29 Aug CC Transcript

Here is the transcript from yesterday's conference call


Mesoblast Limited (NASDAQ:MESO) Q4 2025 Earnings Conference Call August 28, 2025 6:30 PM ET


With that, I would like to turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast.


Silviu Itescu

Good afternoon, good morning -- to the Mesoblast financial results and operational update for the full year ended June 30, 2025. My name is Silviu Itescu. I'm Chief Executive of Mesoblast. On the line with me are Andrew Chaponnel, our Interim Chief Financial Officer; and Marcelo Santoro, our Chief Commercial Officer.
We can go to Slide 4, please. This slide is a snapshot of our company profile. Mesoblast has an FDA-approved product, Ryoncil, which is the first and only FDA-approved mesenchymal stromal cell in the United States.


We have over 1,100 patents and patent applications globally for our platform technology. We have 2 additional assets in Phase III trials. We have FDA commercial scale manufacturing capabilities. And we've built out a U.S. commercial organization.


Next slide, please. Our platform technology is based on a shared mechanism of action across all of our products. Our mesenchymal lineage stromal cells respond to and are activated by multiple inflammatory cytokines through surface receptors on these cells, which result in orchestration of an anti-inflammatory cascade as a result of multiple factors that mesenchymal stromal cells secrete. That's the basis for our products, which address major diseases of inflammation.


Next slide, please. On this slide is a snapshot of our mesenchymal stromal cell product portfolio. We have 2 platform technologies. One is called remestemcel-L, our first-generation technology; and our second-generation technology, which is called rexlemestrocel- L.


Ryoncil, a branded product approved for pediatric steroid-refractory acute graft-versus-host disease and launched in the past quarter is our lead product on the remestemcel-L platform technology. It is also being developed for adult steroid-refractory acute graft-versus- host disease and inflammatory bowel disease.


The rexlemestrocel-L platform technology, which uses monoclonal antibodies to isolate pure and more homogeneous cell population is in Phase III in 2 large areas, inflammatory chronic heart failure and in chronic low back [indiscernible] due to inflammation of the intervertebral disc. More about that later.


Next slide, please. This slide identifies the addressable annual market opportunity for our product portfolio. Ryoncil, the first mesenchymal stromal cell MSC therapy approved by the FDA is being -- is on the market, has been launched for treatment of children with acute GvHD and with the potential for label extension in adults with acute GvHD of high severity. This addressable market is approximately $1 billion.


Biologic refractory inflammatory bowel disease, which represents an extension of the label opportunity has more than $5 billion in an addressable market. Heart failure with reduced ejection fraction for our rexlemestrocel-L product has a more than $10 billion addressable market. Chronic low back pain is similarly positioned for more than $10 billion as an annual market opportunity. And of course, we have multiple additional multi-billion opportunities from existing and future product pipeline based on our technology platforms.


Next slide, please. We're very pleased with the successful commercial launch to date of Ryoncil. In December 2024, Ryoncil became the first and only FDA-approved MSC product in the United States. Ryoncil became commercially available for purchase March 28, 2025, within a quarter of receiving FDA approval.


Since launch, we've onboarded 32 transplant centers across the United States. We aim to, by the end of this quarter, have onboarded the top 45 centers that account for 80% of pediatric bone marrow transplants in the United States. Coverage for Ryoncil continues to expand with over 250 million lives in the U.S. insured by commercial and government payers. Importantly, Medicaid coverage exists for both federal and all states and it was mandated on July 1 of this year.


Next slide, please. Now I'd like to move to our financial results for the period ended June 30, 2025.
Next slide. Financial highlights for this year are as follows: Revenue from cell therapy products was $17.2 million, up 191% on the prior year. We're delighted that this growth in revenue was driven by the successful launch of Ryoncil in that final -- in the final quarter of the year with $13.2 million in gross sales and $11.3 million in reported net sales after a 14.6% gross to net adjustment.


Net operating cash spend for the year was $50 million, very similar to the prior year, and this is despite the fact that we've invested in costs related to the commercial team build-out and activities around product launch. Our cash on hand as of June 30 was $162 million or AUD 247 million.


Now I'd like to have Andrew take us through some details on the financial results.


Andrew Chaponnel


Thanks, Silviu. Next slide. Turning to Slide 11. We have the financial results for the year ended June 30, 2025. All numbers are reported in U.S. dollars. Total revenues from cell therapy products are up 191% on the prior year. Cost of revenues related to product sales were $1.2 million, which is 10% of net product sales and a gross margin of 90%. Additionally, cost of revenues also included $3.9 million of expenses related to non-cash amortization of the intangible value of our prior MSC asset acquisition.


Selling, general and admin expenses were $39.3 million for FY 2025, an increase of $14.3 million on FY 2024. This increase related to our commercial team build and product launch. For revaluation of contingent consideration, we recognized a loss of $14.9 million in FY 2025, a non-cash revaluation of potential future third-party payments. The revaluation of warrant liability as a result of FDA approval of Ryoncil and the consequential share price appreciation resulted in us recognizing a warrant remeasurement loss of $5 million in FY 2025 compared to a gain of $0.8 million for FY 2024.


Back to you, Silviu.


Silviu Itescu


Thank you. Next slide. Let me take you through where we are with Ryoncil for children with acute graft-versus-host disease. This is the first and only mesenchymal stromal cell therapy approved by the FDA.


Next slide. More than 30,000 allogeneic bone marrow transplants are performed globally, of which 10,000 to 12,000 are performed in the U.S. About 20% of these transplants are pediatric. And about 40% to 50% of transplants, whether in children or adults, result in a devastating disease called acute graft-versus-host disease, which when it occurs involves the skin, gut and the liver and in the more severe forms involving severe liver and gut disease can be [ 70% to 90% ] -- associated with 70% to 90% mortality. About 50% overall of acute graft-versus-host disease patients do not respond to steroids. And for these, in the pediatric age group, Ryoncil is the only FDA-approved product for these children.


Next slide, please. The results from our pivotal Phase III trial that underpinned the successful approval of the product Ryoncil is highlighted in this slide. In a 54-patient single-arm multi-center Phase III trial across the U.S., overall day 28 response rate, the primary endpoint of the trial, was 70%. This study enrolled almost 90% of patients with the most severe forms of disease, Grade C and Grade D, which typically does not respond to other agents and is associated with high mortality.


Next slide, please. In fact, the long-term survival in a follow-up study from the International Blood and Bone Marrow Transplant Research Registry showed that despite the severity of the grade in most patients at baseline, as many as almost 50% of patients were alive at 4 and 5 years out and only 14% had died due to acute graft-versus-host disease. In other words, the early response that we saw in the majority of patients translated into durable long-term survival and essentially cure of the underlying disease, GvHD.


Next slide, please. Importantly to understand is that in patients with GvHD who ultimately die of this disease, the cost of treatment, inclusive of intensive care use, is very high. And in fact, the child who has acute GvHD and is treated well with our therapy and is able to be discharged from the hospital costs about $1.8 million less than a child with acute GvHD who is untreated and ultimately dies, a substantial cost saving per patient.


Next slide. These benefits are even more pronounced when one considers that this is a long-term cure of these patients. The total benefits of patient outcomes using Ryoncil range from $3.2 million to $4.1 million when comprising long-term survival benefit, cost offsets and cost savings. And this uses a quality of life years gained analysis.


Next slide. Beyond pediatric GvHD, we actually have a very clear label extension strategy to expand the use of Ryoncil in adult patients with GvHD. Most of the sites that have already onboarded Ryoncil for use in children with the disease also perform adult bone marrow transplants. In fact, we have an active compassionate care program to provide Ryoncil to adults with steroid-refractory acute GvHD who have failed other therapies.


Adults with this disease have a high rate of non-responsiveness to second-line agents such as ruxolitinib. Survival in those with GvHD who have failed at least one additional agent such as ruxolitinib remains as low as 20% to 30% by 100 days. In contrast, in our compassionate care program, in 25 patients aged 12 and older with steroid-refractory GvHD who failed ruxolitinib or other second- line agents, survival at 100 days was 76% when Ryoncil treatment was used under expanded access.


We recently met with FDA to discuss a pivotal trial design for Ryoncil in adults with severe acute GvHD and we intend to conduct a pivotal study of Ryoncil on top of approved second-line therapy such as ruxolitinib in patients with severe steroid-refractory GvHD such as Grade C/D or other characterization of severity.
This trial will be conducted with the NIH-funded Bone Marrow Transplant Clinical Trials Network, the BMT-CTN. The objective is to extend the product's label from children to adults with this devastating disease, enabling Ryoncil to be used in a population approximately 3x larger than the pediatric population that it's currently approved for.
Next slide, please. Beyond adults with acute GvHD, we intend to expand the label into other indications of inflammation.


Next slide, please. Inflammatory bowel disease, notably ulcerative colitis and Crohn's disease are 2 areas that we believe Ryoncil has a place. More than 3 million people across the U.S. alone have inflammatory bowel disease. Amongst these patients, 38,000 new cases of ulcerative colitis and 33,000 new cases of Crohn's disease are diagnosed every year.


There is a substantial unmet need of about 30% of patients who remain unresponsive to biologic agents such as anti-TNF agents or some of the newer monoclonal antibodies. Up to 80% of patients with medically-refractory Crohn's disease and 20% of patients with ulcerative colitis that's non-responsive eventually require surgical treatment of their disease. What is really needed right now is early and durable remission, which remains a major objective for new therapies in order to avoid the longer-term complications and ultimately surgery in these patients.


Next slide, please. Mesenchymal stromal cells have had a long history of being evaluated as potential therapeutic uses in patients with inflammatory bowel disease. More recently, local administration of mesenchymal stromal cells has been shown to be safe and to improve outcomes in diseases such as ulcerative colitis and proctitis.


On this slide, I show you the summary of a pilot study performed in Europe using mesenchymal stromal cells in patients with ulcerative proctitis, which occurs in about 30% of patients with -- in an isolated conditions in ulcerative colitis. In these 13 adult patients with biologic refractory inflammation, local administration into the rectal mucosa of 20 million to 80 million allogeneic bone marrow-derived mesenchymal stromal cells was performed under endoscopic injection. As you can see on this slide, by 6 weeks, mean clinical and endoscopic scores significantly improved. The objective is to achieve remission as early as 6 weeks.


Next slide, please. More recently, local administration of Ryoncil was shown to improve outcomes in patients with biologic-refractory extensive colitis. In a 12-patient pilot study of biologic-refractory inflammation of the colon, local administration of Ryoncil, a single dose resulted in clinical and endoscopic responses and remission by 6 weeks.
As you can see in the pictures on the right, in panels A and B, significant inflammation of the mucosa in a patient with ulcerative colitis extensively involving the colon is clearly evident. In contrast, 6 weeks later, panels C and D, you can see that the inflammatory protrusions have disappeared. This is endoscopic evidence of remission.
In addition, in patients with Crohn's colitis of the large bowel, the improvement in endoscopic and clinical outcomes was accompanied by reduced serum biomarker of inflammation called calprotectin. The calprotectin levels are consistent with rapid mucosal healing and disease remission.


And you can see in the pathologic figure at the bottom, on the left-hand side, the colonic mucosa in active disease is full of inflammatory cells and destruction of the crypts. 6 months later on the right, a repeat endoscopy and biopsy showed total resolution and healing of the mucosa in the patient with refractory colitis.


On the basis of these results and the fact that we've previously shown that intravenous remestemcel-L resulted in early remission within 4 weeks following multiple intravenous infusions in patients who had failed a prior biologic, we plan to initiate a pivotal study of Ryoncil for early remission in patients with medically-refractory inflammatory colitis, and we'll be updating the market in due course.


Next slide, please. Now let me move to our second-generation product, rexlemestrocel-L. This is based on monoclonal antibody isolation and extraction from bone marrow. Chronic low back pain due to degenerative disc disease is a major problem. It impacts more than 7 million people across the United States. There are minimal treatment options for patients who do not respond early to conservative treatments or to anti-inflammatory drugs.


In fact, 50% of opioid prescriptions across the United States are for chronic lower back pain, exactly this patient population. We are very much aware of the opioid epidemic and the many patients who are dying because of opioid abuse and overuse. There's an urgent need to have a durable improvement in pain and avoid the opioid use that is currently causing terrible pain and suffering across the United States.


Next slide, please, Slide 25. This slide identifies the patient journey of patients with chronic low back pain refractory to standard treatment. As I've highlighted, there are minimal options available for these patients. After you've gone through physical therapy, chiropractic, acupuncture and non-steroidal anti-inflammatory drugs, there's only opioids.
Other than opioids, the other potential treatments are interventional therapies that involve interventions with radiofrequency ablation, spinal cord stimulation, et cetera. Epidural steroids typically have short-term benefit only. Ultimately, these patients after many years of suffering come to spinal fusion or disc replacement surgery. We believe that rexlemestrocel-L can target these patients very early, usually as early as 6 months after failure of conservative treatments, although of course, in our clinical trials, patients have been referred after years of struggling with severe pain.


Slide 26, please. This slide summarizes the outcomes in our previous Phase III trial based on a single injection of rexlemestrocel-L together with hyaluronic acid carrier to maintain the cells within the disc space. If you just focus on the green at the top is the mean change in pain from baseline in patients who received placebo at 6, 12, 18 and 24 months, relatively static. In contrast, if you look at the red line at the bottom, you see quite a dramatic reduction in pain at 12 months and then maintenance of that significant difference in pain modulation for as long as 36 months from a single injection.


Next slide, please. Let me move to rexlemestrocel-L for heart failure. Again, a snapshot of this -- in this space.
Slide 28. Heart failure with low ejection fraction also continues to be a major problem with increasing in prevalence and risk of mortality and heart attacks and strokes. Over 60% of patients with chronic heart failure have underlying ischemia and these patients are at highest risk of recurrent major adverse events involving the large vessels such as heart and strokes.


Slide 29. This complex slide really just focuses on, again, the patient journey. Patients progress from early-stage disease Class I to moderate disease Class II and then to Class III and Class IV. We target the most severe patients where inflammation progresses to Class III and Class IV and ultimately death. In these patients, we've completed 2 Phase III trials, both randomized controlled trials with endpoints that have demonstrated that in patients with inflammation, we can reduce the endpoints of severity and reduce mortality.


Next slide, please. Slide 30 demonstrates on the left-hand side that compared to controls, we significantly reduced in a pivotal Phase III trial, both in patients with inflammation on the left-hand side is measured by CRP on the right-hand side is measured by IL-6, the severe risk of mortality quite dramatically over a 5-year period of follow-up.
Next slide, please, 31. And in this slide, we summarize the overall results in a 500-patient randomized controlled study where you see that on the left-hand side, the 2-point MACE, heart attack or stroke. And on the right-hand side, heart attack, stroke or death are progressively decreased as you move from all patients to those patients at highest risk, those with ischemia and inflammation. And what this essentially tells you is that the patients who are at greatest risk of mortality are precisely those patients who are most likely to respond to a single injection of rexlemestrocel-L into the left side of the heart.


On the basis of these data, we met with the FDA last year. We met with the FDA again most recently this year in Type B meetings. And the FDA stated the totality of the trial results from these 2 studies could support an accelerated approval pathway under the existing RMAT designation for the program. We met recently and aligned on items required for filing a biologic license application for Revascor regarding chemistry, manufacturing controls, potency assays and the proposed design and primary endpoint for a confirmatory trial should approval be obtained.


If we could now go to the final slide, Slide 34. This identifies our corporate milestones and updates on expected deliverables in the coming 12-month period. For pediatric and adult inflammatory diseases, Ryoncil will commence a registration trial for label expansion in adults with GvHD and we'll initiate a study for inflammatory colitis. For chronic heart failure in adults with low ejection fraction, we are preparing for an accelerated approval filing for Revascor.


And finally, for rexlemestrocel-L in chronic low back pain, a confirmatory Phase III trial is actively enrolling across multiple sites in the U.S. to confirm the data that we showed in the first trial, which is to reduce pain at 12 months as the trial's primary endpoint. And it's a placebo-controlled trial with a 12-month follow-up following the completion of the last patient enrolled, which we expect to happen towards the end of this year or first quarter -- during the first quarter of next year. On that basis, I think I'll say thank you for listening to us, and I'd like to open this call to questions.