Mediwound Ltd (MDWD) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MediWound Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded. (Operator Instructions) I'd like to turn the floor over to Jeremy [Sefur]. Please go ahead.

Thank you, Katherine, and good morning, everyone. Earlier today, MediWound issued a press release announcing third quarter 2017 financial results and business updates. You may access that release on their website under the investors tab.

Leading the call today is Gal Cohen, President and Chief Executive Officer of MediWound, who will provide an update on the company's programs and review upcoming milestones.

Then, we will hear from Sharon Malka, Chief Financial Officer, who will summarize the company's financial results.

After the prepared remarks, we will open the call for Q&A.

Before we begin, I would like to remind everyone that statements made during this call, including the Q&A session, relating to MediWound's expected future performance, future business prospects or future events or plans, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecasts due the impact of many factors beyond the control of MediWound.

The company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise.

Participants are directed to the cautionary notes set forth in today's press release as well as the risk factors set forth in MediWound's annual report filed with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

This conference call is the property of MediWound, and any recording or rebroadcast is expressly prohibited without the written consent of MediWound.

At this time, I would like to turn the call over to Gal Cohen. Gal?

Thank you, Jeremy, and good morning, everyone. It is a pleasure to speak with you today to provide an update on our business and to review our third quarter results.

We continue to build on our first half momentum and are progressing in our clinical development programs and commercial plans.

During the quarter, we successfully completed a public offering of 5.04 million shares, including the overallotment, from which we generated total net proceeds of $22.8 million from our major existing shareholders as well as new investors.

These financings provides us with resources to fund our research and development activities, primarily the clinical development of EscharEx. In addition, as communicated, BARDA committed an additional $32 million to fund NexoBrid R&D activities, bringing its total commitment to fund R&D to $56 million.

BARDA also has an option to fund an additional $10 million of R&D work. And in addition to that, BARDA -- the BARDA contract also calls for a $16 million procurement commitment for NexoBrid pending FDA emergency authorization, with an option to procure an additional $50 million.

All in all, the deal with BARDA provides up to $132 million in non-dilutive financing that will fully support our NexoBrid R&D costs up to BLA, including our ongoing Phase III DETECT study in adults as well as our Phase III pediatric study and its planned expansion to include Pediatric Burns Centers in the U.S.

Importantly, the upsized BARDA deal allows us to turn NexoBrid into a self-funded opportunity, as BARDA covers all its R&D programs, and we intend to correlate the sales and marketing expenses to the growth of NexoBrid sales. This will enable us to divert our liquidity towards our EscharEx opportunity.

Moving to our clinical developments. We successfully completed the second cohort of our Phase II study, evaluating EscharEx, our topical biological drug, for the debridement of dead or damaged tissues in diabetic foot ulcers and venous leg ulcers.

This cohort included 38 DFU or VLU patients who were randomized to EscharEx or to the hydrogel. The study achieved its primary objective of demonstrating safety over extended period of application of EscharEx, with no material safety concerns identified.

We continue to be enthusiastic about the commercial opportunity of EscharEx, given the large and growing market of people who suffer from chronic wounds, including an estimate of 1.3 million Americans with DFU or VLU, who undergo debridement each year.

The cost of debridement for these patients is between $1,000 to $2,000, so we see a very significant market opportunity in the U.S.

Our excitement is driven by both the solid demand for existing topical enzymatic debridement that currently generates annual U.S. sales of over $340 million and by the market dynamics for existing prescription and treatment practices as well as existing reimbursement for enzymatic debridement.

We look forward to keeping you updated on our progress with EscharEx.

Moving to NexoBrid. We are proud that NexoBrid was highlighted in 43 presentations at the European Burns Association Conference. Moreover, a scientific poster highlighting European consensus statements on the benefit of NexoBrid was endorsed by the European Burn Association and awarded the best poster presentation at that conference. It is the third consecutive year that the scientific presentations highlighting the therapeutic benefits of NexoBrid, was awarded best presentation in a premier burn conference.

The poster contained 68 different consensus statements from leading European burn specialists on the use and the benefit of NexoBrid after collectively treating over 500 patients with NexoBrid.

Among the key findings, the experts agreed that eschar removal with NexoBrid can improve outcomes for patients with severe burns by reducing infection rates, the number of wounds requiring surgical excision, blood loss, the need for autografting and hospital length of stay.

In addition, we are happy to receive yesterday, the positive decision of the European Commission on the 5-year renewal of NexoBrid marketing authorization after the European Medicines Agency, EMA, reviewed the data that accumulated since NexoBrid was approved.

Going now to our commercial strategy, to expand the use of NexoBrid in international markets. As part of the strategy, we collaborate with local companies that assume the financial commitment and diligence and possess the expertise in the local regulatory market access and marketing efforts.

We recently announced an agreement with Holy Stone Healthcare to distribute NexoBrid in Taiwan for the treatment of severe burns.

We expect to begin commercial sales in Taiwan, once they secure local regulatory approvals, which they expect will take about 2 years.

This agreement is similar to other local distribution agreements for NexoBrid that we currently have in many countries, in Latin America, in South Korea, in Japan, in India, and in Russia.

On a separate note, we are pleased to announce that Steve Wills will -- who joined our board earlier this year, has been now appointed as the Chairman of the Board. Steve brings decades of strategic, financial and operational expertise. We would like to thank our previous Chairman, Aharon, for his servicing the board, and wish him best in his future endeavors.

Finally, we announced few days ago that The Tel Aviv District Court ruled that MediWound is obligated to purchase PolyHeal's shares for approximately $6.75 million plus applicable interest, which represents the purchase price for the total number of shares that the buyout auction agreement contemplates would be acquired by us from the shareholders of PolyHeal. The court ordered us to purchase shares in PolyHeal from the 3 PolyHeal shareholders that filed the claim, on the basis of their actual shareholdings in PolyHeal, as of January 15, 2013, for approximately $1.5 million. This claim relates to a previous agreement we entered into with Teva and PolyHeal to develop, manufacture and sale PolyHeal's wound healing product.

The full details of the matter are provided in Form 6-K that we filed earlier this week.

We are continuing to evaluate the implications of the court decision and are considering appealing as well as other possible steps.

We will now turn the call over to Sharon Malka, for review of our 2017 third quarter financials. Sharon?

Thank you, Gal, and good morning, everyone. We are pleased with our financial performance in the third quarter of 2017, which was highlighted by our improved liquidity position and by growing revenues combined with disciplined cost management.

Most notably, we are thrilled with one, BARDA's increased commitment to fund NexoBrid development, as BARDA's financing will now fully fund our development programs for NexoBrid; and two, with our recently successful public equity offering, which provided us with an additional $22.8 million in net proceeds to support our EscharEx pivotal program.

Looking ahead, as NexoBrid becomes a self-funded product, we expect to focus our resources to fund our development programs for EscharEx.

Turning now to our financial results. We are pleased to report that revenues in the third quarter of 2017, increased 43% to $739,000, up from $518,000 in the third quarter of 2016.

Gross profit for the third quarter of 2017 was $400,000, compared to a gross profit of $44,000 in the prior-year period.

Research and development expenses, net of participations for the third quarter of 2017, were $0.8 million compared with $2.4 million for the third quarter 2016.

The decrease in net research and development expenses was primarily due to a decrease of about $0.5 million related to EscharEx clinical trial and nonclinical development, and an increase of about $1 million in participations by BARDA and the Israeli Innovation Authority.

Selling, general and administrative expenses in the third quarter of 2017, decreased to $2.4 million from $2.6 million in the third quarter of 2016. Operating loss for the third quarter of 2017, was $2.8 million, down 43% from $4.5 million during the same period last year.

The decrease was primarily due to improvements in gross margin and the aforementioned decrease of about $1.8 million in operating expenses compared to the third quarter of 2016.

Net loss for the third quarter of 2017, was $11 million or $0.49 per share, compared with a net loss of $5.7 million or $0.26 per share for the third quarter of 2016.

The increase in net loss was comprised of onetime impairment loss as a result of a full provision for the PolyHeal's share purchase price plus the accrued interest in the amount of $7.5 million that was recorded in the last quarter within the loss from discontinued operation pursuant to the district court ruling.

This was offset by a decrease of about $2.2 million in the net loss from continuing operation, primarily due to the decrease of $1.8 million in operating expenses.

Adjusted EBITDA for the third quarter of 2017, was a loss of $2.3 million compared with a loss of $4.2 million for the third quarter of 2016.

Looking at the year-to-date results versus the prior-year period. Revenues for the first 9 months of 2017 were about $2 million, compared with a $1.1 million for the first 9 months of 2016, an increase of 74%. Year-to-date gross profit this year was $0.8 million, compared with a gross loss of $0.2 million in the prior year period, an improvement of approximately $1 million.

This improvement was a combination of increased sales and improved efficiencies.

Operating loss for the first 9 months of 2017, was $10.2 million, an improvement of 35% versus an operating loss of $15.6 million in the first month of 2016. The decrease was primarily due to the positive change in gross profit, a decrease of about $2 million in research and development expenses, net of participation and a decrease of about $2.5 million in selling, general and administrative expenses, compared to the prior year period.

Net loss for the 9 months ended September 30, 2017, was $19.8 million or $0.90 per share compared with a net loss of $17 million or $0.78 per share for the same period in 2016. The change in net loss was as a result of, one, a decrease in net loss from continuing operations, primarily due to a $5.5 million decrease in operating loss, which was offset by an increase of $0.8 million net financial expenses, which was largely comprised of noncash revaluation of contingent labilities, resulting a loss per share for -- from continuing operations of $0.55 per share; and two, a onetime loss from discontinued operation of $7.5 million, following a full provision for the purchase of PolyHeal shares, reflecting its purchase price plus the accrued interest that was recorded as a result of the district court ruling, resulting a loss per share from discontinued operations of $0.34 per share.

Adjusted EBITDA for the 9 months of 2017, was a loss of $8.7 million compared with a loss of $12.9 million for the same period of 2016.

A reconciliation of the adjusted EBITDA to GAAP net income is included in the press release we filed with the SEC earlier this morning.

Turning now to our balance sheet. As of September 30, 2017, the company had cash and short-term deposit of $40.6 million, with this -- and this compares with $30 million as of December 31, 2016. This includes the $22.8 million of net proceeds we generated from the public offering we completed in September. We remained on budget and utilized about $13.1 million in cash to fund operating activities during the first 9 months of 2017.

Looking ahead, we will continue to invest primarily in research and development efforts, and we intend to allocate the majority of our cash resources to advance the development of EscharEx in chronic wounds while the NexoBrid development plans are fully funded by BARDA.

We currently anticipate that existing cash resources together with BARDA's R&D funding and the procurement from BARDA will be sufficient to enable us to complete both our ongoing Phase III clinical programs for NexoBrid and our planned Phase III clinical program for EscharEx.

As a result of the increased funding by BARDA, we expect that cash use for ongoing operating activities in 2017 will be towards the lower end of our $15 million to $17 million guidance.

In addition, we may bear an additional $1.5 million expense to purchase shares of PolyHeal pursuant to the district court ruling in the fourth quarter of 2017.

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

Thank you, Sharon. We look forward to continued progress during the remainder of 2017, as we continue to execute on our commercial and development programs. We will provide further updates about our 2018 plans on our fourth quarter earning call in February.

And now operator, kindly open the call for questions.

(Operator Instructions) We'll go to Bruce Nudell with SunTrust Robinson Humphrey.

Clearly, NexoBrid is a very interesting product. It's getting a lot of attention in the scientific clinical community. I guess, the question is, given the more cohesive reimbursement in the United States and perhaps more cohesive clinical practice pattern, should we be thinking of NexoBrid worldwide 3 years post-launch in the $50 million to $100 million or $75 million range? I mean, where should we be thinking about the midterm opportunity for NexoBrid, just given the frictions in the market that you've experienced in Europe? As counterbalanced by the -- how innovative the product really is?

Bruce, as you mentioned, we do believe that in the U.S. market, things would look different because of, I would say, mainly 4 or 5 reasons. Number one, as you mentioned, it's 1 market, not 14 or 13 markets with different reimbursement systems. Secondly, by the time that we will come to the U.S. market, there will be about a 1/4 of the burn centers in the U.S. that have already practiced the use of NexoBrid with the DETECT, the adult study and the pediatric study, both Phase II studies are going to be [according to] patients in the U.S. In addition to that, when we will come to the U.S, all the data that has been generated in Europe, will already be available, whereas unlike the situation in Europe. So we do agree with you that the situation in the U.S. is different than Europe, because it's less fragmented, different reimbursement systems and a different starting point. In terms of the overall, and, I would say, range that we can find ourselves with NexoBrid, I would say, it's difficult to predict the future with all the changes that have been going on in the last few years, just in the U.S. alone, but I would say that in the ranges of tens of dozens of millions, meaning, anything between $50 million to $100 million in the U.S. can be a reasonable assumption based on what you would think about market share, price and things like that.

Perfect. And just to clarify with regards to the chronic wound trial. It's -- basically, you think you'll have enough cash on hand to fully fund what was communicated as likely 2 trials, the DFU and VLU trial, is that correct?

Yes. I would turn the call to Sharon. Sharon can you, please, give us the details?

Bruce. So you are correct. We currently plan to have 2 Phase III trials, and the estimated cost as of today for this pivotal plan is about $40 million. The resources to fund this pivotal plan is as follows: our cash balance at the end of the year based on our guidance on cash use post '17, will be around the $35 million to $37 million. In addition, EscharEx is a project that is supported by the Israeli Innovation Authority, and the expected support of funds from the Israeli Innovation Authority is estimated at about $5 million to $7 million. And the third resource is the BARDA procure -- procurement. As you remember, BARDA has the commitment to procure NexoBrid in the total amount of $16 million, which will result as a contribution or a gross profit of about $12 million to $13 million. So overall, we have a cash resources of about $53 million to fund this pivotal plan going forward from the beginning of '18. And that's the reason we think we have the sufficient resources to end both the NexoBrid for the development program by the funding, and the EscharEx planned pivotal plan.

I guess it's bootstrap -- would you bootstrap -- how would you pay selling and marketing expenses in the U.S., I mean, is that sufficiently self-funding, or isn't a raise anticipated?

For the U.S. marketing of NexoBrid, we are considering the 2 alternatives that we have. Rather to replicate what we did in Europe and have our sales force team on ground and selling through the U.S. market, with more focus than the European one, or collaborate with a local distributor -- partnering with a local distributor providing the marketing rights to him and not having investment for this -- building this infrastructure for selling. Anyway, even if we will replicate what we did in Europe, probably we'll build this infrastructure on a stage-wise process in order to correlate the investment for anticipated ramp-up in the U.S.

In addition of that as if we haven't mentioned, first of all, when we talk about BARDA, I want to mention the gross profit, we have to remember that we don't have sales and marketing expenses for BARDA. So the gross profit is relatively the contribution, and we do have registration files in many, many countries around the world, including Japan, South Korea, in Mexico and so on and so forth. These are also expected to generate revenues going forward. And the period in which we will execute the pivotal program for EscharEx, that's in the next 2, 3 years, is at the time where we still most probably will not launch NexoBrid yet in the U.S., looking at the 2020 approval. So with this information, I think, I hope that we are able to address your question.

Our next question comes from David Maris with Wells Fargo.

This is Katie Brennan on for David Maris. First on the PolyHeal ruling. It seems that part of the reason why you believe you weren't required to make that milestone payment was because Teva hadn't made its milestone payment to you. Have you moved to receive those funds from Teva? And do you have any plans to try and recuperate some of that? And then, on EscharEx, given that you think that the cash balance will be enough to complete the Phase III clinical program, what -- can you give us an idea, kind of, what assumptions you're making on what that clinical program looks like? What the pivotal Phase III will entail? Or any expectation for when we might know more about that program?

Thank you. So as for the question about the PolyHeal agreement, you rightfully said that we inform Teva of the occurrence of the milestone under the 2010 PolyHeal agreements, upon achievement of which, Teva was required to invest an additional $6.75 million in exchange for the company's ordinary shares. And at this point in time, all we can comment is that we are continuing to evaluate the ruling and its legal and accounting implications and looking at our options, including a potential appeal. All the rest, I think, will need to be specified at the right venues.

One add-on before Gal will answer to address your second question, you just have to bear in mind that in terms of cash implication, in the short term, probably in the next quarter, the implication of this ruling will be about $1.5 million out of the $7.5 million. And the $6 million provision probably will be pending the appeal resolution for the midterm. Go ahead, Gal, for the next -- the assumption of the EscharEx pivotal program.

Yes. Sorry. Thank you. So the key assumptions for the EscharEx pivotal program, we are a -- looking to conduct 2 Phase III studies, 1 in DFU and 1 in VLU. Each study will have about 350 patients approximately. Our statisticians are working to build into this study and interim look after about 200 patients. And at this point in time, the prospective statistical plan would tell whether we need to increase the sample size to the full 350 or part of that or not need to increase it at all. The primary endpoint of the study is going to be incidents of complete debridement versus the gel vehicle, the placebo, and wound closure would be a safety measurement to assure that we don't have any deleterious effect on wound closure. So practically, we are replicating the Phase II study that we successfully completed and reported previously this year. Any other is -- specifically with regard to...

I have one quick follow-up on that. On the Phase III, will it be using the EscharEx II formulation or the original EscharEx formulation?

So this study is planned for the EscharEx -- the EscharEx, not the EscharEx 2 formulation. Because, as I mentioned, we are building the Phase III study on the results of the Phase II study that we have reported. So as we can power the endpoints and replicate the same effect that we did in the Phase II, now in the Phase III.

Our next question will come from Josh Jennings with Cowen.

I just wanted to follow up with a question on EscharEx. Is there any forthcoming data that we should have in our radar in front of the ID submission and subsequent approval?

With EscharEx, I think that the next upcoming milestone would be the initiation of the pivotal program in the U.S. We are in the process of doing all the operational activities that are required in order to do that. And we expect that next year, we will be in a position to open these studies in the U.S. And I think that this will be the next catalyst or next major step in regards to EscharEx in the U.S.

I just wanted to make sure we were -- we had that clear. On NexoBrid, just in terms of the reimbursement picture, any updates that you can provide in any of the countries where you are commercialized and is the cost-effectiveness paper helping this process? Are you taking up any new society support?

Thank you for the question. So, again, in Europe, as I mentioned, it's something that has to be looked at from a country to country perspective, and sometimes, even within countries. So I'll just give like a broad overview, okay? In Germany, we're not going for a national level reimbursement. We are working through the hospitals' budget by creating or we've created a budget impact tool that shows the hospitals that they are compensated by the DRG, and they save money by using the product as was captured in the pharmaco-economical paper that showed that with the use of NexoBrid, hospitals can save up to 30% of the cost of the DRG. In addition to that, the German Burn Association, not the company, but the German burn Association, submitted a request for what is called an OPS code for NexoBrid. This OPS code once it is granted would enable them later on to document the use of NexoBrid and to trigger the DRG just by the use of NexoBrid. So this is the market access or reimbursement activities that are going on in Germany. In Italy, we have full reimbursement on the national level. And in Italy, you have then to go to each region in Italy and get that cleared out on a regional basis. We have started to do that last year. And by now, I would say, we have about 2/3 of the regions in Italy that we passed the bureaucratical process of getting this thing done and we are able to generate orders from about 2/3 of the burn centers in Italy. In England, we are not going to a national level reimbursement, because of the local position. I will not go into all the details. So we go to hospital by hospital and put the product on the formulary of the hospital. We are doing this process, and I would say that by now, more than half or about half of the burn centers in the U.K. are able to procure the product, so they are local formularies. In Spain, again, we are working through the hospital budgets and we are able to generate revenues of orders from -- in most of the burn centers in Spain. These are the major countries.

Great. And then just lastly on potential near-term NexoBrid approvals. Should we still be thinking about some of those countries? You mentioned, I think, to answer an early question, South Korea, Mexico, Japan, India, Russia as potential approvals in the first half '18. And how are you thinking about launching in those countries? Do you have distributors lined up in those regions? And there's -- anything on the reimbursement front and any easier pathways in any of those territories?

So we do have distribution partners in all the countries that you've mentioned. We have distribution partners, in particular -- or a very large portion of Latin America already, Columbia, Brazil, Peru, Chile, Mexico, and so on, Argentina. We have distribution partners in Russia, in India, in South Korea, in Japan, now also in Taiwan. And obviously, we are extending these efforts to continue with that. The strategy behind it is that we don't -- it doesn't take part of our resources. We are not investing our own funds in doing so. This is the responsibility of the local partner. So the local partner is also leading the regulatory -- local regulatory submissions and the obtainment of market access in these countries. And we support them scientifically. We, first of all, provide them with the registration files. We address any questions that the authorities have about the data of the product. So we are relying on the plans of these distributors. The plans are -- or according to the information that we got from them, we do expect to get additional approvals during 2018 in countries like you mentioned, in Russia, South Korea and so on. And as soon as we are informed that we have got that, then we will be able to report that, obviously, to The Street.

Our next question comes from Jay Olson with Oppenheimer.

I was curious about the improvement in gross margins that we saw in the third quarter and then one of the earlier comments you made, and just in terms of how we should be modeling this longer term? Would I be right to think that your gross margins, eventually for NexoBrid, could get up to the 70% or 75% range for gross operating margins -- sorry, gross profit margins?

First of all, yes on the long term, on a steady state, the gross margin of NexoBrid would be around the 75% to 80%. I'd say, seeing our results for the 9 months of 2017, the gross margin is around the 40% for 9 months. We believe, it will be the same for this full year 2017, but it will increase modestly between the years as ramp-up of sales and gradually gets to the 75% to 80% on a steady state.

Okay, great. That's very helpful. And then congratulations on all the data at the European Burn Association. Is there anything, in particular, you would highlight there that you think could drive growth in some of the European markets that you mentioned or perhaps in new markets, maybe, some cost effectiveness or other data that you think could feel growth in those markets?

Yes, I think that there is a large volume of information coming from so many experts with 43 presentations, but I would highlight 2 subjects, I would say. One subject is cost-effectiveness. As I mentioned, we do have a budget impact tour, and we have what is called an HTA model, but the fact that now their local papers, done by third parties, that show that NexoBrid is cost-effective, with a paper from Italy showing a reduction of EUR 5,000 per patient, with a paper from Germany showing that NexoBrid can save up to 30% of the DRG cost, this is obviously very supportive when you come to discuss with reimbursement bodies as well as with regional bodies as well as with local pharmacies and hospitals. So one big element is cost-effectiveness. Another big element that I think would also be crucial as we go to the U.S., is long-term data. Long-term data at the end of day is the Holy Grail. Physicians wants the patient to have a better, long-term outcome, because the patient lives with that outcome for the rest of his life. It's not just the 30 days or 60 days or 40 days that a patient is hospitalized. Long-term data takes time to collect, because it's long-term. And we are starting to see now more and more papers showing that NexoBrid is able to generate better long-term results and because these patients have been treated for several years now and now they can -- they are able to collect that. We've seen a paper from Germany that talks about phases and we've seen a paper from Italy, comparing different case of long-term data -- of long-term benefits that show that NexoBrid was superior to surgical debridement. Last, but not least, I would say, one growth driver is the area of burns that are treated, because every -- you need one vial of 2 grams to treat 1% TBSA. So if you treat a 10% TBSA patient, it's like treating 10 patients with 1% TBSA. So we are, again, starting to see papers by physicians that are driving the size of TBSA that they are treating. Physicians in Europe started already to treat small wounds, because they wanted to get comfortable with the technology. But in the conference, there were physicians that presented areas that have been treated that even are above the 15% TBSA in the label. They even doubled and tripled this area, and this is obviously growth drivers in terms of revenues. Having said all that, I think that our financial reports show that we understand that Europe is a fragmented market. It's unlike the U.S. It's going to take time until we see NexoBrid becoming the standard of care. We are confident that it will become a standard of care, but it will take time. And in order to adjust for that as management, we are correlating the sales and marketing expenses to the ramp-up so that we can, as I mentioned, have NexoBrid as a self-funded product, R&D covered by BARDA, sales and marketing by the revenues, and invest our liquidity predominantly in EscharEx, which is certainly, in our eyes, an outstanding opportunity.

Our next question will come from Raj Denhoy with Jefferies.

This is Christian on for Raj. On enzymatic debridement, the $340 million U.S. debridement market opportunity is certainly significant, but given that EscharEx is still 3 to 4 years away from market entry, how fast do you see that market growing today on an annual basis? And then how much of that $340 million today do you see EscharEx as a specific product being able to address?

So first of all, unfortunately, we see a great growth in this market. It is reported that there is an 8% growth in the U.S. in chronic wounds due to obesity, aging and diabetes. And practically, this is an epidemic that is going on. There are 8.7 million Americans that have chronic wounds in the U.S., and we know that just in diabetic foot ulcers and venous leg ulcers, every year, there are 1.3 million Americans. So the size of the market is huge and, unfortunately, it seems that this market is going to continue to grow because of the factors that I mentioned. Looking at that market, as you've mentioned, enzymatic debridement currently with the current level of efficacy that it is able to provide, is already setting $340 million. In the market studies we have conducted with 230 eschar professionals, sharing with them EscharEx, what you call target product profile, what EscharEx is supposed to do, what EscharEx actually did in the Phase II study, showing that we can remove the eschar in practically less than 2 weeks and on average in 4 to 5 implications, which is practically in a week, these experts tends to think that we can take a substantial part of the entire market. And when they talk about the entire market, they are not just talking about the enzymatic debridement, which is about 20% of the market. They are also referring to the sharp debridement, which is about 60% of the market and they're also referring to the, what you call, autolytic debridement, which are the hydrogels and honey dressings and other means to do autolysis. So looking ahead would -- the way this market is going to evolve, the need for evidence going forward, the level of efficacy that EscharEx demonstrated in Phase II versus the existing efficacy of the current products, we particularly believe that this could be a very, very substantial opportunity.

Yes. So maybe following up on that. What gives you -- if you could just remind us, what gives you the confidence to take market share from the incumbent [Sentio] product? And if you could just remind us of the clinical and possible economic benefits of using EscharEx, in your view?

So the enzymatic debridements that are currently on the market, based on the publication -- the scientific publications that have been published, to the best of our knowledge, take about 4 or 6 to 8 weeks to debride a wound. In our Phase II study, we were able to show that we are able to debride 55% of these patients within, on average of 4 to 5 applications, so about a week. And we're talking about wounds. And if you look at that -- these studies of existing products, we're talking about wounds of about 0.5 square centimeter and up to 52 weeks of duration, we are talking about wounds that have been included in our studies of over 72 weeks of over 33 square centimeters. So the magnitude of the effect, should it replicate itself in Phase III studies and be able to be approved, is a different ballgame. Now let's look at this market, okay? Today, there are more than 100,000 Americans every year that lose a leg because of small chronic wounds we can't heal. So physicians don't want to send patients home to 6 to 8 weeks with treatment that might not provide them with advancement for weeks and weeks. And this is why 60% of these patients are going through sharp debridement. Despite the fact that these patients are elderly, they don't heal well, they take anticoagulated drugs and still patients -- physicians are doing sharp debridement. Now let's look at the reimbursement landscape. What insurance company would like to send a nurse to a patient's house for 6 to 8 weeks if they can send a nurse to a patient house for 1 week or 2 weeks? Let's look at patients. What patient would like to apply the product on himself for 6 to 8 weeks -- you know that compliance is a big issue in this market. When the progress is slow, the patient loses faith. With EscharEx, again, I'm just saying this is Phase II, it's not Phase III, and it's not an approved product yet, but from the existing information that we have currently, if you're able to debride a wound within approximately a week, and the patient sees progress almost on a daily basis, so it gives him the hope that it will give him a hope and will make him more compliant to the treatment. Taking into account that unlike NexoBrid, in which we need to revolutionize the market, with EscharEx, physicians in the U.S. are prescribing enzymatic debridement. Nurses and physicians are used to treat themselves in chronic wounds with enzymatic debridement. There is an existing reimbursement code in the market for debridement. There is a commercial validation with the product selling over $340 million. It was approved in the '60s. All this information supported by the market studies that we have done and other information that we have give us confidence that EscharEx is a very exciting opportunity.

Yes. So, just a follow-up on those numbers and then we can talk about offline as well. So, the $340 million of the wound debridement for this chronic wound market, you're saying that 20% is the total opportunity? So, would you say the total adjustable market for EscharEx is closer to the $1.5 million -- or $1.5 billion or above range? Is that the right way to think about it?

Yes. I can just quote the results of the market study that was conducted in 230 health care professionals. They believe that the market is divided as 60% sharp debridement, 20% enzymatic debridement and 20% autolytic debridement. They believe that we can take about close to a half of this market, and they refer to the entire market, the entire market. They don't think that we are going to replace sharp debridement in the U.S. tomorrow morning, but we're certainly going to be an add-on either before or after and in some cases replacement in terms of enzymatic debridement, which is the $340 million, we discussed it. And as for the autolytic debridement, they also believe that we can take a part of that, because, again, this product have limited efficacy. And again, subject to the fact that we will be able to approve the drug in the U.S. and that the drug will meet in Phase III the same result that it met in Phase II. So this is how they calculated it. They didn't take into account, by the way, the use of the drug in additional indications, because if you look at, for example, pressure sores, postsurgical complications, these are not much different than other chronic wounds like diabetic foot ulcers and so on, in many parts it has to do with debridement. So looking at that, there is a huge, huge market out there and the commercial validation by the product itself, hundreds and millions of dollars.

Thank you. We have no additional questions. I'd like to turn the floor back over to management for any additional or closing remarks.

Thank you, operator. And thank you, everyone, for joining the call today. We look forward to providing you with further updates on our fourth quarter call. Thank you very much, everyone. Have a good day.

Thank you. Ladies and gentlemen. Again, that does conclude today's conference. Thank you, all, again, for your participation. You may now disconnect.