Mediwound Ltd (MDWD) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the MediWound Fourth Quarter 2020 Conference Call.

I would now like to turn the call over to your speaker, Mr. Jeremy Feffer. Thank you. Please go ahead, sir.

Thank you, Natalia, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the fourth quarter and year-end 2020. You may access that release on the company's website under the Investors tab. With us today are Sharon Malka, Chief Executive Officer of MediWound; and Boaz Gur-Lavie, Chief Financial 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 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 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 Sharon Malka, Chief Executive Officer of MediWound. Sharon?

Thank you, Jeremy. Good morning to our listeners and -- the U.S. listeners, and good afternoon to our listeners in Israel. Welcome to MediWound's Fourth Quarter and Full Year 2020 Conference Call to discuss our financial results and business highlights.

We are very proud of our results in 2020, especially given the challenges of COVID-19 pandemic. Despite those significant challenges, our team have presented the highest commitment and executed across the board, clinically, operationally and financially. We are very pleased with the fourth quarter financial results as we continued generating strong product revenue growth compared with the prior year. We have delivered on a BLA filing for NexoBrid, we advanced our Phase II adaptive design study of EscharEx, and we initiated a new clinical development program of our product candidate 005 to treat non-melanoma skin cancer.

Our fourth quarter results demonstrate the significant progress we've made in 2020 and on several key metrics that give us confidence regarding our long-term growth profile and the potential for significant growth acceleration as we move into 2021, and we look forward to achieving multiple significant catalysts in 2021.

Let me start with a quick review of NexoBrid before providing more details on EscharEx development program and our new and exciting non-melanoma skin cancer clinical development program. We are pleased to see product revenue growing and the global expansion of NexoBrid to new territories. From an operational standpoint, we continue to generate strong revenue growth with NexoBrid, aided by our NexoBrid strategic partnership with BARDA and our continued expansion globally through distribution agreements with partners who are all leaders in each of their countries.

Following the BLA submission for NexoBrid, we look forward to potentially adding 1 more major country offering NexoBrid this year, the U.S. We continue to work together with BARDA, Vericel and the FDA during the regulatory review process as we prepare for our PDUFA goal date of June 29, as our U.S. commercial partner for NexoBrid, Vericel, is actively preparing for commercial launch.

As a reminder, we achieved several additional accomplishments with NexoBrid this year. The DETECT study, including its long-term follow-up, was completed, and the 24-month patient follow-up safety data was comparable across all arms. We completed the patient enrollment stage in the NexoBrid pediatric study, expecting top line data in the second half of 2021, and continue to enroll burn patients in the next expanded access program, enabling U.S. burn specialists and their teams to generate hands-on experience with NexoBrid.

Moving to our EscharEx development program. We continue to actively recruit patients for our U.S. Phase II adaptive design study for the treatment of venous leg ulcer. Recently, we have adjusted enrollment target of the study to 120 patients, down from the 174 originally planned. The sample size adjustment was supported by in vivo trial results, which I will elaborate on shortly, as well as statistical powering assessment of our prior Phase II study with first generation EscharEx.

The current design enable us to accelerate study completion while keeping the option to increase the sample size if required based on the interim assessment. We expect to complete patient enrollment by year-end 2021 and reiterate our expectation for the interim assessment around midyear 2021. We successfully completed a preclinical study designed to evaluate the debridement efficacy of EscharEx in a porcine hard-to-heal wound model and compare its efficacy with an FDA-approved and commercially available collagenous enzymatic debridement agent.

The study conducted in collaboration with the U.S. research center, concluded that EscharEx treatment was more effective than the commercially available collagenous agent in removing eschars in this model. And the results from this study are expected to be published in a peer-reviewed journal in the first half of 2021.

We continue to explore EscharEx's pharmacological effect and its potential clinical benefits associated with chronic wound management. We submitted a protocol to the FDA and are preparing to initiate a pharmacology study in the first half of 2021. The study is an open-label, single-arm study, assessing the pharmacological effect of EscharEx in up to 15 patients with both VLUs, venous leg ulcers; and DFUs, diabetic foot ulcer. This study will teach us what is happening in the wound bed during and after debridement with EscharEx. In particular, it will enable to assess the effect on reduction in biofilm burden, the reduction in inflammation and healing progression. We expect data from this study in the second half of 2021.

To provide a more in-depth review of our EscharEx clinical development program, we plan to host an Analyst Day in the coming weeks. This event will feature multiple speakers who will discuss the current wound care treatment landscape in the U.S. The particulars of our ongoing clinical studies, the in vivo comparator study and the biofilm opportunity. Please stay tuned for more details soon, and we look forward to your participation.

We are also exploring pipeline opportunities and are excited with the initiation of our new clinical development program for the treatment of non-melanoma skin cancer with our product candidate under development, 005. The initiation of this new program represents an important step in our strategic evolution to leverage our innovative and thematic platform technology to pioneer solutions for unmet medical needs.

005 is a biological product candidate for topical self-administration, which is based on the same active ingredients as NexoBrid and EscharEx products, a concentrate of proteolytic enzymes enriched in bromelain. The company's decision to investigate 005 and move it into human trials for non-melanoma skin cancer is based on positive preclinical studies, combined with existing scientific evidence demonstrated the bromelain anticarcinogenic activity, which reflected by inhibition of cancer cell growth via apoptotic cascade and reduction of tumor formation and volume. The preclinical studies were performed in parallel with successful clinical case studies that demonstrated the product candidate safety and its pharmacology effect, suggesting that 005 might have a role in treatment of low-risk non-melanoma skin malignancies.

Non-melanoma skin cancers, including basal cell carcinoma, BCC, are by far the most common of all types of cancer and represent a significant potential market opportunity. According to the American Cancer Society, BCC is the most diagnosed skin cancer in the United States with approximately 4.3 million diagnosed cases every year, increasing 5% to 8% a year as the result of increased sun exposure, greater life expectancy and better skin cancer detection. There is a need for more effective, safer, topical treatment options in low-risk BCC, and we believe that 005 has the potential to be an effective non-invasive treatment for BCC without the side effects associated with the current topical therapies and their longer treatment duration.

We plan to initiate a Phase I/II open label, randomized clinical study of 005 in BCC designed to evaluate safety and tolerability using different schedules of administration as well as to provide us with the preliminary evaluation of its efficacy as measured by the percentage of target lesion with complete histological clearance. The study will enroll up to 32 patients with histological-confirmed superficial or nodular BCC and will be conducted at 3 leading clinical centers in the U.S.

In parallel, an investigator-initiated Phase II trial will be conducted at the Soroka Medical Center in Israel, designed to evaluate the safety and efficacy of 005 in removing non-melanoma skin cancer and precancerous lesions in up to 50 patients, including actinic halitosis, basal cell carcinoma and squama cell carcinoma. We expect that data from both studies will be generated by year-end 2021.

In summary, we believe that 005 represents a derisked opportunity leveraging our lead compound used in EscharEx and NexoBrid targeting sizable market with a clear unmet need and requires relatively low development cost. We are pleased with our achievements so far and looking forward to a pivotal year in 2021.

Now I would like to turn the call over to Boaz for a summary of our financials. Boaz?

Thank you, Sharon, and good morning to our U.S. listeners, and good afternoon to our listeners in Israel.

First, I'm proud with our 2020 financial results, which our teams executed in a high-uncertainty and fast-changing environment. We have continuously improved our internal measures to control and monitor our expenses and investments while maintaining flexibility for additional cost reduction in the future, if necessary. We are very pleased with our NexoBrid revenue growth, driven primarily by the deliveries of emergency stockpile to BARDA, Europe sales and our global expansion with new countries added in 2020, resulting in cash inflow to further support our balance sheet and clinical development programs.

I would like now to provide you with an update on our financial results for the fourth quarter and full year of 2020. Revenues for the fourth quarter of 2020 were $6.7 million compared with $5.4 million for the fourth quarter of 2019, an increase of 23%, primarily driven by BARDA emergency stockpile procurement of $1.8 million and partially offset with a $0.5 million decrease in revenues from development services. We generated strong revenue growth as sales of products in the fourth quarter of 2020 were $2.8 million, reflecting an increase of 155% in comparison to the fourth quarter of 2019, primarily driven by BARDA emergency stockpile procurement.

Gross profit was $2.3 million compared to a gross profit of $1.1 million for the fourth quarter of 2019. Gross margin from the sale of products was 56% in comparison to 32% for the fourth quarter of 2019. The increase in gross margin from sales of product is a result of our top line increase and the fixed nature of our costs.

Research and development expenses, net of participations, were $2.2 million compared with the $1.7 million for the fourth quarter of 2019. The increase was primarily due to the ongoing EscharEx clinical development program.

Selling, general and administrative expenses were $2.5 million, stable with the $2.4 million for the fourth quarter of 2019.

Operating loss was $2.4 million compared with an operating loss of $3.1 million in the fourth quarter of 2019.

The company posted a net loss of $1.7 million or $0.06 per share for the fourth quarter of 2020 compared with a net loss of $3.4 million or $0.13 per share for the fourth quarter of 2019.

Adjusted EBITDA, as defined below, for the fourth quarter was a loss of $1.8 million compared with a loss of $2.4 million for the fourth quarter of 2019.

I'd like now to turn to the full year 2020 financial results. Revenues for the year ended December 31, 2020, were $21.8 million compared with the $31.8 million for the year ended December 31, 2019, which included a $17.5 million upfront payment from the Vericel license agreement for NexoBrid. Sale of products for the full year of 2020 were $7.8 million, reflecting an increase of 170% compared to the full year of 2019, primarily driven by BARDA emergency stockpile procurement.

Gross profit was $7.5 million compared with a gross profit of $19.9 million for the year ended December 31, 2019. Excluding the $17.5 million upfront license payment, net of $0.7 million of deal-related expenses, gross profit for the year ended December 31, 2019, was $3.1 million.

Gross margin from sales of products for the full year of 2020 was 60% in comparison to 35% for the full year of 2019. Research and development expenses for the full year of 2020 were $7.7 million compared with the $5 million in the prior year period. The increase was primarily as a result of our U.S. Phase II adaptive design study of EscharEx and the noncash increase in participation from the Israel Innovation Authority grant recorded in 2019.

Selling, general and administrative expenses were $8.7 million compared with the $9.3 million for the year ended December 31, 2019. The decrease was primarily due to the company's headquarters restructuring in Europe.

The company's net loss in 2020 was $9.2 million or a loss of $0.34 per share compared with a net profit of $5 million or a profit of $0.18 per share for the same period in 2019, which included a $17.5 million upfront license payment and $1.7 million of deal-related expenses. Excluding the upfront license payment net of deal-related costs, net loss for the year ended 2019 was $10.8 million or $0.40 per share.

Adjusted EBITDA was a loss of $6.4 million compared to -- with a profit of $8 million for the year ended December 31, 2019, which included the upfront payment of $17.5 million from the Vericel licensing agreement, net of royalty payment of $0.7 million.

The company has $21.6 million in cash and short-term investments as of December 31, 2020, compared with the $29.5 million as of December 31, 2019, with no debt.

The company utilized $7.9 million in cash to fund its ongoing operating activities and repayment of contingent liabilities during 2020, down from its cash guidance for 2020 of $8 million to $10 million.

We expect to continue investing in EscharEx and 005 clinical development programs, supported by the expected cash inflow from NexoBrid. As a result, the company expects its cash use for operating activities in 2021 to be in the range of $5 million to $7 million.

With that, I've concluded the financial overview, and will now turn the call back over to Sharon. Sharon?

Thank you, Boaz. As you can see, we have several tremendous opportunities before us. We will continue our commercialization activities with our partner, Vericel, and we look forward to working with FDA for the regulatory review process for NexoBrid. We are actively recruiting patients for the EscharEx Phase II adaptive design study, and we are excited to initiate our new clinical program in non-melanoma skin cancer.

With that, I conclude our prepared remarks, and it is now my pleasure to open the call for your questions. Operator?

(Operator Instructions) Your first question is from the line of Ryan Zimmerman with BTIG.

Congrats on all the progress. Maybe to start on EscharEx since it is really the key milestone or kind of key value creation event this year. Not to take away any thunder from the Analyst Day, but what can we expect in terms of what you may lay out at the Analyst Day to give investors a sense of kind of your thinking on EscharEx? And any other things you can point to in terms of your confidence around timing of both the interim analysis and the broader trial design?

Thank you for your question, Ryan. First of all, as you know, we remain excited about the EscharEx opportunity and believe it may become a game changer if successfully developed, addressing a significant unmet medical need with a sizable market opportunity. What we can expect for 2021 in this program is as follows: first, we do have the ongoing Phase II adaptive design study where we anticipate the interim assessment around midyear and the completion of patient recruitment towards the end of the year.

The new design of the study after the reduction in sample sites enable us to accelerate the program and complete patient enrollment by year-end 2021 while keeping the options to increase sample size based on the interim assessment. And given the historical data, we are confident with the new sample size. In addition, we plan to initiate a pharmacological study in this quarter, and we anticipate to generate data from this study towards the second half of this year.

Okay. Appreciate that. And maybe, Boaz, for you. In terms of the cadence of BARDA procurement, is there any color you can give around kind of your expectations for 2021 around how BARDA may choose to procure NexoBrid over the coming quarters?

Thank you, Ryan, for the question. We're expecting to have the BARDA procurement throughout the quarters and completed by year-end. And probably, I would look it on a prorated basis throughout the quarter, give or take.

Your next question is from the line of Kevin DeGeeter with Oppenheimer.

Congrats. Everything's moved along really quickly. And so a few questions first us on the non-melanoma skin cancer program. Thanks for the additional detail on study design. Can you comment on how many different dosing regimens you may be looking at or able to capture data on that 32 patients? And it seems like that study is going to enroll quite quickly because -- any general comments on how to think about relative access to patients and pace of enrollment for this patient population as a comparison to your experience with EscharEx?

Thank you very much for your question. I will start with the BCC. And while MediWound's primary focus remains the continued growth of the company and advancement of the NexoBrid and EscharEx program, the company is continuously exploring potential clinical application of its lead compound in a synergetic product candidates to our portfolio. Our platform technology of the pharmaceutical-grade bromelain provides us with the optionality and potential for future products and indications for which we already completed in the last year preclinical and proof-of-concept studies.

We decided to pursue the non-melanoma skin cancer opportunity due to the limited treatment option and the clear unmet need. And we believe that, overall, the development plan is derisked as it is based, first of all, on the same active substance as NexoBrid and EscharEx. It's for topical application, and has supporting evidence, including clinical case studies, while the development plan has relatively low development costs. Specifically to the Phase I/II study that we plan in the U.S., we plan the study will enroll up to 32 patients, which histologically confirmed superficial or nodular BCC, and it will be comprised of 2 cohorts of 16, while we will analyze the safety and tolerability data after the first cohort and adjust accordingly.

Great. And with regard to the clinical case studies and preclinical data on BCC that you highlighted in your prepared comments, will we see any disclosure with regard to either medical meetings or at the upcoming Analyst Day on some of that data and the product profile?

Yes. So basically, the main goal of physician in this indication is to remove this cancer, to remove this lesion. So what we saw or show in the preclinical data as well as in clinical evidence with the cancer cell line, we demonstrated inhibition of cancer cell growth via apoptotic cascade. In addition to that, we did see that bromelain, the active ingredient in our mixture of proteins, has reduction in proliferation process resulting with reduction in tumor formation and tumor volume.

We also saw the same effect in case studies, in clinical case studies we conducted, and this is exactly what we are now want to evaluate. In addition to safety and tolerability of different administration schedules, we believe that this initial study or proof-of-concept study will provide us with the preliminary evaluation of the efficacy of this product in BCC, as measured by the percentage of the target lesion removed and confirmed by histological clearance.

Your next question is from the line of Josh Jennings with Cowen.

I would like to start off with the EscharEx query. Just thinking about the interim analysis at midyear, how would you have investors think about the potential outcomes there? You've downsized the patient enrollment size to 120, interim analysis will hold 60 patients. If the data safety monitoring board gives the green light for the trial to continue, it's our assumption that that would provide us an efficacy signal, and we'd interpret that very positively. We just want to make sure we understood the set up correctly. And how would you have investors think about the interim analysis and the trial proceeding as is or even with an increase in patient numbers?

Yes. Thank you for the question, Josh. As I mentioned before, the current design of the study, the adaptive design of the study, and revised or modified sample size enable us to, on one hand, accelerate the program and complete patient enrollment by year-end 2021 while keeping the option to increase the sample size based on the interim analysis. And specifically to the interim analysis, based on the interim analysis, we will have one of the following outcome as will be recommended by an independent statistician of the DMC.

One is whether the study is futile, i.e., to stop the study. Second alternative is to continue as planned with the original sample size, which is 120 patients. It enable us -- provide us with a clear speak about the potential success to meet the primary endpoint. Or increase the sample size, we have that option to increase the sample size up to 160 patients overall, means additional 40 patients. And based on this commendation, it will give a signal towards the potential success of this study, assuming the residual balance of the patients will behave the same like the ones that's already treated. The sample size will be conducted after we will treat about 80 patients out of the 120.

A question on NexoBrid. I think you referenced in the call that your working with the FDA on the NexoBrid BLA continues. Just talk just about your confidence level that the FDA will meet the June PDUFA date, given the COVID capacity constraints at the agency that we've heard buzzing around.

This is very difficult to estimate. As you know, we remain excited about the next good opportunity and the FDA potential approval of this product. MediWound is continuing to work closely with the FDA during the review of this biologics license application. We are aware that in many instance across the industry, the FDA's facilities inspection schedule has been affected by the COVID-19-related travel restriction. However, at current, our PDUFA goal date remains June 29, 2021.

Excellent. One question on MWPC005. Can you -- thanks for all the details and talking about the patient opportunity. Can you talk about -- help us understand the topical therapy market as it stands today? What topical therapies have been approved and then commercialized? And then what's the size of topical therapy in this segment for BCC?

Okay. So what I can share with you is the initial insights from an initial market assessment we conducted in the U.S. by a third party. What we know is as follows: first of all, the BCC is the most diagnosed skin cancer in U.S. with about 4.3 million diagnosed cases every year. While it's increasing because of all the parameters I mentioned before, the option to diagnosis, the sun exposure, et cetera.

We know that nodular and superficial are the most common subtype of BCC, account for about 90% to 95% of overall cases. And the unmet need for this low-risk skin malignancies is due to the fact that the current or standard of care or the standard of care for low-risk patients, usually, it's tumor by either standard surgical excision, or in some cases, mainly in the superficial 1 or the ineligible operative patients is to use any kind of topical.

The topical treatment, which are mainly 2, one the 5FU, a chemotherapy; and the second one is Imiquimod, it's a generic product, are used specifically in BCC patients but have limited use and are reserved for surgery ineligible patients usually. And they have several drawbacks, which include longer treatment duration. It requires more than 6 weeks of daily application. It's low efficacy. And of course, because of the chemotherapy, the side effects associated with those therapies. That is why we believe that there is a need, clear need for more effective, safer topical agent in low-risk superficial BCC and surgery ineligible patients.

And just 1 last question. Just on the pipeline. Historically, you and I had a talk about MWPC003 in a couple of years, I believe. But that was, I think, for an indication of Dupuytren's contracture, scar formation from this disease. Any update there or any other pipeline candidates that are under development that you haven't talked about recently that there are updates for?

Thank you for this question. As I mentioned before, we, as a company, are continuously exploring potential clinical application of our lead compound in order to add additional product to our pipeline portfolio. As you know, our platform technology of the pharmaceutical-grade bromelain, which is basically a concentrate of proteolytic enzymes enriched in bromelain provide us with optionality and potential for future product and indication, as you mentioned before, like scars, like connective tissue disorder.

And for all those potential indications and potential product, we already completed the preclinical development and the toxicology study for the injectable form and for the topical application, and we completed during 2020 proof-of-concept studies. We concluded to move forward into the clinical stage with 005 as the first new indication to our portfolio, and while we are -- while the primary focus, of course, remains the continued growth through the advancement of NexoBrid and EscharEx.

(Operator Instructions) Your next question is from the line of Swayampakula Ramakanth.

It's RK from H.C. Wainwright. A couple of quick questions. The NexoBrid study in children, you're illustrating to put out some data in the second half of '21. So how should we think about this study? Would this help you or sufficient to get a pediatric indication in the United States and as well in Europe?

Yes. Thank you for your question. We anticipate -- following the completion of the recruitment, we anticipate to report the top line results from this study, which will include the 12 months follow-up safety data during the second half of 2021. This study basically is and/or intended to ask for label extension, both in Europe and in the U.S.

And based on our experience with the DETECT study with the FDA, we believe that we can be in a position to submit a pediatric indication expansion for NexoBrid based on the 12 months follow-up data, while the 24 months follow-up data can be a post-marketing submission. We have to remember that as opposed to Europe, in the U.S., we are excluded from the pediatric investigational plan. But -- and this study was approved and designed together with both EMA and the FDA.

Okay. And then regarding additional geographies where you could potentially expand NexoBrid commercialization. Can you give us the progress in any of these countries that you've already signed up distribution agreements over the last year, France, Switzerland and also the Middle Eastern market?

Yes. So June 2021 (sic) [2020], we sign several distribution agreements in major countries. I think that we can split it into 2. First, some additional countries in EU, which is part of our hybrid model to basically have a growth of NexoBrid, an outreach of NexoBrid in new and additional territories within the European country, leveraging our existing approval. We do have a marketing approval for all EU country. And with that, we signed with, as you said, France, Switzerland, the Baltic country with additional countries in the Europe.

Within those countries, the distributor already have the marketing approval. All it needs to get is basically market access and to launch a product. And we believe that during 2021, we will see in some countries already launched of this product.

Moving to international countries or other territories. We signed several distribution agreements, while we focus in 3 main continents, the Latin America area; the CIS, Russia and Ukraine; and of course, Asia Pacific. We anticipate to have additional approvals during 2021, given the review process in some countries. And we recently signed also a distribution agreement in UAE, in United Arab Emirates, which provides us with -- open up new markets, which is the Middle East market and the African market, and we believe can generate more growth to NexoBrid activity.

I am showing no further questions at this time. I would now like to turn the conference back to Sharon Malka.

Thank you, everyone, for joining us today. We look continuing to execute on our strategy and bringing new therapies to market and to updating you again on our next update call. Thank you, and have a great day. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.