UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Mesoblast Limited

/s/ Niva Sivakumar

Niva Sivakumar

Company Secretary

Item

99.1

Appendix 4C of Mesoblast Ltd, dated January 31, 2022.

•

Meeting held with the US Food and Drug Administration’s (FDA) Office of Tissues and Advanced Therapies (OTAT) to address potency assay and chemistry, manufacturing and controls (CMC) items identified in the complete response letter (CRL) for remestemcel-L in the treatment of SR-aGVHD in children

•

OTAT indicated that the in vitro immunomodulatory activity Mesoblast intends to measure for potency of the product is reasonable and that the relevance of this activity to clinical outcomes should be established  

•

Results from an investigator-initiated study, published in the peer-reviewed journal Bone Marrow Transplantation¹, in children with SR-aGVHD stratified by baseline levels of inflammatory biomarkers, showed that remestemcel-L treatment was associated with 64% survival in children with biomarker levels predictive for highest mortality compared with only 10% survival (p=0.01) in matched controls treated with other available therapies, including ruxolitinib or other biologics

•

These data provide strong supporting evidence that the proposed anti-inflammatory and immunomodulatory mechanism of action of remestemcel-L is responsible for the improved survival in patients with SR-aGVHD

•

Mesoblast has now generated substantial new data that it believes establish the relevance of the proposed potency assay measuring remestemcel-L’s in vitro anti-inflammatory and immunomodulatory activity to the in vivo clinical effect of the product in the Phase 3 trial in children with SR-aGVHD, including survival and biomarkers of in vivo activity

•

Mesoblast will provide these new data to OTAT and address all other outstanding items as required for resubmission of the BLA

•

Mesoblast continues to be in a well-established process with FDA’s Center for Biologics Evaluation and Research (CBER), and if the resubmission is accepted, CBER will consider the adequacy of the clinical data in the context of the related CMC issues noted above.

•

Received feedback from FDA’s OTAT that it agrees with Mesoblast’s proposal for pain reduction at 12 months as the primary endpoint for a pivotal trial to confirm the observed pain reduction with rexlemestrocel-l in the first Phase 3 trial in patients with CLBP due to degenerative disc disease (DDD) refractory to available therapies, including opioids

•

Received feedback from FDA’s OTAT confirming that reduction in major adverse cardiovascular events (MACE) of cardiovascular mortality or irreversible morbidity (non-fatal heart attack or stroke) is an acceptable clinically meaningful endpoint for determining the treatment benefit of rexlemestrocel-L for patients with chronic heart failure and low ejection fraction (HFrEF)

•

Provided OTAT with top-line results of new analyses in pre-specified high-risk groups in the DREAM-HF Phase 3 trial of rexlemestrocel-L in HFrEF which showed that the greatest treatment benefit is in patients with diabetes and/or myocardial ischemia (72% of total treated population), a target population at very high risk for mortality and irreversible morbidity due to micro- and macro-vascular disease despite receiving optimal standard of care therapies ²

•

Preparing formal submission to FDA of the detailed analyses of outcomes in high-risk HFrEF patients with diabetes and/or myocardial ischemia to agree on a potential pathway to approval

•

Revenues were US$3.5 million, including US$2.3 million from TEMCELL® HS Inj.³ royalties on sales for SR-aGvHD in Japan, an increase of 7% on TEMCELL royalties in the comparative quarter last year

•

Total Operating Activities resulted in net cash usage of US$19.8 million in the quarter, a reduction of 38% on the comparative quarter last year. Almost half of this spend was on remestemcel-L regulatory and manufacturing activities

•

Mesoblast completed a refinancing of its senior secured debt facility with a new US$90 million five-year facility provided by funds managed by Oaktree Capital Management, L.P.

•

Cash on hand at the end of the quarter was US$94.8 million, with up to an additional US$40 million available to be drawn down from existing financing facilities subject to certain milestones

1.

Kasikis S., et al. Mesenchymal stromal cell therapy induces high responses and survival in children with steroid refractory GVHD and poor risk. Bone Marrow Transplantation 2021; https://doi.org/10.1038/s41409-021-01442-3

2.

Dunlay SM., et al. Circulation. 2019;140:e294–e324

3.

TEMCELL^® HS Inj. is a registered trademark of JCR Pharmaceuticals Co. Ltd.

Corporate Communications / Investors

Media

Paul Hughes

Sumit Media

T: +61 3 9639 6036

Grant Titmus

E: investors@mesoblast.com

T: +61 419 388 161

E: grant@sumitmedia.com.au

Rubenstein

Nadine Woloshin

T: +1 917-699-9456

E: nwoloshin@rubenstein.com

Name of entity

Mesoblast Limited

ABN

Quarter ended (“current quarter”)

68 109 431 870

31 December 2021

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(6 months)
$US’000

1.

Cash flows from operating activities

1.1

Receipts from customers

-royalty receipts

3,536

5,531

1.2

Payments for

(a)research and development

(7,530)

(14,537)

(b)manufacturing commercialization

(2,222)

(4,430)

(c)product manufacturing and operating costs

(3,471)

(8,343)

(d)advertising and marketing

(179)

(461)

(e)leased assets

—

—

(f)staff costs

(3,089)

(5,321)

(g)other expenses from ordinary activities

(4,552)

(7,447)

(h)other:

-Intellectual property portfolio expenses

(712)

(1,438)

1.3

Dividends received (see note 3)

—

—

1.4

Interest received

—

4

1.5

Interest and other costs of finance paid

(1,544)

(2,951)

1.6

Income taxes paid

1.7

Government grants and tax incentives

—

24

1.8

Other (provide details if material)

—

—

1.9

Net cash from / (used in) operating activities

(19,763)

(39,369)

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(6 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

(4)

(103)

(l)investments

—

—

(m)intellectual property

(26)

(26)

(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

(30)

(129)

3.

Cash flows from financing activities

3.1

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

—

—

3.2

Proceeds from issue of convertible debt securities

—

—

3.3

Proceeds from exercise of options

62

209

3.4

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

(112)

(216)

3.5

Proceeds from borrowings

51,919

51,919

Proceeds from issue of warrants

8,081

8,081

3.6

Repayment of borrowings

(55,458)

(55,458)

3.7

Transaction costs related to loans and borrowings

(5,353)

(5,453)

3.8

Dividends paid

—

—

Consolidated statement of cash flows

Current quarter $US’000

Year to date

(6 months)
$US’000

3.9

Other (payment of lease liability)

(528)

(1,214)

3.10

Net cash from / (used in) financing activities

(1,389)

(2,132)

4.

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

4.1

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

115,956

136,881

4.2

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

(19,763)

(39,369)

4.3

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

(30)

(129)

4.4

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

(1,389)

(2,132)

4.5

Effect of movement in exchange rates on cash held

75

(402)

4.6

Cash and cash equivalents at end of period

94,849

94,849

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

94,414

115,524

5.2

Call deposits

—

—

5.3

Bank overdrafts

—

—

5.4

Other (Term deposits)

435

432

5.5

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

94,849

115,956

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

421

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 $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. Management does not estimate there to be a material gain or loss on derecognition of the Hercules loan.

As at December 31, 2021 the interest rate on the loan 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)

(19,763)

8.2

Cash and cash equivalents at quarter end (item 4.6)

94,849

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)

134,849

8.5

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

6.8

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.