Earnings Call Transcript - MDWD Q3 2025

Operator, Operator

Morning, everyone, and welcome to MediWound's Third Quarter 2025 Earnings Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your questions, you may press star and 2. Please also note today's event is being recorded. And at this time, I'd like to turn the floor over to Dan Ferry of LifeSci Advisors. Please go ahead.

Daniel Ferry, LifeSci Advisors

Thank you, operator, and welcome, everyone. Earlier today, pre-market opened, MediWound issued a press release announcing financial results for the third quarter ended September 30, 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 on today's call. Following our prepared remarks, we will open up 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

Thank you, Dan, and good morning, everyone. The third quarter was another strong period for MediWound, as we executed across our strategic clinical and operational objectives and continue to position the company for its next phase of growth. The three strategic priorities I'd like to emphasize today are our EscharEx VLU trial, our NexoBrid manufacturing expansion, and our ability to fund our strategy. We have made meaningful progress on all those fronts. Let's start with an update on EscharEx, our late-stage enzymatic debridement therapy for chronic wounds. Enrollment in the VALUE Phase III trial in venous leg ulcers (VLU) continues to progress, with a target of 216 patients across roughly 40 sites in the United States and Europe. U.S. site activation proceeded as planned, while several EU sites required additional adjustments to meet ancillary-related regulatory requirements. Overall, the majority of sites are now active and enrolling. At this stage, we cannot yet assess whether these EU-related adjustments will impact the overall study timeline. We are actively monitoring enrollment trends, and we'll update our guidance, if needed, as visibility improves. The trial's co-primary endpoints are the incidence of complete debridement and the facilitation of wound closure, both measures in which EscharEx demonstrated strong results in previous Phase II studies. A prespecified interim sample size assessment will be conducted after 65% of patients complete the treatment. We have also made progress on the diabetic foot ulcer (DFU) program. We have received positive FDA feedback and we are now awaiting EMA scientific advice. The company plans to initiate the study in the second half of 2026. As our VLU and DFU programs move forward, the market around us is also shifting in ways that highlight EscharEx's potential. Medicare recently lowered reimbursement rates of skin substitute products which is expected to put significant pressure on that category and close a long-standing payment loophole. In contrast, EscharEx is a biologic regulated under the BLA pathway and aims to enter the enzymatic debridement segment, where a single legacy product generates roughly $370 million annually. Together, these market changes make EscharEx increasingly attractive to potential strategic partners. To quantify this opportunity, we completed an updated U.S. market access and pricing assessment with an independent global consulting firm, incorporating also input from healthcare professionals and payers. The analysis supports a higher potential U.S. price per course of therapy and estimates annual peak sales of about $831 million. These updated estimates reflect EscharEx's robust clinical data, along with modeled health economic benefits derived from earlier wound closure. So with the VALUE study advancing a clear regulatory path for DFU and strong commercial validation, EscharEx is positioned to drive MediWound to the next phase of growth. Now let's turn the attention to NexoBrid, our innovative enzymatic therapy for severe burns. Most notably, we completed the commissioning of our expanded NexoBrid manufacturing facility, a major milestone that strengthens our ability to meet the rising global demand and maintain reliable supply. The process was not simple. We worked through a 2-year war, drafted personnel and import delays on specialized equipment, but the result is transformative. Our production capacity is now 6x larger, providing a strong foundation for future growth. We expect to reach full operational capacity by year-end 2025, with regulatory review and approval determining the timing of commercial output. In the United States, our partner, Vericel, reported NexoBrid's record quarterly revenue since launch, up 38% year-over-year and 26% sequentially. Vericel noted broad utilization across more than 60 burn centers and plans to pursue a permanent CPT code, which would take effect in 2027. Internationally, the TGA in Australia approved NexoBrid for use in both adult and pediatric patients, bringing the total number of approved markets to 45 countries worldwide. This approval, together with NexoBrid's prominent presence at the recent European Burn Association Congress, where it was featured in 36 scientific presentations, highlights its expanding clinical recognition and global momentum. Regarding the collaboration with BARDA on an RFP covering stockpiling, development of a room temperature stable formulation, and evaluation of an enzymatic debridement product for trauma and blast injury indications, this multiyear program was scheduled to begin on October 1. As Vericel noted in the recent earnings call, the government shutdown caused all related activities to pause. Now that the shutdown has ended, we expect BARDA to resume normal operations and move forward with the planned development and procurement activities. The pause also created some uncertainty around the exact timing of BARDA and DOD-related revenue in Q4. We are actively working on these components, but the final outcome will depend on how activities progress through the remainder of the year. Overall, the advancements we have made with NexoBrid position us as a durable and meaningful growth driver for MediWound. From a corporate standpoint, we recently strengthened our balance sheet with $30 million of equity financing from high-quality healthcare investors. This transaction provides us with the resources and flexibility to execute on our long-term growth strategy with focus and momentum. Given the discussion around the recent financing, this is a perfect point to transition the call to the financials. Hani?

Hani Luxenburg, CFO

Thank you, Ofer, and good morning, everyone. Let's turn to our financial results for the third quarter of 2025. Revenue for the quarter was $5.4 million, up 23% year-over-year compared to $4.4 million for the same period in 2024. The increase was primarily driven by higher development services revenue, including additional contracts with DoD. Gross profit for the quarter was $0.9 million or 16.5% of revenue compared to $0.7 million or 15.5% in the prior year period. R&D expenses were $3.5 million versus $2.5 million in the third quarter of 2024, reflecting increased investment in the EscharEx VALUE Phase III study and related clinical activities. SG&A expenses totaled $4 million compared to $3.2 million in the same period last year. The increase was primarily due to marketing authorization holder expenses. Operating loss for the quarter was $6.5 million compared to $5.1 million in the third quarter of 2024. Net loss was $2.7 million or $0.24 per share compared to a net loss of $10.3 million or $0.98 per share in the prior year period. The improvement was mainly driven by noncash financial income from the revaluation of warrants this quarter compared to noncash financial expenses from warrant revaluation in the third quarter of last year. Adjusted EBITDA loss was $5.4 million compared to a loss of $3.7 million in the third quarter of 2024. Looking at our performance for the first 9 months of the year, revenue for the period was $15.1 million compared to $14.4 million in the same period of 2024. Gross profit was $3 million or 19.7% of revenue compared to $1.7 million or 12% in the first 9 months of last year. The margin improvement was driven by a more favorable revenue mix. R&D expenses were $9.8 million compared to $5.9 million in the same period of 2024. SG&A expenses were $10.6 million versus $9.1 million in the first 9 months of 2024. Operating loss for the period was $17.5 million compared to $13.3 million last year. Net loss for the first 9 months of 2025 was $16.7 million or $1.53 per share compared to $26.3 million or $2.72 per share in the same period of 2024. The reduction in net loss was primarily driven by noncash financial income from the revaluation of warrants in 2025 compared to noncash financial expenses from the revaluation of warrants in the same period of 2024. Adjusted EBITDA loss for the first 9 months was $13.9 million compared to $9.9 million in the prior year period. Now turning to our balance sheet. As of September 30, 2025, we had $60 million in cash, cash equivalents, and short-term deposits compared to $44 million at year-end 2024. During the first 9 months of the year, we used $15.8 million in cash to fund our operating activities. In addition, our balance sheet reflects the completion of a $30 million registered direct offering and $3.5 million in proceeds from Series A warrant exercises. We believe our current cash position provides the financial flexibility needed to advance our key programs and continue executing on our strategic priorities. That concludes my review of the financials. Ofer, back to you.

Ofer Gonen, CEO

Thank you, Hani. To summarize, the third quarter was defined by consistent execution and strategic progress across our programs and operations, clinical advancements with EscharEx, commercial expansion with NexoBrid, and operational readiness for manufacturing infrastructure. With these accomplishments and a solid financial foundation, MediWound is well positioned for 2026.

Operator, Operator

Our first question today comes from Josh Jennings from TD Cowen.

Joshua Jennings, Analyst

Congrats on continued progress. I have two questions on EscharEx. Just first on the new U.S. peak sales estimate $830 million range, up from $725 million. Can you just share any more details just in terms of some assumptions that are baked in there? Is any pricing changes or, I guess, just volumes or patient opportunity assumption deltas from the prior calculation?

Ofer Gonen, CEO

Yes. So Josh, really good to speak to you. Barry, can you address that?

Barry Wolfenson, EVP of Strategy and Corporate Development

Yes, Josh, thanks for the question. So this analysis that we did was more market access-focused. So the respondents are skewed more towards payers than they did health care providers as opposed to the previous assessment that we did. Because of that, the focus was really specifically on pricing. So nothing changes with regard to the number of patients, the adoption rates, none of that changes in the model, it all remains the same. The only thing is the pricing. And really, what we focused on was incremental pricing that we would be able to take relative to HEOR benefits. So in the initial assessment that we did where we landed at $725 million for revenues, the price that we used was the baseline price, which was a 15% increase over SANTYL. And we had heard that previously, and we heard it in this most recent market research as well that, that base case without any HEOR benefits of 15% over SANTYL would stand when we add in the HEOR benefits, however, it changes a bit. And what we found is that the max could go up to as much as 50% over the price of SANTYL, and this is the price of the total cost of therapy per patient. And what we've done is basically taken what we consider to be a conservative kind of slice of it, somewhere in between the base case and the top case. And when we put that into the model, it yields this $831 million of peak sales.

Joshua Jennings, Analyst

Understood. And the DFU study looking to kick off enrollment in the second half of next year. You mentioned some constructive feedback from the FDA. Any nuanced trial design updates? Will the same centers that are enrolling the VLU study be investigator sites for the DFU study?

Ofer Gonen, CEO

Yes. Let me clarify that we are not working with the same centers. We are focusing on centers that specialize in VLU, while we are considering different centers for DFU. Regarding the protocol, as I mentioned in my prepared remarks, we are currently waiting for feedback from the EMA regarding scientific advice, and we will ensure alignment with both regulators as we finalize the study design. We expect to receive this feedback in a few weeks, and we will provide an update in our next call.

Operator, Operator

And our next question comes from RK from H.C. Wainwright.

Swayampakula Ramakanth, Analyst

This is RK from H.C. Wainwright. So I'll go back to the question Josh asked a minute ago, but a little bit different nuance. So of that $830 million that you're projecting now, just trying to understand the breakdown between DFU and VLU opportunities, so that we and the market understand what and how much weight you’re giving to each of these two indications. Then I have a couple more questions.

Ofer Gonen, CEO

So Barry, maybe you will start with that and let's see what RK has else to ask.

Barry Wolfenson, EVP of Strategy and Corporate Development

Sure. There are more diabetic foot ulcers than venous leg ulcers. However, we are focusing on venous leg ulcers first due to their higher pain levels. They are very painful, which makes them less likely to be treated with surgical debridement. Our alternative offers a strong solution for this issue. We believe that even though diabetic foot ulcers can be treated surgically and usually have peripheral neuropathy where pain isn't as significant, our EscharEx product greatly reduces the time needed for complete debridement compared to the current enzymatic debriders on the market, leading to potential market share gains. Overall, when considering all factors, the situation appears balanced, with a slight advantage leaning towards venous leg ulcers.

Swayampakula Ramakanth, Analyst

Then Ofer in your remarks, at least the way I understood your commentary on the RFP with BARDA is it looks like you're almost met with success or it has been successful. Is that true? And then now I understand the U.S. government has not been helpful having had the shutdown. But is there any indication as to how soon this could start for you folks? And then the last question for me is on the CPT code itself. Any nuances you can give us about how not having a CPT code is impacting any adoption at all? Or this just adds more help once you get the CPT code on board?

Ofer Gonen, CEO

So let me break down the answer into two parts. I will start with BARDA and Barry will speak on the code. So in BARDA, I'll tell you the maximum that I'm allowed to share. So as you all know that in August 2025, BARDA issued an RFP covering stockpiling, room temperature stable formulation, and trauma blast injury solutions. We were ready to start the program on October 1. It's a program that is supposed to extend for up to 10 years. Vericel holds the commercial rights of NexoBrid in the United States. So they are leading the effort in the United States, and MediWound is providing full support for that. Now when the shutdown ends, we expect BARDA to resume normal operations and move forward with the planned development and procurement activities. Other than that, I cannot tell you a time, hopefully very soon. And Barry, do you want to speak about the CPT?

Barry Wolfenson, EVP of Strategy and Corporate Development

Yes. Regarding the CPT code, I want to start by mentioning that Vericel has a temporary CPT code that became effective on July 1. Given their strong level of utilization, they anticipate applying for a permanent CPT code in 2026, which would potentially be active in 2027, assuming everything proceeds smoothly. They haven't shared specific details about the potential benefits, so these are just our insights on how this could be advantageous. Generally, we recognize that these procedures are conducted inpatient, under the DRG system. However, CPT codes serve several important functions, primarily by providing legitimacy. One aspect is that they offer national legitimacy, which can enhance physician adoption. By providing standardized terminology for the procedures, they facilitate internal approvals, credentialing, and workflow credibility—all of which helps foster physician acceptance. When physicians feel assured that they can perform a procedure with the appropriate coding, it could lead to increased patient usage, even with a DRG-based payment system. Additionally, they promote institutional acceptance; without these CPT codes, institutions may be reluctant to contract new technologies. Thus, having them enhances the approval processes for burn centers. Vericel has mentioned over 60 burn centers, targeting about 100 top-tier burn centers, indicating there's still work to be done. A permanent CPT code could simplify the process of getting more institutions to adopt and contract NexoBrid. In summary, while they currently hold a temporary CPT code, obtaining a permanent one would enhance legitimacy and facilitate both physician adoption and institutional acceptance.

Operator, Operator

Our next question comes from Jeff Jones from Oppenheimer.

Jeffrey Jones, Analyst

Can you provide any additional visibility on the breakdown of the $5.4 million in revenue? You mentioned increased margin based on Vericel sales, but could you clarify the breakdown between product services and revenues?

Hani Luxenburg, CFO

Thank you for the question, Jeff. In the third quarter, we only provide a press release with condensed financial figures and do not release a full financial statement, which we only do in the second quarter and at the end of the year. Therefore, I can't share more details than that. However, I can tell you that our gross margin this quarter was approximately 20%, up from 12% last year. This improvement reflects a more favorable change in our revenue mix. Our gross margin is also influenced by the mix of revenue from product sales and R&D services, and we expect it to gradually move towards 25% at full capacity.

Jeffrey Jones, Analyst

Appreciate that, Hani. Two additional questions. Just on the U.S. government contract discussions, with BARDA, obviously, that is with Vericel. Just for clarity, the BARDA contract hasn't been awarded correct, the second quarter...

Ofer Gonen, CEO

Yes. There was an RFP for a 10-year contract covering stockpiling, room temperature stable formulations, and trauma blast injury solutions. Vericel disclosed in their previous earnings call, they submitted a proposal to the U.S. government, and we are waiting for the contract to be signed.

Jeffrey Jones, Analyst

Great and look forward to finding out about base options and sort of period of work there. Just any update on the commercialization plans and expansion into Europe?

Ofer Gonen, CEO

So currently, as you know, we are capped by our ability to manufacture. We have much more demand than we can basically manufacture and ship toward the territories. Having said that, we expect that by year-end 2025, our manufacturing facility will be fully operational, and we can start actually manufacturing for the markets. As the demand is extremely higher, we believe that after that, we can disclose our commercial plans for that.

Operator, Operator

Our next question comes from Michael Okunewitch with Maxim Group.

Michael Okunewitch, Analyst

I guess to start off, I just wanted to follow up on some of the previous questions around the pricing and the new health economic analysis. In particular, what endpoints are most relevant to the health economic benefit? Are there any specific thresholds in the Phase III that we should look to that could justify that upside pricing?

Ofer Gonen, CEO

Michael, thank you for joining the call. I see that Barry wants to answer that. Right, Barry?

Barry Wolfenson, EVP of Strategy and Corporate Development

Yes, those are excellent questions. I’ll do my best to address them. Essentially, all the health economic outcomes research we've considered in this assessment, or which payers have urged us to contemplate, revolves around the benefits linked to early wound closure. If a wound remains open for six to ten weeks longer, there are numerous associated costs including nursing time, physician time, product costs, and various risks such as infections, hospitalizations, and any necessary corrective treatments due to inadequate wound progress. When we compile these costs, they represent a certain amount of savings. There is already substantial publicly available data regarding the average weekly cost of an open venous leg ulcer. By combining our data on the costs associated with early closure and the existing published information, we will determine the total cost. Regarding pricing, we’ve received consistent feedback from payers indicating that the legacy product currently on the market, SANTYL, has undergone regular price increases over the years. For instance, a 30-gram tube has escalated from approximately $100 to around $300 over the past decade. Payers have mentioned that there could be a cap at roughly a 50% premium above SANTYL, even though that additional amount may only represent a small fraction of the actual health economic benefits. This is our modeling approach, and as I noted earlier, we're adopting a conservative stance on this. The figure we’ve projected at $831 million is not at the highest price point; rather, it falls between the maximum 50% premium over SANTYL and a 15% premium over SANTYL.

Michael Okunewitch, Analyst

And then just one more for me and I'll hop back into the queue. Just in light of the recent updates to your market research, I want to ask a bit of an opposite question. We all on this call know the significant benefits that would draw converts over to EscharEx. But what are the factors that would lead people to or lead physicians to opt for other methods like sharp or autolytic? I'm trying to understand if there are any hard limits for EscharEx in this setting beyond that 22.3% conversion estimate that you use?

Ofer Gonen, CEO

So Barry take this as well.

Barry Wolfenson, EVP of Strategy and Corporate Development

Thank you. I believe there will still be situations, particularly due to peripheral neuropathy in the diabetic foot ulcer segment, where it may be easier for physicians to clean a wound once or twice with a knife rather than apply medication over several days. Currently, sharp debridement is the standard of care. We estimate that about 10% of the utilization comes from sharp debridement, but there will still be demand for it. Unlike NexoBrid, which can completely eliminate the need for surgery in burn cases, this situation is a bit less straightforward in the chronic wound space. Therefore, we again estimate around 10% on the sharp side. Regarding autolytic debridement, it is much less expensive, so its usage will vary based on the setting, the specific case, and the patient's insurance coverage. We believe there will still be a market for autolytic debridement and that we will capture a significant share of it from the existing options. The legacy products associated with autolytic debridement can be assessed in the literature for advantages, but there is a notable price difference. We expect that our price to clinical efficacy ratio will create an appealing option that encourages broader adoption, yet there will still be a market for autolytic methods.

Michael Okunewitch, Analyst

I really appreciate the additional insights. Once again, congrats on all the progress this quarter.

Operator, Operator

And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Ofer Gonen for closing remarks.

Ofer Gonen, CEO

So thank you, everyone, for joining us today, and we look forward to updating you again on our next quarterly call.

Operator, Operator

And with that, ladies and gentlemen, we'll be concluding today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.