Mesoblast Limited (MESO) Q2 2020 Earnings Report, Transcript and Summary

Hello and welcome to Mesoblast’s Financial Results Webcast for the Six Months Ended December 31, 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. [Operator Instructions] 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 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 over the call to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Thank you, operator. Good morning, good afternoon and thank you everybody for joining us on Mesoblast’s financial and operational highlights for the half year ended December 31, 2019. If we can go straight to Slide 4, please. This slide shows the three pillars that underpin Mesoblast and I want to start by giving you a snapshot of the key attributes of our business. We have an innovative technology platform that is underpinned by our allogeneic mesenchymal precursor cells in their progeny, MSCs, with well-characterized immunomodulatory mechanisms of actions. And one of the most significant events in the history of our company, we completed the BLA filing to the U.S. FDA for our lead product candidate, Ryoncil for the treatment of steroid-refractory acute graft versus host disease in children. In anticipation of potential product approval this year, we have built a targeted U.S. commercial team and are focusing on manufacturing the product to meet commercial demand. Our late stage pipeline reflects the lifecycle expansion strategy for remestemcel-L in pediatric and adult rare diseases. In addition, we have two Phase 3 product candidates, one for heart failure and one for back pain. Both trials will read out this year and both products have partners in various jurisdictions. Next slide is a snapshot of our pipeline. As you know, we achieved a major milestone for the company when we completed the filing of our BLA to the FDA in January of this year for the treatment of steroid refractory acute graft versus host in children. And that’s reflected in the product whose name is Ryoncil. This is a brand name of remestemcel-L that has been accepted by the FDA for steroid-refractory acute graft versus host disease in children and we will be using this name going forward when talking about this indication and the registration process. For all other indications targeting rare diseases in children and adults, we will continue to use the remestemcel-L name for now. One of the most exciting elements of our pipeline is the lifecycle strategy that we are putting in place for remestemcel-L where we are targeting numerous additional indications, including steroid-refractory acute graft versus host disease in adults, chronic graft versus host disease, where we recently announced initial promising clinical outcomes in an investigator-initiated study and biologic-refractory Crohn’s disease. We are making impressive progress in the other half of our pipeline that targets blockbuster-style indications, including chronic heart failure and inflammatory back pain, where we announced a significant partnership recently with Grünenthal during the period. I will highlight that we have two products in Phase 3 clinical trials, one in heart failure one in back pain, both of which are expected to readout around midyear. If we could go to the next slide, please. We continue to see excellent outcomes from JCR, our partner for selected products in Japan in growing royalties from sales of the TEMCELL product for steroid refractory acute graft versus host disease in both children and adults, reflecting strong product adoption. The growth in sales and penetration rates provide strong indicators on how we see the take-up and potential for our lead product candidate, Ryoncil in the U.S. market. We anticipate that peak U.S. addressable market size for steroid-refractory acute graft versus host disease in children and adults would be approximately 8x larger than in Japan due to the greater patient numbers, greater incidents and the pharmacoeconomics. JCR has expanded their license with us to include two additional rare diseases, epidermolysis bullosa, a potentially fatal blistering skin disease in children and hypoxic-ischemic encephalopathy, HIE, a potentially fatal neurologic condition in newborns also known as blue baby syndrome. Under our agreement with JCR, we have rights to use the data generated by their trials for our own regulatory processes on these indications outside of Japan and we plan to incorporate these label extensions into our lifecycle strategy for remestemcel-L. Next slide. For those diseases requiring large distribution channels, we will continue to establish regional and global partnerships. For MPC-06-ID, we have entered into a strategic partnership to develop and commercialize the product in Europe and Latin America with Grünenthal. And for Revascor, we have established a cardiovascular partnership with Tasly, China. The next slide provides a snapshot of our global intellectual property estate, which covers mesenchymal lineage cells with over 1,000 patents and applications across all the major jurisdictions. This intellectual property estate covers composition of matter, manufacturing and therapeutic applications. It provides strong global protection in areas of our core commercial focus and it enables us to grant rights to third-parties who require access to our patent portfolio to commercialize their products when outside of our core commercial areas. In this regard, Mesoblast receives royalty income from its patent licensee, TiGenix, a wholly-owned subsidiary of Takeda, on worldwide sales of its product, Alofisel for complex fistulae, a complication of Crohn’s disease. Moving on to our commercial scale manufacturing capabilities, we continue to be able to scale our allogeneic or off-the-shelf cellular platforms. We have established manufacturing capabilities that meet stringent criteria for international regulatory agencies with robust quality assurance processes ensuring batch-to-batch consistency and reproducibility. Our current capacity is sufficient to meet our near-term commercial projections and we have proprietary technologies to allow us to increase our yields to meet long-term projected growth and importantly to continue to reduce our cost of goods. Now, I will hand this to our Chief Financial Officer, Josh Muntner.

Thanks, Silviu. We have already highlighted in the chart on Slide 6, the continued growth we have seen in our royalty revenue from TEMCELL, growing to $6.6 million over the last 12 months. Now turning to Slide 11, we have some key financial highlights. The first few of these all relate to the impressive growth in revenue that we have seen in the first half of 2020 versus the first half of 2019. Overall, revenue grew 43% to $19.2 million from $13.5 million in the previous period. The key components of overall revenue are commercialization revenue from the TEMCELL royalty and milestone revenue. Commercialization revenue, this is the revenue from our TEMCELL royalty, grew 73% in the period, growing to $3.8 million for the 6-month period from $2.2 million in the year prior. Milestone revenue from our strategic partnerships grew 36% to $15 million from $11 million in the previous period. Regarding non-revenue highlights, we had a 32% reduction in loss after tax. This was partially driven by the increased revenue as well as due to a reduction in R&D expense, which declined by $7.4 million or 22% during the period. Beyond our income statement, our cash position at December 31, 2019 was $81.3 million. In addition to this balance sheet cash, up to an additional $62.5 million maybe available to us through our strategic partnership with Grünenthal as well as our existing financial facilities with Hercules and NovaQuest. Turning to Slide 12, we have included our full income statement. I have already spoken to most of the key items here and just want to conclude that we are pleased with these results, with increasing total revenue and reductions in a number of our key expense items leading to a reduced loss after tax. We posted a lot more information regarding our financial results to the ASX, the SEC as well as our website. I would like to pass the mic back to Silviu to review our operational and corporate highlights.

Thank you, Josh. We would move to Slide 14. This is an overview of the significant market opportunity for Ryoncil in acute graft versus host disease. This is a devastating disease with mortality rates as high as 90% in patients with the most severe forms and significant extended hospital stay costs. Importantly, we believe based on the revenues of TEMCELL from our strategic partner in Japan that this represents a substantial market opportunity for Mesoblast in the United States and Europe. What is our regulatory and commercial strategy? Slide 15, a U.S. strategy for Ryoncil is informed substantially by the TEMCELL sales experience in Japan. We recently filed the BLA submission with the FDA for Ryoncil in the treatment of pediatric steroid-refractory GVHD. Fast track designation that’s already in place provides eligibility for an FDA priority review. And our commercialization strategy is now in place for product launch, assuming time lines linked to the potential priority review process. We are ramping up inventory build and we are building out an efficient and targeted sales force assuming that about 50% of the patients will be treated in 15 centers across the U.S. We are planning for an adult trial for steroid-refractory acute graft versus host disease in order for label extension, and we have a life cycle extension strategy in place, as you can see in the next slide. We target 2020 for the U.S. launch of Ryoncil for steroid-refractory acute GVHD in children. We then plan for broadening the launch into Europe. We will be initiating an adult trial for acute GVHD in the U.S. and ex-U.S. in order for label extension. And we will be expanding the opportunity into chronic GVHD using investigator-initiated studies to support the pilot data that we have seen to-date. Beyond that, we have a strategy in place to continue label extension in other rare diseases such as biologic-refractory Crohn’s disease, hypoxic-ischemic encephalopathy and epidermolysis bullosa. Slide 17 provides a snapshot of the recent highlights and key milestones that we’ve achieved for Ryoncil. As mentioned, we have filed the BLA for Ryoncil with the FDA for steroid-refractory acute GVHD in children. The consistent outcomes using Ryoncil’s both first-line treatment and a salvage therapy, the 309 children with steroid-refractory acute graft versus host disease were presented recently at the Annual Meeting of the American Society for Transplantation and Cellular Therapy and the CIBMTR Research Organization. Clinically meaningful outcomes using remestemcel-L in patients with chronic GVHD have also been reported recently in an investigator-initiated expanded access protocol. In addition, Mesoblast entered into an agreement with Lonza for commercial product manufacturer, in line with our corporate strategy to facilitate inventory build ahead of our planned launch of Ryoncil this year. Key upcoming milestones include an update to the market on the status of the Ryoncil priority review and potential PDUFA dates. If approved, the U.S. launch of Ryoncil is planned for 2020. Let’s move on to the other – another major area of focus for Mesoblast, heart failure. Slide 18 captures the epidemic, the rising incidents and the high mortality rates that highlight the large clinical unmet need for our product candidate, Revascor. Importantly, advanced heart failure has the highest hospital readmission rates of any diagnosis-related group, indicative of the limited treatment options when patients reach this stage. This is a very large clinical unmet need with a substantial multibillion dollar market opportunity just in the U.S. alone. Slide 19 captures the treatment pathway and natural history of heart failure as it progresses towards advanced and end stage and identifies clearly where the Mesoblast focus and target for Revascor is. Once patients fail a variety of generic agents, ACE inhibitors and beta blockers, there are several new oral agents, predominantly for intermediate-stage disease Class 2, perhaps early Class 3. But inevitably, patients will cycle through these drugs and then progress towards an advanced and ultimately to the end-stage for which there are no alternative therapies to prevent the recurrent hospitalization rates and high rates of mortality. And this is precisely what we believe Revascor has a major opportunity given prior data in Phase 2 and beyond. So, where are we with the Revascor Phase 3 trials for advanced and end-stage heart failure? In advanced heart failure, we have completed a Phase 3 trial in 566 patients, one-for-one randomized across 55 sites in North America, using 150 million cell dose versus control. The target population for this trial was selected on the basis of severe disease. The majority of patients, have systolic volumes of more than 100 mls and are at the highest risk for recurrent events. The primary endpoint seeks to reduce recurrent heart failure-related major adverse cardiac events, HF-MACE. The key secondary endpoint is reduction in terminal cardiac events, predominantly mortality. We successfully achieved a prespecified interim futility analysis of the trial’s primary endpoint after the first 270 patients. In end-stage heart failure, we have successfully concluded two prior randomized, controlled Phase 2 trials and we have now agreed on a confirmatory Phase 3 program with our partners, International Center for Health Outcomes and Innovation Research, InCHOIR, at the Icahn School of Medicine in line with FDA guidance. Revascor is being developed for these patients with end-stage heart failure under existing FDA regenerative medicine advanced therapy, RMAT and orphan drug designations. What are the recent highlights for Revascor in these conditions? In December, Phase 3 trial in advanced heart failure surpassed the number of primary endpoint events required for trial completion. The independent data monitoring committee held its tenth and final scheduled meeting and recommended the trial continue as planned. The DMC reviewed components of the trial’s primary and secondary endpoints and all safety data in making their recommendations. Final study business for this trial has been initiated for all surviving patients with advanced heart failure. Upcoming key milestones include data readout for this Phase 3 trial, are planned for mid-2020. The result of this trial may support regulatory approval in the U.S. Mesoblast and InCHOIR will initiate a confirmatory Phase 3 trial for Revascor and end-stage heart failure patients with an LVAD as per FDA guidelines. Now, moving on to our third major focus, our product candidate for inflammatory lower back pain where disease-modifying therapies are solely needed to change the natural history of the disease, again, a major unmet need. I will remind folks that 50% of opioid prescriptions are for chronic lower back pain and this continues to be a major epidemic in the U.S. and other Western societies. Our product candidate, MPC-06-ID, in its development program targets over 3.2 million patients in the U.S. and 4 million patients in the 5 major European jurisdictions who have moderate to severe disease from this disabling condition. What is our development strategy for this product candidate for the U.S. and Europe? We have completed enrollment in our U.S. Phase 3 trial for these patients. In March 2018, 404 patients were randomized to receive this product or placebo in a 2:1 randomization schedule. We plan to initiate a confirmatory Phase 3 trial in Europe, in partnership with Grünenthal. Together with Grünenthal, we are completing commercial manufacturing for in anticipation of both trials, providing us a regulatory pathway. And the results, in fact, of the confirmatory trials in U.S. and Europe, together with commercial manufacturing, are expected to support approvals and launches in both Europe and U.S. for this product in patients with chronic lower back pain due to degenerative disc disease. Recent highlights of the product. As mentioned previously, we’ve entered into a very important strategic partnership with Grünenthal to develop the product candidate in Europe and Latin America. In terms of upcoming milestones, the last patient last visit of this Phase 3 trial at 24 months of follow-up is expected to occur this half with the primary endpoint being a composite outcome of pain and function in both 12 and 24 months. We are working together with our partner, Grünenthal, to obtain clearance from European regulatory authorities to begin the European Phase 3 trial. And as I’ve mentioned, results from both Phase 3 trials will be considered pivotal to support regulatory approvals in both jurisdictions. Let’s look ahead for the next 12 months. What are our major operational milestones by product candidates? Remestemcel-L for steroid refractory acute GVHD and other rare diseases, we will be providing updates on a regular basis on Ryoncil’s priority review and PDUFA dates. If approved, we expect the U.S. launch of Ryoncil to occur this year and we will expand the investigator-initiated clinical trials for chronic graft versus host disease and other indications. Revascor for advanced and end-stage heart failure will have data readouts from the chronic heart failure Phase 3 trial around mid-2020 and we will be initiating confirmatory trial in end-stage heart failure. For the back pain product candidate our data readouts of the trial are also planned for mid-2020, and we seek to obtain clearance from European regulatory authorities to begin a second European Phase 3 trial. And on that note, I’d like to thank you for listening to our presentation, and I’d like to open it up to questions, please.

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

Hi, thanks for taking my questions here. So I had a few questions. My first question for you is on Ryoncil, what is your go-to-market strategy for your U.S. launch if it is approved this year and when will you expand into Europe, is that 2020 or will that be beyond that? And then what’s the likelihood that you will have an AdCom for your product? And if so, what do you think the main topics of discussion might be? And the last question I have for you is on Revascor in heart failure, what data supports a positive outcome in this next Phase 3 data readout. You did mention it was confirmatory study. So if you could remind us of what data we have seen historically? That will be very helpful. Thank you.

Thank you very much for those questions. Very, very in-depth questions and I will take each one at a time. With Ryoncil, let me address the first question. What is our go-to-market strategy, I think, was the first question in the U.S.? So pediatric is our first target. And about 50% of the pediatric transplants occur in 15 centers in the U.S. So we have built a small, targeted and efficient sales force that will work closely with those sites. In fact, already, the majority of those sites use our product under an expanded access program that’s been in place for at least the last 3 years. And so our team will work in partnership with our sites to ensure that product is available when needed. The sales team – the commercial team is working right now with hospitals and with payers to ensure that as soon as practicable, after approval, we have reimbursement in place and we are able to seamlessly transition to commercial. In addition, we have a medical science liaison team that’s in place, working side-by-side with the commercial team and with our Medical Affairs Organization, that MSL team was in fact recently at the TCT Conference, had a major presence and interfaced very well with key opinion leaders and physicians who would be using the product. In terms of manufacturing, we have established a contractual relationship with Lonza. We have made product and continue to make product to ensure that we have sufficient inventory for launch and to ensure that if in fact projections exceed our anticipation, we have enough product to meet market demand. So that is our go-to-market plans in the U.S. In terms of the EU, we have had ongoing discussions with the EU over the past couple of years in terms of the requirement for approval and we are confident that, in fact, the FDA label will facilitate sequential approval in EU, and we will be seeking EU approval. And in the same time, we’ll be establishing a presence in Europe to allow us to put in place both a commercial and regulatory strategy across predominantly the EU/5 jurisdictions. In terms of an AdCom requirement, it’s too early to say at this point whether there will need to be one at all. However, we are anticipating and planning for one. Given the new platform technology, this will be the first allogeneic cellular therapy, if approved, for regenerative medicine in the U.S. And I think one should anticipate an Adcom Committee and putting all the building blocks in place to have a successful one, if it’s required. Let me move on to Revascor for a couple of minutes. I think the question was what prior data gives us confidence in terms of how the Phase 3 trial is unfolding. In Phase 2, we performed a dose-ranging study that was randomized against controls, evaluating a single injection, low dose, intermediate dose and high dose in patients with Class II, III advanced heart failure with low ejection fraction. The data showed us a clear dose response and identified the highest dose of 150 million cells as the optimal dose for both reducing systolic and diastolic volumes over a 6 to 12-month period, improving 6-minute walk distance over a 12-month period, and most importantly, having a substantial impact on prevention of heart failure-related hospitalizations and mortality over 3 years. On the basis of those data – and they were published in Circulation Research in 2015. On the basis of those data, we moved forward into a Phase 3 trial, which used the highest dose, the 150 million dose in a 1:1 randomization protocol. The patients in this trial was specifically enriched for severe disease on the basis of at least a recent heart failure prior hospitalization within 9 months and/or very high levels of NT-proBNP, a biomarker that is well established as predictive of core outcomes. The vast majority of patients have very large left ventricular volumes more than 100 mills. And those patients have – are associated with severe progressive inflammation in the left ventricle, the type of inflammation that we’ve shown is able to activate our mesenchymal lineage cells in such a way that the cells are then able to release factors necessary for reducing the inflammatory process and inducing blood vessel responses. And the severity of disease and the inflammatory process that occurs in these patients, we believe, gives us great confidence in the ability of the cells to respond and to change the dynamics of the myocardium. Does that give you sufficient cause? I would also add to that, in fact, we performed a futility analysis after the first 270 patients were enrolled, which was a futility analysis using an efficacy threshold of the trial’s primary endpoint. And we were successful in that futility analysis, which gives us confidence, at least at an early stage of the trial’s evolution. And as I’ve mentioned earlier, there have been 10 reviews by the data monitoring committee on safety and cardiovascular outcomes in the trial. And at each review, the DMC recommended continuation of the trial’s plant. So I think in totality, those are the elements.

Okay, thank you.

Thank you. Your next question comes from Jeffrey Cohen of Ladenburg Thalman.

This is actually Destiny on for Jeff today. I just had a couple of quick questions. I’m wondering if you can give us an idea about the pivotal trial for chronic GVHD, just number of co-locations and the centers, etcetera. Can you just give us a brief overview on that?

Thank you. Look, we are still working up the total number of patients and sites, and we will be having those discussions on an active basis as part of the BLA process with the FDA as well. And at a high level, the – in adults, we have previously seen that the product candidate is – a signal of efficacy has been seen in patients with the most severe stages of disease, great CD disease. So I would think that the focus and target of an adult, acute graft versus host disease trial will be patients with great CD disease where mortality’s highest and where existing therapies are least effective in terms of standard of care as a control population. In terms of chronic graft versus host disease, which is a commercial opportunity as large as acute graft versus host disease, we are working with a key opinion leader, Professor Joanne Kurtzberg at Duke, using an expanded access protocol to enroll patients with this chronic condition where, again, unlike acute graft versus host disease, this is not an acute condition that causes high early mortality, but rather is chronic, occurs after 100 days and significantly impacts quality of life. In the first 3 patients, we saw substantial responses, and we are working together with our – the opinion leader to work up what a pivotal trial would look like. When one considers that there’s only one drug that’s approved for chronic GVHD, and that drug was approved on the basis of an open-label study in 42 patients, we don’t believe that there will need to be a very large number of patients recruited for a pivotal trial in this condition.

Okay, got it. Thank you. I appreciate that. And then I also appreciate you giving us a reminder on your go-to-market strategy and you have been talking about building a targeted sales force, so I am just wondering if you can remind us the number of representatives?

Yes. I think we are looking at somewhere between 12 to 15 people on the ground that would be sales and MSLs.

Okay, perfect. That’s it for me. Thanks.

Thank you. Your next question comes from Jason Kolbert of Dawson James. Please go ahead.

Two questions. One has to do with the manufacturing methodology that you inherit versus what you are doing today for Ryoncil? And the other question has to do with the current pivotal trial in heart failure. If there was any – I’d like to just ask you to touch on the delivery of the cells and whether – if there was anything you could change in the design of that trial, what would you change when you, let’s say, run a confirmatory trial? Thank you and congratulations on all the progress.

Thank you, Jason. Those are good questions. The first one was about manufacturing for Ryoncil. And we have obviously spent a lot of resources in the last 3 years or so. In terms of bringing manufacturing of Ryoncil to a point where it’s state-of-the-art, where it’s optimized, where we can demonstrate high consistency, reproducibility of dosing, well-characterized product, etcetera. And I think the Phase 3 trial demonstrates that the product is very consistent and reproducible. And I think those data are before the FDA as we speak. We have also invested in next-generation scalability xeno-free media, for example, bioreactor technologies. And as the product is hopefully approved, launched and adopted as we expand its potential users using evidence-based clinical trials and outcomes, we have in-place manufacturing capabilities that will meet the commercial demand of the product as well as substantially reduce the cost of goods. So we are very pleased and confident in our manufacturing capabilities. Regarding Revascor and the heart failure trial, Phase 3 trial I think you asked about mode of delivery. And what’s interesting about the product is that we’ve now accumulated a large body of data through Phase 2 and Phase 3, of how the cells perform in advanced and end-stage heart failure patients, delivered by catheter, delivered by needle in open heart surgery, for example. And we are seeing very consistent results, irrespective of the mode of delivery. I think what the data, hopefully, will show as we un-blinded that as we continue to accumulate data, is a consistent biologic effect of the cell product in the most severe patients, irrespective of the mode of delivery, irrespective of whether it’s catheter-based or surgically delivered. So hopefully, that addresses the questions you just.

Yes, I mean, those are great answers because, one, it sounds like Ryoncil, as a completely new product, it would be really interesting to understand what differentiates it versus the process by which Revascor is made, and I understand that’s outside the scope of this call. And on Revascor, if what you are saying is that the variable associated with delivery is not as big as I had believed and other people had believed it to be then that could – it means the potential to open up a completely new paradigm here exists. And I don’t think people understand the impact to heart failure or because for the first time, as I understand it, you’re treating the underlying cause instead of the symptoms.

I think that’s right, Jason. I appreciate your comments on this. In fact, we see the continuum of heart failure from class III to class IV to end stage, and the treatment today of patients in that category. And that’s probably 15% of the epidemic in patients with low ejection fraction. The treatment of those patients is really suboptimal and the high rates of mortality continued to play that patient population. And we see our product candidate as offering potential benefits irrespective of how it’s delivered. And that opens up the potential to treat patients with advanced heart failure who, for example, require surgical procedures, such as coronary artery bypass surgery as well as outpatient procedures using catheters. So yes, I agree with it. There is a continuum and we are targeting that whole continuum.

Thank you.

Thank you. The next question comes from Tanushree Jain of Bell Potter Securities. Please go ahead.

Hi Silviu and Josh. Thanks for taking my questions. Just a few from me. Just on the chronic GVHD opportunity, Silviu. I think the release mentioned that in the first 3 patients, you had seen clinically meaningful outcomes, if you could just elaborate on that? And then considering that we’ve just got one product in the market, IMBRUVICA approved for it, if there was any initial comparison read, efficacy or safety that you could draw upon? And then secondly, my question is, in terms of the LVAD confirmatory trial, when do you expect that to start? The third one I have is for Ryoncil for Europe. Would you be considering setting up your own sales force there? Or would you be looking for distributors and partners. And then last one for Josh. Just with the first half ‘20 milestone payments, I think the 4c mentioned another $2.5 million was received from Grünenthal in this half. And I think the release today is looking – is stating that it’s $15 million, instead of $17.5 million. Can you just advise what’s driving that change? Thank you.

Hi, Tanu, I am going to start with your last question first. And that is related to the $2.5 million of cash we received from Grünenthal in relation to a milestone. And the milestones in the Grünenthal agreement are linked to the ongoing development program for back pain, both in the U.S., there is some – there are some CMC-related milestones, which is one of the ones we achieved as well as well as future development in Europe. There is significant judgment applied by the auditors as well as our finance team here in recognition of the milestone after receipt of the cash. And it depends on – there is a completion of the different tasks involved. And so based on where we are today, we have received the cash, but we have not taken the money on this revenue. We do plan to recognize that revenue in the future, but there is judgment being applied as to the timing of that.

Thanks, Josh. I might address the other questions, Tanu.

Thanks, Silviu.

With respect to chronic GVHD, I think what’s important – first of all, these results are early, but they’re important enough for us to ensure that the market was aware of them. We – for the first 3 patients, all 3 patients treated with no more than 2 doses of our cells achieved substantial clinical responses within 28 days. It’s very different from the use of IMBRUVICA, where responses are reported at 6 to 9 months after oral treatment. IMBRUVICA is a global immunosuppressive agent and it’s only approved for results. We saw responses within 28 days of two infusions in 2 children and 1 adult. So we were very pleased. And I think those results allow our investigator, our key opinion leader to now build out what would look like a pivotal trial, subject to discussions, obviously, with the FDA across multiple sites with a protocol that continues to use monthly infusions in order to achieve early responses and maintain them for at least 6 months. The second question, I think you had was about the LVAD trial commencement. We are still working up the specifics of a composite endpoint in line with FDA discussions around cardiovascular outcomes. And we will be providing an update on that shortly. And I think once we have those further pieces of information with the FDA and with InCHOIR in line, I think, the market will be will be well informed. Finally, I think the third question was the plans for Ryoncil in the EU and whether we intend to launch the product ourselves or with a partner. I think those remain open discussions, and those are strategic considerations that we will evaluate over the next few months, whilst we continue to interact with the FDA on U.S. approval.

Right. Thank you.

Thank you. Your final question comes from Marc Sinatra of Lodge Partners. Please go ahead.

Good morning. I guess, in the theme of everybody else, I will ask a couple of questions. The first question, just on chronic GVHD and Dr. Kurtzberg’s investigator-initiated trial, that started in August. How fast do you think that trial will enroll patients and how many have enrolled today? Second question is probably for Josh, you have got trials coming off, trials starting, potential revenue, sales force coming on. How should we think about expenses over the next sort of 12 to 24 months?

Thanks, Marc. So with respect to the expanded access protocol with Professor Kurtzberg, she has at the moment individual INDs on a patient-by-patient basis, evaluates those patients and if they consider to be severe and either not responsive or dependent on steroid use, then we evaluate together whether they would be appropriate candidates for ourselves. So that’s an ongoing protocol. Separate and an extension of that, we will be sitting down with Professor Kurtzberg and working up a protocol, which would be multi-center, with a view to being a pivotal study for potential approval by the FDA. It’s important to note that our – the strategy for Ryoncil and remestemcel-L, more broadly, is to work with key opinion leaders and lead investigators in their particular sphere of expertise and work with the investigator-initiated studies in order to both leverage access to patients, knowledge that the investigators have and ensure a reduction in expenditure. So this – many of these trials through the expansion strategy really is very much more of a provision of product from manufacturing and working with NIH-sponsored and network-sponsored investigators. On that note, maybe I can ask Josh to expand on this?

Yes, I think you have identified correctly that we are shifting, I mean, you can see it in this quarter, our R&D expense down with no significant trials coming on that we need to fund at this point. The trials are going to be: a, supported funding from outside with the Grünenthal back pain or NIH for LVAD, as well as smaller, more nimble trials that should require less burn as well as quicker time to readouts. However, we are shifting some resources for this commercial team. Silviu has already addressed that on this call. It’s a focused effort. And so it’s not a significant source of major burn going forward, but it does shift some of the money over to that bucket. And then we’re also seeing some investment as we are doing – as we are building out our pre-launch inventory. And so there is some investment being made in that area and we will shift eventually to COGS after approval of the product. That being said, we do expect overall cash burn to come down. But we can’t give strict guidance at this point. But I would like to say that the cash on the balance sheet brings us through a number of our upcoming key milestones, potentially including approval. In addition, we have additional access to capital that I mentioned earlier in the call from both our financial partners as well as Grünenthal upon meeting certain milestones that brings us well into next year.

Okay, that’s great. Thanks guys.

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

I would like to thank everybody for attending this very important half yearly presentation. This is a critical time and a very exciting time for the company as we march forward, and we hope to be able to update the market in short course on some very important key milestones. Thank you very much.