Mediwound Ltd (MDWD) 2016 Q3 法說會逐字稿

Welcome to the MediWound Q3 2016 Financial Results Conference Call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I'd like to introduce your host for today's conference, Ms. Anne Marie Fields, Senior Vice President with LHA.

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.

Before the opening of the US stock market today, MediWound announced financial results for the third quarter ended September 30th, 2016. If you've not received this news release or if you'd 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 at the Securities and Exchange Commission, including without limitation the Company's Forms 20-F and 6-K which identify specific factors that may call 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, November 14th, 2016. 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.

Thank you all for your interest in MediWound and for participating in today's call.

2016 to date has been a busy and productive time for MediWound highlighted by a number of important achievements with both our Commercial and Clinical programs.

Commercially these include continued growth in the number of burn centers treating and the number of burn patients treated with NexoBrid; the growing conversion of usage into sales after obtaining funding for NexoBrid on the hospital level or on the national level such as in Belgium and Italy; extending NexoBrid reach into important international market and ongoing support from the medical community highlighted in over 100 presentations and award-winning absracts at EMEA conferences.

We also made significant progress with our R&D programs. Notably the results of positive top-line data from our second Phase II clinical study of EscharEx to treat chronic wounds; the initiation of the second cohort of this study of EscharEx to provide patients with even more flexibility in using EscharEx in place and time that best fits their individual daily routine and the advancement of our US Phase III DETECT study, our pediatric study and our progress with our MWPC003 program.

The progress we've made throughout the last nine months puts us in a strong position to build on this momentum throughout the remainder of the year and into 2017.

Let me now turn to a more detailed review of our progress beginning with our ongoing commercial progress with NexoBrid in Europe. As evidenced by our revenue gain in the third quarter, we have continued to make progress converting awareness and interest in NexoBrid into usage and sales.

We continue to focus our efforts on having more centers integrate NexoBrid into their workflows, increasing the number of patients treated in those centers and gradually increasing the burn area -- or the Total Body Surface Area, the TBSA -- treated by those centers as physicians gain more experience and confidence in the use of the product and ultimately moving from experimenting to usage and from usage to procurement at these centers.

In line with our continued efforts, we see quarterly increases in the number of patients being treated and we are beginning to see that usage is gradually starting to turn into revenues.

The progress we are making with adoption is largely the result of our focused efforts on securing national, regional and local hospital funding which enables us to turn usage into sales.

We are keenly aware of the impact such funding has on adoption as we endeavor to establish NexoBrid of the new standard-of-care for the burn or severe burns.

As we reported, we are very pleased to have the Italian Drug Agency approve the pricing and investment conditions for NexoBrid for the removal of eschar in patients with deep partial and full-thickness thermal burns, with pricing in line with the European list price.

With national investment now in place, we continue to work on formula inclusion at the hospital and regional level in order to firmly establish NexoBrid as a standard-of-care in Italy.

We continue to make meaningful progress with those efforts across Europe and we are seeing more centers starting to buy NexoBrid in additional markets such as Spain and the UK.

Another key component of adoption is enhancing awareness, interest and peer discussion about NexoBrid. Over the past 18 months we've brought NexoBrid to the forefront of innovation in burn care.

As you know NexoBrid has been the subject of over 100 oral and poster presentations at every local and international burn conference where leading clinicians demonstrate the benefit of NexoBrid in debridement and highlight its potential as the new standard-of-care in the treatment of severe burns.

Given these success, we'll continue to sponsor international, European national and regional burn conferences and in fact in August this year, there were 14 posters presented in support of NexoBrid and EscharEx at the International Society of Burn Injuries meeting in Miami.

This is an important meeting because it draws a diverse international audience of burn specialists which leads me to our progress extending NexoBrid into other global markets.

Throughout the year we have advanced our strategy that leverages our EMA marketing authorization to expand NexoBrid internationally. This year many of the participants at the ISBI came from Latin America where we have partners in most of the major markets. These partners are in the process of obtaining marketing authorization, or as in the case of Argentina, have already launched.

NexoBrid's broad exposure and [current] endorsement at this last international meeting -- like the ISBI -- support the local effort.

International distributors and partners from other regions have also submitted registration files in countries, such as South Korea and Russia, with more preparing to do so in the near future, such as India and Japan.

Some of these filings will provide approvals and launches in 2017 which we expect will further contribute to our top-line.

The ongoing international exposure NexoBrid receives drives ongoing interest in the product as we pursue potential distribution partners in other important geographies. As always we look for to providing you with updates on this front.

Finally, let me review the progress we've made with our clinical programs and I will start with our ongoing US Phase III clinical study for NexoBrid, which is fully funded by BARDA.

Following recent discussions with the FDA, we amended the protocol for our US Phase III study of NexoBrid to increase the total body surface area of patients eligible for inclusion in the study from 15% total body surface area to 30% total body surface area. This allows for the inclusion of patients with much larger burns and is important because it supports our efforts to broaden the label once the product is approved.

In burns with large total body surface area, the early non-surgical removal of eschar has many potential benefits since maintaining the presence of the last surface of contaminated eschar on the patient for a longer period of time can result in wound deterioration, infections, scars and other sequelae.

Currently, surgical excision of large surfaces of eschar result in substantial surgical burden on these very severe patients, involve massive blood loss and is often limited by the availability -- or the lack of availability -- of the extensive donor site required or by such severe patient's conditions that might not be - that might not withstand general anesthesia or the surgical burden.

In these cases of large TBSA burns, being able to non-surgically remove the eschar early may offer patients and physicians a real breakthrough in the treatment of these severe burns. From a commercial standpoint, as the number of NexoBrid device sold is a function of the burn area requiring debridement, having larger TBSA on the labeling would obviously also grow the sales potential.

In addition, since DETECT is also a post-approval commitment study for the European regulators, we were able to obtain in tandem the EMEA endorsement for such increase in TBSA in the study. This way, the generated data could at the same time serve to support broadening of the European label from 15% to 30% TBSA as well.

With the inclusion of patients with expanded TBSA, the FDA requires us to provide sufficient data also in this cohort of patients. The implementation of this change will require us to submit certain protocol amendments and adjustments for approval by the clinical site, IRB, to optimize the site selection and to redo the sites re-training on the amended protocol.

As a result, we now expect to have the acute top-line data on the extended population in the first half of 2018.

Let's turn now to a discussion of our progress with EscharEx, our treatment for chronic and hard-to-heal wounds. Earlier this year we posted top-line results from our second Phase II trial evaluating EscharEx for the debriding of chronic and other hard-to-heal wounds.

The positive data and post-hoc analysis encourage us to advance this promising product in diabetic foot ulcers and venous leg ulcers which will present a tremendous market opportunity as reflected by the results of the market research we conducted with over 200 healthcare professionals earlier this year and which we previously shared with you.

During the third quarter, we also had the Clinical Advisory Board -- comprised of U.S. and European experts -- to design our pivotal program which was met with considerable enthusiasm. As planned we will be ready to file the data package with the FDA and to request a meeting with agency to discuss the pivotal program by year-end.

We expect the FDA will grant us a meeting in early 2017 with the aim to have further clarity on our clinical program going forward in terms of study design, expected timelines and investments.

We believe that on top of the secrecy, safety and cost-effectiveness, convenience and compliance are very important in the outpatient home use indications for chronic wound care.

To potentially achieve substantial market share we aim to position EscharEx in a way that fits the existing and future patient and treatment workflows as well as the reimbursement program while providing superior results. Therefore, we continue to invest our effort also toward further convenience.

After successfully completing the second Phase II study in 73 patients, we have initiated a second cohort of patients to demonstrate safety over extended period of application of 24 to 48 hours to further support the product's convenient application, which we believe will enhance compliance.

In this second cohort, we are recruiting patients from two [indications], at two time frames, randomized the patients to two study arms, EscharEx [androgen] vehicle at a ratio of 2:1. As such we extended this study from 24 patients to 32 patients and expect recruitment to be completed in the first quarter of 2017 with top-line safety data in mid-2017.

In tandem, we are very pleased to report that we have been working on a second generation of EscharEx which we will refer to as EX2. This advanced formulation is designed to have several advantages. For one, based and our current studies, EX2 demonstrated even higher potency in lower dosage, which would further contribute to EscharEx's efficacy and tolerability.

In addition, EscharEx 2 will be even easier to prepare and administer which will further support compliance by the patient or caregiver. Last but not least, we have also filed a new patent application for EX2 that we believe would further extend its exclusivity.

We have already discussed the EX2 formulation with FDA, conducted the manufacturing and control, as well as the bridging toxicology work recommended by [Debussy]. We now intend to discuss with FDA the pivotal clinical program of EX2 in the coming planned FDA meeting.

I'd like to emphasize again, the important distinction of our EscharEx indication which is for debridement of wounds versus other technologies that have been in development or developed aiming to directly close wounds. As mentioned, EscharEx is complementary with the newest marketed technologies that aim to close these wounds.

We see a number of potential synergies with this product and expect that they will be used sequentially in clinical practice.

With over 1.3 million patients with DFU or VLU in the US alone who undergo debridement, EscharEx represents a very meaningful market opportunity which is one of the reasons why we are excited to advancing our clinical planning.

EscharEx continues to be an important next step in our strategy to bring shareholders value by leveraging our proprietary technology and we look forward to keeping you apprised of our progress.

With this overview of our commercial and clinical program, let me turn the call over to Sharon Malka -- our CFO -- for a review of our third quarter financials.

Thank you, Gal and good morning everyone.

As you have heard from Gal, we continue to make important progress throughout the third quarter that's positioned us to build on the momentum for the remainder of 2016 and beyond.

Most notably, we were pleased with our financial performance which is highlighted by growing revenues and NexoBrid adoption is increasing and the use of NexoBrid starts converting into sales following obtainment of reimbursement, combined with disciplined budget and with continued support of our US clinical program by BARDA.

More specifically, we were pleased to report that revenues for the third quarter of 2016 increased to $518,000 from $102,000 a year ago and from $356,000 in the second quarter of 2016.

Revenues for the first nine months of 2016 were $1.1 million, up from $300,000 for the first nine months of 2015.

During the first nine months of 2016, we delivered EU customers approximately 3,200 units of NexoBrid, of which about a third were part of our sampling programs. This compares with approximately 2,600 NexoBrid units shipped in the first nine months of 2015, of which about two-third were part of our sampling program.

Net research and development expenses for the third quarter of 2016 were $2.4 million, which is in line with our budget and compare with $0.8 million for the third quarter of 2015. The increase was primarily due to an increase of $1.2 million related to expenses for NexoBrid clinical drive and about $0.8 million for net EscharEx and MWPC003 development.

The increase of gross R&D expenses for the third quarter of 2016 was partially offset by an increase of $0.5 million of dissipation from BARDA and the Israeli Office of Chief Scientist.

Sales, marketing and G&A expenses during the third quarter of 2016 saw a modest decrease to $2.6 million from $2.8 million in the 2015 third quarter.

Operating expenses for the first nine months of 2016 were $15.5 million compared with $12.9 million for the first nine months of 2015. Again, primarily due to an increase in net R&D expenses of $2.3 million and about $0.3 million increase in non-cash-shares-based compensation expenses.

This increase in net R&D expenses was comprised of $3.7 million increase for NexoBrid clinical trials and an increase of $2.4 million for EscharEx and MWPC003 development. This increase was offset by an increase of $3.6 million participation by BARDA.

The net loss for the third quarter of 2016 was $5.7 million or $0.26 per share, compared with a loss for the third quarter of 2015 of $3.8 million $0.17 per share, compared with a loss for the third quarter of 2015 of $3.8 million or $0.17 per share.

For the nine-months ended September 30, 2016, the Company had a net loss of $17 million or $0.78 per share, compared with a net loss of $14.3 million for $0.66 per share for the same period in 2015.

Adjusted EBITDA for the third quarter of 2015 was a loss of $4.2 million compared with a loss of $3.6 million for the third quarter of '15, while adjusted EBITDA for the first nine months of 2016 was a loss of $12.9 million compared with a loss of $12.1 million for the first nine months of 2015.

Turning now to our balance sheet, as of September 30, 2016 the Company had cash and short-term deposits of $34 million and a networking capital of about $32.6 million.

During the first nine months of 2016, we remained on budget utilizing $12.2 million in cash to fund operating activities which was somewhat offset by license fees paid by certain distributors.

Our BARDA contract continues to positively affect our financials by offsetting NexoBrid development cost and at the later stage, we expect it to have positive impact on our financials by contributing to revenues as a result of the procurement commitment. Consequentially we now expect cash use for 2016 to be in the lower range of $17 million to $20 million.

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

In conclusion, we are pleased with the progress we have made in both our commercial and clinical programs.

We expect to build on these achievements in the months and years ahead as we work to increase commercial revenues from NexoBrid in Europe and newly launched international markets, to advance our clinical development plans for NexoBrid and EscharEx in the US and with a few other opportunities for growth and expansion with our novel proteolytic enzymes worldwide.

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

(Operator Instructions)

Raj Denhoy, of Jefferies.

I wonder if I could start with some of the clinical trials that you have under way. It sounds like you have pushed out the timing of both the EscharEx second cohort into 2017 as well as the NexoBrid trial as well given the expanded TBSA.

I just wanted to confirm if those are in fact true that both of those trials are now getting pushed out by little bit?

Yes. Ever important. because we would lead now to the cohort stations on the larger TBSA with NexoBrid, on one hand it gives us the access to a much broader label. On the other hand, it will require us to make some submissions locally to the IRBs and to do some adjustments to the protocol and to re-train the centers on the larger burns and therefore we believe that it will postpone the availability of the top line results in this pool of patients.

And therefore, EscharEx, I think this is more technical. First of all the second cohort of patients is just to generate for us safety data to provide this data of putting the product on patients for 24 hours and 48 hours and it's not a limiting step for us, so going to the FDA and discussing the pivotal program, which is what we see as the critical path going forward.

Because this study is being conducted in several sites, in two indications, in two arms and in two timeframes, we thought that it might be wise to increase the sample size by a couple of more patients, six more patients, from 24 to 32 and therefore we believe that the availability of data would be a bit postponed.

You have to remember that after we finish, to include the last patient, we need to debride the patient which takes about a week or two, then we have to wait for 12 weeks for the wound to close and then we have to wait for another two weeks just to reconfirm the wound is closed or something like that.

So, all this follow-up period prolongs the timeline of what could have been a very short study but as I mentioned it's not a limiting step to us to go to the FDA or push forward our pivotal program anyhow.

Just another kind of clarification. I think last quarter you said, the first half of 2016 you'd ship 2,800 units of NexoBrid. If I'm not mistaken I think this quarter you said 3,400 now for the first nine months; is that the right number, 3,400?

Yes. The nine months is 3,400, [total in] customers.

Right and I guess for the first half of the year was 2,800, so roughly 1,400 a quarter and this quarter was a little of trend there. So, I'm curious was it just seasonality into the summer months or something else that caused the trend to bend down a little bit in terms of the units shipped?

I don't know if I have the figures that you mentioned for the six months but currently we just focus on delivery to the EU market while during the second quarter of 2016, we delivered also to Argentina for the launch in Argentina.

So, I have to verify what was included within the [2,800] that you mentioned.

Just on the results for the first three quarters of the year even if you're looking back into last year and there's been a fairly linear progression in terms of the revenue increasing kind of modestly each quarter.

And as we think about the development of this market and certainly there are a lot of activities that you guys are doing on the NexoBrid side, but are there any events that you look to look to over the next 12 to 18 months that could really be sort of a catalyst or an inflection point in the sense that revenue growth perhaps starts to accelerate from this kind of very linear level that we seem to be seeing right now?

I think that the main thing at this stage would be to get funding. So, for example we got the national level funding in Italy in the end of the second quarter and now we have to go province by province to get this thing into the formula of the region and then the hospital.

So, this is like technical process that we have to run, which would take throughout Italy several quarters and I think that once we get this thing done and we can actually utilize all the usage of NexoBrid in Italy in the top line, that would be something that would affect this trend.

Same thing about other countries, that we are just now seeing to starting to contribute like Spain, like England -- I can go into details if you like, in general it's, again, formulaic process, hospital by hospital, so we believe that these things once they gain more momentum -- because we are in the works of all these things, will affect significantly the revenue line.

And the most important thing on a global level I would say -- in addition to by the way, procurement of the international market because we expect South Korea, Mexico and many additional markets to start getting approvals in launching -- but the most important obviously would be BARDA that has a $16 million commitment. And again it's a BARDA decision when to procure these products.

Our estimation is that they will most probably start in '18, '19, '20.

Right. I know you don't like to give guidance around numbers and things around revenues in particular but if you think about it again, this year has been 300,000 in the first quarter, 400,000 - 500,000 this quarter, are we at a point though given everything that you've described in terms of Italy and the other markets in Europe, Argentina, Japan, that we could start to see the growth in the sense of the momentum you described, start to pick up as we move into '17 and ultimately '18, '19, if you get BARDA and things?

But really just trying to gauge the trajectory of the business without asking you to give guidance. Because I doubt you're going to do that. But just in terms of how you're thinking about the numbers as we move into '17?

Yes. I think in general, as we see Europe is very fragmented. The processes there differ from country to country, from province to province, from hospital to hospital and therefore it takes time until you're able to be dissolved into the system and start running.

And I think, again, what we can look at is other competitors in the market of - I don't want to give names -- but if you look at the biggest wound care products in the world, managed by the biggest wound care companies in the world and you look at the entry curves, in most cases you see that it takes several years before you can actually get to this inflection point where reimbursement is in place, funding is in place and then it starts to move steeply and climb.

(Operator Instructions)

Imron Zafar, of SunTrust Robinson Humphrey.

I had a first follow-on question to Raj's about the growth trajectory for NexoBrid. Obviously, the trajectory is taking longer than we had anticipated. A few quarters ago just in terms of reimbursement and changes in practice patterns and maybe even less in percentage of burns so they're surgically debrided.

Is there any strategic change in terms of maybe focusing more resources more on the 10 to 30, hospitals in Europe that are at your highest volume centers or is your commercial strategy unchanged from what it's been previously?

I think that what we see is that we went into the European market and there are about 130 burn centers in Europe and we by now have trained about 80-90 centers out of them.

And through these centers, they're divided between the countries, we see who are the early adopters, who are the centers that are moving faster and obviously, we're shifting our focus to the ones that move faster and can actually make a change earlier.

So, you're absolutely correct that going forward, the more we go forward we focus more on the one that we can actually get [countries done] and we can start to see revenues being generated and we let this snowball, this [middle] by peer-to-peer discussions, by the conferences, by further detailing to expand into to other centers.

I think in general there are three kinds of centers. There are ones that are early adopters, there are ones that are sitting on the fence and will move more forward when they see the [others up and run] and then there are a few that they're just happy with their ways and it's very difficult to convert them to anything else from what they are already used to.

So, I think we have identified already in Europe and we are seeing these are exactly the centers that have started to buy in England -- the ones that started to buy in Spain. And the other thing, the other market that we've been more saturated in Germany and Nordics and others.

Yes, just to recap, Imron, you are absolutely right, we are going to focus more in these centers and we see that in the centers we are capturing already I would say a significant market share of the original patients.

And a quick question on EscharEx. I think you mentioned that you had a recent meeting with your Medical Advisory Board. I just wondered what your latest thoughts vis-a-vis end points, size of trial, timing, et cetera, for the clinical-run study?

Yes. Well first of all of all I can say that the Clinical Advisory Board was very educating and I think we got very good feedback and I think the physicians were very pleased with the development. We discussed several alternatives -- all kinds of possibilities to go forward with that.

I think it will be wise to discuss them with FDA. We have our views. We want to learn what are the FDA's views and to see where they are aligned and where we need to do further education -- provide further reference on.

These are the things that we are planning to ask the FDA and once we have more clarity from FDA we will be in a better position to communicate what are the designs, what are the timelines, what kind of investment will be required to bring this exciting opportunity to the market.

(Operator Instructions)

David Maris, of Wells Fargo.

I don't know if you address this already as I jumped on a little bit late, but can you give a little more detail on how you came to the decision to expand the protocol? Was that at your suggestion or the request by the FDA?

It was our initiative and it's because of several reasons. One, we were always doing the phase II study, so with 70% of the effort already being out there, it makes much sense to get as large label as you can, so this is one reason.

The second reason, it also makes a lot of sense to BARDA because in the next casualty event we cannot anticipate what will be the level of severity of injuries and we do expect that more severe patients will be affected so it makes sense to investigate that.

The third thing is, that you have also wanted to get this information in order to allow us to expand the label in Europe because as you remember our phase II study in Europe was also up to 30% TBSA and not 15% TBSA. So we wanted both studies to target the same population, so that we could have all this information both with the FDA and for the EMEA at the same effort.

And last but not least, as I mentioned, from a medical standpoint, we truly believe that in the larger burns NexoBrid has even bigger advantage because these are exactly the patients where there is nothing else done outside to cover them, where you lose a lot of blood when you try to excise them, where many of these patients can't even go to an OR because you can't put them under general anesthesia because of their situation, their status, their overall condition.

And because of all these reasons we thought that it's worthwhile maybe to spend a little bit more time but to get a much broader indication.

(Operator Instructions)

Jay Olson, of Oppenheimer.

Just going back to the expansion of the eligibility criteria for the Phase III DETECT study, I understand why you're expanding it to 30% TBSA but could you help us understand the timing?

Why did you decide to expand it now and not at the beginning of the trial, especially when the European study was enrolling patients with up to 30% TBSA? Why did the US study start with 15% and then expand to 30 once the trial was already underway?

Yes. The main reason is we had to walk with FDA to convince FDA to allow us to do that. And FDA, they had conservative approaches of what is called a stage-wide development.

And we believe by the way that there are many merits to investigate NexoBrid in large burns. We believe that there is merit in investigating NexoBrid in children. We believe that there is merit to investigate NexoBrid in what is called, Burns Induced Compartment Syndrome, which is another problem that burn patients have.

And I think through the discussions with FDA, through providing them with more data, through exposure of patients in Europe, through DSM-V recommendation, we are enabling the FDA to feel more comfortable and allow us to grow the population at the same time.

And then in Europe the studies were conducted with TBSA up to 30% and yet the European regulators limited the label to patients with only up to 15%. Was that just a matter of the number of patients? And if so, how many patients do you need with TBSA up to 30% in order to expand the European label?

Yes. I think in Europe it wasn't so much a number of patients. If you look at the clinical results of the patients in the upper bracket -- the patients between 15% and 30% TBSA -- you see that the safety profile is comparable between the arms and the efficacy data isn't, again, so clearly or better in the next couple of patients as it was in the lower bracket of 0% to 15% TBSA.

The EMEA limitation doesn't come from the clinical perspective; it came from the technical perspective. It happens to be that by the time that we submitted the file in Europe, which was around 2010, we only had PK data, some proteolytic data from patients with one application of NexoBrid.

Now when we started to develop NexoBrid, we had to follow some kind of a guideline -- some kind of a medical practice -- and it happened to be that usually, you don't do surgery to a patient of more than 15% TBSA in one go.

So, we followed this kind of pattern. So if a patient has up to 15% TBSA, he would be debrided with a single application of NexoBrid. If a patient has more than 15% TBSA, he would be debrided with two applications of NexoBrid.

Now when we submitted the files we had PK data only on patients that were treated with one application of NexoBrid and EMA wanted to see the PK profile; they wanted to see the second application has a similar, CMAX, TMAX, T-HALF, and so on and this is why they limited it.

This study along with the study that we already conducted in 30-some patients in Europe, would exactly provide this information and this is exactly what now also FDA wants to see. They not only want to see PK in patients up to 15%; they want to see also PK in patients of more than 15% and this is exactly why we needed that.

Because we need to record certain set of patients -- more limitations, the longer the time it takes - but I think the main thing is mainly technical things like, needing to go again to the IRB, needing to may be close centers that have more small patients and open centers that have larger patients and needing to re-train the centers.

Because that's exactly what we mentioned before. If you're doing PK analysis and you're looking at two applications, then you have to take blood in different time points because you are limited by the overall amount of blood that you can take from patients.

So, all these technicalities is just going to take a little bit of time to implement and this is why we believe there are be a little bit of delay.

And then can you just give us an idea of the magnitude of the increase in patients that will be eligible? Does this double the number of patients that will be eligible for the next upgrade or more than double?

I think in terms of the number of patients, it doesn't double the number of patients because there are less larger patients than smaller patients but in terms of commercial potential, it does because we still advise per TBSA. So for us to treat one patient with 20% TBSA, it's like treating four patients with 5% TBSA.

And I think Imron also suggested to that in his question or maybe this is also an answer for Raj, one way to drive sales is to increase TBSA. And that's again a process that we see in Europe, that centers start with smaller TBSA and only when they get comfortable they start to increase the TBSA and increase the TBSA. From a sales standpoint, that's a big difference because if you want the TBSA from 3%, to 9%, you triple your sales.

(Operator Instructions)

We always kind of thought that burn would be a secondary market compared to chronic wound, like, 35% of patients to [co-code] and for debridement or 35%-40%.

You're saying that in practice, there are reimbursement hurdles and many new technologies are adopted as curve-shape and the question is, in Europe for burn where do you think the inflection along that S-curve is? Is it two to three years, three to four years, four to five years? Just so that The Street could kind of set their expectations properly.

Yes. I think that in general, we are looking into the future so one way to look into the future is to look into the past and see what's happening with other technologies. What we saw is that in leading technologies that are destructive, that are big change, not another marginal change to recover, it usually took between, let's say, between four to five years at least before they can actually see this hockey stick starting to move up.

I think Europe just by being defragmented to so many countries and regions and so on, puts another level of complexity on that. So, if I could predict the future, the best estimate that I have is in the past and I would say most probably this would be the same.

-- and given that, what does that imply for your financial commitment to commercialization in Europe and the sufficiency of your cash? How long before the cash-burn becomes problematic requiring a raise? And I have one more follow-up.

As we reported, we are utilizing about $4 million per quarter; it means that we probably will have about $30 million in cash by year-end, '16.

This is sufficient for about two years of activities -- '17, '18 -- taking into account the ramp-up in Europe, which as Gal mentioned, it will be at a clip in the next two years but still modest.

With that regard, there are some additional figures that can assist and benefit some more cash, for example, the facilitation of the procurement commitment of BARDA. Meaning if BARDA will starting the procurement in 2018, so this can provide us with an additional few millions for another a few quarters in terms of cash use, for example.

And then--

Just to add to that, Bruce, I think in general what we would like to do, if we have BARDA support for the NexoBrid project and if BARDA also has options and other possibilities on procurement and further R&D and so on, we want to get to a situation and as we focus in Europe on the centers that can actually drive the sales, I think going forward we will be looking at having the NexoBrid project in a situation where the market revenues would offset the investments.

And then we'll grow the investment and the R&D expense would be mainly funded by BARDA so that our resources will be focused on developing the EscharEx program, which will require most of our R&D expenses.

And speaking of EscharEx, seems to be the great source of potential value creation just given the size of the opportunity. And should we be thinking about EscharEx as a sign of a kind of convenient way to kind of get 70% to 80% total debridement in a couple weeks? SANTYL is like maybe at that level, maybe a little less, at four to six weeks.

And then not simply as a replacement for SANTYL but rather in combination with sharp debridement so that you have multiple outpatient facility as well as home and nursing care applications?

I think that certainly what we learned in the market study -- which was conducted with 230 healthcare professionals -- what they said in general is that there are three main ways to debriding wounds in the U.S. today.

About 50%-60% of the market is being debrided by sharp debridement, in which a physician has a patient sitting in the office and he actually cuts his patients and the advantage of that is that it's effective. The disadvantage is that these are old patients, they don't heal well, they take anticoagulated drugs, so there are some risks involved in that.

And the main reasons that physicians are doing that is because more than 100,000 of these patients are getting through [a limitation] every year, so they don't want to prolong this debriding process.

The other two alternatives that they have is to use enzymes which, according to the literature seems to take six to eight weeks to debride these wound and during the six to eight weeks the patient has to either come to the clinic or a nurse has to come to his house, for two, three, times a week.

Or they can use a less expensive, proteolytic alternative like hydrogel and others. Again, prolonged process of six to eight weeks. On one hand with some risks that I mentioned before, on the other hand a big burden to the insurance companies, needing to send its nurses for a prolonged period of time.

So, we ask physicians, fine, so if EscharEx as in the clinical studies can debride most of these patients in a week, maximum two weeks, how would that fit into your practice?

And what they said is, that in terms of the sharp debridement they believe that if you have a product that you can give a patient and say to him, go to the nurse, they'll show you how to use it, come back in three, four, days to the clinic and they already see that the wound is debrided or on the way to be debrided.

And they can either send the patient home for another couple of days with EscharEx or they can just remove whatever is left there, or they can start removing what's easy to remove without fighting with the wound and then completing debridement with EscharEx, they believe that EscharEx could be an add-on to sharp debridement and some replacement to sharp debridement and take a big bite out of that portion of the market.

As for the enzymatic and proteolytic debridement, they question whether somebody would continue to use something for six to eight weeks if you can get the EscharEx off in one week or two, especially when the insurance companies, instead of sending nurses for six to eight weeks could send a nurse for a week or two, which would reduce a big burden of their expenses.

And on the other hand they would say, we're not only going to look at one end of the market; people will already use less expensive alternatives, but overall they believe that EscharEx, should it meet its standard product profile as we are currently seeing in the studies already conducted, will take a substantial part of this market.

And because of the market research seems to indicate that there are 1.3 million Americans undergoing debridement and that the cost of debridement is $1,000 to $2,000, so we're talking about a very, very, very, lucrative market. So, if we can take a substantial market share out of that, that's going to be very exciting.

Thank you. At this time, there's no other questions in queue. I'd like to turn it back to Mr. Cohen for closing remarks.

Thank you very much. Thank you for your questions and thank you for your continued interest in MediWound. We look forward to updating you again when we report our fourth quarter and full-year 2016 result.

Have a good day. Thanks, everybody.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may now disconnect.