Mediwound Ltd

NASDAQ:MDWD

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and welcome to MediWound’s Third Quarter 2023 Earnings Call. [Operator Instructions] Please note, today’s conference is being recorded.At this time, I would like to turn the conference over to [ Dan Ferry ] of LifeSci Advisors. Please go ahead.

[Dan Ferry]

Thank you, operator, and welcome, everyone. Earlier this morning, MediWound issued a press release announcing financial results for the third quarter ended September 30, 2023. You may access this earnings press 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 as 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 forecasts 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 notes set forth in today's press release as well as 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.Conference call is 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]

Good morning, everyone, and thank you, Dan, for the introduction. I'm pleased to welcome you to our third quarter 2023 earnings conference call. Joining me today are Hani Luxenburg, our Chief Financial Officer; and Barry Wolfenson, our Executive Vice President of Strategy and Corporate Development.I want to start by expressing a sincere thank you from the entire MediWound family for the overwhelming support through emails, calls, messages that I've received from many of you since October 7th's terror attack. This war has significantly impacted the lives of many of our employees and their families. We feel privileged that our product can contribute to helping victims and make a difference. Our team is working around the clock to ensure we meet the needs of our community, customers, patients, and partners.This quarter, marks a pivotal period for us with significant achievements that set the stage for consistent future revenue growth. NexoBrid was successfully launched in the United States and Japan. In Europe, we expanded both our presence and the target population.Global demand has risen, fueled in part by world conflict and governmental actions. We have responded with the necessary reallocation of resources to meet this increase and continue with our plans to aggressively expand our manufacturing capabilities.Looking ahead, preparation for the Phase 3 study of EscharEx are progressing with an updated protocol shaped by both the FDA and EMA guidance. Anticipated enrollment is set to begin in the second half of 2024. A new collaboration with the industry leader 3M Health Care further validates EscharEx's anticipated impact on the wound care markets.Let's have a more detailed look at NexoBrid. It has been a very busy and productive period. Notably, at the end of the quarter, we announced United States commercial availability through our partner Vericel. Vericel's launch of NexoBrid is progressing swiftly. Patients started treatment soon after its commercial release. Vericel is dedicated to securing market access, obtaining P&T committee approvals, and training staff at burn centers.Given the burn care community's positive response to NexoBrid, Vericel expects rapid adoption and significant growth of their burn franchise in 2024 and beyond. Further supporting the commercialization efforts in the U.S. and elsewhere, the Journal of Burn Care and Research published results from the Detect Phase 3 study. The study demonstrated that the treatment with NexoBrid resulted in early complete eschar removal in more than 90% of treated burn patients and reduced the need for surgical excision compared to Gel Vehicle and the standard of care. With Vericel's early success, enthusiastic reception, and strong published data, we feel quite confident about NexoBrid's future in the United States.Similarly, in Japan, another major market, NexoBrid was launched this quarter through our partner, Kaken Pharmaceutical. The initial feedback from Kaken is positive, and it is working diligently to secure contracts in key hospital systems. In Europe, 2 recent developments are expected to bolster our sales.The first is that the CHMP recommended NexoBrid's label extension to include pediatric indications, expanding NexoBrid availability to all age groups. This recommendation was based on a global Phase 3 study evaluating NexoBrid in hospitalized pediatric patients, as well as additional data from RA trials. Pediatric patients with severe thermal burns represent approximately 30% of the total burn population. Therefore, this label extension will significantly increase NexoBrid's addressable market.Secondly, our recently announced collaboration with PolyMedics, a burn care market leader, will further the adoption of NexoBrid in Europe by expanding our marketing activities in Germany, Austria, Belgium, the Netherlands, and Luxembourg. This collaboration followed NexoBrid's impressive presence at the recent European Burn Association Congress, where NexoBrid was featured in 20 oral and poster presentations.In addition to these 3 key markets, United States, Japan, and the EU, there has been a noticeable rise in global demand for NexoBrid, driven in part by geopolitical conflicts. In Israel, the entire non-U.S. NexoBrid inventory has been deployed to hospitals and military to successfully treat these affected by the war. The positive outcomes achieved with NexoBrid in the field have prompted additional interest from various governments, including Ukraine, for stockpiling the product.In the United States, we secured a $6.5 million R&D budget from the Department of Defense to advance the development of a new temperature-stable formulation for NexoBrid. It is planned to be the first-line non-surgical solution for field care burn treatment for the United States Army.All of these developments, major markets launches, indication expansion, DoD funding, governmental interest, all of these will accelerate the demand for NexoBrid worldwide. It is therefore critical that we expand our operational capabilities to address this need. Our primary goal is to ensure that our new GMP-compliant, state-of-the-art facility is on schedule for completion by mid-2024, reaching full-scale manufacturing capabilities in 2025.To this end, we are focused on assembling the right team and allocating the necessary resources for that. We are thrilled to welcome Dr. Shmulik Hess as our recently appointed Chief Operating Officer and Chief Commercial Officer. With his extensive experience, we are confident that Dr. Hess will play a pivotal role in ensuring the success of our upgraded production and help us refine our commercial strategy. His expertise will undoubtedly contribute to the efforts to meet the escalating market demands effectively.Now, I'd like to provide an update on our EscharEx program. We have received guidance from both the FDA and EMA on the protocol for the global Phase 3 study, indicating our pathway towards approval. With the strong data from our Phase 2 studies and with the added information we made to the protocol, we are entering the Phase 3 portion of our clinical development program with great confidence. The Phase 3 trial is a multicenter, prospective, randomized placebo-controlled study evaluating the safety and efficacy of EscharEx in patients with venous leg ulcers.The trial will enroll 216 patients equally randomized between EscharEx and the placebo Gel Vehicle. The trial will focus on 2 co-primary endpoints, the incidence of complete debridement at the conclusion of the daily visit period and the incidence of wound closure by the end of the weekly follow-up period. An interim assessment is planned after 67% of the patients have completed the trialWe are currently finalizing the logistic aspect of the trial and anticipate submitting an updated protocol to the FDA in the first quarter of 2024, with patient enrollment to follow by the second half of 2024. At the same time, we are also advancing plans for exploratory studies, including a pharmacokinetic study and a human factor study. These are designed to support the BLA of EscharEx and to improve our future commercialization and market access strategies.Much like NexoBrid's notable impact in the burn care market, EscharEx is also attracting significant interest in the chronic wound care sector. This is demonstrated by the interest expected by key market leaders to form research collaborations around our study.To tell you more about these collaborations, I will now turn the call over to Barry. Barry?

[Barry Wolfenson, executive]

Thanks, Ofer. This quarter, we secured an additional research collaboration partner for our Phase 3 study, 3M Health Care, which is in addition to the previously announced ones, MIMEDX, and Mölnlycke. Our primary goals in securing these agreements were to ensure that we minimized as much as possible the variability between study arms and to provide best-in-class products for patients in our study.As a reminder, we focused on 3 key areas of venous leg ulcer management, 1, compression therapy; 2, advanced wound dressings that provide optimal moisture management; and 3, a cell or tissue-based product to drive active closure, which is key to our endpoint of incidence of wound closure.Compression therapy is part of the gold standard for the management of venous leg ulcers and is an essential component in all the validated clinical practice guidelines for this indication. The superior benefits of 3M Health Care's Coban 2 and Coban 2 Lite were confirmed in a recent real-world evidence retrospective study presented at both the Symposium on Advanced Wound Care and the European Wound Management Association Conference this year. These are the 2 largest annual global wound care conferences.Given the prominent position of this product in the market, we are quite pleased that 3M Health Care will be supplying them for the patients in our study as well as providing the investigators and their teams with the training required to use them appropriately. What happens under the compression wrap system is equally as important. Venous leg ulcers are known to have high levels of wound fluid drainage, and since systems such as Coban 2 are designed to remain in place for up to 1 week, managing this moisture so that it is all handled by the dressing is key.For this, Mölnlycke will provide their category-leading Mepilex foam dressings as well as their Exufiber or Exufiber Ag dressings. Mepilex is the top brand in the largest category of advanced wound dressings, which are called foam dressings. Exufiber will be included for added moisture management and Exufiber Ag for the additional management of localized bioburden.Lastly, a key goal of our Phase 3 study is to demonstrate that EscharEx significantly improves the facilitation of active closure. Due to the sheer amount of clinical data supporting its use, along with its demonstrated ease of use, the cell or tissue-based product to be used in our Phase 3 study will come from MIMEDX, who will provide EPIFIX, their placental tissue allograft. EPIFIX will be used on study subjects as soon as the wound is completely debrided and has 100% granulation tissue when autografting is not an option.As a whole, these 3 class-leading collaborations underscore just how significant of a trial this is in the field of wound management and to the anticipation of what EscharEx can mean to the market upon its approval.With that, I'll hand it back to you, Ofer.

[Ofer Gonen, executive]

Thank you, Barry. In summary, we are making substantial strides towards achieving our strategic goals. NexoBrid was successfully launched in the United States and Japan and is expanding its addressable markets and commercial presence in Europe. The construction and the commissioning of our new manufacturing facility that will support this increased demand are on track. Additionally, EscharEx has attracted collaborations with industry leaders 3M, MIMEDX, and Mölnlycke, and we are well-positioned for our pivotal Phase 3 trial.Finally, our solid balance sheet with $46 million in cash is a key strategic asset that empowers us to successfully execute on our main goals, increase NexoBrid revenues, develop EscharEx through FDA approval, and reach profitability.To discuss our financials in more detail, I will now hand it over to Hani. Hani?

[Hani Luxenburg, executive]

Thank you, Ofer. Let me begin with our revenues. In this quarter, the company reported revenues of $4.8 million, which is a decrease from the $5.8 million reported in the same quarter of the previous year. This decrease is primarily due to the absence of a non-recurring income from BARDA. Gross profit for the quarter stood at $0.9 million, or 19% of total revenue, compared to the $2.4 million, or 41.9% of total revenue, in the third quarter of 2022. The decrease in gross profit is mainly attributed to the absence of non-recurring income from BARDA.Turning to our operating expenses, the company's R&D expenses amounted to $1.5 million, a decrease from $2.9 million in the third quarter of 2022, mainly due to the completion of EscharEx's Phase 2 study. SG&A expenses were reported at $2.6 million, compared to the $3.1 million in the same quarter of the previous year. The operating loss for the quarter was $3 million, which shows an improvement from a $3.5 million loss in the third quarter of 2022.The net loss was reported at $2.2 million, or $0.24 per share, compared to the net loss of $4.2 million, or $0.88 per share, in the same quarter last year. This improvement is mainly attributed to a favorable adjustment from the revaluation of warrants. The non-GAAP adjusted EBITDA for the quarter was a loss of $2.6 million, compared to $2.5 million loss in the third quarter of 2022.Now, let's look at the year-to-date financial highlights. The company's revenue for the first 9 months of 2023 totaled $13.3 million, a decrease from $14.9 million in the first 9 months of 2022. The operating loss for this period was $11.4 million, compared to the operating loss of $10.5 million recorded in the same period last year.The net loss for the first 9 months was $5 million, or $0.56 per share, which is a significant improvement from a net loss of $12.1 million, or $2.67 per share, for the first 9 months of 2022. The non-GAAP adjusted EBITDA showed a loss of $9 million, compared to a loss of $7.9 million reported in the first 9 months of 2022.And now, a few words about the balance sheet. As of September 30, 2023, the company's cash, restricted cash, and investment were at $46 million, an increase from $34.1 million reported on December 31, 2022. In the first quarter of 2023, the company successfully raised a gross amount of $27.5 million.During the third quarter of 2023, the company used $5.4 million to fund its activities. With the current financial standing, the company's cash reserves are expected to support its operation through profitability.With that, I will now turn the call back to Ofer. Ofer?

[Ofer Gonen, executive]

Thank you, Hani. This quarter is marked by significant progress for MediWound. Our optimism for NexoBrid global revenue growth is high, driven by its commercial launches in the United States and Japan, growing presence in the European market, and rising global governmental interest. Addressing this surging demand is our foremost priority in the coming months. We are committed to maintaining our manufacturing targets and expanding our production capabilities. We anticipate a substantial increase in NexoBrid revenue following the completion of this scale-up.In parallel, our EscharEx Phase 3 global study is progressing towards initiation. Guided by the FDA and EMA, and bolstered by partnerships with 3 top global wound care companies, EscharEx stands at the forefront of the $2 billion chronic wound debridement market. It holds the promise to enhancing the lives of millions.With that, we will now open the call for your questions. Operator?

[Operator]

[Operator Instructions] And today's first question comes from R.K. with H.C. Wainwright.

[Swayampakula Ramakanth, analyst]

Ofer and Hani, so to start off with, NexoBrid, in terms of Japan, you said you're getting good feedback, and I'm just trying to see, if you can expand on that comment a little bit more and also in terms of how does the commercialization work in Japan for a product like this. So, if you can highlight on both of those. That would be helpful.

[Ofer Gonen, executive]

R.K., I hope you're well as well. So as I said, in Japan, Kaken Pharmaceutical successfully launched NexoBrid commercially. The Japanese market is quite substantial and more than 6,000 patients that annually receiving the treatment of severe burns and the majority of them undergoing eschar removal as a critical first step. The initial feedback, as someone who licenses the product, we get periodically input from them. So the initial feedback is very positive. They're working diligently to secure contracts in key hospital systems. In Japan, there are something like 420 relevant hospitals.For instance, in the United States, the number is only 120 give or take. So there are 400 hospitals. They approached already all of them, and they exposed the product and gave training to many dozens of healthcare professionals. After deploying them the first few batches, they increased their order. But as we say and as we said in the last quarter or 2, currently there is much more demand for NexoBrid than we can actually manufacture and supply. So we will keep our initial commitment according to the contract. But the Japanese launch is going better than expected.

[Swayampakula Ramakanth, analyst]

Then with the added indication of pediatrics in the new collaboration with PolyMedics, how is this going to work for your folks? And, do you think that PolyMedics collaboration will give a little bit of a win, especially since you have been in Europe for a while?

[Ofer Gonen, executive]

So, again, it's an interesting question. So the recommendation for the label extension to include also a pediatric indication is quite substantial in Europe, because around 30% of all the burn patients are considered children and we got 100% of what we asked from EMA. The label that we got is exactly what we aimed for. The collaboration with PMI, of course, the impact in the near-term will not be substantial because Europe reflects what we see in other territories. We have much more demand than we can actually supply. But we are looking now to 2025, 2026. We want to have a very strong presence in Germany, Austria, Belgium, Netherlands, and Luxembourg.In 2026, we're supposed to have full manufacturing capabilities. We want our spread in Europe to be as strong as we can and PMI is quite an ideal partner. If you go to European Burn Association Congresses, you will see very few strong companies in wound care. Maybe wound, by the way, is one of them, but PMI is very strong there and we think it will justify this collaboration.

[Swayampakula Ramakanth, analyst]

And then the last question is on the manufacturing piece. So, as you said, you have a larger demand than what you can supply. So, and you're saying by early 2025, you should have manufacturing from the new plant. Do you think you have enough material to support commercialization until then so that you're not losing on any contracts between now and early 2025?

[Ofer Gonen, executive]

So, this is a tough question. We have commitments to support our clients and our partners and we also currently our schedule to complete the GMP compliant state-of-the-art facility is by mid-2024 and we hope to reach full-scale manufacturing capability in 2025. By the way, in EMA, it can be quicker. So, we need to set priorities and I think we are very clear with that. United States and Japan are our top priorities because these are considered the most important markets. After that, we have Europe, EU5, and the rest, they need to wait. And we might lose some partners in very small countries, but it is what it is.

[Operator]

And our next question comes from Francois Brisebois with Oppenheimer.

[François Brisebois, analyst]

In terms of the EscharEx trial, can you help us understand maybe the timelines? You talked about an interim assessment. The start of the trial, the enrollment starts second half of next year, but do you have an idea when that interim assessment could happen and what can we expect to see there in terms of outcomes? Is there a look on potential efficacy? Is there an opportunity to end the trial early because of overwhelmingly good efficacy or just any color on timing and interim assessment expectations?

[Ofer Gonen, executive]

Frank, and I appreciate your question. Yes, the Phase 3 protocol, we have been going back and forth with EMA and FDA to make sure that they are both aligned with the same requirements because we want the EscharEx to be approved globally. We managed to approve an interim assessment. This is our plan. After 67% of the participants that completed the trial, we managed to reduce the number of patients. Last time we said, we will need to recruit 244 patients, but now, especially due to the fact that we have an interim analysis, we're able to do a shorter trial.So now we are guiding a shorter trial, not 24 months rather than 18 months, and the interim assessment will be something like after 15 months, and the data will be -- It will be an efficacy data, not a safety data, but there isn't a stopping rule. It's an interim assessment. If we see that we don't have enough power for succeeding in the endpoint, we might increase the number of patients, but we will not be able to decrease it. So the plan is for 216 patients, and I hope I answered your question.

[François Brisebois, analyst]

Yes. Obviously, very unfortunate the reasons for why NexoBrid isn't in such high demand, but can you maybe help us quantify the maybe by a multiple, or how much is the demand superior to the supply? Is it 2x, 3x times, and -- will the manufacturing capability and building be enough for the supply, or is it kind of a surge in supply? Just any comment there on manufacturing goals. Would it completely resolve the greater demand and supply, and what would that do to your balance sheet?

[Ofer Gonen, executive]

Frank, so as I said, our current sales are limited only by our production facility. We have almost zero inventory. As you can probably see in the financial statements, you see that they are always marginal. We have at least 3-fold demand, more than we can produce. The scale-up is planned to do 6x, okay, so currently it seems okay, but this scale-up, if we work in 2 shifts, it's actually 11x, so we don't see a reason why this manufacturing facility will not be enough to manufacture everything that NexoBrid needs in the foreseen future.And just answering the second part of the question, so if you look at our -- if the demand today is 3x on our ability to manufacture, we don't see a reason why in the year 2025 and 2026 when we have full manufacturing capabilities why we're not able to sell 4x or 5x because currently we are just limiting our sales force in order to be able to keep as many partners happy. We cannot supply everything.

[Operator]

And our next question comes from Michael Okunewitch with Maxim Group.

[Michael Okunewitch, analyst]

I guess, first, I'd just like to follow-up on the discussion around the manufacturing scale-up and, in particular, how this plays into your guidance for cash supporting you through profitability. I'd like to get a sense of what timelines are kind of baked into that assumption. Is this kind of the expectation here that the manufacturing scale-up, given the excess demand, could push you into profitability relatively quickly after that's fully up and running?

[Ofer Gonen, executive]

I think, Hani will take that question.

[Hani Luxenburg, executive]

Michael, I appreciate your question. So, our cash, restricted cash and investment totals to $46 million as of the end of the quarter. As you know, we have 2 major expenses going forward. The first one is the Phase 3 program, which will probably cost approximately $30 million. And the second is the remaining cost of the facility scale-up, which totals to about $6 million. And we accept about $1 million to be covered by BARDA. So, assuming we meet the scale-up timeline according to plan, which means that the construction by mid will be end by mid-2024 and full scale-up manufacturing in 2025. So, the next upgrade is expected to generate meaningful revenue in 2025 and going forward. Accordingly, we anticipate the profitability in 2026-2027.

[Michael Okunewitch, analyst]

And then I'd also like to ask a little bit deeper about the research partnerships, in particular now that we have 3M joining in. Do research partners get earlier access to the data or get to follow the trial more closely? I'd like to get a sense if there's some benefit here for partnering or even potential acquisition discussions. And the reason I ask is because EscharEx seems like it could be a really attractive compound for someone, especially like 3M, if they're looking to compete with [ SANTO ].

[Ofer Gonen, executive]

Right. So, that's a very important question and Barry, can you please provide more detail on that?

[Barry Wolfenson, executive]

Sure. As far as the data that they're going to get, they won't have any early look. At the time that we file the BLA, they will get a package of information that focuses on their specific product and how it fared across the -- a couple of arms in the study. For them, they get a solid amount of data. There's not too many Phase 3 studies that are done in this space, certainly not too many studies at all with the rigor with which this study is being done. So, they'll get a good set of data in an actual controlled study and they'll have the marketing capability to say that in the most important Phase 3 study to come around in wound care for decades that their product was used as standard of care. That's kind of what they get out of it.As to the question about M&A licensing, any kind of business development activities, you're right. I would add just as a little bit of flavor that 3M, as you probably know, is splitting off its healthcare division into a listed entity sometime, I believe, in 2024. They just announced the new name of this entity the past week, so it's becoming a reality. And the intent of that spin-off is to really unlock innovation in that division, which does about $8 billion, I think, in sales a year. So, would they be a potential good acquirer or licensor of EscharEx? Absolutely. Obviously, our stated intention at this point is to not only bring EscharEx across the finish line, but to commercialize it as well, as we believe that that is what will maximize value for our shareholders. But, of course, when we get there, we'll always be open to see what the prevailing wins are and what the market bears.

[Michael Okunewitch, analyst]

And then just 1 more, and I'll hop back in the queue. I'd like to see if you could expand a little bit on the exploratory studies for EscharEx. Would these be more geared towards generating additional marketing data in VLUs or potentially towards layering in additional indications?

[Ofer Gonen, executive]

So, when we are speaking about exploratory studies at this stage, we're speaking about guidance that we got from the FDA. FDA is interested in us showing the PK profile of the drug. This study is relatively a small-one, 20 patients. And also, since EscharEx is a drug which is going to be used at home, FDA also wants us to do something which is called human factor study, just making sure that the patients are able to read the information of use.Again, a very small study, even without patients, only healthy volunteers. We might, and we are thinking about it, do additional 1 or 2 studies that will serve the market access, making sure that we are able to charge as maximum as we can after EscharEx is approved. But when we know exactly what we do, we will share it with you and the public.

[Michael Okunewitch, analyst]

And congrats on all the progress you've made this past quarter.

[Operator]

[Operator Instructions] And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Ofer Gonen for any closing remarks.

[Ofer Gonen, executive]

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

[Operator]

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.