Mediwound Ltd (MDWD) 2022 Q2 法說會逐字稿

Good day, and welcome to MediWound's Second Quarter 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Monique Kosse of LifeSci Advisors. Please go ahead.

Thank you, operator, and welcome, everyone. Earlier today, MediWound issued a press release announcing financial results for the second quarter ended June 30, 2022. You may access that release on the company's website under the Investors tab.

With us today are Ofer Gonen, Chief Executive Officer of MediWound; and Boaz Gur-Lavie, Chief Financial Officer. Following our 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 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 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.

The conference call is the property of MediWound, and any recording or rebroadcast is expressly prohibited without the written consent of MediWound. Now I would like to turn the call over to Ofer Gonen, Chief Executive Officer of MediWound. Ofer?

Thank you, Monique. Good morning, everyone. Welcome to our second quarter 2022 conference call to discuss our financial and operational highlights and provide you with our corporate updates.

I would like to begin by saying how proud I am of the accomplishments we made this quarter and note that this is my first earnings call as the new CEO of MediWound. May I add that my transition from being a Board member to becoming a CEO has been very smooth. This quarter, we had positive news across all of our programs, and the company is on a strong trajectory.

Before I begin my update, I would like to welcome Mr. Nachum (Homi) Shamir as our new Chairman of the Board; Dr. Rob Snyder as our Chief Medical Officer; and Mr. Tzvi Palash as our Chief Operating Officer.

Many of you already know Homi from his years as the CEO of Luminex and Given Imaging. He led both companies to M&A transactions valued at billions of dollars. We are honored to have him lead our Board and look forward to benefiting from his valuable insights and extensive experience.

Dr. Rob Snyder, a top-notch industry leader in Wound Care is an outstanding addition to our team. He joined us at the optimal time as EscharEx becomes our primary focus. Dr. Snyder is the past President of the U.S. Association of Advancement of Wound Care and the past President of the American Board of Wound Management. He published over 165 papers in peer-reviewed journals and served as principal investigator on over 65 randomized controlled trials for innovative wound healing products. He has been instrumental in the development of EscharEx. And as of January 1, 2023, he will assume full responsibility from Professor Lior Rosenberg, who will continue to support MediWound as its Medical Director.

Lastly, on that, Tzvi Palash has over 35 years of proven experience in commercial operation in the healthcare industry. His notable record of seamless execution makes him the right COO for MediWound.

Moving now to our performance. It was an excellent quarter for MediWound as we met all of our objectives we set for ourselves. We were successful in both EscharEx Phase 2 clinical trials. We received FDA's acceptance of the NexoBrid BLA resubmission, and we had positive preliminary results in the MW005-US Phase 1/2 study. On top of that, MediWound significantly enhanced the Board and its leadership team. And now we are ready to advance forward maximizing our strategic alternatives.

Let's discuss the EscharEx program. Last month, we hosted a KOL Investor Day with 4 industry leaders highlighting the current treatment practices, the unmet medical need and the potential commercial opportunity for EscharEx. We believe EscharEx has the potential to be a blockbuster. The Phase 2 data from both clinical studies were robust and demonstrated that EscharEx is safe, well tolerated and effective. Primary and secondary endpoints were achieved with statistical significance.

EscharEx is superior to gel vehicle and to non-surgical standard of care in all the relevant parameters. It is better in the incidence of complete debridement, better in number of applications needed and much better in the time to achieve complete debridement. On average, less than 4 applications are required to achieve a complete debridement with EscharEx compared to nearly 13 with nonsurgical standard of care. Median time to complete debridement is 9 days for patients treated with EscharEx compared to 59 days for patients treated with nonsurgical standard of care. These are huge differences.

Additionally, its strong effect on the reduction of biofilm and bacteria burden further demonstrates EscharEx's superiority over the other debridement modalities. Our market research, which was conducted by a third party, suggests that based on those results, it is anticipated that EscharEx will draw market share from all other debridement modalities, not just from the enzymatic and the autolytic debridement, but also from sharp debridement which is currently considered the most effective standard of care and comprise approximately 50% of this market.

As we look at the sales of the current commercial enzymatic debridement agent and drawing additional market share from other modalities, we are optimistic about the commercial opportunity. We believe that we can become a significant player in this $2 billion total debridement market. We aim to be the first choice for the millions of patients suffering from chronic wounds. I strongly encourage you to view the webinar of our KOL event, which is available on our website for an in-depth review of EscharEx's capabilities and its potential market.

Since announcing our Phase 2 data, we see growing interest from potential strategic players, and we are pleased to have several options to continue advancing this therapy. We are evaluating all possibilities, including collaboration with a potential partner or developing it independently. No matter the pathway, we are moving forward. We will develop EscharEx for both VLUs and DFUs. The development costs for additional territories is marginal. Therefore, we will be developing it for the United States, for Europe and for other international markets. We believe that global approach will also speed up our time to market.

Our next step is to meet with the FDA in the second half of this year to discuss the Phase 3 protocol. We will have more to say about this once we gain clarity on the trial design and the regulatory pathway going forward. We believe that EscharEx clinical development program is derisked not only because of the robust data generated to date, but given the fact that it has the same API as NexoBrid, which is a commercial product with more than 10,000 patients successfully treated worldwide.

Moving to our NexoBrid program. We announced last week that the FDA accepted our resubmission filing and has given a PDUFA date of January 1, 2023. We continue to have strong partnerships with BARDA and Vericel. And together, we are committed to NexoBrid becoming a commercial success in the United States. We continue to enroll new patients in the next expanded access program at 24 leading U.S. burn centers with over 165 burn patients who have already been treated successfully with NexoBrid to date. We are on track with our collaboration with the United States Department of Defense for the development of NexoBrid as a nonsurgical solution for field care burn treatment for the U.S. Army. The success of this program would open the gate for armies all over the world. It is also expected to simplify our supply chain costs and administration.

In Europe, we continue to see burn centers embrace NexoBrid as their standard of care and have seen consistent revenue growth. We are progressing with the pediatric label extension and expecting approval in the first half of 2023. Internationally, we continue to execute on our commercial strategy of global expansion. And currently, NexoBrid is already approved in 41 countries. Later this year, we anticipate additional marketing approvals in the larger markets, including Japan and India.

Lastly, we were pleased with the positive initial data from our U.S. Phase 1/2 study of MW005 for the treatment of basal cell carcinoma, BCC. The data shows MW005 to be safe and well tolerated with a majority of patients who completed the study achieved complete histological clearance of their target lesions. These encouraging results suggest that we are on the right path to offer a topical treatment for patients with BCC that would be an alternative to surgery. The market is definitely ready for a safe, effective and patient-friendly topical solution for BCC. This is another validation for our technology platform.

To conclude, we are fundamentally in a very strong position. We believe we have a winner with EscharEx with multiple option moving forward. We have a potential approval in the United States for NexoBrid with an excellent commercial partner, and we have a pipeline of follow-on therapies with MW005 in BCC with very encouraging initial data.

Let me now turn the call over to Boaz for a brief review of our financials. Boaz?

Thank you, Ofer, and good morning, everyone. Total revenue for the second quarter of 2022 were $4.7 million compared to $6.1 million for the second quarter of 2021. This was primarily due to a decrease in revenues from products and licenses of $1.9 million compared to $3 million in the second quarter of 2021. This resulted from $0.7 million decrease in emergency stockpile procurement by BARDA and $0.6 million shift in revenue due to the temporary shortage in the supply chain of gel jars. We have managed to address this issue and expect to regain some of the revenues in the third quarter of 2022.

Gross profit was $1.1 million or 24% of net revenue compared to a gross profit of $2.4 million or 39% of net revenues for the second quarter of 2021, resulting from the decrease in revenues from products and licenses. Operating expenses were $4.8 million compared to $5.3 million in the second quarter of 2021. The decrease in expenses was primarily driven by the completion of the company's U.S. Phase 2 EscharEx trials. Operating loss was $3.7 million compared to $2.9 million in the second quarter of 2021. Net loss was $4.4 million or $0.13 per share compared to a net loss of $3.2 million or $0.12 per share for the second quarter of 2021. Adjusted EBITDA was a loss of $2.8 million compared to a loss of $2 million for the second quarter of 2021.

Moving to year-to-date 2022 financial results. Total revenues for the first half of 2022 were $9.1 million compared to $11.9 million in the first half of 2021. Revenues from products and licenses in the first half of 2022 were $3.2 million compared to $5.9 million for the first half of 2021. This was primarily caused by a decrease in emergency stockpile procurement by BARDA. Also, as stated before, it also included $0.6 million revenue shift due to the temporary supply chain shortage, and we expect to regain some of the revenue in the third quarter of 2022. Operating loss was $7 million compared with an operating loss of $4.8 million in the first half of 2021. Net loss was $7.9 million or $0.26 per share compared to a net loss of $6 million or $0.22 per share for the first half of 2021. Adjusted EBITDA was a loss of $5.4 million compared to a loss of $3.3 million for the first half of 2021.

Moving now to balance sheet highlights. As of June 30, 2022, MediWound had $10.4 million in cash and short-term investments compared with $11 million as of December 31, 2021, and no debt. MediWound utilized $6.4 million in the second quarter of 2022 for its operational activities, which was affected by $1.8 million delay in collection from customers subsequently received in July $0.6 million shift in revenue for the third quarter due to the temporary shortage in supply chain. In addition, cash used for the quarter included $0.6 million in commissions related to the equity raised during the first quarter. The company is updating its cash used for 2022 to be between USD13 million to USD 15 million from the USD 11 million to USD 13 million due to the impact of management changes and projected revenue shifting to 2022.

With that, I have concluded my financial overview, and I'll now turn the call back over to Ofer. Ofer?

Thank you, Boaz. I'm very proud of our accomplishments this quarter. We have made significant strides across our pipeline of game-changing therapies. While we believe NexoBrid's potential FDA approval is a meaningful step forward for burn care in the United States, EscharEx remains our primary focus. We believe it has the potential to be a transformative treatment option for millions of patients suffering from chronic wounds and become a best-in-class debridement preference throughout the medical community. With EscharEx, we hope to capture a significant part of the $1 billion chronic wound debridement market in the United States.

I look forward to sharing continued progress throughout the second half of this year. Our anticipated milestones include meeting with the FDA in the second half of this year regarding the EscharEx Phase 3 study, a PDUFA date of January 1, 2023, with the potential U.S. approval of NexoBrid, and MW005 Phase 1/2 clinical results for basal cell carcinoma in the second half of 2022.

With that, it is now my pleasure to open the call for your questions. Operator?

(Operator Instructions) Your first question comes from the line of Josh Jennings from Cowen.

This is Bryan here for Josh. I wanted to start on NexoBrid. Just on the prelaunch activity, can you provide an update on the next protocol and whether that will be expanded ahead of the formal launch next year? And also for the BLA itself, have the 2 needed facility inspections been scheduled or perhaps more broadly, how are you thinking about the completion of those in the context of the FDA's current review times?

Okay. Bryan, thank you for those questions. So as we said, we continue to enroll patients for the next extended access program at 24 leading U.S. burn centers, and more than 165 patients have been already enrolled. Our plan is to increase the size of the next expanded access program at least until the approval of NexoBrid. We are working with BARDA and Vericel on that, and we will update you as soon as we have additional information about it. This is for the first question.

As for the second one, interesting you asked because we just had a discussion about it. As for the pre-approval inspection, we assume that the FDA will conduct a pre-approval inspection in both facilities in Israel and in Taiwan. As far as we know, FDA schedules a few facility inspections in Israel for the next couple of months. So we don't see an issue about it, and we think it will be as that.

Great. And I also wanted to follow up on your comments regarding possible partnerships or strategic options. And specific to EscharEx, when should investors expect a clear indication of the decision to either independently fund the Phase 3 program versus looking for a partner. And I guess my very specific question is, will that decision be settled by the end of the Phase 2 meeting with the FDA and prior to the start of the Phase 3 program? Or is this an ongoing process that could extend into Phase 3 development itself?

So as I said earlier, since announcing the Phase 2 data, we see growing interest from potential strategic players. We have several options. We have many inbound approaches. We are evaluating all the possibilities. As you can imagine, when we meet with the FDA in the fourth quarter, we will know better about how the Phase 3 looks like, how many patients are required and then we will know how much money is required in order to fund this trial so we can either sign a deal prior or after that. We don't have a decision, and we need to take such a decision. Bryan... Hello?

Your next question comes from the line of Ryan Zimmerman from BTIG.

Good to connect with everyone this morning. Maybe just to follow up on a couple of other topics. One, the supply chain dynamics that impacted product revenues in the third quarter. It sounds like they're fully resolved, Boaz, but can you just give us a little more color there? And is this something that you think shouldn't come up again in terms of just getting the appropriate products for the international sales?

This temporary shortage in supply chain related to gel jars, which is part of the key for NexoBrid and gel. That, as we indicated, affected us with approximately $0.6 million, which most of that will be regained in Q3. Last week, we got 20,000 gel jars. So we had enough now inventory for the next 1.5 years. So we believe that we have resolved it and currently working on replenishment of all the orders that were pending. So we believe that's something we've overcome already and first look forward to continue to support our customers.

That's helpful. And 20,000 sounds like it's certainly enough. The second question I have, Ofer, is if you could just talk a little bit about BARDA's plans to support a pediatric study? And just where BARDA stands in terms of continued support for NexoBrid and just how to think about the potential for BARDA revenue over the next few quarters and into '23?

Okay. It's a good question. Thank you. I will answer something that I cannot answer. I'm not allowed to, but as you can imagine...

The speaker's line has just been disconnected. One moment while we reconnect the line. Ofer, do you hear me?

Yes.

Okay. Let me tell I have you... Ofer, you may go ahead.

Okay. Ryan, I'm sorry about that. I don't know if you heard my answer...

We kind of locked it to start there, Ofer. Sorry.

Okay. I'm sorry about that. So as for BARDA, as you can imagine, we have a very good relationship with them. NexoBrid is considered a strategic program for BARDA. They supported it quite substantially in the past. We have a few programs going forward. we are speaking about replenishment. We are speaking about pediatric label extension. We have many plans going forward, and we just see positive with that specific collaboration in the future.

Okay. That's helpful. And then if I could just ask one more and then hop back in queue. But just following up from the previous question, and you've talked about this over since you've joined the company in terms of interest in terms of partnering or striking some sort of deal on EscharEx. And it'd just be helpful to know kind of what you consider an ideal partner, as we think about potential partners for you guys, be it a comprehensive advanced wound care player or a pharmaceutical company. I mean, what do you think about in terms of the things you're looking for in a partner? And the financial terms aside, what is it that you believe can bring the best value for EscharEx?

Okay. And as you saw from my background, in my previous career, I made the many transactions, many M&A transactions, many collaborations with big pharma and made many strategic agreements with all kinds of pharmaceutical companies. in MediWound. there is a high probability that we have an option to do here something like that as well. So the answer for your question is yes, we have an option to do deals with pharmaceutical companies, with biotech companies and with wound care companies. The reason is that the market is huge. And if you look at the number of approved biotech drugs in the wound care space, you see that the number is somewhere between 0 to 2.

Therefore, this asset is considered very unique, and you cannot find a significant player in the field that is indifferent to the results that we had in the Phase 2 study of EscharEx. Having said that, I want to be very clear. We are not looking for a partner to license EscharEx in the United States. We think that the way to have approval is not that long and it's not that expensive. And we don't want to let go percentage of the drug at this stage. But we can look at other avenues such as other territories or all kind of collaborations around that. But the ideal transaction, and I want to make it clear, is not to license the deal, the EscharEx in North America as we did with NexoBrid.

Your next question comes from the line of Francois Brisebois from Oppenheimer.

This is Daniel on for Frank. Congrats on the quarter, and congrats Ofer on your transition to CEO. Firstly, if I could start with the market research for EscharEx. Based on these efficacy signals you have seen so far, be it speed of complete debridement and improvement of biomarkers, is it sufficient to, are these sufficient to shift the standard of care where a nonsurgical debridement option like EscharEx is used as first-line therapy as a replacement for surgical options?

I think that they definitely touch upon the most important aspect, Daniel, because when we did the market research and we approached dozens of physicians and when they saw the capabilities or the characteristics of product X, they claim all of them said or not all of them, but the majority of them said we need that product, which means that we anticipate that EscharEx will draw market share from all the other debridement modalities. They are not speaking only on the enzymatic and autolytic which is very natural, which is currently something between 20% and 29% of the market.

We are speaking about taking pieces from the sharp debridement, which is currently considered the most effective standard of care, and it comprises something like 50% of the market. And if you look at those numbers, you see that the numbers that you're getting are quite huge. We are speaking about something like 30% of a $2 billion market. And we are speaking when we did that specific market analysis, we spoke only about the United States. We haven't shared information about the European potential, and we are working on that as we speak with a third party. But our internal analysis suggests that there is a significant potential in Europe as well. I hope I answered the question.

Yes. And just if I could just slip in one more, just a follow-up. In case you were sharing anything on the upcoming FDA meeting, could you add some color on what you expect to gain clarity on? Would talking about sharp debridement, is there noninferiority for wound closures. Is that something that is on the table for discussion, anything on that?

Yes, I can share with you something like that. As you can imagine, when you're working on a pivotal program for EscharEx. We are trying the trial to be as close as it can to the very robust Phase 2 study that we did. Actually, we did 3 Phase 2 studies. In all of them, we saw the same results, but our motivation is that the Phase 3 will look almost the same as the robust largest Phase 2 that we did. So of course, with the FDA, when we approach them, we need to speak about the indications.

We need to speak about the sample size, and we need to speak about the study design, which we expect will be very close to the study design that we had in the Phase 2, which means we are speaking about incidence of complete debridement as a primary endpoint because we know the FDA already approved that we can use that endpoint as the primary endpoint. And we saw all kinds of clinical benefit in our study, when we disclose the full data of EscharEx, you saw all the other benefits that EscharEx shows. Hopefully, we're going to repeat those results in the Phase 3 study and then hopefully, the product will be approved. I hope it was helpful.

Congrats again on the quarter.

(Operator Instructions) Your next question comes from the line of Arthur He from H.C. Wainwright.

This is Arthur on for RK. Most of my questions have been asked. And I just want to quickly touch on the MW005 program. Could you remind us what's the difference between the first cohort and the second cohort. And also regarding the dosing regimen, what's the rationale behind 7 topic applications every other week as the dosing regimen, would be that dosing regimen adjusted when we go for the later clinical study?

Thank you for the question about 005. We believe that the market is definitely ready for a safe, effective patient-friendly topical solution for BCC. If you look at the market, you see that like in burns like in wounds, the most common modality is surgery. But if you look at superficial BCCs, topical treatments are quite common. But the 2 available treatments for BCC, they have safety issues, and their efficacy is very limited. So what we wanted to prove in our BCC study with those 2 cohorts is that the product is safe, well tolerated, friendly to the patient and efficacious.

So the first cohort is, what we did is we took the first cohort of patients, and we try to see if it is as effective as we saw in the previous study that was a kind of a case series study. And if we see that the efficacy and safety, we have no issues or there are issues, we will take a decision regarding the second cohort and the second cohort, the amount of material or the number of application is higher. But we may be in a solution that we will in a situation that we do not need that according to the results that we are going to publish next quarter. I hope it was helpful.

At this time, there are no further questions in the queue. I would now like to turn the call back over to Ofer Gonen, Chief Executive Officer, for closing remarks.

Okay. So thank you, everyone, for joining us today. We look forward to updating you again in our next call. Thank you.

This concludes today's conference call. You may now disconnect.