Mesoblast Ltd. Q4 FY2023 earnings call

• Regulatory Interactions: FDA provided a complete response to BLA resubmission for pediatric GVHD, citing a need to link Phase 3 trial product to commercial product via potency assay. A Type A meeting with FDA is scheduled for mid-September to discuss potency data and adult clinical trial plans.
• Clinical Pipeline: Remestemcel has pediatric GVHD data with strong survival outcomes, plans to expand into adult GVHD. Rexlemestrocel has Phase 3 trials for chronic low back pain (RMAT designation, pivotal trial to start next quarter) and inflammatory heart failure, with regulatory alignment.
• Cost Reduction: Targeting 23% reduction in FY 2024 net operating cash spend, 40% annual payroll reduction by Feb 2024, deferred incentives for employees/executives, and shifted to half-yearly financial reporting.

Revenue from royalties was US$7.5 million for the year. Royalties on sales of TEMCELL in Japan were $8.1 million on a constant-currency basis (down from $8.7 million prior year). Remestemcel is developed for pediatric and adult graft versus host disease, with the adult market being approximately five times larger than the pediatric. Rexlemestrocel is in development for chronic low back pain and inflammatory heart failure, with Phase 3 trials ongoing. Japan royalties from TEMCELL provided stable revenue, contributing to the overall royalty income.

• Aim to reduce FY 2024 net operating cash spend by 23%.
• Plan to conduct a targeted adult GVHD study covered by cost reductions.
• Rexlemestrocel's pivotal Phase 3 trial for chronic low back pain to commence next quarter.
• Type A meeting with FDA in mid-September to present potency data and clinical strategies for pediatric and adult GVHD.

• FDA requirement for additional trial to link Phase 3 product to commercial product via potency assay.
• Uncertainty in FDA acceptance of additional potency data and clinical trial results.
• Dependence on successful regulatory outcomes for product approvals in GVHD and other indications.

Q: Will you give a public update after your FDA Type A Meeting? And what's the expiration date on the inventory that you have on remestemcel? And lastly, do you have any sense of what the cost and timing of your adult study will be?

A: Yes, we will provide a detailed update post the Type A meeting. Inventory shelf-life can be extended as long as tests are performed. The adult study cost is relatively small, using the CTN network, and timing will be clearer post-Type A meeting Q: How large do you think the adult trial might be? And will the 23% cost reduction be offset by the adult trial so that cost will be the same? Or will the actual cost reduction just be a little bit less than with the 23% that you mentioned?

A: The trial size is relatively small (60-70 patients per arm). The cost is mid single-digit millions, which will have minimal impact on the 23% cost reduction Q: How much will the chronic lower back pain trial cost and how do you anticipate paying for this? Is that in the budget?

A: Costs are in the budget and already covered Q: How long do you anticipate the cash on hand of funds will last? And what are the capital strategies?

A: Cost containment strategies will keep cash sufficient through at least the first calendar quarter next year. Strategies include strategic partnerships, royalty monetization, and access to capital markets Q: With the adult trial, if you've thought about what the control arm might be. And with regard to the chronic lower back pain trial, I just wanted to confirm that the FDA is okay with you proceeding with saline as the control arm?

A: FDA is okay with saline as the control arm for chronic lower back pain. For the adult trial, control arm will be via the CTN network, using best available therapy Q: What are the fundamental changes between the product that was used in the 001 trial and the product you were now attempting to have registered?

A: There are no changes; the manufacturing process and product are the same. Potency assays are being used to demonstrate similarity