•

Net cash usage for operating activities in the quarter was US$14.3 million; this represented a reduction of US$3.9 million, or 22%, on the comparative quarter in FY2022, and a reduction of $US8.0 million, or 47%, on the comparative quarter in FY2021.¹

•

Cash on hand at the end of the quarter was US$85.5 million after raising gross proceeds of US$45 million in a private placement in August 2022, with up to an additional US$40 million available to be drawn down from existing financing facilities subject to certain milestones.

•

A major milestone in the Company’s complete response to the FDA was the submission at the end of the quarter of substantial new information on clinical and potency assay items to the Investigational New Drug (IND) file for remestemcel-L in the treatment of children with SR-aGVHD, as guided by FDA.

•

Survival outcomes have not improved over the past two decades for children or adults with the most severe forms of SR-aGVHD.^2-4 The lack of any approved treatments for children under 12 means that there is an urgent need for a therapy that improves the dismal survival outcomes in children.

•

Remestemcel-L treatment has shown improved 6-month survival in children with severe SR-aGVHD in comparison to contemporaneous controls treated with best available therapy.

•

Mesoblast has optimized a potency assay that was in place at the time of the 54-patient Phase 3 trial in children with SR-aGVHD and which demonstrates a relationship between the product’s activity in vitro and its effects on survival in the Phase 3 trial

•

Additionally, Mesoblast has now generated data from the expanded access program (EAP 275) of 241 children which confirm the ability of the in-vitro potency assay to measure product activity relevant to survival outcomes.

•

Remestemcel-L has been granted Fast Track Designation and BLA Priority Review from the FDA.

•

Mesoblast gained alignment with the FDA on key metrics for pivotal Phase 3 study in patients with CLBP which seeks to replicate the significant reduction in pain seen at 12 and 24 months in first Phase 3 trial.

•

FDA has confirmed that reduction in pain is approvable indication.

•

The Company plans to have clearance from the FDA by year-end 2022 for the pivotal trial with primary endpoint 12-month reduction in pain.

•

Recent data from Phase 3 trial of 565 patients with HFrEF showed a single intervention with rexlemestrocel-L improves left ventricular ejection fraction (LVEF) at 12 months, preceding long term reduction in major adverse cardiovascular events (MACE).

•

LVEF improvement at 12 months may be an appropriate early surrogate endpoint for long term reduction in MACE.

•

Results from three randomized controlled trials in class II/III HFrEF and in end-stage HFrEF with left ventricular assist devices (LVADs) support the idea of a common mechanism of action (MOA) by which rexlemestrocel-L reverses inflammation-related endothelial dysfunction and reduces adverse clinical outcomes across the spectrum of HFrEF patients.

•

Mesoblast now intends to meet with FDA under its existing regenerative medicine advanced therapy (RMAT) designation to discuss data and the evidence of a common mechanism of action (MOA) across the broader HFrEF spectrum, including LVAD patients.

1.

The Appendix 4C for the quarter ended September 30, 2021 reported net cash usage for operating activities of US$19.6m which was subsequently revised to US$18.2 million due to a change in accounting policy adopted at December 31, 2021.

2.

Berger M, Pessolano R, Carraro F, Saglio F, Vassallo E, Fagioli F. Steroid-refractory acute graft-versus-host disease graded III-IV in pediatric patients. A mono-institutional experience with a long-term follow-up. Pediatric Transplantation. 2020; 24(7):e13806

3.

Rashidi A, DeFor T, Holtan S, Blazar B, Weisdorf D, MacMillan M. Outcomes and Predictors of Response in Steroid-Refractory Acute Graft-versus-Host Disease. Biol Blood Marrow Transplant. 25 (2019) 2297-2302

4.

Biavasco F, Ihorst G, Wasch R, Wehr C, Bertz H, Finke J, Zeiser R. Therapy response of glucocorticoid-refractory acute GVHD of the lower intestinal tract. Bone Marrow Transplantation. 2022

5.

As required by ASX listing rule 4.7 and reported in Item 6 of the Appendix 4C, reported are the aggregated total payments to related parties being Executive Directors and Non-Executive Directors

Corporate Communications / Investors

Media

Paul Hughes

BlueDot Media

T: +61 3 9639 6036

Steve Dabkowski

E: investors@mesoblast.com

T: +61 419 880 486

E: steve@bluedot.net.au

Rubenstein

Tali Mackay

E: tmackay@rubenstein.com

Name of entity

Mesoblast Limited

ABN

Quarter ended (“current quarter”)

68 109 431 870

30 September 2022

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(12 months)
$US’000

1.

Cash flows from operating activities

1.1

Receipts from customers

-royalty receipts

2,219

2,219

1.2

Payments for

(a)research and development

(5,562)

(5,562)

(b)manufacturing commercialization

(4,017)

(4,017)

(c)product manufacturing and operating costs

(795)

(795)

(d)advertising and marketing

(433)

(433)

(e)leased assets

—

—

(f)staff costs

(2,136)

(2,136)

(g)other expenses from ordinary activities

(h)other:

(3,038)

(3,038)

-Intellectual property portfolio expenses

(585)

(585)

1.3

Dividends received (see note 3)

—

—

1.4

Interest received

60

60

1.5

Interest and other costs of finance paid

—

—

1.6

Income taxes paid

—

—

1.7

Government grants and tax incentives

—

—

1.8

Other (provide details if material)

—

—

1.9

Net cash from / (used in) operating activities

(14,287)

(14,287)

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(12 months)
$US’000

2.

Cash flows from investing activities

2.1

Payments to acquire or for:

(i)entities

—

—

(j)businesses

—

—

(k)property, plant and equipment

(153)

(153)

(l)investments

—

—

(m)intellectual property

(50)

(50)

(n)other non-current assets

—

—

2.2

Proceeds from disposal of:

(o)entities

—

—

(p)businesses

—

—

(q)property, plant and equipment

—

—

(r)investments

—

—

(s)intellectual property

—

—

(t)other non-current assets

—

—

2.3

Cash flows from loans to other entities

—

—

2.4

Dividends received (see note 3)

—

—

2.5

Other

—

—

2.6

Net cash from / (used in) investing activities

(203)

(203)

3.

Cash flows from financing activities

3.1

Proceeds from issues of equity securities (excluding convertible debt securities)

45,065

45,065

3.2

Proceeds from issue of convertible debt securities

—

—

3.3

Proceeds from exercise of options

—

—

3.4

Transaction costs related to issues of equity securities or convertible debt securities

(2,565)

(2,565)

3.5

Proceeds from borrowings

—

—

Proceeds from issue of warrants

—

—

3.6

Repayment of borrowings

—

—

3.7

Transaction costs related to loans and borrowings

(151)

(151)

Interest and other costs of finance paid

(1,381)

(1,381)

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(12 months)
$US’000

3.8

Dividends paid

—

—

3.9

Other (payment of lease liability)

(670)

(670)

3.10

Net cash from / (used in) financing activities

40,298

40,298

4.

Net increase / (decrease) in cash and cash equivalents for the period

4.1

Cash and cash equivalents at beginning of quarter (April 1, 2022)/beginning of year (July 1, 2021)

60,447

60,447

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(14,287)

(14,287)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(203)

(203)

4.4

Net cash from / (used in) financing activities (item 3.10 above)

40,298

40,298

4.5

Effect of movement in exchange rates on cash held

(753)

(753)

4.6

Cash and cash equivalents at end of period

85,502

85,502

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$US’000

Previous quarter
$US’000

5.1

Bank balances

85,112

60,034

5.2

Call deposits

—

—

5.3

Bank overdrafts

—

—

5.4

Other (Term deposits)

390

413

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

85,502

60,447

6.

Payments to related parties of the entity and their associates

Current quarter
$US'000

6.1

Aggregate amount of payments to related parties and their associates included in item 1

529

6.2

Aggregate amount of payments to related parties and their associates included in item 2

—

Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments.

7.

Financing facilities
Note: the term “facility’ includes all forms of financing arrangements available to the entity.

Add notes as necessary for an understanding of the sources of finance available to the entity.

Total facility amount at quarter end
$US’000

Amount drawn at quarter end
$US’000

7.1

Loan facilities

130,000*

90,000*

7.2

Credit standby arrangements

—

—

7.3

Other (please specify)

—

—

7.4

Total financing facilities

130,000*

90,000*

7.5

Unused financing facilities available at quarter end

40,000*

7.6

Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

*Loan facility with Oaktree Capital Management, Inc.

On November 19, 2021, Mesoblast refinanced its senior debt facility with a new US$90.0 million secured five-year credit facility provided by funds managed by Oaktree Capital Management, L.P. (“Oaktree”). Mesoblast drew the first tranche of US$60.0 million on closing, the remaining US$30.0 million is available prior to December 31, 2022, subject to certain milestones.

The loan has an initial interest only period of three years, at a fixed rate of 9.75% per annum, after which time 40% of the principal is payable over two years and a final payment due no later than November 2026. Proceeds from the Oaktree facility have been used to discharge Mesoblast’s obligations under the Hercules loan.

The loan interest rate is fixed and as at September 30, 2022 the interest rate was 9.75%. In the current quarter, 8% interest was paid in cash, while 1.75% interest was not paid in cash, instead it was paid in kind (PIK) and accrued onto the loan balance outstanding.

*Loan facility with NovaQuest Capital Management, L.L.C.

On June 29, 2018, Mesoblast entered into a Loan and Security Agreement with NovaQuest Capital Management, L.L.C. (“NovaQuest”) for a non-dilutive US$40.0 million secured eight-year term loan. Mesoblast drew the first tranche of US$30.0 million of the loan on closing. An additional US$10.0 million from the loan will be drawn on marketing approval of RYONCIL by the United States Food and Drug Administration (FDA).

Prior to maturity in July 2026, the loan is only repayable from net sales of RYONCIL in the treatment of pediatric patients who have failed to respond to steroid treatment for acute Graft versus Host Disease (aGvHD), in the United States and other geographies excluding Asia. Interest on the loan will accrue at a rate of 15% per annum with the interest only period lasting 4 years. Interest payments will be deferred until after the first commercial sale. The financing is subordinated to the senior creditor, Oaktree.

8.

Estimated cash available for future operating activities

$US’000

8.1

Net cash from / (used in) operating activities (item 1.9)

(14,287)

8.2

Cash and cash equivalents at quarter end (item 4.6)

85,502

8.3

Unused finance facilities available at quarter end (item 7.5)

40,000*

8.4

Total available funding (item 8.2 + item 8.3)

125,502

8.5

Estimated quarters of funding available (item 8.4 divided by item 8.1)

8.8

Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as “N/A”. Otherwise, a figure for the estimated quarters of funding available must be included in item 8.5.

* Under the Oaktree senior debt facility $30.0 million is available prior to December 31, 2022, subject to certain milestones. Under the NovaQuest loan facility, an additional US$10.0 million from the loan will be drawn on marketing approval of RYONCIL by the United States Food and Drug Administration (FDA).

8.6

If item 8.5 is less than 2 quarters, please provide answers to the following questions:

8.6.1Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?

Answer: Not applicable

8.6.2Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?

Answer: Not applicable

8.6.3Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

Answer: Not applicable

Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

1

This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2

This statement gives a true and fair view of the matters disclosed.

1.

This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.

If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3.

Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.

If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [name of board committee – eg Audit and Risk Committee]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5.

If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.