Mesoblast Limited (MESO) Q4 2023 Earnings Call Transcript

Mesoblast Limited (NASDAQ:MESO) Q4 2023 Results Conference Call August 30, 2023 6:30 PM ET

Company Participants

Dr. Silviu Itescu - Chief Executive Officer

Dr. Eric Rose - Chief Medical Officer

Andrew Chaponnel - Interim Chief Financial Officer

Dr. Philip Krause - Board Member

Conference Call Participants

Louise Chen - Cantor

Edward Tenthoff - Piper Sandler

Sami Corwin - William Blair

John Hester - Bell Potter

Operator

Hello and welcome to the Mesoblast Financial Results for the Period Ended June 30, 2023. An announcement and presentation have been lodged with the ASX and are also available on the home and investor pages@www.mesoblast.com. At this time, all participants are in a listen only mode. Later, we'll 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 extra results to differ materially from those and such forward looking statements.

In addition, any forward looking statements representing the Company's views only as the date of this webcast, it should not be relied upon as representing the Company's views of any subsequent date. The Company specifically disclaims to any obligations to update such statements.

With that, I would like to hand the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Dr. Silviu Itescu

Thank you, operator. Good afternoon and good morning to our financial results and operational update for the year ended June 30th. On the call with me today, our Chief Medical Officer, Dr. Eric Rose, our Interim Chief Financial Officer, Andrew Chaponnel and one of our Board members, Dr. Philip Krause.

Today, we'll be talking about our regulatory interactions with the FDA. We will talk about our operational streamlining and our upcoming milestones as we progress our major Phase 3 programs and talk about our cost reduction strategies that we've implemented to ensure that we have significant cost containment and protection of our cash reserves.

We can now go to the slide deck. Slide 4, please. This slide is a snapshot of our late-stage clinical pipeline that is based on two cellular platforms based on stromal cells, remestemcel, and rexlemestrocel. Remestemcel is being developed for both pediatric and adult graft versus host disease and other follow on indications including inflammatory bowel disease.

I'll be talking about our pediatric GVHD regulatory filing and upcoming Type A meeting with the FDA shortly. The program is also expanding into the much larger market adult GVHD, which is five times larger than the pediatric indication. Rexlemestrocel is being developed for chronic inflammatory lower back pain and inflammatory heart failure, and in both of those indications has completed the first of two pivotal Phase 3 programs. We'll be talking about those towards the end of the presentation.

Next slide please. The investment highlights for the Company, as I mentioned, we're developing products based on our novel allogeneic technology platforms that allows us to through controlling manufacturing, develop scalable mesenchymal stromal cell products without the need for donor matching or immunosuppression, that focus on the core mechanism of action around reduction of significant inflammatory diseases.

The lead indication for remestemcel, our first generation platform is pediatric and adult steroid refractory acute graft versus host disease. We have developed substantial data that has been presented to the FDA. We will -- let me talk about those in a couple of minutes, but we do have a very important Type A meeting with the FDA mid-September -- scheduled for mid-September now to discuss our strategy for product approval.

For chronic low back pain, rexlemestrocel has completed a first Phase 3 trial. It has been granted regenerative medicine advanced therapy designation by the FDA, and we have alignment with the FDA on the primary endpoint of 12 months of pain reduction in a pivotal second Phase 3 trial, which is currently ongoing and an underway. We expect to have first patient recruitment in the next quarter.

The program for inflammatory heart disease with rexlemestrocel also has completed a first Phase 3 trial, in patients with reduced ejection fraction has also completed a trial, in patients with end stage heart failure with an LVAD. In that indication again the FDA has granted the product RMAT designation and we will seek to be meeting with the FDA to talk about extending the RMAT designation to patients prior to LVAD.

Finally, the finances of the past 12 months, we've continued to have stable revenues from our royalties in Japan for TEMCELL from our partner in Japan. We have cash on hand of 71.3 million as of the end of the financial year, and we will have a lot more detail about our cost containment strategies that have been implemented and have been put in place in order to preserve cash further.

Next slide please. Slide 5 -- Slide 6, this slide summarize the regulatory status for any stem cell in pediatric patients with GVHD and the upcoming Type A FDA meetings, which is now scheduled for mid-September. During the six month BLA review, we made substantial progress towards bringing this cutting edge product to market with having completed a comprehensive FDA inspection of our manufacturing process and the facility where our cells are being manufactured.

In August, unfortunately the FDA provided a complete response to our BLA resubmission for the treatment of pediatric GVHD. The basis for this was a requirement the Mesoblast demonstrate that the product used in the Phase 3 trial, which was completed several years ago is similar, closely similar to the product that's intended now for commercial release, as measured by a standardized potency assay.

We believe that we can link the product that was made in the Phase 3 trial to the current commercially risk product through additional work using potency data. The FDA indicates that an additional trial would be needed to establish this link, if the Company is not able to do so via the additional potency assay work that is currently expected to be initiated.

The Type A meeting with the FDA is scheduled to be held in mid-September, and we will be laying out these exact strategies. We proposed providing FDA with additional potency assay data to provide the link between Phase 3 product and the current commercial inventory. We also proposed providing FDA with new clinical trial data in adults, which could also support the pediatric indication.

Next Slide, what are the new clinical data that we propose generating? In line with our overall commercial strategy to progress to the adult indication, which is approximately fivefold larger than the pediatric indication, we intend to conduct a targeted control study in adults with very high mortality risks.

Survival in adults with steroid refractory GVHD, who failed at least one additional agent such as ruxolitinib remains as low as 20% to 30% by 100 days. In contrast, a 100 day survival has been shown to be 63% after remestemcel treatment is used under an expanded access in 71 patients aged 12 and older, with steroid refractory GVHD who failed to respond to at least one additional agent such as ruxolitinib.

We are in discussions with world leading investigators at the Blood and Marrow Clinical Trials Network at the BM CTN, which is a prime body across the U.S., responsible for 80% of all U.S. bone marrow transplants. The discussions with this group, is that they will conduct the new clinical trial. As a result, the costs of this targeted study are expected to be covered fully by the planned spending reduction that we will outline below in the financial section.

We can go down to Slide number 8, which is our financial results section. Andrew, if you could take on the next few slides, please.

Andrew Chaponnel

Thanks, Silviu. Please turn to the financial highlights for the year on Slide 9. Revenue from royalties was US$7.5 million for the year. On a constant-currency basis, royalties on sales of TEMCELL in Japan by our licensee were $8.1 million compared with $8.7 million for the prior year.

Net cash usage for operating activities for the year was $63.3 million. This represented a 37% reduction on FY 2021 and a 4% reduction on FY 2020. At June 30, 2023, cash on hand was US$71.3 million with up to an additional $40 million from our existing financing facilities subject to both certain milestones and the extension of availability.

Turn to Slide 10 please. There you'll see we are reporting a reduction in expenditure and an improved loss before tax for the year ended June 2023. Our revenue of $7.5 million is predominantly from royalties on sales of TEMCELL in Japan. Our R&D expenditure was reduced by 17% from the prior year.

Our R&D spend in the year was primarily to support the remestemcel-L BLA resubmission and preparations for pivotal studies for rexlemestrocel. Our manufacturing expenditure reduced by 10% from the prior year, and our finance costs for the year end June 2023 include $15 million of non-cash accrued interest and borrowing costs.

Now turning to Slide 11. I'll take you through the cost containment plan for the next 12 months. It's important to note that our net operating cash usage in FY 2023 was a 37% reduction compared with 2021 and 4% reduction compared with 2022, but we are targeting a further 23% reduction of approximately $15 million in our projected FY 2024 annual net operating cash spend through reduced spend across research thousand marketing commercial inventory and payroll.

This targeted reduction will be partially offset as we invest in our Phase 3 programs for steroid refractory acute GVHD and CLBP. We are targeting a 40% annual reduction in payroll by February 2024. This reduction is coming from reductions in base salaries, short-term incentive payments, and contractor fees in the coming year.

As CEO and CMO have deferred their entire FY 2023 short-term incentives and have voluntarily reduced their base salaries for FY 2024 by 30% to preserve cash. Instead, they'll receive long-term non-cash incentives to further align with shareholders. Any grants of equity based LTIs will be the shareholder appraisal.

FY 2023 short-term incentives have been entirely deferred for all employees. Management are eligible to receive LTIs in lieu of a 30% reduction in salary, and non-executive directors have voluntarily deferred 100% of the cash payment of their director fees and agreed to receive 50% of their fees in LTIs. Again, any grants of equity based LTI will be subject to shareholder approval.

And for the coming year, we are shifting from quarterly to half yearly reporting of financial statements. The next financial statements we will report will be for the half year ended December 31, 2023. We will continue to report our quarterly cash burn via Appendix 4C and include a report on operational activities. This process is in line with the requirements for ASX listed entities.

Now, I'll hand the call back to Silviu for the remainder of the presentation.

Dr. Silviu Itescu

Thanks Andrew. If we go to Slide 13 please, this is mechanistic slide, which I've addressed many times in the past, but I think just to summarize for those who don't know the disease.

The devastating complication of a bone marrow transplant is acute graft versus host disease. It's mediated by the graft immune system attacking the gut and the liver in particular as well as the skin of the recipient, and the immune cells create a cytokine storm that results in organ destruction and ultimately death.

What we aim to do with our mesenchymal stromal cell product is to target the precise mechanisms of the immune deactivation and turn off the immune cells and turn off the destructive cytokines. Next slide please.

Slide 14. This slide addresses the market size and the opportunity for the Company. There are more than 30,000 allogeneic bone marrow transplants performed globally, and about 10,000 of those are performed annually in the United States, whilst approximately 1,500 are in children who remain are in adults, indicating that the adults GVHD market is about five times the size of the pediatric market.

In Japan, we already have a product that is generating revenues for us. It's the only product that has been approved in Japan through our licensee in JCR Pharma. In the U.S., no products are approved for graft, steroid refractory graft versus host disease in children. In adults, the only product that is approved is ruxolitinib. Next slide please.

Slide 15. This slide is a summary of the short-term survival results across three distinct trials in pediatric GVHD, with children having been treated with remestemcel. In each of these trials, you see short-term survival outcomes that are significantly higher than those survival outcomes at three and six months that have been reported in matched contemporaneous or historical controlled cohorts. These results have been extensively provided to the FDA as part of our BLA resubmissions. Next slide please.

Slide 16. Now shows the long-term survival outcomes of the children in our pivotal Phase 3 trial through to at least four years. And you can see that, whilst one year survival is 63% by two, three and four years, survival is of the order of 50% and remain stable thereafter.

In contrast, you see the results of five published contemporaneous studies in children and adults where survival at one and two years is abysmally low, and substantially different from what we've seen in our Phase 3 trial. And there are no reports of survival outcomes in these high risk patient populations beyond two years. These results also were provided to the FDA. Next slide please.

Slide 17. We are now focusing in addition to the pediatric population on adults with steroid-refractory GVHD. As I mentioned earlier, this is a much larger market opportunity and the only drug that is approved in this patient population is ruxolitinib after steroid failure. However, 45% of ruxolitinib treated patients continue to be non-responders. And survival of these patients is 20% to 30% by 100 days, an abysmal outcome.

In contrast, across 71 patients under expanded access that have been treated with ruxolitinib, patients who are 12 and older, who are considered adolescent or adults and have failed to respond to at least one additional agent, such as ruxolitinib, we have seen a 63% survival, a terrific outcome. And this is very similar to the type of survival that we see in similar high-risk pediatric patients.

As a result of these very promising data, we are in late stage discussions with the Blood and Bone Marrow Clinical Trials Network across the U.S., body responsible for 80% of all U.S. bone marrow transplants to have them conduct the new clinical trial, which will target patients who have failed steroids and at least one additional agent, such as ruxolitinib, with a primary endpoint designed to either reduce to improve early day 28 responses or to demonstrate a survival benefit at 100 days. Importantly, the costs of this targeted study are expected to be entirely covered by the planned spending reductions, as outlined earlier in the financial section.

Move to the next few slides, which focus on the opportunities with rexlemestrocel, our second generation stromal cell allogeneic product. Slide number 19 please. The market opportunity for inflammatory low back pain is huge, both in the U.S. and in the dominant European markets. Over 7 million patients in each of these jurisdictions are estimated to suffer from chronic low back pain due to degenerative disk disease, which is an inflammatory condition.

And despite, non-steroid anti-inflammatory drugs or opioids, none of -- there are no other treatments that have an impact on either the disease symptoms or disease progression in this large patient population. In fact, 50% of opioid prescriptions in the United States are precisely for this indication, and this represents a real major cause of the opioid epidemic that continues to be a major source of healthcare -- poor healthcare outcomes.

Slide 20 provides a summary of where our program is at. We have regulatory alignment with the FDA, on the appropriate pivotal Phase 3 study to confirm the results on the first Phase 3 trial, which showed a significant reduction in pain at 12 and 24 months follow-up. The Phase 3 protocol for this pivotal trial design has been agreed to with the FDA at 12 months reduction in pain compared with placebo.

Secondary endpoints are functional improvement and reduction in opioid usage. Product manufacturing has been completed for the trial and potency assays are in place for product release. The program has a RMAT designation from the FDA, and the pivotal trial startup activities have commenced and recruited, as expected to begin next quarter.

Let me just give you a snapshot of the data that underpinned this pivotal trial and the regulatory interactions with the agency that resulted in RMAT and the agreements on the pivotal trial and its end point.

Slide 21 please. The results from the first trial showed that a single injection of rexlemestrocel delivered together with hyaluronic acid as a carrier into the lumbar disk resulted in significant reduction in pain compared with saline control at 12 and 24, and in fact, 36 months across all subjects in the 404 patient study.

That pain reduction was seen in the subset of patients in addition who used opioids at baseline and equals 168,, so a very large subset, but the precise subset that is a greater risk of opioid overuse and addiction. Among patients on opioids at baseline, despite instructions to maintain existing therapies throughout the trial, by three years, 28% had received the cell product were not taking an opioid compared with just 8% of salient-treated controls.

We'll go to Slide 22 please. This slide is a summary of the effect on pain through 36 months from a single intradiscal lumbar injection of our cells. And as you can see, the green, the green line on this slide represents the mean change in pain at every time point after a saline placebo injection. In fact, the small reduction in pain that you see with saline approximates that that is typically seen with opioid drugs so that even a saline rehydration of the disk has a small beneficial effect.

In contrast, if you look at the red line, the reduction in pain that's observed with single injection of our cells together with the hyaluronic acid carrier gives a substantial reduction in pain that is maximal of 12 months and is durable through 36 months. And that difference between the red and the green lines is really the difference that we expect to see in the pivotal Phase 3 trial design in patients with who are within a five year period post initiation of pain.

In other words, that early five year period when inflammation continues to be at its peak, the disease also in the history is still very much active and at a time point when we can have an impact, not on just pain, but also on the natural history of the disease before the disk is ultimately destroyed by the inflammatory process.

Let's move to the last indication that I want focus on and that is our inflammatory heart failure program also with rexlemestrocel. Slide 24 please. This slide is a snapshot of the current program summary. The significant need is evident, inflammatory low ejection fraction heart failure continues to be a very big unmet need with mortality that approaches 50% at five years.

The data that we've generated across two large programs is particularly promising particularly in the DREAM Heart Failure Phase 3 trial, which was recently published in the Premier Journal in Cardiovascular Field Journal of the American College of Cardiology, which demonstrated an improvement in ejection fraction of 12 months, proceeding a long-term reduction in major adverse cardiovascular events defined by more cardiac mortality, heart attacks and strokes.

Potentially, the LVEF is an early surrogate endpoint for reduction these major adverse event outcomes. We believe that we have a good handle on the mechanism of action by which the cells impact both improving ejection fraction and improvement MACE outcomes and that's by reducing the active inflammatory process.

We expect to have a meeting with the agency that talks about both the data across the large 500 patients study DREAM Heart Failure as well as the data that was previously generated under in LVAD patients for which the ARMAD is already available and the objective of the study is to show that similar mechanisms exist in the continuum of these two indications to allow us to have a larger arm at umbrella that covers much as the LVAD patients, but those patients with advanced disease prior to having an LVAD in place.

And Slide 25 really summarizes and I won't go into a lot of detail, but summarizes the continuum of this disease and where we think that our mesenchymal stromal cell product can have significant benefit both in advanced heart failure as well as obviously those patients who are end stage and have an LVAD in place. This is the basis of the long-term program that we will be talking to with the agency and are also talking to with potential strategic partners.

Finally, Slide 26 provides just a pictorial snapshot on the right of some of the data that came out of the DREAM Heart Failure study. This shows just what an impact a single intramyocardial injection of our cells had on major adverse cardiac events in patients with inflammation, and as you can see here, almost an 80% reduction over a five-year period in heart attacks and strokes. The major cardiac events are affected in these patient populations.

I think on that note I might stop and open it up for questions. Thank you very much.

Question-and-Answer Session

Operator

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

Louise Chen

I wanted to ask you a few things. Firstly, will you give a public update after your FDA Type 2 Meeting? And secondly, what's the expiration date on the inventory that you have on remestemcel that was ready to go? And then lastly, do you have any sense of what the cost and timing of your adult study will be? Thank you.

Dr. Silviu Itescu

Sure. Thank you for the questions. So, yes, we will be providing a detailed update post the Type A meeting to the market. Secondly, our inventory does not currently have an issue with expiration because as long as it's tested we're able to demonstrate a shelf-life that can be extended. I think our shelf-life at the moment is up to at least four years, but it can be extended providing the tests continue to be performed.

Thirdly, the question was the cost. We're projecting a relatively small targeted study in adults. The reason we're working with the bone marrow CTN network across the U.S. is that they have an established infrastructure in place. And those are the relationship with them allows the CTN to conduct the trial in a manner that results in a very inexpensive clinical trial fraction of what a trial would normally cost with a commercial CRO.

That's precisely why we are working with the CTN. They are developing the protocol together with us. And I am very excited to get this trial started in a patient population frankly that has no alternatives. The patient population is patients who have failed a second -- have failed steroids and at least one other agent, which today the only approved agent across the U.S. is ruxolitinib.

There is about 45% of patients who are treated with ruxolitinib have failed. And those patients have nothing else that's approved or that works in the mortality rates. Survival in those patients is abysmally lower at 20% to 30%. That's exactly the patient population where we have been treating with under expanded access, and we are seeing a 63% short-term survival benefit. That's the reason that the Bone Marrow CPN Network is very excited to conduct this trial.

And from our point of view, we will be providing product that we have already made, and the additional costs are relatively very low relative to what a normal large trial would cost, and certainly will be picked up by the cost reductions that we have just outlined in terms of reduction in research and payroll and alike. So, I hope that answers your questions.

Operator

Your next question comes from Edward Tenthoff with Piper Sandler. Please go ahead.

Edward Tenthoff

Thank you very much. Appreciate the update. Just digging in a little bit more on the last [indiscernible]. 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? Thank you.

Dr. Silviu Itescu

The size of this trial is relatively small. And again, until we have full agreement with the agency, we need to be a little bit circumspect. But we are looking at per arm something like 60 to 70 patients, something like that per arm. And the overall cost, given that we are working with the CTN, it's going to be in the mid single-digits, that sort of thing.

So, we are talking about relatively inexpensive trial costs. And so when you say, how much will this offset around 25% cost reduction, over the next six months, a very little will offset good reduction. That's sort of being fairly circumspect. But obviously, the detail of this will be, I will be able to talk to you in more detail after the Type A meeting.

Edward Tenthoff

So, we kind of add that mid single-digit millions for the Phase 3 back on top of the 23% cost reduction when it begins, got you.

Dr. Silviu Itescu

And then again but remember that, that's annualized, we are talking about the next six months in terms of trial costs.

Edward Tenthoff

Yes, absolutely. No. It was helpful color. Thank you, Silviu. And then a quick question just with respect to chronic lower back pain. I know you mentioned that you will start this trial next quarter, which is fiscal first quarter. How much will this cost and how do you anticipate paying for this? Is that in the budget?

Dr. Silviu Itescu

Again, the costs over the first six months are already in the budget. And again, this is a relatively inexpensive trial. It's a little bit more than the -- it's more expensive than a network based study, but it's already well covered by our existing budget, so yes.

Edward Tenthoff

And then just one for Andrew, if I may. How long do you anticipate the cash on hand of fund [indiscernible]?

Andrew Chaponnel

Well, the cost containment strategies that have been enacted will allow us to have sufficient cash through to the end of first calendar quarter at least next year. And our strategy to bring in more cash is three parallel strategies that we're currently acting and working through strategic partnerships. In a number of areas remestemcel and rexlemestrocel, those strategic partnerships are active and ongoing in a number of areas.

Secondly, monetization of royalties, both real royalty monetizations as well as synthetic royalty monetizations, those activities are active and ongoing. And thirdly, there's always the accessibility to capital markets.

Operator

Your next question comes from Sami Corwin with William Blair. Please go ahead.

Sami Corwin

Hi, thanks for the update. I guess I was curious with the adult trial, if you've thought about what the control arm might be. And then 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.

Dr. Silviu Itescu

Yes. Maybe I'll take the second question first. The FDA's perfectly happy with sailing as a controller arm, absolutely yes. With respect to the GVHD program, one of the main reasons to be working with the CTN network is that they also have access to investigators that have large contemporaneous controlled patient populations that we can access and use potentially as controlled arms through our treated arms.

Whether that will be the basis of the exact trial we need to consider a randomization strategy is something that that will continue to be discussed with the agency. But we have various current strategies for what the appropriate control will be. Remembering that there are no approved drugs for the control patients and the controls whether they're randomized or contemporaneous will be on -- will be receiving best available therapy, which are unapproved drugs that target inflammatory pathways and that today when used result in with 20% to 30% survival only.

Sami Corwin

And then just one more if I may. I know you mentioned that in the extended access protocol in adults, you've seen enhanced survival compared to patients treated with standard of care. But if I recall correctly, the adults treated in Study 280 didn't achieve their primary endpoint. So I guess if you could kind of contrast the two studies and what gives you increased confidence that heading into this adult study that it will achieve statistical significance?

Dr. Silviu Itescu

That's a very, very good question. Thank you. Study 280, which was performed about 10 years ago, was performed by Osiris using a product called PROCHYMAL. That product was a first generation mesenchymal stem cell product manufactured using a different process. When Mesoblast acquired the product from Osiris, we made some manufacturing modifications, substantial modifications, and the product with its improved manufacturing is called Ryoncil.

The Ryoncil product has demonstrated superior efficacy to the old PROCHYMAL product in a range of pediatric studies. And now that we have data with Ryoncil in adults who failed steroids plus a second line including ruxolitinib, the type of survival that we're seeing with Ryoncil 63% is very, very different than the our PROCHYMAL achieved in trial 280. So, the potency of the product is a measure of its efficacy and that potency is measured using the potency assays that are now in place.

And that have in part been shown to the FDA although there's additional potency assay work that we're now undergoing that we intend to show further to the FDA. But those potency assays confirm the greater potency of Ryoncil and we believe are the basis for the explanation that survival benefits are greater with Ryoncil in both pediatric and adult populations than with the old PROCHYMAL product.

Operator

The next question comes from John Hester with Bell Potter. Please go ahead.

John Hester

Good morning, Silviu. I want to refer back to your prepared comments. There, Silviu, we discussed about your intention to provide additional data on potency to the FDA. It sounded to me like you were leaving the door open there with respect to their recent decision. I believe you said that you were hoping to show additional data to prove the potency of the current product relative to what was used, the product that was used in the pediatric study from several years ago. Can you just confirm I understood that correctly and what exactly do you mean by those comments and what do you hope to prove?

Dr. Silviu Itescu

Well, that's exactly right. The primary reason for the CRL was that the FDA remains wanting to be convinced that the product in our current inventory that is to be for commercial launch is substantially the same as the product that we're using in the Phase 3 trial. And our potency assay needs to be substantially the same potency assay as was used in the Phase 3 trial in order to demonstrate that the two products are the same. We have those data that are currently being developed. Some are in place. Some still need to be added. We expect that in the next few months we will complete those data. And that is part of the discussion of the upcoming Type A meeting.

Perhaps, Philip Krause could add some color to my comments. Philip?

Dr. Philip Krause

Sure. I will make a quick point here and that is the CRL had, although, of course, the disappointment of being a CRL, but had two positive indicators in it as well or two significant positive indicators. One of course was the favorable results of the inspection, but the other important thing to take note of is that, the CRL did not question the efficiency of the product as was demonstrated in GVHD001, as had been the case in the previous CRL.

But the CRL did continue to question and raise questions about the potency assay. And specifically, the characterization and standardization of product that went into GVHD001, and then the ability then to make future product that was similar to that, which went into GVHD001. And so, this leaves open the real possibility that by using exactly the same assays that were used to characterize the product going into GVHD001, for a new commercial product that it would be possible to show that the new commercial product is similar enough to that, which was shown to be effective in GVHD001.

Now, the CRL then went on to say that, if that can't be accomplished, in other words, this demonstration, then the only way forward would then be another clinical trial in either adults or pediatrics, which would then allow this connection between potency assay and clinical outcomes to be made, and thus allow future product to be related to product that was shown to be effective in a clinical. So, maybe I will stop there, but could take a follow-up to previous one.

John Hester

Maybe just one follow-up Mr. Silviu, if I may. 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?

Dr. Silviu Itescu

I can address that. There were no changes. The same exact manufacturing process and the same product went into the Phase 3 trial as it's currently in inventory and intended for release. And that's really what the inspection of the process and the plant and ultimately concluded. So, there are no changes to the product. What we need to ensure is that, we have a potency assay in place that was used precisely in that Phase 3 that continues to demonstrate the same attributes of the existing inventory. Phil, would you add anything to that?

Dr. Philip Krause

I would not. I think that's exactly right. The manufacturing process has not changed.

Operator

Thank you. That brings us to the end of today's call. I will now hand back for closing remarks.

Dr. Silviu Itescu

Great. Thank you everybody for joining us today. We hope that we have been clear in providing details around our interactions with the FDA our upcoming Type A meeting, our focus on finance and cost reductions, managing our cash runway and laying out the upcoming milestones on some of our most important products and whether value proposition is for our shareholders.

Thank you very much.

Operator

It does conclude our conference for today. Thank you for participating. You may now disconnect.