Mediwound Ltd (MDWD) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MediWound Q4 2016 conference call.

(Operator Instructions)

As a reminder, this call is being recorded. I would now like to turn the call over to Anne Marie Fields. You may begin.

Thank you, Michelle. 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.

Before the opening of the U.S. stock market today, MediWound announced financial results for the fourth quarter and year ended December 31, 2016. If you've 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 Kern].

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 operation 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 contents of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 21, 2017. MediWound undertakes no obligation to revise or update any statement 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, and thank you all for your interest in MediWound and for participating in today's call.

Throughout 2016, we made considerable commercial and clinical progress, which positions us well for 2017 and beyond as we build MediWound into a global leader in burn and wound care. Let me begin with my remarks with a discussion of EscharEx, our product in late-state development for the debridement of chronic and hard-to-heal wounds.

At the end of last month, we were happy to report that the final study results affirmed the positive top line data that [that called early] in 2016, which showed that the incidence of complete debridement in up to 10 once-daily treatments of EscharEx was significantly higher and was achieved earlier compared with the control group. The overall safety was comparable between the study groups.

The results were even more prominent in the prospective sub-group of diabetic foot ulcer and venous leg ulcer, which is in line with the etiologies we are focused on following a comprehensive market research study that we undertook. The topical treatments currently on the market require daily applications for weeks and even months to achieve complete debridement.

A post hoc analysis of our Phase 2 data shows that 93% of the wounds with complete debridement with EscharEx were debrided within seven once-daily applications after four to five applications on average. That's about a week as of weeks or months. In addition to the efficacy, safety, and cost effectiveness, we believe the convenience and compliance are very important for chronic wound care in the outpatient and home use settings.

To achieve substantial market share, we aim to position EscharEx in a way that fits the existing and future treatment flow and reimbursement program while providing superior efficacy. Following the successful completion of this first cohort, we initiated a second cohort of 32 patients to demonstrate safety over extended period of application of 24 to 48 hours, which we believe will enhance convenience and compliance.

Patients with DFUs and VLUs are being randomized to either EscharEx or the [J vehicle] at the ratio of 2:1. We expect to complete the second cohort of EscharEx patients in this phase. Second Phase 2 study and to report the top line results around mid-2017. Data from the second Phase 2 study are important because there is a longstanding unmet medical need for an effective and rapid non-surgical debridement for chronic wounds.

The presence of eschar is a frequent cause of wound [notification] and the removal of eschar is a key step to commence healing. If not effectively treated, this wound can lead to severe complications including further infection and even amputations and mortality. Debridement is a critical first step to facilitate wound management and is complementary to the large and growing number of wound healing products, all of which require clean wound [bed].

We see a number of potential synergies with this product and expect they will be used sequentially with ours in clinical practice. With more than 1.3 million patients with DFU or VLU who undergo debridement each year in the US alone, EscharEx presents a very meaningful market opportunity. This is one of the reasons we are so very excited to be advancing our clinical plan.

Towards that end, we have submitted these data to the USFDA as part of our request for [admitting] to discuss the US [fever] program and we will meet with the agency in the coming months. Subject to agreements with the FDA, we plan to initiate the next EscharEx US study during 2017. In addition, we are in the process of validating a dedicated production line for EscharEx which we expect will be completed during 2017 as well.

EscharEx continues to be a key component in our strategy to build shareholder value by leveraging our proprietary technology and we look forward to updating you on our progress. Let me turn now to the view of our ongoing commercial and clinical progress with NexoBrid. We made great progress advancing NexoBrid towards becoming the standard of care in burn centers across Europe.

This is evidenced by the growing revenues, the number of patients treated with NexoBrid, the increasing number of centers treating and able to procure NexoBrid, additional countries accepting reimbursement for NexoBrid and the significant number of [op stocks] and award-winning presentations at premier burn conferences that highlights NexoBrid benefits.

As expected, the conversion of usage into revenue is enhanced by our market access and reimbursement efforts. [We are] gratified to have the authorities in Belgium and Italy approve pricing and reimbursement conditions for NexoBrid for the removal of eschar in patients with deep partial and full-thickness thermal burns which pricing in line with European list price.

With national reimbursement now in place, we continue to work on formula inclusion at the hospital and regional levels. While these local processes seem to be taking longer than expected, we see continued progress as we gain access region by region and expect to complete this process in these territories during 2017. We recognize that the key factor for widespread adoption of any [new disruptive] technology is reimbursement.

And a significant part of our market access efforts remain focused on securing funding. We continue to make meaningful progress and seeing more centers starting to buy NexoBrid across Europe. We also know that to enhance adoption it is important to integrate NexoBrid into the workflow of the burn center. We have made great inroads as evidenced by the increasing number of patients treated in those centers, by the lower percentage of NexoBrid units used for [sampling], and by the gradually increasing total body surface area treated by these centers.

As physicians gain more experience and confidence in the use of our product, they move from experimenting to usage and from usage to procurement. Speaking of TBSA, I would like to highlight the significance of the recently announced favorable data from our Phase 2 pharmacokinetic study with NexoBrid to treat severe burns with 4% to 30% TBSA. In this study, NexoBrid was applied to burns of up to 15% TBSA in one session.

And when the wound area to be treated was more than 15% TBSA, NexoBrid was applied in two separate sessions each up to 15% TBSA. The trial results show that the usage of NexoBrid was safe and effective. Importantly, the [PK] profile following NexoBrid's first and second topical application was comparable, a finding that suggests there's no concerns with accumulation or [resisting] following a second topical application.

This is important as you know that we have reported that we have already amended the US Phase 3 trial protocol which we call [detect] from debride and protect to include burns of up to 30% total body surface area. [Extra detect] study is also a possible commitment in Europe, we also obtained the European Medicine Agency endorsement for the increase in TBSA in the [detect] study.

We intend to use the data from the [PK] study - [the PK factor] study as well as the [PK] data in large burns that we will collect during the [detect] study to support a request to the FDA and to EMA to expand the label of NexoBrid to include larger burns. This will broaden the scope of eligible patients which from a commercial standpoint increase the number of NexoBrid units sold as a function of the larger surface area requiring debridement.

Our commercial efforts continue to be supported by significant presence at international and regional medical conferences for burn specialists where we continue to gain strong support from KOLs and physicians who are generating clinical and pharmacoeconomic data and sharing their hands-on experience. Since the initial European launch, we are proud to note NexoBrid [with merit] has been highlighted in hundreds of posters and all presentations at these important meetings.

Leading physicians have been demonstrating the benefits of NexoBrid in debriding severe burns to their fields, and highlighting its potential as the new standard of care in the treatment of severe burns. Just in the few recent months, I had the privilege of attending the Italian Burn Association conference, the German speaking conference, Burn Association conference, and the Israeli Burn Association conference, where a substantial portion of the scientific program over and above the sponsor symposiums, were about NexoBrid.

We see the same widespread interest at other international and European conferences as well. The magnitude of these presentations and the share of [voice] NexoBrid occupies in meetings illustrates the evolution taking place at European burn centers as NexoBrid is transitioning to become the new standard of care for severe burns.

Those of you that plan to attend a local burn conference in Europe [are better] to join us at the European burn conference in early September in Barcelona. We'd be able to obtain first hand impression on the revolution that burn care is going through in Europe since we introduced NexoBrid.

We will continue to support international and national conferences, as well as user meetings and centers of excellence gatherings among other initiatives knowing that peer to peer discussions directly influence the adoption of these starter technologies, such as NexoBrid.

We expect that the European experience and the magnitude of the growing clinical value of evidence in support of NexoBrid in the treatment of severe burns will be of great value when we launch NexoBrid in other markets, such as the US market. The presentations and the publications provide a substantial volume of clinical reference as well as [field] for reference and a knowledge base that did not exist when we launched NexoBrid in Europe, which leads me to our progress expanding NexoBrid into other global markets.

In addition to obtaining market authorization, and launching NexoBrid in Argentina earlier this year, we signed a new distribution agreement for NexoBrid in important countries, such as Japan, India and several South American countries, like Colombia, Chile and Peru. Our distributors have submitted registration file in countries such as Mexico, South Korea, India and Russia [with further declarations] under way for additional countries in Latin America and Japan.

We expect some of these filings to provide for marketing approval already in 2017. We will continue to work with our partners in each of these markets to support the regulatory submissions in launches. And in parallel, we will continue our efforts to expand the product global commercial reach to additional important countries.

Now, let's turn to the progress we've made with our clinical programs for NexoBrid, starting with our ongoing US DETECT clinical study, which is fully funded by BARDA, as you remember.

As a recap, the Phase 3 DETECT study is a prospective controlled, multinational, assessor-blinded Phase 3 study with 175 patient randomized to either NexoBrid standard of care or the gel vehicle in ratio of 3:3:1. There will be a follow up period of 12 months and 24 months. The study is expected to involve approximately 30 burn centers. The objective is to evaluate the efficacy and safety of NexoBrid in removing burn eschar earlier and reducing surgical needs in hospitalized patients with severe burns.

Complete eschar removal is the primary endpoint of the study and it will be tested against the vehicle arm. It is important to note that in the European Phase 3 study, the incident of complete debridement of EscharEx was 96.3%, whereas the incident of complete debridement of the gel vehicle in two Phase 2 studies conducted in the US was 0%.

The study also includes secondary endpoints, such as reduction in surgical burden, earlier eschar removal and blood loss, which will be tested against the standard of care arm in order to generate not only clinical data, but also pharmacoeconomical data, which is important for CMS and others.

Wound closure and long term [customer] risk will be assessed as a safety endpoint, and they will be tested against the standard of care as well. We expect to the acute top line data, which includes the primary, secondary and the safety endpoints, in the first half of 2018. Subject to successful completion of the acute phase of the study, we plan to approach the FDA to allow us to submit the BLA with the acute data and to supplement the 12 and 24 month follow up data, once it is available.

As I mentioned earlier, we recently amended the protocol of this study with the FDA to allow inclusion of patients with severe burns of up to 30% total body surface area. Beyond the clear commercial advantage of expanding the TBSA, there are also clear clinical benefits in burns with large TBSA; the early non-surgical removal of eschar has many potential benefits, especially since the presence of a large surface of contaminated eschar on the patient for a longer period of time can result in wound deterioration, infections, scars and other (inaudible).

Today, surgical excisions of large surfaces of eschar result in substantial surgical burden, which includes a number of co-morbidities, such as, for example, massive blood loss. Excisions to remove large surfaces of eschar is often limited by the availability of extensive donor cites or [by acceptable] conditions that might prohibit the patient from tolerating general anesthesia or the surgical procedures. In these cases, being able to non-surgically remove the eschar early may offer patients and physicians a real treatment breakthrough.

Going now to the pediatric study; in connection with our European approval of NexoBrid, we committed to a pediatric investigational plan to generate data to support the use of NexoBrid in children. Our Children Innovative Debridement study, which we call CIDS, Children Innovative Debridement Study, is a Phase 3, multicenter, multinational, randomized, controlled, open-label study in children with thermal burns.

The objective of the study are to evaluate the efficacy and safety of NexoBrid compared with standard of care in hospitalized children with severe thermal burns of 1%-30% total body surface area.

The study is underway in Europe in accordance with the design in those [via near] with three pre-defined stages. Stage 1 included patients from the age of 4 to 18. Stage 2 includes patients from the age of 1 to 18. And Stage 3 includes patients from birth to age 18.

Most recently we were very delighted to report that based on the commendation of the study data safety [also] involved after blindly reviewing the collated CIDS study data and after obtaining the EMA endorsement, we initiated a second stage of the study that allows inclusion of younger pediatric patients beginning at the minimum age of 1 instead of 4 years old. This is the age bracket where there is the largest incidence of pediatric burns.

The current management of pediatric burns requires intensive medical therapy and typically necessitating several traumatic surgical procedures to remove the eschar and prevent secondary complications. However, burn surgery in pediatric patients is even more demanding than in adults for a variety of reasons.

For example, pediatric anesthesia is difficult due to limited vascular access, small blood and fluid volumes, proneness to respiratory attack problems and acute heat loss and narrow safety margins for all anesthetic parameters.

Children's thinner skin and smaller structures leave narrow safety margins for surgical intervention so excisional debridement often results in sacrificing the entire skin and can even cause harm to underlying structures.

The smaller body surface offers less skin graft donor site area to cover the surgically excised eschar.

And because pediatric burn patients tend to suffer from scalding burns that are not easily diagnosed, definitive treatment is often further delayed.

By now, with NexoBrid, nearly 100 children have been treated in completed clinical studies. NexoBrid has demonstrated multiple clinical benefits in children, including earlier eschar removal, reduced number and extent of surgical excision, reduced incidence of grafting and extent of grafting area, reduction in eschar removal blood loss with no deleterious effect on time to wound closure, and showed comparable long term cosmesis and function scores.

In addition, the overall safety profile of pediatric patients treated with NexoBrid did not indicate any specific safety concerns and was similar to that of other patients. Our clinical results to date support the use of NexoBrid in such patients. And we are looking forward to advancing the clinical development of NexoBrid to enable future minimal invasive treatment for these delicate patients.

Another market we are developing for NexoBrid is preparedness for mass casualty incidence. We were delighted to have the [abstract] highlighting NexoBrid as the treatment for burn mass casualties awarded again, Best Poster at the International Conference on Disaster and Military Medicine [and we have the seal], as it underscores the important role NexoBrid can play in the management of such event.

We continue to promote NexoBrid [oral] in managing burn mass casualties with the support and recognition from important government agencies and officials, such as BARDA in the US and the president and government of Romania, following the Colectiv nightclub disaster in Bucharest last year that resulted in severe burn injuries in over 150 young people. We continue to pursue opportunities with government and military groups world-wide, as we see this as an important commercial market where we can build a big customer base and make a difference in the ability of this government to manage mass casualty events.

With that overview of our commercial and clinical programs, let me turn the call over to Sharon Malka, for a review of our 2016 fourth quarter and yearend financials. Sharon?

Thank you, Gal, and good morning, everyone. As you have heard from Gal, [to our] 2016, we made important [in holds] in transitioning NexoBrid to becoming the standard of care in an expanding commercial reach. This is illustrated by our growing revenues at NexoBrid adoption is [including] and the use of NexoBrid start converting into sales following [the] payment of the investments.

Looking ahead, we enter 2017 well-positioned. Due to the growing NexoBrid sales, a continued support of our US clinical programs by BARDA and our commitment to ongoing financial disciplines. Moving forward, we expect to advance NexoBrid commercial expansion and to fund our ongoing development programs for NexoBrid, EscharEx and our pipeline product.

Turning now to our financial results, we are pleased to report that revenues in the fourth quarter of 2016 increased about 60% to $430,000 as from $267,000 in the prior year's fourth quarter. Revenues for the full year of 2016 increased about 160% to approximately $1.6 million at from $0.6 million for 2015. Operating expenses for the fourth quarter of 2016 down $2.3 million, from $6.4 million a year ago, to $4.1 million.

The decrease was primarily due to an increase of participation by BARDA and the Israeli Innovation Authority compared with fourth quarter of 2015, resulting at about $1.5 million reduction in research and development expenses net of participation and $0.8 million decrease in selling, general and [administrative] expenses.

The operating expenses for 2016 were $19.6 million, in line with our budget and up slightly from $19.3 million for 2015. Most statistically, research and development expenses, net of participation in 2016 increased about $1.1 million to $7.1 million from $6 million in 2015. The increase was comprised of an increase of about $3.8 million related to NexoBrid with clinical trials, and an increase of $2.8 million related to EscharEx and [product] candidate 003 development, which was partially offset by an increase of about $5.6 million of participation from BARDA and the Israeli Innovation Authority.

Selling, general and administrative expenses in 2016 decreased $0.8 million to $12.5 million from $13.3 million in 2015. The net loss for the fourth quarter of 2016 was $1.9 million, or $0.09 per share compared with a loss of $7.8 million of $0.36 per share for the fourth quarter of 2015. The decrease in net loss was [at the] result of the [for mentioned] decrease in operating expenses and of non-cash financial income from the revaluation of contingent liabilities recorded in 2016.

The net los for 2016 was $18.9 million or $0.86 per share, compared with a net loss of $22.1 million, or $1.02 per share, in 2015. The decrease in net loss was attributed to higher revenue in 2016, as well as non-cash financial income from revaluation of continent liabilities which recorded in 2016. Adjusted EBITDA for the fourth quarter of 2016 was the loss of $3.5 million compared with a loss of $6 million for the same quarter last year.

The adjusted EBITDA for the full year 2016 was the loss of $16.4 million, down 9% from a loss of $18.1 million for 2015, primarily due to increase in revenues. A reconciliation of the adjusted EBITDA to the GAAP net loss is included in our press release and [six care which Gal said] earlier this morning.

Turning now to our balance sheet, as of December 31, 2016, the Company had cash and short-term deposits of approximately $30 million and had no debt. During 2016, we remained on-budget and utilized approximately $15.7 million in cash to fund operating activities, which was below our guidance of $17 million as [further] offset by [certain] license repayment from distributor.

Our BARDA contract continues to positively affect our financials by offsetting NexoBrid development costs and at the latest stage, we expect it to contribute to revenues as the result of procurement commitment. Throughout 2017, the Company will continue to invest primarily in research and development, both for NexoBrid which is predominantly funded by BARDA, and for EscharEx, as well as in sales and marketing activities in order to advance the adoption of NexoBrid in Europe. As a result, cash use for 2017 is expected to be in the range of $15 million to $17 million.

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

Thank you, Sharon. We have an exciting year ahead which we expect will be highlighted by a number of value-creating milestones and achievements. We expect top line data from the second cohort of our Phase 2 clinical trial of EscharEx in chronic wounds. We look forward to FDA guidance on the US [clinical and] development program for EscharEx to treate chronic wounds. And subject to agreement with FDA, we expect to initiate the next phase of our US EscharEx clinical program this year.

We accept continued commercial adoption of NexoBrid in Europe. We look forward to global expansion of NexoBrid [and certain] of our [in connection] of [expenditures] may gain regulatory approval and [non ship] products. And we also look forward to continued publication and presentation of data highlighting the clinical benefits of NexoBrid, as well as the cost effectiveness of NexoBrid.

We'll keep you in [comprised] of our progress on all of these undertakings and we would like to thank you for your continued interest and support as we build MediWound into a leading, burn and wound care company.

And now Operator, kindly open the call for questions.

(Operator Instructions) Our first question comes from Jason Wittes of Aegis Capital. Your line is open.

First off, in terms of the European experience, are you finding that doctors are treated patients limited to 15% total body surface area and coverage or are they going beyond that, at this point?

Thank you for the question, Jason. Well, currently I will say, in most centers, physicians are starting to treat small burns, not even 50% TBSA, which is also inflected in the revenue. So most centers start with small burns, like a palm of a hand, of 1% TBSA that can go to 3% TBSA and we see a continuous expansion and growth in this process as they gain more experience and they start to use the product on larger areas.

At the same time, in certain countries I would say or in certain centers I will say, we see physicians attempting obviously without our promotions, to treat patients of larger areas, even pediatrics. In Italy, they have treated a [child] with 70% TBSA and saved his life [in David]. And we see additional centers in consensus to this [inter-data] where they treat large surface areas of burns because as I said, in large surfaces -- areas of burns, you have such inflammatory process going on in the body with such a large portion of the body is covered by a burn, by the [head count].

So they see this patient is good candidate for NexoBrid because if they take him to the operating room, they're going to suffer such a trauma. They're going to lose so much blood. Some of them cannot even go through a surgery. So they'll hope in something like NexoBrid. So we already see physicians doing that, as well.

But if, I would like to say, on a general note, [even if] we start small and then grow the TBSA as they gain more experience.

OK that's very helpful and also was curious - the pediatric trial, is [Baris] funding that or is that something you're self funding?

Currently we are fund this - we are funding this study ourselves because this study not's being conducted in the US and - but I think your question is a good question.

OK, thanks and then -

As you know, I would say maybe a couple of sentences about that. There are pediatric patients in the US and pediatric centers are not always the centers that also treat adults.

We cannot and no one can predict, and hopefully it will never happen, but nobody can preclude a situation where pediatrics will be involved in a mass casualty event. So it is important to prepare also the pediatric centers in the US for such an event.

In the US we are exempt from a pediatric investigation of [trials] because we are an orphan drug. In Europe we had to sign on a pediatric investigation [amend] as a condition to being able to submit a file for adults.

So although we have data on more than 100 children and the data in children is even better than in adults, still we have to do this, what you call a [kids] study. But because the study currently is not being performed in the US, BARDA is obviously not participating.

OK. Great, that's helpful. And one last question, in terms of formulation for EscharEx, in the conversation you're going to have with the FDA, I think you said mid-year, are you going to discuss multiple formulations or are you going to stick with one and go with that for the pivotal trials?

We have a [started] with FDA both formulations for EscharEx. We believe that our second formulation of EscharEx to in terms of its advantages because we are able to get greater efficacy in lower doses. It's very easy to use and we get extended exclusivity. Our patents will cover the product for at least 2037.

FDA is aware of both formulations, we provided all the data on both formulations. Both in terms of the clinical [walk] and [still see] [walk], and our intention is following FDA's advice to engage or to commence the pivotal program with only one formulation obviously.

OK and which - do you have a sense of which formulation that's going to be? The lower concentration or the higher dose?

We would hope that this would be with the advanced formulation but we are waiting to see FDA feedback on that and based on that feedback we'll know how to proceed.

Great, I'll jump back with you, thanks guys.

Our next question comes from David Mears of Wells Fargo. Your line is open.

Hi this is Katie Brennan on for David. Good morning and thanks for taking the question. Do you expect any rest of world approvals and launches in 2017 and when do expect that revenues from those regions will begin to kind of contribute meaningfully to the top line?

And on that same kind of line, when do you expect any - are there any further reimbursement approvals in Europe that you expect will also contribute meaningfully to revenue in 2017?

Hi Katie and thank you for the question. So for the first question we have - our partners have submitted the registration files in seven countries in the international market. These include Mexico, South Korea, India as well as others. We do expect to gain approval in some of these markets in 2017.

Again, we are dependent on the regulatory process we don't always have full control of the authorities but looking at the expected timelines we would expect to get approval in 2017 in some of these markets.

Once they have an approval they have to prepare for a launch. So they have to build -- to buy initial stock. Unlike in Europe here we are sending [vile] by [vile] to each center, in these countries we are supplying them with the entire launch stock once they go to launch. So we do believe that - hopefully with everything working out they will issue such orders in 2017.

As for your other question regarding Europe, as a - as you know Europe is very fragmented in the different - the [imbursement] process I would say. So, if you are referring to a national level reimbursement then after obtaining Italy and Belgium we are looking for a decision, let's say, either if not in Europe but it is in other countries that we are very interested in.

And we are working to generate local pharmacoeconomic data. In Spain, for example, because some of the authorities they are - they see the - let's say the international pharmacoeconomic data but they want local pharmacoeconomic data. So in 2017 we are working to generate and there are some works being done and I think that we will also see some publications coming in the future of local pharmacoeconomic data. Once this data will be available then we will try to approach the forces, let's say in Spain, and see if we can go into a national level reimbursement. Because currently in Spain we are studying without national level reimbursement we are studying at the hospital and doing not too bad I would in that country.

In addition to that, as I said, in other countries it's not always the national level reimbursement pathway that we can follow or we need to follow. So we try to work with all kind of local initiatives, for example, we try to work with the German [benefit] association to go for what is called an OPS code which is similar to, I would say a CBD code in the US maybe.

Again, this has to be led by the - by the physicians but we are working closely with them to submit such requests for an OPS code. We are working with them every year to submit a [nube] application. A [nube] application is an application where you get extra payment over and above the DLG. The challenge that we have with that sometimes is that this body say that if NexoBrid is cost effective, why do the centers need an extra payment?

But we are working on all these initiatives to do that. And in England, for example, again we have to go to a center by center [formal] process, there's no nice national reimbursement process. And the way we work in the UK is that - we don't want to do a big [something] program because you're not allowed to supply product to the center before you have [formal] inclusion.

So we kind of tell them, we are looking - we are willing to do all the efforts that you would like, training, centers of excellence, you name it, but you need to place an order. So in some centers we already started to get orders and initiated commercial activities in the UK and in some centers we are still working on that and, let's say, putting the pressure or building the pressure in the center by the physicians on the administrations to get this local processes ongoing so that they can start experimenting and using NexoBrid.

I hope that I addressed your question.

OK. Thank you.

Thank you.

Our next question comes from Jay Olson of Oppenheimer. You're line is open.

Hi, thank you for taking my questions. I guess just in terms of fourth quarter sales, they were down a little bit from the third quarter. Is there any additional details you can provide to help us understand why sales declined in the fourth quarter?

And then, I guess, just looking ahead to 2017 any financial guidance you can give us on as we forecast sales for this year?

Hi Jay. So as to revenues in fourth quarter versus the revenues in the third quarter - so we know that during the fourth quarter some of the hospitals in specific countries were already utilized their overall budget in 2016.

So basically, at least the last two months of the year they cannot buy additional products. So this is one factor that impacts fourth quarter versus third quarter. While the other one is in fact specific three or four orders that were in-between Q3 and Q4 and by accounting decision was part of Q3 instead of Q4 and classified as revenue in Q3. So it's nothing in which we can identify specifically.

As to the guidance for 2017 - so, I don't know, because we aren't in the launch phase yet we do not provide guidance in terms of revenues but we provide our guidance in terms of [test use] and, as we said before, we expected [test use] in 2017 taking into account the [rip up] in revenues and financing by [BARDA] and the R&D activities just [Gal] mentioned in his detailed discussion before would be abot 15 to 17 million for the 2017.

And just to provide a little bit more color on the same thing or maybe specific examples. So one center with such example is, for example, Madrid. This is one of our leading centers in Europe and Madrid continue to treat patients in November and December but could not purchase NexoBrid because they already exhausted the budget in 2016 because there was no national level reimbursement in Spain once the hospital budget was exhausted.

He could use to treat patients but couldn't pay or couldn't buy the product. This is maybe one example of why four was a little bit lower than three. And, as for the timing, some of the orders came, I would say, in the last few days of the third quarter so since these centers had a little bit of stock both just before Q4 they did not issue and order during Q4 and this might be another reason for a small offset between Q3 and Q4.

OK. Thank you, that's very helpful. And then, I guess, just on the costs of goods. It seemed like there was a significant increase in the cost of goods. Can you help us understand what was going on there?

In three, it was decreasing the cost of goods. 2015 cost of goods in our financials were 2.5 million versus 2.1 in 2016. The reason basically behind this reduce in the cost of goods is because of all the support that the manufacturing which was allotted to R&D activities in 2017.

And if we are analyze this cost of goods as a percentage of revenues, we see that the loss is decreasing towards a [equal deepened] in the financial.

If you analyze the cost in terms of adjusted EBITDA, means we excluded our [monetization], depreciation and [shares] compensation. But [can show you] that it was [costly] in 2016, which is the first time that we have a cost [profit].

Okay, I was looking specifically at the cost of goods in the fourth quarter versus the third quarter. And how should we think about that as we forecast 2017?

Okay, so between the quarters [it's] all a matter of allotment of a manufacturing cost to the R&D and based on the R&D activities that the manufacturing team is doing while [in said] quarter. However, looking forward to 2017, we believe that we will [translation] - that we will have a transition from a growth [loss] like we have in 2016 and we'll get to a growth profit in 2017. It will be at the beginning, in terms of financial growth profit, a minimal growth profit. But it will increase as revenues increasing.

And then just one question on EscharEx; can you please remind us what the European regulatory process is?

So obviously [when we] develop EscharEx we do it on a global level. I would say that our main focus is the U.S. In the U.S. there is a [easy market inbribement] that [says] $350 million to the best of our knowledge. The U.S. positions are more use to a prescribing [in market debribements]. There is a reimbursement [call] in place, the cost flows are in place. So obviously, when we need to [weigh] the priority. I would say - so our first priority would be the U.S. markets. But, doing that, we [were] looking at the global development. So our intentions are first to gain the FDA feedback. And once we gain the FDA feedback, to adjust whatever needs to be adjusted and then to approach EMA and to seek their advice; to see if they would be inclined to include this plan also for the Europeans or whether we [will] need to do some adjustments.

So our development plan, I would say in general - also with [Nexo is] we always have to go [through] the effort of harmonizing between the FDA and the EMA. And I think as a smart company, to be honest we were quite successful in doing that [same thing] with the DETECT study. It was a big challenge to have both EMA and the FDA agree on a protocol [and an] indication that a drug [was] never been developed for, at least in the last 50 years.

So we [seek] first the FDA approach - the FDA feedback. And once we get it we [would] share it with EMA to see whether EMA can further contribute to the protocols and we'll go from there.

Anthony Petrone of Jefferies. (Operator Instructions)

[Poor connection, I think]. France, they were still a process that was ongoing. So any update there would be helpful. And then, in terms of just the regions in Belgium and Italy, as you've continued to discuss formulary processes there is there any potential for stocking orders once regional coverage is secured? And then I have a couple of follow ups.

So just to make sure that I heard all your questions, because at the beginning it was muted I think; you had one question about France, you had one question about [versions in] Italy. Any other questions that you asked?

No, those two specifically. So what is the update on France. And then, regionally, in Italy and Belgium is [there] the potential for stocking orders once formulary coverage is secured.

So starting with France; France is a special country I would say. Because although we have a national level - we have centralized [procedure] approval, so we are approved to sell the product in France; in order to be able to supply [all that] to the public system in France, you have to be included in the [rather collective experiment] with the French government. And it's the only country in Europe that we are aware of that you are not allowed to physically supply the product to a hospital without having first - even for free, without [even] first have this agreement.

Now, we had [the] long discussion with the French Ministry of Health. Initially they said, "Okay, you can start selling the product in private hospitals." But perhaps one should have thought about that there are no private hospitals in France [for] burn. Burn's [often in the] public sector, not at the private sector.

I think part of the challenges that we are facing are because there are no burn specialists sitting on [these] committees that are evaluating [this thing]. And [we've got] the burn association in France aware of the situation. And I think [that they] are also trying to make some contact with the [French soldiers] and try to explain to them that; 1. all Europe is marching forward and France is staying behind. I think the challenge of managing [mass] casualties is something to think about as we see things that happen in the region.

And I hope that our discussions with them, [the] burn association discussions with them, the patients [associations] discussions with them would accelerate the [very democratic focuses] that we [are] undergoing in France. And would enable us to provide [the] product in France and start moving forward there.

[As for] Italy; we got additional reimbursement in June and started to go province by province to have the product listed in the province [level]. By now I think we have about two-thirds of the country - actually, this week we got Sicily, which was a good sign for [our Italy, which] usually regionally takes a very long time to finish the process. And we actually this week got the green light from Sicily and we believe that by the end of this year we will finish all the regions in Italy. And once they have green light from the region, usually the [put in all them]. So we [hoped] that Italy would be much more [permanent, let's say], in 2016. And we hopeful that Italy will be permanent in 2017 as well.

And then maybe a follow up on NexoBrid would be in the U.S.; just as it relates to the amended DETECT study, and you provide an update on time to entry for the U.S.? It sounds like the data submission will be 1Q 2018, maybe just an update on timing for entry into the U.S. And then one last question on EscharEx, thanks.

So in 2018; we believe that we will have the top line data in the first half of 2018. Assuming that we have the top line data, as I said, if it's positive practically we have the primary, the secondary and the safety data of this patient. [The only thing we're] miss is the 12 month follow up. Now, if the [acute] data is positive there is [no] reason to believe that the long term data will not be positive; because we just need to show [no disastrous] effects. And we already have an 89 patient study showing that the long term effect of NexoBrid is just as good, if not better, in terms of [cost medicine] function.

So with that, we would go to FDA and ask FDA to submit the file already [at] the [acute] data stage. If this would [walk] out, then we plan [off topic] to submit a file, let's say in early 2019. If the FDA gets us an approval within 12 months, then that would be 2020 to go - to get the approval and go to the markets.

The last one for me would be EscharEx in terms of the data that was recently presented. One of the nuances of the study was that the wound sizes treated by EscharEx were larger and the age of the wounds was older. And so I'm just wondering, is this product being positioned sort of as an alternative for the most severe case? Or is just deliberately designed this way just to increase the attractiveness of EscharEx?

I think EscharEx should be used in any wound that [it's] indicated for and that's [caper beneficial]. Unlike other products, I would say - without going into any details, but other [enzymes] let's say in the U.S., that has conducted eight clinical studies and seems to be successful in one. Which as a small 27 patient study conducted in [one center], open label [against] a gel vehicle. [Well], they show after 42 days there [was evidence of] successfully complete wounds.

If you look at all these wounds - [and] most studies, by the way, the main wound size was 0.5 square centimeters which is very small. In the EscharEx study, the main wound size was 33.6 square centimeters and the age of the wound was more than 72 weeks old. And we did that because we want to show that, unlike other products that have to show wound closure and therefore are trying to target a very small wound so it [would] be possible to close such wounds in 12 [or] 14 weeks; Eschar can be used in any size of wound, in any duration of time of this wound.

We [will] try to focus on DFUs and VLUs, but our first [place to] study showed that the product can be effective in pressure sours. If can be effective in post-surgical complications. It be effective in [traumatized think skin]. It can be effective in even tattoos [or] things like that. So what [we will] try to do, we have to focus when we do the development plan. Based on our market research, we see that there is a great opportunity in DFUs and VLUs. As I said, 1.3 million Americans - if the cost of treatment is [between] $1,000 to $2,000, that's over $1 billion opportunity just in the U.S. alone. Forget about Europe and the [rest] that we discussed before. So this is where we're start, but I would say the sky's the limit.

There are no further questions, I'd like to turn the call back over to Mr. Cohen for any closing remarks.

Thank you for your questions and for your continued interest in MediWound We look forward to updating you again when we report our first quarter 2017 financial results in early [May]. Thank you very much. [Have a good day].

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.