Hello, and welcome to Mesoblast’s Financial Results Webcast for the Quarter Ended September 30, 2019. An announcement and slide presentation have been lodged with the ASX. These materials will also be available on the Investor page at www.mesoblast.com. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and 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 and the company’s filings with the SEC, which could cause actual results to differ materially from those and 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 the company’s views of any subsequent date. The company specifically disclaims any obligations to update such statements. With that, I would now like to turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Thank you. Good morning, good afternoon, and thank you for joining us in the financial results call for the first quarter ended September 30, 2019. Joining me is our Chief Financial Officer, Josh Muntner. We’ll go to Slide 4, fast-forward the snapshot of our corporate history, demonstrating the – over a decade of scientific manufacturing, clinical development and corporate highlights and experience targeted at bringing to market our allogeneic, off-the-shelf cellular medicines. Slide 5. Now cellular medicines are underpinned by three pillars: our innovative technology platform, our late-stage pipeline and our ability to commercialize these products. Our technology targets some of the most severe disease states refractory to conventional therapies. We understand and have characterized well the multimodal mechanisms of action of our cells, key and the unifying mechanism of action of which these cells work. And each of our lead indications is a very strong and potent anti-inflammatory capabilities, which concurrently target multiple arms of the immune system and thereby results in improved outcomes in very refractory diseases. Our late-stage pipeline is exemplified by our graft versus host disease product candidate for which we have initiated and are in the final stages of completion with a rolling BLA, the Biologics License Application, to the FDA for potential product approval in the U.S. Two Phase 3 product candidates, one in heart failure and one in back pain, have near-term trial readouts in the U.S. And back pain Phase 3 product candidate has already been positive in Europe and Latin America with Grünenthal and our Phase 3 heart failure product candidate has been positive in China with Tasly. In terms of commercialization, we are focusing on bringing the graft versus host disease product to market ourselves. We’re building a U.S. sales force targeted for that product launch. We have industrial scale…

Thank you, Silviu. Let me start by saying how glad I’m to report on the financial progress we’ve made. Today, we’re pleased to report an improved cash position and strong consistent revenue growth. Looking at Slide 11, we’ve laid out our Q1 results from the prior two years and we see solid growth in both milestone revenue and commercialization revenue. Overall, revenue increased by $5.4 million, a 46% increase to $17 million for the first quarter of fiscal 2020, compared to a $11.6 million for the year prior period. Of course, the revenue includes the $15 million milestone payment paid to us by Grünenthal. This drove milestone revenue up by 43% over the year prior period. Moving to commercialization revenue, which is to say royalties received, we’re once again reporting record royalty revenue received from JCR Pharma from sales of TEMCELL to treat GvHD in Japan. As shown on Slide 11, royalties from TEMCELL increased to $1.9 million for the quarter from the year prior period and 85% – in the year prior period with an 85% increase. We continue to be pleased with the growth JCR has had with TEMCELL to treat acute GVHD in Japan, as it provides an important guide for how we may be able to perform if our product, remestemcel-L, is approved by the FDA as a treatment for acute GVHD. Furthermore, JCR has expanded their license to our technology in order to seek potential label extensions in two more settings. We may consider such uses for remestemcel-L for our – for remestemcel-L or other allogeneic stem cell products in the future. The growing sales and potential future use of remestemcel provides us great confidence in the future for that product. On Slide 12, I’ll walk through the remainder of the income statement. We’ve already…

Thanks, Josh. If we can move to Slide 15, I’ll begin with our operational highlights. We’re very much focused on the acute graft versus host disease market, because it’s a significant market opportunity for our lead product candidate, remestemcel-L, and is a substantial medical unmet need need. Steroid-refractory graft versus host disease is associated with mortality rates as high as 90%, particularly in those patients who have severe disease, so-called Grade C/D disease involving the gut and liver. Treatment options are very, very limited. Only one drug is approved for treatment with steroid-refractory graft versus host disease. And not – it is not approved – nothing is approved in children under 12 years old outside of Japan. In Japan, the only product approved children and adults is the product TEMCELL marketed by our licensee, JCR. The market opportunity is large. There are more than 30,000 bone marrow transplant, allogeneic transplants performed globally. About 20% of these 25% are in children. And we believe the steroid-refractory GVHD in the U.S. market, in particular, represents a substantial commercial market opportunity. Slide 16 speaks to the U.S. regulatory and commercial strategy for our product candidate, remestemcel-L. First and foremost, the U.S. strategy is informed by the outcomes that we’re seeing with TEMCELL in Japan. The sales, the uptake, the adoption are all for us very informative with respect to the potential that we see in the U.S. market. We are in the midst and concluding our rolling BLA submission to the FDA and that’s obviously the number one focus for us as a company. We already have a fast track designation for the product, which then provides eligibility or priority review by the FDA. And we have a commercial strategy already in place for product launch, that involves both ramp-up for inventory build…

Thank you. [Operator Instructions] Your first question comes from Louise Chen with Cantor. Please go ahead.

Hi. Thanks for taking my question here. So ahead of the launch of remestemcel here in the U.S., assuming approval, just curious how we should think about launch costs in 2020. The uptake will occur, will be fast or slow in your opinion? And anything else that we need to think about as you prepare for this? Thank you.

Thanks. Thanks, Louise. The – so we’ve obviously budgeted the costs of both inventory build and a relatively small targeted sales force of up to 15 people. The specific costs of that, of course, are confidential. But I think what we’ve in great pains to say is that given the success of our expanded access program, where the cells continued to be used in the hands of many of the key opinion leaders across the transplant sites, given that 50% of pediatric transplants are done at 15 hospitals. We think that a targeted sales force will be sufficient to meet the commercial needs for rapid adoption. And we say that, because we’ve seen how our EAP continues to perform, and we are seeing continued increase in royalties from sales of TEMCELL in Japan. So we’re able to use those two observations to model out likely adoption rates et cetera in the U.S. market. Does that answer your question?

Yes, it does. I don’t know if you’re able to comment on pricing at all for your products or what you’re thinking there?

So let me answer it in this way. We know what the pricing for the product is in Japan, and I think it’s around US$165,000 per four-week treatment course. And it’s based on weight, which is why I say that it’s a mean, right? So on a price per unit vial of unit bag for a four-week course, you come to that as an average reimbursement. The way that the Japanese pricing has been set is really a bottom-up approach, which is based on a cost of goods, plus certain margins, plus in the innovation component, very different way of developing a cost structure than in the U.S., where the cost per four-week course of therapy will be very much linked to the pharmacoeconomic benefit. And as I’ve said earlier, the average cost of treating a steroid-refractory child with graft versus host disease approximates $500,000 on top of the reimbursement for a bone marrow transplant. That’s a very expensive cost in the US. And so, the way to look at this is really to say, how much benefit do we get – give to the healthcare, to the payer, to the hospitals, et cetera. And we’ve analyzed this and we believe that we can save approximately 60 days of intensive care stay in the child with severe disease and you can use that as an indicator of the cost savings and how that would be looked at in terms of pharmacoeconomics. But certainly, we would expect that the reimbursement will be significantly higher than is currently being seen in Japan, because the metrics are different and the healthcare utilization costs in the U.S. are much higher. In that sense, our new Chairman, Joe Swedish, is extremely experienced in reimbursement. He was previously the CEO of Anthem, one of the U.S.’ largest healthcare insurance companies. And Joe is working very closely with our commercial team in work – in helping us set the strategy, in working with both payers and end users, hospitals, et cetera, to set the scene for what would be an appropriate reimbursement.

Okay, great. Thank you very much.

Thank you. [Operator Instructions] Your next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Hi, Silviu and Josh, how are you?

Good. How are you?

Hey, Jeff.

Great. So if you could – could you kind of walk us through this thought process about the – for lower back in this confirmatory trial in Europe, the start, potential win and hypothesize with us about the number of patients as well as partner and secondary endpoints. If you could do that, that would be very helpful?

Yes. Thanks for asking. So we’ve previously had guidance from the FDA and from EMA that the two trials don’t need to have the same endpoint or the same duration, for example. And really, the duration of this second trial may be as short as 12 months and it very much depends on the results that we see from trial number one. If we see durable results in trial number one through 24 months, and we see the type of signal at 12 months that we saw in Phase 2, our objective would be to work with the European regulators and the FDA, of course, to have a smaller, shorter Phase 3 trial that replicates the 12-month dataset that we’ve seen already in Phase 2 and then hopefully, we’ll see in the current Phase 3. Does that give you a bit of a sense of the way we see it…

I was hoping to get a sense of your 24 months versus 12-month thought process, so that’s super helpful. And then one more quick one, Josh, I was expecting the Grünenthal milestone in next quarter, being the December quarter. Any comments on our current thoughts that the second milestone or the $20 million would not occur or occur in, say, the fourth quarter this year? Any incremental thoughts on target from your perspective? Thank you.

Sure. So the first part. But the one that we did record in the first quarter is, because we signed a deal earlier in that quarter even though it’s paid down October 1. With respect to the future milestones, we did give some color about some of them will be related to progress and meeting with EMA, and then there’s some other milestones as well. We anticipate that we may need some during this quarter. But we haven’t given further guidance on which ones. And I don’t think we’ll necessarily meet the $20 million one this quarter as the relationship is just getting underway, right?

No, no, I was referring to calendar 2020, so…

Oh, so yes. Yes, okay. Well – so I think that we did say that in the first 12 months of the deal, we anticipate being able to achieve the $30 million remaining for the initial sort of upfront milestone basket. And so we do foresee – within calendar 2020, that gives us plenty of time.

Terrific. Super helpful. Thanks for taking the questions.

Thank you. Our last question will come from Tanushree Jain with Bell Potter Securities. Please go ahead.

Hi, Silviu and Josh, thanks for taking my questions. Just a couple for me. Would you be able to give me some idea around how Takeda’s launch with Alofisel is going in Europe and also what their plans are for U.S. and, I guess, the timing for milestones from Takeda for you guys.

Yes. Maybe let me take that, Josh. I don’t think at this point, it’s too early for us to make any comments on the European sales. I mean, obviously, once we have further information, we’ll, of course, provide it to the market. But it’s too early for us to provide any updates on the product sales. With respect to the U.S. Phase 3 program, what we know is as much as you know, but it’s it’s underway. It’s recruiting. It may take sometime before they complete. We don’t have any further updates other than what is in the public domain. And that is a product local delivery into the fistula of patients with Crohn’s disease, remembering that the – that is the entire focus of the program and the license with us. We at Mesoblast, in parallel, focusing on the use of remestemcel for active Crohn’s disease in the setting of refractory resistance to anti-TNF inhibitors. And so the complementary, if you like, disease states, we’re targeting, putting patients into remission who have very active disease. They’re developing their product for healing of external fistula in this disease.

All right, thanks. And just another one. On the China pathway for your best course. So I guess, once we have the trial results from our ongoing U.S. trial, what seems to be the likely regulatory pathway in China in terms of trials and your discussions, which have taken place there?

So we have a very close relationship with Tasly and we’re providing Tasly with a lot of support in their discussions with the Chinese FDA in terms of our clinical data, our manufacturing, et cetera. What we can say – and again, if we have more information, we’ll make it available as soon as it comes to hand. But they are in discussions with the Chinese FDA around what type of bridging study, for example, is needed to obtain approval in China using our U.S. dataset that’s been generated fro that and that will continue to read out in the coming year, using all of those datasets as supporting data for Chinese approval. And I think as soon as we and Tasly have clarity from the Chinese FDA, we will, of course, update the market.

Great. Thanks.

Thank you. That brings us to the end of today’s call. I’ll now hand back to Dr. Itescu for closing remarks.

Thank you, everybody, for joining us. We’re very pleased with our financial results during the quarter and we hope to be updating the market shortly on some additional milestones as they come to end. Thank you very much.