Mediwound Ltd (MDWD) 2015 Q2 法說會逐字稿

Good day and welcome to the MediWound second-quarter financial results conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Anne Marie Fields. Please go ahead.

Thank you, Daniel. Good morning. This is Anne Marie Fields with LHA. Thank you all for participating in today's call.

Joining me from MediWound are Gal Cohen, Chief Executive Officer, and Sharon Malka, Chief Financial Officer.

After the closing of the stock market yesterday, MediWound announced financial results for the three months ended June 30, 2015. If you have not received this news release or if you would like to be added to the Company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of MediWound. I encourage you to review the Company's filings with the Securities and Exchange Commission including, without limitation, the Company's Forms 20-F and 6-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, August 4, 2015. MediWound undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

So with that said, I would like to turn the call over to Gal Cohen.

Thank you, Ann Marie. Good morning to our listeners in the US and good afternoon to those joining us from Israel. Thank you all for your interest in MediWound and for participating in today's call.

The first half of 2015 was very productive as we continued to make meaningful progress with our clinical and commercial programs. Let me begin with a review of the progress we've made in Europe commercializing NexoBrid for the treatment of severe burns.

Our programs to enhance awareness and interest in NexoBrid have been successful as evidenced by the growing number of burn centers trained, the increasing number of burn centers using NexoBrid, and the growing number of patients treated. Previously, we reported that during the first quarter of 2015 we trained nearly as many patients -- we treated nearly as many patients as we treated during all 2014 and the number of centers using NexoBrid has more than doubled.

The positive momentum is continuing and I am very happy to report that the number of patients treated in the second quarter was almost double the number of patients treated in the first quarter of 2015. In addition, the overall number of burn centers trained by the end of the second quarter increased by 30% compared with the first quarter of 2015 and the number of burn centers treating patients grew by 40% in comparison to the first quarter of 2015. Those advances are significant and mark important progress towards market adoption.

We are also seeing signs of NexoBrid integration into standard of care in centers where automatic reorders for NexoBrid are being generated based on the center's inventory level and centers were NexoBrid is already considered standard of care for certain burns such as burns to extremities. In addition to closely working with the teams at the burn centers, a key to the success of our marketing efforts has been our extensive participation in regional and national burn association meetings and the significant support from the key opinion leaders and burn experts in presenting clinical data highlighting the positive outcome using NexoBrid to treat their severe burn patients.

In particular, during the second quarter we were key sponsors at the Spanish, British, French, and Polish Burn Society meetings, where more than 10 presentations highlighted the clinical benefit of NexoBrid to debride severe thermal burns. These important conferences provide an excellent opportunity for European burn experts to present a bolus of positive hands-on experience before an audience of their local peers, demonstrating the clinical benefits of NexoBrid as an all-surgical debridement for severe thermal burns and encouraging other local centers to initiate their simulation of NexoBrid in their respective centers.

These local early adopters are also an important point of reference for peer consultation and eventually become a local center of excellence that supports the overall integration of NexoBrid in a given country. We are now looking forward to the upcoming European Burn Association meeting taking place in mid-September in Hanover, Germany. This is the largest burn conference in Europe that takes place every two years.

As the platinum sponsors of the EBA, MediWound will have a prominent presence at this key congress for burn specialists. To boost our presence at the meeting, we will have an interactive booth on the exhibition floor and we are supporting an educational symposium, as well as a practical clinical workshop, both dedicated for NexoBrid and led by local key opinion leaders.

In addition, prominent burn specialists for more than 10 European countries will be sharing experience with NexoBrid in more than 25 accepted scientific presentations. We are confident that the volume of data and NexoBrid activity at the EBA will continue to drive further use and adoption of NexoBrid and will be supportive of our market access efforts throughout Europe. The growing patient experience and the increasing number of medical reference points in the burn centers throughout Europe will further increase physician confidence in use and support our aim to establish NexoBrid as the standard of care.

Our goal is to convert the growing usage of NexoBrid into revenues and we know that reimbursement is an important driver for such a widespread market adoption. We have made meaningful progress in this regard and submitted the required clinical and pharmacoeconomic data to initiate the national review processes for reimbursement in the relevant key European markets. Our teams are focused and closely monitoring the local processes addressing any inquiries from the assessment committees with the support of local champions in medical community.

For example, in Italy, where NexoBrid is being used in almost all burn centers, the Italian Burn Association itself sent a consensus letter to the Ministry of Health that was endorsed in writing by nearly all Italian burn centers, stressing their professional support for making NexoBrid available in Italy. The growing body of positive clinical data from real-world experience, along with the compelling clinical and economic benefits of NexoBrid, should support the favorable payment determinations in these territories.

We believe that positive payment decisions from several countries in the coming quarters will enable us to translate the increasing use into sales. In addition, we continue to pursue our broader international strategy. Our partners in Argentina, Russia, South Korea, and Mexico are advancing their registration process in their respective markets and we expect to have marketing authorization in at least one of these territories by year-end 2015.

As previously communicated, the introduction of an innovative treatment paradigm takes time to integrate into the hospital and the physicians' long-standing routine processes. We are pleased with our continued progress in advancing both the usage and reimbursement processes and expect to see further commercial progress throughout the balance of the year.

Shifting gears now to our clinical development program let me give you an update on our recently initiated US Phase 3 study.

We were very excited to initiate our US Phase 3 clinical trial with NexoBrid to treat severe thermal burns. The study was named DETECT because it is an abbreviation of debride and protect. As a recap, DETECT is a prospective, controlled, multicenter, multinational, assessor-blinded Phase 3 study in 175 burn patients randomized to either NexoBrid, standard of care, or the gel vehicle at a ratio of 3 to 3 to 1 with a follow-up at 12 months and 24 months.

This study is being conducted at approximately 30 burn centers. I am very pleased to report that we have opened half of these sites and are treating patients and expect to open the balance of the sites in the coming months.

As previously reported, we are also pleased with the streamlined study protocol that evaluates NexoBrid on a single primary endpoint of eschar removal versus the gel vehicle. We expect to have top-line results on the acute primary and secondary endpoints of the study in the first half of 2017 and to supplement the long-term 12-months' and 24-months' follow-up, respectively, thereafter.

Last, but certainly not least, let's turn to our progress with our Phase 2 study of EscharEx for the treatment of chronic and hard-to-heal wounds. We are especially pleased to be nearing completion of the enrollment of this study and expect to report top-line data around year-end. I can also update you that today we have completed the recruitment of the patients to the diabetic arm of the study and we only have patients to recruit to the venous and to the postsurgical hard-to-heal wound arm.

We continue to be very excited about the opportunities for EscharEx, as we believe it is a derisked development program that addresses an unmet medical need with a multibillion-dollar market.

We recently completed a very comprehensive market research study on EscharEx in the US and in Europe that served over 200 healthcare professionals. According to the study, there are over 1 million patients with diabetic foot or venous leg ulcers in the US alone that undergo debridement. The served physicians indicated that the product having EscharEx product profile would potentially be prescribed to a significant portion of this patient pool.

Now with an average cost of treatment of $1,000 to $2,000 per patient, this may amount to a significant blockbuster opportunity. These findings were reaffirmed by our US advisory board, which is comprised of leading US medical, marketing, and reimbursement experts that we convened recently to review, discuss, and reaffirm the research report.

In addition to the clinical data, the market research and advisory board (inaudible) of reassurance for EscharEx clinical and commercial potential was the receipt from the Israeli Office of the Chief Scientist of our first funding grant for the EscharEx program. This is a milestone, not only because it provides non-dilutive financing to support our ongoing program for EscharEx, but also because such a funding further validates the scientific and commercial potential of EscharEx. We look forward to reporting top-line data from the EscharEx Phase 2 study and are encouraged about its potential as a breakthrough product in the treatment of chronic wounds.

With that overview of our commercial and clinical programs, let me turn the call over to Sharon Malka, our CFO, for a review of our financials.

Thank you, Gal. Good morning, everyone, and thank you for joining us for our quarterly financial review. We are particularly pleased to see that the investment in our market awareness programs are bearing fruit, especially with the number of patients treated nearly doubling during the second quarter compared with the first quarter of 2015 and the number of sites that have used NexoBrid increased by 40%. As Gal stated, we remain committed to ensuring that we convert this growing usage to drive revenues.

For the balance of the year we will continue funding training and sampling programs throughout Europe. We are also investing in market access initiatives in Europe that we expect to result in favorable reimbursement that will help to accelerate market adoption and will enable us to translate the increasing use and the continued momentum into sales.

Now, let me turn to our financial results for the second quarter of 2015. Revenues for the second quarter of 2015 totaled $165,000 compared with $39,000 for the same quarter last year. R&D and SG&A expenses for the second quarter of 2015 were in line with our budget, $1.5 million and $3.4 million, respectively, compared with $1.4 million and $3.1 million for the second quarter of 2014. The increase in SG&A was driven primarily by an increase of $0.8 million in commercial activities associated with the continued build out of the European marketing infrastructure, which was offset by $0.4 million decrease in non-cash share-based compensation expense.

Net loss for the second quarter of 2015 was $4.1 million, or $0.19 per share, compared to a net loss of $6 million, or $0.28 per share, for the second quarter of 2014. The decrease in loss was primarily due to net financial income which was comprised of non-cash devaluation of contingent liabilities and exchange rate differences.

Adjusted EBITDA for the second quarter of 2015 was a loss of $4.8 million compared with a loss of $3.9 million for the same quarter last year. As noted in our 6-K, we believe that these non-IFRS measures are useful for investors and provide meaningful supplemental information regarding our operating results.

Moving to our six-month financial results, during the first half of 2015 we shipped about 1,800 [ppsa] units to burn centers throughout Europe, of which approximately 70% were part of our investment in the sampling programs. Revenues for the first six months of 2015 totaled $232,000 compared with $89,000 for the same period last year.

R&D and SG&A expenses for the first half of 2015 were $2.9 million and $6.4 million, respectively, compared with $2.8 million and $6 million for the same period of 2014. The increase in SG&A was driven primarily by an increase of $1.3 million in commercial activities associated with the continued build out of the European marketing infrastructure, which was offset by $0.9 million decrease in non-cash share-based compensation expense.

Net loss for six months ended June 2015 were $10.6 million, or $0.49 per share, compared with a loss of $6.8 million, or $0.37 per share, for the first half of 2014. The increase was primarily due to a one-time non-cash financial income in 2014 resulted from revaluation of derivative instruments. Adjusted EBITDA for the first half of 2015 was a loss of $8.5 million compared with a loss of $7 million for the same period last year.

Turning now to our balance sheet. As of June 30, 2015, cash, cash equivalents, and short-term bank deposits were $55.2 million and the net working capital was $55.2 million as well. We remained on budget, utilizing $9.5 million in cash during the first half of 2015 to fund ongoing operating activities, of which $4.7 million was used in the second quarter of 2015.

As discussed, we will continue to make investments in our sales and marketing activities to advance the adoption of NexoBrid across Europe. We will also invest in our research and development efforts, including our clinical ongoing programs, to develop products for additional territories and indications. As a result, we raised rates that expected cash used to support ongoing operating activities in 2015 will be in the range of $20 million to $22 million as previously communicated.

With that financial overview, let me turn the call back to Gal.

Thank you, Sharon, for your financial overview. The second half of 2015 is expected to be a time of continued progress, highlighted by the achievement of several key milestones, such as the completion of the enrollment to our EscharEx Phase 2 study, the top-line data readout from our Phase 2 clinical trial of EscharEx, the opening of the balance of clinical sites in the US for the NexoBrid study, and a number of important payment decisions in European markets for NexoBrid, as well as the potential expansion into new territories.

In particular, we are looking forward to a positive reaction to our prominent showing at the upcoming European Burn Association meeting, after which we will be sure to update you on the bolus of data presented.

Now, operator, please open the call for questions.

(Operator Instructions) Matt Keeler, Credit Suisse.

Thanks for taking the questions. First, I was wondering if you could give us an update on reimbursement in France, Italy, and Spain. You talked about some milestones there. I'm just wondering what's the timeline in each of those countries where you expect to hear on reimbursement.

And then once you potentially do have reimbursement, how quickly do you think that might turn into revenues? Are there any indicators in those countries that help you gauge how fast the ramp might be, or do you think you will face an uphill battle, like in Germany where you've got adequate reimbursement but standard of care is relatively entrenched? And then I have one follow-up, thanks.

Sorry for this discontinuation of the call. We were -- the call was disconnected. Can you please ask the question again?

Sure. Sorry, I don't know if you hung up in response to my question. I will ask it again.

Just on France, Italy, and Spain, just wondering if you could remind us when you think you'll have decisions on reimbursement there and just how we should think about, if you do get reimbursement or positive decisions there, how we should think about the ramp. Just keeping in mind in Germany I know it has been kind of a slog to get to change standard of care.

Thank you for the question. And sorry, I did not disconnect because of the question. I haven't heard the question, so this is now the first time I hear the question and I apologize again for this inconvenience.

Well, the reimbursement processes in general in these countries are similar in the way that you first submit your dossier, then it's being assessed by what we call a scientific or more scientific committee, and after the scientific committee grants a decision then it goes to commercial negotiations with another committee. In all these respective markets we have submitted the dossier and what we don't have control over is in which committee meeting we are going to be discussed. We don't have any control on the agenda. So we anticipate that we will finalize the process in these markets sometimes, most probably around the end of this year or at the beginning of next year.

As for the update in these markets, after the decision it's differs from country to country. I will start with Italy. In Italy today practically almost every burn center in Italy is treating patients with NexoBrid. There are centers in Italy that are treating patients almost as standard of care.

So many patients are being treated in Italy; they are treating on a daily basis by almost all the centers in Italy and we are seeing great support from the Italian key opinion leaders. As I said, up to a point they've initiated a letter from the Italian Burn Association to the Ministry of Health asking the Ministry of Health to grant the reimbursement. And this letter was signed by practically almost every burn center in Italy.

So we anticipate that once we are able to charge for the product that is supplied we will be able to ramp up the sales in Italy quite rapidly.

As for Spain, in Spain until May this year there was no need at all to go for a national level reimbursement, so all this national level reimbursement for hospital product is quite a new thing for them as well. And we have submitted the files and everything. We are being assessed.

What will most probably happen, because this is not as structured as in other countries yet, is that in some provinces in Spain once we have a national level reimbursement decision they will be able to procure the product. And in some provinces, we might need in parallel to go also to a decision at the province level.

So in Spain today, again, most of the burn centers, the prominent burn centers in Spain are treating patients with NexoBrid. We had a conference in Spain; the awareness is high. We are seeing good cases. They are presenting cases in the EBA and so on, so I would expect that once we get the reimbursement in Spain, we will see a pickup of the revenues as well.

France, as usual, is a special case because France is the only country in Europe where you are not allowed to physically supply the product to the centers before we have a discussion in the committee, regardless of whether the decision of the committee will be to reimburse or not to reimburse. So we are not able to generate this usage in France at the moment. We are hopeful that once the committee makes a decision, if it is a positive one then for sure this will be a good sign for the uptake of the product.

But even if it's not a positive one, and as you know most of the wound care products or practically all of the wound care products in France are not reimbursed, still we will be able to supply the product to the hospital and then go to a hospital level, present our budget impact tool, and convince the hospital that it makes financial sense, as well as clinical sense, for the hospital to use the product.

I hope that I have addressed your question.

Thanks, that helps. Then second-quarter sales picked up nicely versus the last couple quarters. Just wondering what countries are driving that and is there any stocking in the quarter.

We have no -- we don't know exactly what is the stock level in each hospital, but obviously this pickup in sales is driven by Germany, by the Nordics, by the central eastern countries, which are the main countries that are now in a position to order the product.

We are also seeing uptake in centers themselves. I don't know if you remember, I think last call we talked about Dr. Schulz from Germany that was awarded the price in the EBA for the best poster in the category. When Dr. Schulz returned to Germany, she is practically treating patients almost on a daily basis, so we do see also some uptake in countries that have been treating patients for several months as well.

Great, thanks for taking the questions.

David Maris, BMO Capital Markets.

It's Katie Brennan in for David Maris. Thank you for taking the questions.

I have two; first on the NexoBrid US Phase 3. With half the sites open at this point, is that on track with your anticipated plan? I remember at ABA it sounded like you guys were talking to a lot of physicians that were interested in being involved in the study, so curious if that's on track.

Also, we've seen encouraging growth in use and you've mentioned the potential positive pricing actions expected in the coming months. When do you think these changes will lead to a meaningful inflection in revenue? Thank you.

Thank you for the questions, Katie. In terms of the US study, we are on track as planned. The centers that we have discussed with the ABA are centers that are potential for additional sites and the centers that we are opening to the last month are centers that we have submitted the file to the IRB this month. They go and they were already approved and so on.

So we are on track to open the centers. We believe that in the coming months will be able to open all the study centers. We have already started to recruit patients so everything is on course, up and running.

In regards to Europe, as we mentioned before, I think that as time elapses we will see more and more conversion of a set of usage into sales and the inflection point would be, as we discussed, the ability to obtain reimbursement in countries where we are not able to practically sell without it. So as we discussed, for example, when Italy gets reimbursement and it can convert all this usage into sales, this is most probably where we will see a big ramp up or something of that sort.

Thank you. If I can ask one more, when you are referring to these scientific committee meetings and not having control over when they will discuss NexoBrid reimbursement, do you have any indication of where you are in the queue for each of those countries? And are they going product by product where you can keep track on when you'd expect to be discussed?

We don't have exact [month on that], but the resolution of the data is not in terms of several quarters. We don't know if it's going to be in June or July or August or something around that, so our estimate is that in these countries most probably we will be able to conclude these processes around the end of the year.

Whether it's going to be towards the end of the fourth quarter or the first quarter of next year or getting into such a resolution is not always in our control, because we are not controlling their agenda. And for example, in Italy now they disperse the committee and they will reconvene the committee only in September. These are the level of accuracy that we can predict this timeline.

Thank you.

Akiva Felt, Oppenheimer & Co.

Hello and thank you for taking my call. This is [Carlos Solorzano] on behalf of Akiva. My question is would you please remind us what the addressable markets are for EscharEx and which of those markets would be the top priority at launch?

In terms of territories, obviously our primary focus is on the US and this will be our primary focus for launching EscharEx. Obviously, we will also aiming at Europe and other markets, but US is obviously the first one.

In terms of indications, our ongoing Phase 2 study recruits patients in the diabetic foot ulcers, in venous ulcers, and in post-surgical complications, so we can go and continue our development plan in either of these indications or in some of them. So we can decide to do a study in VLUs and VFUs or just VFUs or just VLUs, and we will do that based on the results of the study that we will have the data for around the end of this year.

I can also tell you that in our previous Phase 2 study and the first Phase 2 study we have treated patients from all those indications and we saw positive critical data on all of them. This is where we stand in terms of indications in terms of territories.

Thank you.

Thank you. We have no further questions at this time. (Operator Instructions) As there are no further questions, I would now like to hand the call back to Mr. Cohen for any final remarks. Thank you.

Thank you for the questions and for your continued interest in MediWound. We look forward to updating you again when we report our third-quarter results. Thank you very much for the call and sorry for the inconvenience with the telephone.

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.