Earnings Call Transcript - MDWD Q1 2021

Operator, Operator

Good day, and thank you for standing by, and welcome to the Quarter 1 MediWound 2021 Conference Call. Please be advised that today's conference is recorded. I would now like to turn the conference over to your speaker today, Mr. Jeremy Feffer. Please go ahead, sir.

Operator, Operator

Thank you, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the first quarter of 2021. 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 results, 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 broadcast 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?

Sharon Malka, CEO

Thank you, Jeremy. Good morning to our U.S. listeners, and good afternoon to our listeners in Israel. Welcome to MediWound First quarter 2021 Conference Call to discuss our financial results and business updates and highlights. This quarter, we continued to generate product revenue growth compared with the prior year, driven by the procurement of NexoBrid by BARDA for emergency response preparedness and out of U.S. sales as we continue to execute on our global expansion strategy of expanding the use of NexoBrid in additional international markets. In addition, we have made progress across each of our ongoing clinical programs, highlighted by the enrollment of the first patient in our Phase II pharmacology study of EscharEx and the launch of our new program in non-melanoma skin cancer, while we continue to advance our U.S. Phase II adaptive design study of EscharEx for the treatment of venous leg ulcers. Let me now provide you with more detail on the progress we made and review the first quarter highlights. Starting with NexoBrid. We continue to enroll new patients in the expanded access program at leading U.S. burn centers with 82 burn victims already treated with NexoBrid to date. The expanded access study runs through approval, and there is plenty of opportunity to continue to enroll patients across over 20 sites, which will continue to increase brand surgeons' experience with NexoBrid. The pediatric study is fully enrolled, and we expect to report top-line results from this study in the third quarter of 2021. On the commercial front, BARDA's procurement for emergency stockpiles continues to drive product revenue growth, and we are expecting to recognize the remaining revenue related to BARDA procurement of NexoBrid in 2021. We are satisfied with NexoBrid's global expansion into new international markets, supporting our top line, signing additional distribution agreements in Europe and Asia and receiving marketing approvals for NexoBrid in Taiwan and Chile. Turning to the BLA, in September 2020, the FDA accepted for review our BLA for NexoBrid for severe burns and assigned a PDUFA goal date of June 29, 2021. However, as is apparent from recent FDA actions across the industry, travel restrictions related to the COVID-19 pandemic are impacting the FDA's ability to complete manufacturing facility inspections, and review processes have been affected. Recently, the FDA has informed us that due to these travel restrictions, it may be unable to conduct the required inspections of our manufacturing facilities in Israel and Taiwan by the PDUFA date, and that it is unlikely that the additional CMC information provided in support of our BLA will be reviewed during the current review cycle. The PDUFA goal date remains June 29, 2021, and FDA review is ongoing as we continue to work closely with the agency. At this time, we expect the timing of potential approval and the commercial launch of NexoBrid to be impacted. We are committed to bringing NexoBrid to the U.S. market as our North American commercial partner, Vericel, continues to make significant progress concerning its commercial and medical affairs prelaunch activity. Given its robust clinical data package, we believe that NexoBrid remains well positioned to replace surgical excision as the standard of care for eschar removal in patients with severe burns, and we look forward, upon approval, to bringing NexoBrid to the U.S. market. Moving to our product candidate, EscharEx, our development program is well underway. We continue to actively recruit patients for our U.S. Phase II adaptive design study for the treatment of venous leg ulcers. We are on track to reach the target of 80 patients required for the interim assessment and reiterate our expectation for an interim assessment around mid-2021, anticipating completion of patient enrollment by year-end 2021. As part of the EscharEx development program, we are conducting a Phase II pharmacology study to explore the potential clinical benefits of EscharEx associated with chronic wound management. The study is an open-label, single-arm study, assessing the pharmacological effect of EscharEx in up to 15 patients with both VLUs and DFUs. This study will provide us with a better understanding of what is happening in the wound bed during and after debridement with EscharEx, and more specifically, it will enable us to assess the effect on reduction in biofilm burden, the reduction in inflammation, and the initiation of the healing process. We enrolled the first patient in this study last month and expect data from this study in the second half of 2021. We were proud to host an EscharEx Analyst Day in March, featuring four prominent key opinion leaders who discussed the current U.S. wound debridement practices and how EscharEx, upon approval, has the potential to change the current standard of practice and care of chronic wounds. Our three key opinion leaders, Dr. Kirsner, Singer, and Snyder, spoke about the need for better therapeutics and improvement upon the current standard of care. With a $1 billion market opportunity in both the VLU and DFU markets, a clear opportunity in the hospital outpatient setting, and potential for meaningful improvements on the current standard of care, we believe EscharEx can have a meaningful impact on chronic wound management, offering significant benefits for patients, healthcare professionals, and payers. Moving now to our product candidate, 005. We submitted a protocol to the FDA for a Phase I/II clinical study for the treatment of basal cell carcinoma, and we are advancing the initiation, which is planned for the second quarter of 2021. This study is designed to evaluate safety and tolerability using different schedules of administration as well as to provide a preliminary evaluation of its efficacy, as measured by the percentage of target lesions with complete histological clearance. In tandem, 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 like actinic keratosis, basal cell carcinoma, and squamous cell carcinoma. We expect that data from both studies will be generated by the end of this year, 2021. We believe that 005 has a reasonable path to market with a clear unmet medical need, and the clinical plan we have laid out carries relatively low development costs, given its active substance, which is the same as NexoBrid and EscharEx and the intended indication. In closing, we anticipate 2021 to have multiple data readouts in EscharEx and 005 clinical trials and are excited about the NexoBrid opportunity in the U.S. as we continue to work closely with the FDA. We remain focused on driving growth and further strengthening our company with a deep pipeline of bio-therapeutic solutions for tissue repair and regeneration. Now I would like to turn the call over to Boaz for a summary of our financials. Boaz?

Boaz Gur-Lavie, CFO

Thank you, Sharon, and good morning, everyone, and good afternoon to our listeners in Israel. I'd like to start our financial review, noting that we continue to generate strong product and license revenue growth from both the U.S. and ex-U.S. markets, as NexoBrid continues to support our balance sheet and clinical development programs. Now I'd like to provide you with an update on our financial results for the first quarter of 2021. Revenues for the first quarter of 2021 were $5.8 million compared with $4.4 million for the first quarter of 2020, an increase of 32%. Revenues from product and licenses were $2.9 million, an increase of 300% compared to the first quarter of 2020, primarily driven by BARDA's procurement for emergency stockpile and sales increase outside of the U.S. Gross profit was $2.4 million, or 41% of net revenues compared with a gross profit of $1.2 million, or 28% of net revenues for the first quarter of 2020. Research and development expenses were $2.2 million compared with $1.7 million for the first quarter of 2020. The increase was primarily driven by the EscharEx clinical development program. Selling, general and administrative expenses were $2.1 million compared with $1.7 million in the first quarter of 2020. This was a result of an increase in directors' and officers' insurance premiums. As a percentage of revenues, SG&A expenses were 36%, reflecting a 300 basis points decrease versus the prior quarter of 2020. Operating loss was $1.9 million, reflecting a 13% decrease in operating loss compared to the $2.2 million in the first quarter of 2020. The company posted a net loss of $2.9 million or $0.10 per share compared with a net loss of $2.5 million or $0.09 per share for the first quarter of 2020. Adjusted EBITDA was a loss of $1.3 million compared with a loss of $1.8 million for the first quarter of 2020, reflecting a decrease in adjusted EBITDA loss of 28%. Moving now to the balance sheet. As of March 31, 2021, MediWound had $17.9 million in cash and short-term investments compared with $21.6 million as of December 31, 2020, and no debt. MediWound remains on budget, utilizing $3.7 million in the first quarter of 2021 for its operational activities. The company reiterates its expectation for cash use in 2021 to be in the range of $5 million to $7 million. With that, I have concluded the financial overview and will now turn the call back over to Sharon. Sharon?

Sharon Malka, CEO

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 continue to work with the 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 the new clinical study in non-melanoma skin cancer. With that, it is my pleasure to open the call for your questions. Operator?

Operator, Operator

Your first question comes from the line of Kevin from Oppenheimer.

Susan Chor, Analyst

This is Susan calling on behalf of Kevin DeGeeter from Oppenheimer. My first question is a clarification on a comment you made earlier. You mentioned that the FDA will not be able to inspect the manufacturing facilities for Taiwan and Chile. Can you comment on how that will affect the regulatory timeline for BLA approval?

Sharon Malka, CEO

Yes. Thank you for the question. As we communicated during the call, the FDA accepted the review of the BLA and provided us with the PDUFA goal date of June 29. However, as we see in the industry from recent FDA actions, travel restrictions related to the COVID-19 pandemic are impacting the FDA's ability to complete manufacturing facility inspections on time and review processes have been affected. As communicated, the FDA informed us that due to this travel restriction, it may be unable to conduct the required inspection of our manufacturing facility in Israel and Taiwan, and that it's unlikely to review the CMC information provided by the PDUFA date within the current review cycle. The PDUFA goal date remains June 29, and the FDA review is still ongoing as we continue to work closely with the agency. However, at this time, we expect the timing of the potential approval and commercial launch of NexoBrid to be impacted, given the different potential scenarios. And we cannot speak for the FDA. Although there are several scenarios, we cannot predict how long the FDA may take to complete the review of the BLA. We are committed to bringing NexoBrid to the U.S. market, while our partner, Vericel, continues to make significant progress with the preparation for launch. Given its robust clinical data package, we believe that NexoBrid remains well-positioned to become standard of care. We believe both the inspection and the additional information provided are just potential timing issues.

Susan Chor, Analyst

Got it. Just one more question for me. So you're planning to initiate the BCC study in the next, I guess, couple of months. Can you provide any color on just on the study protocol, potential enrollment, traits, anything?

Sharon Malka, CEO

Yes. So we have already submitted the protocol as communicated to the FDA for a Phase I/II study. This study is for the treatment of basal cell carcinoma, nodular and superficial basal cell carcinoma, and we plan to initiate this study in this quarter, the second quarter of 2021. The study objective is 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 lesions with complete histological clearance. We will have two cohorts of patients while we assess the first cohort and adjust accordingly to the second cohort regarding the administration regimen. And we believe that 005 has a reasonable path to market with a clear unmet need, as this clinical plan that we laid out carries relatively low development costs, given the active substance and the intended indication.

Operator, Operator

Your next question comes from the line of Swayampakula.

Unidentified Analyst, Analyst

This is RK from H.C. Wainwright. It's quite unfortunate that the FDA is unable to deal with a huge backlog. It's not just you folks. I understand it's an industry-wide situation, and even the government is looking into this. Having said that, how are the conversations going? Because I believe the FDA is trying to figure out how to manage this, even accepting inspection reports from other regulatory agencies. Because you certainly have been inspected by BARDA, at least a couple of times, if I remember it correctly, before the NexoBrid contract came through. Any commentary on that? Or anything that you can provide us?

Sharon Malka, CEO

Yes. Thank you for the question. Specifically, we are not going to discuss the specific details from the interaction with the FDA. We respect the FDA review process. However, with less than two months left before the PDUFA date, we feel that at this stage, the inspection is likely to occur before the PDUFA date, and this is the reason we communicated. We can't speak for the FDA, although the FDA has some guidance and is assessing alternatives to conduct inspections. And although there are a number of scenarios, it is very difficult to predict the impact. We can look at other recent examples across the industry, as you mentioned, it's across the industry now, and the FDA is handling these types of situations. Outcomes can range from a deferral, deferred action, through major amendments with the extension of the review cycle, and potentially a Complete Response Letter (CRL). And given the different potential scenarios, we cannot predict how long it will take the FDA to make or to complete their review. But we do think that both the inspection and the CMC data provided, we believe, are just potential timing issues, and hopefully, it will be resolved soon. As you clearly stated, NexoBrid is approved in Europe and in other international markets with over 7,000 patients treated with the product, with BARDA procurement continuing as we treat patients in the U.S. under the expanded access protocol. Given its robust clinical data, we believe that NexoBrid will be approved in the U.S., and our commercial partner, Vericel, continues to plan for launch.

Unidentified Analyst, Analyst

Okay. Just to clarify, I am assuming that until the PDUFA date, you will not know whether this will be a 3-month CRL or a 6-month delay, correct?

Sharon Malka, CEO

Correct.

Unidentified Analyst, Analyst

Okay. Fair enough. Then just staying within NexoBrid. On the pediatric study that you were talking about, your expectation for the data in the third quarter, could you kind of highlight to us what sort of data we are expecting? And is this steady enough for a label expansion? Or would you need to do any additional work?

Sharon Malka, CEO

Yes. Thank you. So the pediatric study has been communicated and is fully enrolled. We completed the enrollment stage, and we expect to report the top-line data results, which will include the acute stage safety and the 12-month follow-up data in the third quarter of this year, 2021. We believe that this data is sufficient for a label extension. However, we believe that the submission for the pediatric indication expansion for NexoBrid will be subject, of course, to the ongoing review process, and we will get more clarity regarding the BLA review outcome. In general, I can tell you that as an orphan drug, we are waived in the U.S. from pediatric investigational plans. This study was initiated based on our European pediatric investigation plan. But this study is conducted with two protocols from the FDA and EMA, and it will be used for both authorities for label extension.

Unidentified Analyst, Analyst

Okay. One last question on NexoBrid, and I'll step back into the line. Regarding the global expansion that you have been conducting over the last 6 to 8 months, what can you highlight out of that? Any insight into how we should think about revenues from other geographies?

Sharon Malka, CEO

Yes. We look at the other geographies as ex-U.S. We have the U.S. geography currently with BARDA and later on, upon approval, with the commercial market through Vericel. The ex-U.S. geography comprises the European market and the international market. As we discussed during the call, we are satisfied with the NexoBrid global expansion into new international markets, which supports our top line, primarily by advanced payment or upfront payment as part of the distribution agreements and later on by selling the product to the distributor. We continue upon our strategy to sign additional distribution agreements in Europe and Asia. Just recently, in the last quarter, we already received two additional marketing approvals for NexoBrid, one in Taiwan and one in Chile, and we are getting ready with the distributor for launch in these territories.

Operator, Operator

Your next question comes from the line of Nathan Weinstein from Aegis.

Nathan Weinstein, Analyst

I just had one question, and it's a follow-up on the international opportunity. And specifically, I was thinking about BARDA and whether there are stockpiling opportunities from other ex-U.S. governments?

Sharon Malka, CEO

Yes. Thank you for the question, Nathan. So you are totally right; we are working with BARDA, and BARDA procurement for the medicine stockpile continues to drive product revenue growth for MediWound. As mentioned, we expect to recognize the remaining revenue from BARDA of approximately $6.5 million in 2021 related to the initial procurement of BARDA, and we are pleased with the increase in sales of products and expect it to continue in 2021. Looking at other territories, we are exploring the options of having such a model in other countries worldwide. I can tell you that the ability of the budget allocated for such procurement is different in the U.S. and in other territories. However, we are in contact with several governmental authorities worldwide to have such kind of mechanism, but with a less significant amount of procurement compared to BARDA's $16 million procurement.

Operator, Operator

Your next question comes from the line of Joshua Jennings from Cowen.

Bryan Bergin, Analyst

This is Bryan here for Josh. I also have a couple on the FDA approval process for NexoBrid. Just to start, can you clarify the role of the manufacturing facility in Taiwan? I thought the Israel facility was the primary site responsible for manufacturing. And I guess where I'm going with this is, do you need both facilities inspected before a final decision? Or could you start with just the Israel facility approved?

Sharon Malka, CEO

Bryan, to your question, MediWound is the primary manufacturing facility. We are manufacturing here in our facility in Israel, both the drug substance and the drug product, the API, and the drug product as well as the Gel Vehicle. However, because the Taiwanese manufacturing or supplier is manufacturing the bromelain special production, which is the key raw material or intermediate drug substance, it is subject also or required inspection as well. And we've been informed that the FDA may be unable to conduct the required inspections of our manufacturing facilities, both in Israel and Taiwan.

Bryan Bergin, Analyst

Okay. That's helpful. And just on any potential for estimates of time revisions, do you expect to receive any kind of estimate for when these facility inspections could occur? And also, if it turns out that the FDA does not make the June 29 PDUFA date, do you expect there to be an estimated time for a final decision if they do not make that June 29 date?

Sharon Malka, CEO

Yes. So first of all, currently, the review is ongoing, and the PDUFA date is June 29. The FDA communicated that it anticipates to meet this June 29 PDUFA date. But we can't speak for the FDA, and things are evolving in the last few months due to the backlog and other things that they have. And although there are a number of scenarios, it is very difficult to predict now what the impact will be and what the result will be. We will wait for further communication from the FDA, whether it's alternative vehicles for conducting inspections or whether it's scheduling inspections, etc. But currently, given the different potential scenarios, we cannot predict how long it will take them to complete the review, including, of course, the inspection of the facilities.

Bryan Bergin, Analyst

Okay. And maybe just one more on the BARDA procurement process. So you're about halfway done with the delivery there. Do you have insight yet into BARDA's plans for potentially additional procurement after this first tranche is completed?

Sharon Malka, CEO

Yes. So as we said, we are on track with the BARDA procurement for emergency stockpile, which continues to drive the revenue growth of MediWound, and we expect to recognize the remaining revenue during 2021, which is about $6.5 million. Our portion out of the overall $10.5 million for 2021. Currently, we have no definitive decision by BARDA regarding the option. The option for additional procurement will be at BARDA's sole discretion. I assume it will be utilized only when the current procurement will be expired for the rotation of expired stock or alternatively if they require to increase the level of safety stock, emergency stock.

Bryan Bergin, Analyst

Okay. And are you directly in those discussions? Or is Vericel handling those primarily?

Sharon Malka, CEO

We are the primary contract with BARDA. We are the sponsor of BARDA, of course, and with the FDA. We are the primary contract with BARDA.

Operator, Operator

There is no question at this time. Presenters, please continue.

Sharon Malka, CEO

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

Operator, Operator

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