Transcription of The Stock Network Interview with Mesoblast (ASX:MSB, Nasdaq:MESO), CEO and Managing Director Dr Silviu Itescu
Lel Smits: Mesoblast has entered a new chapter following the launch of Ryoncil, with quarterly revenues growing and operating cash burn declining. At the same time, Mesoblast is advancing several late-stage programs across inflammatory diseases, chronic low back pain and heart failure, while outlining what it describes as potential blockbuster opportunities across its pipeline. For investors, the key question is now whether it can translate its scientific platform into sustainable commercial growth and execute on multiple development programs simultaneously.
I’m joined today by Mesoblast CEO and Managing Director, Dr. Silviu Etescu, to discuss the next phase of growth, upcoming milestones, and the timelines investors should be watching. Silviu, welcome back to the Stock Network.
Silviu Itescu: Thank you. Good to be here.
Lel Smits: Now, Ryoncill revenues are approaching around US$100 million since launch, and also operating cash burn has reduced materially. Now, while that represents significant progress, and congratulations, investors ultimately do want to understand the pathway to a self-sustaining commercial business.
And very much hoping today you can outline what metrics investors should be focusing on really over the next 12 months to assess whether this launch is meeting expectations.
Silviu Itescu: Sure. Thank you. Look, we’ve been very happy with the way the first year’s launch has gone. We’re well over US$100 million in gross sales. And we’ve said that by the end of the fiscal year, we’re going to be north of US$110 to US$120 in terms of net revenues.
So we’re on track to deliver that. And that probably represents about 20% of the addressable market in pediatric graft versus host disease in the US. We’ve done a lot in the 12 months since launch.
I think this has delivered beyond most people’s expectations. We had to, from a standing start, build a sales team. We’ve built a relatively small but very efficient sales and marketing organisation.
We’ve worked with the health care reimbursement agencies so that we’re now covered by about 95% of all insurance coverage in the US. We’ve got federal Medicaid coverage. And every state is mandated in the US to cover us.
And so we’re being reimbursed with no discounts. And we think we can achieve not 20% of the penetration, but we’re looking to move from 20% to 30% to 40% penetration of the addressable market in a relatively short order. So we’re very pleased.
And we’ve got our strategy in place to keep growing in the coming 12 months.
Lel Smits: And in line with this growth, you’ve also highlighted a number of opportunities. And given the breadth of the pipeline that you’ve referenced, could you go to some more details, perhaps, on which programs are most likely to generate meaningful value in the near term? Also, what the realistic timelines are that investors should be thinking about?
Silviu Itescu: Sure. The way to look at Mesoblast is we’ve got two major platforms, all based on the same kind of mesenchymal stromal cell technology. Our first platform is called Ryoncil. It’s FDA approved.
It’s the only FDA-approved off-the-shelf mesenchymal stromal cell platform in the US. We don’t see any competitors in the near term. There are many small companies that have tried and failed and continue to struggle.
But with an FDA approved product, it has applications well beyond the first approved indication, GVHD in children. The way to look at that platform is that we aim to expand the indication from children to adults. We’ve commenced an adult trial for severe cases of steroid refractory disease.
And that trial is being executed across the US in 40 sites in conjunction with the bone marrow transplant clinical trials network, which is the largest network of clinicians and hospitals across the US. That will aim to achieve an outcome of improved responses early, day 28, and then ultimately survival, of course, in patients who otherwise don’t respond to existing therapies. The trial is aimed for 180 patients.
But after the first 100 patients, which we expect to be in the next 12 months, we will have an interim readout. And if we achieve the endpoint at that point, we will declare success. That market, the adult GVHD market in the US is three times bigger than the pediatric market.
So that’s where we see the next inflection point in terms of growth beyond the pediatric sales. But that’s our approved product. There are other applications of the approved product, both in children and adults with severe inflammation.
And the other area that we’re looking at is an ultra-often disease in children with inflammatory muscle disease called Duchenne’s muscular dystrophy. And the FDA has already approved us to begin a registration trial for approval and label extension in an indication that, again, has no other approved therapies using cellular therapies. There are gene therapies in that space, but cellular therapy for turning off the damaging inflammation has not yet been approved.
That’s our first platform technology. We then have a next generation platform that we call Rex Lemi-Stroh cell, same kind of off-the-shelf cells, more potent, and targeting diseases that are even harder to address, like inflammatory back pain, inflammatory heart disease. And the shareholders know that we’ve been in this space for a long time.
We continue to be the leaders in this space. The blockbuster indications of back pain and cardiovascular disease will propel mesoblasts to a whole other level once they come through. In particular, the back pain phase three program, which the first trial has already read out in terms of reducing pain.
We’re in the second trial that we’ll read out in about 12 to 14 months or so. And if we meet the primary endpoint of pain reduction at 12 months, we’re going to go to the FDA to get approval. That is a massive indication.
There are about seven million people suffering from severe inflammatory back pain in the US. And other than non-steroidal drugs and other non-interventional approaches, and there’s only opioids, and we’re all aware of the limitations of opioids and the risks of opioid overdose. In fact, 50% of opioid prescriptions are for these unfortunate patients with severe inflammatory back pain.
So if successful, we have a market that is potentially a $10 billion a year market at peak. That’s the one that I think most investors should be looking at on the horizon. And closer to that actually is our cardiovascular program.
We seek to be filing for approval for an orphan indication in the heart failure space, the end stage heart failure patients who are being kept alive with a device. But approval in that indication will open the whole door to the much larger, broader patients with heart failure in class two and three disease. So there’s a lot of excitement that I think people ought to be looking at in the next 12 months, well beyond just the growth in revenues, which of course in and of itself will allow us to break even.
Lel Smits: Now, you have touched on some of these important regulatory, clinical, also commercial milestones. But as biotech investors know, development timelines are not always moving in a straight line. So, Silviu, looking ahead in summary really, where are you seeing the biggest risks and opportunities in the next 12 to 24 months?
Silviu Itescu: Look, the real opportunities are in us bringing strategic partnerships to the table.
And we’ve had various partners at various times for different products. You know, we have a European partner for our back pain product on success and on filing and on first sales, potentially with a hundred million dollars in milestone payments, plus obviously royalties. But I think strategic alliances allow us to bring in more revenue, more money into the company, unlock value in a parallel timeframe and increase the probabilities of success.
And so we’re in discussions with a number of strategic players in areas as diverse as pain, cardiovascular disease and inflammatory indications beyond pulmonary and inflammatory bowel, for example. Beyond that, you know, approvals unlock value. So I think with FDA, having been in a state of chaos in the past, I would say 12 to 18 months, there’s much more clarity right now.
There’s new leadership at the FDA. There’s new head of the CBER biologics organization that we take part in. And I’m very optimistic in our interactions and discussions with the new leadership that, you know, the pathway to additional approvals and therefore value proposition for our shareholders is greater.
Again, when a company is first in its class, it’s done the hard roads, it’s out there, we’ve demonstrated we can sell, we can get reimbursement, we can make money out of this technology. We’re so far ahead of our competitors that I think the next 12 months, it’s about how much further we can execute and how fast.
Silviu, I appreciate the update from Mesoblast.
Silviu Itescu: Thank you for having me.
Ends