Mediwound Ltd

NASDAQ:MDWD

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and welcome to MediWound's Second Quarter 2024 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Gaia Shamis of LifeSci Advisors. Please go ahead.

[Gaia Vasiliver-Shamis]

Thank you, [ Chris ], and welcome, everyone. Today, before the market opened, MediWound issued a press release announcing financial results for the second quarter ended June 30, 2024. You may access that release on the company's website under the Investors tab.

With us today are Ofer Gonen, Chief Executive Officer of MediWound; Hani Luxenburg, Chief Financial Officer; and Barry Wolfenson, Executive Vice President of Strategy and Corporate Development.

Following our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that statements made during this call including the Q&A session relating to MediWound's expected future performance, future business prospects or future events or plans are forward-looking statements and defined under the Private Securities Litigation Reform Act of 1995. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecast due to the impact of many factors beyond the control of MediWound. The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events or otherwise.

Participants are directed to cautionary note set forth in today's press release as well as the risk factors set forth in MediWound's annual report filed with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. The conference call is the property of MediWound, and any recording or rebroadcast is expressly prohibited without the written consent of MediWound. Now I would like to turn the call over to Ofer Gonen, Chief Executive Officer of MediWound. Ofer?

[Ofer Gonen, executive]

Thank you, Gaia, and good morning, everyone. We appreciate you joining us today as we are excited to share the results of another strong quarter. The second quarter has been pivotal for our company, as we continue to execute our strategic plan to become a global leader in tissue repair. At the beginning of the year, we set 3 key goals: First, to complete the construction of our new manufacturing facility; second, to accelerate the revenue growth of NexoBrid; and third, to initiate the Phase III clinical trial of EscharEx. I am pleased to report that we have successfully completed the first goal, and we are well on track to achieving the remaining two.

Moreover, we awarded EUR 16.25 million in funding for the expansion of EscharEx indication to include diabetic foot ulcers, significantly increasing the product's total addressable market. We also raised $25 million in financing led by industry leader, Mölnlycke, reflecting strong confidence in our technology and significantly enhancing our financial position.

Let me begin with an update on NexoBrid, our drug for eschar removal for severe burns. As mentioned, we have completed the construction of our new state-of-the-art GMP compliance manufacturing facility NexoBrid. The commissioning process will begin soon, and we aim to achieve full operational capacity in 2025. The new facility will allow us to support the growing global demand for NexoBrid by increasing our manufacturing capacity sixfold.

In the United States, the launch of NexoBrid by Vericel continued to build strong momentum. Approximately 70 burn centers have completed submission to the P&T committee with over 40 centers already obtaining approval and nearly all of them placing initial product orders. Vericel reported a notable increase in hospital orders and the number of patients treated driving a revenue growth of 76% over the prior quarter.

Additionally, we anticipate FDA approval of the pediatric indication for NexoBrid very soon, which would provide a crucial treatment option for pediatric patients with severe thermal burns. We also had positive results from the United States NexoBrid expanded access protocol, the NEXT program. Initiated in 2019, NEXT ensured the continuous availability of NexoBrid in burn centers prior to its commercialization. This program successfully maintained physician expertise provided burn victims with ongoing access to this life-saving treatment and facilitated the cumulation of real-world safety clinical data for NexoBrid.

The study was conducted at 29 burn centers across the United States and enrolled 239 patients, including 215 adults and 24 children with severe thermal burns covering up to 30% of total body surface area. The finding from the NEXT are consistent with the data from the DETECT and the [ KiP ] Phase III trials, reinforcing the clinical role -- the critical role that NexoBrid will play in standard burn care protocols.

NexoBrid was reaffirmed as a safe and effective eschar removal enzymatic agent that successfully reduces the need for surgical procedures in burn patients. Regarding the development of a room temperature stable formulation of NexoBrid, our partnership with the United States government remain very strong. During the recent [ Type ] meeting, the FDA provided comprehensive guidance on our CMC plan, nonclinical development plan and regulatory strategy. We also received initial feedback on our clinical trial design, indicating that we will be able to initiate the clinical trial in 2026. The [ DoD ] has awarded us an additional $1.5 million to support our ongoing research and development activities.

Turning now to EscharEx, our [ innovative ] therapy for debridement chronic wounds, there have been several exciting developments. We received EUR 16.25 million in funding from the European Commission through a prestigious and highly competitive program. This funding will facilitate the expansion of EscharEx's indications to include diabetic foot ulcer, or DFUs, a substantial and underserved market. Notably, this will expedite our associated revenue projections by 4 years. Preparations for the DFU Phase II/III study are currently underway.

Proper treatment of diabetic foot ulcer is critical to preventing serious complications including amputations, infections and even death. Let's look at the numbers. Among the 38 million diabetic patients in the United States, approximately 30% will develop DFUs in their lifetime. 70% of these patients, and we are speaking about 1.6 million patients every year, will require debridement either with a painful surgical procedure or with an ineffective alternative treatment.

Our program has the potential to have a significant impact on the treatment of diabetic foot ulcer, transforming the current standard of care to a very simple, quick and safe solution, a dramatic benefit to the millions of patients. We are also finalizing the preparations for our Phase III study for treating venous leg ulcers, VLUs, following the success of our Phase II trial. The results of one of these Phase II trials were recently published at the Lancet eClinical Medicine Journal, demonstrating EscharEx's superiority over the nonsurgical standard-of-care in debridement and in the promotion of healthy granulation tissue.

The upcoming Phase III study will replicate the successful design of our Phase II trial and will be structured as a multicenter, prospective, randomized and placebo-controlled global trial. We aim to enroll 216 patients across over 40 sites. An interim assessment will be conducted after 67% of the participants have completed the trial and providing early insights into the efficacy of EscharEx. This study is scheduled to start in the second half of 2024 as planned.

Our ability to consistently execute on multiyear plans as reflected in the significant progress of our NexoBrid and EscharEx program has attracted strategic interest from prominent industry players. Just recently, we raised $25 million private investment led by Mölnlycke Healthcare, a global leader in the wound care solutions. This investment demonstrates confidence in our technology and significantly strengthen our financial position.

In addition, we have signed a strategic collaboration agreement with them. The agreement provide us with access to Mölnlycke's [ insights ], it's pretty clinical and regulatory expertise and educational resources. This also includes Mölnlycke's participation in certain potential strategic partnership discussion and M&A processes. This collaboration aims to enhance our strategic plans and create substantial long-term value for our stakeholders. Now I will hand it over to Hani to briefly review our financials.

[Hani Luxenburg, executive]

Thank you, Ofer. Let me begin with our revenue for the second quarter. Revenue for the second quarter of 2024 was $5.1 million compared to $4.8 million in the same period of 2023. This increase is primarily attributed to revenue from Vericel. Gross profit in the second quarter of 2024 was $0.4 million, representing 9% of total revenue compared to $1.1 million, representing 24% of total revenue in the second quarter of 2023. The decrease in gross margin is mainly due to changes in the revenue mix and nonrecurring production costs.

Turning to our operating expenses. R&D expenses for the second quarter of 2024 were $1.9 million compared to $2 million in the same period of 2023. SG&A expenses for the second quarter of 2024 were $3 million compared to $3.1 million in the second quarter of 2023. Operating loss for the second quarter of 2024 was $4.5 million compared to an operating loss of $4 million in the second quarter of 2023.

Net loss for the quarter of 2024 was $6.3 million or $0.68 per share compared to a net profit of $0.9 million or $0.10 per share in the second quarter of 2023. This change is primarily due to financial expenses driven by the revaluation of warrants. Non-GAAP adjusted EBITDA for the second quarter of 2024 was a loss of $3.4 million compared to a loss of $3 million in the same period of 2023.

Moving on to our year-to-date financial highlights. Total revenue for the first half of 2024 was $10 million, up from $8.6 million in the first half of 2023. The increase is mainly attributed to revenue from Vericel and new contract with the U.S. Department of Defense. Gross profit for the first half of 2024 was $1.1 million or 11% of total revenue compared to $2 million or 23% of total revenue in the first half of 2023.

R&D expenses for the first half of 2024 were $3.4 million compared to $4.1 million in the first half of 2023. This decrease is primarily due to the completion of the EscharEx Phase II study. SG&A expenses for the first half of 2024 were $5.9 million, down from the $6.2 million in the first half of 2023.

Operating loss for the first half of 2024 was $8.2 million compared to an operating loss of $8.4 million in the same period of 2023. Net loss for the first half of 2024 was $16 million or $1.73 per share compared to a net loss of $2.8 million or $0.32 per share in the first half of 2023. The increase in net loss is primarily due to the financial expenses. These expenses are from revaluation of warrants, amounting to $8 million, driven by a 53% increase in our share price.

Adjusted EBITDA for the first half of 2024 was a loss of $6.2 million compared to a loss of $6.4 million in the first half of 2023. Balance sheet highlights. As of June 30, 2024, the company had cash and cash equivalents, restricted cash and deposits totaling $29.7 million compared to $42.1 million as of December 31, 2023.

In the first half of 2024, the company received $0.6 million from the exercise of Series A warrants. The company utilized $12.9 million to fund its activities in the first half of 2024. This included $4.3 million allocated to CapEx, primarily for our facility scale up. On July 15, the company successfully raised $25 million through a PIPE offering. This concludes the financial review. I will now turn the call back to Ofer. Ofer?

[Ofer Gonen, executive]

Thank you, Hani. This was a very -- another very strong quarter. We successfully raised capital, collaborated with one of the largest wound care companies in the world, significantly expanded our target market for EscharEx and completed the construction of our NexoBrid manufacturing facility as planned. We are now well positioned with all the resources we need to achieve our goals and look forward to an exciting second half of the year.

With this said, I'd like now to turn back to the operator for any questions you may have. Operator?

[Operator]

[Operator Instructions] And today's first question comes from Josh Jennings with TD Cowen.

[Joshua Jennings, analyst]

It's great to see all the progress in 2Q. I wanted to start on NexoBrid and congratulations on getting that facility build-out completed. I just wanted to better understand the NEXT steps to increasing NexoBrid capacity and whether that kind of unlocking or eliminating capacity constraints could occur in early 2025 or mid-2025? Just how are you managing expectations from your distributor partners in India and Japan and [ Polymedics ] for Europe?

[Ofer Gonen, executive]

Thank you for the question, Josh. So considering the dynamics around NexoBrid, as you know, we have major market launches recently, United States, Japan, India expansions of indications, including the pediatric population that was -- we were awarded in Europe, and we are waiting for it to be in the United States very shortly. And also, we are working on the military use. And there is also a growing governmental interest. So our assumption that the demand for NexoBrid will escalate rapidly. This is the reason why we spend a lot of [indiscernible] in making sure that we complete the construction of the new state-of-the-art manufacturing facility as planned. We are starting the commissioning very soon. It can be -- it is a 1-year process. It includes 6 months of stability, so you can't expect it to be earlier. Having said that, as I stated in previous calls, we expect the European approval to be earlier in 2025. And in the United States, we expect it to be at the end of 2025, and our forecast is -- reflects this execution. Did I answer your question?

[Joshua Jennings, analyst]

You did. And just a big deal of this EIC funding for the DFU trial, and I was hoping to get a better understanding of the mechanics of it. And with this funding come in tranches, is it a onetime [indiscernible] capital to fund the trial? How do you access the capital? And just should we be thinking that the [ VAP ] trial could kick off -- the Phase II/III could kick off in 2025?

[Ofer Gonen, executive]

Thank you for this question as well. So we were just notified about this funding a few weeks ago, and our final assumptions regarding the initiation and the structure of the trial, of course, will be based on the feedback that we are going to get from the FDA and the EMA. We anticipate it to be along this line. We think that the first year will be dedicated to negotiate with the regulatory authorities, MFDA and to do all kinds of setup activities for this trial. After that, we plan to have a trial which is very similar to our Phase III trial with the diabetic -- with the venous leg ulcer. And it also -- we anticipate that it will take 2 years, but we need to get clarity for that. As for the funding, it's a mechanism. You will never see those EUR 16.25 million in our balance sheet. We will just get reimbursement, I think, quarterly. Hani, is it quarterly? We'll get quarterly reimbursement on expenses, but basically, it should fund these activities.

[Joshua Jennings, analyst]

Outstanding. And then just one last one [ EscharEx ] VLU pivotal study. Sorry if I missed this in your prepared remarks, just -- has the protocol been submitted and approved by the FDA? Maybe just kind of help us think about -- I know you've answered this question [ both in present and past ], but just the timing on getting to that kind of 2/3 enrollment for the interim analysis when investors should be anticipating that initial potential catalyst for this VLU development program?

[Ofer Gonen, executive]

So as for the Phase III study, we are on track to initiate the trial in the second half of 2024. We are about to submit the protocol for final approval for the FDA. You can look at the presentation that we have in our website showing that this task is about to be done very shortly. We are working on the setup activities, which means signing contracts with all the medical centers. We have 40 of those. But the current expectation is that we will start the trial in the second half of this year. The study itself should be around 18 months of recruitment with the 6 months of start-up activities in between after 1 year or after recruiting 66% of the patients. We should have an interim look and getting an early insight about the efficacy of EscharEx.

[Operator]

The next question is from RK with H.C. Wainright.

[Swayampakula Ramakanth, analyst]

A couple of quick questions. On the -- on getting the facility commissioned for expanding manufacturing capacity. So what else is needed for you folks at this point so that you can get this facility into manufacturing mode? That's question number one. And question number two is on EscharEx for the DFU. I know you're looking to start a Phase II/III study on that -- for that indication. What do you need to achieve before trying to start driving a protocol for that clinical study?

[Ofer Gonen, executive]

Thank you for your question. So let me start with the manufacturing scale up. So as we just said that the construction is completed as planned. Now we need to start manufacturing, you start manufacturing. It's a process that takes a few months, making sure that everything that you were able to do in 1x scale, you can do it in 5x scale. After that, you need to manufacture a few batches of NexoBrid and go through 6 months of stability. So it will be practically waiting time to see that NexoBrid is stable after this process of manufacturing. And then there is a submission time basically it takes around 6 months as well. So this is what needs to be done maybe we did that a few times in the past. So I don't see any potential delays here. As for the second question regarding the DFU, we see -- the results that we see with the diabetic foot ulcer and venous leg ulcer are practically -- they show similar results. Like we can see -- we did three Phase II studies, two of them included diabetic foot ulcers patients. We don't see that it works better in this indication or the other. Having said that, we have more patients in venous leg ulcer. Therefore, we had a lot of confidence to do a Phase III trial with 216 patients showing -- knowing that we are going to hit the efficacy end point. With diabetic foot ulcer, we have fewer patients. So our thought is, and we need to get clearance from the FDA and EMA about that, that we will do a little bit of a larger clinical trial and look in an interim -- and to see in between, let's say, after again, after 50% of the patients, 40% of the patients to see that what we see in diabetic foot ulcer is very similar to what we see in venous leg ulcers, and then we know that we are on the right track. Having said that, we need to have an agreement with the regulatory agencies about that. As you know, in the past 30 years, no drug was approved for wound care. So it's not something that we know for sure that it will be accepted by the FDA.

[Swayampakula Ramakanth, analyst]

Very good. And then with the [ EAP ] results that you receive -- achieved which is, obviously, good that it's similar to what we have seen before. But how can you utilize this data that either in the U.S. or elsewhere, are there ways that you can use that data for additional regulatory pathways? Or I'm just trying [indiscernible] ways to commercialize the product?

[Ofer Gonen, executive]

I'm not sure I understood your question. So again...

[Swayampakula Ramakanth, analyst]

Basically, how are you utilizing [ the EAP ] data, that's what I'm trying to...

[Ofer Gonen, executive]

The [ EIC ] data, it's the data we're going to do a Phase III trial, 40 centers, 240 patients. It will be a global trial. Half of the patients will probably be recruited in the United States. So it's a Phase III, like the Phase III in the venous leg ulcer. The only difference is timing. We will start it 1 year later.

[Operator]

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

[Michael Okunewitch, analyst]

I guess to start off, could you just talk a little bit about how much you're expecting the EIC funding to cover on a potential DFU study? And then with that $25 million from Mölnlycke and the other investors, would that study be fully funded essentially given that you're expecting it to be similar to the VLU study?

[Ofer Gonen, executive]

Thank you for the question. Our assumption is that the study is at 0 cost for MediWound. It's a study that is based on all the infrastructure that we have here in MediWound. Maybe we need to recruit another 1 or 2 people or 3 people in order to support that. So our assumption is it will be fully covered. The capital raise we did led by Mölnlycke wasn't to cover that. The capital rate from Mölnlycke was to become closer to such a giant in the field and to make sure that we are able to financially support all the activities that we have here. All the activities mean NexoBrid, it means the VLU study, it means that the DFU study. We have now more than a cushion to support those strategic activities.

[Michael Okunewitch, analyst]

And then -- so would you expect that you would go through a similar collaboration process for a DFU study like you have with Mölnlycke obviously, but also MIMEDX and [indiscernible]? And then if so, would that be the same component as you would need for VLUs? And would you try to use the same partner?

[Ofer Gonen, executive]

This is a great question. I can tell for you for sure, although we are not there yet, that we will collaborate with very large players around this study as well. The interest around the global wound care players is huge in EscharEx. Eventually, we'll need to take a decision if we want the same players or others, I can just tell you that the interest around participating in this trial is among all the players in the field.

[Michael Okunewitch, analyst]

And just one last one for me, kind of in the same vein about interest in EscharEx. So I mean you're working with 3 of the largest players in wound care on that Phase III. You had Mölnlycke come on for equity and collaboration and there were those unconfirmed acquisition rumors. So I wanted to ask just about how much inbound interest are you receiving on EscharEx for partnering or MA?

[Ofer Gonen, executive]

So it's an interesting question. I'm not sure I can comment -- of course, the company cannot comment on rumors and speculations. Having said that, I can tell you that it would be very difficult to find a party or a potential large advanced wound care company in the world that is not interested in collaborating or have access to EscharEx. This is the maximum that I can say at this stage.

[Operator]

And at this time, there are no further questioners in the queue. And this does conclude our question-and-answer session. I would now like to turn the call back over to Ofer Gonen for any closing remarks.

[Ofer Gonen, executive]

So thank you, everyone, for joining us today. We look forward to updating you again on our next quarterly call.

[Operator]

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

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