Mediwound Ltd (MDWD) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 MediWound 2020 Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Jeremy Feffer. Please go ahead.

Thank you, Sidney, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the third quarter of 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 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 Sharon Malka, Chief Executive Officer. Sharon?

Thank you, Jeremy. Good morning, and good afternoon to our listeners in Israel. Thank you, everyone, for joining us today on our third quarter 2020 earnings call. We are proud of our third quarter achievements as our team continued to navigate through the challenges of the COVID-19 pandemic. We are very pleased with our third quarter financial results as we generated strong revenue growth compared with prior year, driven by the procurement of NexoBrid by BARDA for emergency response preparedness.

In addition, the third quarter was highlighted by several important milestones towards our goal of providing NexoBrid as a new standard of care for eschar removal in patients with severe burns. First, the FDA accepted the NexoBrid BLA and provided us with a PDUFA target date in mid-2021.

Second, the DETECT study was completed, and the 24-month patient follow-up safety data was comparable across all arms. Third, we completed the patient enrollment stage in the NexoBrid pediatric study and lastly, continue to enroll [brand] patient in the next expanded access protocol.

In the EscharEx program, we continue to actively recruit patients in our U.S. Phase II study for treatment of venous leg ulcers, and we initiated pharmacology studies to explore additional clinical benefits of EscharEx. We continue to address challenges associated with the COVID-19 pandemic, while prioritizing the health and safety of our workforce and maintaining operational efficiency and flexibility.

While COVID-19 continues to cause considerable uncertainty, we expect to maintain growth, and we are optimistic that we remain on track to strengthen our company further.

Let me now provide some more color on our recent achievements and review of our third quarter highlights. We are pleased to see product revenues growing and the global expansion of NexoBrid to new territories. We generated strong revenue growth in the third quarter, primarily as a result of further acceptance of the first shipment of NexoBrid as part of its mission to build national preparedness for public health emergencies.

The first shipment represents a major milestone in our long-standing partnership with BARDA. As a reminder, the initial BARDA procurement of NexoBrid is valued at $16.5 million, and we expect additional quarterly pro rata deliveries and revenues from this procurement throughout the end of 2021.

In September, the U.S. FDA accepted for review our BLA submission for NexoBrid for eschar removal of deep partial thickness and full-thickness burns and signed a PDUFA goal date of June 29, 2021. This represents a major milestone in the path to bringing NexoBrid to market in the U.S., and we look forward to working together with BARDA, Vericel, and the FDA during the regulatory review process.

We are pleased to report that we completed the U.S. Phase III DETECT study, including the collection and analysis of the long-term patient follow-up safety data. As a reminder, in early 2019, we announced the results of the U.S. Phase III DETECT study, which were robust across all endpoints. The study met its primary endpoint and all of its secondary endpoints. Subsequently, we reported a 12-month follow-up safety data, which was comparable across all study arms with no safety signals observed.

The 24 months safety data of cosmetics, function, and quality of life was, again, comparable across all study arms, the NexoBrid arm, Gel Vehicle, and the standard of care arm. Additionally, the overall safety profile of NexoBrid was consistent with the previous data and no new safety signals were observed.

As agreed with the FDA in our pre-BLA meeting, we plan to submit the 24-month safety data as part of a post-approval commitment. We recently announced the completion of the enrollment stage of the Phase III NexoBrid pediatric study, CIDS, completing the enrollment stage of the CIDS study is an important step towards our goal of providing NexoBrid as a treatment option for pediatric for patients with severe burns, giving NexoBrid potential to address the unique challenges in treating children with severe burns with the current standard of care.

We anticipate reporting top line results from this study, including the 12-month follow-up data during the second half of 2021. As we await FDA review, we continue to enroll patients in our NexoBrid expanded access program, NEXT. To date, 22 U.S. burn centers were trained with a majority actively treating burn patients, and we expect to activate additional clinical sites before year-end.

We see increase of the use of NexoBrid with more burn patients treated in more burn centers across the U.S. The completion of the CIDS enrollment stage followed the FDA's agreement to allow the NexoBrid expanded access protocol to be expanded and to include pediatric as well as adult burn patients.

The inclusion of pediatric patients in the next protocol will allow additional physicians to expand their experience with NexoBrid in pediatric patients and expand the national capacity of trained physicians. The next program, importantly and strategically keeps us engaged with the key burn centers in the U.S. as our U.S. commercial partner, for NexoBrid, Vericel is actively preparing for commercial launch, as discussed in detail during the recent analyst and Investor Day.

We were encouraged by the KOL's enthusiasm for NexoBrid effect and how upon approval by the FDA, it could change the treatment paradigm for eschar removal of severe thermal burns. Vericel provided an overview of the potential market opportunity in the U.S., estimating a total addressable market of over $200 million with a target of 140 burn centers across the U.S., most of which are already Vericel's customers.

In addition, Vericel reviewed its extensive ongoing prelaunch and medical initiatives, which include significant expansion of its burn sales team, development, extensive education, and support plan and cost effectiveness and pricing analysis.

Let me now shift gears and update you on the EscharEx development program. We continue to actively recruit patients in our Phase II U.S. study for the treatment of venous leg ulcers in compliance with applicable governmental orders and clinical sites policies and procedures, as we expect an interim assessment towards mid-2021. Since the re-initiation in June, we continue to initiate new clinical sites across the U.S., and we currently have 25 clinical sites open and ready to enroll patients with a majority having already begun enrollment.

While considerable uncertainties related to COVID-19 remain, we expect to add additional clinical sites in the U.S. before year-end, and our team continued its efforts to have additional clinical sites out of the U.S.

We also believe that EscharEx can provide additional clinical benefits and address other areas of unmet medical needs where enzymatic debridement can be helpful such as reduction of biofilm burden. There is a consensus among clinicians that biofilm, an aggregate of microorganism encapsulated in a self-created metrics, contributes to delay in wound healing and that it may be possible to use enzymatic debridement agent such as EscharEx to promote improved healing.

Multiple preclinical studies have reported that enzymes, including bromelin, show promise as an effective treatment for reduction of the biofilm burden independent of its debridement capabilities. As part of our initiative to explore the pharmacological effect of EscharEx, we have initiated pharmacological studies to assess the effect of EscharEx on biofilm burden as well as other clinical effect associated with chronic wounds. We look forward to sharing more details with you about our development plan in this area in the near future.

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

Thank you, Sharon, and good morning, everyone, and good afternoon to our listeners in Israel. First, I would like to update that we're continuously monitoring the COVID-19 crisis and implementing prudent measures to reduce and control our operating expenses while maintaining flexibility for additional cost reduction in the future, if necessary. We are also very satisfied with our NexoBrid revenue growth driven by the deliveries to BARDA and global expansion, resulting with cash inflows to further support our cash position.

I would like now to provide you with an update on our financial performance for the third quarter of 2020. Revenue for the quarter ended September 30, 2020, were $6.6 million compared with the $5.1 million for the third quarter of 2019, an increase of 29%. Revenues from products in the quarter ended September 30, 2020, was $3.2 million, an increase of 189% in comparison to the third quarter of 2019, primarily driven by BARDA procurement. As a result of this procurement, we expect to maintain consistent product revenue growth on a year-over-year basis.

Gross profit for the quarter ended September 30 was $2.8 million compared to a gross profit of $1.2 million for the third quarter of 2019. Gross margin increased from about 23% in the third quarter of 2019 to about 42% in the third quarter ended September 30, 2020. As a result of revenues from BARDA's procurement, gross margin from sales of products increased to about 65% from the 40% in the third quarter of 2019. The research and development expenses for the quarter ended September 30 were $2.1 million compared with $1.6 million for the third quarter of 2019. The increase was a result of EscharEx clinical development.

Selling, general, and administrative expenses for the quarter ended September 30 were $2.2 million, in line with the third quarter of 2019. Operating loss for the quarter ended September 30 was $1.5 million compared with an operating loss of $2.7 million in the third quarter of 2019. The net loss for the quarter ended September 30 was $1.9 million or $0.07 per share compared with a net loss of $0.2 million or $0.01 per share for the third quarter of 2019, which included $2.8 million profit from discontinued operation.

Excluding the discontinued operation profit, net loss for the third quarter of 2019 was [$3.0000001099999998] million per share. Adjusted EBITDA as defined below for the quarter ended September 30, 2020, was a loss of $0.8 million compared with a loss of $2 million for the third quarter of 2019.

I'd like now to move to year-to-date 2020 financial results. Revenues for the 9 months ended September 30, 2020, were $15.1 million compared with $26.3 million in the first 9 months of 2019. The revenues from products were $5 million in the 9 months ended September 30, reflecting an increase of 100% compared with the prior period, excluding the $17.5 million upfront payment from the Vericel licensing agreement for NexoBrid.

Operating loss for the 9 months ended September 30, 2020, was $6.5 million compared with an operating profit of $7.6 million in the parallel period, which included a $17.5 million upfront license payment and $1.7 million of deal related expenses. Excluding the upfront license payment and deal related expenses, operating loss for the first 9 months of 2019 was $8.2 million, which reflects an improvement of 21% in the first 9 months of 2020 versus the prior period.

The company net loss for the 9 months ended September 30 was $7.5 million or $0.28 per share compared with a net profit of $8.4 million or $0.31 per share for the first 9 months of 2019, which included a $17.5 million upfront license payment, $1.7 million dealer related expenses and discontinued operating profit of $2.8 million. Excluding the upfront license payment, net of deal-related costs and discontinued profit, net loss for the first 9 months of 2019 was $10.2 million or $0.37 per share.

Adjusted EBITDA for the 9 months ended September 30, 2020, was a loss of $4.7 million compared with a profit of $10.5 million for the first 9 months of 2019, which included the upfront payment of $17.5 million from the Vericel licensing agreement, net of royalty payment of $0.7 million.

Moving now to our balance sheet. Cash and short-term investments as of September 30, 2020, was $25 million compared with $29.5 million as of December 31, 2019, with no debt. The company remained on budget in the first 9 months of 2020 for its operational activities. We reiterate our expectation of cash use for operating activities for the full year to be in the range of $8 million to $10 million. With that, I have concluded our financial overview, and I will now turn the call back over to Sharon. Sharon?

Thank you, Boaz. As you can see, it was a very busy and productive third quarter for MediWound and much to expect in the coming future. We will continue to support our partner, Vericel, with the preparation for commercialization, and we look forward to working with the FDA for the regulatory review process of NexoBrid. We are actively recruiting patients for our EscharEx U.S. Phase II study, and we're exploring the pharmacological effect of EscharEx on wound healing. We are grateful to our employees, the physicians, the patients and all of our partners as we continue to navigate through the challenges of COVID-19 pandemic. With that, we concluded our prepared remarks, and it's now my pleasure to open up the call for your questions. Operator?

(Operator Instructions) Or first question comes from Ryan Zimmerman with BTIG.

So maybe I could ask one on BARDA's procurement on NexoBrid. And certainly encouraging to see the procurement revenue this quarter. Can you just talk a little bit about your expectations for cadence through '21 on the NexoBrid revenue? Is it generally consistent quarter-to-quarter? Is there some lumpiness? Maybe just some color there.

And then my follow-up question is just around the agreement with Vericel and how you're helping Vericel prepare for their launch? Or conversely, how they're helping you prepare for the launch of NexoBrid in the U.S.? Any color there would be appreciated.

Thank you, and good morning, Ryan. So we were indeed excited with the first delivery of NexoBrid to BARDA this quarter as part of its effort for emergency response preparedness. The second delivery to BARDA, the second quarterly delivery to BARDA is expected to take place in this quarter, followed by subsequent quarterly deliveries throughout 2021 on a prorated basis.

Currently, we are expecting to recognize revenues of approximately $3.7 million in 2020 from BARDA procurement and the balance throughout 2021, again, prorated. Overall, the gross initial procurement of BARDA gross revenue is $16.5 million, of which about $10.5 million is our portion, and the balance is Vericel's portion.

Regarding your second question, regarding the activity and support with Vericel. So Vericel is responsible as a U.S. commercial partner. Vericel is responsible for commercializing the product in the U.S. As reflected in the recent Analyst Day, they are currently conducting an extensive prelaunch and medical initiative, which includes significant expansion of their sales team. It includes development of educational and support plans and, of course, cost effectiveness and pricing analysis.

Our support is mainly focused on the following: one, we are running the next program in the U.S. and the next program, as we mentioned before, is importantly and strategically, and keep us both, Vericel and MediWound engaged with the key brand centers in the U.S., while they are treating on a routine basis with NexoBrid.

And 2, the cost effectiveness and pricing analysis is conducting together with BARDA, Vericel and IQVIA is our lead vendor for that. And we provide them with additional scientific peer-reviewed paper and publication from Europe and globally to support the expected launch upon BLA approval.

And our next question comes from Raj Denhoy with Jefferies.

Maybe just following up a little on that last question. When you think about the $3.2 million you did of product revenue in the quarter, can you tell us what percentage of that or how much of that was tied to the procurement of NexoBrid by BARDA? And how much was your sales of NexoBrid outside the United States?

Sure. I will turn the call to Boaz, please.

Raj, thank you for the question. So BARDA procurement for the quarter was $2.1 million and [1 billion to 3.2 billion] is from sales outside of the U.S.

Okay. And to that point, as you think about NexoBrid getting commercial in the United States over the next year or so, is there any potential for that to have sort of a bit of a halo effect or any impact on your sales outside the United States as it gets FDA approval and sort of gets that stamp of approval? Could it have an impact on what you're doing OUS?

So thank you for the question, Raj. First, we do think that, first of all, the key market or the focused market for NexoBrid is, of course, the U.S. market, which represents a major opportunity for NexoBrid. Having said that, we do have expectation to growth in other territories as a result of 2 main things: one, the launch, and take-up of NexoBrid in the U.S. market can support other international markets such as EU; and 2, we do expect to get additional marketing approval in some territories where our distributors submitted the file for marketing approval. And following the approval, we expect launch in these territories.

Okay. That's helpful. And maybe just one quickly on EscharEx. So you mentioned the trial is enrolling again, and you have this mid-2021 time line through the interim assessment. What I'm trying to get at is how risk-adjusted that is. When you think about the path between here and what you'll need for that interim assessment in the VLU study, is that a firm date in your mind at this point? And when you say mid-2021, is there anything more you can tell us about when that interim look might come?

Yes. So thank you for this question. First, I would like to say that we are pleased with our site initiation since the re-initiation of this study in last June. We're currently having 25 active sites participating in the study, primarily in the U.S., with the majority of them having already begun enrollment of patients. We do expect to add additional clinical sites in the U.S. before year-end, and our team continued its effort to have additional clinical sites out of U.S. as part of our efforts to address the COVID-19 challenges.

We plan to have eventually around 30 to 35 clinical sites, active sites as part of our plan for interim assessment towards mid-2021. And while considerable global uncertainties related to COVID-19 remains and are recently increasing with the second wave of the pandemic, we believe that more time is required to evaluate the pace going forward of the recruitment, which is subject to governmental policies, individual clinical facilities policies and, of course, the willingness of the and ability of patients to arrive to clinical sites to get this treatment.

Okay. So it sounds like you're confident at this point, but there is a healthy amount of uncertainty, I suppose, in that mid- '21. Exactly. To date, we are comfortable with our plan. But as we're all facing now the second wave worldwide, let's see what will be the result. We are actively taking some measurement and activities to address potential disruption. But currently, we are on plan.

Our next question comes from the line of Kevin DeGeeter with Oppenheimer.

Thanks for the detailed updates. With regard to the expansion of clinicians being targeted under the next study to include pediatrics. Should we think of those as additional surgeons substantially within the same hospitals as the adult population? Or is this increase the range and the footprint of institutions that you're able to get into prior to launch, those that are either strictly pediatric or those for whom you'll be targeting pediatrics, but where previously, they were not enrolling for adult patients.

Thank you for the question, Kevin. Currently, we have 22 active sites across the U.S. that actively treating burn patients with NexoBrid, while additional sites are in activation process with the goal to have about 30 sites participating in the expanded access program by year-end.

To date, about 51 patients were treated successfully with NexoBrid, while the protocol, the original protocol enables up to 150 patients to be treated. Now with the completion of the pediatric study enrollment stage and the FDA has agreed to allow the next program to be expanded and include also pediatric and it will impact us for one. We will have additional sites that can treat.

There are some sites, limited number of sites that are dedicated for pediatric population. Most of sites are treating both adults and pediatric, but you correctly asked. In most of the cases, it's different clinicians or different physicians, different teams within the burn centers. So we, for sure, anticipate to expand the experience of additional clinicians with NexoBrid and also to expand the number of burn centers that we treat with NexoBrid.

And following up on that, I appreciate the granularity with regard to potential TAMs for the pediatric subsegment in the U.S. I think you called out around 5,000 patients. How should we think about the relative concentration of the pediatric patients in terms of sites? And of those 5,000, how many in general terms or a portion, do you think are typically treated by some of the centers you'll be able to gain access through the next protocol?

I don't have the exact number, but I can just give you a rough estimation. I assume that 80% of the overall pediatric population is treated on the same brand centers that we also adopt, in some cases, by other teams. And the balance is treated in specific burn centers for pediatric, dedicated for pediatric. We saw it also in the pediatric study that we conducted. And we also see it now in the next study of protocol, where we are now opening or in the process of activation of additional sites and expanding the population of the study.

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

I wanted to just focus a couple of questions on EscharEx. The exploration of the pharmacological effects on biofilm burden. I know it's still early days, but any more color you can give us in terms of what these actions may entail? And when you may update the investment community on those results?

Thank you for your question, and good morning, Josh. As I discussed in the prepared remarks, we believe that EscharEx can provide additional clinical benefits and address other areas of unmet medical needs on top of the debridement of chronic wounds.

One of them is the reduction of the biofilm burden. As you probably know, there is a consensus among a clinician about the delay of wound dealing because of the biofilm. And since there are multiple clinical studies that demonstrated that the enzyme and bromelin, which is the key component of our product, of our API, show promise as an effective treatment of reduction.

So we are now initiated pharmacological studies to assess and explore the pharmacological effect of EscharEx and we look forward to sharing more details with you in the first quarter of Q1 regarding the development plan and the status of those pharmacology studies.

And then if we just think about some of the value-creating events in the EscharEx program and the interim analysis mid next year seems to be a potential big deal as long as things work out, and this trial continues after that interim assessment, you'll have this other details around EscharEx and the effect on biofilm burden. When do you see the potential to open up a strategic process again, similar to what you did with NexoBrid? Is there anything in your mind where you would unlock enough value where that strategic -- second strategic process could commence?

Thank you for the question. So this is something to see in the future, but I assume that the positive interim assessment can accelerate a potential process. But definitely, final results or top line results of this study. We are a data-driven company, and we believe that the data of this Phase II study will support one discussion with the FDA regarding the next stage of development or next step of development towards BLA. And 2, may potentially support any further discussion or reach out of potential key wound care players in the market.

The next question comes from the line of Swayampakula Ramakanth with HC Wainwright.

Most of my questions have been answered. Just a couple of them. In terms of the next study that you're conducting in the U.S., you said there are, I think, 21 or 22 centers open at this point. For you to reach your time point of data analysis in the second half of '21, how many additional centers do you think you need to add so that it's an optimal number to reach your goal? That's question number one. And the other question is, do you have an idea of when you would publish the complete analysis of the DETECT study?

Thank you for your question. So I'll start with the second question. We now have the study completed and data analyzed. I assume that in the first quarter of 2021, we will have a final thesis, so we can have the full data set of the DETECT study. As agreed with the FDA, the 24 months safety data will be submitted as a post-approval commitment unless during the review process, they will ask for this data because it's already available.

Regarding your second question for the next. So you correctly described that we currently have 22 active sites in the U.S., treating patients with NexoBrid, and we plan to have about 30 sites. We will keep enrolling patients to the next study until the product will be -- the BLA will be approved, and the product will be launched 2, 3 months following the approval of such a BLA.

And from this point in time, we will keep treating pediatric population under this protocol going forward.

Talking about the pediatric population that you want to include in this, if you can expand the label to the pediatric patient, can you give us an idea of what sort of a market expansion we are looking at once we have that patient group also included?

Thanks for the question. So first of all, the completion of the enrollment stage of the pediatric study is an important step towards our goal of providing NexoBrid for treatment for this specific population. Given the potential of NexoBrid to address the unique challenges of treating burn children. We anticipate reporting top line results from this study, including the follow-up data, the 12-month follow-up data in the second half of 2021.

Based on our experience with the DETECT study and the BLA, we believe that we can submit the pediatric indication expansion of NexoBrid to the FDA based on the 12-month follow-up data, while the 24 months follow-up data will be a post-marketing submission. And so, we plan to have a pre-BLA meeting with the FDA in the first half of 2021. And if the FDA accepts our submission plan, we anticipate submission in the second half of 2022.

Thank you. And I'm not showing any further questions at this time. I'd now like to turn the conference back to management for further remarks.

Thank you, operator. Thank you, everyone, for joining us today. We look continuing to executing on our strategy and bringing new therapies to market and to update you again on our next 2020 full year update call. Thank you, and have a great day. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a good day.