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Mesoblast Limited (NASDAQ:MESO)
Q3 2020 Earnings Call
May 27, 2020, 6:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the financial results for the period ended March 31, 2020, and corporate update for Mesoblast. An announcement and presentation has been lodged with the ASX and are also available on the Home and Investor pages at www.mesoblast.com.

[Operator Instructions] Later, we'll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

Before we begin, let me remind you that in 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 and 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 such statements.

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

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you, operator. And welcome everybody to the financial and operational highlights for the third quarter ended March 31, 2020. We could go to slide four, please.

This slide highlights the three pillars that underpin Mesoblast's technology platform and our product pipeline. Our innovative platform is based on allogeneic mesenchymal precursor cells and their progeny, mesenchymal stem cells, which are well-characterized immunomodulatory mechanisms of action and which allows to target the most severe and life-threatening inflammatory conditions. Underpinning this is a very global strong intellectual property estate.

Our lead product candidate is Ryoncil, being developed for pediatric steroid-refractory acute graft-versus-host disease. A BLA has been filed with the FDA and the FDA has designated this as under priority review with an approvable PDUFA date set for September. If approved, launch for this product will be in 2020. We have industrialized scale manufacturing in place to meet the commercial demand for the product and we have learned greatly from the continued growth in royalty revenues from the similar product in Japan where it's been sold by our licensee for acute graft-versus-host disease. Beyond GVHD, we have a plan in place for lifecycle extension for remestemcel-L for pediatric and adult inflammatory conditions. We'll be talking a lot today about a Phase III trial that is ongoing in 300 patients using remestemcel-L in acute respiratory distress syndrome due to COVID-19.

In addition, two additional product candidates are in Phase III trials, one for heart failure, one for chronic inflammatory back pain with both with near-term US readouts.

Next slide please. This slide identifies the mechanism of action of our product candidates and our platform technology. Our cellular therapies are activated by multiple inflammatory cytokines through surface receptors. This results in orchestration of an anti-inflammatory cascade and a concomitant down-regulation of multiple arms of the immune system that are implicated in the inflammatory conditions we are targeting.

Next slide. This slide shows the pipeline on our Phase III product candidates. As you can see remestemcel-L is being developed for a range of pediatric and adult systemic inflammatory conditions. The first of which is acute pediatric graft-versus-host disease. We are also in an advanced -- in a Phase III program for respiratory distress syndrome due to COVID-19 and we'll be talking a lot more about that.

Rexlemestrocel platform technology is being developed for localized inflammatory conditions. And two products from that platform technology, one -- are being developed for Phase III indications, one for chronic advanced and end-stage heart failure, and the second for chronic inflammatory low back pain. Both are in Phase III and both will have readouts around mid-year.

Next slide. We have commercial scale manufacturing capabilities in place. Our technology is able to be scaled for off-the-shelf usage, the manufacturing meets stringent criteria of international regulatory agencies. We have robust quality assurance processes in place that ensure final product with batch-to-batch consistency and reproducibility. We have current capacity that is sufficient to meet our commercial needs for the Ryoncil launch for acute GVHD. We do project an increase in capacity requirements as our pipeline matures, including for graft-versus-host disease label extensions for remestemcel-L and for COVID-19 ARDS. We achieved this increase in capacity requirements that's projected, we'll be using proprietary xeno-free technologies to increase yields and output. We will be moving to three financial bioreactors to reduce labor costs and improved manufacturing efficiencies. And these innovations will significantly reduce in the future our cost of goods.

Next slide. Underpinning what we do and the products that we're developing is a very strong global intellectual property estate with patent protection extending through at least 2040 in all major markets. We have over 1,000 patents and patent applications in these major jurisdictions. Our patents cover compositions of matter, manufacturing and therapeutic applications of mesenchymal lineage cells for all of the areas that we're developing products. Our patents provide strong global protection to our core commercial areas of focus and allow us to grant rights to third parties that require access to our patents in order to commercialize their products. And those products fall outside of our core commercial areas.

Next slide. So with that as a backdrop, I'd like to ask our Chief Financial Officer Josh Muntner to present our financials.

Josh Muntner -- Chief Financial Officer

Thanks, Silviu. It's truly an exciting time at Mesoblast. Turning to slide 10, I've highlighted items from our income statement where we've seen tremendous growth in revenue and reduction in our operating loss for the nine months ended March 31, 2020.

Total revenue grew 113% to $31.5 million from $14.8 million for the year-earlier period. The key components of total revenue are commercialization revenue and milestone revenue. Commercialization revenue which is royalty revenue collected from JCR Pharma for their product TEMCELL grew 81% over the period -- in the period -- in the period over period comparison, growing to $5.9 million for the nine month period. from $3.3 million for the year-earlier period.

Milestone revenue from our strategic partnerships grew 127% to $25 million from $11 million. The milestone revenue of the current nine months period reflects the $15 million upfront payment from Grunenthal received in late 2019. And also are recognizing $10 million of revenue related to our license agreement with Tasly Pharmaceuticals.

Regarding nonrevenue highlights, we had a 34% reduction in loss after-tax, this was partially driven by the increased revenue, as well as due to a reduction in R&D expense, which declined by $7.5 million or 15% when compared to the year-earlier period. When looking at the three month period from March 31 -- three month period ended March 31, 2020, we observe a sharp increase in total revenue, growing tenfold from $1.2 million to $12.2 million. The increase was due to the inclusion of the Tasly upfront payment, but also 100% growth in royalty revenue to $2.1 million from JCR Pharmaceuticals for sales of their product TEMCELL used for the treatment of GVHD in Japan.

Moving to slide 11. We'll pause for a moment to review our relationship with JCR, a Japanese company focused on commercializing products for orphan markets. JCR has exclusive rights to our MSC technology for acute GVHD in Japan, which is why they commercialize TEMCELL. They introduced the product in 2016 and have steadily grown the sales leading to a consistently rising royalties paid to us. As shown on the chart on the right part of slide, during the last 12 months ended March 31, 2020 we recognized $7.6 million of royalty revenue from JCR. Their success in launching TEMCELL and the rapid adoption the product have seen in Japan informs our potential for the US launch of Ryoncil if approved by the FDA. We know, however, that there are some differences between the Japanese GVHD market and what we expect to see in the US. We estimate that the US market is eight times larger than Japan. The size differences are due to population differences, of course, between the two countries, but also take into account different incidence of GVHD between the two regions. In Japan there is a lower incidence of GVHD due to the makeup of the patient population.

Finally, we expect there to be a price difference between TEMCELL pricing in Japan and Ryoncil's potential pricing in the US. Overall, we've enjoyed a very productive relationship with JCR. And look forward to their continued success with TEMCELL in developing the product for other therapeutic areas, including epidermolysis bullosa and HIE.

Moving to slide 12 where you find the entire income statement for the nine month period. I've already covered the growth seen when comparing the nine month -- the recent nine month period to the prior period with respect to revenue. I've also highlighted the reduction in R&D expense, primarily related to reduced spend on our clinical and preclinical development activities. Cost savings here are, in part, offset, however, by increased spend on manufacturing, which you can see rose approximately 20% to $15.5 million in the recent nine month period. Overall, however, we do see a -- as already noted, a reduction in loss after-tax.

Finally, on slide 13, I'd like to mention one of the key items from our balance sheet, which is our cash position. Cash on hand at March 31, 2020 was $60.1 million, we raised $90 million earlier this month, receiving strong support from existing and new institutional investors. This resulted in a pro forma cash position of $150 million. The proceeds from this offering will be primarily used toward scale to manufacturing for remestemcel-L in the treatment of acute respiratory diseases -- acute respiratory distress syndrome due to COVID-19, as well as for the commercial launch of Ryoncil for acute GVHD.

In addition to the pro forma cash position of $150 million, up to an additional $67.5 million may be available through our existing strategic partnerships and our ongoing financing facilities over the next 12 months. We believe that this puts our cash position and available cash in a great spot to be able to maximize the value of our assets. As always, additional information regarding our financial results have been posted to the ASX and the SEC, as well as to our website.

I'd like to hand the call back to Silviu now to review our operational and corporate highlights.

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you, Josh. Joining us also on this call is Dr. Fred Grossman, our Chief Medical Officer and he will be available to discuss together with me any questions around our operations in the Q&A session.

Let's go straight to slide 15. So acute graft-versus-host disease remains a significant problem and a market opportunity for our lead product Ryoncil.

Slide 16 please. To just reemphasize, the fundamental problem here is that severe inflammatory grades C/D disease results in severe mortality risk, up to 90% mortality in grade D disease and these mortality outcomes have not changed over the past few years. Given that inflammatory therapies target the most severe degree of inflammation, we are focusing our therapies on these severe grades of the disease where mortality continues to be a problem.

Next slide. In our Phase III trial, remestemcel-L in 55 children failing steroids 89% of whom grade C/D disease demonstrated significant benefit in terms of day 28 overall response and day 100 survival. And these outcomes were superior to those from a matched cohort of children -- matched grade disease severity in a contemporaneous consortium called the magic consortium across the US and Europe. Day 28 response was significantly better in our Phase III trial, as well as day 100 survival.

Next slide, please. These data together with published data from two other studies, one where Ryoncil was used in an open label fashion in patients who had failed multiple biologics, again, with 80% of Grade C/D disease. And the third study where Ryoncil was used as first-line therapy in a randomized placebo-controlled Phase III trial of 260 adults and children with steroid-refractory acute graft-versus-host disease. All three studies provide the support to the BLA that has been filed for Ryoncil with the FDA and that is under priority review. The FDA has set a Prescription Drug User Fee Act, PDUFA date of September 30, and if approved Ryoncil will be launched in the US in the fourth quarter.

Next slide, please. This slide demonstrates lifecycle extension strategy that we put in place for remestemcel-L. Planned US launch later this year for Ryoncil in pediatrics steroid-refractory GVHD will be followed, we hope, by a subsequent launch in COVID-19 ARDS. And beyond that -- we expanded indications in chronic GVHD, adult acute GvHD and other inflammatory conditions including other causes of acute respiratory distress syndrome.

Let's move now to the next slide to the devastating complication of acute respiratory distress syndrome due to COVID-19. Slide 21, please. COVID-19 is a respiratory virus with a very high mortality rate due to severe inflammatory condition of the lungs, which is called acute respiratory distress syndrome, ARDS. ARDS is caused by cytokines storm due to a severe inflammatory response to the very virus that is in the lungs, and it is the primary cause of death in patients with COVID-19. We have an extensive safety dataset using remestemcel-L and its anti-inflammatory effect in patients with acute graft-versus-host disease. And those data and the shared mechanism of action made for a compelling rationale in moving to evaluate whether remestemcel-L has a place in the treatment of COVID-19 ARDS. In addition, we have known for quite some time that intravenous delivery of remestemcel-L results in its selective migration for the lungs, making inflammatory lung disease an appropriate target of this therapy. Remestemcel therefore has the potential mechanistically and for other reasons to tame the cytokine storm specific to ARDS, and may therefore offer a life-saving treatment to those unfortunate individuals who suffered from COVID-19 ARDS.

Go to the next slide 22. This slide summarizes the clinical and pathophysiological

Features of ARDS. An ARDS, of course, is caused by COVID-19 but traditionally has been caused by a variety of different viruses and bacterial infections. It remains a major unmet medical need. As I've mentioned multiple triggers can cause ARDS, and typically, the immunoresponse to the inciting agent, whether it's a virus or bacteria results in extended intensive care hospitalizations and interventions using ventilators. Mortality rates in ARDS ranges from 40% in those caused by influenza, to 80% when caused by COVID-19. The pathophysiology is activation of immune cells in the lungs, particularly macrophages and T-cells and when activated these cells secrete a range of damaging cytokines. So the while they're battering the deciding agent, such as COVID-19, the cytokines that they release results in by standard destruction of the lung tissue, influx of additional new cells, aberrant secretion of fluid by the lung alveolar cells, ultimately, the patient has severe fluid and the entire lung fills up with fluid and inflammation and destruction.

Slide 23. So most specifically the rationale for using remestemcel-L is it's anti-inflammatory mode of action. The COVID-19 virus is known to stimulate cytokines storm in the lung and results in release of cytokines and biomarkers such as TNF-alpha, interleukin 6, interleukin 8, hepatocyte growth factor and interleukin 2 receptors, all of which reflect the macrophages in the T-cells that are wildly activated in the lungs. When remestemcel-L rise in the inflamed lung it's surface receptors are activated by these very major inflammatory cytokines, including TNF and IL-6. Engagement of these receptors resulted secretion by remestemcel of multiple well defined and inflammatory factors that switch off multiple arms of the immune system, macrophages, B-cells and T-cells. Much as they've been shown to do in acute graft-versus-host disease. This resulted in reduction of the cytokine storm and reduction in the very cytokines that have initiated it, such as TNF-alpha, interleukin 8, Hepatocyte Growth Factor and expression of IL-2 receptors. And these are the very same biomarkers that are significantly impacted and reduced by remestemcel in acute graft versus host disease. Ultimately, the anti-inflammatory and additional reparative factors that can be produced by remestemcel have the potential to reverse ARDS, protect the alveolar epithelial cells and improve lung function.

Let's go to slide 24, please. So the rationale was clear and we moved quickly to obtain pilot data under an emergency IND in New York to provide clinical rationale for moving forward with an appropriately randomized controlled trial in COVID-19 ARDS. The data from the compassionate use we previously published, 12 patients with moderate or severe ARDS on ventilators who had failed all other therapies receive two infusions of remestemcel-L at Mt. Sinai Hospital in New York City. The choice of the two infusions of 2 million cells per kilogram was that the protocol used was identical to the standard protocol we are using today in acute graft-versus-host disease, well established protocol with a lot of safety data behind it.

Nine patients of the 12 successfully come off ventilator support at a median of 10 days following the second dose -- following initiation of the first dose and were discharged from hospital. Strikingly this contrasts with only 9% of COVID-19 patients in the same city, in the same hospital networks being able to be extubated within the same timeframe and only a 12% survival rate for such severe patients. And when we talk about the disease severity, we're talking about moderate to severe ARDS by criteria called the Berlin criteria for ventilation. These are very, very severe patients with a very high mortality rate and inability to do without ventilators. Based on these very positive data, striking data we moved rapidly to initiate a confirmatory Phase III trial in up to 300 patients randomized one-to-one to either remestemcel or placebo. The primary endpoint of the trial is day 30 mortality, key secondary endpoint in days alive of ventilator support. And the first patients have been randomized and dosed in early May and this trial is currently recruiting. We expect to have up to 30 sites contracted. And you'll hear a lot more about this trial in the short term.

Next slide 25, I think, summarizes, again, in more detail what I've just said in terms of objectives, trial design, primary and secondary endpoints. If folks would like a lot more detail on this trial, I'm sure that Dr. Grossman will be happy to address any questions on the trial itself.

Slide 26, please. This slide highlights now the key milestones that we anticipate to see over the next few months for remestemcel-L in COVID-19 ARDS. Recruitment is expected to take through the four months. A first interim analysis is planned for when 30% of patients reached the primary endpoint of 30 days. And we will seek expedited regulatory approval, subject to positive data readouts. In the interim we need to anticipate for positive outcomes and be in a position to scale up manufacturing to meet the projected increase in capacity requirements for both COVID-19 ARDS and overall, our maturing pipeline. And to do this we will seek to increase our manufacturing footprint for capacity expansion. We will be implementing proprietary xeno-free technologies to increase yields and output, and we'll be starting to plan for the longer term transition to 3D bioreactor in order to reduce labor and improved manufacturing efficiencies. In addition, we will be seeking to establish manufacturing commercialization partnerships as these high-volume opportunities start to readout.

Finally, let me conclude the operational update in regards to our heart failure and chronic low back pain products. Slide 28. For our back pain product candidate MPC-0- ID, we have a strategic partnership in place to develop and commercialize the product candidate in Europe and Latin America with [Indecipherable] for our product Revascor for heart failure, we have a relationship in place for exclusive cardiovascular partnership with Tasly Pharmaceuticals. Both of these product candidates are in Phase III in the US and at this point in time we retain 100% of the US commercial rights for the products.

Slide 29. Revascor for advanced and end-stage heart failure. In December, the Phase III trial for advanced heart failure surpassed the number of primary endpoint events required for trial completion. The final study visits for all surviving patients have been completed. There is an ongoing quality review of all the data, it will be completed shortly at the study sites. The data readout is planned in mid 2020 and the results may support regulatory approval in the US. Recently, we presented results from a sub-study of 70 patients with end-stage ischemic heart failure and a left ventricular assist device of a total of 159 randomized patients who received either Revascor or saline, and these results were presented by the independent trial investigators at the American College of Cardiology Virtual Scientific Sessions in the March. The conclusions from that study whether the MPCs had a beneficial effect on the ability to wean the patients off the LVADs, beneficial for the major mucosal bleeding, serious adverse events and a reduction in readmissions due to ischemic heart failure. The end-stage ischemic heart failure patients with LVAD are older and have comorbidities such as diabetes, and therefore closely resemble the majority of the patients in our 556 patient Phase III trial for advanced chronic heart failure. These results were therefore very encouraging in that context.

Let's move to slide 30. Summarizing where we are with MPC-06-ID for chronic inflammatory low back pain. The Phase III trial of this product candidate is in 404 patients in the completed enrollment. And all patients had been follow-up for more than two years. The final study business has been included for all patients. The ongoing quality review of all data has been completed at the study sites and the data readout is planned for mid-2020. There's excellent continued operational progress in our strategic partnership for this candidate with Grunenthal in Europe in order to complete that clinical protocol design, to obtain regulatory input and receive clearance from the European regulatory agency to begin European Phase III trial that will be complementary to the US Phase III trial. And the results from both trials will be considered pivotal in order to support regulatory approval in both US and Europe.

Finally, if we can move to slide 31. This slide highlights our major upcoming operational milestones for the next 12 months and their identified product candidates. For remestemcel-L for steroid-refractory acute graft-versus-host disease. The product Ryoncil has received priority review. We are interacting with the agency at present and a PDUFA date is set for September 30. If approved, the U.S. launch for Ryoncil is planned for shortly thereafter. And in parallel, we will be expanding investigator initiative clinical trials for chronic graft-versus-host disease and other indications of the product candidate.

Specifically, with respect to remestemcel-L for acute respiratory distress syndrome due to COVID-19, as I've mentioned, the active Phase III trial is ongoing with its recruitment across up to 30 sites in North America. The trial will complete within three to four months enrollment, and we hope to establish strategic partnerships for both manufacturing and commercialization for this indication. Revascor for advanced and end-stage heart failure, the read out in the Phase III trial results in mid-2020, and we expect to initiate a confirmatory trials in end-stage heart failure in patients with LVADs.

And finally, for chronic inflammatory low back pain, as I've mentioned earlier, the data readout will be mid-2020 for the Phase III trial, and we will work closely with our partner to obtain clearence to begin the European trial for the same indication.

And with that, I'd like to thank everybody and open it up now for questions to myself, to Fred Grossman and Josh Muntner. Thank you.

Questions and Answers:

Operator

Thank you. Your first question comes from Louise Chen from Cantor. Please go ahead.

Louise Chen -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my questions here. So my first question for you is how fast do you think this ARDS trial will enroll? And when can we expect to see an internal readout here? Second question is, we often get asked by investors, which data set do you expect to see first, the heart failure or chronic low back pain? And if you can't say, if you could just help us think through that, that would be great. And last question here is that, you had noted that in December 2019, your Phase III heart failure trial surpassed a number of primary endpoints for completion. I'm just curious what needs to be done from that point on to the middle of this year before we can see the results. Thank you.

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you. So those are three sets of questions. Let's take the first question to Dr. Grossman. Fred, could you address the [Indecipherable] in ARDS trial and interim analysis, please?

Fred Grossman -- Chief Medical Officer

Yes, Silviu. Thank you for the question, Louise. So as mentioned before, the study has started, and patients have been recruited. We're expecting, as noted before, the study to be completed in three to four months. We are carefully choosing the top medical centers and many of which are in hot spots around the country in North America, and we're recruiting up to 300 patients across 30 sites. In terms of the interim analysis, the first interim analysis will be when 30% have completed the primary efficacy variable. That should take about two months or so. And at that point, depending on how many have completed, an independent board will be reviewing the data for substantial efficacy and utility. And at that point, if there's substantial efficacy, then they may recommend that the study stops.

Silviu Itescu -- Chief Executive Officer and Managing Director

And then we could go to your second question, Louise. Second question was, which of the two trials really, that first hearts or back pain. And I would say we're not in control of those. And really, it's partly the same with your third question, which was, since the minimum number of events were accrued in December, how long will it take you to close the trial out. The minimum number is great that we allowed -- we needed to have all patients followed up for at least 12 months in a [Indecipherable] the last patient, 12 months follow-up could, I believe, end of January, early February. So we had a requirement for 12 months follow-up with more patients. And that meant that we weren't in a position to start closing out that trial until after the last patient had its 12-month visit. And so we will have something like 10%, 15% of primary endpoint events more than the minimum requirement by the FDA. It's really a good thing.

And the team is very much in the process of cleaning up the data and interfacing with the CRO with responsibility, it is to ensure that all data are accurate and error free. And to do that, they have to verify lots of components, obviously, at the sites, at the source. And that goes with both the heart failure program and the back pain program. And that's currently being completed. Fred, do you have anything that you'd like to add to that?

Fred Grossman -- Chief Medical Officer

No, I think that covered it. We want to make sure that the data are pristine, and we have a very robust process to make sure that all the data are clean. And that at the end of the day, when it's analyzed, the results are robust and perfect.

Louise Chen -- Cantor Fitzgerald -- Analyst

Thank you very much.

Operator

Thank you. Your next question comes from Jeffrey Cohen from Ladenburg Thalmann. Please go ahead.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Hi, Silviu, Josh and Fred. How are you?

Silviu Itescu -- Chief Executive Officer and Managing Director

All right. Thank you.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

So few questions. Fred, can you talk to us a little bit about the ARDS trial and give us a sense of the size of the subset that we know about there, at least in the United States as far as the ARDS subset from the total patient population or the total hospitalized population. And then, can you remind us of the date or the time between the two infusions, at least in the short trial among 12 patients and talk to us about the number of sites which you currently have, I think you stated that you have up to 30. And the kind of time frame you think we will see. I think you said three to four months and what kind of look might you get to look at or you're going to look at? Thank you.

Fred Grossman -- Chief Medical Officer

Yes. Thank you for that question. So let me start with the dosing first. So the dosing and the criteria that we used for the 12 patients is the same dosing and criteria that we're using for the randomized placebo-controlled trial. Patients receive two doses of remestemcel-L separated by three to five days in the first week. So the first week, they will have received two doses, both in the 12-patient emergency IND, as well as in the randomized clinical trial. The clinical trial -- the randomized clinical trial, as mentioned before, is across 30 sites. Many of these sites are in hotspot areas. So, as you know, across the country there are some states where the number of hospitalizations are flat or going down somewhat, others where it's going up. It's certainly predicted that none of the country is opening up, that there's going to be some spikes. So we're making sure that we're covering most of the country so that we can hopefully get those patients enrolled in our study.

It's very hard to determine what the total number of COVID ARDS patients there are. But obviously, it's very substantial. We're hearing now that in Alabama, for example, the ICUs are full. So this is a very substantial population. I'll point out that we're focusing on the severe cases. We're focusing on those with moderate to severe ARDS. There's no one in that space. There's no competition in that space, and hence, there's a tremendous medical need to come up with treatments that reduce the mortality because, as mentioned by Silviu before, the mortality is quite high.

So depending on the pace of enrollment, as we noted before, we expect the enrollment to complete in three to four months. And then allowing for another month after that for the last patient to get to the 30-day period, that's about the time that the study will complete, analyze the data, we have both primary and secondary outcomes measures in that trial.

As noted before, we are including interim analysis. And the first interim will be when 30% of the subjects have met or completed the primary efficacy variable. That said, that would be about 90 to 100 patients. And depending on the enrollment, I'm anticipating anywhere from two months or so. Again, it depends on the enrollment for the first interim look, and that will be by an independent committee. If they determine based on general criteria of efficacy and futility, that the studies would stopped for efficacy, then that will be their recommendation. And at that point, we will make a decision to perhaps stop the trial and move forward with our discussions for a potential approval in COVID ARDS. Did I answer your question?

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

That's very helpful. Yes. It's very helpful. A couple more follow-ons. One, is second interim look at 60% or 70%? And then in addition, could you give us a sense of how many IRBs are locked in as of today?

Fred Grossman -- Chief Medical Officer

We have three interim looks during this trial. So the interim looks are going to occur at 30%, 45% and 60%. So there's quite a few periods where the independent board is going to look this data. And the reason that we've built this into it, it was based on the signal, the strong signal we saw in the 12 patients. If it holds up, then it's quite possible that this study could start early. However, we're planning for the study to go to completion and cover those 300 patients. But again, we can hear very early that the study is to be stopped.

I'm sorry, what was the second question that you asked?

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Can you give us a sense of the number of IRBs?

Fred Grossman -- Chief Medical Officer

Yes. I mean we're recruiting sites very quickly. We started fast, there's tremendous interest in the study. So we're getting calls from many sites around the country who want to take part in this, because, as I noted before, there's no one in the space. Most of the other studies, whether they are antivirals or other treatments, are including milder patients as well as those who are critical. We're focusing purely on those that are on ventilators, who are moderate to severe ARDS. And therefore, there are many sites that are engaged. We have quite a few sites already signed up. We have many patients who are in the trial, and we look forward to continuing this pace.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. Got it. So one more question, if I may, on a different topic. I guess for Silviu on the VAS score. Could you talk to us a little bit about if the data comes out positive mid year, is that going to be enough to file within your opinion to the agency here? And could we also, just to contrast in greater detail, what stage you'd be going after with the available as far as the heart failure stage and any IMAT [Phonetic] classifications? Thank you.

Silviu Itescu -- Chief Executive Officer and Managing Director

Sure. Thank you. See, it's a common theme of what we're targeting in terms of each disease area, requiring the most severe patients where alternatives don't exist. We've done that with severe end-stage and severe advanced grades GVHD C/D disease. We're doing that with COVID-19 ARDS, severe ARDS with a very high mortality rate. And we're also doing that with severe heart failure. The patient groups we have enrolled are those patients somewhere between 80% to 85% who has got very severe, very large [Indecipherable] and a substantial risk of mortality over an 18 to 24 month period, very much the mortality risk that resembles in many ways in certain cancers.

And these patients have progressed through this advanced stage despite our maximum existing standard of care therapies. We've even gone beyond this group of patients in patients who are otherwise [Indecipherable] they have be kept alive really on artificial mechanical devices [Indecipherable] devices. And in that setting, again, we've seen strong signal of efficacy as I stated earlier. So we -- I think we've seen a significant benefit in mortality in this 566-person trial, together with the date that we have already seen in the ischemic end-stage heart failure patients with LVAD, it's the totality of the data that will potentially allow us to have a really meaningful discussion with the agency.

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Okay. That's it from me. Thanks very much for taking the questions.

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Your next question comes from Jason Folger from Dawson James Securities. Please go ahead.

Jason Folger -- Dawson James Securities -- Analyst

Hi, guys. Thank you so much. Really appreciate all your hard work. It's been a terrible pandemic. With that said, there's a couple of questions I have. I know that you guys are highly connected, and some of your Board members are highly connected to DoD and BARDA. And I'm just trying to understand what the interest level might be for a BARDA procurement. What -- at the end of data? And how long does the US government wait to get data? This is not -- do they wait for a completion of a clinical trials? Do they get good interim data and make a procurement effort? How much time are you spending in Washington? How active is that process?

Silviu Itescu -- Chief Executive Officer and Managing Director

It's a fairly complex question there, Jason. I would start out by saying, clearly, data drive any discussions with BARDA and procurement. And I think we have those discussions ongoing. But I think the disease needs to be looked at in various ways. COVID-19 and ARDS is clearly the major focus for us and for regulators, ultimately, for the government at large. If we can make a meaningful impact on mortality and get these patients off ventilators and out of ICU, that will have a tremendous impact on the healthcare utilization as well as patient well-being, of course, and outcomes.

Beyond that, there's the opportunity to use the product for not just to COVID-19 but in Influenza ARDS and more broader causes of ARDS including, sepsis, bacterial sepsis, etc. So this is the beginning of a discussion and whether the right approach is stockpiling, which is what you're referring to, versus our ability to manufacture sufficient product through capacity expansion, that is the commercial initiative, together with strategic commercial parties or a combination of both, a partnership with commercial pharmaceutical companies in the space, together with the US government. It's a combination of all those thing is may be the way to go. But I think it's -- we are in discussions with parties that are both global, commercial and government. And I think the clinical data will underpin those outcomes. We are well financed now to put in place the initial manufacturing requirements that will underpin the capacity. Initially, it's required for meeting the outcome [Indecipherable] positive.

Jason Folger -- Dawson James Securities -- Analyst

Yes. Silviu, I mean, your answer makes perfect sense, and that's exactly how I would answer the question as a scientist or as a clinician. But I also know, these are unusual times and politically, things can move very, very rapidly. Let me ask a slightly different question to Dr. Grossman. One of the really interesting things that's becoming understood is that many of these patients who do come out of ventilators and induced comas have many, many other after effects. So it would be really, really interesting to be able to not only analyze mortality, but the many, many secondary endpoints that will determine, not only if patients recover faster and are not necessarily as acute and whether they recover more completely and fully. And so can you touch a little bit in terms of the things that you're tracking, even if they're not kind of the primary endpoint and top of mind?

Fred Grossman -- Chief Medical Officer

Yes. First of all, I agree with you. I think that many of these patients, in fact, when they come off a ventilator, have sequela for quite some time. One of the reasons that in our trial and in the 12 patients, we have a treatment initiated with remestemcel-L within 72 hours of being on a ventilator is because we want rapid resolution of treatment. And as you heard before, there was a median number of days of 10 days off of a ventilator. But longer you're on the ventilator, the greater the chance of having long-term effects, such as fibrosis. So we're gearing our treatment early in the process of patients being on a ventilator. Also in our randomized clinical trial, we have a whole variety of secondary outcome measures, including 60 and 90 days post ventilation, beyond just mortality. We're looking at a variety of factors. We're also looking at biomarkers, which are really critical here because as you heard before, these cells are stimulated by cytokines and they release anti-inflammatory factors. And we want to measure what they are, and we're doing so in the study. So I agree fully with you. It's very important to look at the long-term effects, but we're trying to get to these patients early so that we can have complete resolution beyond just reducing mortality, which, in and of itself, is important.

Jason Folger -- Dawson James Securities -- Analyst

Understood. Thank you Dr. Grossman. And the last question, Silviu. And I'm gritting my teeth to ask that, but I think I should ask it, and I think you should address it. U.S.-China relations right now are pretty tenuous. There's a lot of crazy stuff going on, whether it's Hong Kong or whether it's US trade or whether it's source of COVID. How could this or might this affect you and your relationship with Tasly? And I did hear you say that you realized the milestone from Tasly, I think that's positive. How is Mesoblast protecting this deal and protecting its intellectual property going forward?

Silviu Itescu -- Chief Executive Officer and Managing Director

Look, we have an excellent relationship with Tasly. And I certainly don't want to discuss politics in this call one way or the other, but our relationship with Tasly is a commercial one and it's an excellent relationship. In terms of intellectual property, our arrangement with respect to the initial phase of at least to provide products on a commercial arms length basis in terms of supply. Over time, we will work out our arrangements with respect to commercial manufacturing and distribution. And certainly, protection of intellectual property is a critical aspect of the relationship, and I have no reason to think that this relationship will continue to be anything but strong and growth areas at over time.

Jason Folger -- Dawson James Securities -- Analyst

Okay. Good. And one last question. And first of all, congratulations to you and Josh on raising capital. I think that made a lot of sense given that we live in the stock price. When I look at the risk and the reward in the stock, I'm very excited about what I believe is going to be very powerful results in COVID. But what -- and I know you've kind of addressed this, but I'd like to put it specifically in the frame of reference of what -- we're going to see COVID degenerative discontinued in congestive heart failure. We're going to see that data all coming together in about the same time. It would be really interesting to know what data might come when in terms of the sequence. But I guess that's not really up to you. But how do you look at that?

Silviu Itescu -- Chief Executive Officer and Managing Director

Well, I think the most important thing to look at in the short term is Mesoblast's go-to-market strategy, right? So our remestemcel-L product for steroids indication, GVHD, with a brand name Ryoncil is first and foremost the value drive for the company. We are in advanced discussions with the agency. We're under a priority review. The team is led by Dr. Grossman, he's [Indecipherable] interactions, discussions, responses. And the focus for the company is to get this product approved and succes when we launch it. And we've invested in a targeted commercial sales force led by Eric Strati in our organization. That sales force will be focused on at least the 50% of transplant centers -- sorry, the 15 sites in the US that do 50% of the pediatric transplants. We have invested in inventory to support the successful launch.

And that's clearly the short-term value driver for the company. And then the value driver beyond that will be ensuring that there's appropriate data to support label extensions for the product. And broadening of the indications, and COVID-19 ARDS is an example of that. Our ability to leverage the many uses of safety and efficacy data generated with remestemcel-L, not just for GVHD, but in other areas like Crohn's disease and inflammatory lung disease will allow us to move to new indications.

And as you've seen, our partner in Japan have moved into areas like HIE, otherwise known as [Indecipherable] syndrome and epidermolysis bullosa data to which we will have access and use for the US market. We intend to move hard to work with investigator, with the leaders in this space to generate the kind of data that will support label expansions for the product, underpinning all of that will have to be our manufacturing strategy. And that's a major rationale for why we raise capital recently. We have to be able to invest in capacity enlargement and contractual discussions are under way, and we have to be in a position to anticipate positive readouts and not skip a beat with respect to the ability to have inventory to launch products for indications beyond the [Indecipherable]. And that includes, of course, COVID-19 ARDS.

With respect to readouts in the Phase III trials, as we said, they're not under our control. What is under our control is successful launch, successful presentations to the agency, the successful ability to commercialize products and build them out into new areas and make sure that we generate the sort of revenue that this platform technology can deliver to -- for our stakeholders.

Jason Folger -- Dawson James Securities -- Analyst

Thank you Silviu, Josh and Dr. Grossman. Thank you so much. Really appreciate the time today and really look forward to the interim analysis in ARDS related to COVID. It could be a real breakthrough for the globe. Thank you.

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Your last question comes from Tanushree Jain from Bell Potter Securities. Please go ahead.

Tanushree Jain -- Bell Potter Securities -- Analyst

Hi, Silviu, Josh and Fred. Thank for taking my questions. Just a couple of ones from me. Just on the GVHD, do you have any visibility about the advisory committee date of yet? And then just on the second one, given TEMCELL approved in Japan for GVHD, is there any plans or discussions with JCR to pursue the COVID-19 ARDS opportunity for Japan?

And then my last question is just on the manufacturing. Over the next two quarters, I guess, Josh, this is more for you, before we see the ARDS trial results and I think also assuming that there is possibility that the trial could be stopped early for efficacy on an interim analysis. I guess, how should we be looking at these spend on increasing the manufacturing capacity over the next two quarters?

Silviu Itescu -- Chief Executive Officer and Managing Director

So can I have Fred to address the first question, please?

Fred Grossman -- Chief Medical Officer

Yes. The advisory committee is planned for August. We're in discussions right now with the FDA regarding format and content. And we're really looking forward to presenting to the committee.

Silviu Itescu -- Chief Executive Officer and Managing Director

Josh, could you address the spend over the next period, please?

Fred Grossman -- Chief Medical Officer

Sure. I think I'll echo some of Silviu's comments from earlier. It's important to make sure that we have the capacity to meet the requirements of our maturing pipeline, including this opportunity to treat ARDS in COVID-19 patients. At this point, we don't have any contractual arrangements, but we're working on putting them in place, and we'll provide updates to the market as we do so.

Silviu Itescu -- Chief Executive Officer and Managing Director

Tanu, did that address those questions?

Tanushree Jain -- Bell Potter Securities -- Analyst

Just the JCR one as well, and I think then I'll just have a follow-up for Josh with respect to the contractual obligations. Are we just going to look at adding, I guess, another manufacturing [Indecipherable]? Or are you also going to be considering other self manufacturers?

Silviu Itescu -- Chief Executive Officer and Managing Director

Maybe I can address that, Tanu, for you first. So there's obviously ability to build that capacity in Singapore with the existing arrangements with Lonza. But we're -- given the importance of COVID-19 in the US, we are looking at having expansion capabilities for production in the US. And so we're in discussions with multiple parties, including Lonza, of course, in the US to access those facilities, existing and otherwise for increased production for remestemcel-L and its applications as well as down the track for other of our important products with high volumes. So those discussions are under way and we're evaluating other options.

The question with JCR, we have a very strong relation with JCR. They are primarily focused on orphan indication as a company strategically. And that has driven so far the interest in acute GVHD, epidermolysis bullosa and hypoxic ischemic encephalopathy, in short [Indecipherable]. COVID-19 is not an orphan disease, obviously. And we've had initial discussions with JCR, but we're also having those discussions more broadly. And I think we'll update folks over time as to our strategic initiatives in Japan and the US, in Europe, etc, with respect to COVID-19.

Tanushree Jain -- Bell Potter Securities -- Analyst

Great. Thank you.

Silviu Itescu -- Chief Executive Officer and Managing Director

Thanks, Tanu.

Operator

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

Silviu Itescu -- Chief Executive Officer and Managing Director

Thank you very much. We really appreciate everybody's interest today. Clearly, the last three months have been incredibly busy and a strong quarter for us as a company. I think it puts Mesoblast well and truly at the forefront of providing a potential therapy to combat this devastating disease, COVID-19. And I think it speaks greatly to the strength of the underlying technology that Mesoblast was developing as well as the more than a decade of clinical data, which are being generated in terms of both safety and efficacy and understanding the mechanism of action, that allow it at a time of devastation. It's really the only word I can use that has been caused by COVID-19 pandemic. But we're able to exhibit and use all of our know-how and expertise and worked diligently and feverishly, really, to attempt to provide a therapeutic solution to the many, many, many patients who are affected by this virus and have a very high risk of death due to this terrible inflammatory condition of the lungs. And we hope to update the market as soon as we possibly can. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Silviu Itescu -- Chief Executive Officer and Managing Director

Josh Muntner -- Chief Financial Officer

Fred Grossman -- Chief Medical Officer

Louise Chen -- Cantor Fitzgerald -- Analyst

Jeffrey Cohen -- Ladenburg Thalmann -- Analyst

Jason Folger -- Dawson James Securities -- Analyst

Tanushree Jain -- Bell Potter Securities -- Analyst

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