Mediwound Ltd (MDWD) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MediWound First Quarter 2019 Conference Call. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Jeremy Feffer. Please go ahead.

Thank you, Chris, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the first quarter of 2019. You may access that release on the website under the Investors tab. With us today are Steve Wills, Chairman of the Board; and Sharon Malka, Chief Executive Officer. Following management's 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 forecast due to 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 cautionary note 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 material result -- that could cause actual results to differ materially from those anticipated in the forward-looking statements. The conference call is the property of MediWound and any recording or rebroadcast is expressly prohibited without the consent -- written consent of MediWound.

Now I would like to turn the call over to Steve Wills, Chairman of the Board. Steve?

Thank you, Jeremy. Good morning, good afternoon, everyone, and thank you for joining us today. First quarter 2019 has been very eventful for MediWound with a series of significant announcements and strategic developments. First, in January, we announced positive data from our pivotal Phase III DETECT study with NexoBrid in severe thermal burns, meeting primary and all secondary endpoints with statistically significant results. The results were robust and demonstrated clear significant benefit for patients.

In early May, on the heels of these data, we entered into exclusive license and supply agreements with Vericel to market NexoBrid in North America. This collaboration is strategic for both parties and leverages Vericel's commercial infrastructure and expertise with its already established sales and marketing team. Additionally, the funds from the Vericel deal will allow us to significantly advance development of EscharEx, our topical biologic drug candidate for the debridement of chronic and other hard-to-heal wounds through the FDA BLA filing. We will continue to be opportunistic in seeking collaborations for NexoBrid in other markets and with the assessment of potential strategic opportunities for EscharEx as this development program advances towards regulatory approval.

Finally, this quarter, we welcome Sharon to his new role of CEO, as Gal Cohen announced in March his plans to step down. We wish Gal good fortune with his future endeavors and thank him for his tireless efforts in his 12 years as CEO and appreciate his work to bring the company to this point, where we have positive pivotal data for NexoBrid, a North American license deal with a clear path to the U.S. markets, and a strategic asset in EscharEx that we believe will be a meaningful medical treatment for patients and a driver of value for MediWound.

Over the years, Sharon has demonstrated his leadership abilities and has gained the trust and respect of those around him. The Board and I appreciate the ease with which this transition has occurred. And we look forward to his guidance as he leads the company on the execution of our strategic vision. We welcome Sharon to the CEO position, and I'll look forward to my continued involvement with him.

With that, it is now my pleasure to turn the call over to Sharon. Sharon?

Thank you, Steve, and good morning, everyone. It is my pleasure to be here this morning and provide an overview of our accomplishments this past quarter. As Steve said, MediWound had a very active start to this year with several significant milestones achieved, including the positive Phase III data for NexoBrid and the licensing agreement that provided a clear path to the U.S. commercial markets.

On NexoBrid, we published earlier this year positive top line results from our pivotal U.S. Phase III DETECT clinical study to treat patients with deep partial thickness and full-thickness thermal burns. This study met its primary endpoint of complete eschar removal as well as secondary endpoints of reduction in the need for surgical eschar removal, earlier eschar removal and blood loss. Those are both positive results across all endpoints, which corroborate our previous positive EU Phase III clinical study results, clearly demonstrate the significant beneficial impact NexoBrid has on burn patient as a new paradigm in burn care management. We continue to plan for U.S. BLA submission towards the end of the year subject to FDA concurrence in a pre-BLA meeting, which we plan to have soon, and we'll keep you informed as preparation progress.

The Vericel deal, which includes a $17.5 million upfront payment, a $7.5 million payment contingent upon U.S. BLA approval, tiered royalty payments and up to $125 million in annual sales milestones provides both clinical and commercial validation for NexoBrid as a new paradigm in the burn care management.

Vericel is an ideal commercial partner to drive NexoBrid adoption in the U.S. market for a number of reasons. First, Vericel operates sales and marketing team in the U.S. targeting the burn centers. Second, Vericel knows the U.S. burn care market extremely well and has significant expertise in the burn care market, particularly, the customers in the reimbursement landscape. And third, Vericel's organizational culture is very similar to our own.

In summary, we believe Vericel is uniquely positioned to leverage the medical need and to maximize the commercial potential of NexoBrid in North America. With the proceed generated from this collaboration, combined with our current cash in hand, we are well positioned to optimize and significantly advance our EscharEx program through BLA filing. We remain very excited about the potential of EscharEx for the debridement of chronic and other hard-to-heal wounds. Our enthusiasm for EscharEx and its commercial opportunity is derived by both the solid demand of existing topical enzymatic debridement treatments that generates annual U.S. sales of hundreds of millions of dollars and by the medical benefit EscharEx demonstrated in the recent clinical trials.

Additionally, current clinical treatment practices and the existing reimbursement for enzymatic debridement suggests a favorable market environment for a new, more effective debridement treatment. We believe EscharEx represents a significant commercial opportunity as physicians may find EscharEx competitive product relative to current standard of care, offering a shorter debridement period than the products on the market today.

As a reminder, EscharEx Phase II study demonstrated statistically significant superiority in the incidence of complete debridement with no deleterious effect on wound healing as well as a comparable safety profile. We are very pleased to have obtained FDA concurrence on the primary endpoints for the pivotal program to being incidence of complete debridement versus the gel vehicle, and that wound closure will be a safety endpoint to demonstrate there is no deleterious effect as in our previous successful trials. As requested by the FDA, we submitted additional information on suggested secondary efficacy endpoints. And subject to FDA agreement, we plan to initiate the next step of EscharEx U.S. clinical development program in the next few months.

Turning now to our financial results. Revenues for the first quarter of 2019 were $0.5 million, flat compared to first quarter last year. Gross profit during the quarter was $0.15 million. Research and development expenses for the first quarter net of participations were $1.3 million, flat compared to last year. Selling, general and administrative expenses in the first quarter were $2.4 million, an increase of 14% compared to $2.1 million in the same period last year as a result of onetime management transition costs.

Operating loss in the first quarter was $3.6 million compared to $3.7 million in the same period last year. The company posted a net loss of $4.1 million or $0.15 per share for the first quarter of 2019 compared with a net loss of $4.6 million or $0.17 per share for the first quarter of 2018. The adjusted EBITDA for the first quarter was loss of $2.9 million compared with the loss of $2.8 million for the prior year period. A reconciliation of 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 March 31, 2019, the company had cash and cash equivalents of $21.5 million compared with $23.6 million at year-end of 2018, utilizing about $2.1 million in cash to fund ongoing operating activities during the first quarter of 2019.

Looking ahead, we believe that the existing cash, combined with the proceeds generated from the collaboration with Vericel, will provide sufficient funds enabling us to significantly advance the ongoing development of EscharEx through BLA filing, while NexoBrid becomes a self-funded product as its research and development programs are funded by BARDA. As a result, the company expects cash use for ongoing operating activities in 2019 to be in the range of $12 million to $14 million.

We're actively searching for a new CFO, and we'll update as soon as we have news. As you can appreciate, we believe it is important to have a person with not only the right experience but also the right fit for the company and its culture. In the meantime, we are pleased to have a very capable team supporting the company as we complete the search.

To recap, this has been a very active period for us, and we look forward to continuing to progress our programs forward and achieving additional important milestones, including filing our BLA for the NexoBrid in the first quarter of this year, continuing the recruitment in our pediatric Phase III study also in the U.S. pediatric burn centers, and initiating our clinical program for EscharEx in the U.S.

With that, it is now my pleasure to open the call for Q&A. Operator?

(Operator Instructions) And our first question comes from the line of Raj Denhoy with Jefferies.

Wonder if maybe I could start with EscharEx. You noted that you expect to begin the trial in next few months. I just wanted to see if that was a little bit of a push from where it was before. I think we had previously talked about it, perhaps, being in the second half of 2019. Is there -- is that still the timing? Or is there a little bit more of a delay there?

Thank you, Raj, for the question. So the short answer is, no, there is no change. As we stated before, we wait for the FDA agreement regarding the information we submitted as to additional secondary endpoints. And as soon as we get this agreement, we will start the study. Our preparation already done, we have engagement in place with the CRO and other vendors and the hospital themself. And we are waiting just to get this feedback and initiate the study.

Okay. That's clear. Maybe just if I could transition to NexoBrid quickly. So you mentioned that you're still potentially looking for additional partners for NexoBrid, perhaps, for other geographies of the United States. Are those discussions active at this point? My understanding was, after you concluded the Vericel deal that you were sort of taking a step back from looking for additional partners. But it sounds like maybe you're still engaged in that activity.

So Steve, can you please...

Yes. This is Steve. We -- I mean when we're going through the process, we really -- when we're talking to certain companies that -- there were discussions around a global deal. We ended up doing the North American deal and specifically, Vericel doesn't play outside of North America. So as we go forward now, we're -- from a completeness standpoint, we're looking hard at the -- our existing structure, how many people are on the ground, is that the best way to increase the market? We're sensitive that we've been losing a little bit of money in the rest of the world. But we're also being opportunistic. There were certain parties that were only interested in certain territories outside of North America. So we are now reengage -- or starting the process to reengage with those individuals. So the -- in the coming months or definitely within -- on the next conference call, Sharon will go into a bit more detail on our strategy there. But more than likely, we'll be definitely advancing marketing approvals in other select areas, trying to get the right distribution partner in that regard. But again, there were several companies that expressed an interest in certain regions outside of North America that we're going to be reengaging shortly.

That's helpful. And actually segues my next question, which is just really the prospects for NexoBrid outside of the United States, it was $0.5 million in the quarter, little lower than we were expecting and flat on last year. And so the question is really do you have plans? And it sounds like you do to potentially accelerate the growth there. And is there anything you can offer and it sounds like maybe you are going to give us more later. But anything over the short term in terms of whether we should expect that number to accelerate? Or is that $0.5 million a quarter sort of the expected run rate at this point?

Sharon?

Yes. So Raj, as we did mention before, we are currently fine-tune our strategy regarding rest of the world or the ex non-America territories. And we'll share the information as soon as we have it, probably towards the next earning call. But our goal is, as you mentioned, we have now BARDA to fund all the R&D expenses of NexoBrid. And we plan to -- the NexoBrid will be self-funded, means we'll not lose money in note -- in none of our territories that we're active in. Does this answer your question?

Yes, it does. It sounds like you're, again, fine-tuning the plans there. Maybe you'll give us more in the next few quarters in terms of prospects there. Maybe just lastly just on the cash position. Just wanted to confirm the milestone payment expected from Vericel this year, $17.5 million. That is not contingent upon any sort of approvals or anything? That is a straight payment from them you expect this year. And then also, it sounds like, perhaps, the first BARDA sales could occur this year, and you're expected to receive some portion of that as well. Is that correct in terms of additional cash to expect this year?

Correct. First of all, the upfront payment was already received after the end of the first quarter. So we will see it in the next quarter cash balance. So you -- it's correct. And as to BARDA, we do anticipate that the BARDA procurement will initiate in the second half of this year. And we'll see revenues and booked revenues from the BARDA committed procurement already in the second half of 2019.

And our next question comes from the line of Josh Jennings with Cowen.

I just want to follow up initially on EscharEx. And it sounds like you're going to start the commencement of the trial in the next few months. But I just wanted to sanity check our expectations for enrollment and then FDA review. Should we be thinking about a 1-year enrollment period approximately? And then 1-year follow-up? And then FDA review from there. Is that appropriate?

Jennings, thank you for the question. So first of all, as you know that we have a CDP plan for the EscharEx development in order to have it ready for BLA submission. And because EscharEx is not an orphan drug, it requires at least 2 adequately controlled studies. We are now fine-tuning the best alternatives and scenarios regarding this CDP. And we'll share this information as soon as we have it assigned in tandems to the feedback that we will get from the FDA. But to your point, the overall period of this clinical development program is estimated about 3 years approximately to -- and the overall cost of this development program is about $30 million to $40 million.

Great. And then just thinking about what you submitted the FDA and the secondary endpoints for the EscharEx IDE trial? I mean it sounds like you got some input or learnings from some of your strategic discussions. And I was just wondering if you could share any of the kind of updated secondary endpoints that you're having discussion with the FDA. What are those secondary endpoints that you want to proceed with?

So as you know and as a reminder, we agreed with the FDA and have the FDA concurrence regarding the primary endpoint to be incidence of complete debridement, exactly like we have in the previous study of EscharEx as well as the DETECT study. Not only that, we agreed also that wound closure will be a safety measurement for our pivotal program. Regarding the additional information requested by the FDA, we suggested several secondary endpoints, some of them to support pharmacoeconomic plans, some of them to support additional benefits and clinical benefits of the EscharEx versus the placebo and standard of care. And as soon as we get the feedback, we will share this information with you. But basically, it's -- some of those additional endpoints are ones that we get some feedback from the market that it is better to have it part of the study, or we gained some information in the previous studies and we just want to demonstrate it also in the pivotal plan.

So just to be clear, it sounds like those are pretty straightforward and shouldn't cause a hold up in terms of the FDA signing off from the IDE design and moving forward with enrollment. Is that a fair way to think about it?

Correct.

Great. And just on NexoBrid. And I'm just following up on Raj's questions about -- around the path forward here in international markets. Are you seeing any increased enthusiasm or utilization post the NexoBrid Phase III data? Is it a thing that could potentially be a catalyst for international burn centers to adopt the product or utilize it at a higher clip? How do you see that Phase III data transiting through? Is acute data good enough or do we need to see the 12-month data or even longer for it to have an impact on international clinicians in adoption of utilization trends?

So as a background, doing the reminder just to -- we are focusing basically in 3 territories or 3 continent regarding the, what we call, the international market out of EU and U.S. The first one is the Latin America countries; second is the CIS, Russia and those countries; and the third one is the Asia-Pacific countries, in which we have several distribution agreements with local distributors. Those countries or those distributors are using the following information: First, they have the European data, the European marketing approval and the European file. Second, they have more and more information gathered from the commercial setting, mainly from Europe publication, pharmacoeconomic independent cost-effectiveness study and of course, medical support from the European commercial setting. And third is the DETECT results that corroborate both the Phase III in Europe as well as the data that we generate from the market. All of those information are used by those distributors, each one in his country. As you know, some of those countries it's just a process of submitting the European file and get the approval, and it may happen quicker. And in some countries, there will be some bridges -- bridge studies or bridge clinical studies to have before the approval. So we are getting progress in each one of those country. We provide them the support with no investment in terms of cash. And we anticipate that during this year, we will get one additional marketing approval in several countries that we already have an agreement, and they submitted already the file. And two, as mentioned by Steve, obtaining additional distribution agreement in few more countries.

Excellent. And then just lastly, on the NexoBrid data. I mean when should we be expecting the acute data to be presented? And then just thinking about publication time lines, I mean, can you publish the acute data or do you need to have the 12-month data in order to move forward the publication to peer review journal?

Thank you for the questions. So to this specific question, we announced the top line results in January. We are currently gathering and getting more and more information and guiding the acute analysis in order to prepare a CSR. And as soon as we have this CSR, probably it would be associated with publication and more information about the study as the former CSR, which we will also share with the FDA.

(Operator Instructions) And our next question comes from the line of Jay Olson with Oppenheimer.

I have 2 questions. The first one is related to your evaluation of strategic options for EscharEx. Since you decided to retain the ex U.S. rights to NexoBrid, does that suggest that you plan to leverage your ex U.S. commercial infrastructure for EscharEx? And if you do a deal for EscharEx, should we expect that to be a U.S.-only deal similar to the NexoBrid deal? And then I have a follow-up question.

This is Steve. The -- they're actually mutually exclusive there. We're concentrating on outside of North America with the NexoBrid as we've talked about a bit with some additional distributors in the select countries and reengaging some of the partners. That infrastructure, that call point that we have in place, that wouldn't rollover as well for the EscharEx treatment paradigm. So in our mind it's mutually exclusive. At this stage, and this is one of the things we talked about on the last call when we announced the Vericel deal and just briefly earlier, we -- because of the cash flow, the upfront payment, the anticipated procurement orders from BARDA, we're in that nice flexible position whereby we can definitely concentrate with the EscharEx, optimize the program, take it all the way through the BLA filing. But we haven't made the decision yet, and that's not a decision that you would make now and that you wouldn't change on if we are going to push to build our own commercial sales force and sell the EscharEx. It's -- we're going to be data driven but that data is going to be coming in over the next year or 2. If something -- if somebody wants to initiate discussions, move aggressively there, would we consider that? The answer is, yes. We look at those types of items, but we don't have to do any of those items. So it's nice not to have any of those financing constraints over your head. With -- and I mentioned this on the last call. With the NexoBrid, we were not going to commercialize that. So it was absolutely stage appropriate to find the right commercial partner for the NexoBrid asset. And Sharon and I and the Board, we believe we've done that with the licensing of Vericel. So hopefully that was responsive. If it's -- if you want me to add more color or Sharon to jump in.

Oh, no, it's super helpful. It's very clear. And then just as a follow up, as you described, now that you have a deal for NexoBrid in the U.S. and with EscharEx development entirely funded, it seems like you might want to explore life cycle planning. So as you look out into the future beyond EscharEx, what sort of new indications are you considering beside, for example, DBU (sic) [DFU] and VLU? And specifically, I'm curious if you've considered any potential applications for medical aesthetics such as treatment of wrinkles, scars, skin discoloration or other cosmetic opportunities that you might pursue?

Sharon?

Thank you, Jay, for the question. So as you know, MediWound developed throughout the last, let's say, almost 20 years a platform technology, enzymatic platform technology, that is the base -- on basis of the NexoBrid as well as the EscharEx. So regarding the chronic wound landscape, we will start probably with one of the indication or either VLU, DFU or combination. But as you know, you have to get indication or to develop the product for each of those indication and you have DFU, you have VLU. Pressure ulcers is a huge opportunity mainly in the U.S. because it's a problem of the hospital themselves that cause those pressure ulcers. So this is one direction. The other one, of course, is we have a third product candidate named [Jack] or 003, which is basically injectable form of the API that we developed. And this injectable form basically followed the development of Xiaflex. And it can be directed to -- indicated to several disease indications. One of them can be connective tissues disorder as Dupuytren, Peyronie, Frozen shoulders or other. Another alternative that we are considering and have some data regarding the market potential is, of course, scars as you mentioned, hypertrophic scars. And now that we have the funds following the deal with Vericel's collaboration and Vericel, we believe that towards the end of the year or beginning of next year, we will be in a position to advance this specific sales program of the self-injectable product and to start the clinical development stage of this product.

And that does close today's question-and-answer session. I would now like to turn the call back to Sharon Malka for any further remarks.

Thank you, everyone, for joining us today. We look forward to updating you again on our next quarterly update call. Thank you. Have a nice day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may now disconnect. And everyone, have a great day.