Earnings Call Transcript - MDWD Q1 2025

Operator, Operator

Good day. And welcome to the MediWound First Quarter 2025 Earnings Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Dan Ferry of LifeSci Advisors. Please go ahead.

Dan Ferry, LifeSci Advisors

Thank you, operator. And welcome, everyone. Earlier today, pre-market open, MediWound issued a press release announcing financial results for the first quarter ended March 31, 2025. You may access this press release on the company's website under the Investors tab. I would ask you to review the full text of our forward-looking statements within this morning's press release. 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. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the SEC. In addition, all forward-looking statements represent our views only as of today and MediWound assumes no obligation to update or supplement any forward looking statements, whether as a result of new information, future events or otherwise. This conference call is the property of MediWound and any recording or rebroadcast is expressly prohibited without the written consent of MediWound. With us today are Ofer Gonen, Chief Executive Officer of MediWound; and Hani Luxenburg, Chief Financial Officer. Barry Wolfenson, EVP of Strategy and Corporate Development is also participating in today's call. Following our prepared remarks, we will open the call for Q&A. Now I would like to turn the call over to Ofer Gonen, Chief Executive Officer of MediWound. Ofer?

Ofer Gonen, CEO

Hey, thank you, Dan. And good morning, everyone. We entered 2025 with strong execution across our clinical, commercial and operational priorities, maintaining the momentum we established in 2024. The VALUE Phase III study for EscharEx is on track and the addition of a collaboration with Kerecis marked a significant milestone, actually bringing nearly all the major wound care companies into our clinical research program. Meanwhile, NexoBrid continues to gain global traction as we advance long-term manufacturing investments to support sustained growth. Let's begin with EscharEx, our next-generation enzymatic debridement therapy for chronic wounds. Recruitment for the VALUE Phase III study for venous leg ulcers is progressing as planned. The global trial will enroll 216 patients across approximately 40 sites in the United States and Europe. Most of the US sites are already open and the majority of the European sites are expected to be activated in the third quarter of 2025. Our EscharEx program is strategically derisked, building on the strong results of our Phase II studies. If EscharEx simply replicates those clinical outcomes, the Phase III trial would be considered a clear success with results expected to support both regulatory submissions and commercial positioning. The VALUE Phase III protocol also includes key enhancements designed to further increase the likelihood of success. We have a larger patient population to increase statistical power and interim analysis at 65% enrollment enabling adaptive adjustments. This assessment is anticipated in mid-2026. And we have standardized treatment protocols to minimize variability and ensure consistency across sites. Finally, it is important to note that EscharEx shares the same FDA approved active pharmaceutical ingredient as NexoBrid for nearly identical indications of eschar removal. To further strengthen our BLA submission and to enhance commercial readiness, we are planning a 45 patient randomized prospective Phase II head-to-head comparison of EscharEx versus Collagenase scheduled to begin in the second half of 2025. This study will include both SANTYL and the European Collagenase product IRUXOL, generating critical comparative data that will be instrumental in supporting our market access and pricing strategies. This quarter also marks a major milestone in our strategic research collaborations. We now have participation by almost all the leading global wound care companies across our clinical development programs. Added to the list is Kerecis, which will support our upcoming diabetic foot ulcer trial by providing its tissue product, MariGen, a fish skin graft for active closure. With Solventum, Mölnlycke, Kerecis, MIMEDX supporting our clinical programs, EscharEx has received strong external validation from most of the key players in the industry. The growing excitement around EscharEx comes from its clear clinical advantages, particularly when we compare it to SANTYL, the only FDA approved enzymatic debridement agent. This was further reinforced by a recent peer-reviewed publication in the journal Wound, which included a post hoc analysis of our Phase II chronic study in VLUs. The data there confirmed EscharEx's superiority across multiple endpoints, including faster debridement, enhanced granulation tissue formation and improved wound closure. The company has secured the EUR2.5 million grant component of the European Innovation Council Accelerator funding to support the clinical and regulatory advancement of EscharEx for the treatment of diabetic foot ulcers. Following a successful evaluation process, the company is engaged in discussions for a EUR13.75 million equity investment, which may not materialize. We don't expect this to impact our timeline. The DFU study remains on track to begin in 2026, pending alignment with both the FDA and EMA on the trial protocol. The rationale for our excitement around the DFU program was clearly demonstrated at recent major international wound care conferences, including the WHS, SAWC and Yuma. We presented DFU specific data from our first Phase II study of EscharEx. That study included patients with DFU, VLU, and trauma wounds, and the DFU results mirror the strong efficacy we have already seen in VLUs. I will mention a few key findings. EscharEx achieved 58% complete debridement compared to just 14% with a gel vehicle. Granulation tissue was observed in 42% of EscharEx treated wounds versus only 11% with the vehicle. The median time to complete debridement was just 23 days for EscharEx compared to 128 days with the gel. And the median time to wound bed preparation was 24 days for EscharEx, whereas it was not achieved at all in the vehicle group. With all this momentum and assuming positive results from the VALUE Phase III study, we believe EscharEx is well positioned to become the global leader in enzymatic wound debridement. Now let's turn our attention to NexoBrid, our innovative enzymatic therapy for severe burns. US adoption of NexoBrid continues to expand with consistent ordering from nearly 60 burn centers. Our commercial partner, Vericel, reported a 207% year-over-year increase and a 31% sequential increase in NexoBrid revenue during the first quarter of 2025. In Japan and Europe, demand continues to exceed manufacturing capacity. We remain on track with the commissioning of our new manufacturing facility with operational readiness expected by year-end 2025. Commercial availability will follow regulatory approvals from the FDA and EMA, and it is anticipated in 2026. This facility will significantly expand our production capabilities, enabling us to meet growing global demand and support sustained revenue growth. NexoBrid also featured prominently in recent scientific and clinical communications. Results from a pediatric Phase III study were published in the peer-reviewed journal Burns, reinforcing NexoBrid efficacy and safety as a nonsurgical eschar removal therapy for both adult and pediatric burn patients. At the American Burn Association Annual Meeting, new data were presented on NexoBrid's emergency use during the Israel-Hamas War. NexoBrid was used to treat patients with blast injuries and complex burns. One hospital reported treating a trauma or a burn patient every minute for 24 hours, highlighting NexoBrid's vital role in mass casualty and emergency situations. Governments around the world took note of NexoBrid's impact. In particular, the US government has expressed interest in establishing a domestic backup manufacturing site. In response, we have initiated planning and site selection for a future US-based facility, a project supported by BARDA. We are also seeing increased interest in stockpiling NexoBrid as part of global emergency preparedness efforts, and we believe some of these discussions will translate into concrete opportunities once our manufacturing capacity expands. And now I would like to turn the call over to Hani to review our financial performance in more detail. Hani?

Hani Luxenburg, CFO

Thank you, Ofer. And good morning. Total revenue for the first quarter of 2025 was $4 million compared to $5 million in the first quarter of 2024. The decline reflects lower revenue from BARDA-funded development services as the NexoBrid development program for both adult and pediatric populations approaches completion. Gross profit for the quarter was $0.7 million, representing a gross margin of 19% compared to $0.6 million and a gross margin of 12% in the prior year period. This improvement reflects a favorable change in our revenue mix. R&D expenses totaled $2.9 million compared to $1.5 million in Q1 2024, reflecting continued investment in the EscharEx VALUE Phase III trial and associated development activities. SG&A expenses were $3.1 million compared to $2.9 million in the prior year period. Operating loss for the quarter was $5.2 million versus $3.7 million in Q1 2024. Net loss was $0.7 million or $0.07 per share compared to a net loss of $9.7 million or $1.05 per share last year. The improvement was primarily driven by noncash financial income related to warrant revaluation. Adjusted EBITDA loss for the quarter was $4 million compared to $2.9 million in the prior year period. Now turning to our balance sheet. As of March 31, 2025, we had $38.7 million in cash, cash equivalents and deposits compared to $43.6 million at year-end 2024. We used $5.1 million to fund our operations during the quarter. That concludes my financial review. Ofer, back to you.

Ofer Gonen, CEO

Thank you, Hani. So in summary, we began 2025 with strong execution and meaningful progress across our key programs. The VALUE Phase III trial of EscharEx remains on track, supported by growing scientific evidence and engagement of virtually all major wound care players and partners. We are advancing complementary studies to support market access and future commercial success. NexoBrid continues to gain traction globally with record U.S. sales, high demand in international markets and new clinical data demonstrating its value in both routine and emergency care. Operationally, we remain focused on scaling our manufacturing capabilities to support long-term growth with the new manufacturing facility progressing on schedule and the U.S. expansion plans underway. With a solid foundation, a focused pipeline and strong strategic alliances, we are well positioned to deliver long-term value. With that, I will now turn back the call to the operator to open the line for questions. Operator?

Operator, Operator

Our first question comes from Chase Knickerbocker with Craig-Hallum.

Chase Knickerbocker, Analyst

Maybe just first on manufacturing. Can you remind us what is kind of yet to be done to be ready for scale up by year-end? And then any additional feedback that you've gotten from the relevant agencies around timing of those required regulatory approvals sign-offs, particularly with the FDA?

Ofer Gonen, CEO

Chase, great to have you with us today. Let me address the manufacturing question. So as I said, the demand for NexoBrid is increasing due to several factors. We have major market launches, US, Japan, growing governmental interest, expanding indications, the pediatric indication, the military use. So we are focusing on making sure that we will be able to deliver. We completed the construction of the new facility, and we are now in the commissioning phase. Actually, we are on time, and we anticipate achieving all operational capacity by the end of 2025. After that, we are calling for inspections, EMA and FDA. EMA is easier because the inspectors are Israeli, so we expect it to be quite sooner. As for the FDA, there is quite a bit of uncertainty about how they are conducting remote inspections these days. Anyway, we are expecting that only around mid-2026, so we have time.

Chase Knickerbocker, Analyst

And then just on the potential for some US capacity. Any thoughts on when investors should be expecting kind of movement there, when we could have seen a site be identified, something formal with the U.S. government in place, etc. Do you have any thoughts on kind of timing there?

Ofer Gonen, CEO

As you know, the US government has expressed interest in establishing such a domestic backup manufacturing site. We have a project that we believe will be finished by Q3 this year. After that, we will have a better understanding about the location, timing, etc. As I said, this project is fully supported by BARDA.

Chase Knickerbocker, Analyst

And then you had a number of posters and presentations at SAWC, and I would imagine you had an opportunity to catch up with a lot of the relevant clinicians at a lot of your sites for the VLU study. Any incremental thoughts from them? And as far as enrollment goes, are things kind of to plan as far as what you expected thus far? Anything taking longer or shorter than expected? Just kind of an update on initial cadence of activations and as we look for some initial enrollment progress here in the short term?

Ofer Gonen, CEO

So since I met you at this conference, I know that you have been there. In this conference, MediWound had a very strong performance, many presentations, posters, and abstracts were shared. We met the majority of the principal investigators from the United States and the excitement is there. This trial is the most significant and comprehensive trial in venous leg ulcer patients in the past few decades. This is why all the leading wound care companies and the top KOLs are collaborating with us in this endeavor because they know that if it is a success, this trial is going to have a huge impact on the market. So as we said, the recruitment of this study is progressing as planned. We expect the next milestone, the most important milestone, is having the interim data by mid-2026, and we don't see an issue in getting there.

Operator, Operator

And the next question comes from RK with H.C. Wainwright.

RK, Analyst

So a couple of quick questions. So in your prepared remarks, you started talking a little bit about stockpiling of NexoBrid. So in general terms, how are you planning for this? I know you have enough demands on you for the product. So I'm just trying to think in general terms, what could we even be thinking in dollar amounts worth of stockpiling that you could be expected to fill?

Ofer Gonen, CEO

It's wonderful to have you on the line today. That's an excellent question. Currently, we have guidance related to our revenue, and we are confident in achieving those figures. Our main focus right now is to treat patients rather than stockpiling NexoBrid. We prefer it not to just sit unused. The governments we are engaging with understand our priority is to treat real patients, which will also facilitate successful commercial launches in specific regions. Regarding the amounts governments might purchase in 2026 and 2027, I cannot provide specific figures at this time. However, I can tell you that our guidance includes expectations of generating $24 million in revenue this year and $30 million to $33 million next year. We will have a clearer picture after that. Additionally, following the recent events involving the Israeli-Hamas conflict, there has been increased interest from many governments, including those in the United States and Europe, and we are just beginning these discussions.

RK, Analyst

So in terms of the EscharEx ongoing Phase III trial, you are saying you have 40 centers running the trial for you. Of the 40 centers, what percentage is in the US? And would there be any reason why the study could get completed ahead of time than what you're anticipating right now?

Ofer Gonen, CEO

It's a good question. Nearly 50% of the sites for the trial from 17 to 20 will be located in the United States, with two to three sites in Israel and the remaining in Europe. This is the distribution of our sites. Regarding the pace of enrollment, there are 1.5 million patients in the United States who fit the criteria for this treatment, and we've selected the top-performing sites to participate in the trial, so we don't foresee any issues with enrollment. However, we are investing significant resources to ensure we recruit the right patients. We want to avoid including healthy patients, those who could be cured by a placebo, or individuals who may have a personal connection to the principal investigator. Therefore, our screening process is extremely thorough. We anticipate enrolling half a patient per site each month, based on our previous clinical trial experience with our contract research organization. We don't expect to speed up this process, and frankly, we're not in a hurry. Our primary concern is the success of this trial and its potential to transform the treatment of chronic wounds.

RK, Analyst

And last question from me, Ofer. In terms of the Phase II head-to-head study against Collagenase, which you plan to start soon, would the results of that study and the Phase III study come around the same time or would the Phase II come ahead of it? Just trying to understand so that when the whole package will be ready to be sent out to the regulators.

Ofer Gonen, CEO

The plan is that the trials will finish around the same time. I think the head-to-head study, since it hasn't started yet, I cannot tell for sure. But the plan is that it will be finished ahead of the Phase III study. It's a much shorter study. We are looking at various parameters that will impact especially safety, market aspects, pricing aspects, etc. We don't need the long follow-up, the three-month follow-up after the study completes in the Phase III trial. So this is a much shorter and simpler trial. As far as we are planning now, we will get the final results before the Phase III is completed.

Operator, Operator

And the next question comes from Michael Okunewitch with Maxim Group.

Michael Okunewitch, Analyst

I would like to ask about the head-to-head study, specifically regarding the pricing strategy. If your product achieves faster debridement than SANTYL with fewer applications, do you need to set a higher price to match the cost per application, or should you also factor in the reduced healthcare utilization from quicker debridement? I'm interested in understanding what factors and metrics will influence your pricing decisions.

Ofer Gonen, CEO

Michael, thank you for joining us today. Barry, can you please address that question?

Barry Wolfenson, EVP of Strategy and Corporate Development

I think the model that we have out right now with our $851 price target is merely the first component that you mentioned, which is what was the cost of the product over the duration of the treatment period, and we're comparing the average cost of SANTYL over a treatment period versus then what would be the anticipated premium for the average cost of EscharEx. The next part is what we'll be doing. We're actually doing a full market research study on market access and pricing that will get into the second component, which is the HEOR, the health economics component of it, where we do look at what are all the downstream impacts of saving 6 weeks of treatment from the time that it takes to apply the drug, the nursing time, the physician time to what happens to these patients? Do some of them end up in the hospital? Do they have infections that need to be treated? And once we get all of that together, if indeed there is a good pot of dollars that the facility would save on average, then we think that we have the opportunity to take a higher premium against SANTYL.

Michael Okunewitch, Analyst

I really appreciate that additional clarity. And then when thinking about the potential for new stockpiling programs for NexoBrid, would you expect that fees would come from your expanded new manufacturing facility? Or could there be more agreements similar to the U.S. domestic program to set up a dedicated manufacturing for those?

Ofer Gonen, CEO

We are planning to have some flexibilities here. We have the current manufacturing facility, and we are going to have the new scale-up manufacturing facility. We are planning a new manufacturing facility in the United States. We have another facility to support the Department of Defense program, another facility that will be completed by the end of 2025, actually will be completed this year. For MediWound, those facilities significantly expand our manufacturing capacity. We don't want to be in a position three years from now, launching EscharEx and telling the analysts again, hey, there is a huge demand, but we cannot support that. So those facilities significantly expand our manufacturing capacity and will provide us with critical support to, first of all, to a successful launch of EscharEx and to be able to satisfy the demand for all the countries that will be interested in stockpiling.

Michael Okunewitch, Analyst

So there is an expectation that this new US backup manufacturing could be used to help support demand commercially as well, not just stockpiling?

Ofer Gonen, CEO

The current facility that we are building in Israel is enough to support the demand we anticipate. Adding a facility in the United States can be not only a backup but also to expand manufacturing of NexoBrid and maybe to support us with the manufacturing of EscharEx as well.

Operator, Operator

And the next question comes from Scott Henry with Alliance Global Partners.

Scott Henry, Analyst

First question, the NIH funding environment is certainly challenging, which could impact BARDA, the Department of Defense. It seems like that revenue was down a little bit in Q1. Are you expecting that to rebound significantly in the coming quarters, or how should we think about that overhang even though that's not a main priority, obviously, the product sales are more important? Just trying to get a sense of how to model that development services line.

Ofer Gonen, CEO

It's great to have you with us today. Maybe, Hani, do you want to answer this question?

Hani Luxenburg, CFO

So our guidance for 2024 remains unchanged. Actually, we anticipate $24 million in total revenue. As you're all aware, the change in the U.S. administration caused a brief delay in the approval of both BARDA and DoD funded activity during the transition. However, all programs now appear to be back on track, and we do not anticipate any material impact on our 2025 funding outlook. And the outcome is that the revenue will not change for this year.

Scott Henry, Analyst

So it sounds like we should expect that to rebound, if not in the second quarter, certainly in the second half of the year.

Ofer Gonen, CEO

Let me step in here and clarify. In the first 60 days, the administration did not know what they could approve or what they could not approve. So it was a kind of uncertainty. The feedback that we are getting is everything, at least for our programs, is back on track, and we anticipate the $24 million guidance to remain as it is and the programs that they are funding as programs with priority that we will keep on getting US government funds.

Scott Henry, Analyst

Hani, could you explain the financial income expense line that has been quite volatile? It was very positive this quarter, whereas it was more of an expense in the prior quarter. How should we approach this expense going forward? What would be a typical figure? Is there any variability we should consider?

Hani Luxenburg, CFO

I wish I knew the representative number. If I knew it, I wouldn't be here because it's very much influenced by our share price at the end of each quarter. So the below-the-line expenses are mainly from financial income or expenses from the revaluation of our warrants. So at the end of each quarter, we are doing a revaluation. And it depends very much on the share price. If it increases or decreases from the beginning of the quarter, this sets the direction of the income or expense. So at the end of this quarter, the share price was $15.52, much below what it is now. So it is very much dependent, and I cannot tell you what to expect. It depends on the market. I hope we'll see a good transition in our share price, and it will set the opposite way because if it increases, there are expenses, financial expenses. If it decreases, there are financial income. I hope I answered.

Ofer Gonen, CEO

If I may add, those options expire in November 2026. These are $34 million of warrants that are way below the money. If you want to look at next quarter, you will see that there was a significant increase in the share price. Probably there will be financial expenses related to that, but we are okay with that. Hopefully, after November 2026, this company will remain with no warrants and this issue will disappear.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ofer Gonen for any closing remarks.

Ofer Gonen, CEO

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

Operator, Operator

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