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 and 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, non-Executive Director, along with Dr. Philip Krause, non-Executive Director. i'm also pleased to say we have a number of key Executives here today. I ask each Director, excuse me, each Executive, to stand briefly when I introduce them. Ms. Geraldine Storton, head of Regulatory Affairs and Quality Management, Mr. Paul Simmons, Chief Scientific Advisor, and Mr. Andrew Chaponnel, our Interim Chief Financial Officer. Also with us is Ms. Neva Cichy 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. Sam Lobley, Ms. Elia Kinghorn, and Mr. John 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 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 versus 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. Last week, we announced an agreement with the Blood and Marrow Transplant Clinical Trials Network to partner on a phase three pivotal trial of Ryoncil in the treatment of adults with steroid-refractory acute graft versus host disease.
Indeed, as evidence for management's continued positive interactions with the FDA, I'm pleased to say that FDA granted Regenerative Medicine Advanced Therapy designation for our next generation potential blockbuster product, rexlemestrocel-L, 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 outline 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 two 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 2023 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. Hope I have 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're 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 two platform technologies, one that we call remestemcel-L being developed for pediatric and adult steroid refractory acute graft versus host disease. And the second platform, immunoselective cells, called rexlemestrocel-L 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.
The advantage of this type of preferred strategy to partner and develop carve-outs is that there are potential immediate financial rewards through partnership. There's 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 technical execution of our corporate strategy is highlighted schematically in 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 lifecycle 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're 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 provide 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, while we continue to develop the adult indication. We will further advance our MSC therapies, the rexlemestrocel-L platform, with a second phase lll trial for inflammatory back pain, and with further FDA interactions around both the adult program for heart failure with reduced ejection fraction and for now, 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 to build out the enterprise. The objective is to maintain two years of cash flow position at minimum, including potentially monetizing certain assets. And finally, we will continue to attract, retain, and develop key talent 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 the areas of our core commercial focus. Outside of our core areas, we may 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. This is really my only scientific slide, and it's really just a schematic representation of a slide we've shown many times in the past. But essentially, both our first and second generation platform technologies, remestemcel-L and rexlemestrocel-L, 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 to cause cytokine storms in bad inflammatory diseases like you're all familiar with, adult lung disease, for example. And when these cells are are in a concentrated form, 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 concept that results in orchestration of an anti-inflammatory process that turns off multiple arms of 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 other treatments and that result in high level of mortality. Next slide, please.
A snapshot of our late-stage clinical pipeline on this slide. As I've mentioned, we're focusing on late-stage assets derived from either the remestemcel-L or the rexlemestrocel-L platforms. The remestemcel-L 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 a little bit more, but it's in line to commence a pivotal phase lll trial. Crohn's disease is a further indication that we're focusing on, because it very much reflects and is reminiscent of the GVHD gut involvement, and we've had some very exciting data in Crohn's disease as well.
With respect to the second generation rexlemestrocel-L programs, those products are in phase lll 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 three buckets. The Ryoncil, which is the brand name for the remestemcel-L product for GVHD, has its particular milestones for the next 12 months. Then the rexlemestrocel-L for inflammatory back pain, and Revascor, which is the rexlemestrocel-L 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 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 the protocol for the adult GVHD phase lll 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 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 with 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.
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. Next slide, please. That's a busy year ahead for us. Now let me give you a snapshot of where we are with Ryoncil, the 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 lll 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 year and a half, understanding the root cause of that variability and addressed it. The manufacturing process demonstrated that we have a consistent product throughout, and we, 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 cells, that is, inhibition of IL-2 receptor activation on T-cells, and that this improved potency assay is now sufficient to initiate an adult phase lll 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 lll trial. 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 lll trial and the product that's currently in inventory. So that potentially, 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 five times larger than the pediatric indication?
Survival in adult, 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 fail this is as low as 20%-30%, and for this patient population, there are no approved therapies. In contrast, 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. So 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 out draft guidance to industry that agents to treat GVHD, steroid-refractory GVHD, may be approved on the basis of a single-arm trial, just like the single-arm trial that we did in children, if there are no, if there are no approved therapies for that patient population. So we're very encouraged by these, these guidances that, that for the first time, exist for GVHD therapies. We intend to commence a phase three trial of Ryoncil in adults and adolescents, in, 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 US.
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 lll trial, remembering that this BMT CTN is funded by the National Institutes of Health. In fact, the incoming chairman of this BMT CTN was with us at the Type A meeting and presented 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, 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 two years has been reduced by 37%, and we are targeting a further 23% reduction, for the fiscal year FY 2024.
Understanding that some of this will be offset by further investment in our phase lll 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. You would think there's many more, but we're talking about very specifically inflammatory back pain, a total unmet medical need. In fact, it's the number one cause of opioid prescriptions in the U.S.
50% of opioid prescriptions are for patients with inflammatory degenerative disease. Next slide, please. The program summary is that 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 result that we've already seen in the first phase lll, in the second phase lll, that's 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 is being tested now so that it can be released for use in this phase lll trial. Potency assays are already in place, and the FDA has seen these potency assays. We also have an RMAT designation, a 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 lll trial. Startup activities for this trial are significantly advanced, together with investigators, 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 lll trial.
So the FDA saw the full extent of the data, saw 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. This slide is, I think, probably the most important piece of data that can be pointed to from the study. 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, 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 lines is a huge difference that is not, has not been seen with any other kind of therapy, and it's highly significant. 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.
Why that 5-year duration is important is because what it indicates is 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 disc tissue. 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 that we've gone to the FDA, and we've 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've failed all conservative therapies, including nonsteroidal drugs and opioids, and are within 5 years of initial symptoms. Next slide, please.
Moving on to our heart failure program, another very large unmet need. It continues to be the number one 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 lll 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 death, in a study that was followed up 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. We know that because the maximal 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. 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. 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, and death.
We're targeting that, that continuum to the right of the figure, where all drugs have essentially failed and mortality is high. Next slide, please. I apologize for the busyness of this slide, but essentially what we're saying here is that we've done two large-phase 2B/3 trials, the LVAD study of 159 patients and the DREAM Heart Failure study of 537 patients. What both studies have shown is that in the continual 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.
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 number one 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 three 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-L, 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 number one pediatric hospital across the U.S., working with a surgical team that is the best in the world at surgical management of the most serious and common of the congenital heart diseases, 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 at 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 their lungs but also to the rest of their body. And what happens is that after several years, the right side of the heart conks out effectively. Patients go into right 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 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 two years ago was a randomized controlled study. 19 patients have been enrolled, and 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.
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 at 12 months in the size of the left ventricle from about 40 ml of volume of that little red chamber. It's now doubled to about 80 ml in volume, and it was a highly significant difference. 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 it's grown, means that it can pump more effectively and support the systemic circulation. We're very excited by these data.
We filed for rare pediatric 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 left ventricle is exactly what one would have expected based on the data that we've seen in adults with a DREAM Heart Failure study, in the setting of inflammation. We're very much looking forward to interacting with the FDA and talking about how to proceed in this particularly unmet, high unmet need moving forward. Next slide, please. Yeah, let's move to the next slide.
So I think moving back to the data that that underpin our most advanced program, and that's Ryoncil for GvHD, let me summarize again why we think that the data supports an early approval in children, and we'll 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, has had leukemia, has had treatment with chemotherapy, has had their bone marrow destroyed by the chemotherapy in the process of eliminating cancer.
The bone marrow they receive then is, is meant to repair and rebuild their immune system. Unfortunately, as I say, the foreign bone marrow sees the, the host, the recipient, as foreign and attacks it 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, 1,500-2,000 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 three 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 a 79% survival in children who received remestemcel-L versus, in this case, a randomized controlled study, 54% in controls. In our pivotal phase lll trial, which was a single-arm study as agreed to with the FDA, we saw a 74% early survival. When we looked at matched controls from an external cohort that matched for disease severity, only 57% had survival.
Then we've had a variety of expanded access programs, 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 analyses, we see repeatedly high survival with our cells 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 our phase lll trial. Next slide.
We published this a while ago now, in the past, in the past year. Long-term survival data from our phase lll trial demonstrates that, on the left-hand side, in the blue column, you can see that the 50% or so survival at two years is durable. Year 3, year 4, and beyond that, about the 50% who survive are long-term survivors, and they're essentially cured of this disease. In contrast, if you see each of 5 other studies in children and adults, by two years, survival is a dismal 25%-38%, and that's despite the best available therapy, including ruxolitinib, the only approved therapy in adults. There are no studies beyond two 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 pivot, the existing potency asset 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 standalone 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 is reflects about 45% of all ruxolitinib patients, because that's how many are non-responders. We're seeing a survival benefit that if we can replicate that in the pivotal trial, we'll be 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?
Yeah, 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.
Graham Horne, what's our current relationship with Dr. Amy Lightner?
Dr. Lightner has never been, other than an employee of the Cleveland Clinic, any independent 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. Lightner was principal investigator at the Cleveland Clinic.
Hi, David Segal 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 pressure off the other two programs.
Yeah. 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've succeeded, sometimes they haven't succeeded. You know, it's you can't always be a hundred percent aligned with your partners. So, we had a fantastic partnership with Cephalon. Cephalon was acquired by another company, by Teva, that then had a very different strategic objective, so we disengaged from Teva. We then we've got an active partnership with Grünenthal 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 an area of respiratory disease.
Again, during a 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, you know, I think the further our interactions with FDA progress, the more attractive those discussions are. But, you know, again, I can't give you- I can't tell you whether it's next week, next month, but they're very advanced. They're in advanced discussions that are active and ongoing.
Hi, Danny here. Just want to know, can you explain in simple terms, what's the difference between the new potency assay versus the one that was resubmitted, and why are you more confident?
So, the FDA wanted us to improve the consistency of our potency assay. They wanted to see that it 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's ever questioned the product itself, because the product manufacturing has been well-validated by the FDA, and the product is always... The product is consistent, right? It's having an assay that is always measurable, is the question.
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 lll trial, and therefore needs to be tested again in another trial." And they've said, "You can use it to test the product that is 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 that was successful in the phase lll children's trial, and this new assay are very similar, and that the additional data needed to demonstrate that that assay in the phase lll trial was also not variable, was also very consistent. We think should be enough to wrap up the entire pediatric phase lll study with an appropriate assay that is consistent to release product to 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. So that it's a complicated, complicated scientific descriptor, but I'm trying to make it as simple as possible.
Got it. So regarding the assay, is the confirmation that you've 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 control 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's 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 where 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 that the product's equally effective in adults. And that protocol, as I've said, is being developed in partnership with the Blood and Marrow CTN in the US. 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 that phase lll is standardized or demonstrates the product was standardized and is good to test, product can be released commercially.
Thank you.
Are we still giving compassionate use to the under-12 kids for Ryoncil? And if so, what-
... You're, you're asking if we still are making available our expanded access product to children under twelve? The short answer is yes, of course, we are. We, we can't just stop. The product is, in our view, highly effective, in the physician's view, highly effective. Demonstrating that when they, when they're being given unapproved drugs, and there's a whole bunch of unapproved drugs that are out there, once they've cycled through those, these poor children are being referred to us from across the U.S. Quite a lot of children, and I've, you know, 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 is it creates, or what you don't want to have is a reference pricing problem. So for the time being, we're being, you know, we're working with physicians, and we are making that product available. But I think, you know, that's a whole other 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's 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. What's the rationale behind that?
Well, we're not persisting with a single-arm study. I think the final arbiter of what the protocol is gonna be is gonna be the FDA, right? I think it's important, first of all, at the outset, to say that in September, literally two 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. This was a joint communication by CBER, who we work with, the biologics group, and CDER, the drugs people. For the first time, their 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 controlled trial. For a population where Jakafi has failed, which is our target population, which is where, you know, 45%-50% of Jakafi patients fail, and then they have nothing, for that population is where the discussion with the FDA needs to go.
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 as being the pivotal components 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 gonna 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 to us, have acknowledged that.
They've acknowledged that now twice, both in the CRL and in the Type A meeting response to us. And so I you know, that's a, that's a parallel strategy for us as to how we go back, present them with additional potency assay data from, explicitly from product used in the phase lll trial, to show that we're confident that product is well-standardized with a potency assay 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 adult, and you want to separate an indication in GvHD where there's an approved drug or where there isn't one. Does that address the question? Okay, thank you very much. Appreciate your attention.
Thank you, both of you. We appreciate hearing your 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 will 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 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 a 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 gonna 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 Koumantaris 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 appointer 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 do not 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. It will also be made available on our company website. I will now move to each of the items of business separately, and we will provide an opportunity for questions on each item. The company's annual report includes the financial statements and the Directors' declaration, the Directors' report, and the auditors' 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 reports, 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?
Sure, 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 non-binding 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.
... Yeah. Hi, everybody. I'm a shareholder. My name's Brad. I invested in this company 2020, 3 years ago. My average price was around AUD 4 a share. It's now worth AUD 0.40. Now, what you've described in your presentation, fantastic. Ticks everything, a lot in progress, a lot of positive feedback, but that's not what's being shown in the share price. So my question, remuneration. Everybody always puts a hand out for more options, more salary. I understand you've taken a reduction, but in lieu of extras down the track, which is fine. But I just find that, I'm invested in about 9 different companies, and all, 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 there, I've been following you, I've been supporting you. I haven't sold one share in three 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.
Yeah, 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 in a 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 Nominating Committee, and I think he and maybe myself, as well as the CEO, can respond to you. I'm gonna 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. And the options we've benchmarked against, Australian companies and US companies, they're not going up in volume, so therefore, the, you know, the value is, 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, 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 by... We've taken a deferment on 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 our strategies with respect to adoption of these incredibly beneficial treatments that are in hand and hopefully will 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. Proxy votes received for item two are displayed on the screen. I now propose item two 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. I'm now turning to the amendment to the constitution. We next move to a discussion of item three 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, 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. Okay, the next item deals with the re-election of Mr. Philip Facchina as a Director. We now move to that discussion of that re-election. Items 4A and 4B involve the re-election, actually, of two 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 re-election.
The board recommends that shareholders vote in favor of the re-election 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 re-election 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 deals 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. The next resolution deals with the re-election 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 four B, 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. 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 five A, 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. 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... 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. 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 August 30, 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 to the next resolution. The next resolution relates to the approval of a proposed issuance of options to non-Executive Directors. and the non-Executive Directors are in that class: Mr. William M. Burns, Ms. Jane Bell, and Mr. Philip 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 seven, 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. The next resolution deals with approval of proposed issuance of options to the Director, Dr. Philip Kraus, 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 eight, 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. The next resolution is item nine, 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 nine are displayed on the screen. I now propose item nine, 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. 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.