Hello, and welcome to Mesoblast 2020 Full-Year Financial Results and Corporate Highlights Webcast. An announcement and presentation have been lodged with the ASX and are also available on the Home and Investors 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 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 hand the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Thank you very much, and good afternoon and good morning to everybody to the call on the operational and financial highlights for the year ended June 30, 2020. It’s been a tremendous year, very important year for Mesoblast and the next few months are certainly going to be transformational for the company. If we could go to Slide 4 of the presentation, please. The allogeneic cellular medicines that we’re developing are based on three pillars. We have an innovative technology platform. We have a very clearly defined lead product candidate, and we have a number of Phase 3 product candidates that will have short-term readouts. In terms of our innovative technology platform, we have a well-characterized immunomodulatory mechanism of action. We’re targeting severe and life-threatening conditions, and the technology is underpinned by an extensive and global intellectual property estate. Our lead product candidate is RYONCIL. It has a targeted market. If approved, the launch for this product is planned in 2020. It has been filed with the FDA for pediatric steroid-refractory acute GVHD and is currently undergoing the final stages of the review process under a priority review. We have a PDUFA date for September 30, and we have industrial scale manufacturing in place to meet the commercial demand as we expect to move forward. In addition, we have well-established plans for life cycle expansion of remestemcel in pediatric and adult inflammatory diseases. We have a Phase 3 trial ongoing in patients with acute respiratory distress syndrome from COVID-19, and we have two additional product candidates in Phase 3 trials for heart failure and back pain with near-term U.S. readouts. We could move to the next slide. Slide 5 shows the platform technology mechanism of action. The cells that we’re developing mesenchymal lineage cells are found in every vascularized tissue…

Thanks, Silviu. That was a terrific review of our recent highlights and some of the important activities in Mesoblast. Turning to the financials, Slide 12. Slide 12 includes highlights from our income statement, where we see growth in revenue and reduction in our operating loss for our fiscal year ended June 30, 2020. Total revenue grew by nearly 100% to $32.2 million from $16.7 million. The key components of total revenue were milestone revenue and commercialization revenue. Milestone revenue from our strategic partnerships grew 127% in fiscal 2020 to $25 million from $11 million a year earlier. The milestone revenue reflects the $50 million upfront payment from Grunenthal received as part of the partnership we established with them and also recognizes $10 million in revenue from our license agreement with Tasly. Commercialization revenue, which is royalty revenue collected from JCR Pharmaceuticals for their product, TEMCELL, grew 32% in the period-over-period comparison going to $6.6 million for fiscal 2020 from $5 million for the year earlier period. Regarding non-revenue highlights, we had a 13% reduction in loss after-tax. The reduction in loss after-tax was partially driven by the increased revenue, but also reduced spend on our clinical trials. The impact of the reduced spending on clinical trials was offset by significant investments we’ve been making in manufacturing and building out the commercial team in anticipation of the near-term launch. Slide 13. In Slide 13, we review our relationship with JCR Pharmaceuticals, a Japanese company focused on commercializing products for rare and orphan disease markets in Japan. JCR has exclusive rights to our MSC technology for acute GVHD in Japan, which they commercializes TEMCELL They introduced the product in 2016 and steadily grew sales in Japan, which lead to a consistently rising royalty paid to us. As shown on the chart on…

Thank you, Josh. We can now move to Slide #17. I’ll talk about our programs and various other product highlights. Acute graft versus host disease is a serious and fatal complication of an allogeneic bone marrow transplant. It’s considered in three phases. Phase 1 is the host tissue damage that occurs following bone marrow transplant conditioning. Phase 2 is the immune cell activation and the cytokine storm that ensues. The cytokine storm is a very important components, because the cytokines that ultimately result in tissue destruction, which is Phase 3, the inflammation in the organ damage of the skin, the gut and the liver. Next slide, please. Children with steroid-refractory acute graft versus host disease are particularly high-risk of treatment failure and death, because there is nothing approved in children under 12. More than 2,000 allogeneic bone marrow transplants are performed annually in children and adolescents in the U.S. Despite prophylaxis, 50% will develop acute graft versus host disease. First-line treatment is with steroids, but more than 50% of patients will be refractory and failed to respond to steroids. And as I said, children under 12 have no approved treatments. Acute graft versus host disease primarily affects skin, gut and liver. You can detect the problems through large volumes of diarrhea through increasing levels of bilirubin. And when you start to get gut and liver disease, the mortality approach is 90% when involving these organs. Next slide, please. The immunomodulatory activities of remestemcel are highlighted in this particular slide. When the inflammatory cytokines from a cytokine storm produced by cells called M1 macrophages, or T-cells are in train, and you put remestemcel in that microenvironment. The receptors on remestemcel, such as TNF-alpha receptor, TNFR1 is activated, resulting in the cells’ ability to respond to creating factors that then turn off…

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

Hi, thank you for taking my question and follow-up here. So my question for you is, how should we think about modeling fiscal year 2021? It looks like there’s a lot of moving parts. So how should we think about the sales progression for RYONCIL assuming approval? Any milestones that you expect if the chronic low back pain and heart failure data are positive, and then SG&A and R&D expense in 2021 versus what we saw in fiscal 2020? Thank you.

Sorry.

So we, of course, have a planned trajectory for sales of RYONCIL. I think a lot of that obviously depends on agreements with payers around pricing and reimbursement. And those discussions are actively ongoing by our commercial team. They – the pricing reimbursement details, of course, will be in place after the product launch as required. But really the most important way to look at this is lessons learned from the TEMCELL experience in Japan. So in Japan, the reimbursement based on pharmacoeconomics and the healthcare costs is sort of as a rule of thumb for most drugs, of the order, say, 50% of what one would expect to see in the U.S. And having seen that – having seen the market adoption that has occurred in the last three years in Japan, which has ultimately resulted in the requirement for JCR to expand their manufacturing capabilities. In other words, they underestimated the demand. Putting those two together gives us pretty clear line of sight around how we see the roll out and the revenue generation and the number of patients that are likely to adopt this treatment for which, if we get approval, we’ll be the only approved to therapy for children under 12. So I’m not sure how specific I can be beyond that. But I think that’s the way we see the roll out for pediatric GVHD. Beyond pediatric, pediatric transplants account for about 25% of all bone marrow transplants in the U.S. So clearly, we have a major focus on the adult GVHD market as well, which obviously, then is three times larger than the pediatric. And in order to address that patient population, we have a plan in place for a randomized controlled study in those patients with the most severe forms of the disease,…

Yes. Thank you. And then just on the OpEx, how should we think about the year-over-year increase for R&D and SG&A, if there is any?

Yes. Josh, can I ask you to address that?

Sure. So in this current year, which just ended, we actually are not carrying anything under SG&A. That will start to shift into that category as we have sales revenue. And we believe that we’ll be able to have – so we’ll be able to shift some of the costs into a separate category. Right now, we’ve been carrying it a bit in R&D. And that’s why, although I mentioned the trials spend slowing down. If you look at the income statement in the press release, you see only about a $3 million difference, $4 million difference. And that’s because some of the investment in commercial is sitting in there, it’ll move to a separate category called SG&A. Manufacturing commercialization includes inventory until we have a high certainty of approval and we’re confident. But from an accounting standard, we’re not at that high certainty level. We are still expensing product we’re linking for potential launch. That will be reversed and carried on to our balance sheet as inventory within approval. And so you’ll see actually the manufacturing commercialization come down significantly and be more like 2019. There will still be spend, but it’ll be capitalized as inventory. Overall, Louise, for…

Okay. Thank you very much.

…yes. So – and overall, just for the end of the last quarter, we had a pro forma cash balance of about $150 million. We just reported a cash balance of $129.3 million. So a use of about $20 million of cash during the quarter just over $20 million. There was a little bit of revenue – a little bit of cash received from JCR. But otherwise, that’s about the cash burn, and we expect to see for the coming quarter.

Your next question comes from Jeffrey Cohen with Ladenburg Thalmann & Co. Incorporated. Please go ahead.

Oh. Hi. Silviu, Josh and Fred, how are you?

Hi.

Just a recap from last week as far as the ODAC panel on RYONCIL for adolescents, what was the average age of the treated patients? And I assume that was up to 12 or 14 in age and it sounding like the label would be up to 18. Could you just clarify them and talk about that for a moment, please?

Yes. I’d like to have Dr. Fred Grossman address the details of the trial and what we think maybe in the label. Fred?

Yes. So the label will follow the trial and the trial enroll patients up to and through the age of 17. The mean age was about between five and seven. So we enroll the full gamut of the ages in that study. And I expect that the label, if approved, will follow that pivotal trial.

Okay. So you’re expecting the label up to 18 as you referenced?

That’s what I would expect, because it will follow the pivotal trial.

Okay. And my second question – thanks for that. As a follow-up as far as what you found learning more about the JCR experience in adults and children, as far as the composition of use. Can you give us any flavor on the composition of use, and talk a little more about where they stand on production and backlog and then perhaps how that may relate to your fiscal 2021 revenues as compared to 2020? Thank you.

Yes. I would say that, we just don’t have that information around the specifics on use in children versus adults, number one. Number two, the details around backlog and strategic plans are something that are obviously JCR’s. So I would refer you to their public statement at this point. But, Josh, perhaps you could address the projected royalties we expect in the next 12 months from TEMCELL cells?

Sure. So JCR has put out some guidance for the – for their current fiscal year, which carries through to March 2021 that showed about a 30% drop in TEMCELL sales was their expectation. And then more recently, at the end of July or early August, they published their first quarter results and they actually exceeded their estimate of a third drop and they dropped by 60 some odd percent, 67% in TEMCELL sales for that quarter. That’s potentially impacted by reduction in usage due to COVID. Although, I think it’s largely driven by their restrictions around patient access. But we – we’re going with the one-third as their sort of long-term forecast and one-third drop.

Okay. Got it. And I’m going to squeeze in one more if I can. As far as Grunenthal and their Phase 3 and your Phase 3 readout. Is there a trial going to be dependent on your Phase 3 readout? Does it feel like they’re going to pursue and proceed, regardless of the outcome? Or the second would be partly based upon how your Phase 3 reads out in the fourth quarter?

Oh, so I can tell you that we’re considering a second – and we’ve spoken about this before. We’ve considered that the second trial would have a 12-month primary endpoint, not a 24-month primary endpoint, right? So the second trial is using the 12-month component of the 24-month overall outcome of the current trial to have a confirmatory to trial data set for both the European and the U.S. regulators. And so really, it’s the totality of the data that will come out in this current trial that will support the specifics of the second trial. And those discussions are active and ongoing with the European regulators already. And so, more than that, I can’t speak specifically for Grunenthal. They’re running their strategy and their program. But I would say, there are many components and considerations as to the second trial in Europe beyond simply yes or no on a 24-month primary endpoint.

Okay. Got it. Thanks for taking questions. A lot going on between now and the end of the year. Thanks very much.

Your next question comes from Tanushree Jain with Bell Potter Securities. Please go ahead.

Hi, Silviu, Josh and Fred, thanks for taking my questions.

Hi.

…and it truly was a monumental milestone achieved for you guys in this month. Just a couple of firstly, on the adult GVHD trial. I’ve got two questions on that. Anything that you can tell me about what that trial may look like in terms of sizing or costs? And the other thing, Silviu, you mentioned that we’re really going to be focusing on the high-risk adults there. Can you perhaps talk to me about any biomarkers, et cetera, that you might use to actually select these patients?

Yes. It’s a great – that’s a great question. I’ll defer to Fred in terms of the thought process right now around specific patients size, et cetera, which I think probably a little bit early. But in terms of biomarkers, what I will say is that, in the pediatric Phase 3 trial, we’ve clearly identified in vivo biomarkers that are both reflective of the mechanism of action of the therapy that are being impacted over time. And secondly, validated biomarkers of disease severity that can stratify patients at baseline based on maximal unmet medical need and the worst possible survival. And in that type of stratification, we have seen that remestemcel was effective, at least, in the children, so stratified in – with acute GVHD. And those type of biomarkers are certainly going to be helping us in design the adult study. Fred, would you like to add to that?

Yes, sure. As mentioned before, the unmet need in these – in adult patients is very considerable, especially in the severe steroid-refractory acute GVHD patients. In particular, the treatments that are available have safety liabilities and toxicities. So we’re moving into a population of great unmet needs, and we’ll be focusing on those most severe patients those that have stages C and D or three and four, who are steroid-refractory acute GVHD. As mentioned before, we’ll be doing a randomized placebo controlled trial that compares treatment of remestemcel to – versus best available treatment. And we’re in the process now of designing the trial. We look forward to having discussions with the FDA regarding that design. And so we’re not disclosing at this point the size. But it’ll be powered to detect the difference and to allow us to extend the label into adults as positive.

Right. And assuming you guys get approved and launched in the market in fourth quarter for pediatric. How soon do you think we’re looking at starting an adult trial?

Fred?

Yes. Well, this is eminent. We’re at this point, designing the trial. And the start date will really depend on the discussions we have with the FDA, so that we have complete agreement on the path forward.

Right. And then just one last question on that. With the adult trial, Silviu, what would be your preference, I guess, to go market strategy? Would you consider going direct as you’re doing for pediatric? Or would you consider involving a partner debt?

No, no, for the adult GVHD market?

Yes.

No, I think we have embarked on a clear strategy. We’ve built out a commercial team that that’s being led internally by Eric Strati. And then we’ve recently appointed a new COO, Dagmar Bjorkeson, who will lead our overall strategy and business unit growth. This is the adult GVHD’s part of that whole strategy, pediatrics and adults market, we will build our own – on our own.

Great. And just a question in terms of the COVID-19 trial, can you perhaps tell me how many of the 20 sites are already recruiting patients?

Fred?

Yes. I mean, all of the sites are recruiting patients. But as you know, there are hotspots around the country and that’s why we’re focusing on all of the region, because those hotspots change. So clearly, in the Southeast and the West during these last peak times, we were recruiting primarily in those areas in those regions. But now things are starting to bump up in the Midwest. And unfortunately, I suspect that things will start to increase in the Northeast as well. So we’re covering all of the regions at this point.

And you’re happy with the rate of enrollment?

Yes. We’re on track as expected at this point.

Great. That’s all for me. Thank you.

Thank you.

Next question comes from Jason Folger with Dawson James. Please go ahead.

Hi, guys. Congratulations on all the progress. I’d just like to ask a little bit about the powering assumptions and the effect size assumed in the COVID trial? Thanks.

Fred, would you like to take that question?

Yes. So I think, as mentioned before, the mortality rate remains high, despite some of the advances and changes in the way patients are treated once on ventilation, they’re still ranging from 60% to 80%. We’ve assumed a very conservative mortality rate for the control group of much lower than that. So it’s powered based on that. And we’re powered to 90% – between 80% and 90%. It’s powered to allow us to get this an indication if we succeed at the end of the trial. It’s a very efficient trial, and it also – that efficiency allows us to do the interim analysis.

Sorry, I was really looking for the effect size in those calculations?

Yes. So I think we have – you’re asking for a lot of detail, which I don’t think is something that we’ve previously made public. But I think what Fred is saying that, obviously, if the mortality rate in the controls is between 60% to 80%, then you can simply look at our pilot data, where we had a something like a 20% mortality. And you can make your own assessment of what the delta could be used to power such a study. What Fred is saying is that it’s well and truly strongly powered, given the very conservative approach to what we think the controls are likely to be. Does that correct, Fred?

Yes.

Well, I understand what you’re saying. But without – I’m sure you’re not assuming the effect size that you saw on the pilot study, if you will. But what I think you’re saying is that you’re assuming a much more conservative effect size and a very conservative control rate. So you’re powered for that delta. So if you’ve come anywhere near what you saw on the pilot program, it would be a home run. Is that fair?

I would say that’s very fair.

Yes. And I think not only is that fair, I think, if we were to see the kind of data that we saw in the pilot, we would not need anywhere near 300 patients to succeed, right? We would be a fraction of that 300-patient number would be what would be needed to show a significant out.

So you’ve given the number of therapeutics that are in development, how do you zero out for all of those different therapeutics across the control arm? And second part is, on good data, what happens given project work speed and the U.S. government’s intense focus on the acquisition of product?

Well, I would say that both the control and the treatment arms are being offered every available standard therapy that’s being used. And I would expect right now that most patients who are on ventilators would have been exposed to steroids to probably remdesivir, right? Those are used most broadly. Despite that, in most recent publications out of the U.S., the mortality rate appears to have remained a constant 60% to 80% in patients who are of the severity that are being enrolled in this trial. That makes us very comfortable that despite new changes in therapeutics, they’re evenly balanced between the treatment and control arms. The second question you’re asking is, what is likely to happen should the results be positive, I think, of the trial? So we see that the potential approval for GVHD supports the initial label of the product, and it’s built around a very large safety database. Should the COVID-19 trial also be positive several months thereafter, for example, we would leverage the extensive safety database of remestemcel for GVHD, and be in discussions with the agency around a potential label extension for COVID-19. If we were in that position, we then have to be prepared to substantially scale up manufacturing, which is currently have invested in and are currently investing in to be in a position next year to make sufficient quality of product to start to meet some of this – the unmet need. And really the unmet need is dependent obviously on the success or otherwise of the vaccines at the front end. I think if there’s a successful one or more vaccines, as we all hope, there will be then really the incidence of patients getting infected or the proportion of patients progressing to requiring ventilation will become more manageable. We are planning for, obviously, a long-term therapy to patients with viral-induced ARDS. Today, the number of patients who died from influenza related to ARDS in ICUs across the U.S. is around 60,000 to 70,000 patients a year. That’s a very large number. And if we overlay on top of that, a steady state number from COVID-19 that provides us with a substantial market opportunity, but also substantial challenge for our rapid scale-up in manufacturing, and that’s exactly what we’re working towards.

Yes. Good problems. I would like to…

Yes. I would like to just add that this trial before initiating it was based on discussions with the FDA. So I would fully expect that if we had a positive outcome, we would move forward with an indication.

Your next question comes from Swayampakula Ramakanth with H.C. Wainwright & Co. Please go ahead.

Thank you. This is RK from H.C. Wainwright and good morning, gentlemen. In terms of MIS-C, I mean, it’s great that you have established an EAP and have actually a successful first patient. So how should we think about the progression on this indication? Do you – should we assume you’re going to do something similar to what you did with adult patients in the sense – look at like the first dozen or so patients and see where the data falls and progress from there? I’m just trying to understand what could be a potential timeline for this to become a real indication for you?. And on top – additionally, with the current data that you have in the pediatric patients with the acute GVHD, is there anything that you can draw from the anti-inflammatory properties that you’ve seen that acute GVHD into the MIS-C?

Yes. These are great questions. Okay. Thank you very much. A really important question. So first of all, with extensive safety database in children having treated something like at least several hundred children or at least 1,000 overall patients with steroid-refractory GVHD, but the database in children is unique in terms of the extent of any therapeutic in this large patient population with severe inflammatory disease. The mechanism of action of ourselves in acute GVHD is the use of surface receptors to sense high levels of inflammatory cytokines and the ability thus then to dampen down the cytokine storm by switching off the production of the cytokines by the inciting inflammatory cells. That’s a mechanism that we think is pervasive and present in the setting of COVID-19, both ARDS and the more systemic manifestations that involve vascular inflammation and cardiovascular complications, renal, CNS complications. What happens particularly in these children with multisystem disorder is that, they don’t necessarily have such a big problem with the lungs and, in fact, seems to clear the virus better than adults do. But then develop an autoimmune process that is due to excessive cytokine production and inflammation of multiple vessels in various organs. And the heart is very significantly involved at 50% of cases. An so since the mechanisms appear to be quite similar between systemic GVHD involving the gut and liver and systemic COVID-19 evolving major organs, we think that if we’re able to get the cells delivered to those types of inflammation, they can respond in a similar way and hopefully result in similar beneficial outcomes. So I think with respect to the MIS-C children, you’re quite right, we are selecting an initial group of children, who will be traded under the EAP, we will be reviewing both the safety, but more importantly, the efficacy if we see it. And that’s fairly easy to read out. These children have a requirement to have cardiac dysfunction. And so if we see cardiac functional recovery that is rapid and that leads to discharge home, it’ll be quite quite evident in a very short amount of time. And I guess, how we would then be in a position to have a therapy for the larger population would be a discussion that we’d want to have with the agency around what kind of pivotal studies need to be in place to support the use of the cells more broadly beyond initial FDA approval for these children at high-risk. Fred, do you have anything else you would like to add to this?

Yes. I would add- look, given our mission in treating those most severe patients where there’s an unmet need, this certainly meets that definition. There are no available modern treatments for these patients. They’re usually given IVIG and steroids. And sometimes it works. But in this case, because this is affecting the myocardium and these kids are getting pericarditis, myocarditis and have vascular components, this is a problem. And the larger problem is that now with schools opening, I think, many hospitals are expecting to see more cases. So we’re making ourselves available based on everything that was just mentioned in terms of the mechanisms of action. And, as noted, we’re monitoring safety and, of course, efficacy. And based on those signals, we’ll determine what the next steps are.

Okay. As a follow-up, in the patient – in the kid that was recorded, obviously, he had a severe cardiac function issue. But based on the definition of the syndrome, it could be any other system. Was anything else affected for this patient? And also, what do you think remestemcel could do if it is not the cardiac tissue, but if it’s something else like the liver or the kidney. Could you – are you, including such patients in the EAP? Or is it only the patients who have a cardiac issue?

No, we are focusing on the cardiac issue. And many of these patients have cardiac, as well as liver, kidney at times. It can also affect the brain. So what do we expect the cells to do? We expect the cells to perform the same way that they did in GVHD, which also can have multiple organs involved. So I would expect that we would see improvement if other organs are involved. But we’re focusing on the cardiac involvement, because these are the most severe cases, some of whom are in the ICU, some of whom wind up on mechanical ventilation. In the last large cohort that occurred in the U.S., there were 20% on mechanical ventilation and 2% died. And these are otherwise healthy children. So an answer to your question, we’re focusing on cardiac involvement, because that’s the area of greatest need. And if there were other organs involved, and sometimes there are, we would expect that remestemcel could have the potential to reduce the inflammation in those organs as well.

Thank you. Thank you, gentlemen, for taking my questions. Thanks.

Thank you.

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

Great. Well, thank you very much, everybody, for joining this call. It’s been a very important year for us that we’ve just reported on. But I think the next few months are going to be momentous for the company, and we look forward to updating everybody in due course. Thank you.