Earnings Call Transcript - MDWD Q3 2022

Operator, Operator

Good day, and welcome to the MediWound's Third Quarter 2022 Earnings Call. Today's conference call is being recorded. And at this time, I would like to turn the conference over to Monique Kosse of LifeSci Advisors. Please go ahead, ma'am.

Monique Kosse, LifeSci Advisors

Thank you, operator, and welcome, everyone. Earlier today, MediWound issued a press release announcing financial results for the third quarter ended September 30, 2022. You may access that release on the company's website under the Investors tab. With us today are Ofer Gonen, Chief Executive Officer of MediWound; and Boaz Gur-Lavie, Chief Financial Officer. Following our 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 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 would like to turn the call over to Ofer Gonen, Chief Executive Officer of MediWound. Ofer?

Ofer Gonen, CEO

Thank you, Monique. Good morning, everyone. Welcome to our third quarter 2022 conference call to discuss our financial and operational highlights. This quarter, we continue to be on track with a series of positive announcements across all our programs. We are approaching several significant inflection points for the company. We believe that once NexoBrid is approved, it will generate meaningful revenues in 2023 and significant growth going forward. Following the launch of NexoBrid, we will focus on the $1 billion market opportunity presented to us with EscharEx where we plan to initiate a Phase 3 study next year. We have all these essential elements aligned for success: a mature pipeline, favorable data, large addressable markets, an experienced operational team, Tier 1 partners, and a strong balance sheet. Before I discuss the progress we made this quarter, I would like to address the capital raise we completed in October where we added an additional $30 million to our balance sheet through a combined Registered Direct and Private offering. This significant addition of funds will support our activities through 2025. It was important for us to complete this raise now ahead of our expected positive news to better position MediWound for success. We saw participation from our current shareholders, and as an additional benefit, we were able to bring in new validating investors for the company. We were also pleased with the vote of confidence from both our management team and Board members who participated in the offering, demonstrating commitment and firm support of our strategy. Now with the funding, we will be able to accelerate our clinical progress for EscharEx, scale up manufacturing to address the increasing demand for NexoBrid, and support our global operation. We are in a strong sentimental position for the future, both the near and long-term. In addition to securing our financing, we have established a Strategic Advisory Board comprised of highly esteemed industry leaders, Dr. John Lantis, Samuel Moed, and Eric Shem-Tov. They will contribute their experience and insights to our strategic and operational activities by sharing their medical expertise in all aspects of wound care, providing knowledge of life science innovation, and supporting us in scaling up our manufacturing facilities and optimizing our manufacturing processes. As a CEO, I believe engaging with such talent is essential in advancing MediWound into becoming a world-class biopharmaceutical company. Moving to our clinical development program, let me start with an update on EscharEx where we have demonstrated the tremendous unmet medical needs and our belief in the significant commercial opportunity. We are now more certain than ever of its potential to become a blockbuster. Our Phase 2 results from both clinical studies were robust. EscharEx was proven to be safe, well tolerated, effective, and superior to the non-surgical standard of care across all key parameters, including the incidence of complete debridement, the number of applications that are required, the time to achieve complete debridement, and so on. We also saw a reduction of biofilm and bacteria burden, which further demonstrated EscharEx's superiority over the other debridement modalities. These results were highlighted in two poster presentations at the symposium on Advanced Wound Care in Las Vegas. We were honored when one of the poster presentations was selected out of the 290 abstracts to be the one featured as an oral presentation. The data was very well received. Our next step in the coming few weeks is to meet with the FDA to discuss the Phase 3 study design. We will provide an update once we gain clarity on the regulatory path forward. In the meantime, we are on track and prepared to initiate our planned pivotal Phase 3 study in the first half of 2023. We believe that our EscharEx clinical development program is de-risked not only due to the robust data we generated to date, but also due to the fact that EscharEx has the same API as NexoBrid, and we have seen NexoBrid used as a commercial product to successfully treat over 11,000 patients worldwide. We continue to generate interest from strategic players. A topical debridement agent with the competitive qualities demonstrated by EscharEx in the Phase 2 studies is something most players in the wound care market are following very closely. We are evaluating all of our options from collaborating with a strategic partner to developing EscharEx on our own. We are pleased to be very well positioned with the flexibility to create significant shareholder value. We believe we have a winner here. Turning to NexoBrid, as we announced in our last call, the NexoBrid BLA resubmission was accepted for review by the FDA and given a PDUFA date of January 1, 2023. The FDA's review of the BLA is progressing, and an inspection of our manufacturing facilities in Taiwan and in Israel is underway. Our partner Vericel continues to actively plan for a potential NexoBrid launch in the first half of 2023. Our expanded access program NEXT continues to enroll patients and health physicians gain important firsthand experience with NexoBrid. To date, 183 burn patients have been treated with NexoBrid at 24 of the leading burn centers in the United States. These sites have been very supportive of NexoBrid. The patient and physician experiences confirm our belief that NexoBrid will become an important part of the standard of care practice in the United States. Additionally, I'm pleased to report that our collaboration with the United States Department of Defense for the development of NexoBrid as a non-surgical solution for the treatment of burns in the skin remains on track. In Europe, sales of NexoBrid steadily grow. We see that NexoBrid is embraced as the standard of care in more and more countries. Last quarter, we submitted a pediatric label extension request to the European Medicines Agency and we anticipate a decision in the first quarter of 2023. Pediatric patients represent about 25% to 30% of the total burn population. They often face painful surgery, which can be very traumatic to the young patients and their families. An approval will allow pediatric patients to have safe, fast, and effective debridement option without having to undergo a painful surgery. The growing interest in burn mass casualty incidents preparedness in Europe is another opportunity for NexoBrid. This is fueled in part by the Ukrainian-Russian conflict and by mass casualty events that have occurred just recently. While we are unable to quantify the magnitude of this opportunity, we believe that the preparedness strategy that BARDA endorsed in the United States will be embraced in Europe as well. Lastly, we were pleased by the warm reception we received at the 19th European Burn Association Congress in Italy. NexoBrid was highlighted in 45 posters and presentations. Leading burn specialists and thought leaders from around the world shared their positive experiences and patient outcomes using NexoBrid in a wide range of settings. Internationally, we anticipate additional approval in large meaningful markets such as Japan and India by the end of this year. Today, NexoBrid is approved in 41 countries and we look forward to the expansion. Turning to MW005, we continue to move forward in the development of the topical treatment for patients with basal cell carcinoma or BCC. We saw positive initial results from our U.S. Phase 1/2 study. MW005 was shown to be safe and well tolerated with the majority of patients who completed the study achieving clinical and histological clearance of the target lesions. We anticipate announcing the study results by the end of this year. In conclusion, we are very well positioned and continue to excel across the board. We anticipate the potential approval and commercial launch of NexoBrid in the United States, which will also enable us to generate meaningful revenues in the near term. We are eager to launch our Phase 3 pivotal program in EscharEx, and we continue to develop a compelling pipeline, including follow-on therapies such as MW005. We have all the resources to do that. I'm very optimistic about MediWound's future and look forward to updating you on our progress. Let me now turn the call over to Boaz for a brief review of our financials. Boaz?

Boaz Gur-Lavie, CFO

Thank you, Ofer, and good morning, everyone. We're pleased with the recent fundraising despite the turbulent capital market, which has significantly stressed our balance sheet. Along with the expected $7.5 million milestone payments from Vericel upon the BLA approval planned in January 2023, and NexoBrid commercial sales growth, we believe that we have sufficient funding to support our EscharEx clinical development program. Moving to our financial statements, total revenues for the third quarter of 2022 were $5.8 million compared to $6.4 million for the third quarter of 2021. Revenues from products in the third quarter of 2022 were $1.4 million compared to $2.6 million. This was primarily the result of a $1 million decrease in emergency stockpile procurement by BARDA. Gross profit for the third quarter of 2022 was $2.4 million, or 42% of net revenues, compared to a gross profit of $2.5 million, or 39% of net revenues. Research and development expenses for the third quarter of 2022 were $2.9 million, the same as in the prior period. SG&A expenses for the third quarter of 2022 were $3.1 million, compared to $2.4 million. The increase was primarily a result of approximately $0.2 million of share-based compensation costs and $0.3 million of one-time marketing expenses related to EscharEx market research activities at the European Burn Association Congress. The operating loss for the third quarter of 2022 was $3.5 million compared to $2.9 million. Our financial expenses, which are non-cash in nature, were $0.7 million compared to $0.5 million in the third quarter of 2021. The increase was primarily due to $0.4 million resulting from warrants expenses allocation related to our recent fundraising. This allocation is dictated by IFRS regulation, which is different than the U.S. GAAP. This has affected our loss per share by $0.02. The company posted a net loss for the third quarter of 2022 of $4.2 million or $0.13 per share, compared to a net loss of $3.3 million, or $0.12 per share. Adjusted EBITDA for the third quarter of 2022 was a loss of $2.5 million, compared to a loss of $2.2 million. Moving now to year-to-date 2022 financial results. Total revenues for the first nine months of 2022 were $14.9 million, compared to $18.3 million in the first nine months of 2021. Revenues from products in the first nine months of 2022 were $4.2 million compared to $7.7 million, primarily the result of a decrease of $3.3 million in emergency stockpile procurement by BARDA. The operating loss for the first nine months of 2022 was $10.5 million, compared to an operating loss of $7.7 million. The net loss for the first nine months of 2022 was $12.1 million or $0.38 per share compared to a net loss of $9.4 million or $0.34 per share. Adjusted EBITDA for the first nine months of 2022 was a loss of $7.9 million, compared to a loss of $5.5 million. Moving to the balance sheet highlights, as of September 30, 2022, MediWound had $17.6 million in cash and short-term investments, compared with $11 million as of December 31, 2021. MediWound utilized $4.6 million in the third quarter of 2022 for its operational activities. The company reiterates its cash use for 2022 to be in the range of $13 million to $15 million. In addition, $17.2 million in gross proceeds ($16.6 million in net proceeds) were received in October from the $30.5 million equity offering providing sufficient cash to fund the company’s expected operations through 2025. With that, I have concluded the financial overview. I'll now turn the call back to Ofer. Ofer?

Ofer Gonen, CEO

Thank you, Boaz. Our momentum continues to build. We believe that we are on a very positive trajectory through this year and into 2023. As I mentioned, we have significant catalysts ahead: anticipated NexoBrid marketing approvals in India, Japan, and the United States, and expect meaningful revenues to follow. As our revenues continue to increase, we are scaling up our manufacturing facility to ensure we are able to meet the growing demand. We are ready to confirm our Phase 3 design and move into a pivotal development program next year with EscharEx. This $1 billion market opportunity will definitely be our profit. Finally, we look forward to sharing more about our MW005 development plan in basal cell carcinoma. With that, it is now my pleasure to open the call for your questions. Operator?

Operator, Operator

Thank you. We will now start the question-and-answer session. Our first question today will come from Josh Jennings with Cowen. Please go ahead.

Josh Jennings, Analyst

Hi, good morning, Ofer, Boaz. Thanks for taking the questions. I wanted two questions. First on EscharEx. Sounds like you're making nice progress there and about to get in front of the FDA and propose the final design of the Phase 3 program. Just wanted to see whether there's any push/pull in terms of the timing there and moving forward with the FDA locking in a trial design in front of locking in a strategic that may want to be involved in the program and have their own team contribute to that to the design parameters. And then just on NexoBrid maybe for Boaz, it'd be helpful to just remind us on just the revenue generation potential of FDA approval and then any milestone payments that we should have on our radar as Vericel gets ready to launch in the United States. And also just any timing in terms of revenue contributions for NexoBrid launches in India and Japan would be helpful. Thanks for taking the questions.

Ofer Gonen, CEO

Hi, Josh, that's a great question. Thank you for it. Our next step in the coming weeks is to meet with the FDA to discuss the study design. We will initially aim for the early indication. The discussion will focus on sample size, study design, and protocol. We will provide an update once we have more clarity on the regulatory pathway. As you can imagine, strategic partners interested in participating are also eager for the responses we receive from regulatory agencies. Following that, we will pursue the DFU, but we first need to understand the agency's perspective on the future development plan. Regarding NexoBrid, I believe Boaz should address that question.

Boaz Gur-Lavie, CFO

Yes. So, hi Josh. Regarding NexoBrid, I think you know what we should expect in 2023: first is the BLA milestone payment of $7.5 million from Vericel, that hopefully will come right after the BLA approval. In addition to that we mentioned that we're expecting marketing approval in Japan and India. We're starting to see first orders and kind of focus for next year, and I believe that should be in the $1.5 to $2 million range. That's probably the key milestones that we should look for. Aside from Vericel, they haven't yet provided a forecast, but we expect to launch in the first half of 2023. Additionally, we have Europe itself, which we anticipate that will continue to show consistent growth and additional marketing approvals we received in smaller countries that will contribute to the product revenue. Did that answer your question, Josh?

Josh Jennings, Analyst

That's helpful. Thanks so much. Yes, absolutely. That was great. Thank you.

Operator, Operator

And our next question will come from Francois Brisebois with Oppenheimer. Please go ahead.

Francois Brisebois, Analyst

Hi, thanks for the question. Regarding the update on the design as we approach the end of Phase 2, are there any major concerns, or should we expect this to resemble a successful Phase 2? Additionally, is there any discussion about the number of pivotal trials you will require?

Ofer Gonen, CEO

Excellent question. So regarding the debate, we are trying to have a similar Phase 3 study to the Phase 2 study that we succeeded in a very robust manner. This is what we aim for. We are discussing it with the agency, and hopefully, it'll be very clear once we provide you with an update about the regulatory path going forward. Definitely, our aim is that the study design will be very close to the one that we already succeeded. What was the next question?

Francois Brisebois, Analyst

Just regarding the potential number of pivotal trials, if they have any further questions, I'll let you proceed. Yes.

Ofer Gonen, CEO

Yes, I understand. The development costs of the additional territories other than the United States are marginal, so we decided to go for global approval. In Europe, it is very clear-cut. In Europe, you need to do one pivotal study. The guidelines are very clear. We don't need anything other than a single Phase 3 study. Based on the FDA guidelines and the fact that NexoBrid and EscharEx contain the same API, we believe that the single Phase 3 with the existing available data will be the basis of the approval.

Francois Brisebois, Analyst

Okay. Great. And then, you mentioned venous leg ulcers, any discussion about maybe the market? If you can remind us about VLUs versus DFUs and why you go with the VLUs in the Phase 3 design?

Ofer Gonen, CEO

Okay. This is a very good question. We have the data that supports both VLU and DFU Phase 3 studies. We know that EscharEx works for the debridement the same for both indications. Having said that, the markets are almost similar: you have 1.1 million eligible patients with VLU and about one point something million for DFU. So the markets are quite the same. The unmet medical need for VLU is much bigger because VLU wounds are very painful. You can't even get close to them. A sharp debridement is not a solution. For DFU, patients do not feel the wound at all, so you can debride it with a knife. Therefore, the unmet medical need for VLU is extremely larger than for DFU. If you look at clinical trials' data, you will see that there are about 100 clinical trials now on DFU patients not for debridement, all kinds of devices and appliances that are supposed to ease their pain or help them heal quicker, whereas for VLU, there is nothing out there. We believe that we'll be able to recruit patients quicker, and the unmet medical need is bigger. After having the VLU indication approved, moving to the DFU population will be easier.

Operator, Operator

And our next question will come from Swayampakula Ramakanth with H.C. Wainwright. Please go ahead.

Swayampakula Ramakanth, Analyst

Thank you. This is RK from H.C. Wainwright. Good morning, Ofer and Boaz. So congratulations getting this for on the NexoBrid approval situation, getting the FDA to do your inspection. So it's a good sign. In terms of the EAP program, where you said that there are 183 patients who have been treated so far. How do you see this in terms of launching the product, and how is this experience helping both Vericel and yourself in terms of how to manage detailing and what are you learning from that process itself?

Ofer Gonen, CEO

Thank you for the question, RK, and it was nice seeing you last week. The NEXT program is an expanded access program. It's a standard FDA program that enables clinical sites to treat patients with drugs currently under FDA review. We can see it keeps enrolling patients in a very good space, and we get a lot of feedback from patients and physicians that strengthen our belief that this is going to be the standard of care in the United States. We don't see anything that we didn't see in Europe. The reported results from the study, which is not a clinical trial, are consistent with what we have seen among the 11,000 patients treated. The most important aspect that we have now, assuming that we are approved in the United States in January, is that we keep collecting data for the pediatric population, which is also a very significant market in the United States. So we are going to accelerate our efforts to ensure that NexoBrid increases substantially in the U.S. This is one of the reasons that we expect that after the BLA approval, the revenues from NexoBrid will become meaningful for MediWound.

Swayampakula Ramakanth, Analyst

Okay. Very good. And then, in terms of the approvals in India and Japan, India is a market that is kind of spread and probably not as clear as either U.S. or Europe is. So how are you planning to manage that market in a sense now? Do you have distributorships in place? I think you have one. And how are you going to manage that market? Japan is a little bit different as well, which probably has a different strategy there. If you can highlight your preparations in these two markets, that would be helpful.

Boaz Gur-Lavie, CFO

Yes. As we've mentioned in the past, in those two markets we have partners. In Japan, Kaken Pharmaceuticals is a global healthcare company, and I must admit that given the demand we have already received from them for next year, I think we're very pleased with what we see in the Japanese market and the acceptance of NexoBrid. As for India, I believe you're also familiar with a company called Essar, which is an Indian pharmaceutical company working worldwide and has operations in the U.S. and Germany. They are an established pharmaceutical company and are expecting and excited about NexoBrid. I think there's still more to learn about the Indian market. On the one hand, it has the biggest number of severe burn patients given the population size, but not all of them are under medical care. So I think it's too premature to give capital numbers, but assuming that together, India and Japan will look to produce between $1.5 and $2 million next year. Once we get more data and work together with BSV and Kaken, we will hopefully be able to provide more information going forward into 2024 and beyond.

Swayampakula Ramakanth, Analyst

Okay. Thank you for that. And then on EscharEx, certainly this is a larger potential compared to what NexoBrid could have. And then in terms of thinking about potential partnerships, as you said, you have already started receiving at least requests for conversation on the product. So what's the type of collaborators which are coming to the table at this point? And how do you plan to get through that and also make sure that you can initiate your pivotal study within the next six months?

Ofer Gonen, CEO

This is also a very good question. As I've told you, strategic players are very interested. They just cannot ignore our topical debridement agent with the qualities demonstrated in our Phase 2 studies. So we have all kinds of options that are standard practices such as licensing, collaborations, territorial licenses, and so on. At this stage, we were very lucky to be able to finalize financing, so we are very flexible because we have the capital to do everything by ourselves. I’m proud of MediWound that has succeeded in 13 out of 13 clinical trials. The operational team in MediWound is capable of succeeding in another significant trial. The potential partners are aware of that. There is a lot of competition surrounding MediWound, but currently, we are flexible and we think we have a winner in hand, so we are going to be very picky if and what partner we are going to choose.

Operator, Operator

And at this time, there are no further questions in the queue. I would like to turn the call back over to management for any closing remarks.

Ofer Gonen, CEO

Okay. Thank you, everyone, for joining us today. We look forward to updating you again on our next call. Goodbye.

Operator, Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.