MediWound Ltd.
Q1 2019 Earnings Call Transcript

Published: 21 May 2019

[Operator:]

Good day, ladies and gentlemen. And welcome to the MediWound First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be followed at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today’s conference, Jeremy Feffer. Please go ahead.

[Jeremy Feffer:]

Thank you, Chris, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the first quarter of 2019. You may access that release on the website under the Investors tab. With us today are Steve Wills, Chairman of the Board; and Sharon Malka, Chief Executive Officer. Following management’s prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that statements made during this call, including the Q&A session, relating to MediWound’s expected future performance, future business prospects, or future events or plans, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Although, the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecast due to the impact of many factors beyond the control of MediWound. The company assumes no obligation to update or supplement any forward-looking statement whether as a result of new information, future events or otherwise. Participants are directed to cautionary note 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 expressed and prohibited without the consent -- written consent of MediWound. Now I would like to turn the call over to Steve Wills, Chairman of the Board. Steve?

[Steve Wills:]

Thank you, Jeremy. Good morning. Good afternoon, everyone, and thank you for joining us today. First quarter 2019 has been very eventful for MediWound with a series of significant announcements and strategic developments. First, in January we announced positive data from our pivotal Phase III DETECT study with NexoBrid in severe thermal burns meeting primary and all secondary endpoints with statistically significant results. The results were robust and demonstrated clear significant benefit for patients. In early May, on the heels of these data we entered into exclusive license and supply agreements with Vericel to market NexoBrid in North America. This collaboration is strategic for both parties and leverages Vericel’s commercial infrastructure and expertise with it’s already establish sales and marketing team. Additionally, the funds from the Vericel deal will allow us to significantly advance the development of EscharEx, our topical biologic drug candidate for the debridement of chronic and other hard-to-heal wounds, through FDA/BLA filing. We will continue to be opportunistic in seeking collaborations for NexoBrid in other markets and with the assessment of potential strategic opportunities for EscharEx as its development program advances towards regulatory approval. Finally this quarter we welcomed Sharon to his new role of CEO as Gal Cohen announced in March his plans to step down. We wish Gal good fortune with his future endeavors and thank him for tireless efforts in his 12 years as CEO and appreciate his work to bring the company at this point, where we have positive pivotal data for NexoBrid and North America license deal with clear path to the U.S. markets and a strategic asset in EscharEx that we believe will be a meaningful medical treatment for patients and a driver of value for MediWound. Over the years, Sharon has demonstrated his leadership abilities and he has gained the trust and respect of those around him. The Board and I appreciate the ease with which this transition has occurred and we look forward to his guidance as he leads the company on the execution of our strategic vision. We welcome Sharon to the CEO position and I look forward to my continued involvement with him. With that, it is now my pleasure to turn the call over to Sharon. Sharon?

[Sharon Malka:]

Thank you, Steve, and good morning, everyone. It is my pleasure to be here this morning and provide an overview of our accomplishments this past quarter. As Steve said, MediWound had a very active start to this year, with several significant milestones achieved, including the positive Phase III data for NexoBrid and the licensing agreement that provided a clear path to the U.S. commercial markets. On NexoBrid we published earlier this year, positive topline results for our pivotal U.S. Phase III DETECT clinical study to treat patients with deep-partial thickness and full thickness thermal burns. The study meets its primary endpoint of complete eschar removal, as well as secondary endpoints of reduction in the need for surgical eschar removal earlier eschar removal and blood loss. Those were both positive results across all endpoints, which collaborate our previous positive EU Phase III clinical study results clearly demonstrate the significant beneficial impact NexoBrid on burn patient as a new paradigm in care management. We continue to plan for U.S. BLA submission towards the end of the year subject to FDA concurrence in pre-BLA meeting, which we plan to have soon and we’ll keep you informed as preparation progress. The Vericel deal, which includes a $17.5 million upfront payment, a $7.5 million payment contingent upon U.S. BLA approval, tiered royalty payments and up to $125 million in annual sales milestones provides both clinical and commercial validation for NexoBrid as a new paradigm in the burn care management. Vericel is in a ideal commercial partner to drive NexoBrid adoption in the U.S. market for number of reasons. First Vericel operates sales and marketing team in the U.S. targeting the burn centers. Second Vericel knows the U.S. burn care market extremely well and has significant expertise in the burn care market particularly the customers and the reimbursement landscape. And third, Vericel’s organizational culture is very similar to our own. In summary, we believe Vericel is uniquely positioned to leverage the medical need and to maximize the commercial potential of NexoBrid in North America. With proceeds generated from this collaboration combined with our current cash in hand, we are well-positioned to optimize and significantly advance our EscharEx program through BLA filing. We remain very excited about the potential of EscharEx for the debridement of chronic and other hard-to-heal wounds, our enthusiasm for EscharEx and its commercial opportunity is derived by both the solid demand of existing topical and haematic debridement, treatments thus generates annual U.S. sales of hundreds of millions of dollars and by the medical benefits, EscharEx demonstrated in the recent clinical trials. Additionally, current clinical treatment practices and the existing reimbursement for hematic debridement suggest a favorable market environment for a new more effective debridement treatment. We believe EscharEx represents a significant commercial opportunity as physicians may find EscharEx competitive product relative to current standard-of-care, offering a shorter debridement period than the products on the market today. As a reminder, EscharEx Phase II study demonstrated statistically significant superiority in the incident of complete debridement with no deleterious effect on wound healing, as well as a comparable certificated profile. We were very pleased to have obtained FDA concurrence on the primary endpoint for the pivotal program to beat incidents of complete deprivement versus the gel vehicle and that wound closure will be a safety endpoint to demonstrate there is no deleterious effect as in our previous successful trial. As requested by the FDA, we submitted additional information on suggested secondary efficacy endpoints and subject to FDA agreement, we plan to initiate the next step of EscharEx U.S. clinical development program in the next few months. Turning now to our financial results, revenues for the first quarter of 2019 were $0.5 million flat compared to first quarter last year. Gross profit during the quarter was $0.15 million. Research and development expenses for the first quarter net of participations were $1.3 million flat compared to last year. Selling, general and administrative expenses in the first quarter were $2.4 million, an increase of 14%, compared to $2.1 million in the same period last year as a result of one-time management transition costs. Operating loss in the first quarter was $3.6 million, compared to $3.7 million in the same period last year. The company posted a net loss of $4.1 million or $0.15 per share for the first quarter of 2018, compared with a net loss of $4.6 million or $0.17 per share for the first quarter of 2018. The adjusted EBITDA for the first quarter was loss of $2.9 million, compared with a loss of $2.8 million for the prior year period. A reconciliation of adjusted EBITDA to GAAP net income is included in the press release we filed with the SEC earlier this morning. Turning now to our balance sheet. As of March 31, 2018, the company had cash and cash equivalents of $21.5 million, compared with $23.6 million at year end 2018, utilizing about $2.1 million in cash to fund ongoing operating activities during the first quarter of 2018. Looking ahead, we believe that the existing cash combined with the proceeds generated from the collaboration with Vericel will provide sufficient funds enabling us to significantly advance the ongoing development of EscharEx through BLA filing, while NexoBrid becomes a self-funded product as its research and development programs are funded by BARDA. As a result, the company expects cash use for ongoing operating activities in 2018 to be in the range of $12 million to $14 million. We are actively searching for a new CFO and will update as soon as we have news. As you can appreciate, we believe it is important to have a person with not only the right experience but also the right fit for the company and its culture. In the meantime, we are pleased to have a very capable team supporting the company as we complete the search. To recap, this has been a very active period for us and we look forward to continuing to progress our programs forward and achieving additional important milestones, including filing our BLA for the NexoBrid in the fourth quarter of this year, continuing the recruitment in our pediatric Phase III study also in the U.S. pediatric burn centers and initiating our clinical program for EscharEx in the U.S. With that, it is now my pleasure to open the call for Q&A. Operator?

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of Raj Denhoy with Jefferies. Your line is now open.

[Raj Denhoy:]

Hi. Good morning.

[Sharon Malka:]

Good morning.

[Raj Denhoy:]

I’m wondering, maybe if I could start with EscharEx, you noted that you expect to begin the trial in the next few months, right? I just wanted to see if that was a little bit of a push from where it was before. I think we had previously talked about it perhaps being in the second half of 2019, is there -- is that still the timing or is there a little bit more of a delay there?

[Sharon Malka:]

Thank you, Raj, for the question. So the short answer is no there is no change. As we stated before, we wait for the FDA agreement regarding the information we submitted as to addition secondary endpoint and as soon as we get this agreement, we will start the study, all preparation already done, we have engagement in place with the CRO and other vendors and hospitals themselves and we are waiting just to get this feedback and initiate the study.

[Raj Denhoy:]

Okay. That’s clear. Maybe just like a transition to NexoBrid quickly. So you mentioned that you’re still potentially looking for additional partners for NexoBrid perhaps for other geographies in the United States. Are those discussions active at this point, right? My understanding was after you concluded the Vericel deal that you were sort of taking a step back from looking for additional partners, but it sounds like maybe you’re still engaged in that activity?

[Sharon Malka:]

Steve, can you please?

[Steve Wills:]

Yeah. This is Steve. I mean, when we’re going through the process, we really -- we’re talking to certain companies that there were discussions around a global deal. We ended up doing the North American deal and specifically it doesn’t play outside of North America. So as we go forward now, we are from a competitive standpoint, we’re looking hard at our existing structure. How many people on the ground, is that the best way to increase the market, we’re sensitive that we’ve been losing a little bit of money in the rest of the world. But we’re also being opportunistic. There were certain parties that were only interested in certain territories outside of North America. So we are now we engage are starting the process to re-engage with those individuals. So the -0- in the coming months are definitely within on the next conference call. Sharon will go into a bit more detail on our strategy there. But more than likely, we’ll be definitely advancing marketing approvals in other select areas trying to get the right distribution partner in that regard. But again there were several companies that expressed an interest in certain regions outside of North America that we’re going to be reengaging shortly.

[Raj Denhoy:]

That’s helpful. And actually segue to my next question which is just purely the prospects for NexoBrid outside the United States was $0.5 million in the quarter a little lower than we were expecting and it’s flat on last year. And so the question is really, do you have plans and it sounds like you do to potentially accelerate the growth there and is there anything you can offer and sounds like maybe you’re going to give us more later, but anything over the short-term in terms of whether we should expect that number to accelerate or is that $0.5 million a quarter for the expected run rate at this point?

[Steve Wills:]

Sharon?

[Sharon Malka:]

Yeah. So, Raj, as Steve mentioned before, we are currently fine-tune our strategy regarding NexoBrid with the ex-non-America territories and we share the information as soon as we have it probably towards their next earnings call. But our goal is as you mentioned we have no bothered to fund all the R&D expenses of NexoBrid and we plan to -- the NexoBrid would be self-funded, means we will not lose money in not -- in none of our territories that we are active in. That breaks question?

[Raj Denhoy:]

Okay. It does. It sounds like you’re again fine tuning the plans there maybe you’ll give us more in the next few quarters in terms of prospects there. Maybe just lastly just on the cash position. I just wanted to confirm the milestone payment expected from Vericel this year $17.5 million. That is not contingent upon any sort of approvals or anything that is a straight payment from them you expect this year. And then also it sounds like perhaps the first BARDA sales could occur this year and you’re expected to receive some portion of that as well. Is that correct in terms of additional cash you expect this year?

[Sharon Malka:]

Correct. First of all, the upfront payment was already received after the end of the first quarter. So we would see it in the next quarter cash balance. So it’s correct. And as to BARDA, we do anticipate that the BARDA procurement will initiate in the second half of this year and we will see revenues and book revenues from the BARDA committed procurement already in the second half of 2019.

[Raj Denhoy:]

Great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Josh Jennings with Cowen. Your line is now open.

[Josh Jennings:]

Hi. Good morning. Thanks for taking the questions. As a follow-up initially on EscharEx and it sounds like you’re going to start the commencement of the trial in the next few months. But I just wanted to certainly check our expectations for enrollment and then FDA review, should we be thinking about one year enrollment period approximately and then one year follow-up and then FDA review from there, is that appropriate?

[Sharon Malka:]

Hi, Jennings. Thank you for the question. So, first of all, as you know, we have a CDP plan for the EscharEx development in order to have it ready for BLA submission and because ExcharEx is not an orphan drug, it requires at least two adequately controlled studies. We are now fine tuning the best alternatives and scenarios regarding this CDP and we’ll share this information as soon as we have it find in tandem to the feedback that we will get from the FDA. But upon the overall period of this clinical development program is estimated about three years approximately to and overall cost of this development program is about $30 million to $440 million.

[Josh Jennings:]

Great. And then just thinking about what you submitted to the FDA and the secondary endpoints for EscharEx, IDE trial? It sounds like you’ve got some input or learnings from some of your strategic discussions and I was just wondering if you could share any of the kind of updated secondary endpoints that you have in discussion with the FDA and what are those secondary endpoints that you want to proceed with?

[Sharon Malka:]

As you know and as a reminder we agreed with the FDA and have the FDA concurrence regarding the primary endpoint to be incidence of complete debridement exactly like we have in the previous study of EscharEx, as well as the DETECT study, not only that, we agreed also that wound closure will be a safety measurement for our pivotal program. Regarding the additional information requested by the FDA, we suggested several secondary endpoints, some of it to support pharmaeconomics plan, some of it to support additional benefits and clinical benefits of the EscharEx versus the placebo and standard-of-care. And as soon as we get the feedback we will share this information with you. But basically -- some of those additional endpoints are ones that we get from people from the market that is better to have it as part of the study or we gained some information in the previous study and we just want to demonstrate also in the pivotal plan.

[Josh Jennings:]

So just to be clear it sounds like those are pretty straightforward and shouldn’t cause a holdup in terms of the FDA signing off on IDE design and then moving forward with enrollment is that fair way to think about it?

[Sharon Malka:]

Correct.

[Josh Jennings:]

Great. And just on NexoBrid and I’d just following up on Raj’s questions about around the path forward here in international markets. Are you seeing any increase enthusiasm or utilization post the NexoBrid Phase III data is where you think NexoBrid could potentially be a catalyst for international burn centers to adopt the product or utilize it at a higher clip? How do you see that Phase III data transiting through is data good enough or do we need to see the 12-month data or even longer for it to have an impact on international clinicians in adoption of utilization trends?

[Sharon Malka:]

So as a background and the reminder just to, we are focusing basically in three territories or three continents regarding what we call the international market out of EU and U.S. The first one is the Latin America countries, second is the CAS, Russia and Korea and those countries, and the third one is the Asia-Pacific countries, in which we have several distribution agreements with local distributors. Those countries or those distributors are using the following information. First they have the European data the European marketing approval and the European file. Second they have more and more information gathered from the commercial setting mainly from Europe publication, pharmaeconomic and independent cost effectiveness study and of course medical support on the European commercial setting. And third, is the DETECT results that collaborate both the Phase III in Europe, as well as the data that we generate from the market. All of those information are used by those distributor each one in his country. As you know some of those countries is just a process of submitting the European file and get approval and it may happen quicker and in some countries there will be some bridges, bridge studies or bridge clinical study to have before their approval. So we are getting progress in each one of those countries, we providing the support with no investment in terms of cash and we anticipate that during this year we will get one additional marketing approval in several countries that we have already have an agreement, and two, as mentioned by Steve, obtaining additional distribution agreement in few more countries.

[Josh Jennings:]

Excellent. And then, just lastly on the NexoBrid data, I mean when should we be expecting the acute data to be presented and then just thing about publication timelines, I mean can you publish the acute data do you need to have the 12-month data in order to move forward the publication in peer-reviewed journal? Thanks for taking all the questions.

[Sharon Malka:]

Thank you for your question. So to this specific question we announced the topline result on January. We are currently gathering and getting more and more information and guiding the acute analysis in order to prepared a CSR and as soon as we have this CSR probably it will be associated with publication and more information about the study as the former CSR which we will also share with the FDA.

[Operator:]

Thank you. [Operator Instructions] And the next question comes from the line of Jay Olson with Oppenheimer. Your line is now open.

[Jay Olson:]

Hey, guys. Thanks for taking my questions. I have two questions. The first one is related to your evaluation of strategic options for EscharEx. Since you decided to retain the ex-U.S. rights to NexoBrid, does that suggest that you plan to leverage your ex-U.S. commercial infrastructure for EscharEx and if you do a deal for EscharEx, should we expect that to be a U.S.-only deal similar to the NexoBird deal and I have a follow-up question?

[Steve Wills:]

Hey. This is Steve. The -- they are actually mutually exclusive there. We’re concentrating on outside of North America with the NexoBird as we’ve talked about a bit with some additional distributors in the select countries and we’re engaged in some of the partners. That infrastructure, that call point that we have in place that wouldn’t well over as well for EscharEx treatment paradigm. So in our mind it’s mutually exclusive. And at this stage and this is one of the things we talked about on the last call when we announced Vericel deal and just briefly earlier. We -- because of the cash flow the upfront payment the anticipated procurement order -- from -- order from BARDA, we’re like nice flexible position whereby we can definitely concentrate with the EscharEx, optimize the program, take them all the way through the BLA filing. But we haven’t made the decision yet and that’s not a decision that you would make now that wouldn’t change on it if we are going to push to their own commercial sales force and sell the EscharEx. We’re going to be data driven but that data is going to be coming in over the next year or two if somebody wants to initiate discussions, move aggressively there would we consider that, the answer is, yes, we’ll look at those types of items, but we don’t have to do any of those items. So it’s nice not have any of those financing constraints over your head. With -- and I mentioned this on the last call with the NexoBird we were not going to commercialize that. So it was absolutely stage appropriate to find a commercial the right commercial partner for the NexoBird asset, and Sharon and I and the Board we believe we’ve done that with the licensing of Vericel. So I’ll say that was responsive if you want to add more color Sharon will jump in.

[Jay Olson:]

Oh! No. It’s super helpful. It’s very clear. And then just as follow-up, as you describe now that you have a deal for NexoBird in the U.S. and with EscharEx development entirely funded. It seems like you might want to explore lifecycle planning. So as you look out into the future beyond EscharEx what sort of new indications are you considering besides for example DBU and VLU? And specifically I’m curious if you’ve considered any potential applications for medical aesthetics such as treatment of wrinkles, scars, skin discoloration or other cosmetic opportunities that you might pursue?

[Steve Wills:]

Sharon?

[Sharon Malka:]

Thank you. Yeah. Thank you, Jay, for the question. As you know, MediWound developed throughout the last spent almost 20 years in platform technology, and systematic platform technology that we pay on the basis of the NexoBird, as well as the EscharEx. So regarding the chronic wound landscape we will start probably with one of the indication or either DBU or VLU or combination but as we will have to get indication or to develop the product for each of those indication and you have DVU, you have VLU, pressurized with huge opportunity mainly in the U.S. because its problem of the hospital themselves that caused those pressurized. So this is one direction. The other one of course is we have a third product candidate named JAK003, which is basically injectable form of the API that we develop. And this injectable form basically followed the development of a [inaudible] and it can be directed to -- indicated to several diseases or indication. One of them can be connective tissues disorder as deep [inaudible] folded shoulders or other and other alternative that we are considering and have some data regarding the market potential is of course a scar as you mentioned, hypertrophic scar and now that we have the fund following the deal with a Vericel collaboration with Vericel we believe that towards the end of day or beginning of next day we’ll be in a position to advance this specific cell program of the self injectable product and to start the clinical development stage of this product.

[Jay Olson:]

Oh! Great. Thank you very much. That’s super helpful. Thank you.

[Sharon Malka:]

Thank you.

[Operator:]

Thank you. And that does close today’s question-and-answer session. I would now like to turn the call back to Sharon Malka for any further remarks.

[Sharon Malka:]

Thank you everyone for joining us today. We look forward to updating you again on our next quarterly update call. Thank you. Have a nice day.

[Operator:]

Ladies and gentlemen, thank you for participating in today conference. This does conclude today’s program. You may all disconnect and everyone have a great day.