Hello, and welcome to the Mesoblast 2021 Full Year Financial Results. An announcement and presentation have been lodged with the ASX and are available on the Home and Investor pages at www.methoblast.com. At this time, all participants are in a listen only mode. Later, we will conduct a question and As a reminder, this conference call is being recorded. Before we begin, let me remind you that during today's conference call, the company will be making forward looking statements that represent the company's intentions, expectations or beliefs concerning future events.
These forward looking statements are qualified by important factors set forth in today's announcement and the company's filings with the SEC, which could cause actual results to differ materially from those in such forward looking statements. In addition, any forward looking statements represent the company's views only as of the date of this webcast and should not be relied upon as representing views of any subsequent date. The company specifically disclaims any obligations to update such statements. With that, I'd now like to turn the call over to Doctor. Silvi Uteschi, Chief Executive of Mesoblast.
Please go ahead.
Thank you very much, operator, and welcome everybody to Mesoblast's operational highlights and financial results for the year ended is June 30, 2021. With me today is Doctor. Fred Grossman, our Chief Medical Officer and Andrew Chaponnel, who has recently been promoted to Interim Chief Financial Officer. We thank Josh Luntner, who is moving on to other opportunities for his terrific support over the last few years. If we can move to the presentation, please, straight to slide 4.
Slide 4 is a snapshot of our platform and pipeline. We have 2 platforms, the remestemcel platform technology, is being developed for pediatric and adult systemic inflammatory diseases and the RexelimestroCell platform technology for localized inflammatory conditions, both are derived from stromal mesenchymal cell lineage cells. Remestemcel is being developed for pediatric and adult acute graft versus host disease as well as acute for respiratory distress syndrome due to COVID-nineteen, influenza and other causes and refractory inflammatory bowel disease. Rexlin Strocel is being developed for advanced heart failure and for chronic low back pain. And as you can see, both platforms have Slide 5 shows the mechanism of action of our mesenchymal lineage stromal cells.
These cells respond to and are activated by multiple inflammatory cytokines in diseases of inflammation of inflammatory factors that target the various cells that are critical to the inflammatory process. Next slide please. Slide 6 shows our global intellectual property estate, which provides substantial competitive advantages. We have over 1,000 patents and patent applications across all the major jurisdictions. These patents cover compositions of matter, manufacturing and and therapeutic applications of mesenchymal lineage cells and they provide us with global strong protection in areas of our core commercial focus against competitors.
When outside of our core commercial areas, we may consider granting rights to third parties who require access to commercialize their particular products. Slide 7. We have commercial scale manufacturing capabilities. Our scalable allogeneic cellular platforms are off the shelf. The manufacturing meets stringent criteria to international regulatory agencies.
We have robust quality assurance processes that ensure final product with batch to batch consistency and reproducibility. And we have in place of 2nd generation technologies to allow us to meet our projected increase in capacity requirements for our maturing pipeline. In particular, our animal free technologies will increase yields and output. We're able to move towards 3 dimensional bioreactors to reduce labor and improve manufacturing efficiencies. And together, these innovations significantly will reduce cost of goods.
Now let's move to the financial results on Slide 9. Andrew Schepanel, would you please take the next few slides?
Thanks, Sophie. Now turning to Slide 9, let's review the financial highlights for the year ended June 30, for 2021. As at June 30, our cash reserves were US136.9 million dollars In regards to sales of GVHD in Japan, our licensee JCR have increased their plant capacity to enable them to meet ongoing demand. For the year, we recognized royalty income of CAD7.2 million reflects growth of 10% on the prior year. We have amended the terms of our senior debt facility to extend the interest earning period to January 2022, and we are in active discussion to refinance this loan.
In the year, we continued our ongoing investment in our remestemcel platform to support both the regulatory pathway to potential approval and manufacturing scale up as well as life cycle management. To recognize this prelaunch inventory balance of $21,900,000 on our balance sheet. Turning to Slide 10. Let's review sales growth of TEMCELL for GvHD in Japan. The chart on the right highlights the ongoing year on year growth in royalty income since launch in 2016.
The chart clearly illustrates the strong product adoption of TEMCELL for GVHD in Japan. We are pleased to see this sort of adoption as we plan for the potential launch of remestemcel in the U. S. The addressable market for GVHD in children and adults in the U. S.
Is 8 fold larger than Japan. Now let's move to the profit and loss statement for the year on Slide 11. This slide provides granularity on the P and L for the year ended June 30, 2021. Within revenue, we've seen growth in commercialization revenues due to the growth in TEMCELL. Within milestone revenue, in the prior year, the P and L included $25,000,000 of revenue in relation to Rex Lemistrocel for upfront and milestone payments from Grunenthal and Tasly.
Moving further down the P and L, the key observation is that 54% of spend within research and development And 92% of spend within manufacturing related to remestemcel as we focused our assets on this platform in anticipation of potential resubmission and approval. More specifically, within manufacturing, I note we produced of $13,100,000 of pre launch inventory in FY 2021 year. Over the last 2 years, we've produced $21,900,000 of pre launch inventory. We received FDA approval. We expect to recognize this balance on the balance sheet.
A full set of our financial statements are available in today's ASX filing. I'd now like to return the call to Sylvie. Thanks, Sylvie.
Thank you, Andrew. Now if we could turn to on Slide 13, where we will talk about an update on remestemcel for acute graft versus host disease. This is a serious and fatal complication of allogeneic bone marrow transplantation. Following the host tissue Damaged by the bone marrow transplant conditioning, the therapeutic agents used in the underlying disease. After a bone marrow transplant, there is significant and severe immune cell activation whereby the donor host immune system, of T cells and the macrophages are activated and they produce a large number of cytokines, the so called cytokine storm that ultimately results We go to slide 14, please.
This is a particular concern, especially in children who remain at high risk of treatment failure and death from this disease. The Unmet need continues to be extremely high. More than 2,000 bone marrow transplants in children and adolescents are performed in the U. S. Alone.
And despite first line treatment as well as prophylaxis, a large number of these children develop graft versus host disease with a response rate of less than 50%. In children under 12, there are no approved treatments for the treatment of steroid refractory graft versus host disease and in these children, the target organs being the gut and the liver in particular, mortality rate is as high as 70% to 90%. Next slide please. Over the past few years, Across more than 3 studies and more than 309 children have received remestemcel for steroid refractory acute graft versus host disease and the results have been consistent across each of these studies in terms of Overall day 28 response and day 100 survival. And as you can see in the table below, in yellow, those results are outlined across 3 different studies using remestemcel, either in a randomized controlled study, at Selvage therapy in children who failed multiple biologic agents and most recently in a Phase 3 trial where remestemcel was used as is the first line after steroid failure.
The numbers are very similar and very consistent across all of these studies. In comparison, In a cohort called the MAGIC cohort of children who were matched by disease severity and inclusion criteria to the recently completed 1 study, the day 28 overall response and the day 100 survival are clearly worse than is seen in the patients who received remestemcel. Next slide, please. Slide 16. In this slide on the left is shown the 2 year survival from a single center, historically looking at pediatric patients with acute Grubhub as host disease and treated with As you can see at 6 months, the overall survival is 49% and by 2 years, it's a dismal 35%.
In contrast, in the Phase 3 trial completed 1,002 on the right with remestemcel, Survival outcomes at 6 months were substantially higher at 69%. Next slide please, Slide 17. So this slide summarizes the regulatory and commercial update for remestemcel insteo refractory acute GVHD in children. We were disappointed obviously last year when we had a setback in our regulatory interactions and where we received the complete response letter. Subsequently, we've continued in active dialogue with the will be in discussion through a well established regulatory process that may include a BLA resubmission with a 6 month review aiming to achieve approval.
Following the recommendation of FDA's Center For Biologics Evaluation and Research, CEVA, MizaBLAS as our next step, we'll discuss with OTAP, the Office of Tissue and Advanced Therapies, our approach to address certain outstanding of the industry manufacturing and controls, including potency assay validation. We expect to meet with OTAT in the Q4 of this year to address potency assays and other outstanding CMC items. Now let's move to the next slide, which is an overview of the use of remestemcel in acute respiratory distress syndrome due to COVID-nineteen. COVID-nineteen is a respiratory virus with a high mortality due to severe inflammatory condition in the lungs called ARDS, acute respiratory distress syndrome. This disease is caused by a cytokine storm in the lungs of patients infected with COVID-nineteen and remains the primary cause of death in this disease.
Extensive safety data of remestemcel and its anti inflammatory effects in acute graft versus host disease makes a compelling rationale for evaluating of the new stem cell in COVID-nineteen odds. Intravenous delivery of REMISTemcel results in selective migration to the lungs, making inflammatory lung disease an ideal target for this therapy. And we believe based on understanding the mechanism of action of the cells that remestemcel has the potential to tame the cytokine stormingitis may offer a life saving treatment for those suffering from COVID-nineteen. Slide 19. What we have learned over the past 12 months in this pandemic is that age greater than 65 is associated with reduced T cell responses to the virus, delayed viral clearance and greater disease severity.
In fact, age greater than 65 is the single greatest predictor of poor outcome and high mortality in this disease. As you can see in the bottom left figure, under normal circumstances, when an individual is infected with of the SARS CoV-two virus, there's an initial innate immune response and then an adaptive T cell immune response, of disease severity in conjunction with antibodies. In contrast, in older people over 65 or those who are immunocompromised, The ability to mount a normal T cell response is diminished, viral load is substantially higher and clearance of virus is significantly delayed. This results in the figure on the right, a substantially higher peak disease severity in patients who are older than 65. And this is now being established and well validated across many studies globally.
So moving to Slide 20, we move forward in the midst of this pandemic in evaluating whether remestemcel could make a difference in this very severe outcome in patients infected with the virus. Initially, we performed an emergency IND. We evaluate under emergency IND the outcomes of 11 patients in Mount Sinai Hospital New York about a year ago early in the pandemic, these patients were all on ventilators for COVID-nineteen. Notably, 10 out of these first 11 patients were young under the age of 65. These patients received 2 infusions of remi stem cell 2,000,000 cells per kilogram within the 1st 5 days.
9 of these patients successfully came off a ventilator within 10 days and will discharge from the ICU. The experience under this emergency IND informed the dosing regimen for the randomized controlled Phase 2bthree trial. Notably, however, no data from on this dosing regimen was available in patients who are older than 65. We commenced a randomized controlled trial, Multi center, randomized, blinded to assess the safety and efficacy of remestemcel versus placebo in up to 300 patients, ventilator dependent with moderate or severe ARDS due to COVID-nineteen. The protocol was to randomize 1 to 1 and to receive either placebo or 2 infusions of remestemcel within 3 to 5 days.
Unfortunately, the Data Safety Monitoring Board terminated the study early after 2 22 patients were enrolled. This was because they determined that the study was unlikely to meet its primary endpoint of 43% overall reduction in mortality. Notably, during the conduct of this trial, the median age increased from 59 in the first half of the trial to 67 in the second half, more than a decade. So over time, the patients enrolled in the trial were substantially older than earlier in the study. The preliminary results were based on 60 day outcomes and pre specified analyses were generated by stratification of age younger or older than 65.
125 patients were younger than 65 and 97 patients were older than 65. Next slide, please. Slide 21. In the control population in this study, as expected, Age was the major factor that predicted mortality. As you can see here in red, patients who were younger than 65 had a significantly lower mortality, 42% through 60 days than those who are older than 65, 70% at through 60 days.
Nonetheless, the 42% mortality in the under-sixty five is a very worrisome and continues to be a worrisome trend as the new delta virus starts So here we see on the left hand side in the modified intent to treat population of 217 patients who received either remestemcel or placebo An overall mortality risk reduction of 14%, which as I said earlier did not meet our targeted primary endpoint requirement. On the right hand side, however, in the pre specified group under 65, which accounted for the majority of the patients in this study, You can see that remestemcel reduced the risk of mortality for 60 days by 46%. Next slide, please. We then looked at a number of key secondary endpoints. And here on this slide, we looked at The overall improvement in ARDS severity from severe to moderate, from moderate to mild, etcetera, by at least one category at each of the pre specified time points, 7, 14, 21 is on the left hand side, in patients under the age of 65, there was improvement in ARDS score severity.
In contrast, on the right hand side in patients over 65, we see A substantial improvement in the heart severity at day 7 after the first two doses were administered, but not beyond day 7. So, what this suggests is that in those patients over 65, there is a requirement for higher or more prolonged dosing regimen in order to achieve the same sort of outcomes as we see on the left hand side in patients under the age of 65. And this increased requirement for dosing goes along with the known observation that patients over 65 have much greater levels of inflammation and we will be exploring high dosing in that patient population. Slide 24. In an exploratory subset analysis in patients who are on dexamethasone, which accounted for about 3 quarters of the study, remembering that about a quarter of the way through into this trial dexamethasone became the standard of care in ventilator dependent patients.
In this exploratory population, we see an even greater effect of remestemcel on top of standard of care. So on the left hand side remestemcel plus dexamethasone compared to dexamethasone alone. And again, on the right hand side, you see that the combination relative to patients on dexamethasone alone substantially increased the likelihood of improving the ARDS severity score at every time point from baseline for 30 days. We can now move to slide 25. We've recently had a meeting with the FDA on the regulatory pathway for an emergency use authorization in COVID-nineteen for remestemcel based on the data that I've just highlighted.
The outcomes from the meeting included as follows. The FDA have told us that an additional clinical study would be required, which if statistically positive could provide a data set in conjunction with the recently completed study that might be sufficient to support an emergency use authorization. The existing COVID-nineteen IND file and future submissions for remestemcel in this indication may continue to cross reference Manufacturing information in the BLA-one hundred and twenty five thousand seven hundred and six for pediatric steroid refractory acute graft versus host disease. Potency assays must be established and agreed prior to commencement of this proposed Phase 3 clinical trial. Potency assays that are currently in development appears to be reasonable based on in vitro results provided in the briefing document to the FDA.
The in vitro activity of the product appears will be relatively well established, but the relationship between in vitro activity and the product's actual mechanism of action remains theoretical. Mesoblast intends to meet with FDA's OTAT, Office of Tissue Advanced Therapies, in this coming Q4 to address potency assets for remestemcel in relation to steroid acute steroid refractory acute graft versus host disease. And we believe that the attributes that we're presenting for that indication will also be relevant to COVID-nineteen. Now, let's move to slide 27 to focus on updating the market on of the programs for our 2nd platform technology, rexelenstrucel. Chronic heart failure continues to be a major problem As many as 26,000,000 patients globally and more than 6,000,000 patients in the U.
S. Suffer with chronic Heart failure. This disease has a mortality that approaches 50% at 5 years as high as many cancers. And patients with heart failure remain at risk of recurrent major adverse cardiac events, including mortality, heart attacks and strokes. Sensation and volume overload, but do not have a material impact on cardiac mortality or major vascular events such as heart attacks.
On Slide 28. The DREAM Heart Failure Phase 3 trial, the overview This was a randomized placebo controlled trial in conducted across 55 sites in North America, comparing 1 to 1 local delivery by catheter of 150,000,000 cells intramyocardially versus controls in 565 patients. The primary endpoint was reduction in hospitalizations related to the compensation events and the key secondary endpoints were a reduction in ischemic vascular events such as heart attacks and strokes or reduction in mortality. We looked in a post hoc analysis also the composite of these pre specified major events. On Slide 29.
The results of this trial showed that rexlimestrosel may provide a major breakthrough in reducing heart failure progression and mortality when used early in Class II disease and may provide durable protection from heart attacks or strokes We saw a 60% reduction in the incidence of ischemic MACE, heart attacks or strokes across the entire 537 patient study population who received either an injection of cells or placebo, irrespective of New York Heart Association class and And irrespective of ischemic or nonischemic ideology, we saw a 30% reduction in the incidence of the so called 3 point MACE, of cardiac death, heart attack or stroke across the entire 5 37 patient population, we saw a 55% reduction in the incidence of the 3 point MACE in Class II patients and in particular in this Class II population, we saw a 60% reduction in cardiac death. This indicates that this therapy may change the natural history of this disease, particularly when instituted earlier in the disease pathway in patients who are in advanced Class II before they get to of End Stage Class III OR Class IV disease. Based on the observed reduction in mortality and morbidity in this trial, will be back in the next quarter from the FDA on potential pathways towards approval.
If we can move now to slide 30. This slide summarizes the unmet need and the potential treatment paradigm for using rexelenstruicel in patients with chronic low back pain due to degenerative disc disease. This continues to be a major unmet need and it is important to remember that for patients with this type of chronic Severe inflammatory back pain, the only type of therapies beyond conservative non steroidal agents are the use of opioids to diminish the pain and 50% of opioid prescriptions in the U. S. Are for the use of of Opioids in the treatment of chronic low back pain.
Over 7,000,000 patients are estimated to suffer from this disease in each of the U. S. And EU5. And our MPC-six ID development program targets approximately equal numbers of patients in each of these, the U. S.
And the major jurisdictions in Europe. Next slide please, Slide 31. The Phase 3 trial of rexelimidrostel in these patients was a randomized placebo controlled three trial in patients with more than 6 months of chronic piscogenic low back pain not responsive to conservative measures. The diagnosis of degenerative disc disease was made by an MRI. We excluded non discogenic causes and 404 patients were enrolled randomized to of either saline cells alone or cells together with a hyaluronic acid carrier.
On Slide 32 is a summary of the results from this study. We saw substantial and durable reductions in chronic low back pain through 24 months across the entire study population of 3901 patients who received either The greatest pain reduction observed was in those patients with shorter duration than the study median of 68 months, suggesting that earlier intervention is important in patients with active inflammation. Significantly greater pain reduction in the pre specified patient subset of opioid users at all time points was seen compared with saline controls And by 24 months, there was a 40% reduction in opioid use. We concluded that rexlimestrosol may provide a safe, of the durable and effective opioid experience therapy for patients with chronic inflammatory back pain due to degenerative disc disease. Based on the above results from this trial, Misabos expects to receive feedback in the next quarter from FDA on potential pathways towards approval.
For the last slide, if we could look at Slide 33, are the key initiatives and upcoming milestones for the next 12 months. With remestemcel for children and adults with systemic inflammatory diseases, we continue to be in discussion with the FDA through a well established regulatory process for potential approval of remestemcel in the treatment of steroid refractory GVHD in children. During the next quarter, We plan to meet with the FDA to address certain outstanding CMC items, including potency assay development, which are required for a potential BLA resubmission and a 6 month review. We intend to reach agreement with the FDA on the final protocol and potency assay required for additional Phase 3 trial in COVID-nineteen with The objective to obtain an emergency use authorization. And I'll remind folks that the license and collaboration agreement between Mesoblast and Novartis for the development, manufacture and commercialization of remestemcel with an initial focus on the development and treatment over the development of the treatment for ARDS remains subject to certain closing conditions, including the time needed to analyze results from the COVID-nineteen ARDS trial.
With respect to rexcelemi strocel, our programs for chronic heart failure and chronic low back pain, we expect to receive feedback from in the next quarter on potential pathways to U. S. Regulatory approval following the recently completed trials and we will update the market in due course. And on that note, I'd like to thank you very much for allowing us to give this presentation. And operator, please open up to questions.
Your first question comes from Kabi Liuying with Cantor Fitzgerald. Please go ahead.
Hi, everyone. Congrats on the progress. This is Carly in for Lily today. Thank you for taking our questions here. First of all, on COVID-nineteen, Given the outcome of the FDA meeting, how long should the final protocol and potency assay require an additional Phase III trial Jake, what is the go forward strategy here?
Secondly, are you still expecting to have clinical results from
Thanks very much. Look, I might start with the Crohn's disease question first and then ask Doctor. Grossman to will give us some more detailed response on the next program for COVID-nineteen. With respect to the of Crohn's disease program, it is there is an active study that's ongoing at Cleveland Clinic. It's an investigator initiated study.
The unmet need that continues to be a major problem in inflammatory bowel disease is the need to induce remission within the 1st early remission within the 1st 4 weeks, and that's particularly in patients who failed other biologics such as anti TNF therapy. The approach that is being taken by our investigator in this study is to identify by colonoscopy of inflammatory environment with a view to achieving early remissions. That study is still ongoing. We expect to be able to update The market later this year on preliminary data and the unmet need is clearly there. And if we see A signal of the type of efficacy that we'd like to see, which is early remission within the 1st 4 weeks, we will be moving this program towards Doctor.
Grossman, would you like to expand on the needs to move forward rapidly with a
There is a very Significant urgency to move forward as quickly as we can. There are surges that are occurring, Particularly in the United States right now, in vaccinated people with increasing breakthrough infections, While there are therapeutic approaches to try to prevent infection, whether it be through vaccination or therapeutics. There are very few or no studies taking place or treatment for patients once they wind up on a ventilator. The only treatments that are available are supportive measures and steroids such as dexamethasone. So there's a very significant unmet need and we feel an obligation to move as fast as we can with The next study will be dependent on alignment with the FDA on the protocol and as you heard before, potency measures.
The FDA is equally
motivated to move quickly because of the surges that are taking place. So we look forward to Continuing to work with the FDA to get that alignment so we can move forward.
Got it. Okay. This is super helpful. Thank you so much.
Thank you. Your next question comes from Jason Kolbert with Dawson James. Please go ahead.
Hi, thanks guys. Doctor. Grossman, can you just clarify something you said? Where exactly would monoclonal antibodies In the treatment scheme of a COVID patient, I assume that they're stopping or blocking viral replication, But it's you've already had the inflammatory cascade and that's where This kind of therapy would come into play. Is that right?
Well, monoclonal antibodies have been shown to be effective if given within the 1st 7 to 10 days. So it's to prevent further What we're talking about here are those that go beyond that, Those patients where either the therapeutics don't work or who have breakthrough infection and get Severe cytokine reactions and wind up in the ICU. We hear now of ICUs being filled, particularly in the southern parts of the country. And those that's the target population, those with moderate to severe COVID ARDS will wind up in the ICU on a ventilator and those are the treatments for those are the patients for which There is a lack of adequate therapies. Those are the patients that we're targeting.
Well, no, I understand. And I mean to the extent that steroids and dexamethasone, they're also blunting The body's ability to clear virus, right? So if you could have monoclonal antibodies as a background therapy, This is really my question. That's something a little bit new because the original COVID trial that Mesoblast run cascade under control without blunting the positive aspects of the immune system and viral clearance. Is that right?
These are 2 separate parts of the disease. So the first is the viral load and the duration of that viral load, which then Triggers a cytokine reaction. That's the war that takes place in the lungs. That's where it goes.
Right. But they're going on simultaneously.
They are, but the monoclonals are treating the early phase to prevent the viral load from having Great durability and increases, whereas by the time people wind up in the ICU, it's in the cytokine part of this activity, which is doing damage to the lungs. And that's why treatments such as dexamethasone or steroids are used Try to attain that reaction. That's the area that we're treating and that's the focus
of that portion of the disease there. Yes. And I might add a bit to that as well. I think it's clear that monoclonal antibodies are really just an increased mechanism by which viral load is attempted to be controlled in those patients where remdesivir doesn't work well enough. And so the vast majority of patients who are exposed to these antibodies also break through and continue to require other therapies to reduce inflammatory response to the high viral load.
So we think that antibodies are going to be part of the armamentarium, but many patients will require additional approaches that specifically target the inflammatory cascade. Now we've seen that dexamethasone is one such approach. We in our particular study, dexamethasone did not have a particularly strong benefit in terms of at least in the exploratory analysis in our study, between dexamethasone and ourselves, so that the combination of the 2, presumably through Similar pathways augment the ability of our therapy to switch off the inflammatory cascade as a completely
Hang on one second. A light just went off in something you said, which is patients who've been vaccinated, who The 3 in an inflammatory cascade is not positive in those patients, Monoclonal antibody therapy, which does record exactly what you're saying.
That's exactly right. And in breakthrough infections, Of course, we're talking about patients who have either already been vaccinated and have got some degree of neutralizing antibodies or patients who've previously had natural infection have got Despite all of that, the fact that there's a substantial number of breakthrough infections means that the problem is Not addressable by further antibody approaches, but rather by reduction in the inflammatory cascade to protect the lungs. Exactly right. Yes. Doctor.
Grossman, sorry I interrupted you.
Yes. The other thing to add to this discussion is that the Treatment for COVID-nineteen is probably going to be very similar to treatment for HIV, for example. No single drug or treatment is going to be adequate. So they're going to be antivirals, monoclonals, other kinds of
I hope what you're saying turns out to be true because I know HIV and HCV are very different viral Haven't seen it yet, it may take a while, which further supports the importance of the therapy.
The point is that there's going to be no single therapy. It's a complex disease and it's going to require complex intervention and we hope to be part of that intervention.
One quick question. It sounds like a lot of the bottleneck has to do with manufacturing CMC and or if I want to be specific and pin point potency assay and it seems like once you clear that roadblock that several clinical pathways get resolved. Are you feeling that same thinking, that same Am I on the right path?
Absolutely. We've just had an excellent meeting with the FDA, very collegial and Very positive meeting that has delineated for us exactly where we're going. We Have very precise potency assays that are being developed that we think support the mechanism and the action of these cells in both And we will be providing the FDA in a meeting over the next quarter with more details around this potency development, and we expect to be updating the market shortly after that.
Great. And my last couple of questions are on Slide 10, which is a spectacular slide and shows the growth of TEMCELL in Japan. This is exactly what you want to see. How many patients are represented in, say, fiscal year 2020?
Look, the way to look at these slides is we the information that we receive from our partner is based on the therapeutic units sold as opposed to the numbers of patients. So we can talk to The revenue stream based on our royalty, which is based on the number of units that have been sold, we can make an assessment and take a guess given that we know the protocol is 2,000,000 cells per kilogram twice weekly for about 4 weeks, we know the protocol, but the Precise numbers of patients is hard to estimate. We would say that we think that looking at these numbers and knowing what the denominator is likely to be This suggests that the penetration rate is off the order of around 30% of the addressable market, which from our point of view is a very important provides important insight as to how a similar product would be adopted in the U. S. Market, remembering that the U.
S. Market is About 8 times bigger than the Japanese market, both in terms of the
numbers And that's exactly where
I was going, right? As well as pharmacoeconomics, right? In other words, the reimbursement is higher in the U. S. And the number of patients is larger because of The outbreak nature of the patients in the more so the incidence of GVHD is much lower in Japan than it is in the U.
S.
Right. So that's where I was going that really from this launch characteristic in Japan, which is Less than optimum for a lot of complex reasons, but it's suggesting that the U. S. And or EU markets Could be significantly larger and maybe even a more compressed chart given that the launch dynamics and The concentration will be different, maybe improved than the U. S.
And Europe.
That's right. That's right. And in fact, we've done a lot of work, of course, on our potential commercial launch. And in fact, again, I'll restate that we were disappointed by the setback that we had last year. We were anticipating already to be in the market this year.
We've had that delay now, but we've done a lot of the groundwork in terms of preparing payers and And assuming that we have a good meeting with the FDA upcoming, we will be in a position to again ramp up The commercial phase of this product for the U. S. Market.
Yes. Well, I mean, it seems like once you have CMC and potency So yes, they've taken care of that like I said, a lot of clinical pathways open up and you combine that with the potential work that you're doing in COVID and in UA, that could be these things positively reinforce each other, right? So if I'm looking at this, What I'm trying to do as an analyst is determine that it seems like Mesoblast is on the precipice of an inflection point.
We thank you for that perspective and we certainly feel that way too. Thank you. Okay.
Thank you so much guys. Really appreciate it.
Thank you. Your next question comes from Kennen MacKay with RBC Capital Markets. Please go ahead.
Hi, good morning. It's Jacky in for Kevin. Thanks for taking our questions. I just want to focus on ARDS For this inflammatory biomarkers you mentioned at baseline for the trial like IL-eight, Yes, Alcon, SIG, Xiaocha, wondering when you will present this result and Each while these things best represent the driver of these disease or even measure your treatment impact?
Yes, that's an excellent question. Thank you for asking that. We have collected a lot of samples And those samples for a variety of biomarkers, which are both inflammatory markers of the disease as well as cytokines that are produced by various immune cells, T cells and macrophages in particular. They've all been collected. They are being analyzed and they'll I'll take a little bit more time, but we expect to be able to update the market with those results as soon as they're at hand.
I think it's important Much has been learned in the last 12 months in terms of the mechanisms by which ARDS progresses And the type of biomarkers that one should look for. It's very clear now that the defects with age relates to loss of so called naive T cells that are there to respond to the virus in the first place. Younger people have more of these cells, older people have less of these cells. As a result of that, viral load is Greater and less likely to be eliminated in older people than younger people. As a result of that, the persistence and high levels of virus results in activation of a dysregulated immune arm that is ineffectual against the virus, but highly effective unfortunately in And that also is greater in older than in younger people.
But that's generally that's the understood pathogenesis right now of COVID-nineteen and the relation between age and worse outcomes. So to understand the type of immune cells in the lung that are responsible for the disease and to measure the output of those cells, meaning the signature pattern of the inflammatory biomarkers of those cells in the lung and in the bloodstream is really at the heart of understanding the biomarkers and whether or not our cells, remestemcel, has had an impact on improving those biomarkers as an underlying mechanism of action that explains the survival benefit. And that's what we will be fully analyzing and presenting in due course.
Got it, got it. Super helpful. And then just a quick follow-up to that point. Have you or has the FDA ever request Biomarket data when you were talking with them regarding NASDAQ. And are you planning to share those data with them Not only for the ARDS program, but kind of like socialize the data with other FDA groups for your other progress.
Look, as a general statement, we have an underlying shared mechanism of action that we postulate is the rationale for why remestemcel provides a survival benefit in the severe forms of GVHD with gut disease And in severe COVID-nineteen with severe lung disease, we have a working mechanism of action that we believe brings the 2 together, and we've shared some of those with the FDA. They, of course, remain at this point theoretical and continue to We continue to generate data to support those MEC businesses. But in general, they're not required for approval of the product. They Support the rationale of the potency assets and the activity of in vitro Quality attributes of the product. And of course, they will be important as we move forward in providing data to clinicians and people who are important in providing the therapy to their patients.
Yes. And I would add, Mesoblast
is at the cutting edge of understanding and developing And part of that understanding is to elucidate the mechanism. But we can't lose sight of the fact that the most important endpoints are the clinical endpoints and they're the survival endpoints that we've seen in GVHD as well as in COVID-nineteen, particularly in those that are younger than
And the last question, just wanted to hear What you'll be hearing maybe since COVID has been changing now that certain variant is delta. So will this Make the ARDS different from the ARDS in the last trial, just thinking from this point or have you seen any
Could you just explain again, you're suggesting You're asking whether we're seeing different outcomes according to the different variants? Was that the question?
Yes.
Yes. Yes. I think look, I think it's too early for us to be able to address that. We just haven't had enough patience. But I think it will be important to try to look at some of those questions.
It's difficult today given that over 90% to 95% of patients to present with ARDS have got the delta virus across the U. S. So, it's shifted. I think there will be more variants. There will be variants that are fully resistant to the current vaccines.
There will be variants that are more infectious that even if Sensitive will result in greater numbers of patients with breakthrough infections. So, I think all of those are variables and unfortunately it's a Tough way to be conducting clinical trials as we saw with our own trial where age changed midway through the study as well as different therapeutic modalities were tried and tested during the conduct of the trial. Fred, do you have any views
on that?
So did that address the question?
Yes, yes, yes, for sure. Thanks again for all the color. Thank you.
Thank you. Your next question comes from Tano Shree Jain with Bell Potter Securities. Please go ahead.
Hi, Silvio. Thank you for taking my questions. Just a couple for me, just on the COVID ARDS trial and the EUA part, can you advise what And then just secondly on
the delta variant in question, we see
A lot of news flow and studies by CDC where they're talking about how in vaccinated people essentially, you're still seeing a lot of cases, but it's keeping people out of ICUs. It's reducing the severity. And I think we're seeing Most of the cases in Australia at the moment also, people who are in the hospital and ICUs being primarily unvaccinated people. So just on the basis of this, can you perhaps talk about what you see now as the market opportunity or the proportion of people getting COVID-nineteen.
Yes, sure. I mean, look, it's a numbers game, right? I mean, there's no doubt The vaccines today are reducing both the numbers, perhaps not the numbers of patients getting expected. And that's step number 1 is that even vaccinated people carry the same amount of virus as unvaccinated people. But they clearly The vaccines have reduced the proportion of patients who, once infected, are hospitalized.
And whether that's by 2 thirds or that sort of number, I mean, if you look at the U. K. And Israel as Countries that almost have fully vaccinated their adult populations, those are the sort of numbers that we're seeing. However, when you're talking about such large numbers of patients being Infected, then what does the 2 thirds reduction in hospitalization rates mean? Well, it's very important, but that extra 1 third, 20% of patients who end up in hospital end up the number of those who are hospitalized that end up in continue to be to require ventilation and ICU hospitalization either because they've had serious breakthrough infection or because they've got a variant that is resistant or because they're in that sort of vulnerable window, we now know that after about 5 5 to 6 months immunity to the vaccines wanes and there's this window period where immunity to being And resistance to the infection is at its lowest.
So that window is when Patients are most likely when even having been vaccinated to respond poorly to a new infection and there's a high risk of Hospitalization and then ICU stay. So that's what Fred was saying. They will continue now that we're shifting from a pandemic to an endemic phase to a need for therapeutics as the proportion and the numbers of patients despite vaccination will continue to be there. You asked a separate question as to our focus on non COVID-nineteen. That will include, of course, influenza and bacterial pneumonia as triggers for inflammatory responses in the lung.
Our main focus for an emergency use authorization is on COVID, COVID related. That's where the FDA is focusing that's where the unmet need is and that's where one trial would, if positive, get us approval. Together with our Strategic partnership with Novartis. Of course, we're looking at how to move forward into the non COVID-nineteen space, what those trials need to look like We will update the market together with the discussions with Novartis.
Right.
I would just say that whatever data when you look at various parts of Those that are vaccinated and includes the data out of Israel as well. So the problem is that there's always going to be breakthroughs And given the large numbers, as Silviu mentioned, there's still going to be a need for those in the ICU. Regarding vaccination, until the world is fully vaccinated and even in that case, which is sort of an implausible type of situation, There's going to be variants, and so there'll always be this catch up between vaccinations. And that's why there's such an emphasis now on therapeutics that are required both early in the treatment and where we're studying late in
And just for Novartis' relationship, they're obviously obliged to fund our next study with non COVID-nineteen focus. So in terms of, I guess, the next study for COVID-nineteen that we're pursuing for EUA, am I correct to understand that the funding for this will rest on Lisoublatt or RV
or in-depth part of it?
I think that's too early to say. At this stage, All potential options are on the table. We will come back and be able to discuss that in more detail at a later time point.
Great. Thank you.
Thank you. That does bring us to the end of today's call. I'll now hand back to Doctor. Itescu for closing remarks.
Thank you, everybody, for Listening to our financial results for the year. It's been a difficult year, no doubt. We were disappointed by the initial setback. We had hoped that the remestemcel would have gotten approval in the first instance, but nonetheless, we have regrouped And we're very excited by where we are today with respect to the potential for remestemcel to be approved Moving forward for both acute graft versus host disease and under emergency use authorization potentially for COVID-nineteen. And that is we will be able to update the market in short order on our ongoing discussions with the FDA and as well as our discussion of our potential strategic partners.
Thank you very much everybody.
Concludes our conference for today. Thank you for participating. You may now disconnect.