Mediwound Ltd (MDWD) 2015 Q3 法說會逐字稿

Good day and welcome to the MediWound Third Quarter 2015 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, madam.

Thank you. 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 and Chief Operations Officer.

After the closing of the stock market yesterday, MediWound announced financial results for the three months ended September 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, October 28, 2015. MediWound undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Gal Cohen. Gal?

Thank you, Anne Marie. Good morning to our listeners in the U.S., 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 third quarter was a time of tremendous focus for MediWound highlighted by three main events: the award of contract with the U.S. Biomedical Advanced Research and Development Authority or BARDA, to support the development and procurement of NexoBrid, for preparedness in the event of mass casualties; the completion of the patient recruitment for our Phase 2 EscharEx clinical trial for the treatment of chronic wounds; and the positive market use of feedback around NexoBrid at the recent European Burns Association Congress or the EBA.

Let me begin with a review of the progress we've made in Europe commercializing NexoBrid for the treatment of severe burns and about the EBA. We continue to train additional burn centers facilitated the use of NexoBrid by additional centers and accelerated the overall treatment of burn victims with NexoBrid.

During the last nine months, we made significant inroads into training burn centers across Europe and walking with these centers to integrate NexoBrid use into the workflows. We can now say that almost 80% of our initial target burn centers in Europe have been trained, and over 60% of these trained burn centers started to treat patients with NexoBrid. In parallel, we continue our efforts to obtain reimbursement knowing that it is an important component for widespread adoption and for converting the growing usage of NexoBrid into revenues. As previously reported, accompanied by a local market experts, the local investment processes are ongoing through the different stages in all the applicable markets and we are looking forward to reporting our progress over the coming quarters.

I would like to share with you the positive feedback we got in the recent EBA Congress. We were delighted to see over two dozen medical presentations at the EBA last month, presented by burn specialists with firsthand experience with NexoBrid from 10 different countries across Europe. We have yet to encounter such a bullish of data presented for a single product in a prominent international congress attesting to the level of interest NexoBrid creates among burn teams. Throughout the congress, our exhibit booth was constantly crowded with clinicians interested in learning more about NexoBrid treatment. And the satellite symposium and workshop were significantly oversubscribed and addressed the challenges of transforming NexoBrid from another therapy to a new standard of care in severe burn treatments.

We are also pleased to facilitate peer-to-peer discussions that shared best practices between burn teams from different centers and different countries, encouraging each other as they (embark) on implementing a minimally invasive approach in burn care.

The event clearly indicated that NexoBrid was the buzz of the EBA conference, with key opinion leaders openly voicing their beliefs that NexoBrid is one of the few disruptive technologies introduced into severe burn care treatment in the last 40 years.

In addition, analyst from BMO Capital Markets also admit the expert panel discussion with European pillars in burn care from six different countries, each of whom discuss their experience integrating NexoBrid into their practices. The webcast of the panel discussion is archived on our website at www.mediwound.com. I encourage you to listen to it as it offers a wealth of knowledge about the physicians? individual and collective experience in adopting the product, and describes some of the initial difficulties in integrating NexoBrid into the center workflow. The one message that comes through clearly is that clearly all believe that with time NexoBrid will become the standard of care for the debridement of thermal burn.

We are also seeing signs on the ground, NexoBrid being integrated into standard of care incentives where automatically orders for NexoBrid are being generated based on the center of inventory level and centers where NexoBrid is already considered standard of care for certain burns such as burns through extremities. The exposure at the EBA was supportive also for our global strategy as we were approached by leading burn experts from countries in Latin America and Asia Pacific, including the presidents of the Burn Associations in Argentina, Brazil, Mexico, and China, all expressing their interest in introducing NexoBrid into their respective countries. We have translated these interactions into immediate action starting with an official invitation by the Chinese Burn Association to give a presentation as well as a daily workshop on NexoBrid next week at the coming Chinese Burn Association Congress.

We shall continue to pursue our broader international strategy to leverage our marketing authorization from the European Medicines Agency to expand NexoBrid into emerging markets in Latin America, in Asia Pacific, and in the CIS countries. Towards that end, we are very pleased to report our recent approval from the Argentinian Ministry of Health to market NexoBrid for the treatment of severe burns. Our exclusive distributor partner, Tuteur, that has over 40 years of experience in Argentinian market is expected to launch NexoBrid in Argentina in early 2016. We look forward to report additional approvals in other emerging markets where we have already the solution partner in the coming quarters, and we continue to seek to expand to additional markets through our ongoing business development efforts.

Shifting gears now to another important milestone for NexoBrid, our recently awarded contract with BARDA. On September, we were awarded a BARDA contract valued at up to $112 million. The contract is for the advancement and development and manufacturing, as well as procurement of NexoBrid as a medical county measure in preparedness for mass casualty events. The five-year based contract includes up to $24 million of non-dilutive funding to support development activities to complete the U.S. Food and Drug Administration approval process for NexoBrid and $60 million for procurement of NexoBrid which is contingent upon FDA emergency use authorization and/or FDA marketing authorization for NexoBrid. In addition, the contract includes options for further funding of up to $22 million for expanding NexoBrid indications and up to $50 million for additional procurement of NexoBrid.

In addition to the support, this contract provides for MediWound in bringing NexoBrid to the U.S. market. It may open a new market for us globally of governments, preparedness for mass causalities. Both are civilians as well like in the case of BARDA for the U.S. but also for military preparedness for mass casualty incidents.

Unfortunately, burn care is demanding, and mass casualty incidents may not only be an extensive terrorist attack. There are civilian mass causalities such as the recent explosion at the Chinese chemical company where more than 400 people were burnt, or the amusement park in Taiwan where more than 200 people were set on fire due to an explosion just this past June. Even (the old chain) accident in the U.S. could challenge burn treatment capacity and turn into a mass casualty incident.

Moreover, Western militaries are evacuating personnel with severe burns from the field of injury to European burn centers to be treated due to the lack of specialty facilities in some region. Having NexoBrid on ground may allow initiating definitive burn treatment at the field hospital much closer to the injury event.

In January, Israel will host an international conference on Healthcare Preparedness for Mass Casualties. Certain generals from countries around the world will come to discuss the important issues and to see how they can put in place plans for viable solutions to prepare for such events. This is another area where we are making an effort to expand the medical contribution of NexoBrid and hope to be able to join hands with a variety of other countries and aid in their preparedness for mass casualty incidents. We look forward to keeping you apprised of our progress in what we believe could become an additional important opportunity for MediWound.

Turning now to a brief update on our U.S. phase 3 study. The study is named DETECT, an abbreviation for DEbride and proTECT As a recap, DETECT is a prospective controlled multicentre, multinational assessor blinded phase 3 study in 175 patients randomized either to NexoBrid, to standard of care, or to the Gel Vehicle at a ratio of 3:3:1, and with a follow-up at 12 months and 24 months.

This study is being conducted at approximately 30 burn centers. The study has a single primary endpoint of eschar removal versus the Gel Vehicle. It is important to note that in previous studies, NexoBrid demonstrated a proportion of wounds reaching complete debridement of 96.3%, whereas the Gel Vehicle achieved zero of wound reaching complete debridement.

In addition to the primary endpoint, there are additional acute endpoint in the DETEC study that asses surgical burden, wound healing, blood loss, and other pharmacoeconomic measurements that need to be supportive also for reimbursement. We expect to have top line results of the acute primary and secondary endpoints of the study in the first half of 2017 and plan to supplement the long-term 12 months and 24 months follow-up respectively thereafter.

Subject to the strengths of the data, which should replicate European clinical results, we will seek FDA consent to file for approval with the data from the acute phase of the study, while supplementing the long-term data as it becomes available as presented above.

Turning now to EscharEx for the treatment of chronic and hard-to-heal wounds. Expanding our portfolio into the chronic wound market with EscharEx is the next step in our strategy to become a key player in this market. We are especially pleased to complete the enrollment of our second phase 2 clinical trial evaluating EscharEx for the treatment of chronic and hard-to-heal wounds. The prospective randomized controlled phase 2 study of 73 patients was conducted at 15 clinical sites in Israel and Europe and evaluated the safety and efficacy of EscharEx compared with the vehicle for the treatment of a variety of chronic and hard-to-heal wounds including a study group of diabetic foot ulcers, a study group of venous leg ulcers, and a study group of post-surgical or post traumatic hard-to-heal wounds. The primary endpoint of the study was incidence of complete debridement. And secondary endpoints asses several parameters such as wound bed preparations, wound healing, and other efficacy and safety end points.

The results from the first phase 2 feasibility study in 24 patients at two clinical sites in Israel already demonstrated efficacy in debriding after just a few topical applications in various wound etiologies such as the one we described before DSUs, VLUs, pressure sores, and other post-surgical or post-trauma hard-to-heal wounds. We believe that since EscharEx is based on the same technology as NexoBrid, the wealth of development data supporting NexoBrid, which is an approved drug, as well as the clinical data from our first phase 2 feasibility study in treating chronic wounds and hard-to-heal wounds, derisks EscharEx development. It is also important to note that EscharEx indication is debridement of the wounds, and thus it is a complimentary with a numerous marketed technologies that are aiming to heal these wounds.

We recently completed a comprehensive market research study on EscharEx in the U.S. and Europe that surveyed over 200 health care professionals. According to the study, there are over 1 million patients with diabetic foot and venous leg ulcers in the U.S. alone who undergo debridement. The surveyed physicians indicated that the product having EscharEx product profile would potentially be prescribed to a significant portion of this patient pool. With an average cost of treatment of $1,000 to $2,000 per patient, EscharEx represents a blockbuster potential and a huge market opportunity. These findings were reaffirmed by U.S. Advisory Board, which is comprised of leaving U.S. medical marketing and reimbursement experts. This was convened to review and discuss the research report. We look forward to the coming month to reporting top line data from the EscharEx Phase 2 study around yearend, and I encourage 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 Chief Financial Officer, for a review of our financials. Sharon?

Thank you, Gal. Good morning, everyone, and thank you for joining us for our quarterly financial review. The third quarter has been a very productive time for MediWound. In particular, the (parallel) contract which will positively affect our financials, both by offsetting our NexoBrid development cost and by contributing to our revenue line as a result of the procurement commitments. For the balance of the year, we will continue to invade in training and sampling programs throughout Europe as well as in market access initiative that we expect to result in favorable reimbursement that will help to accelerate market adoption and will enable us to translate the positive momentum into sales.

Now let me turn to our financial results for the third quarter of 2015. Revenues for the third quarter of 2015 were $102,000 compared with $46,000 for the same quarter last year. Operating expenses for the third quarter of 2015 were in line with the company's budget of $3.6 million compared with $4.5 million for the third quarter of 2014.

The decrease was primarily due to 0.6 million decrease in non cash share-based compensation expenses and an increase of participation by the Israeli Office of the Chief Scientific Officer in our R&D cost.

Net loss for the third quarter of 2015 was $3.8 million or $0.17 per share compared with a net loss of $5 million or $0.24 per share for the third quarter of 2014. The decrease in loss was primarily due to non cash net financial income. Adjusted EBITDA for the third quarter of 2015 was a loss of $3.6 million compared with a loss of $3.7 million for the same quarter last year. As noted in our 6-K, we believe that this non-IFRS measures are useful for investors and provide meaningful supplemental information regarding our operating results.

Moving to our nine-month financial results. During the nine months period ended September 30, 2015, we shipped about 2,600 NexoBrid units to burn centers across Europe. Of which, approximately 70% were part of our investment in the sampling programs. Revenues for the first nine months of 2015 were $334,000 compared with $135,000 for the same period last year.

Research and development, and sales, general and administrative expenses for the first nine months of 2015 were in line with our budget at $12.9 million compared with $13.3 million for the same period of 2014. The decrease was primarily due to $1.7 million decrease in non-cash share-based compensation expenses offset by an increase of $1.3 million in commercial activities throughout Europe.

The net loss for the nine-months ended September 30, 2015, was $14.3 million or $0.66 per share compared with a loss of $11.7 million or $0.61 per share for nine months ended September 30, 2014. The increase was primarily due to onetime non cash financial income in 2014, which resulted from revaluation of derivative (improvement). Adjusted EBITDA for the nine months ended September 30 2015 was a loss of $12.1 million compared with a loss of $10.3 million for the same period last year.

Turning now to our balance sheet. As of September 30, 2015, cash, cash equivalents and short term bank deposits were about $50 million and the networking capital was $50 million as well. We remained on budget, utilizing $14.7 million in cash during the period ended September 30, 2015, to fund ongoing operating activities, of which $5.2 million in the third quarter of 2015.

As a result of the BARDA contract, we now expect that 2015 full year cash use for ongoing operating activities will be about $20 million, reflecting anticipated investment in our sales and marketing activities to accelerate the adoption of NexoBrid across Europe and investment in our research and development programs net of participation by BARDA. In addition, the BARDA non-dilutive funding frees up a portion of the company's cash balance, which were initially intended for use in clinical development of NexoBrid in the U.S. and now can be used to further advance our pipeline.

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

Thank you, Sharon, for the financial overview. We are very excited about the opportunities ahead, and we are getting closer to the end of the year and look over 2016. We are looking forward to working with BARDA towards availability of NexoBrid in the U.S., and we have a number of value creating milestones in front of us including the very near data readout from our Phase 2 EscharEx study and some key reinvestment decision in Europe as well a further expansion into new markets and territories.

And now, operator, please open the call for questions.

(Operator Instructions) And we'll take our first question from Anthony Petrone of Jefferies. Please go ahead.

Thanks, gentlemen, and good afternoon and good morning. Maybe first to start on the BARDA contract, the first, just to get a little bit more color on the timing of flow of funds on that contract, so the first $24 million funding. Can you just provide a little bit of timing on when that occurs?

And then secondly, what actually triggers the additional expansion options under that contract? Does the company have the safety initiative and then expanding to other indications? Or will FDA actually request other indications over time, and that will sort of facilitate the additional funding under that contract? And I have a couple of follow-ups. Thanks.

Thank you, Anthony. So, in terms of the contract, the first $24 million for supporting our R&D efforts is a back-to-back reimbursement of our expenses. So, every quarter or every month that we spend money to advance NexoBrid towards U.S. registration, we send BARDA the expenses and data for (debt) expenses. And this effect is immediate as you can already see in the spin in the current quarter where we have, in next quarter, we can see in our expected cash burn until the end of the year.

As for procurement, the $16 million of contingent upon obtaining one of the following: either BARDA obtains what is called an emergency user authorization, which is something that BARDA can ask in order to stockpile a product for emergency use. So, this is not for commercial use, it's for an emergency use. In order to do that BARDA needs to submit a request. And from what we have learnt or have been advised, this is a positive, it can one to two years, and in the vast majority of the cases subject obviously to FDA review and approval, and BARDA is able to do that. So, it means that BARDA has a binding commitment to buy NexoBrid for $60 million within the period of the contract.

In addition to that, BARDA has several other options. One option is to fund for $22 million additional indications. For example, if MediWound submits a protocol to the FDA or includes children in the FDA study, BARDA will have an option to fund this activity as well. We have discussed with BARDA, and unfortunately one cannot preclude a situation that children would be affected in a dreadful mass casualty event in the U.S. And if unfortunately they are, we need the centers that treat pediatrics in the U.S. to be prepared for such an event. And the only way to getting prepared for such an event is to have the product on ground and to have the teams practice the use of NexoBrid. So, this is the motivation behind these options.

The option for the $50 million for further procurement, again, is an option of BARDA. BARDA can at any time decide the date within the framework of the contract. So they have a limited time to make a decision that they want to procure more than $60 million, and they can go up to another $50 million of procurement of the product in a fixed price and so on.

Did that address the question?

That's helpful. Yes, very much so. That's helpful. And maybe just a follow-up on actual usage in European sites and some color at EBA. So at current sites, can you give us the sense of what types of burns that you're seeing NexoBrid used in. Is it burns that are in a small body surface area, say less than 15%? Or you're actually seeing it being used in larger burns at some of the active sites? And then again just at EBA, any discussions on cost effectiveness studies that you can point us to, that would helpful. Thanks again.

Thank you. So, as for larger burns, I think this is an excellent question. As you know, the average burn patient in the clinical studies or if you go to the NBR, which is a huge database, would be around 10% total body surface area, which means that we would need to provide them with 20 grams of NexoBrid, which would amount to a cost of about $5,000.

When centers in Europe start to treat patient, and again it depends on different centers and different countries having different approaches to innovation, I would say, but in general, they usually start with a small burn, they start with the hands for example, because the hand is a small burn and 1% TBSA burn, in an area that is very challenging to do surgery on, in an area where cosmetics and functionality is highly important. So this is where they feel comfortable starting, and then they expand from there.

Our efforts are to get centers that did not start to start, to get the centers that started to use the product on more patients, and to get centers that use the product on more patients to expand the use of the product to larger areas because for us if a physicians treats, let's say, 10% TBSA, 10% of the total body surface area of the patient, that's like treating 10 patients with a hand. And we believe that one of the sources of growth and revenues will come exactly from that, and this is a natural process. And we already see centers, for example, that are moving towards that direction. I cannot give you the exact information but I can tell you that we've just seen in the last week centers in Europe treating patients to the maximum of the label indication and some (would save) and beyond.

So this is a good question. As for cost effectiveness, we did, not we, but experts in Europe did present in EBA papers about a cost effectiveness of NexoBrid. And as I said, we had 26 presentations given by individual, independent burn specialists in Europe.

I personally have not participated in a conference where 26 presentations were given on a single product in international conference, and some of them were referring to cost effectiveness. These abstracts are available in our -- I can send it to you, but there is a link towards the abstract and you can go and see exactly what was said. In general, the conclusion of the (auto world), this NexoBrid is a cost effective treatment that saves money to the hospital.

Thank you.

Thank you.

(Operator Instructions) And as there are no further questions remaining, that will conclude today's Q&A session. I would now like to turn the call back to Mr. Gal Cohen for any final closing remarks.

I just wanted to say thank you for your questions and for your continued interest in MediWound. We look forward to updating you again when we report our fourth quarter and yearly financial results. Have a good day. Thank you very much.

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