Mediwound Ltd (MDWD) 2024 Q1 法說會逐字稿

Good day and welcome to MediWound's first-quarter 2024 earnings call. Today's conference is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Dan Ferry of LifeSci Advisors. Please go ahead.

Thank you, operator, and welcome, everyone. Today, before the market opened, MediWound issued a press release announcing financial results for the first quarter ended March 31, 2024. 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; Hani Luxenburg, Chief Financial Officer; and Barry Wolfenson, Executive Vice President of Strategy and Corporate Development. 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 in the Private Securities Litigation Reform Act of 1995.

Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual outcomes and the results are subject to risks and uncertainties that 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 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, Dan, and good morning, everyone. Welcome to MediWound's first-quarter 2024 earning call. Joining me today are Hani Luxenburg, our Chief Financial Officer; and Barry Wolfenson, our Executive Vice President of Strategy and Corporate Development. After a presentation of the financial results and business updates, we will open the call for your questions.

During the first quarter, we were laser focused on executing our strategic plan. At the beginning of the year, we set three major goals: first, to accelerate NexoBrid revenue growth; second, to complete the construction of our new manufacturing facility by mid-year; and third, initiate the EscharEx Phase III clinical trial in the second half of 2024 for which we already established collaborations with the most prominent wound care companies. I'm pleased to report that we are on track to achieve all these targets.

I'm also excited to announce that according to a preliminary list of additions posted on May 24, we are set to join the Russell 3000 Index as part of the 2024 Russell indexes reconstitution. This inclusion will also grant us automatic membership in the small-cap Russell 2000 Index. Being included in these indexes is a significant milestone, enabling our visibility and reach within the investment community.

Now let's move for the first-quarter highlights and recent developments. NexoBrid overview. This quarter has showcased significant achievements for NexoBrid, aligning with our strategic goals. We have secured orders that meet our annual revenue projection of $24 million with $5 million realized this quarter.

In the United States, our collaborations with Vericel has been very productive. Over 60 burn centers have submitted applications to their P&T committees. Approximately, 40 have received approvals and more than 30 centers have placed initial orders. Vericel has reported substantial increases in both the number of patients treated with NexoBrid and the number of orders from burn centers and hospitals.

Internationally, the adoption of NexoBrid in Europe, Japan, and India through our partnerships with PolyMedics, Kaken Pharmaceutical, and BSV, continue to show promising growth. These markets are instrumental in driving broader interest and use of NexoBrid.

Additionally, we have seen a continued increase in demand for NexoBrid in treating military casualties due to the ongoing war in Israel. Dozens of lives of soldiers and civilians were saved. The positive outcome achieved with NexoBrid have generated interest from many governments for future stockpiling.

To meet this surging demand, we are actively enhancing our manufacturing infrastructure. Construction of our new GMP-compliant, state-of-the-art facility is progressing on schedule to be completed by mid-2024 with commissioning set to begin in the third quarter of this year. The facility is expected to be fully operational in 2025, increasing our manufacturing capacity sixfold.

Regarding additional growth drivers, the FDA has accepted our supplemental BLA for pediatric use with the decision expected in the second half of this year. It is worth noting that NexoBrid is already approved for pediatric population in Europe and in Japan.

Our partnership with the US Army is advancing as planned, focusing on the development of temperature-stable formulation for NexoBrid. We anticipate FDA's feedback on the product development patch in the second half of this year. This project, bolstered by a $13 million grant from the Department of Defense, underscores the strategic importance of NexoBrid in field care burn treatments.

Lastly, we continue to generate further data to support NexoBrid use. Our expanded access treatment protocol has successfully treated 239 burn patients across 29 US sites. With enrollment and 12 month follow-up now complete, we are ready to begin data analysis with findings to be published in the second half of 2024.

Overall, the increasing global demand and our strategic expansion of the manufacturing capabilities, along with the broadening scope of indications, position NexoBrid to establish a new standard of care in eschar removal for severe burns. We are very pleased with NexoBrid performance and the ongoing progress in all those areas.

Now I will provide an update on EscharEx, our innovative bioactive therapy for venous leg ulcers and other chronic wounds. We have successfully manufactured the clinical batches and our schedule to submit the final protocol for our Phase III trial in the first half of 2024. The trial is set to commence in the second half of this year.

The Phase III study mirroring the successful design of our Phase II trials will be structured as a multicenter, prospective, randomized, and placebo-controlled global trial. We aim to enroll 216 patients across 40 sites, focusing on two co-primary endpoints: the incidence of complete debridement and the incidence of wound closure. An interim assessment will be conducted after 67% of the participant complete the trial, providing early insights into the efficacy of EscharEx.

This study has garnered significant interest from prominent companies in the wound care space, resulting in established research collaborations with Solventum, Mölnlycke, and MIMEDX, leaders in compression therapy, advanced wound care settings, and tissue-based products.

EscharEx has also attracted a lot of attention at three major annual wound care conferences: The Wound Healing Society, The Symposium of Advanced Wound Care, and The European Wound Management Association. A strong Phase II data was presented, demonstrating EscharEx's superiority over SANTYL, the current market leader with more than $360 million in annual US sales.

Recently, there has been a significant discussion about the proposed changes in Medicare reimbursement for cell and tissue-based products. If implemented, these changes will have major impact on the wound care industry and will greatly benefit EscharEx.

We are not surprised by these changes. We anticipate that the market share will shift from smaller companies without strong clinical evidence to larger established companies. Additionally, one of the key changes is to limit the number of tissue units that can be applied to a wound requiring a more attention to the condition of the wound bed prior to initiating tissue applications. EscharEx excels in this area. It is not just debridement, but it also quickly prepare the wound for application of tissue.

Our Phase III study is perfectly aligned with this as we aim to secure a claim for preparing a wound for active closure. Generally, as the market value of tissue therapies decreases, the relative value of biologic drug with a blockbuster potential will increase. EscharEx is going through a rigorous BLA process backed by extensive and robust trial data and entering into a category that has just stable reimbursement for decades, becoming even more valuable asset when these policies become effective.

In conclusion, EscharEx is poised to become a leader in the biologic sector of the advanced wound care market. Our data to date showcases its superior efficacy in debridement, wound closure preparation, time to wound healing, biofilm removal, and bacterial reduction, highlighting its versatility and utility. A comprehensive clinical and health economic data that we are generating in the Phase III study will further solidify EscharEx's strong position within the industry.

Now I'll hand it over to Hani to briefly review our financials. Hani?

Thank you, Ofer. Let me begin with our revenue for the first quarter. Revenue for the first quarter of 2024 was $5 million compared to $3.8 million in the first quarter of 2023. The increase is primarily attributed to revenue from Vericel, a new contract with the US Department of Defense.

Gross profit in the first quarter of 2024 was $0.6 million, representing 12.2% of total revenue compared to $0.8 million, representing 21.7% of total revenue in the same quarter in the previous year. The decrease in gross profit is primarily due to changes in the revenue mix.

Turning to our operating expenses, R&D expenses in the first quarter of 2024 were $1.5 million compared to $2.1 million in the first quarter of 2023. This decrease is primarily due to the completion of EscharEx Phase II study.

SG&A expenses in the first quarter of 2024 were $2.9 million compared to $3.1 million in the first quarter of last year. Operating loss in the first quarter of 2024 was $3.7 million compared to an operating loss of $4.4 million in the first quarter of 2023.

Net loss in the first quarter of 2024 was $9.7 million or $1.05 per share compared to a net loss of $3.7 million or $0.44 per share in the first quarter of 2023. The increase in net loss is primarily due to financial expenses from revaluation of warrants amounting to $6.1 million, driven by 40% increase in our share price. Non-GAAP adjusted EBITDA for the first quarter of 2024 was a loss of $2.9 million compared to a loss of $3.4 million in the first quarter of 2023.

Balance sheet highlights. As of March 31, 2024, the company had cash and cash equivalent, restricted cash, and deposits totaling $36 million compared to $42.1 million as of December 31, 2023. During the first quarter of 2024, the company received $0.5 million from exercise of warrants. The company utilized $6.5 million to fund its activity, of which $2.7 million was invested in CapEx related to facility scale-up.

This concludes the financial review. I will now turn the call back to Ofer. Ofer?

Thank you, Hani. This past quarter, we demonstrated operational excellence achieving $5 million in revenues from NexoBrid and progressing towards the completion of our manufacturing facility. This expansion will enable us to effectively meet both current and anticipated demand for NexoBrid.

Regarding EscharEx, which targets a highly lucrative $2 billion market, we remain on track to initiate the Phase III trial in the second half of this year. We look forward to working closely with Solventum, Mölnlycke, and MIMEDX while supporting this trial. Their collaboration set the stage for a successful and reputable Phase III study, ensuring best treatment options are available for patients.

With these highlights shared, I'd like to turn back to the operator for any questions you may have. Operator?

(Operator Instructions) Josh Jennings, TD Cowen.

Thanks so much for taking the questions and congratulations on the continued progress. Ofer, just to ask two manufacturing questions, relatively high level, but maybe you'd share some more details, first, on the build-out of manufacturing capacity for NexoBrid. What are the remaining steps left to complete that project? And should we be thinking about that plant, that facility ramping up and being cleared and ready to go early in 2025? Or could that be some time closer to mid-year?

Thank you for your question, Josh. I would like to address these points. So as for the facility, we guided that we are about to complete the manufacturing in mid-2024. It means that all the equipment is here and it was not a trivial assignment. So all the equipment is here. It is now -- we are in the final stages of installing it. And once it's done and we expect it will be done in the middle of the year, which means in the next few weeks, we will start the commissioning process, which means all kinds of validation activities, et cetera.

After that, it will take a few months. We are submitting the facility for approval by EMA and FDA. We do not expect both of them to approve the facility in the same time. We expect that the European authorities will be quicker, which means that I don't have an answer when it will be fully operational, if it will be in the beginning of '25, or in the mid of '25, or even in the third quarter of '25.

I think it will be gradual with the European agency approving it much quicker. And when it is done, we have our capacity -- our major bottleneck will be resolved because we can start immediately manufacture to the European market from the new facility. So in 2025, we will be in a position definitely towards the end of it that we have almost no limitation.

Excellent. That's helpful. And then just on the last earnings call, you mentioned that there were some initial manufacturing of EscharEx batches for the clinical trial and for stability testing being performed. Hoping to just get an update on where MediWound stands in terms of EscharEx production or manufacturing for the clinical trial.

And if you can just remind us about the formulation, any differences in manufacturing between EscharEx and NexoBrid and has everything progressed? And it sounds like it has because you've given timelines of starting this trial, getting the trial approved and ready to roll by midyear. Thanks a lot.

Yeah. So let me elaborate on this aspect. The manufacturing of EscharEx and NexoBrid are not being done in the same suite. It's a different suite of manufacturing. The process of having our clearance from the FDA to start the trial is manufacturing the clinical batches, which was done in Q1.

After that, there is a stability time period, which is around 30 days. We do not anticipate any issues with that because we've manufactured many, many EscharEx batches for previous trials or for all kinds of preclinical studies. And immediately after that -- and as we guided, which means in the middle of this year or in the first half of this year, which is almost the same, we will be able to submit the final protocol to the FDA with all the data regarding the batches that were manufactured. After that, when we get the clearance, which should be something like after 30 days, 60 days, we will be ready to roll.

Excellent. Thanks for reviewing that. Appreciate it.

François Brisebois, Oppenheimer.

Hi, thanks for the question. Just to follow-up on the previous one, in terms of being fully operational in '25, that sixfold capacity, so that's the part that might be gradual. Is it fair to assume that the sixfold will be gradual to get there? And can you just elaborate a little bit on where demand is currently versus capacity?

Hi, Franç, and thank you for the question. It's an important topic. So currently, the demand is the same. As we mentioned last quarter, it is approximately threefold in our ability to manufacture. So if you need to anticipate what's the step-up in our manufacturing capabilities, currently, let's assume it's a 1x.

And after we get the European approval, it becomes 2x because we can manufacture everything for Europe in the new manufacturing facility. Still the manufacturing capabilities for the United States and from Japan, which are very significant markets, still will be done in the previous manufacturing facility until we get the approval from the FDA. But the bottleneck now that makes us juggle between all kinds of customers and patients that need a solution, we believe the main bottleneck will be removed in the beginning of 2025.

Understood. And then in terms of the interim analysis, can you help us understand the implications there, what that means? Is there a chance that the interim analysis with overwhelming efficacy would just end the trial or just what are the different scenarios from this interim analysis?

Thank you for the question. So the interim analysis will not stop the trial, a Phase III study for such a huge indication. We are speaking about one million patients annually in the United States. A Phase 3 study with 216 patients is considered very small. I do not anticipate FDA to approve a drug based on the Phase III study with only 140 patients. The reason that we are doing an interim assessment, it's just an assessment for the sample size.

If we see currently that the trial is planned with a -- for 90% power for succeeding in the trial in the both primary endpoints, we want to make sure that after 140 patients, we are on track to achieve that. If we need to increase the number by, I don't know, 20 patient, 30 patients to be sure that we are going to succeed in the trial, it will be done. Most probably, that's after the interim analysis, we will continue the trial as planned without changing anything.

Thank you.

RK, H.C. Wainwright.

Good morning, Ofer. How are you doing? Thanks for taking my questions. In your prepared remarks, you said you have secured orders for $24 million from Vericel. Do they have a minimum every year or how about this order set up?

Well, I didn't say that we secured $24 million from Vericel. We said we secured $24 million for the year 2024. Vericel is only one of our revenue channels. So we have an agreement with Vericel. They tell us in advance how much they anticipate for the year. We didn't disclose the number, and they're getting it as they request. So for 2024, for instance, we already got the binding order for Vericel. Some of it was already shipped to them and some of it is being manufactured.

Thank you for that. And then in terms of the next data that you're planning to publish, so would we see some of that this year or do you expect it next year? And how is that going to help in reimbursement and also in your conversations with the private payers?

Are you speaking about NexoBrid?

Yeah.

Okay. So don't hold your breath. We are going to -- the 239 patient data that we are about to share the data later in the second half of the year are patients that are treated in real life. I wouldn't expect something different than what we saw in the Phase III study. The efficacy of NexoBrid is so robust. We saw it in the trial, 93% versus, I don't know, 4%. So it will be very robust.

I do not expect anything different than what we saw. And as for the impact on the reimbursement, Vericel is doing a great job in having this treatment approved by P&T committees in hospitals in a specific price. And I think it won't make a change at all.

Okay. And then in terms of EscharEx, now that you have all your material ready for the start of the study, is there any other approvals or conversations needed between you and the FDA before you start the study? Or is it just IRB approvals that you're waiting for to get the study going?

So the process is quite clear since we manufacture the clinical batches and waiting for a stability. It's only 30 days. Let's assume it will be done in the next couple of weeks. After that, we submit the protocol that we already got the guidance and approval from EMA and FDA.

We'll submit the protocols and then let's say something which is very different than what we agreed on. We will get a clearance or no objections in the next 30 days following the submission. After that, the IRB is also something technical. We do not expect any delay in our guidance of initiating the trial in the second half of this year.

Okay. Thank you very much. Thanks for taking all my questions.

Michael Okunewitch, Maxim Group.

Hey, guys. Thank you so much for taking my questions today. I guess first off, just to talk about the Medicare changes that you mentioned earlier, in the Phase III, will you be looking at the difference in the number of required tissue applications just to potentially have data addressing those claims directly?

Well, it's a great question. Barry, can you please address it?

Certainly, we're not going to change the protocol of our study in anticipation of any changes that are being made in Medicare. But we will absolutely capture the data and hope that it's reflective of where those changes land.

I think one of the benefits that -- obviously in the study is that we get this head start. And so as the wounds get to be completely debrided and completely covered with granulation tissue, we get to start with active closure sooner. And it stands to bear given the data that already exists in the published literature that there's going to be more that close in our arm and close with these limited number of tissues before than there would be in the control arm. So either way, we stand to benefit.

All right. Thank you. And then with regards to the Phase III, now that you're getting pretty close to getting that started, do you have any updated expectations regarding the enrollment rate and the time to that interim data?

So with the low number of patients that we anticipate to recruit, the 216 patients -- and also we have limited competition. Look at clinicaltrials.gov. You will not find a clinical trial with VLU patients. We are confident for a very quick patient enrollment. It should take us after six months of start-up period. It will take us additional 18 months to finish in executing the protocol.

All right. Thank you very much. And then just one last one for me, just a point of clarification. Have you met with the FDA on the temperature-stable DoD formulation and are waiting for feedback or are you still expecting to meet with them in the next couple of weeks?

This is a great question. So as I told earlier, we got quite a significant funding from the DoD to develop this temperature-stable formulation. We already approached the FDA regarding the product development path, and we are anticipating the feedback which will be in the second half of 2024.

Thank you very much.

This concludes our Q&A session. I would like to turn the call back over to Ofer Gonen for closing remarks.

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

The conference has concluded. Thank you for attending today's presentation. You may now disconnect.