be launching this product in the coming weeks. And I'd like to introduce to you all now Marcelo Santoro, who will lead the commercialization efforts. Marcelo, could you please introduce yourself and tell us a little bit about your background and how you see the launch progressing?

Absolutely, Silviu. So first of all, thank you very much for the opportunity. I am Marcelo Santoro, Chief Commercial Officer for Mesoblast. I've been in the pharma industry for over 30 years and in the commercial function for a number of those 30 years and was able to -- I was fortunate enough to have participated in many different product launches in pharma, in companies such as Pfizer, AstraZeneca, Otsuka, among others, right? I've also led many global brands, many global assets. But honestly, I am very excited about this launch. I couldn't be more excited about what this product, what RYONCIL can make -- can do for the kids in need, right? So this is a tremendous medical need. We have the urgency to bring this product to market, as Silviu has mentioned because the kids are in needs of such a therapy. So very quickly on the plan. So obviously, we will start onboarding the centers immediately. We will focus on 45 of the top transplant centers in the U.S. that represents 77% of the potential. We will continue the discussions with payers to ensure that they understand the value that this therapy brings to the patient in needs. And we will also continue to build the organization to be able to launch the products as soon as possible. So I'll leave you with this, Silviu, and then I'll turn the call back to you.

Thank you, Marcelo. And of course, we'll take more detailed questions on our commercialization and launch plans. Again, this is a day to celebrate the tremendous work, the commitment and the perseverance of everybody at Mesoblast for these many, many years. And I think the science, the clinical development, the ability to manufacture at scale has all supported where we are today to be the very first mesenchymal stromal cell product approved by the FDA is testament to the hard work, perseverance and commitment to everybody at Mesoblast. Eric, would you like to say a couple of words? Eric Rose? We may have lost Eric.

I'm here.

You're there?

It's been in and out. Sorry. I didn't hear the last 30 seconds.

My question to you was any further thoughts on the tremendous effort that the company has put in and all of our stakeholders.

Well, I think the most important thanks we should give, Silviu, frankly, is to you because your perseverance and in addition to your scientific insight is responsible for leading this group here. And I can't tell you how proud I am to be part of this.

Thanks, Eric. This is...

Can you hear me?

Yes. We can hear you. This is the team...

But team need great leaders and you've been a great leader as well.

Thank you. I'd like to, at this point, open up to questions because I'm sure many of you have got questions to us all the way from the science to the development, to the clinical opportunities in front of us to the commercial plans and to potential reimbursement, but most importantly, to how quickly and how efficiently we're going to get this product out to the many children and their families who desperately need it. Operator, could you please open the line to any potential questions.

[Operator Instructions] Your first question comes from Edward Tenthoff from Tenthoff.

And Silviu, my sincere congratulations to you and all the team. I remember when we still met and I think maybe you were still at Columbia, still in New York back in those days. So it's been a long road to get here, and I agree your perseverance has been great, and it's important for the kids. You just sort of kind of teed up my question, but how quickly do you anticipate being able to get product out into centers' hands and starting to be able to treat children. And do you have any commentary on pricing?

Yes. So in terms of product, we have made substantial inventory enough to last -- to take the next couple of years' worth of requirements. We've worked closely with the FDA to ensure that we have appropriate labeling to be able to have a supply chain that provides the product through our distributors to the hospitals. And of course, this product has been in continuous use under expanded access on an ongoing basis. So this is not going to be an issue. With respect to -- and I'll ask Marcelo to give a little bit more granularity on how we will be putting product into the various centers and the type of relationships and arrangements we're putting in place. In terms of reimbursement and payers, we're in active dialogue with all the major payers, both nationally as well as by state. But I think the way to look at -- and we'll be in a position to make formal disclosures around the exact payment in the coming weeks. But the way to look at the likely reimbursement for the product, think about a number of cell and gene therapies that have been approved over the past couple of years with the type of durable long-term outcomes that we're seeing with our patients, almost 50% survival at 4 and 5 years out. The early responses are highly predictive of long-term survival. And I guess the comparative reimbursement for cell and gene therapies that give that type of long-term outcomes is something that is likely to be similar to what is seen with the reimbursement for RYONCIL. But Marcelo, would you like to expand a little bit on the rollout plan?

Yes. Sure thing, Silviu. So first, thank you for the question. We really want to make sure that we have a streamlined process for the centers, right, that we make it as easy as possible for them to order and use the product. So we have a very good and deep relationship with Cencora, formerly AmerisourceBergen. The centers will be ordering through ICS, which is one of their companies. And our goal is to make sure the product gets there at a maximum of 48 hours, if not 24. So we'll try to make that as streamlined as possible for the centers. We do not have to certify the centers. There's not a request or requirements for that. But we will proactively onboard all the centers to make sure that they are ready to go the moment we have products in the U.S. And this reflects the urgency that I think we have to make sure that this product gets to the patients that need it as soon as possible.

Well, congratulations, guys.

Thank you for your long-term support, Ted.

Your next question comes from Michael Okunewitch from Maxim Group.

Congrats on the tremendous news. This has been a seriously long and difficult road, but you guys stuck it out. And I'm really glad to see you clear this huge milestone both for Mesoblast and the MSC space at large. I guess to kick things off, just the FDA going as young as 2 months, does that speak to the safety of the platform versus something like Jakafi, which is restricted to 12 plus? And then is this something that could be a competitive advantage or even lead you to be preferred in probably the most competitive segment of your market, that 12- to 18-year-old setting?

Yes. I think the FDA has focused very much on the safety of this product and has been quite explicit in the prescribing information to define those adverse events. And really, there's a relatively low number of adverse events of serious grade, and we've got all those in great detail. And unlike Jakafi, which has some black box warnings and very high numbers of adverse events related, particularly to bone marrow suppression, our product does not seem to have anything like those type of adverse events, which is why we think that we've been approved in such young children. Moving forward, we will, of course, continue to collect data in the real-world setting as well as in formal studies in adults. And we hope that the safety profile of our product continues to demonstrate the value proposition relative to the efficacy of the therapy. So we're very pleased by the way it's being positioned in the market. And I think its approval in children is testament to the overall safety profile of the product.

And then just given that this is an orphan indication and in children, do you expect -- do you qualify for a priority review voucher on this approval?

Well, graft versus host disease, it does not -- is not a disease that is uniquely seen in children. And obviously, an adult who has a bone marrow transplant and is just as higher risk of getting acute GVHD. So it's not a typical disease that is initially present or only present in children. So I think from that point of view, it's unlikely to meet the threshold of a pediatric rare disease.

All right. And then one more quick one for me, and I'll hop back in the queue. Could you just talk about what sort of sales force you have in place right now for GVHD? And do you need any new hires? Are you guys pretty much good to hit the ground running?

Well, we've said that we're approaching this from a perspective that 50% of transplants are performed at 15 sites across the U.S. So the footprint that we have to build out is relatively modest, and it will be built out in waves beyond the first 15 sites, we'll target the next total of 40 sites and so on. Marcelo has certainly got some people already on the ground and continues to recruit. But Marcelo, perhaps you can speak to the plans over the coming months.

Yes. No, I think you're absolutely right, Silviu. Obviously, it's a relatively small number of transplant centers, right? So 45 represents 77% of the potential. It's a highly specialized sales force that we all need. Honestly, we will do a lot ourselves internally. I think the beauty of Mesoblast is that everyone is committed to the patients. So this is a team play. And we'll hire the appropriate people to be able to bring these products to the centers, not only sales force, key account managers, but also MSLs and also payer folks that will be helping us out as we move forward.

And once again, congratulations, very exciting news.

Your next question comes from Elyse Shapiro from Canaccord.

Silviu, congrats on the approval. Maybe looking forward to the next set of catalysts into the adult indication. Are we seeing any expectation of maybe some kind of clinician-directed alternate use of the product for adults?

Well, thank you for that. We have a plan to begin an adult trial, evaluating this product as third line in patients with -- adults with steroid-refractory acute GVHD who are refractory to not just steroids, but the only approved therapy, ruxolitinib. That will be a study that will commence in together with the bone marrow transplant clinical trial network across the U.S. more about that in the coming weeks. In addition to that, the approval in children means that we can start to explore other indications, pediatric indications, particularly in children with inflammatory diseases where there are -- which represent unmet needs today, and we'll be working closely with the physician community to explore broadening the indications for the product.

Got it. And as we think about kind of the broader indication set and how that kind of -- how that interacts with your interaction with the regulator. Do you have any more clarity on what the FDA might be looking for in the adult indication, especially now that those potency assays are done?

Yes. We now have through this approval process, an agreement with the agency around what constitutes potency assays for the product, what constitutes appropriate release criteria for the product and what would be appropriate comparability as we, for example, add different manufacturing sites or make changes to the manufacturing process in terms of scale up and scale out, that sort of thing. And with respect to adult indications, again, the same release criteria and potency assays would support the way the product is used in clinical trials in new expanded indications, including such as acute GVHD in adults or inflammatory bowel disease in adults or inflammatory lung disease as well as other indications in children, inflammatory conditions in children. So we are very happy to have gotten this initial approval because it really establishes the benchmark for how the product will start to be used and expanded and looked at across different indications. I think it's extremely important that this is the first FDA-approved mesenchymal stromal cell product for any indication because it sets a benchmark and it really sets the expectations of both the regulators as well as the clinicians across the U.S. in terms of what constitutes a regulated and approved stromal cell product.

Thanks, and congrats, again.

Your next question comes from Jason McCarthy from Maxim Group.

Hi, Silviu. I have echo everybody's comments and thoughts and what a day for cell therapy. It's amazing to be first. And I'm wondering if you could just kind of give us your thoughts on -- so what's changed at the regulatory level, call it, in the last 12 to 24 months because there's clearly a shift in sentiment towards unmodified, I'll use that phrase, cell therapies and GVHD is just kind of the tip of the iceberg. You can get to heart failure. There's other groups that are filing BLAs now. Can you talk to just a little bit about the shifting environment at a regulatory level, just from a high-level view?

You want me to take that?

Yes. look, I think that the FDA has been getting clearer and clearer with innovators like ourselves in terms of their expectations and what we need to do and what others need to do to reach a certain threshold of data that is acceptable. And I would say that, that information and that alignment has been evolving over the past few years and has become much clearer and much more focused now, for example, than it was, let's say, 3 years ago. That's principally the major change, the alignment between the agency and the innovators in terms of expectations and deliverables. Mesoblast has always driven to provide the highest level of evidence-based outcomes in terms of appropriately performed clinical trials, whether they be single arm as it was in this population of children or randomized controlled Phase III trials as we've performed in cardiovascular disease and in inflammatory back pain, for example. And so in terms of clinical evidence, we've always provided the highest level of evidence. And then that's been supported by strong manufacturing and the understanding that we needed to provide appropriate potency assay data and evidence that there is batch-to-batch consistency, reproducibility and that the product that works in a particular trial is exactly the same product that is made commercially under stringent conditions. So I think it's really been an educational process and an alignment of expectations between the agency and us, and I think that's going to continue.

I think in addition, it's worth pointing out that the leadership in the FDA with Nicole Verdun taking over OTAT, what used to be OTAT has been a dramatic change as well. And she's a great leader as well.

I would echo that. I think that the change in leadership in the cell and gene therapy division has allowed the division to mature to one that better appreciates the amount of effort and work in the cell therapy industry. And I think you're going to see more positive interactions along the lines of what has been seen with RYONCIL.

At a high level, what about at the pharma, big pharma, big biotech level with the first kind of unmodified cell therapy approved. Do you think bigger companies are now going to start to take more of an interest in this type of regenerative medicine in terms of being able to align themselves with initiatives for much larger indications like heart failure, for example?

Well, I think that's exactly the point. Being the first-in-class means that we've demonstrated that we can take a product that's scalable with appropriate supply chain, with appropriate regulatory approvals to the market, right? And we can do that with a relatively small product and a smallish indication and build out a commercial sales force and generate revenues. The larger applications like heart failure, like inflammatory back pain, we can complete clinical development, and we think we know how to get those products over the line and approved by the FDA as well. But you are correct. Those will require strategic partnerships in order to leverage the commercial footprint of companies in those spaces. And I think this approval demonstrates that there is a vibrant and viable path to commercialization of regenerative medicine products like ours, allogeneic products. And that this is the basis for the type of strategic partnerships in large indications that I think will bear fruit.

Okay. And sorry, one more, I don't know if anybody knows the answer to this. Any thoughts on why it was 3 weeks ahead of the PDUFA. I think it caught me off surprise, Michael, who's with me and probably everybody on this call that it came. Any thoughts on why that...

Well, I don't know, but I think it gives everybody a lovely Christmas present, doesn't it? And a happy New Year too.

I think the process itself, we had more than 70 inquiries from the FDA in the last several months and we respond to them quickly, and they process the responses. Some they were right about, some we were right about, some both of us were wrong about, some of this led to more insights on both parts.

That's true.

The fact that they were able to finish their work is testimony to hard work on both sides of this process.

[Operator Instructions] Your next question comes from Edward Tenthoff.

I got back in the queue. You answered my questions about the adult study. I'm wondering if you can give an update on sort of what the plans are for the new year for the platform in other indications, including the cardiovascular programs as well as the ongoing trial in chronic lower back pain.

Thanks, Ted. The cardiovascular program has really moved in leaps and bounds over the past 12 months. As you know, we completed a very large randomized controlled Phase III trial in patients with heart failure. And the results of that program have identified exactly where the largest unmet need is and where the intersection with where the most likely responders are to our therapy. And so as recently as about 2 weeks ago, we published a major paper in the European Journal of Heart Failure, which is complementary to an earlier paper last year in the American Journal of Cardiology, American Journal of Cardiology, both of which demonstrate that a single injection of our cells into the left ventricle had substantially reduced the risk of heart attack, stroke and mortality, an endpoint called 3-point MACE over a median of 30 months or as long as 3 years of follow-up. And the particular subgroup that was both at highest risk for mortality and that responded best to that treatment was the group with ischemic heart failure and inflammation. And that goes right to the heart of understanding the mechanism of action, and it's complementary to a further group of patients with end-stage heart failure who are being kept alive on artificial heart, where again, in the setting of ischemia and inflammation, we saw great treatment benefit. The totality of these data across 2 large randomized controlled trials allowed us to have alignment with the FDA, in particular, earlier this year, the FDA provided support for us moving forward with filing for a potential accelerated approval. And that is a focus that we will have for this product in the coming months. But in addition to the data in adults, we've been very excited by the data generated in collaboration with lead surgeons at Boston Children's Hospital, where a single injection of ourselves into very young children with congenital heart disease called hypoplastic left heart syndrome resulted in a significant enlargement of the left ventricle and an increase in the ability of the surgeon to create a sustainable biventricular system that allows these children to have a long-term future, free of potential heart failure and right-sided heart failure and cirrhosis. We're very excited by that particular indication for the same product, Revascor, and in fact, have obtained from the FDA a rare disease voucher designation as well as orphan designation. And we intend to meet with -- as well as a Regenerative Medicine Advanced Therapy designation, RMAT, and we intend to meet with the agency in the coming months to talk about filing for potential approval in that patient population as well. And so this coming 12 months is going to be a very exciting one for us for the cardiovascular space with respect to both pediatric and adult potential filings. And you'll hear a lot more about that shortly. With respect to the adult program for back pain, that Phase III trial to confirm the results of an earlier Phase III of reduction in pain from a single intradiscal injection for up to 12 months -- for at least 12 months or up to 3 years is ongoing, and we're very excited about that program. It will take a little bit longer to complete than the cardiovascular program, but it provides the next leg up, if you like, beyond the GVHD cardiac and cardiac program. So Eric, I know this is a particular program that is close to your heart. How do you feel about the back pain program being up and running?

We started enrolling in our additional trial. And I'm very confident it's going to yield a comparable results. We saw the -- in the previous trial, we had a very positive result with regard to pain. We just missed with regard to function. But I think that endpoint, the FDA agrees now can be shortened from 2 years to 1 year and does not have to include a functional endpoint, even though we think we will make it. So it's very encouraging as well.

There are no further questions at this time. I'll now hand back to Dr. Itescu for closing remarks.

Well, I'd like to thank everybody for jumping on to this call. We are absolutely over the moon to have our first U.S. FDA-approved product. It's the first mesenchymal stromal cell therapy to be approved by the FDA, and we'll be updating the market in short order. This is a very exciting day, and I think happy New Year to everybody. Look forward to catching up in the new year. Thank you.