Mesoblast Limited
Q3 2016 Earnings Call Transcript

Published: 10 May 2016

[Operator:]

Thank you for standing by, and welcome to the Mesoblast March 2016 Quarterly Results. All participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to [Audio Gap].

[Silviu Itescu:]

Good morning. Thank you, operator. Good morning and good evening everyone. I am joined today by our Chief Financial Officer, Paul Hodgkinson, who will take you through the financial details of the results for the third quarter and nine months ended March 31, 2016. I will then guide you through the rest of the presentation focusing on our operational highlights for the quarter and the strategic path to bring our key products to market. We will then be happy to take questions. I would like to draw your attention to the cautionary note regarding forward-looking statements in this presentation. I will now turn the call over to Paul to provide you with an overview of our financial results.

[Paul Hodgkinson:]

Thanks, Silviu. If I start on Slide 5, just to introduce this, we are reporting as stated previously in US dollars, and this is the highlights of the nine months ended 31st of March. So cash on hand was $100 million at the end of the period, and if we look at the outflows as we indicated in the guidance given in earlier quarters, we have achieved a reduction of 25% versus the higher spending earlier quarters, and I will share that in a bit more detail shortly. In terms of the profit and loss account, we improved the loss before income tax by 14% or $9 million versus the comparative period, and within that the main cash affecting items were a deliberate reduction in R&D of 19%, and a reduction in our management and administration by 21%. And we still look to manage our runway to achieve the key inflection points for the coming period. Turing to Slide 6, if we look at the profit and loss account, you can see that 14% improvement in profit to $9 million, and a relatively flat position in revenue. I guess of note within the revenue line is we did get our first royalty - we did recognize our first royalty income on TEMCELL, which was launched pretty late in the quarter on February 24, and if we then turn to the driver of the loss performance in terms of why that has improved over the comparative, again the R&D expenses, we have reduced our expenditure on Tier 2 and we have deliberately managed our labor costs, and being quite selective about rehiring and managing our labor performance. In terms of management and admin we saved another $4.6 million, again focusing on labor costs. We did benefit by some currency impacts, and we reduced expenditure on IT. Finally in line with our readiness for the MSC asset, we did ramp up our manufacturing commercialization continuing the production for MSC-100-IV. Those are the main movements pertaining to cash in the profit and loss accounts. There were a couple of other movements on contingent consideration, but they relate to future cash flows, not today’s cash. Turning now to Slide 7, looking at our cash in more detail, so as we said in the previous quarters, you can see in quarter one of this year and quarter four of last year we had higher operating cash outflow and we have managed to bring that down. So we have had two quarters, one at $19.8 million, one at $22 million and I expect the third quarter to continue at that level. So in terms of our overall performance, we can see that we will deliver this 25% in comparison to those two high quarters, and we should be able to manage our inflection points going forward for the next 12 to 15 months. That is all I wanted to cover on the financials and now I hand back for a review of operations to Silviu.

[Silviu Itescu:]

Thank you, Paul. If you go to Slide 9, this is an overview of our product candidates in the major markets with high unmet need, and I will focus primarily today on those that we call our Tier 1 products and progress. The operational highlights for the nine months ended are as follows. For our MPC-150-IM product candidate for advanced heart failure, the Phase 3 trial was significantly reduced in size from 1,165 patients to 600 subjects following a meeting between our partner Teva Pharmaceutical Industries and the FDA. The trial is recruiting well across North America and is expected to expand substantially into Europe in the second quarter of 2016. Importantly the trial’s data monitoring committee convened in April. After reviewing the clinical data, the DMC recommended that the study should continue according to its protocol. This is a very important milestone for the company. The second product MPC-6 ID for Chronic Low Back Pain the current 360 patient Phase 3 trial continues to expand across many US sites, and in line with the FDA written guidance, the trial now uses a composite primary endpoint with acceptable thresholds for pain and function and a follow-up period of 24 months and these amendments have been put into the protocol as per the FDA guidelines. MPC-300 IV for biologic refractory rheumatoid arthritis top line Phase 2 results were released last quarter from the first cohort of patients who previously have failed one or more biologic agents, and the data showed that a single infusion of the lower dose resulted in early and sustained clinical responses with no cell related adverse events. With respect to TEMCELL, Mesoblast’s licensee in Japan, JCR Pharma, launched the first Allogeneic Regenerative Medicine product in Japan earlier this year, and this was a full approval not a conditional approval. The product has received reimbursement and the first royalties were recognized as Paul just mentioned. The same product has generated results in 241 children treated in an Expanded Access Program globally with steroid-refractory GVHD and the results, which were presented recently, and I will talk more about these demonstrative clinically meaningful responses associated with significantly increased survival. Mesoblast is currently recruiting an open label single Phase 3 trial in 60 children with steroid-refractory GVHD as first line therapy. Over the past several quarters we have had also significant results highlighted in public presentations and peer-reviewed articles. With respect to our heart failure product candidate and our diabetes product candidate that Phase 2 trial results were published in peer-reviewed journals, Circulation Research and Diabetes Care, respectively. More recently we exclusively licensed technology developed at Harvard University, which was shown at a pre-clinical study in the journal, Stem Cells, to enhance the homing properties of mesenchymal cells to sites of inflammation and to induce durable reversal of Type I diabetes opening a new potential product candidate. With respect to our GVHD program data from 241 children were presented at the Center for International Blood & Marrow Transplant Research and the American Society of Blood and Bone Marrow Transplantation in February. The data were also presented at the third international conference on regenerative medicine held recently within the Vatican. And finally, with our product for intra-articular treatment of osteoarthritis of the knee results from a randomized Phase 2a trial in patients with post-traumatic knee injury to the anterior cruciate ligament were presented at the 2016 Osteoarthritis Research Society International World Congress showing a substantial improvement over 24 months following a single intra-articular cell injection, in pain, function, cartilage thickness and joint structure. Now I'm going to go into more detail on our Tier 1 programs. The market opportunity on Slide 13 is outlined. What is important here is that most recently the incidence of heart failure has continued to skyrocket in the US. 915,000 new cases of heart failure are being diagnosed each year and continues to grow by at least 2% per annum. Patients with Class II to IV heart failure with a low ejection fraction represent almost 2 million patients. Most importantly the real gap in treatment option is for patients with the more advanced forms of heart failure Class III or IV heart failure patients for whom maximum existing therapy does not appear to slow down or change the natural history of recurrent hospitalizations and death. For these patients, the only option is mechanical support for heart transplantation. Importantly our product candidate MPC-150-IM is positioned to fill the significant treatment gap with patients with Class III, IV heart failure or advanced heart failure. The peak potential sales of our product in this space are approximately north of $4 billion as recently highlighted by several analysts. Slide 14 speaks to the clinical data for this product that we have generated in Phase 2, and the promise of this product in preventing heart failure related major adverse clinical events defined as recurrent hospitalizations or death, HF-MACE. On the left-hand panel, you see the overall prevention of a first heart failure MACE event in a Phase 2 trial that was published in Circulation Research in 2015. In the right-hand slide, you see the effect of a single injection of our cells in patients who have matched at baseline for a very large systolic volume of greater than 100 ml. These patients represent - are analogous to Class III, IV heart failure, and what you see is that in the control population, it is these patients that have the highest incidence of a heart failure major hospitalization event, 71% had one of these events at least over a three-year period of follow-up, and it is in these patients that we see the maximum benefit of a single injection of our cells preventing any heart failure MACE events over that period of time. Analyzing these data either by time to first event or by recurrent event analysis showed a highly significant protective and preventative effect of a single injection of our cells. So using this information we set up a Phase 3 program together with our partner Teva to target those patients with advanced heart failure, where medical need is the greatest. Patients with large baseline left ventricle systolic volumes Class III, IV heart failure and advanced heart failure are at the highest risk of recurrent heart failure MACE events. For these patients, as I mentioned, existing therapies are inadequate and the economic burden is the greatest. So the ongoing Phase 3 trial is designed specifically to enrich these patients at the highest risk of HF-MACE events. An operational update on the trial. The Phase 3 trial because it is recruiting patients at high risk of recurrent HF-MACE events, in discussions between our partner Teva and the FDA, was reduced in size from 1,100 to 600 because the primary endpoint was amended to take note of the multiple heart failure hospitalization events, where we are looking for a treatment related effect, no just on our first event, but on multiple events. The trial is recruiting well across North American sites, the primary endpoint is the comparison of recurrent heart failure MACE between MPC treated patients and controls. And during the second quarter of this year, European sites will be initiated for the trial. It will substantially increase recruitment across many sites. We will be providing together with Teva updated timelines for completion of the current Phase 3 trial for FDA and EMA regulatory submissions and for overall program completion, including the need for a confirmatory trial. Under our agreement, Teva may review its participation in the program during the quarter. Now for an important update and an important milestone that was achieved during the quarter. The data monitoring committee convened on April 4 to review the safety of the trial based on clinical data from the first 175 patients, after reviewing the data, the data monitoring committee recommended that the study should continue unchanged according to its protocol. We were very pleased by that and it is a critical first step in the success of this program. A futility analysis based on the trial’s primary endpoint will be performed when approximately 50% of the total heart failure MACE events have occurred. Interim trial results whether based on surrogates or the primary endpoint markers will not be disclosed in order to protect the integrity of the trial in accordance with the FDA’s written guidance. Now I would like to turn to our second major product, MPC-6 ID for Chronic Low Back Pain due to disc degeneration. Here again the market opportunity is tremendous. We are targeting approximately 4 million patients today in the US who have mild or moderate chronic low back pain and for whom existing therapies are ineffective. 60% to 65% of these patients are chronic opioid users and despite that they continue to suffer with severe chronic back pain. For these patients the only alternative option would be surgery and we are aware that less than 5% of these patients will ever undergo surgery. Slide 19, you see the results of our 100 patient Phase 2 trial, and what you see here on the left hand panel is the composite of pain and function as achieved by in blue the low dose; in green, the high dose treated patients; in black, the saline controls; and in red, the hyaluronic acid treated controls. And what you see is that in fact at a 12 month point, 3 to 4 times as many patients treated with a single injection of the lowest dose achieved a significant improvement in pain and function relative to saline treated controls. 80% of these patients continued to maintain the significant benefit in pain and function through 24 months. And we've very encouraged by these data and proceeded with the Phase 3 program whilst we were in further discussions with the FDA. The next slide speaks to the updated Phase 3 trial itself, including recently implemented components following written FDA guidance. The current 360-patient trial recruits well across multiple US sites and the FDA has provided the following written guidance that has been incorporated into the trial; use of a composite primary endpoint is acceptable for approval; the agreed thresholds for pain, 50% decreased in visual analogs score; and in function, 15 point improvement in Oswestry Disability Index are acceptable. Two time points, 12 and 24 months for meeting the pain and functional improvement criteria are acceptable together with no intervention of the treated level through 24 months. The FDA is also agreeable to the following two interim analyses, the first when 80% of patients have completed 12 months of follow-up and the second, a Bayesian analysis when all patients have completed 18 months of follow-up. In addition, we anticipate having an earlier interim analysis, the specific timing of which will be agreed upon with our potential strategic partner in this indication. Page 21, I want to talk to now Japan is an important commercial opportunity leading into this graph versus host disease product. Japan is the second largest established healthcare market. Our first product has been launched in Japan through our licensee, JCR Pharmaceuticals, who received full approval and launched TEMCELL for the treatment of acute Graft-versus-host disease in Japan in February. This was the first allogeneic cell-based product to receive full approval in Japan. Treatment course of TEMCELL has been established and has substantial reimbursement. Japan represents tremendous opportunity for Mesoblast product pipeline under the new legislation. This potential for conditional product approvals based on Phase 2 results showing safety and a signal of efficacy. Small bridging studies are needed in Japanese patients and they will support conditional approvals with reimbursement and sales for product candidates for up to 7 years, providing that the sponsor agrees to support the conditional approvals with Phase 3 programs. A mature pipeline means that we are well positioned in Japan for strategic initiatives across a wide range of indications. Regarding MSC-100-IV, a Phase 3 trial in children with steroid-refractory graft-versus-host disease is ongoing in the US, and this trial is based on an extensive body of data that we have generated, demonstrating that this product is effective when used as salvage therapy in children who have severe graft-versus-host disease and who failed other therapies. The use of this product in salvage therapy in 241 children was recently presented at several major international conferences as I have mentioned. However we believe that this product should be used as first line in children with steroid-refractory graft-versus-host disease because of its efficacy and its safety. And as a result of discussions with the FDA we have agreement that a 60 patient open label trial in this population as first line of the steroid failure supports an accelerated US approval pathway. This trial is currently active and recruiting in the US. And I think with that I might stop, hand it back to the operator and open this for questions. Thank you.

[Operator:]

Thank you. [Operator Instructions] Your first question comes from Alethia Young with Credit Suisse. Please go ahead.

[Unidentified Analyst:]

Hi guys. This is [Indiscernible] on for Alethia Young. Thanks for the question. Can you comment on how conversations are going in terms of partnering in the back program this year? Thank you a much

[Silviu Itescu:]

Thank you for the question. So it is very important that I think Mesoblast partnered this product with a strategic partner that has a distribution, sales and marketing capability in the back pain space so that we can leverage a sales force that already caters to the target patient population. It is also important in our discussions with certain strategic partners that we have clarity from the FDA around approvability of the product and the whole program in totality. And I think what I can say is that I have given you a sense today of written guidance from the FDA, how we have implemented the written guidance into our existing Phase 3 program such that we have a high degree of confidence that this program meets the FDA’s expectations of achieving - that it could achieve its primary endpoint will be an approvable program. That is very important in our discussions with strategic partners and look, you know, our discussions are very advanced, and I would hope that and expect that in the short-term we will be able to update the market on strategic partnership for our back pain product.

[Unidentified Analyst:]

Prefect. Thank you.

[Operator:]

Your next question comes from Kevin de Geeter with Ladenburg. One moment.

[Kevin de Geeter:]

Good evening. Do you hear me Silviu?

[Silviu Itescu:]

Yes. Hi Kevin.

[Kevin de Geeter:]

Terrific. I guess staying on back pain for a moment, how should we think about the - just from a powering standpoint the portion of patients that will have no interventions through 12 to 24 months, you know, how many will not sort of make the protocol analysis?

[Silviu Itescu:]

Look, I think you just need to look back at our Phase 2 data. The definition of treatment success in Phase 2 that I showed you on that slide was exactly the primary endpoint that is in the Phase 3. So in fact, through 24 months, 37% of the low dose treated patients versus 11.8% of the saline treated patients achieved a prespecified threshold of 50% back pain reduction, 15 point ODI improvement and no intervention at the treated level. That is how we have powered the study. So we have powered it for something like a 25% delta, and of course, expecting that something like a 15% to 20% dropout rate.

[Kevin de Geeter:]

Terrific. That is very helpful and back to Graft-versus-host disease in the US, Phase 3 pediatric program, you know, when should we think of a timeline for last patient enrolled, just a general update of how enrollment is going in that study?

[Silviu Itescu:]

Yes, I think there are two ways to look at that. The trial is enrolling to its natural completion. We hope to be able to complete it over the next 12 months, or sooner, but I think the point there is we continue to expand the number of sites. This is an active expansion process to more and more sites as they come on board. But in addition to that we have an active dialogue with the FDA and an upcoming meeting that we will talk about potential early interims, and an early stop based on efficacy that is beyond the minimum expectation. So I think this is an ongoing review of the program that may complete sooner rather than later, but it really depends on upcoming decisions with the FDA.

[Kevin de Geeter:]

One last one if I may, and then I will get back into queue, can you just comment on any learning from TEMCELL’s launch in Japan, the potential applicability particularly to the US market, based on your exposure to that sort of commercial experience and then just your general thoughts at the moment whether or not with regard to the US market you would anticipate Mesoblast commercializing at least for your pediatric Graft-versus-host, or do you think a partner may add value?

[Silviu Itescu:]

Okay. So, I think it is too early to ascribe any learnings from the Japan launch to the US. I have to say we have got to have at least two quarters of information before we can say anything. But with respect to the US, absolutely our plan is to launch the pediatric product ourselves. I think there is no doubt that the US launch will benefit from the history of the Expanded Access program, which has been a huge program, which has encompassed more than 50 sites. And I think that will speak to the ease of the launch in the US if we are fortunate enough to have product regulatory approval. So we don't believe there needs to be a very large preparative state for the US launch, and we don't believe that for pediatric alone there will need to be a lot of people on the ground because maybe 50% of all the pediatric transplants performed in a handful of sites. So, in addition to that there is a possibility obviously of a pediatric voucher associated with product approval, and I think that is obviously dependent on legislation being renewed this year. But we are very optimistic that should we get approval a pediatric voucher could be linked to this product and that is why it is very important for us to take this to launch on our own. I think with respect to the adult GVHD program and other applications of the MSC technology, obviously we would be open and continue to talk to multiple partners.

[Kevin de Geeter:]

Okay, I’ll get back to the queue.

[Operator:]

Your next question comes from Jason Kolbert with Maxim.

[Jason Kolbert:]

Thank you Silviu and congratulations on the progress. But I am sorry, I dying to ask you this question. Where are we with Celgene are they - we were looking for a go or no go decision, can you give me an update there?

[Silviu Itescu:]

I don’t think anybody was looking for go or no go decision, that’s not the way I would ever have characterized that it all. And in fact, Celgene continues to be an important strategic investor of Mesoblast. We’ve had ongoing discussions that are far broader than the original indications covered in the Right of First Refusal and we continue to be an active dialogue with Celgene as well as with many other, rather may be a substantial number of other pharma companies who are in the inflammatory and immune mediated space and I think the results.

[Jason Kolbert:]

And so, we hope you understand why you are thinking I am characterizing it, giving Celgene coverage time limit associated with the agreement when the time limit passed you announced that the agreement was being extended. So I am little bit confused why you think that question is kind of better line?

[Silviu Itescu:]

I am not sure what the question is, could you repeat the question? They had a Right of First Refusal indications, yes.

[Jason Kolbert:]

In the original agreement you announced that there was a time line associated with that when that time line was passed you announced that the time line was being extended, so I am confused now as to whether there is a time line or whether that first Right of First Refusal you know, ever expires wasn’t there a time associated with that?

[Silviu Itescu:]

Of course, so they had a Right of First Refusal of certain asset notably GVHD and chronic disease. And that Right of First Refusal has expired, we continue to be in dialogue with Celgene as we are with the number of other companies that have an interest in potentially commercializing inflammatory bowel diseases assets as well as the number of other inflammatory conditions such as rheumatoid arthritis. And of course the rheumatoid arthritis asset which was never passed of the Right of First Refusal with Celgene is a major driver of the way we see our inflammatory portfolio. Our first interim analysis of the RA data was at a top level presented last quarter, the full data set will be presented around end of June where we will have a full read on both cohorts and both doses and that represents probably the lead value inflection for an inflammatory discussions with a number of pharma companies.

[Jason Kolbert:]

Silviu, thank you so much for clearing that all.

[Operator:]

Your next question comes from [indiscernible]

[Unidentified Analyst:]

Hi, thank you. With respect to the Phase 3 Chronic Low Back Pain trial, I think previously you talked about and interim analysis that may be consistent with respect to CHF once that interim work is done whether also due the case that you don’t scroll what the result is?

[Silviu Itescu:]

Yes, I think a very important question. As I mentioned earlier, we plan to have multiple interim looks in this trial and the early look has to be in line with our strategic partners views. And so I think rather than be prescript it at this point I think it’s important to note that several of our partners have strong views on how to handle an early interim and what the objectives are. Most importantly I think is to use the 12-month interim as a potential resizing event for a parallel second trial that will need to be done so the two trials in conjunction complete at the same time so we have product registration and product approval. And I think some of these discussion points are very much linked to the initiatives and the plans to potential strategic partners in respect.

[Unidentified Analyst:]

Okay and then just shifting back over to the CHF Study you talked about providing some further guidance on time line this quarter, can you give more specific about what you might be able to say, like you might be haven’t followed?

[Silviu Itescu:]

Sure, I think the important point is this exit Phase 3 trials are trading very low, we - based on the recruitment rights across the US, based on initiation of multiple sites in pretty short order in Europe, based on additional strategic initiatives, we together with our partner should be able to update on time of completion of this trial, which is obviously much shorter than we have previously talked about, when it was 1,100 patients, time of initiation and completion of a confirmatory study and whether or not we can sequence other in parallel and sequence depending on the FDA’s views of how sick these patients are and what's needed for product approval.

[Unidentified Analyst:]

Okay great. We’ll look forward to that.

[Operator:]

Your next question comes from Anupam Rama with JPMorgan.

[Anupam Rama:]

Hi, good morning guys. This is Anupam Rama. Thanks for taking the question. Just a question on CHF, so we are today understanding correctly that we have must be reviewing its participation in the program in this quarter I just wonder if you can help us understand what can might determine their ongoing involvement and if there is not to go forward. How you might be thinking of strategic alternatives for the program?

[Silviu Itescu:]

Look [indiscernible] has been able to review its participation from the very beginning, contractually has the ability to review again at this point in the quarter, but really you need to address this question to Teva not to me, I mean I'm sure that they take their review based on many components including efficacy safety data including strategic objectives, including how well the trial is progressing including the views of the data monitoring committee, the principal investigators and the like. I think, there were many components, but I think Teva had the ability at previous times to continue to look and review you know, it’s not that I'm not going to pre-empt and I think at this point in time Teva is a sponsor continues to interact with the FDA has done a terrific job operationally and I have no reason to believe that he will change.

[Anupam Rama:]

Got it and just as patient number note in the DMC review, should this be 125 patients is it somewhat reflexive works things currently stand in terms of patient enrolment in a trial. And has that like change in the pace of enrolment?

[Silviu Itescu:]

Now the short answer is no. The DMC reviewed the first 175 patients. We are way beyond that, we will be approaching the 250 patient mark and beyond. So I think what you are seeing now is there is a hockey stick effect where patient recruitment is substantially going to pick up as we move into Europe. And clinical trials give you the expected completion date for this trial, so it’s publically available. And that’s our recruitment target with 600 patients.

[Anupam Rama:]

Great, thanks for taking the questions.

[Silviu Itescu:]

Thank you.

[Operator:]

Your next question comes from [indiscernible].

[Unidentified Analyst:]

Hey guys, can you hear me.

[Silviu Itescu:]

Yes.

[Unidentified Analyst:]

I shouldn’t have been given my middle name, its bit embarassing. Of course, all right. Listen just quickly one thing can you just clarify the difference between royalties and revenues from Kenzo out of Japan are we talking revenues from sales or royalties as an sort of milestone payment?

[Silviu Itescu:]

Yes, Mike. Yes, as we have disclosed in the perspectives where we get a royalty in the 20s from the sales and net sales of JCR into the market. Does that clarify for you?

[Unidentified Analyst:]

Okay, that was helpful. Plus this last question, so you’ve got a number programs that could potentially be partnered and the one that’s obviously received the most attention is back pain you also mentioned GVHD, but are there any other programs out there that you actively engaging potential partners with [indiscernible] for?

[Silviu Itescu:]

Well the key programs are rheumatoid arthritis and chronic disease, those are the two programs that we have substantial data set and represent major unmet needs particular in the biological refractory population there the intense with chronic disease is early remission and with rheumatoid arthritis certainly an ACR response remission. So those are two very important areas that we’re in substantial discussions with various parties.

[Unidentified Analyst:]

Okay, thank you that’s all from me.

[Operator:]

Your next question comes from Tanushree Jain, Bell Potter Securities.

[Tanushree Jain:]

Hi Silviu and Paul thanks for taking my questions. I just wanted to understand Silviu the conditional approval part in Japan has been in place for a while and we’ve seen on obvious highlighting of that in your presentation today. Should we read that as a near term focus of Mesoblast in using that path way to get some of their late stage products in Japan and if that’s the case could you clarify what products could be up for initial launch there?

[Silviu Itescu:]

Sure. So, we’ve gained a fair bit of experience in dealing with the PMDA through this new regulatory pathway, and obviously in the JCR in the approval process and the reimbursement process. Each of our product candidates that has generated signals in phase 2 in the US, heart failure, diabetic nephropathy, rheumatoid arthritis and chronic disease each of those programs is appropriate for accelerated approval in Japan on the basis of conditional approvals. And we’ve put a lot of thought into this and I think rather than pursuing individual products with individuals partners the likely approach in Japan is to establish a multi-product partnership, a strategic collaboration with either a large pharma company of a conglomerate so that we have effectively a stable of products that can be channeled through a parallel process for conditional approvals and launch with appropriate support for phase 3 for these assets which could come either in standalone programs in Japan or could be part of global phase 3 programs that are ongoing.

[Tanushree Jain:]

Right. And do you have more visibility now on what the size of bridging trial might look like in Japan?

[Silviu Itescu:]

Well, you only need to look at some of the products that are recently being approved in Japan. At the same time as [indiscernible] for example, an [indiscernible] muscle based therapy for class 4 heart failure patients was approved on the basis of seven patients and that product was reimbursed quite substantially for that type of population. We believe that we’ve got a more effective product with greater safety, with greater phase 2 data that would be potentially appropriate for not just class 4 but also class 3 patients. And so, I think Japan for a heart failure program is an obvious entry point. But I think the message is that small phase 2 data sets may be sufficient for indications where there substantial unmet needs and where there mortality risks.

[Operator:]

Your next question comes from Chris Kallos with Morningstar.

[Chris Kallos:]

Good morning Silviu. Maybe I’m repeating this question, but just back on the CHS trial, can you just clarify why the disclosure of interim trail results and also when should we expect something out of that trail in terms of clinical data?

[Silviu Itescu:]

The FDA has been very clear with us, it’s a standard view of the FDA, but the provider ask with specific written guidance that we should not be providing specific data based on either [indiscernible] or the primary end point to the market because potentially that can impact the integrity of the trail and can bias both patients and investigators to how well the trial is travelling. So, we’ve got to be very mindful of what the FDA says because if we don’t do what the FDA says the risk is that they will accept this trail for registration purposes. So this is a real and important issue. Having said that you can take note of the data monitoring committee that has reviewed clinical data from the first 175 patients and they’ve been very clear that the trial should proceed as planned and I don’t take those kind of statements lightly.

[Chris Kallos:]

So, is this a new development?

[Silviu Itescu:]

Yes.

[Chris Kallos:]

Okay. And just broadly speaking given the rate of uptake and the right of recruitment can we speculate on what might be a reasonable timeframe to get a result?

[Silviu Itescu:]

The clinicaltrials.gov website talks about this trial completing on August 18.

[Chris Kallos:]

So any time between now and then?

[Silviu Itescu:]

We’ve a second interim announces in-built based on futility and we’ve previously announced that will be done when 50% of the events have occurred. And we’ve previously announced that in discussions with FDA that will have an in-built early stop potentially based on overwhelming efficacy. So if we see that we’ve substantially reduced heart failure events, hospitalizations or death, there is a possibility for earlier completion based on positive outcomes.

[Chris Kallos:]

Great, thanks for that very helpful.

[Operator:]

Your next question comes from Craig Collie with Macquarie Research.

[Craig Collie:]

Hi guys, thanks for taking my questions. I just have a couple of quick ones. First of all, Paul in the slide, you received royalties of [Timsel] but I couldn’t see anything in the 4C, can you point in the direction where I can see that number?

[Paul Hodgkinson:]

Yes, the royalty there are in our revenue line Craig.

[Craig Collie:]

Cash?

[Paul Hodgkinson:]

No, no because as you depreciate with many of these contracts cash is receipted in subsequent period. So let’s not forget they only launched on February 24, book sales they have a contractual period to calculate the royalty and then they have an agreed contractual period to pay it over. So no, we’ve not got the cash from the multi, we expect that in future quarters.

[Craig Collie:]

Okay, thanks. And second, any commentary as to what might happen to cash consumption if [indiscernible] review on its involvement turns out to be unfavorable?

[Silviu Itescu:]

I don’t think it’s for us to speculate anything like that we don’t see any evidence of that and this is not an issue that we would be working through at this point in time. At this point, Teva is a sponsor of the trial, funding the trial and things are going better than we could have anticipated.

[Craig Collie:]

Okay. So no consents about potential cash burn increasing if they pull out?

[Silviu Itescu:]

This is not an issue that we’re reviewing at this point in time at all.

[Craig Collie:]

Okay, thank you.

[Operator:]

Your next question comes from [indiscernible]

[Unidentified Analyst:]

Thanks for taking my question. Referring back to the CHF interim trial understanding that they’ll be looking at responses in admissions like may be systolic and diastolic volumes, can I just double check did the DMC look at those and if they did examine those, who has been told that information to yourselves and Teva have information about those, getting points at the time of the interim analysis?

[Silviu Itescu:]

The monitoring committee certainly had access to the systolic volumes, diastolic volumes and the like they review all clinical data available to them. Neither Mesoblast nor Teva have received specific outcome of the interim analysis. What we’ve received at this point is a recommendation of the DMC to continue the trial as planned.

[Unidentified Analyst:]

And my second question is, can you give a timeline of when you expect to be able to give an update on the future timing for the trial?

[Silviu Itescu:]

Yes. We expect to provide detailed updates on timelines during Q2.

[Unidentified Analyst:]

Thank you, that’s all from me.

[Operator:]

Your next question comes from Chris Kallos with Morningstar.

[Chris Kallos:]

Sorry I had a follow up question. Just in broad terms how would you characterize market at the moment in the absence of getting a partnering deal, you had to come back to the market to raise money?

[Silviu Itescu:]

We’re looking for non dilutive capital from strategic partnerships and we expect that we’ll be able to update the market in the short term about that.

[Chris Kallos:]

Okay, great thanks.

[Operator:]

There are no further questions at this time, I’ll now hand back to Mr. Itescu for closing remarks.

[Silviu Itescu:]

Great, thank you everybody, your continuing interest in Mesoblast and ongoing support is appreciated. Thank you for your time today.

[Operator:]

That does conclude our conference, thank you for participating, you may now disconnect.