Mesoblast Limited Sponsored ADR Stock

Hello, and welcome to the Mesoblast financial results for the full year ended June 30, 2026. An announcement and presentation have been lodged with the ASX and are also available on the Home and Investor pages at www.mesoblast.com. [Operator Instructions] 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 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 turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Thank you, operator. Good morning, good afternoon, and thank you all for joining us on Mesoblast's financial results and operational update for the period ended June 30, 2026. With me are our Chief Financial Officer, Jim O'Brien; Chief Commercial Officer, Marcelo Santoro; and our Head of the Orthopedic Musculoskeletal Program, Roger Brown.

If we go to Slide #2, please. Mesoblast is a -- the leader in allogeneic cellular therapies. RYONCIL, our lead product for mesenchymal stromal cells is the only FDA-approved product of its type, a first-in-class therapy and has undergone a successful first year launch with net revenues of $115 million for fiscal year 2026, first full year post launch. This is a highly profitable single product on a stand-alone basis and the proceeds from revenues generated from this product are being reinvested in our Phase 3 programs and in our manufacturing for potential blockbuster opportunities.

We've built a mature commercial capability with an infrastructure that supports product launch growth and beyond RYONCIL multiple expansion indications beyond GvHD and other areas. We've built a specialized sales team focused on hospitals, transplant centers and specialists. And we've built a robust Phase 3 pipeline with multiple blockbuster opportunities, including chronic low back pain that I'll be talking quite a bit on today and inflammatory heart failure. RYONCIL label expansion beyond GvHD is focused on pediatric, adult and children rare inflammatory conditions such as Duchenne.

Next slide, please. Our market leadership position is underpinned by our so-called moat. We have a global IP portfolio of more than 1,100 patents and patent applications, which provide commercial protection beyond 2044. Our dominant IP protects ourselves, our manufacturing capabilities and our multiple indications and commercial opportunities.

We have a first-mover advantage in that RYONCIL is the first and only mesenchymal stromal cell product approved by the FDA. We're leveraging FDA guidance on how approved products such as RYONCIL can be expanded to obtain additional label for new indications. We've completed multiple large U.S.-based randomized clinical trials, which continue to provide evidence of efficacy of our platform technologies. We are the leader in complex manufacturing with strong IP protection, significant know-how advantages and demonstrable FDA alignment, scale-up capability and ability to leverage across our product pipelines.

And finally, we are investing further in our next-generation technology to maintain our leadership position and enhance our tissue homing characteristics and have new products that leverage our existing development to date.

Next slide, please. This slide is a snapshot of our worldwide leadership in allogeneic mesenchymal stromal cell using a portfolio that leverages two major platforms, our rexlemestrocel platform in green and our remestemcel platform in blue. As you can see here, the remestemcel platform branded RYONCIL is obviously now in the market for children with this life-threatening disease called acute graft versus host disease, but is also being expanded in adults in markets that are at least 3x bigger than the pediatric market. The total addressable market for the GvHD opportunity in children and adults is in excess of $1 billion.

Remestemcel or RYONCIL is also being developed for other rare inflammatory conditions where the underlying mechanism of action -- it can be leveraged beyond GvHD. One of these indications is Duchenne's. Duchenne is a very large unmet need in children as young as two to three years old. And these unfortunate children continue to develop inflammation of their muscles, the muscle destruction and end organ damage involving the heart and lungs.

On the basis of preclinical data plus the -- leveraging the approval of RYONCIL and its mechanism of action, the FDA cleared an IND to commence a Phase 3 trial with potential registration of the product in this very large opportunity.

The second-generation platform, rexlemestrocel is based on using monoclonal antibodies to isolate an even more potent platform technology of cells, stromal cells that are highly purified and demonstrated significant outcomes across multiple major indications. This platform has been focused on local delivery in the heart, in inflammatory heart disease and in the orthopedic applications, particularly the intervertebral disc disease where a single injection into the disc space has resulted in substantial and durable long-term reduction in pain. The total addressable markets for rexlemestrocel just in cardiac disease and in back pain in aggregate, exceed $20 billion, huge blockbuster opportunities.

Next slide, please. Fiscal year 2026 proved to be a successful transition from the R&D company that Mesoblast was to a commercial company with delivery of major milestones. In our first full commercial year, we were successful in demonstrating a U.S. launch of RYONCIL with fourth quarter net revenue of $36 million and annual revenue in first year in FY 2026 of $115 million. Our gross profit on total sales, excluding amortization expenses, was $110 million.

The major milestones that were achieved during the fiscal year were registration trial, the label extension of RYONCIL into adults with steroid-refractory acute graft versus host disease that has commenced and is currently enrolling across more than 40 sites in the United States. A successful IND submission with clearance by the FDA of our Phase 3 trial for pediatric Duchenne, a completion of 350 patients treated in the pivotal randomized controlled Phase 3 trial for the blockbuster indication of chronic low back pain. This trial seeks to replicate an earlier trial, which achieved more than 12 months reduction in pain from a single injection. The total patient numbers, importantly, in this trial increased from 300 patients to 350 patients as a result of strong demand from the trial investigators to have their patients enrolled in this innovative program for patients who otherwise have no alternatives.

Now let's move to our financial update, which will be presented by our Chief Financial Officer, Jim O'Brien.

Thank you, Silviu, and good day, everybody. On Slide 8, our income statement for the year ended -- June 2026 as compared to June of 2025. Important to note here, as Silviu pointed out, we had $115 million of net revenue for the year, a very exciting year for us that we expect to build on in the future. We continue to invest in our R&D programs. Product development costs for the year was $17.3 million, and our continued R&D investment in our Phase 3 programs were roughly $21.2 million.

We did support the revenue growth of RYONCIL with the increased investment in sales and marketing expenses of roughly about $18 million. We have a very strong commercial team now built around the launch, and we continue to penetrate the market and grow market share. Importantly, we reduced our net loss after taxes this year by 44% to $57.5 million.

Next slide, please. Our balance sheet remains very strong. We ended the fiscal year in June with $103 million. For the year, our net cash usage was $43.8 million. And importantly, in the second half of the fiscal year, our cash burn was $13.4 million compared to $50 million in the same period a year ago. We are working towards profitability. We have a very strong cash flow forecast, plus we're controlling costs in all areas across the businesses, and we're deploying funds where our operations are most needed to support operations and to continue to grow the company.

Our operating plan includes spending money on our Phase 3 programs, building out our manufacturing capabilities, supporting BLA filings and having the appropriate inventory levels to support patient demand. Earlier this year, as we've reported, we entered into a credit line facility of $125 million, replacing a long-term debt. That carries an 8% interest rate. There is no amortization of the principal for five years. Our balance sheet is very strong to support our upcoming fiscal year in terms of being able to deploy capital where we need to.

Next slide, please. And with that, I'd like to turn it over to Silviu again to take you through our acute graft associated versus host disease programs and to address the accomplishments that we've reached so far this year.

Thanks, Jim. This next slide summarizes the key accomplishments so far for RYONCIL's commercialization in acute GvHD in children. Importantly, in green, the real-world experience continues to show the difference we're making in these children and their outcomes with 84% survival in -- early in the disease process with treatment of RYONCIL in children who otherwise would have a very high mortality.

As I mentioned earlier, the net revenue exceeded the $125 million since launch of last year. We've now got more than 50 centers onboarded. And importantly, insurance coverage shows that more than 98% of U.S. lives across the country are now covered. Medicaid cover federally was in place early, mandatory in every state, and we were very pleased having received a J-Code in October 2025, which continued to contribute to the growth in revenues. Finally, our focus in the next 12 months will be to expand the product adoption in the adult market, and I'll talk about that in the next couple of slides.

Next slide, please. So this is a snapshot of strategic approach to continued growth based on identifying and prioritizing those appropriate patients using various tools at our disposal, reinforcing the superior outcomes, particularly the earlier the product is used, the better the outcome in these very, very sick children. We will continue to access reimbursement pull-through and empower caregivers to demand that RYONCIL be used in their children as soon as the disease is diagnosed.

Next slide. Now the adult form of this disease is a huge opportunity for RYONCIL growth. There are more than 2,000 adults annually in the U.S. with steroid refractory graft versus host disease. And of these 50% approximately have got Grade III/IV disease, which is associated with high mortality. Ruxolitinib is the only drug that's approved in the U.S. as second line for adults with acute GvHD. However, only about 42% of patients with the severe form of the disease, Grade III/IV, actually achieve a response at day 28 to ruxolitinib. And these patients who don't respond have a very, very dismal survival as low as 20% to 30% by day 100.

So there is a very large unmet need in adults who are currently being treated with ruxolitinib or steroid refractory graft versus host disease. In these adults, mortality remains very high. Importantly, those are the very adults who have been enrolled under expanded IND and the compassionate care by Mesoblast for treatment with RYONCIL. And unlike other therapies, which result in, as I said, survival of only 20% to 30%, we're seeing a 76% survival at day 100 in these patients with terrible outcomes.

Next slide, please. This is a slide that provides a snapshot of, on the left-hand side, survival in patients who have failed ruxolitinib as second line and who are then being treated with other agents as third line. And on the right-hand side, patients who have failed ruxolitinib and another second-line agent have then been offered RYONCIL under our compassionate care program. And what you can see here is on the left-hand side, the day 100 survival in the -- where the dotted line is, is a dismal 20% to 30%, roughly 25% in this particular report. But on the right-hand side, patients who otherwise meet the exact same criteria have a 76% survival, adolescents and adults when they've been treated for four to eight weeks with a regimen of RYONCIL.

Therefore, we believe that this is a treatment that should be offered to these patients, a potential adult market of more than 600 patients annually with Grade III/IV disease refractory to ruxolitinib or any other agents.

Next slide, please. But even more proximal than that is the entire second-line market in adults with acute graft versus host disease. As mentioned earlier, there are more than 2,000 adults who annually who develop Grade III/IV disease as part of their disease process after a bone marrow transplant. This is a market that's 3x bigger than the pediatric market. And this is a market that we have currently addressed through a randomized controlled trial of 180 patients actively enrolling across the U.S. These patients in this trial are being randomized 1:1 to ruxolitinib alone versus ruxolitinib plus RYONCIL. We are hoping to see a significant benefit in terms of the day 28 response and a further benefit in overall survival. And if we're successful in this trial, RYONCIL would become part of the second-line treatment regimen in these high-risk patients with Grade III/IV disease.

This trial is expected to take a total of 18 months to complete with -- but it will have an interim analysis when approximately 57% of patients are enrolled or close to 100 patients. And we expect that interim analysis to be performed in the fourth quarter of 2027. If successful, that would allow us to move forward with a BLA filing for a label extension.

Next slide. Now let me move on to what we think is our largest and most exciting near-term blockbuster opportunity. That's our second-generation pipeline rexlemestrocel for chronic low back pain. The unmet need is substantial. Of the 35 million patients across the U.S. who -- suffer from chronic low back pain, about 60% the cause is degenerative disc disease, which is an inflammatory condition. And of these, about 7 million fit into our criteria of moderate to severe disease within the first five years of diagnosis refractory to all medical therapies, including opioids. The addressable market here is at least USD 10 billion.

Major milestones to commercial launch are a Phase 3 trial that has completed treatment. All 350 patients have completed treatment. This Phase 3 trial seeks to confirm an earlier Phase 3 trial, which showed pain reduction at 12 months. This is an FDA approvable endpoint as supported by various meetings and documents with the FDA. The trial readout is going to be in the second half of calendar year '27, followed by a BLA filing with potential approval in calendar year '28.

Next slide. This is a diagram that shows what the cause of this severe degenerative disease back pain is all about. On the left-hand side, you see what a healthy intervertebral disc looks like. On the right-hand side, you see what a degenerative intervertebral disc looks like. In the middle of that area in red, right in the middle of the intervertebral disc is inflammation. That's where your immune cells come in to try to restore this integrity. But in the process of trying to repair, they release a cytokine storm, and many of you are familiar with that term from the COVID period, but a cytokine storm that inadvertently destroys healthy parts of the disc, you lose disc height and you have severe pain as your outcome. That's what we seek to address with a single injection of our cells right in the middle of that inflamed disc.

Next slide, please. What is the patient treatment journey in this disease? Well, after conservative treatments that include non-steroidal anti-inflammatory drugs, there's very little. After patients have failed for three months or more to conservative approaches, many physicians still prescribe opioids. And unfortunately, opioids are very weak agents that reduce pain. They lead to continued requirement for progressively increasing dosing. There's addiction behavior that is associated with it and unfortunately, accidental overdosing.

Beyond opioids, there really isn't anything else that can address the severe unremitting chronic pain. And so many patients then move on to interventional approaches that are really surgically based and that includes epidural injections that are guided by radiography, but also radio frequency ablation, spinal cord stimulation and intrathecal pumps. Beyond that, all we are left with are severe invasive surgeries. So there is a large unmet market that we're targeting to treat moderate to severe chronic low back pain that is totally unaddressed at this point in time.

Next slide, please. In the earlier Phase 3 trial, this snapshot is taken from -- in 202 patients who received a single injection in blue of rexlemestrocel or in red rexlemestrocel combined with a carrier. What we see is a significant pain reduction was seen as early as six months, maximal by 12 months and durable through at least 36 months. And in comparison to a saline injection in green, which shows very little effect. But just to put this into context, a very mild reduction in pain from a saline injection is about equivalent to what you would expect to see with opioids. So this is a dramatic reduction in pain that is long-lasting from a single injection. And this is -- these are the data that we are aiming to replicate in the 350-patient pivotal trial that has just completed treatment.

Next slide, please. Now who are the physicians that administer this product? Today, the dominant caregiver that provides treatment for these patients are the pain specialists in multidisciplinary clinics where a patient either goes directly or where the patient is referred to from his primary care physician.

Next slide. And when we've done a formal outreach, a commercial outreach to various types of physicians, what you see in this middle panel circle, amongst the pain specialists who are the experts in this space, 85% of them on reviewing the data from the earlier trial I just showed you are more likely on that basis of those results to recommend rexlemestrocel for chronic low back pain than anything else if these results were to be replicated in a commercial product.

Next slide, please. Let me move on to our other blockbuster indication, which is chronic heart failure, also from a single injection with rexlemestrocel. We're targeting the sickest end-stage patients because that's where the biggest unmet need is today as we move forward in the broader indications. Despite an artificial heart, the left ventricular assist device that is currently implanted in the left ventricle of these patients who otherwise would have a 50% death rate in the first 12 months -- the right side of the heart continues to be unprotected, continues to have inflammation and continues to fail. Right heart failure is the #1 cause of death in these end-stage patients despite the fact that they've been checked alive with an artificial heart in the left side of the heart.

Next slide, please. And in registry data that cover more than 6,000 patients, this is very recent data in 2021 and continues to -- in 2026 be supported by registry data. The #1 cause of both death, hospitalizations is right heart failure. You can see as many as 28% get right heart failure in these large registry studies. And when you get right heart failure, you have backup of blood in your liver and your gut and you have terrible bleeding. And so they die of multiple complications, including severe bleeding from the gastrointestinal tract.

Next slide. Our randomized controlled trial was performed in conjunction with the investigators across the U.S. who performed these surgical procedures. And in that study at both 6 and 12 months, a single injection of rexlemestrocel reduced by fivefold or more the incidence of major life-threatening gastrointestinal bleeding. And this was due to strengthening of the right side of the heart and reduction in right side of heart failure.

Next slide, please. In addition to reducing bleeding, which was the principal efficacy endpoint in that trial, as you can see here in the top panel, we also reduced hospitalizations from right heart failure by about fourfold at 12 months in all patients and particularly in those patients at highest risk, which were ischemic patients. And most importantly, as you can see in the panel below, survival was improved from a 30% mortality rate in these high-risk patients to about 9%, and this was significant.

Next slide. So our strategy is to file for full approval of REVASCOR in this high-risk patient population at risk of right heart failure and severe life-threatening bleeding. And if we're successful to gain FDA approval, then this approval can be extended into the much larger patient segment with Class II/III heart failure where there's approximately at least 1 million patients in the U.S. alone.

Next slide. So in summary, the presentation today has told you what we've done, what we intend to do and how we're going to do it in the next 12 months. RYONCIL is commercial today and we seek to have multiple label extensions for this product in order to strongly grow our revenue base. We seek to increase penetration of the pediatric market, maximize early use and position the product as both a third line and a second-line treatment for adults with steroid-refractory graft versus host disease, markets that are more than 3x bigger than the current pediatric market.

Our focus beyond that is on additional inflammatory diseases both in pediatric patients and adult patients. And the first that we're targeting is Duchenne's which is a pediatric disease that's progressive without any cures today that begin as early as three to four years of age.

In addition, we're pursuing strategic partnering opportunities for inflammatory conditions in both children and adults with various appropriate strategic partners. For our second-generation pipeline platform rexlemestrocel, we've taken the program right to the end and retain full value in the U.S. market for the blockbuster indication of chronic low back pain. The pivotal Phase 3 trial of 350 patients has completed treatment, and we are following these patients through 12 months with the trial to complete mid-2027 calendar year and then if a positive readout positions us for a BLA filing for a blockbuster indication.

Our chronic heart failure program is -- we seek to complete our BLA filing with the FDA with the expectation that if approved, that can be expanded into the much larger Class II/III heart failure indication, which will be an opportunity for a strategic alliance.

On that note, I think I'll stop, and we would be delighted to take questions.

[Operator Instructions] Thank you. Your first question comes from Edward Tenthoff with Piper Sandler.

It's really exciting to see all the progress you guys are making. I have a question. I mean, great growth from RYONCIL in the current label. Would you hazard a guess to what kind of growth we should be expecting over the next fiscal year? How far do you think we are in terms of penetration of the kids with steroid-refractory GvHD.

And I guess my second question really came down to with so many different sort of pediatric inflammatory diseases and with the backdrop that DMD has been tough, there is some competition there. Why did DMD come to the top of the list in terms of secondary indications for childhood inflammation?

Sure. These are all great questions, Ted. Thank you. I think with respect to guidance, I think we've only just completed our first year, the next 12 months will be -- we will assess it in due course. I know that Jim is very keen to review progress and by midyear we will have a better sense of continued growth. But we certainly expect to see double-digit growth in the coming 12-month period.

I think your question pertains also to our potential areas of growth in new inflammatory conditions. Why Duchenne is a great question. Duchenne is a complete unmet need. To your point, there are various people looking at how to use cell therapy in Duchenne's patients. Most of those people are looking at later-stage disease, 10 years and older at a point in time when the children are already non-ambulatory and that's when we believe the disease is very late. That's not where we think we can make the maximal difference in benefit. Maximal benefit, we think can be -- should be obtained in children as early as age three to four well before the age of nine, for example, when there is maximal inflammation by both T cells, macrophages in the muscles -- in skeletal muscles and early on even in the cardiac muscle.

The mechanism of action of our cells with graft versus host disease lends itself extremely well to targeting the T cell process that is going on in the skeletal muscle in these young children. And if we can turn off that disease early there won't be any need for product later on.

And today, there are a number of gene therapy approaches that aim to improve or bring back some of the normal dystrophin protein. None of those are going to be curative and all of those will continue to be accompanied by severe T cell-mediated inflammation of the skeletal muscles. So we think that we have a unique product built on the mechanism of action in GvHD, and we've demonstrated this in preclinical studies that is both likely to have a major impact early on in the disease and be additive to the gene therapies that are out there.

Your next question comes from Olivia Saunders with Cantor.

What can you guys tell us at this stage just around how enrollment is going in the adult GvHD study? And for that interim analysis later next year, is that alone enough for a potential sBLA filing? Or is there anything else the FDA has actually asked for as part of that adult submission? And then also just wanted to ask about powering for that trial design, if you guys have disclosed that and how you ultimately decided on a treatment effect on top of Jakafi just in terms of effect size. Really just trying to get a better sense for your overall confidence level around enrolling the right patients that will produce a high enough response rate to hit your stats goal.

Yes. These are great questions. So let me see if I can take those one at a time. The basis for starting this trial -- and this trial is being recruited across more than 40 sites in the U.S., and it's performed in collaboration and partnership with the Bone Marrow Transplant Clinical Trials Network, BMT CTN, which is a network of 80% of all the top bone marrow transplant centers across the U.S. So it's being validated by this group, which is an NIH organization, which tells you where the unmet need is because they're driving this indication.

The unmet need is in patients with Grade III/IV disease who are currently being treated by the only approved drug, ruxolitinib. In that group of patients, which is about 50% of the adult GvHD market, in that group of patients, ruxolitinib does not perform very well, has not demonstrated a survival benefit with overall response rates in the 50% range. And so there is a big unmet need because these patients -- if 50% of patients fail ruxolitinib, I showed you earlier, these patients have nothing else beyond that with a 25% survival at day 100 once they failed ruxolitinib. That's where the big unmet need is.

We're addressing this market in two different ways. I showed you data where RYONCIL, once ruxolitinib fails, can rescue these patients and get a 76% survival outcome. That's great, but it's a sequence that we and the physicians believe should be addressed even earlier. And so the trial design here is a trial in that group of patients, Grade III/IV disease, randomized 1:1 to ruxolitinib only where we expect a 50% failure rate versus ruxolitinib plus RYONCIL, where based on a single center pilot study, we would expect to see an overall treatment benefit of at least 75% day 28 response. And so that's how the trial has been powered with powering approximately 85% to 90%.

Your question was then -- actually, I'm sorry, I believe the expectation is that it will be about -- from 50% to about 70% overall response rate. Our interim analysis on 57% of patients is based on the assumption that we might do better than that actually and achieve a responder rate north of 75%. If we're successful and do achieve that, then 100 patients will be sufficient to declare success. And so both of those, the full powering of the 180 patients and the interim analysis to declare early success have been vetted with the FDA. And both of those, if we overachieved at the early interim or if we achieved the expected outcome of the full study, both of those would support an sBLA filing.

Okay. Great. And have you actually -- are you able to disclose the percent or the number of patients that you've enrolled at this point? -- suffice to say you're still feeling good about the interim...

Patients have been enrolled, treated. We expect the sort of hockey stick effect as we enroll more by the end of this year, and then we expect to have a substantial number on a monthly accrual basis from January onwards, such that we will have achieved 100 patients roughly by the fourth quarter of next year. And we're on track to do that.

Your next question comes from Madeline Williams with Canaccord.

Just as it relates to just off the back of the expansion into the adult population, you have mentioned that you've treated adults and adolescents and there has obviously been some good data that has come out as it relates to that. I mean what have the conversations been with the FDA about your capacity to treat the later stage patients at an earlier time point and how feasible that might be?

Yes. Look, as you can imagine, those discussions are very active. What I would say is that there's a new leadership at the FDA, and we're very pleased with the new leadership, both at the level of senior -- the most senior leadership of the FDA as well as at the CBER level as well as the cell and gene therapy level. And there has been evident flexibility shown by the new leadership in other areas of cell and gene therapy. And we're in discussions, and we will have meetings this quarter with the agency to discuss some of these new potential areas of label extension.

And just as it relates to the timeline associated with DMD, you sort of touched on it. But do you sort of have any sort of clear plans to initiate the pivotal trial in that space in the next 12 months?

Well, we certainly do, absolutely. We -- at the moment, are in discussions with a group of clinicians across the U.S. to put in place what the appropriate sites need to be and in discussions also with the stakeholders of the parents and children to ensure that we have the right groups that can recruit most rapidly and most efficiently. And as soon as all of that's in place, the study is ready to begin.

Great. And just finally for me, and I'll jump back in the queue. Just for the next 12 months and sort of growing RYONCIL in the pediatric business, I mean, do you foresee that there'll need to be additional spend in that sort of core business to continue growing it -- the revenue?

Madeleine, it's Jim O'Brien. Let me try to address that. I think we've got a good clear line of sight in our spending on our important Phase 3 programs over the next 12 months. The capital allocation that we have and the plan to do so is crystal clear to us and execution is utmost important in terms of achieving our milestones as we've laid out today as well as controlling costs and reducing our cash burn. So our plan for the new fiscal year is to be able to fund the programs that we've outlined today in a very judicious way.

[Operator Instructions] Your next question comes from John Hester with Bell Potter.

A question for Jim. Jim, just looking at balance sheet, you've got cash of $103 million, net debt of about $15 million. And your cash burn in the second half, you said reduced to about $13 million. What is your expectation of the need to raise additional capital at this time?

Well, I think we want to keep all of our options open. With that being said, my expectation is that our cash burn in fiscal '27 will be less than it is in fiscal '26, given the growth of the RYONCIL franchise and the market growth that we expect, cash receipts that we expect. Our budgets are very clear in terms of where we're allocating capital. So we'll keep our options open. But at this time, our balance sheet is very supportive of it. Recall that our debt is all long term. It's got a five-year balloon on it.

So when I look at the cash balance that we have, our strong working capital, the company's balance sheet can support the growth that we've spoken about today. And we'll always look to continue to invest in growth opportunities and be supportive of that from a financial standpoint.

And perhaps just a follow-up. At what quarter do you expect to go cash flow positive from operations?

Yes. I'd rather not -- I'd rather steer away from that question at this point. It's early in our fiscal year. And as you know, when you talk about spending on R&D programs and enrollment, we're doing a number of projects around manufacturing processes. We are the leader in this space. Quarter-by-quarter fluctuations can happen, but we have a clear line of sight in terms of what our priorities are and Silviu and I are guiding the company towards profitability for the next fiscal year and beyond.

So quarter-by-quarter, I think it's a little tough to pin me down on that. But I would expect to see in our future filings this year, certainly a lower cash burn than we experienced in 2026.

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

Great. Thank you, everybody, for joining us today and for the very insightful questions. We hope we've given you a very clear trajectory of the company. We've had a terrific year in the last 12 months. We think the next 12 months are going to be even more exciting on multiple areas, including growth of our revenue stream for RYONCIL and most excitedly about our back pain blockbuster opportunity. So we look forward to speaking with you all in the short term. Thank you, everybody.

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

Good morning, and welcome, everyone, today is Mesoblast's inaugural and R&D Day. We've got a wonderful morning planned and appreciate you all investing the time to come along and hear the Mesoblast story.

Before we get started, I'll just draw your attention to the slide, the forward-looking statement that I've got displayed on the screen. Okay. So the format will be presentations from Mesoblast program heads and our leaders. And they will be followed by a fireside chat with KOLs, and then we'll conclude with Q&A. We're delighted to have such a distinguished lineup of industry key opinion leaders for you to hear from today, and we're very grateful for their time.

And with that, I'll now hand over to Silviu, Mesoblast Chief Executive.

Good morning, everybody, and thank you for coming. We're very excited to have our inaugural R&D Day and it's great to have so many friends in the audience. So nice to see you all. Mesoblast is the global leader in allogeneic or off-the-shelf cellular medicines. We are located in the United States, in Australia and Singapore, and were listed [ July ] on the NASDAQ and on the [ ASX ].

We're developing product candidates for distinct indications based on two leading platform technologies, our Remestemcel first generation technology and Rexlemestrocel, our second-generation technologies. And you'll hear about both of these. But importantly, we have the only first FDA-approved product launched successfully for any indication across the U.S., but most importantly, for children with a devastating complication called acute [ graft ] versus host disease.

We have a very extensive global intellectual property portfolio with protection across all the major jurisdictions through to at least 2044 and we have devoted a lot of time and effort to FDA-inspected commercial scale manufacturing that underpins everything that we do. Our proprietary stromal cell technology platform positions Mesoblast to be first-in-class. Our unique [ mesenchymal ] cells are cells that fight inflammation uniquely. They're derived from healthy donors, they're [ hone ] to inform tissues and respond to inflammatory signals. They secrete factors when activated that turn off multiple inflammatory pathways.

But importantly, are otherwise [ inert ] in the absence of inflammation, that underpins their extensive safety profile. Otherwise, the mechanism is to reduce inflammation and to improve tissues result [ in ] tissue repair more broadly. We have proven first and second-generation technology platforms. And as I mentioned, the first generation is called Remestemcel. That's the one that's FDA approved, and we'll talk a lot about that shortly and that focuses on rare pediatric and adult orphan diseases.

Rexlemestrocel is our second-generation product that is based on immunoselection for precision. It's highly scalable, has greater potency and is geared towards blockbuster high-volume diseases. Our unique off-the-shelf properties, the allogeneic properties of this technology underpin our business model. These cells do not express certain surface co-stimulatory molecules that otherwise would be detrimental and therefore, do not induce immune reactions There's, therefore, no need for immunosuppression unlike many other types of cells that people are focusing on. And ultimately, from a single donor, we can generate products that treat thousands of unrelated recipients. And this has been a vision for many years both from our former various collaborators.

But more important, we've been in this space for a long time. We know this. People are skeptical that we would be able to make an off-the-shelf product to treat unrelated people. But here we are. We have an industrialized process. It's based on a very well-understood technology, and we can really scale this up with the supply chain from end-to-end that makes business sustainable. And in fact, our manufacturing process, which you'll hear more about today, is a highly scalable proposition with expansion without differentiation with validated potency assays, which ensure batch-to-batch consistency and reproducibility and equally as important proprietary media formulations that enable substantial scale up ultimately to be used with bioreactors for footprint reduction.

This slide speaks to the underlying mechanism of action of all of our technologies and how we use them to target severe diseases of inflammation, the so-called cytokine storm syndromes, our cells are well characterized. They have on their surface, a variety of surface receptors that [ bid ] to various pro-inflammatory cytokines, including IL-1, IL-6, IL-17, TNF [ interferon ] gamma. So you can imagine when these cells right in the middle of a cytokine storm where all of these big cytokines are generated at high levels. And you'd all be familiar with the cytokine storm that we all were worried about COVID [ AD ] some years ago.

You put these cells right in the middle of all that and they get activated, and then they turn on their precision-based responses, turning on and producing various factors that are also very well characterized and switching off the multitude of immune cells that are responsible for the diseases that these cells ultimately aim to turn off. We've understood all of this and it's the basis of how we select the appropriate diseases that we target, the appropriate patient populations and how we structure our business going forward in terms of not just precision medicine, but aiming for remission induction outcomes.

We are the first-in-class leader in allogeneic cellular therapies. Our business is based on at least these three pillars the technology, the commercial capability and the pipeline. Our technology has resulted in having our first successful U.S. launch. Net revenues today approach $100 million since launch just last year and continuing to grow. We've got a highly profitable single product on a stand-alone basis. If this was a company that only had one product, this would be a profitable company.

But more importantly, the revenues that we're now generating quarter-on-quarter are used to support our internal programs. We're able to now match our internal spend on our programs to the strength of our revenues. And we invest in our label extension programs, and we invest in our blockbuster opportunities. Our commercial capability is now well established.

We've got infrastructure that supports our product launches across multiple expansion indications. And we just announced yesterday that we've been -- the FDA has allowed us to initiate a Phase III trial in Duchenne's muscular dystrophy, gone straight from preclinical data straight to a registration trial on the basis of the extensive safety data that we have on the basis of the infrastructure that's in place to ensure that the products are safe and are reproducible.

And the FDA had no concerns based on our own data to allow us to move directly into a registration trial. But we've also built a specialized sales team that focuses on the patients, on the hospitals, on the centers and on the [ specialists ] to deliver this therapy. And finally, we have those blockbuster programs. We've been working on this for a while, but they've now come to fruition. Our Phase III programs for our second-generation pipeline product rexlemestrocel will transform the treatment of big unmet needs, including the treatment of low back pain from degenerative [ disc ] disease and inflammatory process and inflammatory heart failure.

And you'll hear from very distinguished key opinion leaders on their views of the data generated and where we're going with these important programs. But beyond that, we also have our Phase III programs to extend the life cycle of Ryoncil, the FDA-approved product in adults with the same devastating disease as in children, graft versus host disease, and in other pediatric diseases. And I just gave you one example, the Duchenne opportunity.

Ryoncil is -- has a trajectory towards profitability that will fund our growth pipeline. I just mentioned to you how we intend to do that. We just reported net revenues of $30 million in just this quarter, which was based on $35.3 million in gross revenues. And I've said that we're approaching $100 million in sales since just last year's launch. That allows us to project internal operational needs and to adjust according to our quarterly revenue so that we're able to efficiently manage our cash flow.

In terms of our operating performance, it was very strong in the period, allowing us to invest in a well-considered way into R&D and into the programs, both the ones that are moving that are in Phase III and those that are [ for ] life cycle extension. And we're in the process of commercializing manufacture of our second pipeline program, which you'll hear more about. But what we have built importantly is a commercial capability that is second to none.

We've got commercial infrastructure. We've got specialized sales and marketing teams. We've got market access and payer engagement. We've established strong manufacturing supply chain capabilities. We've leveraged clinical data and real-world evidence to support product positioning, physician uptake. We've established medical affairs and educational programs. And we've ensured beyond all of that, that we continue and will be the world leader in this space by continuing access to next-generation cutting-edge technology that you'll hear about today in terms of genetically modified [ mesenchymal ] in cells that have the potential to open up a whole range of new indications.

Our pipeline for the blockbuster opportunities is really near term. And so you need to look at us not just in terms of our first product for graft versus host disease. That becomes really the shining light. And the example of what we can do in terms of regulatory approvals, in terms of getting payer engagement, in terms of getting adoption by the physicians, in terms of selling product. If we can do that with Ryoncil for the smallest indication, imagine what we can do with rexlemestrocel for cardiac indications and for inflammatory pain indications. So those are the real future as we move forward.

And those opportunities have total addressable [ marks ] not of $1 billion, which is sizable for the acute graft versus host disease indication, but their addressable markets represent north of $10 billion for each of the back pain and heart failure opportunities. This slide is a snapshot of where our products and their indications sit in time frames. And you can see we're a mature a late-stage company with an initial product that's been launched and several that are in Phase III. But I mean we're not talking about years away. We're talking about completing a pivotal trial for the largest opportunity in back pain now with a potential 12-month readout and then engagement with the FDA for approval. So these are not long-term weights.

We've been at this game for a long time. We're now at the -- in the end zone. And the anticipated major upcoming milestones for these programs for our blockbuster opportunities, chronic low back pain, we've completed enrollment of our pivotal trial end of this month. [ upline ] primary endpoint readout will be about 12 months away, middle of next year. Assuming that we have a positive readout, we intend to file for [ BLA ] approval third quarter of next year and all going well, potential FDA approval and the U.S. launch is targeted for second quarter of '28.

Our cardiac program is the other one that we're very excited about. We have a regulatory strategy in place to gain approval for this blockbuster indication as well. In order to do that, we will be filing with the FDA for a BLA for the smallest, highest unmet need patient segment, those with [ end-stage ] heart failure who are being kept alive on an artificial heart an [ LVAD ], and that will allow us to leverage an initial approval and move to a post-approval confirmatory study in the much larger opportunity in Class II/III heart failure.

And finally, the label extension approach for Ryoncil allows us to move into both adults with acute graft versus host disease in children with various inflammatory diseases, Duchenne's being the first amongst several. Again, funded very carefully by our internal resources. But in collaboration with various groups, the adult program is partnered with the bone marrow transplant clinical trials network, pediatric studies partner with the advocacy group PPMD, and you'll hear a lot more about that today.

And finally, this is entirely driven by innovation. We've been the leader in this space for many years. We've innovated what we do. This is why we're at the -- [ that ] we're in today, and we continue to innovate. We're innovating in new technologies, we've brought in genetically modifying ourselves through a number of ways, including chimeric antigen receptors for enhanced storming and enhanced potency of our products. We've brought in genetically modified oncolytic viruses that are best-in-class in terms of encoded with immunostimulatory factors for treating cancer.

So this is just a sampling of the way we see ourselves in maintaining a leadership position and, in fact, growing it in a whole [ loft ] of new areas by taking advantage of technologies that weren't around years ago that will take us from where we are today to a whole other level. In terms of manufacturing efficiencies, second-generation media formulations, which are proprietary to us, have allowed us to increase our manufacturing to meet the scale and volume needed for some of these large indications. And you'll hear from [ Justin Horst ], our Head of Manufacturing about some of those. And we seem to have lost our audio visual.

And so I think on that note, I hope I've given you a little bit of a tantalizing view of the many things we're going to talk about today. Let me start by reducing it to our Chief Commercial Officer, Marcelo Santoro, who's going to be telling us about his experience and how he has built this company in the last 12 months from an R&D company to a truly commercial stage company, which is generating substantial revenues already.

So thank you very much, Silviu. Good morning, everybody. It's a pleasure to be here. Thank you for coming today. It's been exactly 1 year, a little over 1 year since we received price approval or we published the price in the U.S. companion for Ryoncil. And we couldn't be more excited about what this product is doing for patients. It is really transforming the treatment of acute graft versus host disease.

Let's talk about the patients a little bit, right? So first of all, when we first started this conversation, this launch, we said that we would redefine what was possible in the treatment of these children. That's exactly what we're doing right now. And the feedback from clinicians couldn't be more positive today, right? And we hear [ then ] every day, in fact, from one of our very first patients, a patient who was extremely sick. We treated that patient, the clinician [ seated ] that patient. And eventually, they gave us a call.

My [ name ] is Jose, Baby Jose, right? It gave us a call to say that baby [ Joes ], could not be controlled anymore because she was running around the hospitals like crazy. And for us, I mean, at the end of the day, this justifies what we do. We are here to really save the lives of these children. That is the purpose for our products in acute graft versus host disease. So as I age, I can only remember three things. I have four in the slides. So it's a stretch, right?

But if you -- there are some takeaways here, please. The first one is that, again, we're transforming the outcomes of pediatric [ sterorefractory ] GVC with very strong feedback from treating physicians [ boiler ] from some of them today, right? The commercial uptake has truly exceeded our own expectations. And believe me, they are not low, right? Outperforming benchmarks from comparable successful launches. We have established the capability to scale with a clear path to doubling our U.S. revenues from Ryoncil. So by the time by the end of this presentation, I think you understand why we believe we can get there beyond, right? So this is coming.

And then finally, we are super excited about the adult indication opportunity, not only because of what we believe the product can do for these patients and the medical needs, but also due to the fact that this will triple our franchise as we move forward. So let's just talk a little bit about some of the accomplishments so far, right?

So first of all, again, all about the patient, the initial real-world experience could not be better. 84% survival. And I remind you that all of these patients were severe patients, Grade 3 and 4 of [ Zee ], right? So [ mentioned ] we're approaching $100 million in net sales. We're just starting. But that's where we are right now. We took -- we, as a team, took a long time to build the infrastructure to make Ryoncil as successful as it can be. So in the past year, we onboarded 50 centers. We received formal area approvals in 30 of them. And that is very important because it allows -- if a clinician wants to make a clinical decision to use the products being on formulary facilitates that clinical decision quite dramatically. 13 of our accounts use our partner for specialty [ farm ] which may or may not require the product being on formulary. So this number is even bigger than the 30 that I mentioned before.

Virtually everyone on label can get access to this product. 98% of U.S. lives covered today. We never had one single claim denies for patients on label. And that reflects the exceptional work done by the market access team, which I'm very proud of, right? Medicaid is in place. And in fact, just a story here. We were able to achieve Medicaid approval in 24 hours. So we -- I believe that has to be a record for the industry. We had a patient who needed the drug and was a Medicaid patient. We appeal to the government. They listen. We got an approval in 24 hours and that reflects what this product can do for these patients and I believe that all stakeholders have in this product.

We also received [ Jaco's ] in October 2025 having a specific [ J code ] is important because it allows the states to have clarity on reimbursement levels at the state level from a Medicaid standpoint. So for us, that was very helpful. And finally, as I mentioned before, we're expanding into the adult marketplace. Michael Schuster will walk you through the program. Phase III is underway. It will be also a meaningful expansion the [ GVC ] franchise.

This is the team that made it happen. So this is -- it's -- I'm very proud of the team. I couldn't be prouder of what was accomplished today. But as you can see, this is a small specialized, super passionate, incredibly committed team to putting these patients on therapy. I've been doing this for a long time. I have never seen a more committed group of people to helping these children talk about we care, we really do care. And it's all anchored in the key account executives. Those are the folks who are responsible for all the transplant centers and engage support as needed.

From the MSLs, from fuse reimbursement, making sure that they get patients on therapy and supported by a digital ecosystem to expand our reach, a small focus team that is taking us to where we are today and take us to our next level of performance. So I mentioned we could double the size of the net sales. Again, we're approaching $100 million net sales at the moment. Strategies underpins on three key factors here, right?

First of all, we have a large number of institutions that have used the products and not only use ones, but had repeat use for the product. We want to make sure that all 64 of them have a chance to experience what we also can do for these patients. There is absolutely no reason why they wouldn't -- that is a good opportunity for us to expand the utilization and the experience with the product.

Second is, and we heard this feedback loud and clear from one of our KOLs, Ryoncil needs to be available at the sites of care for immediate dispensing once the clinical decision has been made. And that's exactly what [ where ] we run now. We're implementing a program that will place the products in most, if not all, institutions to be able to do that. Don't take me wrong. I think we are really good -- we became really good in getting these products very fast to the treatment centers. So if you place an order today, by 10:30, I can get you the product tomorrow. That was not enough.

We want to make sure that the product is there. So at the moment, [ clinical ] decision is made to start using the product and you don't use an inferior alternative because you do not have the product available on site. And finally, our biggest opportunity here, and it's a combination of education plus experience with the product, right? But this broader utilization of the products first line right after steroids, you really propel us to next level of performance.

And really, it's just consistent with our label, consistent with -- if you look at the PI for Ryoncil, that's exactly what it should be, and that's where we must get there. So that's really the journey, the path to get us there is through these three key main strategies. And again, we're working on all of them as we speak.

So what are our priorities for the year, right, for [ 2027 ]. First and foremost, this is rare disease. Every patient counts. You're going to find these patients. This will always be the #1 strategy. Finding the right patients, putting them on therapy, making sure that we are serving these patients well. That is our first strategy.

Second is, we need to continue to reinforce the outcomes in first line. Again, it's a combination of experience and education. So when people have both, obviously, you start migrating and using more and more the products in the first line. And lastly, we'll give the caregivers a voice, [ chooses ] the answer to their children. As a father of four, I can tell you that if one of my children had this devastating conditions. I would want to know about it because then I could talk, I could engage with the treatment teams. I could ask, and I could see if this was a possibility for my own trial, right? This is what we're doing. So you'll see a couple of things.

You will see a large campaign focused on caregivers as we evolve. You'll also see that we've been partnering with advocacy associations such as the [ Managed ] Cowden Foundation, the GVHD Alliance, and MGP, among others, to be able to get the message out and to be able to provide education at the point of care so that the caregivers do have a voice. So some key takeaways here, right?

Again, approaching $100 million in net sales, but that's just the start. I think I showed you the path to more than double the net sales we have the excitement regarding the adult potential, combined children and adults represents over $1 billion in potential total addressable market here. So for us, it is really a good opportunity to expand our GVHD franchise, right? Then you will hear from all of the presenters, but I believe one of the underpinning factors is that the commercial capability that Silviu mentioned that took us so long to build, right?

We already support the launch of different extensions for Ryoncil, which will greatly increase our performance, right? And finally, we've been actively working on opportunities to expand outside of the U.S. But the most important things here is keeping the most favor nation pricing. You don't want to obviously destroy value. You want to make sure that you benefit kids outside of the U.S. while respecting most variation pricing.

So with that, let me ask Michael Schuster, our Head of Business Development, to talk about the adult program, and we will [ take ] questions in the end.

Thank you, Marcelo. So adult steroid-refractory acute graft versus host disease really represents the start of our label extension strategy. And we believe this is a huge opportunity for Ryoncil growth. Approximately 50% of all adult steroid-refractory acute graft versus host disease patients are Grade III/IV. These are the patients that are at highest risk of dying. And despite ruxolitinib, which is also known as [ Jakafi ] being approved for adults, this remains a major unmet need.

The market size, as Marcelo indicated, in adult is approximately 3x larger than that of pediatric patients. Therefore, when you combine the pediatric and adult revenue potential, we believe it's well over $1 billion. And there's a large overlap across the adult and pediatric call centers. They were the existing pediatric commercial and medical affairs infrastructure that's already in place can be leveraged and expanded. The lessons learned will allow us to enable quicker onboarding and faster time for market penetration once the adult product is approved.

And finally, the pricing structure will be maintained given the high mortality risk and orphan nature of these adult high-risk patients. Now we know ruxolitinib is the only approved therapeutic in the adult setting. And as you could see here, the registrational trial to [ REACH1 ], it's actually quite effective in the less severe Grade 2 graft versus host disease patients.

In this setting, it primarily affects the skin, and they're able to achieve approximately 80% day 28 overall response rate. However, as you can see, about 2/3 of the patients in this study were Grade III/IV. This component of the disease primarily targets the GI and liver. And unfortunately, ruxolinib was far less effective. Only about 40% of the patients for these Grade III/IV disease settings are able to achieve a day 28 response and it's these patients that are at highest risk of dying. And in fact, when any of these patients fail to respond to ruxolitinib in the additional therapies, the investigators may put them on, their survival rate is dismal.

Only about 25% of the patients will survive 100 days, as you could see in this left-hand figure with a median survival of only 28 days. In contrast, we've now been treating through emergency IND. Over 25 adult patients who have failed steroids as well as a second-line therapy, the majority of which have been ruxolitinib, and we're able to achieve a 76% day 100 survival as you could see in this Kaplan-Meier curve. Therefore, this is significantly better than the expected 25% survival rate at day 100.

Furthermore, there's evidence from a single site pilot study that has shown there could be an additive benefit when MSCs are used concurrently with ruxolitinib, its severe GI steroid-refractory acute graft versus host disease, where these investigators have been able to achieve almost a 90% day 28 overall response. Therefore, we really believe that the potential combination of Ryoncil plus ruxolitinib could perhaps address these high-risk patients. And as such, we've designed a registrational trial for adult steroid-refractory acute graft versus host disease patients in partnership with the NIH-funded blood and marrow transplant clinical trial network, also known as the BMT CTN.

We will enroll 180 patients Grade III/IV. So again, these high-risk patients who are steroid refractory acute graft versus host disease patients in adults. Adults are defined as 18 and older for this trial. That will be randomized 1:1. The groups will be ruxolitinib plus [ Heinzel ] versus ruxolitinib alone. The dosing for [ RINs ] will be identical to the pediatric commercial dosing already in place. 2 million cells per kilogram twice a week for 4 weeks. And if you're a partial responder, you're then eligible for an additional infusion weekly for 4 weeks, to get a total of well potential doses.

The trial's primary endpoint will be the assessment of overall response at day 28. This is a surrogate for survival that the FDA prefers. And in fact, it's the same primary end point we achieved in our pediatric registrational trial. And the trial's key secondary endpoint is overall survival at day 180. We are very confident that we will be able to achieve this trial's primary endpoint for a number of reasons, one of which is the fact that the trial is designed will allow us to administer Ryoncil as soon as they fail steroids.

So as Marcelo indicated, the sooner you can get our Ryoncil therapy to the patient, the earlier after steroid refractoriness the better the outcome, we believe, Second of all, you've already seen the data that we're able to salvage and rescue these patients in the adult setting who failed ruxolitinib who otherwise would have died. And when you do the math, there's about 30% additional patients I would have otherwise survived that would have survived by receiving our therapy that will now be able to contribute to the treatment arm of the trial.

And finally, we believe that the combination of ruxolitinib and [ Rainville ] could be additive and synergistic. Therefore, we are very confident we will be successful. We will be rolling across 45 of the larger BMT CTN network centers across the United States. This represents approximately 5,000 out of the 8,500 allo transplants performed in the United States each year. The FDA has now signed off on the protocol. The DSMB is now signed off on the protocol and the NMDP central IRB recently met, and we do not have any material protocol changes acquired.

Therefore, we believe we will be able to initiate the first sites and activate them this quarter. Now the trial, we believe, will recruit very quickly within 18 months. But because it's very conservatively powered with only a 20% delta, we've also built in an interim analysis to potentially stop the trial for early success. So when 57% of the patients have been recruited and randomized and then followed for 28 days, the primary endpoint will be assessed.

And if instead of 20%, we're able to achieve a 20% plus 6% day 28 overall response rate, we'll be able to stop trial early for success and then soon thereafter file for marketing approval. This could result in a net 6 months time savings. Now the label extension into adult graft versus host disease provides a significant revenue upside. The partnership with the BMT CTN [ consulting ] will allow us to perform this trial in a subsidized and cost-efficient manner and create end user awareness and market adoption.

Remember, these top 45 centers, the end users, the physicians, they're ultimately the physicians that will be prescribing this if the product is approved. And we really believe there's a potential to shorten the time to launch by 6 months through a successful interim analysis. And the label extension into adult steroid-refractory acute graft versus host disease will allow us to maintain the existing Ryoncil pricing structure on WACC. And of course, we're able to leverage Marcelo's existing commercial infrastructure and allow us to utilize that for an adult approval.

And importantly, the adult steroid-refractory acute graft versus host disease represents a market opportunity in the 3x the size of that of pediatric. So when you combine the pediatric revenue plus the potential adult revenue, we believe that's over $1 billion in annual sales. And finally, it really comes down to the patient as Marcelo always emphasizes. Marcelo is now able to make a real difference and save lives and children. And we believe that the adult trial is successful, we'll be able to offer a similar new treatment paradigm for patients in adult [indiscernible] graft versus host disease extend life.

So I think with that, we'll now stop and segue to a discussion with some of the key leading bone marrow transplant KOLs or fireside chat that Silviu will now lead. Thank you.

So I'd like to introduce to key opinion leaders for this session. Joanne Kurtzberg, who's Professor of Pediatrics and Pathology at Duke University School of Medicine, and we have by video link Dr. Susan Prockop, who's Director of the Clinical and Translational Research in the stem cell transplant program at the Dana Farber in Boston.

So let me start by asking Joanne, who's been a strong supporter of our program for a long time and was a principal investigator of our pivotal Phase III trial, Joanne. Maybe you could give us some of your reminiscence of some of the patients, in particular, who you can remember have benefited from this therapy.

Sure. As you said, I'm a great supporter of the product because I treat children who have severe life-threatening GVHD, and I know that before this product, there really weren't options for these children. The best story I can tell you is the first child we ever treated who had a mud unrelated donor transplant 5 weeks out overnight, develop severe acute GVHD with very high volumes of diarrhea and vomiting and we tried all the drugs available in the day and nothing worked.

And I was able to get remestemcel for him, and he responded, we thought he was going to die. He responded. He didn't have any overlapping toxicity. So a lot of times, these kids have renal failure and infections and all kinds of other problems that are life-threatening as well. And this drug was able to be given without any of those additional complications. Very long story short, he responded, he did well. He was able to be discharged from the hospital. He stayed in North Carolina to [ was ] from California to later [ 10 ] high school, where she was a [ Hovictorian ] then he went to Harvard and went to med school, then he had a first [ other ] in the New England Journal of Medicine. And now he's an oncology fellow in UCLA.

And honestly, I can tell you with my many years of experience, he wasn't going to survive to [ HD ]. But along the way, we've treated many other children who, again, are resistant to steroids hep toxicity from all the therapies and our end stage and finally, get this drug, do well and recover and go on to lead productive lives. We just had a little girl who had essentially lung failure and again, had failed everything, including ruxolitimib.

And which isn't even indicated for children these days, and she's been treated and is coming off oxygen and is recovering. You just don't see that kind of response typically with the drugs we have available to treat the disease. And I'll just say [ to ] pediatrician, the fact that it's IV is great because we know it gets into the tile. There's no resistance to taking the medicine, and that's very important, both because it's children and also because GVHD causes diarrhea. So you don't always absorb oral drugs as well as you might think you should.

Let me address the question to us. Susan, maybe you could talk a little bit about your experiences since the product has been launched. And in particular, if you could just give us your insights into how you think the product is being used immediately after steroids at your place. And just given the safety considerations and how safe it is, et cetera, is there any reason why people would not want to use it as quickly as possible if it was available immediately in -- especially in those children with [ gun ] or liver disease.

Yes. So question first, I guess. I don't know if you guys are hearing me.

We hear you very well.

So we treated two patients with [ metal ] product at this point. And for them, both at [ of ] liver and GI involvement, which I think it increases the risk of the graft versus host disease were both at steroid-refractory disease, but also makes the attritional support in these very ill children challenging.

So the [ packet ] offerings, especially our first patient and transaminases that were over 10x the per limit and thermal. So makes it challenging to try to get a total Nutrition of GPN and the GI business makes it challenging to give [ unfold ] nutrition and so I think for the [ use ] of remestemcel in first-line [ Peter ] refractories of the mine treatment was very appealing were sort of emphasized that the responses tend to be quite rapid.

And my personal experience, especially for hepatic disease and will the other to the trail. So her like disease responded relatively quickly. We were able to ramp up rental nutrition and give her full calories with IB nutrition. And then as GI track improve, we're able to transition her to unfold nutrition. And that was a very important part, I think, giving an [ inner ] giving a therapy that has a relatively rapid response. And our second patient similarly had at as well and gastrointestinal disease. Until again, both increasing the risk of for response to additional therapy and increasing the risk of toxicity from agents like [ Ryoncil ] because of the hepatic [indiscernible].

We think -- the answer to the second question is harder. It's harder to be in other people's heads. But I would say, overall, pediatricians have become as you pointed out, the studies that led to [indiscernible] in pediatrics, we're in a very limited number of patients and I think only post approval for RUX, there was some hesitance because of how small that cohort was. And I think people over time have become a little bit more comfortable [indiscernible] as first line. I told me I go with you on said. I think in very small children, it's really not a good option and the oral administration can be an issue, as I mentioned, to the hepatic toxicity can be an issue as well as like PBs that many of these patients have a manifestation of the severity of graft versus host disease.

So I think from the see profile, [indiscernible] very appealing agent. Any part of it is about time and comfort with it. And part of it is both the accessibility and the sense of accessibility. And we have a pretty robust team here that got from stem cell onto the formulary before our patient was identified and had to be pathway built out for how we administer and get approval rapidly for medications like this.

And this sort of balance of place with that process. So we did not have to invent a new process to be able to remestemcel. And I would say when our first paper was treated our contracting [indiscernible] had not been completed, and that did be into a 1- or 2-day additional time second competent that was in place. And that second picture was actually not covered by insurance, just some time to get the payer for that patient aligned. But I think overall, yes, I see even here that my colleagues have gotten more comfortable with thinking of this as an appropriate agent for line after identifying something steroid refractory and sort of have more confidence in the process that we can get it relatively quickly.

Thank you, Susan. Appreciate it. And I think as we heard from Marcelo, we're all, I think we can really facilitate things by having Ryoncil [indiscernible] at the point of care immediately. And that's our objective.

We think that will absolutely and I think you've heard from others that I think that will absolutely be beneficial. I do think the importance of having an embedded team that is familiar with how to get approval will also be important as part of that. And I know that Brian, if your [indiscernible] to along those processes.

Am I just -- to Joanne. Did you want to add to that? Or should we move on to the adult program?

I think you should move on.

Yes. So a question to you, Joanne. Do you think the ground can fill a major gap in the treatment of adults with severe disease?

So the answer to that is yes. At our center at Duke, we've been using on and been involved in the clinical trials for many years. But my adult colleagues often call and say they had a patient with a resistant disease, how can they get it. And the company has been very enabling through INDs or whatever to make that happen because this is considered off label currently trading in adult.

But I think once a center has experience with the product and again sees that it's not a big sort of barrier to administer it, number one. And number two, it doesn't have overlapping toxicities. Number three, it works. They become supporters and want to use the drug more. You mentioned and Michael mentioned, there'll be the BMT CTN trial.

I can just say it's an amazing accomplishment to get the BMC CTN to do a cell therapy trial. This is their first one. They are not the easiest group of people to bring on board, and they have embraced us and multiple centers have indicated they will enroll patients. And again, you're moved to have drug available.

So they can give the first dose without having to compete with the drug that's in the pharmacy. I think psychologically, will make a big difference. But it's an amazing accomplishment for the CTM to actually have adopted this. So I congratulate you all on that. And I think the trial will be successful. And I think the general experiences once a physician uses the drug in a patient who is end stage, and then it works and it didn't cause other problems is going to bring them on board.

We're very excited about this program. It's where the growth curve needs to be. Just in the last couple of minutes that we have, you've been a pioneer in the use of MSAs for neuroinflammatory diseases, including HAE, hypoxic [ cemipopathy ], autism. You've also used our cells to treat children with chronic GVHD. I just wonder whether you might want to touch on some of these areas as potential areas of [indiscernible] for the company.

So I think all of these areas are one situations of unmet medical need to situations where patients have desperate illnesses and symptoms and don't have an option in the conventional medical armamentarium. So for HIE, which is hypoxic injury in [indiscernible] who had a normal pregnancy and were supposed to be okay. And suddenly during or around the delivery have some event that deprives some of oxygen and then they are born severely ill with encephalitis that can cause a 50% mortality and 80% of kids can get cerebral policy. And here are these new parents. Thought they were going to have a normal baby and they had this tragedy.

We've had a limited experience treating six of those babies and they had spectacular results and maybe that was good luck with those six babies, but it justifies moving forward with an approach.

And again, it's safe, it's tolerated. It's easy in the sense of sick babies to administer. And if it protects the brain it will have major improved outcomes for these kids who were otherwise be damaged for life. I think there's an opportunity to treat kids with older kids with autoimmune encephalitis, we've talked about it. That's an area of opportunity to pursue another disease where you have a normal kid and suddenly in adolescents, they seize they change their personality and they become debilitated and there's no effective treatment.

So I think that's an area autism, which is an inflammatory disease of microglia. [ All ] will respond to this therapy. We have to figure out the dose schedule, the timing. But again, it's an opportunity where there's no treatment for these diseases. So those are neuroinflammatory diseases that we have a limited but positive experience and then in chronic GVHD, I've used it in a handful of patients who again had extensive ability and disease, both in skin, liver sometimes got and they have responded. Their quality of life has improved. They've been able to get off many other drugs that weren't working anyway and move forward. So I think chronic TV should be one of your targets

You can see the fruitful areas of [ fibration ] that we'll be talking much more about in the coming months and years. I'd like to thank our distinguished key opinion leaders for being here today, and I think very providing terrific insight. Thank you, both.

Now we'd like to move forward with the next segment and introducing our head of the musculoskeletal programs Roger Brown, who will talk about the blockbuster opportunity in back pain.

Thank you, Silviu, and thank you for the opportunity to talk about this really exciting program. I joined Mesoblast 17 years ago with the idea of coming here and working on this to find a way to treat back pain without having to go to surgery. I've worked with companies that look at surgical and there's got to be a better way. And through my 30 years now and 20 years in orthopedics, I've been just amazed at the amount of suffering that goes on from back pain.

These are people that are in the prime of their lives, prime of their earning years and it just absolutely is heartbreaking to get the e-mails going, can I get in your trial. They can't sleep. They can't sit for long periods of time. You'll see the people on the plane. They're up and down all the time, trying to move to keep their back mobile to try and get rid of the pain. It is heartbreaking to see whether they can't pick up their kids or can't pick up their grandkids.

It is -- they aren't dying front, but manned is a lot of suffering. So we have a huge opportunity. Because of all this suffering, there are 35 million patients in the U.S. that have chronic low back pain and about 60% of that is due to the generation of the disk between the vertebral bodies. About 25% of the entire U.S. population will develop back pain every year of the adult population. Of those, 32, it will become chronic. I mean it's lasted longer than 3 months and hasn't responded to physical therapy and analgesics.

So the problem is massive. So in a very conservative estimate, we believe there's about 7 million patients that have moderate severe back pain with moderate distant generation and have less than 5 years of diagnosis. As we found in our previous Phase III trial that patients that had at least 6 months of back pain, but less than 5 years, actually responded better to our treatment, which makes sense because that's when the inflammation is greatest and our cells respond to the inflammation.

So if you look at 7 million patients, if we can just treat 10% of those patients at $20,000 a year, that's a $14 billion opportunity and countless lives made better. I tell my team, and I said it at the investigator meeting that Doug deal attended, not many people have a chance in their life to make millions of people's lives better, and we have that opportunity. That's our responsibility. That's what we're trying to do.

So I'm happy to tell you guys today that we are going to be completing enrollment this month in the back pain trial. So that puts us on a very defined time line going forward. And that will give us top line results in about a year in the middle of 2027. So this is now a near-term opportunity. You know this has been going for years. It is now to fruition. We're ready to realize this. As Silvius said, that will put filing a BLA in the third quarter of 2027. And then because we have RMAT designation from the FDA. We will have priority review that would hopefully give us a BLA approval in second quarter of 2028. So this is now -- we've been talking about it for years. This is now a real term, near-term opportunity for the company. So when you look at the size of the market, it's not just the U.S. The U.S. has 3 million people with back pain, Japan is $14.9 million.

Those programs are -- those geographies are on partner right now. So we're planning and Marcelo come up here in a little bit and talk to that we will either find a strategic partner that will help us penetrate that market sooner or we will go ahead and commercialize ourselves and maintain all the value for Mesoblast. The side Europe is just as big as the U.S. And we are already partnered with Grunenthal, which is one of the top 2 paying companies in Europe. And we will receive milestone payments as well as royalties from them, and they will take the data from the Phase III trial that will complete next year and work to get EMA approval in parallel with us working with FDA to get approval.

So this is real term, not just in the U.S., but there's also the opportunity with our partnership with Grunenthal to expedite getting approval in Europe and treating even more patients. So why is this such a big problem? Well, at about age 18, you lose your [ note ] core cells that help build the body from ability all the way through the end of adolescents. As those go away, the ability of the disk to repair and regenerate itself becomes less.

So from 18 on, we're all degenerating and our spines are getting worse over time. At some point, the inflammation will become too great. It will start having pain. The disk will start [ being ] down. And so it is a constant downward trend that we're on. And so by treating with cellular therapy, we're putting the cells back in there, we're giving any regenerative potential that will respond to the inflammation. It will tamp down the inflammation, prevent the end growth of the nerves and the blood vessels that then will reduce the pain, and we've seen pretty tremendous results, as I'll show you.

So what are the options right now? Why hasn't this been solved? This has been around for decades. Well, there aren't any really good treatments right now. So the patients that have that first flare of back pain They'll get treated probably by themselves initially take some advils, [ some ] believe or -- and then if it continues for a few weeks, they'll go see Dr. [ Belen ] go, "Hey, doc, they'll go see their primary care physician, they'll prescribe them some NSAIDs and [ seniliphysical ] therapy.

By that point, if they are not better by the 3 to 6 months, they're probably not going to get better with those therapies. So the only options then are opioid analgesics, which have huge complications. We all know about the opioid crisis that was largely fed by use of opioids for treating back pain because they have no other options. These patients are coming to Dr. [ People ], please help me, help me get my life back. And what are you going to do?

You don't have any options. Then the other options are unproven, unapproved interventional therapies. They're just grasping as strong to try and find some -- and then at the other end, it's surgery. And about half of the surgery, the patient is still in pain after they've had a major invasive surgery. So there are no good options for these people. Once they get past being an acute back pain, if it doesn't resolve, there is nothing for these people. So we're going to be offering a non-opioid, nonaddictive treatment for pain that these people have, no hope for otherwise.

So in our last Phase III trial that we've completed, we showed improvement in the mean change in pain, which is the standard way most drugs are approved for treating pain in all subjects at both 12 and 24 months. But what we saw, as I said a little bit earlier, in the patients had a shorter duration of back pain. So they've been dealing with it last time, we saw a significant enhanced response in the people that receive a master cell with HA, the red line on the graph here.

And what you can also see in the green line is the control it was an [ intradiscal ] injection of sailing and the response you see on that is about the same as what you would see in an opioid that was studied for 3 months. They haven't even been studied opioids for longer term and the effects of that are unknown. We know that with opioids, they will develop hyperalgesia. And so they won't be as effective over longer periods of time.

So we beat a very [indiscernible] with the saline and the trial we're doing now, we're doing a sham injection. We actually believe that the injection of saline probably was a week therapeutic and added to the benefit in the controls. So with the shame, we actually think that the control response will probably be less in this trial while we anticipate that based on what we've seen in both of our trials that the cells with the HA will maintain the response we saw. If that's the case, we have a very high probability of hitting our endpoint of mean change in pain at 12 months. We've already hit once.

FDA has agreed that that's an acceptable endpoint for this trial and for approval. So we just have to wash rents repeat here. We are not breaking the ground. It's just proving that we did it once, we'll do it again. So the other thing that was really interesting is that in a quality of life measure, we saw substantial. You see the P values are huge, particularly at 36 months where they improve their quality of life, and it's a measure of mobility, self-care, usual activities, pain and mental health because that's the sort of quiet thing about these patients.

Because they have no hope, their mental health gets worse and their relationship suffer. It is absolutely devastating. And what was absolutely amazing at 12 and 24 months, we had 2/3 of the patients had no or slight problems in all five domains. So they basically went from having significant quality of life problems to having no problems. We're talking about remission for pain and remission of quality of life problems from a single injection for up to 36 months here. That is absolutely remarkable.

We're talking about remission of something these people have had for up to 5 years. So where do these people go now? So most of the patients, they'll go to their primary care physician or they go to a pain specialists or anesthesiologists for initial diagnosis. And once they get past that sort of acute back pain phase, those primary care physicians will refer them to people like Dr. Bill to just manage their decline. That's what we're talking about. It's almost like cancer where you're just managing their decline because there aren't any other options. So we're really meeting a huge unmet need.

And in market research, we did over 50 pain specialists, 85% of them said they were likely to use and prescribe remestemcel for treating their back pain patients. So you can see that this is something that the doctors, the patients are begging for. This is not something that we're going to have to push that they are going to pull this because they need it. They have no other options. So when you look at the market, about 35 million people in the U.S. have back pain. Of those 21 million have associated with degenerative disc disease. So they've had a disk at least one, if not more, that are generated that are the source of the pain.

Of those, about $12 million are moderate. And if we conservatively estimate that have back pain with moderate DDD and less than 5-year duration. It's about 7 million patients. That's a very conservative estimate of our addressable market. If you -- we believe, based on the market research we've done that if we can show the benefit that we've seen in the previous trial, you'd be looking at a price point of about $20,000 and speaking with medical directors of over 20 payer groups.

They've set a price point of $20,000 would be very reasonable for the benefit you'd be seeing. And with 85% of the pain specialist saying that they're willing to prescribe it. If you just get 10% of those 7 million patients, you're talking about a $14 billion opportunity. which is massive. And that is just the U.S. It does not include Europe, does not include Japan or the rest of the world.

So I'm pleased to say we are going to complete enrollment this month. We're very excited. We're very positive and confident that this trial is going to be successful. So that really puts us on a very defined time line. [ Thinner ] is not guessing of when we're going to be done. We know when the time points are. So last patient will be consented this month. They'll go through the screening process and get treated probably midyear this year. And then that would give us a primary endpoint and no -- the top line results of the trial in mid of 2027.

That would put BLA submission and we're going to talk about the -- as we talked about the LVAD, that will help a lot of the work to go into the BLA submission will have already been done. It's the same product with just some minor differences that we need to update for our BLA submission. So we think we can do that very rapidly submit that in Q3 of 2027. And with the RMAT and priority review, you're looking at approval in Q2 of 2028.

So this is now very real term, very near term. And I'm going to turn it over to Marcelo to talk about the commercial.

Yes. So the question now is how do we launch this drug, right? And we need to be prepared. Two launch, we want to do it ourselves. And again, CLBP this opportunity is transformation, not only for the patients, but also for the company. There is no question about. I hope you're all as excited as I am when I hear what it can do for patients but also the potential for $14 billion revenue.

This is really at another stage, if you will, right? So what we'll do is, I mean, we're 12 months away from data readout. So we already started the strategic work, the HEOR work, health economics, the value proposition development. Obviously, the strategic portion of the work has been started as we get closer to data readouts, we'll start engaging with payers, we'll start engaging with physicians to be able to really develop this market, right, disease awareness, right?

And eventually, we'll launch the drug. The launch -- my proposal is a launch phase launch based on milestones achieved. So in other words, Phase 1, we'll go to the most productive accounts, pay managers represents a lot of this market, 90% plus, right? We'll have limited consumer type of engagements, limited contracting with payers. And that's the launch. At some point, we achieve some milestone, and we're talking billions, right? We go to our second stage of the launch where we expand. We expand to primary care physicians, great source of referrals every single pay manager in the U.S., a greater ability to negotiate into contracts with payers as well as more consumer direct engagement.

And then at some point, and again, we're talking multiple billions. We'll have a conversation again on does it make sense to go to direct-to-consumer to expand the uptake even further. I've seen this happen. I've done it multiple times before. At some point, in the U.S. market, it just makes sense to engage the patients. So the patients have a chance to seek for this treatment with the trading physicians, right? Obviously, maintaining the share of voice, obviously, optimizing the contracting situation with payers. So that's our go-to-market plan for CRBT. And again, super exciting next opportunity for the product.

So with that, let me ask Silviu to come back to stage for our next steps.

Thank you, Roger, and thank you, Marcelo. Very exciting. I'd like to invite Dr. Doug Beall, please to this stage. Beall it's a principal investigator in our most recent trial and is experienced across this industry is the #1 in this industry. So let's get some of his insights.

Thank you. I'd just like to start by asking you to give us a little bit of your sense of some of the patients that you've treated, particularly in our most recent Phase III trial that preceded the current trial. I know there are patients in various parts of this country that came to you and maybe you could give us a sense of how they were when they initiate the trial and then you follow them up over several years, I think.

Sure. This is a huge patient population. In all due respect to Roger, you have 7 million people with chronic low back pain, there's no way. it's that few. I mean, so look across this room of young, healthy, good-looking people. How many of you guys have had back pain, right? I mean look, it's lifetime debilitating incidents of back pain is 80%. 80%. So these estimates are based on things that are using [indiscernible] razor to the degree, and it's all the way down to 7 million people.

I mean, this is something that -- the way that I categorized the trial is this is a friends and family members trial. Right now, I'm on my 60th clinical trial. I started when I was 5 years old and this is something if you were to ask, if you were to come to my house for Christmas, you would see people that had cellular therapy of the disk. And it's because it doesn't really affect old people. It's not like a lot of things we do. It doesn't affect people that are 85 years old, walking like this, it affects the only healthy people.

I mean degenerative disease and discogenic back pain is a disease of 18- to 40-year old people. I've had people that wait until they get -- until their 18th birthday to get into the trial. And this is -- it takes people robs of their prime of life. The example about Roger gave about getting -- same people in the airplane, absolutely. You can't sit. You can't drive for very long. You walk into the exam room and people are standing up. And it's one of those things. I mean, this is a blinded trial.

But when they come in for the follow-up, they see me down the hole. Dr. Beall, I'm doing great. I'm great. I have no pay. Yes, there goes to blinding, right? So -- and I did -- and based on the time line, we're here Q2 of '28. It's about time. I was interviewing Fox News a couple of weeks ago. And they said, "Oh, I heard the person that I treated says, "Oh, I'm doing great, is a local attorney. I do great. I have no pain. Dr. Beall injected me 9 years ago, I had to think in 9 years. It's been 9 years in regulatory, but the BLA pathway is a very high bar. It's difficult. But by the same token, if you clear that bar and clear with height to go, you're going to tap into a market that is absolutely not only massive, but this stuff just works, right? It just works.

And I've got personal experience with it. There's not surprisingly to me, I don't think there's anybody that's done more cellular therapy of the spine in the world than I have. And I started doing it barely. I love it. It's super common. [ Elias Zaroni ] used to say. He was my chair at Hopkins when I did resident. He's a former Director of the NIH. You want to research something, Doug, do something that's common, make a difference.

And he did it with the heart I'm dealing with the spine and this is something that we're very near towards the finish line. And man, it is about time because this is something that people need. This is something people here in this room needs. You don't have to tell me. I know because I do something radical, like actually see patients and practice medicine every day.

And this feeds everything else we do. So this is something that I appreciate being here. I'm headed to the Barcelona over for stem cell conference over there and get invited all over the world to talk about this stuff, and this is the lead marquee for cellular therapy. This is a leader. This is the opening slides of what I talk about. And so thank you for making it all possible.

We really appreciate you being here actually. So I think you've touched on an important point. Not all stem cells are the same, right? We've taken great, great care and focus to do the right thing here to do the randomized controlled trials to get our manufacturing right to work with the FDA around regulatory.

We've demonstrated and get products across the line because of our rigor manufacturing. And I think that's ultimately, we've got to sell that is well characterized, it's reproducible. And importantly, you want to know that every vial that you get guarantees the exact same dose, the exact same product and the same potency. So with that in mind, can you sort of just touch base a little bit on the supply chain, given the volume of patients that you see, you probably -- you felt ourselves, you know how they come, you know how easy it is to [ tore ] them and draw them and use them. Maybe talk a little bit about that, how you see this as being a an easy-to-handle product that you would have readily available either provided in real time on an [ ASM ] basis or perhaps if you had some storage facilities that you could keep the vials.

Yes, it's not a barrier. It just isn't. The due that they came in, FedEx box big, like a small refrigerator, that was way back when. And even that wasn't a barrier. Staff kind of looked at it and they took the cold pack homes so they could read them at the lake and the weekends when their ice chest. But what we have now is not a barrier at all. But for me, knowing exactly what you get is huge. So let's take BMAC, for example, you ask somebody's bone marrow and you get it back in the disk.

Even that works pretty well, not nearly as well as directional master cell, but it works reasonably well. But what do you get? You're getting maybe 1% or 2% as you can get a lot of everything else, including white cells and everything in there. But to be able to get an off-the-shelf allogeneic dose that's consistent that I know is going to produce. And I know a lot about the cell and it was engineered specifically for this reason. It regrows cartilage. It re-grows also, it can regrow bone. It can recur blood vessels.

So this is something that has a certain degree of potency beyond just regrowing cartilage. So this is -- and you give a dose of 6 million cells. We don't give a does in [indiscernible] we don't give a dose of 1 million that's been tried. 18 million wasn't quite as good as 6 million. Maybe just lower Manhattan, a little too crowded. People are fighting over resources and we know that giving it with the carriers a way to go, the care provides a little bit of life to the cells, provides a little bit of water in the Gobi desert. And it's a better thing.

And this combination of 6 million cells with HA as a carrier, that's a secret sauce. And it was mentioned about the placebo, saline. Saline sailing is not a placebo. I used to use saline as an active treatment. It washes inflammatory meteors out. It hydrates the disc recent it objectively resets the data potential you get inject saline in a desk, you get 40% pain relief at 1 year.

The problem is it fades off very quickly after that and the patient, what are they going to do? But we've known this. I mean, in the '90s, we used to inject saline into the disc as an active treatment. Suddenly, the regulatory is since COVID, they're all new. They have no institutional memory in there, but also use a placebo, and -- but that bar has been cleared, and that is not an insubstantial bar. That's the wall that most people end up against. And there's a ton of really good therapies that have gone in the disk to die right there.

Good friend of mine. [indiscernible], he says, the disk, where most good therapies go to die. And this is -- that has been true. I think I've been through 12 clinical trials, testing out various sundry things for the disk and all of them done at the end. So this would not only cleared the bar, but you can just see it even in Phase II. We started watching this thing shortly after Phase I Phase II [indiscernible], who's a good friend of mine and colleague as a primary investigator in that. It just to quote him. He said, "Man, this stuff just works. And so that's -- it's one of the things that is going to be interesting to see how this is used, probably be overutilized, frankly.

But in my world, my buddy from Jersey calls it three wax in a back, meaning three epidural injections and fusion surgery. And I talked to Blue Cross HCSC. This is my local Blue Cross, Oklahoma, Texas, Montana, New Mexico and a few other areas. And this what compare this to the landscape. And remestemcel compared to fusion surgery, which is its only viable competitor works 2.5x better. It's 5x cheaper, no incision or downstream [indiscernible] disease, no recovery. I have no idea how you guys are going to make up an excuse not to cover this.

And it's not the first time they've been in front of them. They've rolled their eyes and they expected that. Thank you, Dr. Beall was appropriately condescending to them. But this is something that is -- but the way is paved. We are now teaching. I will teach tomorrow. And last weekend, I taught how to inject the disk because people are prepared for this. Not only do you have the product, you have to have a way to get it in spine.

And I call -- every time I talk to my colleagues, I said this is the decade of the anterior column because that's where the disc lit, that's where the pain is. 70% of the pain comes from the anterior middle column. But hardly anything we do traditionally treat an tier calling. You're doing rezoned branch blocks for back pain. Yes, that's 20%, 30% of most -- what about the other 70%?

So finally, this is the decade of the anterior column. Finally, we are going to be able to treat people the [ bilnd ] share of people for their back pain next to the common cold is the most common cause of a doctor visit. Huge problem.

I think we're all celebrating here. All of us with the kind of back problems, how do we get this product. Look, I think this has been extremely helpful and we really appreciate both your enthusiasm and your work with app programs, and we look forward to a great result and then working towards how we're going to educate the rest of the physician community.

Well, on behalf of people I see on a daily basis, and I'll run through to people a day, most of those will have exactly something that this can treat on behalf of these people, thank you.

Now we'll move to a whole different program which is the use of our product, remestemcel for inflammatory cardiovascular disease. Let me introduce Ken Borow, who is Head of the Cardiovascular program.

Thank you, Silviu. All right. Let's talk about the magnitude of the problem as well as the opportunity. So chronic heart failure is it has a rising incidence of high morbidity and mentality. Cardiovascular associated inflammation is the leading cause of death in the United States. Think about atherosclerosis, okay? #1 [indiscernible] really in the U.S., okay?

Ourselves are extraordinarily capable of dealing with the consequences of that disease, and I'll tell you more data. Now heart failure in the U.S. is projected to affect more than 7 million people by the year 2030. Approximately 50% of these will have heart failure with reduced ejection fraction. That's bad pump heart failure, so about 50%. Chronic heart failure is a progressive disease with mortality that approaches 50% at 5 years and at least 75% after initial hospitalization.

This slide looks a little bit busy. Let's make it simple. Okay. The heart failure program has two components. One is the Dream heart failure program and the second is the LVAD program. The difference between the two, the DREAM program are patients who are -- have established disease, established heart failure. And at the same time, they are not at a point of being a candidate for a leftie assist device, okay? So that's the DREAM program, right?

And then the LVAD program are those dream patients who have progressed to the point that they need an additional therapy, which is implantable left ventricular assist device. That's an [indiscernible] all right now. For both of those programs, the cells that we use have the same formulation. We use the same dose -- and the potency assay for the product is the same for both of the indications.

So for the pre-VA patients as well as the LVAD patients. The MPCs are injected into viable but dysfunctional myocardium. They are activated by local cytokines in the heart. Silvius talked about that in his earlier presentation. And the MPCs exert anti-inflammatory neovascular and immunomodulatory effects. And what I'm going to show you is that there have been successful outcomes of the same as 150 million cells that are injected [indiscernible] okay, in both of the programs, the DREAM program and in the LVAD program.

This is some data from DREAM. And the cells significantly reduced cardiovascular deaths. That's the Y axis in patients with inflammation, okay? And the p-value was 0.003. You can see -- sorry about that -- you can see the control patients over a time point of 5 years, just have a step-wise increase in badness. Okay? More and more patients die from their disease. In contrast to that, the cells over the course of 5 years have a marked reduction, and this differential between the two 2 continues to grow out to 5 years.

Now this slide is a slide that I'm particularly favorably inclined to. This shows in the DREAM trial, the event of the cell on two point, so that as time is been for [indiscernible] MI or heart attack, or a stroke. And that's the data that I'm going to show you in panel A. And then 3-point MACE, which is the time to first event for a myocardial infarction, stroke or cardiovascular death. Okay? And this is in all patients, and I'll show you the data in all patients and then subgroups with inflammation and subgroups with ischemia plus inflammation.

So let's start with the 2-point MACE which -- okay. So this is for all patients. You can see that this is statistically significant. This is MI stroke, okay? When we look at the patients with inflammation, okay, the -- we go from a treatment effect of 50% to a treatment effect of 75%. And when we go to the patients who have inflammation and ischemic etiology, we end with an 88% reduction in myocardial infarctions. So think about the patient who has had a heart attack and has a bad pump has a bad left ventricle ventricular pump, okay?

When you tell them that we potentially have a therapy that can decrease can decrease the likelihood that you'll have an MI or stroke as a complication of your intrinsic disease and that will certainly worsen your heart failure and make [indiscernible] okay, by 88% is quite remarkable. So that's the 2-point MACE site. And I should mention that both 2.0 and 3-point MACE are well-established endpoints in clinical trials of all kinds of therapies that have been used for establishment of standard of care.

All right. Let's talk about the B panel, which is 3-point MACE. Okay. Here we see all patients and that's a 27% treatment effect. So this is above and beyond the control. Again, the control is a sham procedure that is conducted during the time that the patient either receives the cells or a mark procedure for administration of the cells. For the inflammation group, the 27% goes to 37%. And then for the ischemia and inflammation group, it goes to 52%, 52%.

Okay, keep that number in mind, 52% -- this very busy slide, okay, has some very important messages. The slide itself looked at standard of care, okay? So the whitish and blue roads are standard of care and then the dark blue at the bottom are the cells. If you look at the risk reduction, so that's this column, the average risk reduction for the guideline-directed medical therapies is 10%. Okay, this is for 3-point MACE standard entity, 3.8 MACE time to first event MI stroke cardiovascular death.

In contrast to that 10% average 52%. We're talking about a more than 5-fold improvement on top on top of standard of care on top of this 10%, okay? We basically build the 10% to 52%, quite remarkable. Now I want to mention one other thing that the data that I showed you here was published in the European Journal of [indiscernible] which is a very prestigious cardiology journal.

The first author on that paper was Dr. Emerson Perin, who will be part of our fireside chat group, okay? So he's got a lot of experience many, many types, but he really knows the DREAM program well. Okay. So let's look at the addressable market size. Conservatively, I think that the -- we started off with a 6.7 million patients who have heart failure.

Patients who have bad pump heart failure, heart failure reduced ejection fraction is about 50% of that number. And then we have, at the very bottom for patients with heart failure with reduced ejection fraction and ischemic etiology to their heart failure plus inflammation. It's around $1 million. I think that's probably conservative. Okay? Now if we talk about a sales price of $150,000, remembering that these patients are not only surviving, but they're surviving with better quality of life because they're not having the hospitalizations for MIs, stroke, things like that, okay?

So the sales price of $150,000 would be supported by the data that I just showed you from our DREAM study. And the potential annual revenue would be greater than about $15 billion. If we just assume a 10% penetration. Okay? And I'll say again, 88% reduction in MI or stroke, patients are going to want to be lining up for this therapy, okay? So we're assuming 10%, 10% will give us a $15 billion yearly revenue.

All right. Now let's go and shift to our LVAD program. So we're going to be looking now at end-stage chronic heart failure with reduced ejection fraction in patients who were given in LVAD. And LVAD is essentially a cannula is placed in the bottom part of the left ventricle, it goes out into the chamber. And what it does is it sucks the blood that returns from the lungs to the left side of the heart, the oxygen blood through the cannula to the pump and then it goes up to the aorta and out to the body. So it can take a patient who has a poor cardiac output, a poor amount of blood lean pump to the body and goes ahead and makes it something that's much more functional, okay?

So despite an LVAD in the left ventricle, progressive right heart failure continues due to ongoing inflammation of the right ventricle. What this means is the left ventricle doesn't get blood. If the right ventricle doesn't get it to the as long so they can return to the body to the left ventricle, there's nothing to pump. So it becomes a progressive problem for these patients. So progressive rate heart failure occurs in about 15% to 30% of patients and is the primary cause of multi-organ failure and death.

A further complication of right heart failure is potentially life-threatening major mucosal bleeding, predominantly gastrointestinal that's seen in about 30% of patients and is the main cause of recurrent hospitalizations. In this slide, let's just look at a couple of quick takeaways. okay? This is from the INTERMACS left ventricular assist device registers a national registry okay? And what this shows is that for patients who have moderately severe rate heart failure, they have a 28% mortality rate, okay, at 12 months. a 24% incidence of first-time GI bleed at 12 months. So both of these are major problems okay, that the underlying patient population to get an LVAD face.

Okay. So in our LVAD study, the cells in these end-stage patients with left ventricular assist devices are injected at the time that the LVAD is implanted in the operating room. So it's a single procedure. The cells are injected, the operation is done, and that's it. Okay? And then the data down here, which the data down here show you just bar grants looking at the major mucosal bleeding, GI bleeding. And what you can see here is for the control group is in red, and the cell group is in blue.

And we have a p-value that is highly significant at 6 months. So we get a marked reduction in this GI bleed kind of problem. At 12 months, it's sustained, okay? And it's still twofold with a p-value of 0.004. And part of that reduction is due to the control -- the control patient is actually dying. So they're not around to go ahead and have an event. Okay. So now what's our tactics and strategy that tie the DREAM program together with the LVAD program, okay? We're about to file with the FDA for full [indiscernible] of the cells in patients with LVAD. Okay.

The filing is based on GI bleeding. I showed you some of the GI bleeding data, being an FDA acknowledged indication and in addition, we have an [ orphan ] drug designation, which has a number of beneficial effects from a regulatory perspective. And the orphan drug designation is for GI production and GI bleeding. The FDA stated preference for randomized controlled trials has resulted in usable seeking a full FDA approval pathway with the benefit that an additional confirmatory trial is not required.

So we can get into potential approval on the trial that we have, the data that we have. The FDA approval of the cells in patients with LVADs will facilitate subsequent approval, we believe, of music list pre-LVAD program, our DREAM program, okay? Chronic [indiscernible] patients. But rather than starting from scratch with a submission, it would be a label extension. So that has a tremendous advantage when the time comes for the pre-LVAD population. Okay. So let's look at what the addressable LVAD market is. again, start off with about 6.7 million patients with heart failure.

By the time you get down to the real world the real world has somewhere in the neighborhood of 2,000, 3,000 LVADs that are given per year. The sales price at a sales price of $200,000 or a price of administration of $200,000, which would be supported by our Phase III results. And again, the justification is a reduction, amongst other things, of cardiac ICU hospitalizations, reduction of bleeding events, et cetera. The total addressable market potential is about $400 million. And this is a market that initially could be justified across 190 LVAD certified centers in the United States, okay?

So a big opportunity, and we're only beginning with it. All right. Now we're going to turn from this presentation to a fireside chat, Dr. Emerson Perin from Texas Heart Institute, who again was the lead principal investigator on the DREAM-1 trial. and Dr. Eric Rose, who is one of the foremost authorities in left ventricular is devices will be part of the panel. Thank you very much.

Thanks, Ken. That was very exciting introduction to the whole space. Delighted to be here with Emerson and with Eric. We've all been in this field for a long time. But I think we're there. So Emerson, I'd like to ask you, first of all, you were the principal investigator of the DREAM trial of 565 patients, a very big trial in this space. And you saw just some of those data, and you were, of course, the lead author in those major publications. Just talk to us a little bit about what you thought about the data and about the technology and where we're at.

Yes. So one point I want to make is I looked at the favor parter on the titles, it is inflammatory heart failure. Well, if this audience is full of cardiologists, they'd be like, what do you mean, okay? So the word inflammation is not part of the lexicon of heart failure in the mainstream cardiac world.

So all these drugs that we have, [ Entresto ] and [ core ] and in Sprint, they address one half of the problem, which is the maladaptive changes that happen when you have heart failure. Your body tries to fix it and -- but there's a bunch of bad things. So we have different medicines, beta blockers and things that help kind of undo some of that damage. But the real problem of heart failure is not the maladaptive changes. What starts heart failure is inflammation. What keeps heart failure going is inflammation.

We have never treated the other half of heart failure, which is inflammation. So this is sort of a paradigm shift that everybody is sort of coming to terms with. You look at these data that Ken was showing you. If you look at those data that Ken was showing you, [indiscernible] point it's ridiculous. Should this be -- of course, this should be approved already. Why is it not approved because we're just not ready, right? The world hasn't been ready yet. The FDA hasn't been ready but they're ready now. And I think to make myself feel a little bit better, I think about ACE inhibitor, which are common drugs approved in the mid-2000s for heart failure. They started investigating like [indiscernible] back in the '70s.

So when you think about the first in capital Australia I think it's 2007. So it's been about 20 years. So we're going to get there. We're ahead of schedule. And these data that are obviously overwhelming. They were very positive. We know the recipe. So this is one problem as the whole development of the field is we didn't kind of know how does this work really think well maybe there's some math going on there's a with these sales specifically from real classes. We have been able through the [indiscernible] to reverse engineer the plan very elect what the mechanisms are. of event -- and I can consist here in his view how important an or and drilling that estimate this happens so we can understand what's going on.

And now we have treated that is extremely powerful. And but it looks like control -- and which comes nation and the cell to identify the patients that have met. Well, what happened is the control people get treated and we look at them through the study. And when we people with two had 4x mortality than the people that did. So we know that these cells are treating inflammation. [indiscernible] you're only going to get this treatment patients have a -- and 52% reduction when we're talking about a your in. We're talking about 10% reduction -- we're totaling 50% -- 80% in production in part -- so this is a matter of time. We've got the what we're doing now -- and it's exciting. I think the world, the FDA everybody ready to treat probably most important [indiscernible] 1 that you the rely actually probably in [indiscernible]

[indiscernible] position Around large volume communications, which is historically have required two randomized control trials or [indiscernible] and even the is recognize that we the trial make an impact on major I don't know that could accelerate through the regulatory price has improved on the base of a single well conducted randomized was tell us that other trials.

[indiscernible]. I could not part of the hospital on the day patients are getting treated so there was a true firewall, but between the people that knew that we're doing the and treating patients. And then the people who screen patients are going to follow them up. So the community is true blinded the patient. We did it all management the patients that didn't get the treatment.

We put a we have eventual and we put these in the many strategic way and so everybody has all the going there a picture that you fill -- so everybody, they got the catheter in the picture and then the down and we actually injected the sale in terms of the we just sat down and did injection number one, completely. So the patients at the time, and they didn't really have no clue because at -- there is a complete, very well-executed blindsided all kinds of all.

And 587, you can't fake result in 587 patients. I mean in our Phase II trial, where we figured out that 150 million cells was the right dose, there were no events in , there were no events in the people that got 150 million cells. And you think, well, okay, we're a little lucky. This is 60 patients. It wasn't that much. Okay, this is $587 million the results are amazing. They speak for themselves. And so this is just at a time now where with some open-mindedness and straightforward thinking this should get approved.

And it will help the people die of the #1 cause of death in the world. I mean, so I think that's another barrier because heart failure is a high bar. It's a big problem, and it's the thing that kills most people. So, oh, we have to be really careful to approve something that we could treat everybody with.

So you saw that the reduction in heart attacks of 88% was I think there was a significant reduction in the entire study without any kind of subgroup analysis, does that sort of outcome surprise you? And does that sort of outcome tell you that this is a technology that is going to make a big difference on that basis on that trial?

So Ken was on the phone -- I almost fell out of my chair the blind the committee, the safety committee that guided the DREAM trial, we wanted to keep going because I wanted more data. And this whole study with all the follow-up, the mean follow-up is about 3 years, but it took like 5 years to do this. But I wanted more patients because like we need to know more and all that, and they said, "Listen, Dr. [indiscernible], a fantastic guy, the head of the Montreal Heart Institute, and he says, he without telling us very much as you have all the data you need.

And it's like just stopped the study and like, okay, yes, sir, we'll stop the study. So we that's right. That was just on heart -- and then we looking -- and it's complicated to look at a study like this, and then you tease out the things and you figure out the mechanisms. And so it just makes so much sense. And so now we're introducing this concept to the cardiology mainstream that we're now able to treat heart failure, not just with all the drugs that like everything that we do, and I see heart failure patients every day.

And that's -- we give them all the drugs and yes, it makes them better, but there's the whole other half that has not been addressed and we can now do it and people just like it's unbelievable to see these patients doing better. I mean it's incredible.

That's great to hear that. On that note, let me shift to Eric because I think it's -- the theme is the same theme. We've got one product. That product has been, as you call it, engineered. We have proprietary ways of manufacturing it that is -- that optimizes the product response to inflammation and has a similar effect across the spectrum. So not only do we see a reduction in these major events in the inflamed patients in the DREAM [ drop ], but we saw the same benefits in a way in the VAT population. Eric, of course, is the world leader who was responsible for getting the first FDA approval for permanent use of an LVAD device in patients who are the typical heart failure patients who then progress from advanced stage to end stage.

And otherwise, have a 50% 1-year mortality on medicine treatments. So Eric Champion that. And despite his clear demonstration that you could increase survival by putting one of these devices in, it's pretty evident that the field has not dramatically moved forward and the number of devices that is still pretty low. And I wonder if you could comment a little bit on the progression of right heart failure disease and how you think our cells might have had a benefit on the results that we showed.

Thank you. It's clear that cells and two randomized trials, improve [indiscernible] heart failure and decrease the incidence of GI bleeding, major [ mucous ] bleeding, almost all of just GI. That's clear. The reason is probably improvement in RV function, which we've also demonstrated into randomized trials as well. This was work that was done actually as part of a grant that we got at Columbia when Sylvia and I were there to look at the human biology of long-term mechanical circuitory support.

When we first reported this trial, everybody was disappointed because we were not able -- we were hoping we administer ourselves and get people off LVADS. That proved the bridge too far. But as we look closely at the data, it's clear that patients who get cells who have pre-existing inflammation in particular, do better with the LVAD in, which arguably may make LVAD therapy safer and better for a larger number of people. The biggest problem with LVADs still is the perceived quality of life that these patients have.

But I think if you end up hospitalized for bleeding [indiscernible] heart failure or die during the early period enthusiasm for them is minimum in the cardiology community, which is why there are only 2,000, 3,000 implants per year done in the United States. That being the case, though, this is a perfect orphan scenario in which to pursue an FDA approval now.

It's -- I guess, we were surprised and really a little bit late in our thinking process. But in fact, the difference between the LVAD patients versus the pre-VAT patients is that the left ventricle is protected and is dependent on artificial device, but the right ventricle isn't whereas the pre-VAT patients, both metricals are at risk.

And I guess this is an experiment of nature in a sense where these patients have a progressive disease of the right ventricle that injection of our cells, which we injected in the septum, facilitated an improvement in this population, but it's really a continuum from the other patient population. So what's your view of the two randomized controlled trials that demonstrate kind of a continuum and a similarity in terms of mechanism?

Well, I think before I comment on that, I also think it's -- I want to acknowledge Silviu's role in this because Emerson and I were both speaking about a meeting that we had years ago. This product was initially licensed to Cephalon, about 15 years ago in that range. Very enthusiastic CEO, Frank Baldino who paradoxically died due to acute leukemia, about 6 months after they took on DREAM population and the DREAM trial. And those early trials use MACE as the primary endpoint.

I forgot about the Phase II showing 0 events, which an equal 60, you say, maybe this is luck. Silviu somehow the drug ended up with Teva, at a time, yes, have acquired Cephalon. But Teva a generic drug company that had no business in a cell therapy indication to begin with, screw this up so badly, it's amazing. They changed the primary endpoint to this ridiculous joint reality thing, which works fine for the other half a non-flame path of -- yes.

Well, Silviu, and I joined his Board at this point. reacquired the asset in the middle of the trial, which I think is hierarch. At the time, I thought maybe it was crazy, but it was a rock. And I think the availability of the DREAM data could only been realized with that kind of courage. And I think you deserve enormous credit.

Well, look, I appreciate you saying all that. But I think the message really is this is an incredibly powerful technology. And how else can you get a powerful technology that's new and first-in-class to patients into the market if you don't go for it, right? And you don't really know the power of something like this until you actually try it out.

And I think that's the message in the cardiac space. I think it's also the message in have approved product Ryoncil which, without the fortitude of people here in this company and without all of the -- frankly, the agendas, the table amongst regulators I would never have seen a lot of day. And I think this is what you got to do to bring new technology first-in-class. You just got to keep going for it and trust your scientific rigor.

I think the other group, we should acknowledge the patients that agreed to these randomizations. And we have an obligation to them that goes beyond any primary endpoint. The reason that all these trials are designed to measure a lot you would think would be to look at other data besides the primary endpoint in order to see whether or not there is something else learned. And these examples, there's plenty learn.

Plenty. And to say that these trials are failures is ridiculous, especially when they relate to improvements in mortality of a hot [indiscernible]

Yes. So a quick story about that. So when we got the data from the DREAM trial, again, it's a fall off your chair kind of result. So like we put this [indiscernible] together. And I said it in the New England Journal of Medicine, okay?

Well, what happens? Well, because of all the shenanigans that the primary endpoint got changed and so originally, it was a -- so we'd be here on a very extremely positive trial, but it got changed to recurrent hospitalization. Well, are the cells diuretics are they decongested treatments? No, they're anti-inflammatory. So guess what, we missed although people dive less and had less heart attack and stroke, we missed the primary endpoint that you have to put in because of how things are in science that's established.

And so I get it back in 3 days later from the Lion Journal of Medicine. And that's how silly some of the academic world we live. But the results you can see them. Yes, now we know the recipe. I can with my blindfold on, I can put on the primary endpoint for the low confirmatory trial that we'll do and then we'll be fine.

So to Eric's point, this is really all about patient right, and it's about making sure that we can deliver therapies today, which are life-saving and not 5 years from today and how many patients would die waiting for these therapies. And that's what this is about. They deserve it.

And they deserve not to wait another 5 years to have the dream population benefit from this therapy. I think that's still a pipe dream. And I think that's the reason the company has to persist in pursuing both indications, both in the LVAD patients where there's evidence of improvement of morbidity and the patients on orphan population, but the bar is -- the regulatory bar fortunately, is lower, Ken got the RMAT designation for that indication, and I think we should go for.

And I can't use the language up here, but we're some persistent guys. Yes. I tell you what. Patients are lined up for this. I mean we're ready to get you to get this thing approved. We're finally ready. The regulatory environment is good. we're on our way and lets us get this thing going. And we will revolutionize how heart failure is treated.

Thank you. And thanks to you to both of your giants in your fields. Thanks.

Let's shift again and now talk about some of our other opportunities of label extension, particularly in the pediatric rare disease space. Michael Schuster, please.

Well, thank you, Sylvia. As Dr. Kurtzberg indicated earlier today, there's certainly a large number of applications in the pediatric orphan space where Ryoncil could potentially be effective. And our objective is really to leverage our FDA approval of Ryoncil and identified new pediatric label extension indications. And I'll talk today about the first one that we'll be advancing with into the clinic.

So Duchenne muscular dystrophy, what is it? It's really a disease of inflammation with a very large unmet need. It's a genetic X-linked disease, meaning that it's a disease that impacts young boys. And it's a disease in which the muscle lacks dystrophin. Dystrophin is extremely important because it's a stabilizing protein essential for muscle strength. There's about 15,000 of these children living with Duchenne muscular dystrophy with 500 new cases each year in the United States.

The symptoms typically developed by the age of 3 to 5 and when the underlying inflammation continues to advance in the first decade of life and the skeletal muscle dies off, it's replaced with fat and fibrosis and it results in loss of ambulation or the ability of these children to walk and by 12 years old, the majority of these children are all wheelchair bound. And soon thereafter, they'll develop respiratory failure and cardiomyopathy with a median survival of only 24 years.

So it's really a horrific progressive disease. And the only therapy that is somewhat effective is steroids that has been shown to delay the loss on time to ambulation and actually improve survival. But even steroids, their improvement plateaus after about 6 months and as we know, long-term usage of steroids has some serious side effects, just one of which is the stunting of growth, which, as you can imagine for boys entering their teenage years, height is extremely important.

In fact, some of these children choose to go off of steroids. Now one would have thought that gene replacement of dystrophin could have perhaps been curative and makes sense, replace the missing gene. But unfortunately, it's only been able to show modest effect. And I think that's due to a number of reasons. Firstly, the dystropin that is upregulated on a skeletal muscle is actually viewed as foreign and there is an immune response. So it suggests inflammation is even more relevant to this disease than one may have initially thought.

Second of all, about 20% of all Duchenne muscular dystrophy patients have pre-existing anti-AAV antibodies preventing the administration of the gene therapy. Those that do get the gene therapy will then develop these antibodies preventing repeat administration. So when this is taken together with the high dose of AAV resulting in liver toxicity and more recently deaths. This is accounting for why the uptake more recently has been limited with gene therapy.

So we really view DMD as a revenue growth opportunity where we're able to leverage Ryoncil's anti-inflammatory mechanism of action. We've shown that Ryoncil has been proven to be very efficacious and safe in pediatric steroid-refractory acute graft versus host disease following steroid resistance. Now graft versus host disease, as we know, is really a disease of massive inflammation of cytokine storm, and we're able to shut down T activation and proliferation. These are the same modalities that are involved in the progressive nature of DMD. And we've been able to show that Ryoncil still has now demonstrated benefit both alone as well as in combination with gene therapy in animal models of DMD.

And because of this, when we take the totality of the Ryoncil safety dossier, the BLA package that supports the manufacturing robustness and potency assays, combined with the preclinical data we've been able to now receive IND clearance to proceed directly to a registrational trial that will allow us to extend Ryoncil label, if successful, for the treatment of ambulatory patients with DMD.

Now these are young kids we're going after, 5 to 9 years of age. And the reason that age group is critical is because that's where inflammation is maximal. Inflammation increases in the first decade of life but then when the muscle is replaced with the fat and fibrosis, inflammation goes down. So the science drives us to actually want to intervene where inflammation is maximal. And our objective is to intervene before the patients have lost the ability to walk.

We want to make a real difference and delay, if not reverse the likelihood of them needing a wheelchair. And ultimately, we'll be able to label extend into DMD will allow us to maintain the existing Ryoncil pricing structure. And similar to steroid acute refractory graft versus host disease a relatively small number of centers, about 38 certified DMD centers in the U.S. account for about 50% of the market opportunity.

Therefore, Marcelo's existing commercial and medical infrastructure can be leveraged to support a commercial rollout once approved. Now our proprietary Mesoblast MSC technology has been shown to improve muscle function in Duchenne mice. These are MDX DMD mouse models. And we've been able to show the down regulation of T cell, macrophage and neutrophil immune activation pathways. So we're able to inhibit T cell activation and proliferation. We're able to take M1 pro-inflammatory bad cells and convert them into an immunomodulatory cell types. These are the same themes you've heard Roger and Ken talk about mechanistically, this occurs across all of our diseases.

In addition, we've been able to show an increase in muscle regeneration pathways. So despite when we administer Ryoncil alone, we're not able to increase dystrophin we're actually able to increase regenerative pathways of the muscle and improve muscle contractility. And taken together, this resulted in animal models and improvement in exercise-induced muscle fatigue.

So just to show you one piece of data in the mouse model, this is Ryoncil reduction of serum creatinine kinase. This is a biomarker that is used clinically to show the progression nature of the disease. So higher amount of serum creatinine kinase activity reflects muscle damage. So as you could see in these mice, on the left-hand side, these are the DMD mice alone.

On the right-hand side, these are the DMD mice that received [ prime ]. So we're able to significantly reduce the amount of CK release over a 2-week period, bringing it back to near normal levels. Now we've also been able to show that metas proprietary MSC technology when combined with a micro or subtherapeutic dose of distro, gene therapy has demonstrated additive benefit in Duchenne dog. So a larger animal model. And we've created a composite score index that includes a variety of components such as mobility limb function, muscle atrophy.

Basically, quality of life assessment for dogs was developed a 0 to 30, 30 being the worst quality of life and increased severity of disease and the lower score is better. So the DMD dogs that have not received the MSC therapy over 2 years have a very high severity. Yet those dogs that received the MSC therapy over 2 years have a very low severity of score. And what does this really mean?

So let's look at the video. So the upper panel will be the video of the DMD dogs without the therapy and the lower panel video will be the DMD dogs that received the Ryoncil therapy. This is 8 months post therapy. So you could see in the upper panel, the dog that received the DMD dog without the therapy, it's walking very slow. It's lethargic. It doesn't look that healthy, has to be [ coworse ] to move, clearly, not in great shape.

Yet the dog on the bottom is able to run very firstly faster than I can even talk and it's clearly much healthier looking. So it really suggests that we're able to improve muscle function in these animals. Now we've been able to show a wide variety of other factors as well. We're able to improve and demonstrate that we're able to inhibit T cell activation in these dogs.

And importantly, these dogs over 2 years have cardiovascular deficiencies that were able to completely reverse. So taken together, when -- again, when we combine the safety profile of Ryoncil with the preclinical data, we've been able to advance directly into a registrational Phase III trial where we'll be targeting children age 5 to 9 years of age for Duchenne muscular dystrophy. This will be a randomized controlled study, 76 patients, 1:1 randomized.

The group that receives the treatment Ryoncil will receive 7 infusions over a 9-month period compared to placebo control. We'll be enrolling patients 5 to 9 years of age. Again, those are the patients that have high levels of inflammation as Dr. Perin indicated, inflammation is important. And we'll be taking all comers. So patients could have had gene therapy or they could not have been candidates for gene therapy.

All patients must have had steroid exposure for at least 6 months. So we want to make sure that initial approval hump, the initial benefit of steroids has been met. And essentially, what we're trying to accomplish between the inclusion exclusion criteria is to capture patients who, despite maximal medical therapy are still declining, which unfortunately, in the real world is the majority of these children. The primary endpoint, which is an FDA validated endpoint will be 9-month change in time to stand velocity.

So basically, the kids are playing flat on the floor, and we time them how long it takes them to stand up. And that has been shown to correlate with the delay in time to loss of ambulation and ultimately survival. And we'll be performing this study in collaboration with the parent project muscular dystrophy and patient advocacy. And this group was paramount in helping Sarepta obtain approval for their gene therapies, and they'll be helping us with patient identification and trial awareness in the community.

We expect this trial will take approximately 12 months to enroll. And the prevalence of just this 5- to 9-year age group is about 2,500 patients and again, with 500 new patients each year. Therefore, we think this is a $1 billion annual opportunity. But just bringing it back to the patients, we really believe that this is an opportunity to -- if Ryoncil is approved to really make a difference and offer potentially disease modification in these patients.

So with that, I think I'll stop and Dan Devine will now talk about some next-generation MSC therapies.

Thank you, Michael. Good morning. I appreciate the opportunity to present to you. My wife told me not to be sarcastic, Don't try to be funny because I'm not and keep it short. I could promise the last one I will follow, but don't mistake the brevity of the presentation. It's not correlated to the value of these technologies for the company going forward.

So Ryoncil has actually set a new bar for everybody in the industry, and it's reinvigorated interest across the board. It's been truly revolutionary. And we want to leverage that revolution to create long-term value. So we -- the way we view it is we're moving from revolution to evolution. And that evolution includes incorporating new technologies into our platform.

And the way we do that, we focus on two areas. We can increase the targeting of our cells. Right now when they're administered IV, they go to a lot of places where there's inflammation. We can put a binding more on the cell to bind to specific antigens. So that's very important. And secondly, we can increase their potency. And I'll talk about those 2 in a minute. A little of course. The two technologies that we've acquired, our CAR MSCs developed at Mayo Clinic by [ Dr. Kandarian ], who's here today; and oncolytic virus delivery with MSC developed at Baylor. We're looking at IND in about 24 months.

What is the car MSC? So Car MSC expresses an antibody binding mode on the surface. That triggers an intercellular pathway to enhance potency. Basically, we home sells directly to target tissues. And when they get there, it triggers a reaction inside the cell to produce desired molecules. The technology was developed by [ Sad Kandarian ] and -- had cold this week. I'm sorry about that. And it can be plug and play in the sense that we could pick different antigens to target, including CD19, ECAD, [ COLT ], we won and others. And we could choose different pathways within the cells to trigger depending on the disease indication. Again, we're looking at an IND in Mayo within the next 24 months.

The second product, the first product we have CAD Car MSC. So this product is -- you will be familiar with the company that in the past, we had a product for Crohn's of unmodified cells. In this particular case, we believe that the car modification can take those positive results and exponentially improve outcomes. If you look at the panel on the right, that is the presence of ECAD CAR MSCs in inflamed colon.

Compared to the left, where unmodified cells are present but not nearly as much in number. So you're looking at a 10- to 20-fold increase in the presence of the cells with better outcomes. So we're very excited about that technology. This is an example where we can take a current product that works in the clinic, make it better, have better outcomes, have a lower dosing and as a defensive matter, that means anybody who's coming behind us is going to have to reach a new bar therapeutically to be successful and overcome our leadership position.

So we're very excited about that. in addition to its own effect, the MSC, when it is in those tissues, it also reduces harmful CD3 T cells, and it increases the presence of positive acting CD4+ T cells. The second product we're looking at Mayo is a CD19 CAR MSC for lupus and nephritis. This is an indication. The last indication was an example where we could take a product that could be treated with first-generation MSCs but we think we could get much more potency, lower dose, better results for patients.

This is an example where we could take our MSCs and deploy it in a field where we frankly haven't considered using MSC therapy because of the more specific targeting. So this has a CD19 antibody fragment on the surface of the cells that can bind to B cells that are at the heart of the pathology of lupus nephritis and other immunological disorders. And when it binds to the B cells, it triggers the release of molecules that change the activity of that B cell from negative to positive without killing the B-cell.

This is important. I think some of you may be familiar, there's been green reports of CD19 CAR T cells in the clinic, which have been very successful in Phase II. But every time they talk about the success of those products, they talk about the safety problems with those products including [ Sinocom ] storm release and the fact that they eliminate the B cells, so you put the patient in an immunocompromised state, and it leads to infection. MSCs do not have those safety issues.

In addition, the CAR T cells are really singular in action, whereas our MSCs not only act on the harmful B cells but they also inhibit CD3 positive T cells and recruit and induce [ Treg ] cells. So they have multiple mechanisms compared to the CAR T they'll be much more safe. So we're really excited about this indication. And as I mentioned before, this is an indication that we couldn't go after without this technology, so it enhances our competitive position. expands our patient access. So that's the CD cars, and we'll talk about that in the Q&A after this presentation with Dr. Kandarian.

The other platform that we have is for the delivery of oncolytic viruses. If you looked at clinical trials in 2022, 2023, there were 400 oncolytic viruses in the clinic. Today, there is one approved product. And one of the -- there's two reasons for that.

Number one is when you administer an oncolytic virus, not surprising, it gets negated by the human immune system. So it doesn't last very long. Number two, there's no specificity in its delivery. So it has a lot of off-target activity. What researchers have found at Baylor College of Medicine is that if you load MSCs with the oncolytic virus, they can protect the payload and deliver it to tumors because they home to inflame tissues, and we go after hot tumors.

So the MSCs like a Trojan horse, they protect the virus, they home to the tumor. Eventually, the MSCs will die from the virus being payloaded but that's a good thing because they deliver the virus to the tumor, then go away. This technology is really very exciting. There's a lot of papers in this space but we found the most advanced technology in this space has been developed at Baylor by Malcolm Brenner, who is very well known in the oncology cell therapy space.

The lead product that we're advancing at Baylor is a product that expresses cytokine and IL-12. It expresses a PD-L1 checkpoint inhibitor. And it also expresses a bite which causes or facilitates the homing of the virus to tumor cells, binding to tumor cells and bringing in CD3 positive T cells basically recruiting the immune system to the tumor. So this product for us is actually -- has for mechanisms. Number one, it has the cytokine. Number two it has the checkpoint inhibitor. Number three, it has oncolysis and number four, it has the buy specific T cell engager molecule.

So we're taking an oncolidvirus, adding three mechanisms and protecting the virus with our cells for delivery. So really potentially valuable option for cancer patients. And this is certainly an indication that even 5 years ago, Mesoblast would not have considered would be possible with MSCs, but we think it's not only possible, but we're looking for a 90 in the next 12 months. the payload that we're evaluating a prior version of that has actually been in the clinic and there's data there, got responses of 5 out of 7 patients but not surprising, it had to be administered intratumorally it couldn't be administered IV, which caused Baylor to reach out to us and ask if we want to partner around use of MSCs to deliver the virus.

So next slide. So you've heard a lot today, Silviu, you started off by saying we're the leader in this space. Everybody says that. But I think the presentations that followed show that we are a leader in this space. And that was not easy for a lot of people. Eric pointed out at Silviu's role in persistence and staying around and this is a little bit emotional for me because I've been here 20 years, but that was a hard road. That was difficult.

There were a lot of people who are very critical, skeptical and even active negative during that time. But we persisted and we got to approval. And that type of experience does two things to people. It either makes you tired and want to retire or do something else or go away or just avoid the pain. But I think we've embraced the pain and we've taken that, gotten stronger.

And the other thing that can to people is make them very resilient and resolved to be successful. And I think you saw that in the people today. I think that's a common characteristic of everybody who comes to work at this company. So when we look at our competitive position, we're not very happy that we're the leader. I'm not very happy about it. I'm not comfortable that the gap is wide enough between us and the others who are in this space and the more people who are coming in because we've been successful.

I think by securing these two technologies, we really put ourselves in a position that 5 and 10 years down the road, I don't care what MSC you're developing. You don't have a car MSC where you don't have an MSO delivery. So the first generation, our goal, Michael, is to put first generation 10 years from now as first generation and focus on second and take the competition away. And not only that, but obviously, if we can expand our capabilities to cover things like lupus and cancer, that's obviously better for patients as well.

The other thing I want to leave on is we understand fully that the focus of this company is primarily on commercial and is on our late-stage clinical programs every day. We don't have to be reminded, remind ourselves of that fact. So it's important not to distract our regulatory, quality, manufacturing, clinical folks on the new programs, and we don't have to because we're doing a Matt Bayler, and we're doing them at Mayo Clinic. This is really important not just from a management perspective, capabilities because they are the experts. So we're going to leverage that power that those capabilities those competencies going forward, but it avoids the distraction inside.

The other benefit of doing it at Mayo and Baylor is financial prudence. They have all the infrastructure. They have all the laboratories. They have the staff, they have manufacturing. And it's a very different world than 5 years ago, even 10 years ago. when a university would license something, and that was the last time they were involved in it. I mean, Silviu, if we look back at MPCs or MSCs or other technologies, you take it in, in the tours, that's not really the way that things are working these days.

We are truly partners with Baylor and we're partners with Mayo. So going forward, their contributions to the programs will greatly minimize the financial demands on our company. So they're not going to -- these programs, you haven't heard about them because they're not material to our cash runway and we don't have to disclose those. And I'd rather not tell people about them until the patent stays in place.

Our competitive position stake is put in the ground and we've done that with these two technologies. So we filed a patent on MSC cars as early as 2 days ago as recently as 2 days ago, it enables us to talk about it today. the OV MSC IP is very long as well. So we're in a good position there. But again, I want to thank Dr. Kandarian for being here today, but that's just the beginning of our relationship. So we'll be working hard here over the next 2 years to get those products in the clinic. And for Dr. Brenner, I'll express the same sentiment when I go down there next month.

So that's the end of my presentation. My group used to be called 2GT. I'm going to get a little bit revenge here for a minute. So we were called the 2GT group and then our Head of Manufacturing and his group came up with a new approach for manufacturing that has the potential of increasing our yield by sixfold, and he called it second generation. So not surprising, that title got taken from my group, and I was put ahead -- I was made Head of Special Projects and everybody says, what does that mean? And I say exactly.

So a little bit stealth. I'm not used to talking and I'm used to being a little bit more secret about the function, but I appreciate the opportunity to see everybody here today and tell the story. Thank you.

Silviu, do you want to bring it...

Thanks, Dan. If we could have Dr. [ Kenderian ], please. Dr. Kenderian is the developer of the technology from the Mayo Clinic that you just heard from Dan. So we're very excited about these technologies. And as Dan said, this is work that has been long coming from your group. And we're excited because you came to us, have identified us as a leader, which we are in the cell therapy space. We have had many, many technologies that we have evaluated. And of course, we decided that what you were doing is so exciting and gives us yet another trajectory and yet another arrow to our boat.

I'd like to talk to you a little bit about the potential for using this technology in lupus, in B-cell autoimmune diseases. I'm a rheumatologist by training, and lupus nephritis has been a disease that's been really -- not much has changed in the treatment of lupus nephritis. It's young ladies often, young patients, terrible outcomes, kidney disease, transplants, high mortality. And we've had nothing in the armamentarium. Recently, the CAR-T developers have learned from the use of CAR-T cells for leukemia, B-cell leukemias, et cetera, and have adapted that sort of technology for B-cell diseases in the autoimmune space and the field has rejuvenated, but with potential downside.

So I'd like to hear a little bit from you about why you decided that perhaps a superior approach might be to use the same technology, but harnessing the power of MSCs.

Yes. Thank you, Silviu. We are equally excited about this partnership and about the potential for us to work together with CAR MSCs to take that to the clinic. I think what we see with when we incorporate the CAR into the MSC that we enhance 2 functions for the MSC that they home better to where they're supposed where we want them to go. And then with the signal of the CAR that will make them more immunosuppressive or that desired function that we want them to get to. I think for lupus, we are excited. As you mentioned, we are seeing now patients getting treated with CAR-T cell, for example, CAR-T 19. And we're seeing remarkable outcomes in some patients. I'm a hematologist.

So in my clinical hat, I see patients that go through CAR-T cell therapy. And patients with autoimmune diseases, they come to our service. We have one cell therapy service and what we're seeing is unlike in cancer where we're able to accept cytokine release syndrome, neurotoxicity, the use of lymphodepleting chemotherapy prior to CAR-T cell therapy is common, is accepted. Patients with cancer commonly have received chemotherapy. And these toxicities are kind of like the bar is low for cancer, right? This is the last resort that we have, and we accept the risk of toxicities for autoimmune diseases, and as you said, when we have treating rheumatologists, the bar for accepting cytokine release syndrome, neurotoxicity for the patients, for the treating physicians is higher, right?

Patients are not used to these toxicities. Even the use of lymphodepleting chemotherapy, higher doses of chemotherapy, patients are not used to such therapy. So when we use MSCs that are engineered with CAR19, we have the advantage that we're not going to see cytokine release syndrome and neurotoxicity. This is an allogeneic platform unlike the autologous complex platform with CAR-T, does not need lymphodepleting chemotherapy. And then there is no long-term side effects with CD19 CAR-T, patients have long-term B-cell aplasia and about 1/3 of patients have long-term cytopenias, long-term neutropenia, higher risk of infections and make them ineligible for future therapies, and that risk will not be existent in MSCs.

In addition, CAR19 depletes the B cells, and that's what it does. What we see with the MSC is that there are multifunctions is through the incorporation of the CAR, we're able to suppress B cells. But in addition to that, basically suppressive cytokines, they suppress T cells. So they will be more effective in diseases that are not purely B-cell mediated. And you mentioned lupus nephritis is not necessarily purely B-cell mediated. People are surprised by the responses with CAR19. So we're very excited about this technology. We're excited about the preliminary data, and we're doing more studies trying to understand how we can optimize that and further advance it for lupus and lupus models.

Lupus and B-cell autoimmune diseases are an important part of our trajectory in terms of diseases that we'd like to target, and we look forward to collaboration with you in your lab and we'll be hearing a lot more about work with Saad in the future.

And another area that I'd love to just touch on is a big space for us is neuroinflammation. And we heard earlier from Dr. Kurtzberg in children with neuroinflammation. We have an interest in Alzheimer's disease, in Parkinson's disease. I'd like to hear from you how you see potential targeting of the cells to the CNS.

Absolutely. And definitely, these are areas in our docket in our list of diseases that we're targeting. I think Dan had mentioned in the pipeline, we have an engineered MSC with a CAR that targets is myelooligondrocyte glycoprotein, and that is expressed on the myeloid sheets. And now we have really encouraging data, very significant data in preclinical models of multiple sclerosis where these cells are effective in improving, completely resolving the phenotype of multiple sclerosis in mouse models as well as inducing the downstream changes of T cells and changes of the mechanistic pathway as we expect with these cells.

So that's an area that we're actively pursuing. There is no reason why we can't see development of such a platform for other immune inflammation or degenerative diseases like Parkinson's or Alzheimer's. I think we know MSCs have multiple functions. They are important and powerful cell, and we know that we can enhance their homing and their function with the incorporation of the CAR.

Terrific. Just a flavor of where I think Mesoblast is going and why not only are we at the forefront today, but this type of technology gives us a 10-year runway to continue to develop, ensuring, as Dan said, that we keep our focus today on our lead programs and our commercial programs. But this represents where you can see the Mesoblast with genetic modification of our cells will continue to create life cycle opportunities in areas that are as big, if not bigger than the areas we've already targeted. So thank you very much. Look forward to working closely together.

Thank you, I'd like to now ask Justin Horst, our Head of Manufacturing, to just give you a high-level overview of the -- what actually is a very complex manufacturing strategy that's in place, but Justin has got it all very simply under control.

Thank you, Silviu. Good morning. I'd like to take this opportunity to kind of talk through some of the manufacturing developments and innovations to support all these programs that we've heard about today, right? Obviously, we have an existing portfolio that's approved. We're looking to label expand that and extend into additional indications, and we have to be able to support that from a supply chain and commercial manufacturing capacity. This is a quick look at how we see these innovations in manufacturing that we've developed will take us to that next level of manufacturing to be able to support all these indications.

So where we are today is with our GEN-1 platform. This is what we've heard about with the Ryoncil and the pediatric GVHD products that have been approved. This is a 2-dimensional or what we call a 2D manufacturing process. The cells are adherent on a culture surface. They are expanded through our proprietary and closed system manufacturing process. It's very controlled, very robust. And in fact, we've been manufacturing this way for many, many years. It's been very stable throughout the development of these programs, both MSCs and MPCs, and it's gotten us to where we are today. So this is our kind of base level Generation 1 program.

A little bit of the thunder that Dan stole from me earlier is what we call our Generation 2 platform. And this is actually based on some work that came out of our bioreactor programs. We found a proprietary recombinant growth factor supplement that we can add to our existing platforms and boost our output by about sixfold. This comes through increased expansion of the cells and also shortened duration of the culture process. The advantage here is, obviously, we can plug these into where we are today. It's a process that's already been inspected by the FDA. So we're able to leverage a lot of that. And really, we're just simplistically putting a frozen growth factor supplement, adding it to existing medias and existing cultures. This has given us a tremendous increase in the output of the cells and also reduced costs, obviously.

We've also demonstrated that this is able to sustain and maintain all of our critical potency aspects for the product. So we put this through the validated methods that we use for Ryoncil and the other programs and demonstrate no difference in those products that are produced. Stepwise, next step of that is once we've generated all these extra cells, we need to be able to actually get them cryopreserved and frozen and stored quickly. So this is what we call the downstream portion of our manufacturing process. The upstream is handled by this growth factor supplement where we see these significant increases in yield. And now we actually need to be able to handle these cells and get them efficiently through into a frozen state. This is not an easy process.

As we talked about and you see some of these indications, right? We're talking about millions and millions of patients, so that translates to millions and millions of vials that need to be handled. We've been working with some partners to establish a downstream automation pipeline that can feed into our existing manufacturing platforms and handle these cells. So this will significantly reduce operator manipulations, the manual handling that we have to do for this, reduce some of the variability of that process as well and ensure that we have a consistent and robust way to deliver these cells. So these are all activities that we can do in our existing facilities, in our existing platforms with minimal additional modifications needed.

So to this point, I've talked quite a bit about scaling up of our manufacturing process. We are also looking at scaling out of our manufacturing process, and we are working currently with partners here in the U.S. to establish or onshore those manufacturing capabilities here in the States. This will help secure that supply, ensure continuity, also quite significantly reduce some of the cost of goods associated with transporting products across the globe to distribute them here within the U.S. So that is also actively underway.

And then lastly, we've talked in the past quite a bit about a 3D or suspension bioreactor program that we have. This has been kind of a long-running program with the organization. And ultimately, where we do see the programs heading towards a really significant commercial scale manufacturing platform. This will even further reduce the COGS and also increase automation. It will remove quite a bit of manual intervention and operators, which, again, translates to a consistent product and a cheaper product. Just quickly, I would like to touch on then how we're going about this and how we're actually managing this and managing this with our milestones that we hit.

We can't just run out and establish a new manufacturing process without proper milestones in place. So first and foremost, we are continuing to support and supply our commercial product for Ryoncil for pediatric patients and then the near-term label extensions that you guys have heard about today. So that's our key position. We are, I think, well positioned to supply those products commercially for these indications with the existing platforms. But then again, we do have the second-generation platforms that come in, utilizing these growth factor supplements where we're able to significantly reduce cost of goods, also increase the supply from existing manufacturing facilities. So this will be a much more efficient process as those are introduced.

And we're working to actually introduce this in the next 12 to 18 months. This will depend on a case-by-case scenario as to how it will be introduced to the regulators, whether it's through clinical studies or through post-approval changes. I mentioned again, the automation. So we need this automation to match our production scale as we increase, and we've been working with partners as well to sequence this to match our commercial milestones. So we're not just running out and implementing this today. This is a very well thought through process that's based on data-driven and where we need to implement this and when we need to implement this. So that's also an activity we see taking place over the next 12 to 18 months.

And then lastly, we are working towards validating our Generation 1 manufacturing processes here in the U.S. and onshoring some of that manufacturing. Again, this helps derisk us from tariffs from import and some of the other current geopolitical challenges that are faced with this. So we are currently working with partners. This is probably a process that will then be a post-approval supplement to add these additional sites to manufacture here in the U.S. So those are kind of a high level of our activities for manufacturing.

And I think with that, I will transition to Jim, who's going to speak about the financials.

Hi, everybody. I'm going to spend a couple of minutes talking about our current financials and our strategy going forward. We reported this week net revenues for our fiscal third quarter of $30.3 million. In February, we reported our first half results, where we had reported $44 million of gross profit on Ryoncil, and that had $7.7 million with of direct selling expenses to it. Our net cash usage for the first half of the year ending in December was $30.3 million. And at the time, we messaged to investors that our spend in the back half of the year will be lower than it was in the first year.

So our cash burn is actually going down. as receipts for Ryoncil go up. And as a result of that, we'll be using less cash in this back end of the year. We've really implemented a cost disciplined approach so that we're really matching what we're receiving in from Ryoncil to what we're spending. And along the way, we are still supporting the clinical trials that we've talked about today, our BLA filing and maintaining our commercial inventory. We have $130 million of cash on the balance sheet at the end of December, a very strong balance sheet.

We also entered into a new term loan, $125 million term loan at the end of December, retired some debt, and we'll draw another $50 million on that later this year to retire all of our debt. So after June, we will have no current debt. We've got a 5-year term on it. It's a very flexible balance sheet to be able to work with all the programs that we've talked to you today about.

From a strategy standpoint, I just wanted to emphasize a couple of points. We're looking at various ways of making sure that we fund the company, most importantly, on a nondilutive basis. We're matching our cash generation to our cash spend. We've already messaged to the markets that we expect full fiscal year net revenues to be between $110 million and $120 million. Our costs are well controlled. Our margins are really terrific. We're very pleased about that. And as Marcelo mentioned, we're looking to target to double our revenues in Ryoncil.

We have a long-term debt facility, which I will also mention that it carries only an 8% interest rate on it. It doesn't encumber any of our assets. to then be able to get into other partnering discussions and licensing that we're active with, with Michael and I leading the charge on that. So we're looking at other ways of bringing sources of cash into the company to fund our needs. But I want to make a point very clear that we're very cost disciplined, making sure that we're not overspending where we need to be and really preserving our cash balance sheet. With that, I think I'll turn it back over to Silviu, who's going to just have some closing comments.

Thanks, Jim. We really are financially disciplined company, and I think that's the message that you're all hearing. But really, what I'm excited about, I think you're all excited about, we've heard some fantastic data today and some real aspirational stuff. What are these MSCs? What's the magic? What makes these cells so special? Well, they've got multimodal anti-inflammatory mechanisms of action, which means they can currently act on multiple pathways of the immune system, not just one. When they're inert and they're self-regulating.

So in the absence of inflammation, there's no adverse events. There's no safety issues. These features result in superior efficacy without any concerns of off-target adverse events that are typical of small molecules and typical of antibodies. So this is a paradigm shift in drug development, precisely what the pharmaceutical industry is concerned about off-target effects, which forces them to go down very narrow paths is exactly what we don't have. We have a product that is multimodal, does not have the off-target effects, and we can take advantage of those multimodal pathways to deliver outcomes.

The body is not a single pathway individual, right? We are all complex. These cells are able to respond and in a complex way, turn off disease states. The platform technologies that we've developed can be leveraged, therefore, across many indications with high unmet needs that are not accessible to other drug developers. There's no requirement for matching or immunosuppression. These cells are highly expandable and scalable. This was a feature of the cells that led us and drove us to build a manufacturing process that underpins a business model that's sustainable. And the industrial scale of these cells give us a sustainable, high-margin business model that can only improve with the innovations that you heard from our Head of Manufacturing.

We've developed a moat, meaning we've developed an entire strategy around what sets Mesoblast apart and protects our market leadership position. We have a global intellectual property portfolio of more than 1,000 patents that provide us with commercial protection through greater than 2044. We have a dominant IP position, protecting a cell type whose unique properties underpin a scalable commercial business model. But we have a first-mover advantage, and this is really important. We have the first and only FDA-approved MSC product. We can take advantage of that.

We've completed large U.S.-based randomized clinical trials, which provide evidence of efficacy. You heard some of these today. We are the benchmark in complex manufacturing with IP protection with significant know-how with FDA alignment. We've demonstrated that FDA alignment, scale of capacity and ability to leverage. In addition to that, you've just heard the tip of the iceberg today about next-generation technologies that we're accessing and rolling up in order to enhance our leadership position and be able to develop new products moving forward for the next decade to continue and separate us from the rest of the pack. And these allow us to move into new areas that we haven't even talked about yet, including, as you heard today, lupus nephritis, a major disease of unmet need including potentially areas like Alzheimer's disease and other neuroinflammatory conditions and interestingly and excitingly, potentially even cancer.

So we have some major anticipated upcoming milestones that I think I want you all to focus on because that's where the business is. That's what we need to deliver in the short term. We have milestones for Ryoncil, our FDA-approved product, and some of those are commercial and some of those are clinical and strategic around label extension. For Ryoncil, our commercial milestones, we talked about our net revenue approaching $100 million just since recent launch, but we have a plan to double that revenue. And you heard what that strategy is from our commercial leader. In addition, we're well funded already to execute on our existing operational plans. And Ryoncil sales as they grow, will continue to fund our internal pipeline.

Discipline. We're focused on increasing penetration of the pediatric GVHD market. We have to continue to grow. This product saves lives and physicians who use it will endorse it, and they should be using this as soon as they have an inkling that steroids are not working well. This product is the only approved product that saves lives in these children. And beyond GVHD, this product should be used more broadly in other indications. So you heard about our strategy to broaden it into use in adults who otherwise also have a very severe disease with a high mortality rate, a market that is 3x bigger than our current pediatric market.

That program is in collaboration with the BMTCTN trial is initiated, and we expect it to complete somewhere as early as 12 months, but certainly not later than 18 months. And you heard today about the new area that we are looking at, pediatric Duchenne's disease, another devastating disease, where, again, inflammation is at the core, and we think we can make an impact. Moving on, the real growth potential is in our blockbuster opportunities of rexlemestrocel for BA and rexlemestrocel for heart failure. You heard a lot of discussions about those today, and we're extremely excited. Rexlemestrocel for back represents a blue sky potential that is really in front of our eyes. Here it is.

We -- you heard that we're completing enrollment this month of our pivotal Phase III trial. That then starts the clock. you will have about 12 months to wait and the endpoint will be read out around the middle of next year. Every indication is that we'll be successful. We've had multiple trials that have successfully met the exact same endpoint. We're very success -- very, very optimistic and confident that we'll have a positive outcome. And if positive, we will have already preprepared most of the documentation for a BLA filing a quarter post readout. The reason for that, of course, is that all of the manufacturing and CMC activities are already underway and hopefully will have already been signed off by the FDA.

The potential launch for this blockbuster product, which is really a multibillion-dollar opportunity for this company will transform Mesoblast from where we are today to something that is 10x bigger, maybe more. is an approval and potential launch in the second quarter of '28. And finally, our cardiovascular opportunity, you heard about today, we have a strategy in place to start with the orphan area at the end-stage patient population and then use that potential approval to move into the larger indication in heart failure for patients who really continue to have a devastating mortality risk.

And on that note, I think we'll stop. We hope we've gotten you excited and teased you with some of the many opportunities in front of us. And maybe we'll start with some of the Q&As. Thank you. Paul, you might want to get people to ask the questions that we have a roving microphone, and I'll ask various people in the audience to then chime in.

Yes, Ted here from Piper Sandler. Can you talk a little bit more about that interim analysis for the Ryoncil trial? What kind of ORR do you expect from the rux group? And what kind of effect size are you powered to detect at the interim and at the final analysis?

Yes. I mean the final analysis is looking for a very modest 20-point difference in the day 28 response. I call it modest. the field thinks it's a very important improvement on standard of care. It was exactly the same endpoint that we used in the pediatric Phase III trial and exactly the same threshold, a 20-point improvement over other therapies, and we achieved it successfully. Dr. Kurtzberg was our principal investigator, and she can tell you a lot more about that. But -- so we're very confident of being able to achieve this.

Why are we confident, as Michael tried to explain, it's because we're already treating the very patients who are not being adequately treated by existing standard of care, ruxolitinib, are precisely the patients who then come to us under expanded access as a last line of resort, having failed rux and maybe having failed other agents. And with a potential 25% survival at 100 days, in our EIND studies, we see north of 70% survival in those patients. So since we can treat them when they're already gone too far, the earlier we can intervene, the more likely it is that we'll see a positive response.

So together with our BMT CTN collaborators, the protocol design is such that it allows the cells to be combined with RUX at the front end when a patient is not doing well, maximizing our chance that we'll see a treatment benefit. And look, the data tells you -- the data tells you why we're confident that we're likely to succeed. And so an interim analysis is great to put in place if you're confident about your own data, right? And that bar to achieve a successful interim analysis is not much higher than the 20-point delta. I think you mentioned it was 26 points. So if we can't do the 26-point delta, then we should go somewhere else. That's how confident I feel.

Thank you for the remarkable day. I'm Tom Shrader from BTIG. I'm actually here for Julian Harrison. Will your current lower back trials support redosing? Is that something that you expect to be a heavy lift at the FDA? Or if somebody wanted it again in 2 years, would that be easy? And then for Dr. Beal, do you have a sense of any prognostics as to which patients do particularly well? And you also mentioned repair. Could this drug get a disease-modifying label? And would that be a big deal for pricing power and uptake? And then I have a cardiovascular follow-up.

Redosing. It's not been tested. But the redosing and other cellular therapies appear to work about the same as the initial therapy. Let's say, I'm going to take another example. This is nonpublished data, but this is to be published data. Out of 100 people, let's say, 85% still do pretty well in terms of pain and functional response. For the 15% of people that don't do well, they can be redosed and ostensibly do about as well as they did the first time, which is pretty good. And when I say pretty good, the pain and functional improvements on the range of about 60% to 63%. In regard to -- let's see, redosing, what was the other question?

Prognostic factors forortzole.

Prognostic factors are people with back pain 5 to 6 years or less. And that's about it. If you separate in the Phase IIIa trial, if you separated the whole of the population between the ones that did better and the best, there was a dividing line of 68 months. And inside of 68 months, people did very well in the pain and functional improvements approaching 70% and that were ostensibly durable at 3 years. So what we consider with back pain, if they're durable at 3 years, it's ostensibly permanent.

And it appears to be -- look, it appears to be like a regular disc. You can have a disc problem, it can heal on your own, you can do well. But any type of degeneration predisposes it for additional injury. So you can look at this as a speed to heal the -- and it can be injured, it can be retreated. And with every product coming down the pipe for the back, we always reserve the right for retreatment. The only exception to that is something called basal retteral nerve ablation, and that's a wholesale different animal in this.

I might just add to that, right? In addition to retreatment, the other big area for this product is static nerve injury. We've deliberately excluded acute siatic nerve injury from patients being included in our trials. So that's a whole other large patient population, as you know. And we're pretty confident that I think an injection of these cells is likely to have a substantial improvement in patients with predominant cytokine, right?

The other way to think about this is once we get approval for this as an immunomodulatory pain therapeutic, the growth of this product in other areas that have similar pathophysiology like knee osteoarthritis is obvious, right? And we already have data that we've generated with the same product in patients with post-ACL injury, for example, who are at very high risk of progressive osteoarthritis. We've injected these cells into the knee joints in young, healthy athletes and shown that and published that over a 2-year period, we prevented progressive osteoarthritis and loss of function and loss of pain. So that's a whole other area that this product will have potential use for.

And I was going to respond to your question about disease modification. So in the research we've done with the payers, they've said because everything else only goes out to 3 months, NSAIDs, opioids, they view anything benefit 12 months or beyond is disease modifying in their question. And so I think that's what's really driving their willingness to pay the higher prices as they see anything beyond 12 months with a single injection is disease modifying.

Yes, it makes sense. And a quick one for Dr. [indiscernible]. We've had some hints about powerful anti-inflammatory drugs in cardiovascular disease, the CANTOS trial, things like that. And it's a vague question, I apologize. But in your -- the DREAM results are so remarkable. Are they more than you would expect for remodeling drug and then a powerful anti-inflammatory? Is it too early to tell? It's a crowded area. I'm just curious your thoughts.

Well, that's a great question. So the interesting thing is there have been 3 trials of anti-inflammatory cytokines used and Doug Mann has led these CANTOS against IL-1 beta. The problem is that it's one thing when you use TNF alpha or IL-1 beta. So the beauty of these cells is they sit there with those receptors that got shown, IL-6, TNF alpha, IL-1 beta, all these things, the inflammatory cytokines plug into the cells and they activate. And now you've got a cell that's putting out dozens of medications. So instead of just treating it with one thing, the cells are now treating it with a whole host of things. And that's why these other trials have failed and the cells work because we're just giving a whole soup of stuff instead of just one product.

That's exactly right. That's what these cells do. That is core to the mechanism of action. These cells sit in these tissues in our bodies. They sit in the heart actually. And they call sentinel cells, and they sense inflammation. They have a whole bunch of receptors. What does that mean sensing inflammation? They're being activated by cytokine A, B, C, D, E, F, G, right? And when you're sitting in that cytokine storm, they get activated and they can respond. That's a living interaction between cell to cell. And that's what you don't have with any of the monoclonals that target just one cytokine. No one do they fail. This type of outcome is unheard of and will not be -- it will remain unparalleled because this product has unique mechanisms that are different from small molecules or antibodies.

Unheard of and unparalleled, I like that. I thought I heard when you were talking about the pre-LVAD market strategy that there was an indication of a label extension. Do you feel comfortable talking about that and expanding on that concept?

Well really, what I meant was we see a continuum between patients being treated in end stage with an LVAD because they're really -- our cells are treating the only remaining ventricle that can be helped, which is the right ventricle, and it's clearly reducing right heart failure and the consequences of right heart failure, which is GI bleeding. And if we were to get approval for that group of patients, which is an orphan population, and we've had a successful randomized controlled trial.

If we were to get approval, then that product, the exact product, the same dose formulation, potency assays becomes potentially a label extension strategy for other indications, particularly an indication which is a continuum of this disease, which is heart failure involving the left ventricle. And so this is our strategy to bring this cardiac product to the large numbers of patients who could use it.

That's what I thought I heard.

Michael Okunewitch from Maxim Group. Thank you for putting together an interesting event and pulling back the curtain to show some things that we haven't seen before. I'd actually like to start off just on that topic, in particular, around the oncolytic virus program, given the activity in that space coming up, I think, later this week. So what causes the MSCs to actually localize to the cancer? How long do the MSCs reside there before actually being destroyed by the oncolytic virus and releasing it? And then is there any risk to having mesenchymal stem cells present in the tumor microenvironment given the anti-inflammatory effects?

Yes. I mean these are critical questions, and this is why this is a very early-stage program. This is early, early preclinical R&D. Having said that, there are dozens and dozens of papers in the literature for 20 years of various people using MSCs and the properties of MSCs to target drugs to target all sorts of things, including first-generation oncolytic viruses to tumors. In preclinical models, no evidence of downside. Why that should be the case is primarily because these kind of cells actually don't survive, and you wouldn't want them to survive, and they die within 24 hours. All they're useful for really is homing and payload delivery.

So in this particular scenario, these cells are really fairly benign and inert and irrelevant. What's relevant is what's the payload that they deliver. So the studies that Dan is leading with really the world experts at Baylor is precisely what you've asked, right? How effective are these cells in delivering third, fourth-generation oncolytic viruses, which are not possible to be delivered systemically unless they're clocked. And so really, our cells are cloking agents that prevent these viruses from being destroyed by the host immune system for a very short brief moment while the cells take them to the tumors. And the viruses destroy the cell that got them there and then the viruses can do whatever they do.

So look, we identified probably the #1 group in the country that's leading the charge in building genetically modified oncolytic viruses that express all sorts of things Dan touched on some of those things, but the traditional immunomodulatory agents, anti-PD-L1 and various other factors, IL-12, et cetera. We're leveraging the know-how and the expertise of the Baylor investigators. And we'll know from their studies whether our cells have -- are able to deliver outcomes that naked viruses are not able to.

There's a ton of data on that I can share you, Frank Marini, who's a very well-respected oncologist at I think MD Anderson just published a review in 2025, and he looked at 217 MSC trials over thousands and thousands of patients and not one occurrence of any kind of contribution to an oncological event. So we've always known that, but it's incredibly validated that there's no issue. On top of that, Dr. Brenner is very cautious. So there's a suicide gene built into our oncolytic viruses that make sure the MSC doesn't in any way transform into something that sticks around for some time. So it's an incredibly -- we think it's an incredibly safe product.

Yes. Certainly very interesting. And then just on the topic of some of the newly announced programs. Within DMD, in particular, I'd like to see if you could talk a little bit about how you plan to contend with the potential presence of other cell therapies in that indication and how you plan to differentiate yourself?

We are differentiated. We've got the only FDA-approved cell. This FDA-approved cell should be available for patients with bad inflammatory diseases who have nothing else to help them with. And so that's why we're working with the PPMD, which is the advocacy group. They wanted us to do this study, right? Because they need something, they need an anti-inflammatory cell. So the FDA-approved Ryoncil needs to be evaluated to see whether we can improve outcomes. Nobody is looking at cell therapy in children 5 to 9 who have inflammation who need something to improve their muscle disease and prevent them from becoming nonambulatory.

I believe there's a question on the phone line.

Yes. We have a question from Edward Tenthoff with Piper Sandler.

I'm so sorry that I can't be there today for this inaugural event, really a lot of exciting data, and I echo Eric's words earlier about the long-term effort and persistence to get these therapies approved. I really feel like Mesoblast is like on the here of launching some really big therapies. And my question kind of has to do with that point. How do you fund the company kind of in the short -- in the intermediate term to [indiscernible] approved for chronic lower back pain? Is the plan to potentially partner one of these assets, whether it's heart failure and chronic, but how does partnering factor into the funding strategy for this really exciting late-stage pipeline?

I mean it's clear. we laid out today our confidence in using the revenue from Ryoncil, which is growing to fund internal operations. That's our #1 strategy. And we see our budget allows us to plan for that. And as we -- as revenues increase, then our investment in internal programs will increase accordingly. So that's our #1 strategy. We're well cashed up. We're well funded. We have important readouts coming up. So the back pain program will read out in 12 months. if positive, that will be transformational for the company.

We, of course, have discussions on an active basis with companies that have substantial commercial capabilities in pain, in back pain, in inflammation, et cetera. Whether we take that product to market on our own or whether we co-promote and maintain a relationship with others who have bigger commercial footprints is something that we'll decide in due course.

Certainly, in Europe, which is a very different category, it's a cemented geography. We've already chosen Europe's #1 or #2 pain pharmaceutical company, Grünenthal, to be a commercial distributor. And Grünenthal is awaiting with deliberate enthusiasm, the readout of this Phase III trial. They've got the footprint across all the major jurisdictions. And if it's positive, they'll be running to the regulator, they'll be preparing for appropriate launch and reimbursement discussions across the EU5 and other jurisdictions. But in the U.S., I think that we will evaluate the opportunities and the options when the trial reads out.

With respect to cardiovascular disease, I laid out the strategy, I think, pretty clearly that we have a stepwise approach to approvals that start with the most extreme, severe end-stage patients and then build out towards the larger opportunities. And of course, to the extent that commercialization of the larger opportunity in Class II/III heart failure that will be a partnering opportunity. We're in discussions with some major strategic partners. But that heart failure program is, of course, you saw the numbers, that program will be partnered at the appropriate time to take advantage of the opportunity.

Ted, does that sort of address the question you're asking?

Yes. Thank you very much.

Okay. I think there are no further questions. And hopefully, you guys have had an exciting time because we think it's exciting. And hopefully, there'll be a lot more questions in due course that we can address. Thank you, everybody, for attending.

Hello, and welcome to the Mesoblast Financial results for the half year ended December 31, 2025. An announcement and presentation have been merged for the ASX and are also available on the Home and Investor pages at www.mesoblast.com. [Operator Instructions] 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 in such forward-looking statements.

In addition, any forward-looking statements represent the company's views only at the date of this webcast and should not be relied upon as representing the company's views of any subsequent day. The company specifically disclaims any obligations to update such statements. With that, I would like to turn the call over to Paul Hughes. Thank you.

Welcome, everyone, to Nest last financial results call for the period ending 31 December 2025. My name is Paul Hughes. I'm Head of Corporate Finance and Investor Relations. In the room with me today is our CEO, Silviu Itescu; our CFO, Jim O'Brien; and our CEO, Marcelo Santoro. We have a presentation to run further highlighting the financial results and the operations for the period and then we'll have some time for questions at the end. So now I'll hand over to Silviu to begin.

Thank you, Paul. We can go to Slide 4, please. This slide highlights the corporate priorities for 2026. We intend to continue to show strong growth in Ryoncil sales driven by market adoption. We will build a strong cash flow with devices use of funds for operations and an optimal capital structure. Cultural transition is critical so that we can move to an efficient commercial organization. We will expand Ryoncil label indications and plan approval set approval for recontrol products, our second-generation platform.

Our manufacturing focus will seek to increase diversification, capacity and cost efficiency for our platforms, and we will continue to focus on appropriate commercial partnering impacted by demonstrable value drivers including FDA approvals, strong revenues and advanced clinical programs. Next slide, please. This year was marked by a very successful product launch. We initially received FDA approval for Ryoncil in December 2024. We as the first and only FDA accrued allogeneic mesenchymal teleco product. The product was launched in April of 2025 with revenues growing quarter-on-quarter. There is a significant unmet need to continue to update and increasing market adoption. And our net revenue from Rynocil was USD 49 million in the first half of FY '26. Next slide, please. Thank you, Eric.

Jim will take us through the financial slides. Thanks, Jim.

Thank you, Paul. Hi, everybody. I'd like to now review our first half fiscal 2026 operating results. And I should mention that these figures are in U.S. dollars. Total revenues for the period were $51.3 million, driven by the successful launch of once. Our net product revenues, as Sylvia mentioned, were $49 million, and we had a gross margin of around 93%. Our R&D expenses for the period were $46.1 million compared to what we reported last year of $5.1 million. Now last year's numbers were a bit skewed because we had a $23 million reversal of the inventory provision once we got approval of Rynocil.

Without that adjustment, the prior year number would have been about $18.1 million. So I'm sorry, we would have grown about $18.1 million over the prior year. And again, the spending in the period really related to our adult GVHD trials, vaccine and also our LVAD program as well as getting ready for the BLA and some manufacturing work. Our sales and general and administrative expenses were $28.5 million compared to $18 million in the prior year, and that increase really related to the sales and marketing effort that Marcella and the sales team did in terms of driving sales growth.

The loss during the period this year was $40.2 million compared to $48 million in the prior year period. again, as I mentioned a few moments ago, that prior year loss was impacted by the $23 million worth of reversal on inventory. And -- but for not those items, we were down -- we were up about -- we were down on a net loss of about $30 million year-over-year. Just in terms of our operating spend in our cash flows, for the first fiscal quarter -- first fiscal half of the year, excuse me, we were at $30.3 million.

As we look to the second half of the year, we expect our operating cash flow usage to decline when compared to the first half of '26 based upon our projected cash receipts from revenues as well as maintaining disciplined cost control measures and efficiencies in the operation. Now on the next slide, just to point out our profitability and the growth pipeline from Ryoncil, as I mentioned, we had strong revenues for the period. Gross margin, excluding amortization expense would have been about $44.2 million.

Our direct selling costs were $7.7 million. And again, we have strong operating performance allows us to invest in our R&D programs and our life cycle extensions and we do have a very robust pipeline, and we continue to invest in our manufacturing footprint as well as building inventory where needed and getting our second-generation products to market.

On Page 9, next slide, please. We had $130 million worth of cash at the end of December of this year, which you can also note that the reduction in our net spend over the year, as I said, will decline over the second half of this year. On December 30, 2025, we entered into a $125 million nondilutive credit line facility. The first tranche of which is $75 million was drawn at closing and enabled Mesoblast to replay full its prior senior secured loan. We also partially repay the subordinated royalty facility, which will continue to be reduced from ongoing revenue and will be fully repaid by the middle of 2026.

The second tranche of $50 million is available to be drawn on our option through June of 2026. The new facility, the lower cost of capital for the company, freed up its major assets to provide flexibility for strategic partnerships and commercialization. In addition, the new facility can be repaid at any time without incurring early prepayment or make-whole fees. It does not include any exit fees that does not [ cover ] any of Mesoblast assets. Which is a very strong point for the reason why we did this. This is terrific for the company. We have no restrictions on doing additional unsecured debt or any licensing activities.

We're very pleased with this line of credit and believe is strengthen our balance sheet to support an exciting growth period for Mesoblast. On the next slide, looking ahead to the second half of 2026, we anticipate full year Ryoncil net revenues to range between $110 million and $120 million on a full year basis. With that, I'll turn the call back to Sylviu for additional comments.

Thanks, Jim. If we can go to Slide 12, I'd like to bring Marcela Santora, our Chief Commercial Officer.

Thank you very much. So the next slide, please. So good afternoon, good morning, everyone. We are extremely pleased with the performance of the launch to date, and I couldn't be proud of the work, the commitment and the passion that our colleagues at Mesoblast demonstrates every single day towards these children. We have treated numerous patients since we launched, and we also is having a transformational impact in the treatment of these children. According to this feedback we received strong shipment centers and treatment teams. In fact, we are on track to achieve 20% market share by the end of year 1 in the market.

The commercial performance today has been exceptional. This holds true not only against our initial expectations but also when benchmarked against other successful rare disease launches. We have been laser focused on building the infrastructure needed to ensure Ryoncil reaches its full potential. I am very happy to report that we have onboarded 49 treatment centers to date. In addition, Ryoncil is now listed on the formulary of 30 of those enters a number that continues to grow steadily as more P&T committees review and approve its use. -- formulary inclusion is critical, as you know, has streamlined the adoption and use of Ryoncil when it's selected for a patient.

Having these many formulary approvals in less than 1 year demonstrates the outstanding value of these products and the tireless commitment of the team to build the appropriate infrastructure suspension -- in addition, Pesin hospitals have opted to use Optum front here, our specialty pharmacy partner, virtually eliminating their financial responsibilities with the product. On the payer side, we have also made exceptional progress Ryoncil is now covered by insurance plans, representing over 280 million lives across both commercial and government payers. Medicaid coverage is in place in all states and our specific J-code for Ryoncil 3402 went into effect on October 1, allowing for more efficient billing and reimbursement for both sites of care and payers, along with CMS published rates.

Commercial payer support has also been very strong. All major payers, including Aetna, Cigna, United Healthcare, Anton, Humana and Prime Therapeutics covering all brokers plants have issued favorable coverage policies for Ryoncil. Notably, these policies do not require step therapy, which simplifies patient access significantly. All of this has occurred within the first 6 months post launch.

Next slide, please. From a strategic power standpoint, the Ryoncil team is 100% focused on 3 key strategic deals. The first is to proactively identify and prioritize appropriate patients who may benefit from the local therapy. The second should reinforce our superior patient outcomes in first light treatment right after steroids and the third is in power caregivers to domains we also for their children. We have been working with several focus groups and will so launch a comprehensive campaign dedicated to support in both caregivers and patients.

With that, let me turn back to Paul.

Thanks, Marcelo. I'll hand over to Salviu, who's going to take us through the rest of the deck before we open it up to Q&A.

Thank you. We can move to Slide 14. This slide summarize our plans for label expansion of Ryoncil into adults. A pivotal study of Ryoncil part of second-line treatment regimen in a dust severe sterorefractory grapes disease is underway with our partners at the NIH funded bone transplant clinical trials network. The basis for this trial is that 50% of adults who have severe GVHD fail existing second-line treatment, including predominantly ruxolitinib.

These patients have failed have a 25% of business survival at 100 days. We have previously used Roontalaner expanded access in patients aged 12 and older in many adults as well, 18 and older. -- to fail as solid or other second-line agents and use of our product in this patient population was associated with 76% survival at Day 100, a remarkable result. As a result of these results, the final protocol design for the registrational study in adults has been locked down and has been worked through with the FDA recently in the meeting with the FDA agency. We expect the following Central Institutional Review Board approval coming up in March, site initiation and patient enrollment will commence.

Next slide, please. Further extension strategy for Ryoncil is focused on various opportunities in pediatric and adult inflammatory diseases. The team is currently evaluating multiple indications to unlock value, including in the inflammatory bowel, neurodegenerative and restore conditions. Our portfolio will be prioritized to maximize shareholder return by utilizing either internal investment strategies versus external partnership initiatives.

Next slide, Slide 16. Now I'll be updating you on our second-generation platform, rexlemestrocel currently being developed for discogenic chronic low back pain and chronic ischemic heart failure. Slide 17. Our Phase III chronic low back pain program, a first 404-patient randomized controlled Phase III trial has already completed and that included about 40% of patients who are opioid dependent. We met with the FDA recently and received positive feedback on potential filing of a BLA based on achieving a clinically meaningful reduction in pain intensity at 12 months between the treatment arm and placebo arm.

The robust result in opioid reduction from at least 1 adequate and well-controlled trial could be included according to our meeting with the ADC as part of product labeling, which is a very, very, very important outcome. We, in fact, do already have an RMAT Regenerative Medicine Advanced Therapy designation for Rexlemestrocel as a potential opioid experience therapy in chronic lower back pain.

Next slide. The confirmatory Phase III trial is recruiting currently 300 patients across 40 sites in the U.S. with a primary intent 12-month reduction in pain. As I've mentioned on multiple occasions, FDA has confirmed that, that is an approvable endpoint. The enrollment of these 300 patients is expected to be completed in March or April. Data readout and BLA filings are expected in calendar year 2027. We have, at the same time, our undergoing commercial manufacturing in order to leverage our existing capacity and cost efficiencies.

I'll reinforce that there are many patients who are suffering from this terrible disease, over 7 million patients across each of the U.S. and EU [indiscernible] due to deal this disease, patients who are otherwise have run out of options other than a surgeon. This is a large unmet need for a potential blockbuster opportunity. Next slide, Slide 19. Now I'd like to update you on Revascor, our product based on our Rinse platform that is being developed for chronic heart failure with ejection fraction and persistent inflammation in either patients with Class II/III heart failure or very end-stage heart failure patients will be capitalized with the ventricles [indiscernible] in the left ventricle.

Looking to Slide 20. Delvinplantation improves overall survival in these end-stage patients, and that's well established. However, the underlying causes of RF in these patients, notably inflammation, persist. And whilst the left ventricles improving left side, the vats improving on the left side of the half -- the right ventricular pump function remains vulnerable and continues to deteriorate. Therefore, progressive ride heart failure continues to occur in up to 30% of patients and is the primary cause of multi-organ failure invest in this group of patients, mortality occurring within the first 12 months.

In addition, life-threatening major mucosal bleeding, due to aggressive right heart failure, and portal hypertension occurring at our 30% of patients and is a measure morbidity in this group, the main cause of recurrent hospitalization.

Next slide. Now we performed 2 randomized controlled studies in this patient population. The more recent study was called LVAT Study 2 and that randomized 159 patients in a 2:1 mization to provide primary evidence of Revascor's efficacy in reducing major bleeding events. A second study, LVAT Study 1, an earlier study, is a supportive study AD2, randomized 30 patients in a 2:1 fashion and provide supportive evidence also of Revascor's efficacy introducing major bleeding events. Intramyocardial injections in both of these studies are either Revascor or control will perform at the time of LBaantation.

Importantly, both trials, both randomized controlled trials showed the Revascor reduced cumulative incidence of major bleeding events like threatening Gilead, the trial's primary efficacy and say endpoint and related hospitalizations through 6 months, both were significant in the next slide, Slide 22. This provides you with some new data that we have not previously presented. This slide demonstrates the total number of major bleeding events resulting in hospitalizations over 6 months on the left-hand side and over 12 months compared to controls. in the entire study LVAD 2.

As you can see, both on the left-hand side and the panel on the right-hand side, Revascor reduced major bleeding events and hospitalizations by about fivefold and very significant reduction throughout a 12-month period compared to NPC treatment -- compared to control treatment. Next slide, please. Now moreover, particularly in the ischemic group of patients, what you can see is that on the left-hand side, in controls, in red, the scenic controls had approximately a 3 to fourfold increase in hospitalizations due to right heart failure.

The nonscheme had a very low incidence and risk of half failure hospitalization. In contrast, on the right-hand side, by 12 months, you can see that the MPC treatment reduced the right heart failure hospitalization events in ischemic patients back to background levels, the same well as I've seen in nonischemic controls. And again, those reductions of hospitalization from right heart failure was significant.

Next slide, please. This slide focuses on the risk of death from right heart failure in controls on the left and in Revascor treated patients on the right. As you can see in Panel A on the left, amongst patient controls who have at least 1 hospital issue from right heart failure, the presence of -- sorry, amongst controls, the presence of right heart failure hospitalization, at least on right heart failure hospitalization in red was associated with a mortality risk and a hazard ratio of 7 -- more than 7 compared to patients who did not have right heart failure.

So in controls, particularly early within the first 4 months after Alvadiplantation. The presence of a right heart failure hospitalization was a very strong predictor of death. In contrast, what you can see on the right-hand side, amongst Revascor treated patients, the risk of debt, particularly in that early period 4-month period is almost completely abolished. And you can see that the overall survival over a 12-month period in Revascor tried patient was the same, irrespective of whether they had a right heart fertilization or not.

And so what this means is that Revascor not only reduces the incidence of hospitalization rates but protect these patients against debt from Road. You can go to the next slide, please. And so the summary of these new data, Dan, that I haven't shown you here, but we have also observed is that Revascor reduces inflammatory cytokines and through formation reduction protects the at-risk right ventricle in these patients, the same ride better continues to fail despite the fact that there's an elevating the left pedicle.

The strengthened right ventricle reduces authorization rates in the intensive care unit due to road heart failure and improve survival. The strengthened right ventricle decreases the risk of portal hypertension and therefore, decreases [ geo ] bleeding events. This leads us to think very carefully about how Revascor beyond its potential use in patients with left heart failure problems also has the potential to be used to improve right heart failure function in patients not only with ischemic heart disease, but other causes of right heart failure, including primary pulmonary hypertension and chronic lung diseases.

Next slide, Slide 26. So let me give you an update on our CHF program, particularly our plans to file for approval. With these new data, and our existing orphan drug designation for treated this group of high-risk patients with high mortality as well as FDA stated preference for randomized control cells. Mesoblast is moving from filing for an accelerated approval to filing for a full approved. Unlike an accelerated approval, full approval does not require a confirmatory study. aligned with FDA on items required for filing the BLA regarding CMC potency assays or product release and commercial manufacturing, we now have these activities well and truly underway, and we expect to file our BLA for full approval for this indication in the next quarter.

Let me summarize our highlights and our upcoming milestones. We also is the first and only FDA approved in the product. We delivered net revenues of USD 49 million in the first half of FY '26. As you heard, 49 centers have been onboarded. 60 core centers account for 94% of the entire pediatric bone transplant population. So we're well underway to achieve that in record time. We're initiating label expansion to adult acute GVHD, a market that is 3x larger than the pediatric market.

We are currently prioritizing our portfolio which includes the potential to go into the inflammatory bowel disease, neurodegenerative diseases and respite conditions, and we will update the market as we focus on certain areas in priority over others. Our second generation of recliner cell is enrolling the second trial in back pain with full enrollment expected to complete by the end of March or end of April. BLA filing next quarter is in line for full approval for patients with right heart failure and end-stage heart failure with LVAD. And we're actively optimizing manufacturing logistics to support commercialization, both of the Rexlemestrocel pipeline and obviously, to have further inventory for the projected growth in Ryoncil sales.

With $130 million in cash on hand as of December 31 and the new credit line that you heard about, which still has the potential for $50 million available to draw down, we're in a very strong financial position. And as you heard earlier, we are projecting full year fiscal 2026 Ryoncil net revenue to range between USD 10 million and USD 20 million. And I think I'll stop there and hopefully, there are some questions that we can all address. Thank you.

Operator, if you could please open the lines for questions.

[Operator Instructions] Your first question comes from Edward Tenthoff with Piper Sandler.

Great. And congrats on all the great progress across the board. Could you just repeat the guidance? You broke up a little bit for 2 for this coming year?

Yes. Yes. What we're projecting for the full fiscal year, our net revenues ranging from $110 million to $120 million again, on a full year fiscal basis 2026, I think June 2026..

Your next question comes from Olivia Brayer with Cantor Fitzgerald.

I have a few, if you don't mind. Maybe just first on Ryoncil in peds. You all mentioned potentially hitting 20% penetration of that pediatric population by the -- I think it was by the end of your fiscal year, if I heard that correctly. So can you maybe just run through what those assumptions include to get to that 20%? And how high of penetration do you think you can realistically reach in this specifically peds population over time? And then I've got a couple more on your pipeline programs.

Yes. So thank you. So let me start with the second 1 and then go to the first, right? So the second one, we assume a 40% peak share -- and you have to understand, we believe it should be 100%. This is a product that should be used by everyone. But let's be responsible and realistic, a 40% share is reasonable, right? So if you assume a range of patients, and obviously, that's dynamic of 375 patients, that's what the 20% is based on. It's 20% until the end of our fiscal year. that what we aim on achieving at that point.

And is that specifically for the fourth quarter of your fiscal year? Like if I'm kind of doing the math Okay. Okay. That's helpful. And then for your Revascor BLA next quarter, how is the FDA viewing the ischemic versus nonischemic phenotypes? And have they given any input on to or around potential labeling language around the ischemic etiology or inflammation biomarkers.

Well, so I think it's important to note that in the the 59 patient trial, we achieved the principal endpoint of -- in overall in the full patient population without having to go to any subgroups in terms of the cumulative incidence of major bleeding events over 6 months. Also, we achieved a significant reduction in hospitalizations from major bleeding events across the entire patient population without having to go some. So our position is that we will be seeking a label for the entire patient population, especially given that the confirmatory study LVAD 1 also achieve the same endpoint across all patients.

There's no question that the patients at greatest risk of those with ischemic etiology. And those patients have a higher level of inflammation. They have a higher risk for bleeding right heart failure and death. And interestingly, we saw that the same sort of thing in the larger trial in Class II/III heart failure where, again, we saw patients with ischemic heart disease as an etiology had high levels of inflammation, greater risk of 3 MACE and greater treatment benefit.

So we will be providing the FDA with the totality of the data, the supportive trials, demonstration that schemic patients are at greater risk and treatment with our cells is even more effective in that subgroup, but we've achieved the endpoint around the prespecified bleeding endpoint and hospitalization end point across the entire population. So that remains to be negotiated.

That's helpful. Understood. And then last question is just on the chronic back pain. Can you just clarify what data you're submitting to the FDA? Is it just a new analysis of the preexisting data and is your ongoing Phase III not actually going to be part of that submission package, maybe just some clarity around that update because I do think that is a new disclosure.

No, no, no. I didn't mean to say that we wouldn't be submitting the data from the neutral trial, the second trial, which completes enrollment by -- over the next month to 6 weeks is the plan to complete enrollment. That trial becomes the primary data set and the previous trial becomes a supportive data set. That's certainly our intention. We have spoken with the FDA about looking at the subgroup of patients who are opioid dependent and that's a discussion that is ongoing with the agency. But with respect to the primary endpoint in all comers of pain reduction, we will be using the 2 trials to present full data sets..

Okay. But that additional Phase III readout is coming in 2027, correct?

That's correct.

So will you -- you're kicking up filing before actually having that data?.

The objective is to complete that trial, get the readout and move to a filing with those data in the primary fine.

Your next question comes from Madelin Williams with Canaccord.

James just in regards -- just coming back to the pediatric ions and just the FY '26 guidance. Can you speak a little bit to sort of how you're seeing repeat utilization among centers or just how that kind of shakes out over the remaining of the year sort of just trying to dig into more.

Yes. No, we'd be happy to do that. Yes. Yes. So we see the continuous growth in the center, continuous adoption not only by more centers, but also repeated use by the current centers we already have, which shows that they are finding utility in the products and repeating the treatment in all the children, right? So that's 1 component.

The second component, we're also seeing very big, very large centers coming onwards which will substantially increase our confidence in this guidance. And it's a reality it's happening every day.

And I would add to that I think a major additional combines moving forward is continued physician education. We've shown both in our previous Phase III trials and in the real-world data that the earlier this product is used, the greater the survival, it's unquestionable. And so a lot of the effort by the team will be to educate physicians. Physicians have their own practice habits and they all believe that their particular way of doing things is standard, nothing is standard in this disease, especially given that only Ryoncil is approved by FDA for treatment should run into. So I think a major focus and an area of growth is to educate to the majority to use the product as early as possible to see a the agreement.

For sure. And I would add 1 more, right? So as a father, unfortunately, my tie and something like this robo disease, I would like to know that this option of it. So it's our obligation to empower the trim power the caregivers make sure that they understand that this product is available and is the only FAA-approved products so that they can talk to their treatment teams and ask for this as a potential therapeutic option for the shield.

That's helpful. And just maybe 1 more for me. Just in regards to your Revascor and the full approval filing for full approval rather than accelerated. I'm just interested, you've obviously discussed the additional data, but I'm assuming there's sort of being some sort of constructive discussions with the FDA? And just sort of if you can provide more color about what your confidence is in receiving that full approval?

Well, we've had multiple discussions with the agency. So we understand what they wanted to see and the data that I've highlighted to you today, particularly as it relates to mortality is the #1 area of focus. And the recent the recent guidance by the agency to focus on randomized controlled trials rather than single-arm trials where major endpoints would be targeted like mortality, give us a sort of particularly in an orphan disease indication where a single trial should be viewed as sufficient for approval. Full approval.

[Operator Instructions] Your next question comes from Michael Okunewitch with Maxim Group.

Congrats on all the progress. I guess just to kick things off, there's obviously been a lot of changes at the FDA since you first launched the Phase III in chronic lower back pain, so I wanted to see if you received confirmation from the current FDA administration of the 12-month pain only endpoint is sufficient for approval?

Yes, we have. Absolutely. That's exactly why we had the meeting recently to gain confirmation from the current administration that, that endpoint is an approvable endpoint, and that's exactly what we received. Moreover, the recent guidance from the FDA that a single well-conducted randomized controlled trial is sufficient for approvals in various indications also gives us great confidence that if we achieve that end point, this is an approvable trial in premia end point.

And then just one more for me, and I'll hop back in the queue. I wanted to ask, when it comes to the upcoming filing in the Class IV heart failure programs. Are there any outstanding items that FDA has requested that you need to finalize before you can submit that next quarter?

While commercial manufacturing is always a very important component of this. And that is something that we are heavily engaged in the product, reinstruction and is Phase III trials was all made at Lonza in the same facility where Roncil was made and which was approved for Ryoncil we believe that the vast majority of the manufacturing process is quite similar to the Ryoncil process. So I think that will be an advantage in our filing, but that remains. We need to get some more confirmation from the agency.

Nonetheless, we expect that the long history of manufactured product for back pain trials, -- at will hold us in good stead.

That brings us to the end of today's call. I'll hand back to Paul Hughes.

Thank you. As you heard today, we're in a strong position with a number of significant milestones in this current second half through the period. We look forward to keeping you updated on the progress and the achievements. I'd like to thank everyone for their interest in Movies and participation in the call today. Thank you, and have a great day.

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

Hello, and welcome to the Mesoblast Financial Results for the Full Year Ended June 30, 2025. An announcement and presentation have been lodged with the ASX and are also available on the home and investor pages at www.mesoblast.com. [Operator Instructions] 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 in 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 like to turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast.

Good afternoon, good morning -- to the Mesoblast financial results and operational update for the full year ended June 30, 2025. My name is Silviu Itescu. I'm Chief Executive of Mesoblast. On the line with me are Andrew Chaponnel, our Interim Chief Financial Officer; and Marcelo Santoro, our Chief Commercial Officer.

We can go to Slide 4, please. This slide is a snapshot of our company profile. Mesoblast has an FDA-approved product, Ryoncil, which is the first and only FDA-approved mesenchymal stromal cell in the United States. We have over 1,100 patents and patent applications globally for our platform technology. We have 2 additional assets in Phase III trials. We have FDA commercial scale manufacturing capabilities. And we've built out a U.S. commercial organization.

Next slide, please. Our platform technology is based on a shared mechanism of action across all of our products. Our mesenchymal lineage stromal cells respond to and are activated by multiple inflammatory cytokines through surface receptors on these cells, which result in orchestration of an anti-inflammatory cascade as a result of multiple factors that mesenchymal stromal cells secrete. That's the basis for our products, which address major diseases of inflammation.

Next slide, please. On this slide is a snapshot of our mesenchymal stromal cell product portfolio. We have 2 platform technologies. One is called remestemcel-L, our first-generation technology; and our second-generation technology, which is called rexlemestrocel-L.

Ryoncil, a branded product approved for pediatric steroid-refractory acute graft-versus-host disease and launched in the past quarter is our lead product on the remestemcel-L platform technology. It is also being developed for adult steroid-refractory acute graft-versus-host disease and inflammatory bowel disease.

The rexlemestrocel-L platform technology, which uses monoclonal antibodies to isolate pure and more homogeneous cell population is in Phase III in 2 large areas, inflammatory chronic heart failure and in chronic low back [indiscernible] due to inflammation of the intervertebral disc. More about that later.

Next slide, please. This slide identifies the addressable annual market opportunity for our product portfolio. Ryoncil, the first mesenchymal stromal cell MSC therapy approved by the FDA is being -- is on the market, has been launched for treatment of children with acute GvHD and with the potential for label extension in adults with acute GvHD of high severity. This addressable market is approximately $1 billion.

Biologic refractory inflammatory bowel disease, which represents an extension of the label opportunity has more than $5 billion in an addressable market. Heart failure with reduced ejection fraction for our rexlemestrocel-L product has a more than $10 billion addressable market. Chronic low back pain is similarly positioned for more than $10 billion as an annual market opportunity. And of course, we have multiple additional multi-billion opportunities from existing and future product pipeline based on our technology platforms.

Next slide, please. We're very pleased with the successful commercial launch to date of Ryoncil. In December 2024, Ryoncil became the first and only FDA-approved MSC product in the United States. Ryoncil became commercially available for purchase March 28, 2025, within a quarter of receiving FDA approval.

Since launch, we've onboarded 32 transplant centers across the United States. We aim to, by the end of this quarter, have onboarded the top 45 centers that account for 80% of pediatric bone marrow transplants in the United States. Coverage for Ryoncil continues to expand with over 250 million lives in the U.S. insured by commercial and government payers. Importantly, Medicaid coverage exists for both federal and all states and it was mandated on July 1 of this year.

Next slide, please. Now I'd like to move to our financial results for the period ended June 30, 2025.

Next slide. Financial highlights for this year are as follows: Revenue from cell therapy products was $17.2 million, up 191% on the prior year. We're delighted that this growth in revenue was driven by the successful launch of Ryoncil in that final -- in the final quarter of the year with $13.2 million in gross sales and $11.3 million in reported net sales after a 14.6% gross to net adjustment.

Net operating cash spend for the year was $50 million, very similar to the prior year, and this is despite the fact that we've invested in costs related to the commercial team build-out and activities around product launch. Our cash on hand as of June 30 was $162 million or AUD 247 million.

Now I'd like to have Andrew take us through some details on the financial results.

Thanks, Silviu. Next slide. Turning to Slide 11. We have the financial results for the year ended June 30, 2025. All numbers are reported in U.S. dollars. Total revenues from cell therapy products are up 191% on the prior year. Cost of revenues related to product sales were $1.2 million, which is 10% of net product sales and a gross margin of 90%. Additionally, cost of revenues also included $3.9 million of expenses related to non-cash amortization of the intangible value of our prior MSC asset acquisition.

Selling, general and admin expenses were $39.3 million for FY 2025, an increase of $14.3 million on FY 2024. This increase related to our commercial team build and product launch. For revaluation of contingent consideration, we recognized a loss of $14.9 million in FY 2025, a non-cash revaluation of potential future third-party payments. The revaluation of warrant liability as a result of FDA approval of Ryoncil and the consequential share price appreciation resulted in us recognizing a warrant remeasurement loss of $5 million in FY 2025 compared to a gain of $0.8 million for FY 2024.

Back to you, Silviu.

Thank you. Next slide. Let me take you through where we are with Ryoncil for children with acute graft-versus-host disease. This is the first and only mesenchymal stromal cell therapy approved by the FDA.

Next slide. More than 30,000 allogeneic bone marrow transplants are performed globally, of which 10,000 to 12,000 are performed in the U.S. About 20% of these transplants are pediatric. And about 40% to 50% of transplants, whether in children or adults, result in a devastating disease called acute graft-versus-host disease, which when it occurs involves the skin, gut and the liver and in the more severe forms involving severe liver and gut disease can be [ 70% to 90% ] -- associated with 70% to 90% mortality. About 50% overall of acute graft-versus-host disease patients do not respond to steroids. And for these, in the pediatric age group, Ryoncil is the only FDA-approved product for these children.

Next slide, please. The results from our pivotal Phase III trial that underpinned the successful approval of the product Ryoncil is highlighted in this slide. In a 54-patient single-arm multi-center Phase III trial across the U.S., overall day 28 response rate, the primary endpoint of the trial, was 70%. This study enrolled almost 90% of patients with the most severe forms of disease, Grade C and Grade D, which typically does not respond to other agents and is associated with high mortality.

Next slide, please. In fact, the long-term survival in a follow-up study from the International Blood and Bone Marrow Transplant Research Registry showed that despite the severity of the grade in most patients at baseline, as many as almost 50% of patients were alive at 4 and 5 years out and only 14% had died due to acute graft-versus-host disease. In other words, the early response that we saw in the majority of patients translated into durable long-term survival and essentially cure of the underlying disease, GvHD.

Next slide, please. Importantly to understand is that in patients with GvHD who ultimately die of this disease, the cost of treatment, inclusive of intensive care use, is very high. And in fact, the child who has acute GvHD and is treated well with our therapy and is able to be discharged from the hospital costs about $1.8 million less than a child with acute GvHD who is untreated and ultimately dies, a substantial cost saving per patient.

Next slide. These benefits are even more pronounced when one considers that this is a long-term cure of these patients. The total benefits of patient outcomes using Ryoncil range from $3.2 million to $4.1 million when comprising long-term survival benefit, cost offsets and cost savings. And this uses a quality of life years gained analysis.

Next slide. Beyond pediatric GvHD, we actually have a very clear label extension strategy to expand the use of Ryoncil in adult patients with GvHD. Most of the sites that have already onboarded Ryoncil for use in children with the disease also perform adult bone marrow transplants. In fact, we have an active compassionate care program to provide Ryoncil to adults with steroid-refractory acute GvHD who have failed other therapies.

Adults with this disease have a high rate of non-responsiveness to second-line agents such as ruxolitinib. Survival in those with GvHD who have failed at least one additional agent such as ruxolitinib remains as low as 20% to 30% by 100 days. In contrast, in our compassionate care program, in 25 patients aged 12 and older with steroid-refractory GvHD who failed ruxolitinib or other second-line agents, survival at 100 days was 76% when Ryoncil treatment was used under expanded access.

We recently met with FDA to discuss a pivotal trial design for Ryoncil in adults with severe acute GvHD and we intend to conduct a pivotal study of Ryoncil on top of approved second-line therapy such as ruxolitinib in patients with severe steroid-refractory GvHD such as Grade C/D or other characterization of severity.

This trial will be conducted with the NIH-funded Bone Marrow Transplant Clinical Trials Network, the BMT-CTN. The objective is to extend the product's label from children to adults with this devastating disease, enabling Ryoncil to be used in a population approximately 3x larger than the pediatric population that it's currently approved for.

Next slide, please. Beyond adults with acute GvHD, we intend to expand the label into other indications of inflammation.

Next slide, please. Inflammatory bowel disease, notably ulcerative colitis and Crohn's disease are 2 areas that we believe Ryoncil has a place. More than 3 million people across the U.S. alone have inflammatory bowel disease. Amongst these patients, 38,000 new cases of ulcerative colitis and 33,000 new cases of Crohn's disease are diagnosed every year.

There is a substantial unmet need of about 30% of patients who remain unresponsive to biologic agents such as anti-TNF agents or some of the newer monoclonal antibodies. Up to 80% of patients with medically-refractory Crohn's disease and 20% of patients with ulcerative colitis that's non-responsive eventually require surgical treatment of their disease. What is really needed right now is early and durable remission, which remains a major objective for new therapies in order to avoid the longer-term complications and ultimately surgery in these patients.

Next slide, please. Mesenchymal stromal cells have had a long history of being evaluated as potential therapeutic uses in patients with inflammatory bowel disease. More recently, local administration of mesenchymal stromal cells has been shown to be safe and to improve outcomes in diseases such as ulcerative colitis and proctitis.

On this slide, I show you the summary of a pilot study performed in Europe using mesenchymal stromal cells in patients with ulcerative proctitis, which occurs in about 30% of patients with -- in an isolated conditions in ulcerative colitis. In these 13 adult patients with biologic refractory inflammation, local administration into the rectal mucosa of 20 million to 80 million allogeneic bone marrow-derived mesenchymal stromal cells was performed under endoscopic injection. As you can see on this slide, by 6 weeks, mean clinical and endoscopic scores significantly improved. The objective is to achieve remission as early as 6 weeks.

Next slide, please. More recently, local administration of Ryoncil was shown to improve outcomes in patients with biologic-refractory extensive colitis. In a 12-patient pilot study of biologic-refractory inflammation of the colon, local administration of Ryoncil, a single dose resulted in clinical and endoscopic responses and remission by 6 weeks.

As you can see in the pictures on the right, in panels A and B, significant inflammation of the mucosa in a patient with ulcerative colitis extensively involving the colon is clearly evident. In contrast, 6 weeks later, panels C and D, you can see that the inflammatory protrusions have disappeared. This is endoscopic evidence of remission.

In addition, in patients with Crohn's colitis of the large bowel, the improvement in endoscopic and clinical outcomes was accompanied by reduced serum biomarker of inflammation called calprotectin. The calprotectin levels are consistent with rapid mucosal healing and disease remission.

And you can see in the pathologic figure at the bottom, on the left-hand side, the colonic mucosa in active disease is full of inflammatory cells and destruction of the crypts. 6 months later on the right, a repeat endoscopy and biopsy showed total resolution and healing of the mucosa in the patient with refractory colitis.

On the basis of these results and the fact that we've previously shown that intravenous remestemcel-L resulted in early remission within 4 weeks following multiple intravenous infusions in patients who had failed a prior biologic, we plan to initiate a pivotal study of Ryoncil for early remission in patients with medically-refractory inflammatory colitis, and we'll be updating the market in due course.

Next slide, please. Now let me move to our second-generation product, rexlemestrocel-L. This is based on monoclonal antibody isolation and extraction from bone marrow. Chronic low back pain due to degenerative disc disease is a major problem. It impacts more than 7 million people across the United States. There are minimal treatment options for patients who do not respond early to conservative treatments or to anti-inflammatory drugs.

In fact, 50% of opioid prescriptions across the United States are for chronic lower back pain, exactly this patient population. We are very much aware of the opioid epidemic and the many patients who are dying because of opioid abuse and overuse. There's an urgent need to have a durable improvement in pain and avoid the opioid use that is currently causing terrible pain and suffering across the United States.

Next slide, please, Slide 25. This slide identifies the patient journey of patients with chronic low back pain refractory to standard treatment. As I've highlighted, there are minimal options available for these patients. After you've gone through physical therapy, chiropractic, acupuncture and non-steroidal anti-inflammatory drugs, there's only opioids.

Other than opioids, the other potential treatments are interventional therapies that involve interventions with radiofrequency ablation, spinal cord stimulation, et cetera. Epidural steroids typically have short-term benefit only. Ultimately, these patients after many years of suffering come to spinal fusion or disc replacement surgery. We believe that rexlemestrocel-L can target these patients very early, usually as early as 6 months after failure of conservative treatments, although of course, in our clinical trials, patients have been referred after years of struggling with severe pain.

Slide 26, please. This slide summarizes the outcomes in our previous Phase III trial based on a single injection of rexlemestrocel-L together with hyaluronic acid carrier to maintain the cells within the disc space. If you just focus on the green at the top is the mean change in pain from baseline in patients who received placebo at 6, 12, 18 and 24 months, relatively static. In contrast, if you look at the red line at the bottom, you see quite a dramatic reduction in pain at 12 months and then maintenance of that significant difference in pain modulation for as long as 36 months from a single injection.

Next slide, please. Let me move to rexlemestrocel-L for heart failure. Again, a snapshot of this -- in this space.

Slide 28. Heart failure with low ejection fraction also continues to be a major problem with increasing in prevalence and risk of mortality and heart attacks and strokes. Over 60% of patients with chronic heart failure have underlying ischemia and these patients are at highest risk of recurrent major adverse events involving the large vessels such as heart and strokes.

Slide 29. This complex slide really just focuses on, again, the patient journey. Patients progress from early-stage disease Class I to moderate disease Class II and then to Class III and Class IV. We target the most severe patients where inflammation progresses to Class III and Class IV and ultimately death. In these patients, we've completed 2 Phase III trials, both randomized controlled trials with endpoints that have demonstrated that in patients with inflammation, we can reduce the endpoints of severity and reduce mortality.

Next slide, please. Slide 30 demonstrates on the left-hand side that compared to controls, we significantly reduced in a pivotal Phase III trial, both in patients with inflammation on the left-hand side is measured by CRP on the right-hand side is measured by IL-6, the severe risk of mortality quite dramatically over a 5-year period of follow-up.

Next slide, please, 31. And in this slide, we summarize the overall results in a 500-patient randomized controlled study where you see that on the left-hand side, the 2-point MACE, heart attack or stroke. And on the right-hand side, heart attack, stroke or death are progressively decreased as you move from all patients to those patients at highest risk, those with ischemia and inflammation. And what this essentially tells you is that the patients who are at greatest risk of mortality are precisely those patients who are most likely to respond to a single injection of rexlemestrocel-L into the left side of the heart.

On the basis of these data, we met with the FDA last year. We met with the FDA again most recently this year in Type B meetings. And the FDA stated the totality of the trial results from these 2 studies could support an accelerated approval pathway under the existing RMAT designation for the program. We met recently and aligned on items required for filing a biologic license application for Revascor regarding chemistry, manufacturing controls, potency assays and the proposed design and primary endpoint for a confirmatory trial should approval be obtained.

If we could now go to the final slide, Slide 34. This identifies our corporate milestones and updates on expected deliverables in the coming 12-month period. For pediatric and adult inflammatory diseases, Ryoncil will commence a registration trial for label expansion in adults with GvHD and we'll initiate a study for inflammatory colitis. For chronic heart failure in adults with low ejection fraction, we are preparing for an accelerated approval filing for Revascor.

And finally, for rexlemestrocel-L in chronic low back pain, a confirmatory Phase III trial is actively enrolling across multiple sites in the U.S. to confirm the data that we showed in the first trial, which is to reduce pain at 12 months as the trial's primary endpoint. And it's a placebo-controlled trial with a 12-month follow-up following the completion of the last patient enrolled, which we expect to happen towards the end of this year or first quarter -- during the first quarter of next year.

On that basis, I think I'll say thank you for listening to us, and I'd like to open this call to questions.

[Operator Instructions] Your first question today comes from Ted Tenthoff with Piper.

Congrats on all the progress. Really excited to see Ryoncil sales coming off. I wanted to get a sense from you guys, you laid out how the opportunity in adults is larger. How long do you think it might take for label expansion and to run that Phase III trial?

Thanks, Ted. I think you asked how long it might take for label extension to in adults.

Yes. Sorry for the background noise.

So the objective is to commence an adult acute GvHD trial this quarter. We are working with the Bone Marrow Transplant CTN group, which is an NIH-funded organization. They will conduct the trial under their auspices will provide product. We will contribute to funding. And the objective is to add our product on top of existing second-line agents, ruxolitinib being the only approved therapy in patients with severe disease, those patients with Grade C/D disease where ruxolitinib does not adequately address the requirement of these patients where we think that our product will substantially add to the early responses and overall survival. We expect to initiate the study this year, and we'll come back with specific dates and duration.

Great. And then just can you give us a little more color on how the back trial, the Phase III chronic lower back pain trial is coming?

Sure. So this is a huge opportunity for us and a tremendous unmet need, both from the point of view of disability, chronicity and the ability to generate a product that reduces or completely abolishes any pain in these patients for at least 2 to 3 years from a single injection.

As important is the fact that as many as 40% of patients in this category are forced to take opioids as the only alternative. And if we can result in opioid avoidance, it's incredibly important at this moment in time. In fact, in our first Phase III trial, we saw 3x as many patients able to come off opioids in the treated patients as in the controls despite being told not to change their medication during that trial. So we're very optimistic that we will see the same sort of outcomes in this study.

We've been ramping up the study over the past few months in terms of increasing the number of sites. We're now at almost 40 sites enrolling across the U.S. And as we increase sites, enrollment picks up. We've made various adjustments to the protocol design so that we're able to tweak the enrollment criteria. And to date, we're enrolling well. There are no safety signals.

Obviously, the trial is double-blind. So we're not -- we don't know really how it's coming along. But we're confident that we will complete enrollment towards either by the end of the year or sometime in the first quarter of next year. We're very keen to accelerate the study as fast as we can. And following the last patient in, there will be a 12-month period of follow-up in order to read out the trial's primary endpoint of pain at 12 months.

The next question comes from Olivia Brayer with Cantor.

Congratulations on a really strong start to the launch. Are you guys able to disclose how many monthly treatment kits have been administered to date? And what can you tell us about inventory dynamics here? Was any of this net revenue actually related to inventory? And as you think about going forward with the launch, what level of inventory will you typically have to maintain going forward? And then I've got a couple of follow-up questions, if you don't mind.

Sure. So the way we treat the kids is on a weight band basis. And so we have infusion kits that are all priced at the same price, but they have progressively greater product per kit. And so we -- our inventory is constantly stocked to meet the needs of children at every weight band as we treat kids that might be a 20-kilogram child and that gets replenished. If it's a 50 kilogram, a larger child, then that kit gets replenished. So we continue with each child that gets treated, they would be treated typically for 8 to 12 kits for infusions. And as each infusion goes out, we replenish. Typically, we send 2 kits per week per child. So that's how we keep stocking our inventory, if that makes sense.

Does that make sense, Olivia?

Yes, that does. Can you disclose how many treatment kits you guys have actually administered so far?

Well, I mean you can -- it's very easy. We're very transparent, right? So each kit costs -- so we know what each kit costs. You know what it costs. And we've told you what our gross to net discount -- gross to net adjustments are. So you can divide the total gross to net by the price per kit and you can figure out how many kits we've sold.

Okay, perfect. Helpful. And then you mentioned the gross to net dynamics, how do you expect those to evolve as the launch progresses or should they be pretty stagnant? And then one final question, just maybe a follow-up on the adult GvHD trial design. Will there be a subset of Jakafi-naive patients or will the entire study really be Jakafi-refractory patient population for the adult?

Yes. So with respect to gross to net, we expect that to be pretty stagnant, pretty flat. That's the sort of number that we've given you today is what we expect it to stay at. With respect to the adult trial, we've decided not to go to Jakafi-refractory patients, but rather on top of Jakafi. And the reason for that is that it provides us with the largest possible market entry.

So in second line, in other words, straight after steroids where Jakafi is currently approved in patients with Grade C/D disease or Grade 3/4 disease, which is about 50% of the Jakafi-treated patients, day 28 response is only about 50%. In other words, 50% of patients do not respond to Jakafi. That's the market opportunity.

And we believe that adding our cells on top of Jakafi in all patients with severe disease will have a major impact and a major increase in the proportion of patients who achieve response at day 28. And as you know, if you're a responder at day 28, you're likely to be a long-term survivor with our cells. So this is an opportunity to really make a major impact on severe patients as early as possible and make ourselves available to the largest possible patients who need it.

Your next question comes from Elyse Shapiro with Canaccord.

Just on the adult study, are you planning on disclosing a bit more detail from your FDA minutes now that you've probably gotten them? And do you have any -- are there any kind of surprises around trial design or will it be similar to what we've seen with the Jakafi trials?

I think we updated through our release today and our slides, a summary of our discussions with the FDA. The FDA and Mesoblast are aligned. We are in agreement that we want to see the product used as early as possible in the most severe adult population. That is the patient population who is on Jakafi with Grade C/D disease where Jakafi only helps around 50% of patients and the other 50% don't respond.

Rather than waiting for these patients to fail Jakafi, where the survival is an abysmal 20%, the best way to provide ourselves is in combination with Jakafi in these patients as soon as they're diagnosed so that we would like to increase the responder rate from, say, 50% to 80% or more. That will be the objective, right? And that allows our product to be used as early as possible in the most severe patients, which is a market size that's about 3x the current pediatric addressable population. And that's where we'll be going into in the pivotal trial.

Got it. Understood. And then just good to see a bit more of a focus on IBD. I guess, what are the timelines to more detail on what a trial would look like? And do you need to do any additional kind of dose-finding work before commencing a pivotal registrational study?

So we've got a KOL group that's been assembled. These are experts in trial design and they've managed and run trials of the latest innovative therapies for ulcerative colitis and Crohn's disease, both in the U.S. and in Europe. These key opinion leaders are putting together right now the best possible trial design.

We may very well use both local delivery of Ryoncil as well as intravenous delivery in order to aim to achieve rapid remission as early as week 6 to week 8 in patients who are otherwise refractory to other biologics. Remission remains the challenge. Remission remains a target that is not well addressed by any of the biologics. And in fact, the best available therapy in ulcerative colitis achieves a remission rate of only about 20%. So there's a very large unmet medical need. Our trial design is being worked on and we'll update the market this quarter.

Great. And just one more, if I may. Kind of stepping back, looking at the number of kits that have been sold, are they -- I mean, to your knowledge, are they all being used in pediatric GvHD or could that be inclusive of some additional indications, too?

Yes. We have no way of knowing specifically how much of the product is used for acute GvHD versus for other indications because really physicians and their licenses enable them to make their own judgments as to which patients are best and most suitable for Ryoncil treatment.

Of course, we work closely with institutions. Our commercial group works very closely with the institutions as they enroll patients. So we're certainly aware of patients with acute GvHD that are being treated throughout the country. And there have been certain situations where children with acute GvHD who have fallen between the cracks and have not been domiciled, have not had insurance. And for those children, we provide product, obviously, free of charge.

We also have a compassionate care use program for adults. And again, make our product available on an as-need basis from -- on a case-by-case basis. So in general, our product is being used predominantly on label for pediatric acute GvHD, where it's reimbursed federally and at every state level by Medicaid and it's reimbursed by the vast majority of commercial carriers. But more transparency than that, we don't really have on how it's being used by individual physicians.

Your next question comes from Michael Okunewitch with Maxim Group.

Congrats on a great start to the launch. I guess to start off, I'd just like to see if you can give us a sense of how the initial sales were distributed over the period? Were they weighted more towards the back end? I'm trying to get a sense of what sort of revenue trajectory we can expect going into the second half of calendar year '25.

Yes. Look, I think it's a little bit early to make projections right now. We've only had really 1 quarter of sales that we're reporting. So it's early. The commercial team has done a fantastic job in terms of getting insurance coverage, getting sites onboarded, getting us on formulary. I certainly expect that over the coming quarters, we're going to see continued strengthening of sales. But to provide guidance is a little bit early.

Marcelo, would you like to add?

Yes. No, Silviu, I think it's a good question, and thank you. I think you mentioned that, right? So we're very pleased with the feedback that we've received so far from multiple treatment centers and the healthcare providers we serve right around. So it's certainly already making a meaningful impact in the treatment of these children.

The performance to date, especially for the first quarter alone from launch has been outstanding, I would consider not only compared to our own expectations, but also when you benchmark that against other successful rare disease launches. And of course, I mean, I think we're all focused on building the infrastructure. You mentioned that in terms of payers, in terms of onboarding that is needed to ensure that we continue to reach our full potential. So yes, I mean, while we do expect growth, we also recognize that this baseline work is super important for our future performance.

All right. And then just one more for me and I'll hop back into the queue. I wanted to get a sense, in particular, in the context of the changes that we've seen at the FDA over the past 6 to 12 months. What sort of feedback have you gotten on the potential for a filing in heart failure based on your existing body of data? Have you gotten any additional follow-up since you last disclosed to the market?

Yes. We had a terrific meeting, and clearly, there was agreement on all of our manufacturing, our potency assays, which are really important given all of the learnings that we had with Ryoncil. I think getting alignment on that is really important ahead of a filing.

And the other important issue is that we have total alignment on what a confirmatory study of somewhere between 250 to 350 patients would look like with an endpoint that aims to -- in patients with the greatest risk for MACE events, aims to reduce MACE events and mortality. So we're very pleased with the interactions with the FDA and we're working diligently to get our documents in.

Your next question comes from John Hester with Bell Potter.

Just a quick question there on market access and this might be one for Marcelo. What work is left to do with market access in terms of Medicare in the various states across the U.S.? And are you sort of halfway there or can you give us some sort of sense of your remaining market access activities?

Marcelo, would you like to address that? I think the short answer is…

Yes, very happy to do that. And the short answer, yes. We're already there for sure. I think on the payer side, we've made excellent progress, thanks to the tireless efforts of our team. We've engaged with more than 97 payers around clinical and value discussions. Ryoncil is now covered by insurance plans, representing over 250 million lives across both the commercial and government payers. And I think importantly, Medicaid is covered and is in place everywhere in all states as of July 1.

And in addition to that, which I think addresses your -- part of your question, is that the commercial payer support has also been strong. All of the major players and that includes Aetna, Cigna, United, Anthem, Humana, Pride, which is the Blue Cross Blue Shields. They have issued favorable coverage policies for Ryoncil. And I think notably, this policy do not require step therapy, which simplifies patient access significantly. All of this has occurred within the first 6 months post launch.

And then to further support the reimbursement, a specific J-Code for Ryoncil is already in place and goes into effect on October 1, allowing for more efficient billing from our clients or from our customers and payers along with CMS published rates. So that will be very important as we move forward and October is around the corner and that will be important not only for us but also for our clients.

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

Well, thank you, everybody, for being on this call. We are extremely, extremely excited and pleased by the way things have gone this whole year, actually, the fact that this has been a banner year for the company. We've received approval. We are the only company that has an FDA-approved mesenchymal stromal cell therapy in the U.S. and we're extremely pleased by the first quarter results.

We will continue to work hard. We've got a growing commercial team in the United States. And we hope to continue to provide sales and updates to the market that continues to give the confidence as we transform this company from an R&D company to a fleet-footed commercial biotech organization. Thank you very much, everybody.

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