Earnings Call Transcript - MDWD Q3 2021

Operator, Operator

Good day, and welcome to the MediWound Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Monique Kosse of LifeSci Advisors. Please go ahead.

Monique Kosse, LifeSci Advisors

Thank you, Sarah, and good morning, everyone. Earlier today, MediWound issued a press release, announcing financial results for the third quarter 2021. You may access that release on the company's website under the Investors tab. With us today is 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 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. The conference call is the property of MediWound and any recording or rebroadcast is expressly prohibited without the written consent of MediWound. Now I'd like to turn the call over to Sharon Malka, Chief Executive Officer of MediWound. Sharon?

Sharon Malka, CEO

Thank you, Monique. Good morning to our U.S. listeners, and good afternoon to our listeners in Israel. Welcome to our third quarter 2021 conference call to discuss our financial results and provide you with our business highlights. We have been very active this quarter and the subsequent weeks, making progress across our portfolio. We are nearing some very important and value-increasing events in both of our lead programs. We gained regulatory clarity on the path forward for resubmission of the NexoBrid BLA following a productive Type A meeting with the FDA, and we continue to advance significantly in the EscharEx clinical development program towards data readout. Let me begin first with a review of our EscharEx program followed by an update on our NexoBrid program. Starting with EscharEx, we made significant progress in the clinical development plan. Our EscharEx team has been very busy as we near completion of enrollment in our ongoing Phase II adaptive design trial for the treatment of venous leg ulcers. We anticipate complete enrollment before the end of this year and currently expect to report top-line data from this study in the first quarter of 2022, earlier than originally planned. As a reminder, this study is a multicenter prospective randomized placebo-controlled study in 120 patients designed to assess safety and efficacy of EscharEx in debridement of VLU. The primary endpoint in this trial is the incidence of complete debridement compared with Gel Vehicle. In conjunction with our Phase II adaptive design trial, our team has also been focused on executing our Phase II pharmacology study, and we are on track for generating initial data by the end of this year. As a reminder, the pharmacology trial is an open-label, single-arm study in up to 15 patients designed to assess the pharmacological effect of EscharEx in both diabetic foot ulcers and venous leg ulcers. We aim to gain a better understanding of what is happening in the wound bed, both during and after debridement with EscharEx and to assess the number of clinical effect impacting wound healing. Lastly, on EscharEx, we are very pleased to see our in-vivo head-to-head comparator study of EscharEx published in the Journal of Wound Care, a well-esteemed peer-reviewed paper. The study showed EscharEx to be more effective than the commercially available collagenous product in removing the eschar in this porcine eschar model. We are very enthusiastic about this program and believe EscharEx has the potential to become a game-changer in the chronic wound debridement market. We look forward to having data from both trials soon, which we believe will add much value to our growing portfolio. Moving to NexoBrid. We recently had a productive Type A with the FDA, where there is agreement on the path forward to address the questions and information requests by the FDA. We continue to partner with Ferritel and BARDA, and we're currently targeting a BLA resubmission in mid-2022. We anticipate a 6-month review period with a potential approval by year-end 2022. In tandem, we continue to enroll new patients at leading U.S. burn centers in the next expanded access program, which will run through approval. We remain enthusiastic about the prospects and long-term potential for NexoBrid and look forward to potentially bringing this innovative product to the U.S. market as expeditiously as possible. We are thrilled to announce earlier this quarter positive top-line results from our Phase III study of NexoBrid in children with severe thermal burns, which met all its primary endpoints with a high degree of statistical significance, reinforcing the strong clinical safety and efficacy profile of the product. Following those results, we are planning to submit the data for label expansion in Europe and other international markets during 2022, and believe it would further enhance growth and global expansion of NexoBrid. On the commercial front, we continue to gain commercial traction in Europe and globally. BARDA's procurement for the emergency stockpile continues to drive product revenue growth, and we are expecting to recognize the remaining revenue related to the BARDA procurement by the end of the third quarter 2022. In addition, we continue to execute on our global expansion strategy with sustained revenue growth. We see more and more burn centers around Europe embracing NexoBrid as the standard of care. Globally, we recently received marketing approvals in Ukraine, Taiwan, and the United Arab Emirates and anticipate more to come in lucrative markets such as Japan, India, and others in 2022. Lastly, we recently initiated a U.S. Phase I/II study of a product for the treatment of low-risk Basal Cell Carcinoma and a Phase II investigator-initiated trial in non-melanoma skin cancer is running in parallel, with data from both expected in the first half of 2022. 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. First, I'd like to reiterate our continued product revenue growth from both the U.S. and the ex-U.S. market as NexoBrid continues to gain traction into new territories. We're expecting to increase our outreach and revenues outside of the U.S., supporting our balance sheet with a growing profitability of NexoBrid. Moving to our third quarter and first 9 months of 2021 financial results. Total revenues for the third quarter decreased 4% to $6.4 million compared to $6.6 million for the third quarter of 2020, and up 5% sequentially. Total revenue this quarter included product revenues of $3.1 million and development services revenues provided to BARDA of $3.3 million, a slight reduction compared to the $3.5 million for the same period last year. Product revenue this quarter was primarily driven by BARDA’s procurement of NexoBrid for emergency response preparedness and an increase in sales outside of the U.S. Total revenues year-to-date increased 21% to $18.3 million compared to $15.1 million in the same period of 2020. Product revenue for the first 9 months of 2021 was $9 million, an increase of 81% compared to product revenues of $5 million for the first 9 months of 2020. Revenue growth was primarily related to product procurement, increasing sales in Europe, and expansion of NexoBrid into new territories. Gross profit for the third quarter was $2.5 million with a gross margin of 39% compared to a gross profit of $2.8 million and gross margin of 42% for the third quarter of last year. Gross margin for the first 9 months increased from 35% in 2020 to 40% in 2021. Research and development expenses for the third quarter were $2.9 million compared to $2.1 million for the third quarter last year. The increase was primarily due to the clinical development program of EscharEx. Selling, general and administrative expenses for the third quarter were $2.4 million compared to $2.2 million in the third quarter of 2020. Operating loss for the third quarter was $2.9 million compared to a loss of $1.5 million in the third quarter last year. For the first 9 months of 2021, the operating loss was $7.7 million compared to a loss of $6.5 million in the first 9 months of 2020, primarily due to an increase in research and development expenses. Net loss for the quarter was $3.3 million or $0.12 per share compared to a net loss of $1.9 million or $0.07 per share for the third quarter of 2020. For the first 9 months of 2021, net loss was $9.4 million or $0.34 per share compared to a net loss of $7.5 million or $0.27 per share for the final period. Adjusted EBITDA for the quarter was a loss of $2.2 million compared to a loss of $0.8 million for the third quarter last year. For the first 9 months of 2021, adjusted EBITDA was a loss of $5.5 million compared to a loss of $4.7 million for the first 9 months of 2020. Moving to the balance sheet highlights. As of September 30, 2021, cash and short-term investments were $13.9 million compared to $21.6 million as of December 31, 2020. We remain on budget, utilizing $7.7 million in the first 9 months of 2021. We reiterate our cash year's guidance for 2021 to be in the range of $9 million to $11 million. With revenue growth, BARDA procurement, and expected cash inflow upon BLA approval, and based on our current operating plan, we believe that existing cash and cash equivalents will be sufficient to fund currently anticipated operating expenses through mid-year of 2023. With that, I've concluded my financial overview, and I will now turn the call back over to Sharon. Sharon?

Sharon Malka, CEO

Thank you, Boaz. As we approach the end of the year, we remain optimistic about our programs as we move towards important milestones in the coming quarters. We look forward to keeping you updated as we continue to execute. With that, it is now my pleasure to open the call for your questions. Operator?

Operator, Operator

Our first question comes from the line of Josh Jennings with Cowen and Company.

Bryan Bergin, Analyst

This is Bryan here for Josh. To start on NexoBrid, did the scope of the additional work change as part of your recent meeting with the FDA review team? You had previously cited 3 areas to address and your intention to provide a safety update. Is that still the outstanding work to be done? Or has the required work changed in any way? And I have a follow-up on EscharEx, if I may.

Sharon Malka, CEO

Sure. Bryan, thank you for the question. So the short answer is, no. And the more extensive answer is that there are the 4 things that we communicated before: one is the additional CMC info requested; next is the inspection required by the FDA at our facilities in Israel and Taiwan; third, FDA reference observation on the GCP inspection in certain detect sites; and finally, a routine safety update, which we are preparing to include as part of the resubmission. So overall, there are 4 elements that are all moving forward with the support and funding of BARDA. And again, we had a productive meeting with the FDA, an agreement on how we were going to respond to their questions and information requests. So with the work that is being done and completed, that will be assembled into the resubmission package and submitted at this point. Our anticipation, as I said, is by mid-year 2022, and we anticipate a 6-month review period with potential approval by year-end 2022.

Bryan Bergin, Analyst

Okay. And on EscharEx, do you have a sense of the size and timing of either a second study in VLU or a trial in BFU? And if the upcoming Phase II results in VLU are positive, do you have clarity yet on whether these can stand as one of the two pivotal data sets you’ll need for FDA approval?

Sharon Malka, CEO

Sure. So I think it’s premature at this point to provide some data or expectation for the next stage. First, we need to complete the ongoing Phase II study and, of course, the pharmacological study. The next step will be to discuss with the FDA once we have the results of the ongoing Phase II data and the pharmacology Phase II data. We plan to have an end of Phase II meeting with the FDA in the second half of 2022. Once we have the CSR complete study report to discuss the pivotal stage, which includes, of course, the indications, the sample size required, study design, etc. Once we have this clarity, and once we have the data and then the meeting, we will be able to share much more information with you.

Operator, Operator

Our next question comes from the line of Ryan Zimmerman with BTIG.

Ryan Zimmerman, Analyst

Just a follow-up on a couple of things. One, within NexoBrid, what components is Vericel taking the lead on versus maybe what you guys are taking the lead on for the NexoBrid resubmission? And then I have a follow-up on NexoBrid as well.

Sharon Malka, CEO

Sure. So bringing NexoBrid into the U.S. market is a joint collaboration, as you know, which very well as a commercial partner; BARDA supporting organization and of course, MediWound with extensive experience and expertise with NexoBrid within the last 20 years. As to the risk submission itself, we have vast experience with the product given the 20 years of history. Vericel has clinical regulatory and operation teams with a great deal of experience and success on the regulatory front. So we believe we are in a great position to leverage Vericel's track record, leading the regulatory front. Our years of experience with NexoBrid and BARDA’s subject matter consultants supporting us, who bring personal experience, and we believe that this strong collaboration provides us with the confidence that we have the best team to achieve the BLA approval.

Ryan Zimmerman, Analyst

Okay. As far as usage in Europe goes, Sharon, what types of burns are you seeing as more sites do start to use NexoBrid? Maybe you could just talk a little bit about how the utilization and usage is looking, and whether we should view that as an example for how burn surgeons in the U.S. think about the use of NexoBrid?

Sharon Malka, CEO

Thank you for the question. So I think that what you see now in the last, let’s say, 1.5 years in Europe is that all leading burn centers that we are targeting and working with basically turned NexoBrid into the standard of care. And if at the beginning, they started with specific burns, sometimes it can be small burns. It can be some specific areas like hands. Currently, it’s the standard of care in those leading burn centers. Moving to the U.S. and our expectation, we have to remember that we currently are running an expanded access program in the U.S., in which about 20 to 25 leading burn centers in the U.S. are continuing to treat burn patients with NexoBrid, almost without limitation, up to 30% in all areas. It’s less restricted protocol than the DETECT study. So I believe that the fact they generate more confidence, more hands-on experience with NexoBrid will enable them to be more tolerant towards various types of burns to be used once approved. And hopefully, it will also be reflected in the uptake of NexoBrid in the U.S. market.

Operator, Operator

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

Kevin DeGeeter, Analyst

I guess as we prepare for the Phase II VLU update for EscharEx, how should we think about the scope of at least the initial topline disclosure? Should we expect to get relatively significant tolerability and safety data alongside of wound healing? Or will you look to potentially hold some data for future presentation or publication?

Sharon Malka, CEO

Thank you for the question, Kevin. As we mentioned, we anticipate reporting topline data from this study in the first quarter of 2022, which is one quarter earlier than we initially planned. This will include the primary endpoint and safety data from the study, and will be followed by additional secondary endpoints and long-term safety analysis, which will be provided in the second quarter.

Kevin DeGeeter, Analyst

Great. And then just a follow-up on the NexoBrid BLA resubmission. How should we think about the timeline defined here in the context of the facility inspections? I guess, particularly Taiwan, I mean that’s question. At least currently, I’m not sure many of us have a lot of visibility on what steps are we even sort of enable that process. So how – at what level of detail can you kind of provide some perspective on how that question is currently being handled?

Sharon Malka, CEO

Yes. So as you know, there are still some travel restrictions worldwide. It’s a little premature at this point to anticipate what will happen once we submitted given the dynamic of the pandemic, and that’s something we will discuss with the FDA upon resubmission. But we do know that those inspections outside the U.S. are now occurring. So hopefully, we’ll be in a position that following the resubmission, we will be able to schedule inspections in both facilities.

Operator, Operator

Our next question comes from Swayampakula Ramakanth with H.C. Wainwright.

Swayampakula Ramakanth, Analyst

A couple of quick questions on NexoBrid. You're talking about the EAP program. Just trying to understand how many patients have kind of undergone this program or enrolled in this? And how could you utilize this data, especially when you're going into the resubmission?

Sharon Malka, CEO

Yes. Thanks for the question. So the Expanded Access Program, as I said, runs through approval and includes both pediatric and adult populations. We continue to actively enroll new patients in this next protocol at leading U.S. burn centers across the U.S. with over 120 burn victims already treated with NexoBrid to date. Of course, we plan to generate data from this protocol. This is the goal of this protocol from the perspective of the FDA, BARDA, Vericel, and ourselves, both cost-effectiveness data, usage data, and safety data that can support discussions with the FDA. Of course, the safety analysis of the first 100 patients will be captured as part of the safety update that will be part of the resubmission, but also other, hopefully, data that we will get from this study will support the discussion with the FDA.

Swayampakula Ramakanth, Analyst

Perfect. Regarding the pediatric study, you mentioned that data would be available in 2022. Where do you plan to publish that data? Will it be in a publication, or will you be presenting at a conference so that we can see more details from that analysis?

Sharon Malka, CEO

Yes. So I believe that the data will be presented at the next ABA, which is anywhere around April next year, 2022. Not less important than just publishing the data because we shared this data in PR. We are planning to use this data, leverage this data, and submit this data for label expansion in Europe and other international markets. If accepted, we will be able to submit it during 2022 for label expansion in these territories, and we believe it would further enhance growth and global expansion of NexoBrid worldwide.

Swayampakula Ramakanth, Analyst

So my last question is about your expansion into regions like the UAE. Do you already have distribution partners in these areas or are you in the process of establishing them? Additionally, what is the market size like for you in these regions?

Sharon Malka, CEO

So generally speaking, on the international market, I can share with you that we continue to execute on our global expansion strategy with sustained revenue growth. As a reminder, our focus is in America, CE countries, Asia Pacific, EMEA, and the Middle East. We recently received marketing approvals in Ukraine, Taiwan, and the United Arab Emirates, and we anticipate more to come in some lucrative markets. When we're referring to lucrative markets, we refer specifically to Japan, where the distributor has already filed for approval. We are looking for India, where the distributor is in the last mile of getting it approved and launched and other territories in June 2022.

Operator, Operator

There are no further questions. I will now turn the call back to Sharon Malka, CEO of MediWound, for closing remarks.

Sharon Malka, CEO

Thank you, Sarah, and thank you, everyone, for joining us today. We look forward to updating you again on our next call. Thank you, and have a great day.

Operator, Operator

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