Hello, everyone, welcome to the Mesoblast financial results for the period ended September 30th, 2022. An announcement and presentation have been lodged with the ASX and will also be available on the home and investor pages at www.mesoblast.com. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, instructions will follow at that time. 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 in the company's filings with the SEC, which could cause actual results to differ materially from those and such forward-looking statements.
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 the company's views of any subsequent date. The company specifically disclaims any obligations to update such statements. I would now like to turn the floor over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.
Good morning, good afternoon to the operational highlights and financial results for the quarter ended September 30th, 2022, as well as our upcoming annual general meeting. Apologies for the slight delay due to technical difficulties beyond our control. Joining me here today is Dr. Eric Rose, our Chief Medical Officer, and Andrew Chaponnel, our Interim Chief Financial Officer. If we could go to the first slide. If we could go to slide number 4, please. Survival outcomes have not improved over the past two decades for children or adults with the most severe forms of steroid-refractory acute graft versus host disease. In particular, the lack of any approved treatments for children under 12 means that there's an urgent need for a therapy that improves the dismal survival outcomes in children.
In light of the unmet need, remestemcel-L has been granted Fast Track designation and BLA priority review from the FDA. A major milestone in the company's complete response to the FDA was our submission at the end of the last quarter of substantial new information on clinical and potency assay items to the IND file for remestemcel in the treatment of children with steroid-refractory acute GVHD, as has been guided by the FDA. Mesoblast has optimized the potency assay that was in place at the time of the phase III trial and which demonstrates a relationship between the product's activity in vitro and its effects on survival in the phase III trial.
Mesoblast has now generated data from the Expanded Access Program, EAP 275, in 241 children, which confirm the ability of the in vitro potency assay to measure product activity relevant to survival outcomes. Next slide, please. Today, Mesoblast provided new results from a four-year observational survival study performed by the Center for International Blood and Marrow Transplant Research, CIBMTR, on 51 evaluable patients with steroid-refractory acute GVHD who were enrolled in Mesoblast phase III clinical trial of remestemcel-L. Overall survival in the remestemcel-L cohort was 63% at one year, 51% at two years, and 49% at four years.
Across four recently published studies of children or adults with steroid-refractory acute GVHD, one-year survival of just 40%-49% and two-year survival of just 25%-38% was seen after best available therapy or the only FDA-approved agent for adults, ruxolitinib. The new long-term survival data provide assurance that the short-term day 28 responses and early survival through 180 days in the 54 patient phase III trial in children with acute GVHD previously presented to the FDA in the original BLA submission are unlikely to have arisen by chance. These long-term survival outcomes are a cornerstone of the BLA resubmission. Next slide, please. This slide is a snapshot of our late-stage clinical pipeline. As you can see, we have two platform technologies.
In red is our lead technology platform, remestemcel-L, and in blue is our second-generation technology platform, rexlemestrocel-L, using immunoselection to isolate stromal cells. Our remestemcel platform is more advanced, and our lead product is currently in the approval phase for acute graft versus host disease in children. I will be talking more about this product shortly, as well as updating on rexlemestrocel-L for chronic low back pain and chronic heart failure from reduced ejection fraction, both conditions due to severe inflammation. Now we move to the financial results for the quarter for the period ending September 30, 2022. Andrew, over to you please.
Thanks, Silviu. Turning to slide 8, we have the financial highlights for the quarter. As at September 30th, 2022, cash on hand was $85 million. Up to an additional $40 million may be drawn from existing financing facilities, subject to certain milestones, with current discussions to extend the period for the drawdown option. Net cash usage for operating activities in the quarter was $14.3 million. This represented a 22% reduction of $3.9 million on the comparative quarter in FY 2022, and a 47% reduction of $12.5 million on the comparative quarter in FY 2021. Revenue from royalty on sales of TEMCELL in Japan for the quarter were $1.4 million and $1.8 million on a constant currency basis.
For the 12-month period ended September 30th, 2022, royalties were $7.7 million, and on a constant currency basis, $9 million, which was a 9% increase on the comparative period. Turning to the next slide, which is slide 9, please. We can see the P&L result for the three months ended September 30th. Within revenue, the majority of the change was due to one-off licensing milestone in the prior period and the impact of currency movements. There is a reduction in expenditure for R&D, manufacturing, and management administration, totaling a decrease of 23% or $5.2 million for the period ended September 30, 2022 on the comparative quarter. During the quarter, we continued pre-launch manufacturing activities and product testing for remestemcel-L to support the potential commercial launch.
On FDA approval, remestemcel-L inventory will be recognized on the balance sheet, currently valued at $28 million. Within finance costs, we include actual cash interest paid of $1.2 million for the quarter ended September 30, 2021, and also quarter ended 2022. The increase in our reported finance costs was primarily due to the recognition of a non-cash gain on revaluation of our borrowings in the comparative year. Turning to the last finance slide 10. This slide highlights our reduction in burn, which has reduced 33% or $30 million on a rolling 12-month basis. Now I'd like to turn the call back to Silviu.
Thank you, Andrew. We can now go to slide 12, which is our pipeline slide. I'll focus on the updates to our product candidate, remestemcel-L, for acute graft versus host disease in children. This continues to be a significant unmet need with high mortality in children under 12, there are no approved therapies. The disease burden remains very high, and mortality can be as high as 90% with significant extended hospital stay costs. Slide 14, please. Slide 14 summarizes the data that has been generated over a number of years with remestemcel-L on improvement in early survival in children with steroid-refractory graft versus host disease. The data highlighted on this slide come from 4 distinct studies.
27 children who were randomized in a controlled phase III trial of 260 patients, mostly adults, with steroid-refractory graft versus host disease. A second study of, in a phase III trial of 54 children, open label, 89% of whom had grade C/D disease, who were compared with 30 propensity-controlled children in the MAGIC cohort. An Expanded Access protocol, overall survival of which has been analyzed in 241 children, where remestemcel-L was used as salvage therapy after failure of steroids and other biologic agents. Finally, a subset of that study, an expanded, in the Expanded Access protocol, ran a controlled study against propensity-controlled children in the CIBMTR database.
As you can see, in each of these studies, short-term survival at day 100 was high in all of the remestemcel-L-treated cohorts, including just the grade D patients, in the Expanded Access Program. You can see that in the matched controls, propensity-matched controls as outlined, short-term survival was substantially less than with the remestemcel-L. If we go to the next slide, please. Slide 15. This slide now is a summary of the long-term survival outcomes of children with steroid-refractory acute graft versus host disease from our open label, single arm study phase III trial in 54 children, where remestemcel-L was used as first line after steroid failure, 89% of whom had grade CD disease.
Overall survival through four years in the 51 children who were available for follow-up, one-year survival was 63%, two-year survival 51%, three-year survival 49%, and four-year survival 49%. What you can see in this table is an analysis of the survival outcomes at one and two years in this remestemcel-L cohort in light blue, and survival outcomes in four recent studies from 2019 and 2020 of children or adults with steroid-refractory acute graft versus host disease. The McMillan study covered 128 children, 22% of whom were grade 3/4. The Rashidi study, 203 adults, 54% of whom were grade 3/4. The REACH2 study comparing ruxolitinib against best available therapy, where approximately 63% had grade 3/4 disease.
In addition to that, the open label study of ruxolitinib that supported product approval, of 71 adults with 68% of whom were grade three/four. You can see the overall one and two-year survivals in these studies. If we go to the next slide, please. Slide 16. This compares the Kaplan-Meier results on the left-hand side, in two-year survival outcomes with, of children with steroid-refractory acute graft versus host disease treated with best available therapy. You can see the six-month survival with best available therapy six, is 49%, and at 24 months is 35%. In contrast, the Kaplan-Meier curve on the right shows that six-month survival in the remestemcel-L cohort was 69%, and at 24 months, survival was 51%, substantially higher. We can go to the next slide now, please.
Slide 17. These data, published in Bone Marrow Transplantation last year, further show that in the most severe patients in the remestemcel-L cohort, those with high MAP scores, MAPs, MAP biomarker score above 0.29, a validated threshold for very severe disease and very high mortality, that in this group, and focus on the, on the right-hand figure, in this group of patients, we see a particularly striking difference in survival against propensity matched controls, matched for the same biomarker severity score. Here we see a 64% survival in the remestemcel-L cohort versus 10% survival in those treated with best available therapy.
Evidence now both short-term and long-term that remestemcel-L therapy resulted in substantial survival benefit against best available care in a subject population which continues to have abysmal survival outcomes and for whom there are no approved therapies. This becomes the cornerstone of our BLA resubmission. Next slide, please. Let's move on to the rest of our late-stage pipeline. I'd like to just focus on now some of our other advanced indications that we think are going to be real value propositions for the company going forward. rexlemestrocel-L is our second-generation product based on immunoselected STRO-3 stromal cells. Let me just focus a little bit on its lead indication for chronic low back pain in patients with inflammatory degenerative disc disease.
This is also a very large unmet need. In fact, inflammatory back pain as a cause of progressive, severe unremitting pain, is the number 1 cause of opioid prescriptions across the U.S., with 50% of opioid prescriptions being for discogenic back pain. The market opportunity is very large. About 6 million-7 million patients suffer from inflammatory chronic low back pain due to degenerative disc disease in each of the U.S. and the EU5. Other than opioids or non-steroidal anti-inflammatory drugs, there are no other therapeutics that have made a difference in this space. If we go to slide 20, this is a slide that shows the patient journey. Once conservative treatments have failed, other than opioids, really you're left with interventional therapies and ultimately potentially surgery.
We believe that rexlemestrocel-L targets the moderate to severe patient population before anybody would consider to use opioids. Next slide, please. Slide 21. In our first phase III trial, we demonstrated that in the subset of patients with relatively early disease or severe debilitating pain for up to five years, in a randomized controlled trial, you see in red, our cells delivered with a hyaluronic acid carrier, giving a substantial reduction in pain at 12 months relative to controls who received a saline injection in green. That difference, which is of the order of something like 20 points on a VAS score of 0 to 100, is very substantial and remains separated at every time point during the duration of follow-up through 36 months.
These results were highly significant. They were concordant with a number of other secondary endpoints, including quality of life, and functional improvement. If we go to the next slide 22, this provides the pricing points for various agents that are currently used in the treatment of pain and back pain in more particular, including on the left-hand side, a variety of abuse-deterring opioids, and on the right-hand side, various biologic agents including Humira for the treatment of ankylosing spondylitis in the back. We believe that a biologic that treats inflammatory discogenic back pain will be favorably seen, assuming that it we can replicate the data on reduction in pain through 12 months and improvement in function. Next slide, please. Slide 23. We've met with the FDA.
We had a very good meeting and alignment on how this product can be taken to market. The OTAT agreed with Mesoblast's proposal that the primary endpoint for a confirmatory second trial would be 12 months reduction in pain, and that would be an approvable indication for the product. Mean functional improvement and potentially reduction in opioid use would be secondary outcome measurements. The planned upcoming trial in the U.S. is aimed to also include 20% of subjects in the E.U. to support submissions to both the FDA and EMA. We're in the process of completing our final protocol design with our key investigators. We'll be waiting for clearance from the FDA in short order to begin this trial.
Moving on to the last indication in our pipeline, slide 24, is rexlemestrocel-L for chronic heart failure with reduced ejection fraction, another very large unmet medical need. Go to slide 25, please. Cardiovascular disease remains the leading cause of death in the U.S. Heart failure affects as many as 6.5 million-7 million patients annually across the U.S. Despite the fact that there are a number of new drugs that improve the symptoms of heart failure and reduce hospitalizations due to symptomatic shortness of breath, they do not reduce the major complications of cardiovascular mortality and other complications such as heart attacks and strokes. We think that this is where our product can be differentiated from the competitive landscape.
The next slide, 26, shows the continuum of heart failure across class 2, 3, and 4. A single intervention with our cells, we believe, can change the natural progression of this disease. Slide 27. What do the data show to date? We completed a 537 patient study in patients with low ejection fraction heart failure. At 12 months, we saw a 50% greater increase in left ventricular ejection fraction in those who received a single ejection of rexlemestrocel-L than in controls. While both groups had similar ejection fractions at baseline, the difference was substantial at 12 months for those who had cells versus sham.
That resulted, in particular in those patients with evidence of inflammation as measured by simple CRP measurement, in 86% greater increase in ejection fraction from baseline 12 months relative to controls. We can go to the next slide. Those short-term 12-month changes in ejection fraction and systolic volume appear to be predictive of long-term outcomes in this disease, as evidenced by, on the left-hand side, time to first event for three-point MACE, as measured by reduction in cardiovascular death or non-fatal heart attack or non-fatal stroke. Even more strikingly, on the right-hand side, in the presence of inflammation, you see an overall 45% reduction long-term in the three-point MACE in rexlemestrocel-L patients compared to control. That's our last slide.
I think we're very excited today about, in particular, the status of our long-term survival data in our acute graft versus host disease study, which becomes the cornerstone, of course, of our BLA resubmission. We'd like to take some questions and happy to address questions by the three folks who are on the call today. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are using a speaker, please pick up the handset to ask your questions. Our first question today comes from Louise Chen from Cantor Fitzgerald. Please go ahead with your question.
Hi, everyone. This is Carvey on for Louise from Cantor. Congrats on the progress. Thank you for taking our questions. First, on remestemcel-L commercial front, can you comment how quickly you can launch the product after approval in acute GVHD? When do you expect a potential approval? What are the remaining steps to get there? I'll have a follow-up questions after this. Thank you.
Sure. Thank you. Of course, we have a priority review designation for the product. We are working towards a complete response with the FDA that addresses their issues around the clinical survival data, potency assays, and the relationship between potency and survival. All of those data have been provided in a submission to the IND, to the FDA about six weeks ago.
These new survival data will form now the cornerstone of the rest of the documentation to the FDA. We would expect that somewhere between, you know, the statutory requirement is to complete the review between two to six months. We are building out our commercial capabilities, putting in place the team that will lead the interactions with the payers and with the key opinion leaders at the end users at the hospital. We should be in a position by mid-year if we get approval to launch the product immediately after approval.
Got it. Awesome. Our second question is on your heart failure opportunity. What does the pathway to approval look like in this opportunity?
We expect to be meeting with the agency in, over the next couple of months. The data before them is the totality of data in patients in class 2, 3 heart failure from the DREAM-HF trial, as well as in patients with end-stage heart failure that previously generated in patients with LVADs. What we're seeing is a continuum of improvement in systolic function in patients with inflammation, whether they're class 2, 3, or 4 disease. I think that's the basis of the discussion. We already have an RMAT in place, that focuses on the LVAD population, so we'll be having a discussion around the continuum of the data set, not just in the LVAD population, but in the broader class, 2, 3 patients with high CRPs.
Great. Thank you so much, and congrats on the progress. Thank you.
Once again, if you would like to ask a question, please press star one. Our next question comes from Edward Tenthoff from Piper Sandler. Please go ahead with your question.
Great. Thank you very much. Silviu, not to split hairs here, but I really wanna just understand the exact process. The new survival data that you included in the IND, does that constitute the response to the CRL? Does this two to six-month clock kinda start ticking from October third? Then I have a follow-up to that.
No. The survival data we've just provided today has just become available to us. Today's announcement is the new data that has been generated by CIBMTR completely independently. That has not yet been provided to the FDA and will now be filed with the FDA. The clock is not ticking-
Understood
- until these data are in the hands of the FDA.
How long? That'll take weeks or something like that?
Yes.
Pretty short time? Yeah.
Very short time.
Okay, excellent. Really helpful. Very, very clear. Then, just with respect to launching the lower back pain study, what are plans to advance that into phase III? Kind of, I guess, similar question for heart failure, is the goal still to partner heart failure, and develop chronic lower back pain on your own, or what's the kinda latest on that? Thank you.
I'll take the question on heart failure, and then I'll ask Eric Rose to talk about the back pain program. With respect to the heart failure, you're quite correct. As soon as we've had our meetings with the FDA on and pathways clarified, we intend to work with partners to complete the commercialization of the heart failure program. Eric, do you wanna talk about our plans for confirmatory phase III trial in back pain?
Yeah. Silviu, sorry to interrupt. Eric, sorry to interrupt before you start on lower back pain.
Yeah.
Silviu, have the FDA meetings regarding FVRAP been scheduled dates?
We're waiting for specific dates.
Gotcha.
We're wai-
Thanks for updating. Eric? Yeah, go ahead, sorry.
Yeah. With regard to back pain, our expectation is to do two trials, which we will begin, we hope in the second quarter to third quarter of 2023. We're finalizing that trial design with pain as the primary endpoint at a year. As a secondary, we'll be using a scale of quality of life, but it will not be a co-primary, it will be a secondary endpoint. We believe that we will show a quality of life benefit using this scale as well. It's a scale which we have familiarity with, and we expect to finalize the design with the agency in the next few weeks, actually. The final trial design will be submitted to them in accordance with the discussion that we had on what it should be in the past.
Again, with that, we expect to start that trial in the second quarter of 2023.
I might.
Great. Thank you, Eric.
Ted, I might add.
Yeah, please.
The U.S. trial will start rapidly.
Yeah.
A second trial is likely to be a European-focused study so that we can get potentially in front of both FDA and EMA concurrently.
Great. Thanks, guys.
Good.
With that brings us to the end of today's call. I'd now like to turn the floor back over to Dr. Itescu for closing remarks.
Great. Again, thank you to everybody for joining us this morning. We're extremely excited by the long-term survival data, which really are unparalleled. We'll have a lot more to say at our upcoming AGM. Thank you very much.
With that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.