MediWound Ltd.
Q1 2018 Earnings Call Transcript

Published: 12 May 2018

[Operator:]

Good day, everyone, and welcome to the MediWound First Quarter 2018 Earnings Conference. Today’s call is being recorded. And at this time, it’s my pleasure to turn the conference over to Bob Yedid of LifeSci Advisors. Please go ahead, sir.

[Bob Yedid:]

Good morning, and good afternoon to everyone, respectively, and thank you for joining today’s call. Earlier today, MediWound issued a press release announcing first quarter 2018 financial results and business updates. You may access that release on their website under the Investors tabs. With us today is Steve Wills, Chairman of the Board; Gal Cohen, President and Chief Executive Officer of MediWound; and Sharon Malka, Chief Ops and Chief Financial Officer. Steve is with us to share an update on the discussions regarding a potential strategic transaction, gal will provide an update on the company’s programs and review upcoming milestones and Sharon will summarize the company’s financial results. After the prepared remarks, we will open the call to Q&A. Before we begin, I’d look to remind everyone that the 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 on reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and can 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 results or otherwise. Participants are directed to the cautionary note 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. At this time, with the conclusion of those remarks, I’d like to turn the call over to Steve Wills, Chairman of the Board. Steve?

[Steve Wills:]

Thank you, Bob, and hello, everyone. I would like to update today that following the approach by another company to consider a potential strategic transaction, which was announced in our fourth quarter release, we have received preliminary approaches from other strategic parties and we are now engaged in discussions with multiple strategic parties. The board continues to be advised by Moelis & Company in a thorough evaluation and assessment of these potential strategic transactions. There is no additional information we can share at this stage, and there can be no assurances that a definitive agreement between the parties or any other agreement will be reached. I will respond to any questions at the completion of our team’s remarks, though please note that I am very limited in what I can say. Now I will turn the call over to MediWound’s CEO, Gal Cohen. Gal?

[Gal Cohen:]

Thank you, Steve, and good morning, everyone. Thank you for joining the call. I would like to share with you some incremental information since our recent call a couple of months ago. First, we are pleased to say that the pace of enrollment in our U.S. Phase III clinical trial of NexoBrid, the DETECT trial, is proceeding within the parameters we expected, with a dozen patients left to go. We expect to complete the recruitment of 175 patients around midyear. As a recap, the Phase III DETECT study is a prospective, controlled, multinational, assessor-blinded Phase III study with 175 patients randomized to be treated with either NexoBrid or gel vehicle or standard-of-care in the ratio of 3

[Sharon Malka:]

Thank you, Gal, and good morning, everyone. As we completed the first quarter of 2018, MediWound is in solid financial shape with $32.9 million of cash. This was possible because of two notable financing achievements last year. First, the BARDA’s increased commitment to support NexoBrid; and second, the completion of public equity offering. Let’s turn now to our financial results for the first quarter. We reported revenues in the first quarter of 2018 of $520,000, which was consistent with the fourth quarter of 2017 and the first quarter of 2017. Gross profit for the first quarter of 2018 was $139,000, compared to a gross profit of $200,000 in the prior year period. Research and development expenses, net of participation, for the first quarter of ‘18 were $1.2 million compared with $1.8 million for the first quarter of ‘17, a decrease of 33%. The decrease in R&D net was as a result of an increase of about $0.6 million of NexoBrid clinical trial expenses on one hand, which was offset by an increase of $1.2 million in participation by BARDA in the company’s R&D expenses on the other hand. Selling, marketing and general and administrative expenses in the first quarter of 2018 was $2.1 million, unchanged from the prior year period. Operating loss was $3.7 million for both the first quarter of ‘18 and ‘17. Operating expenses in the first quarter of 2018 included onetime other expenses of $0.6 million, associated with a review and analysis of potential strategic transactions. Net loss for the first quarter of 2018 was $4.6 million or $0.70 per share compared with a net loss of $4.3 million or $0.20 per share for the first quarter of 2017. The decrease in net loss was primarily a result of the onetime other expenses as mentioned before. Adjusted EBITDA for the first quarter of 2018 was a loss of $2.8 million compared with a loss of $3.2 million for the prior year period. A reconciliation of the adjusted EBITDA to GAAP net loss 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, cash equivalents and short-term bank deposits of $32.9 million and this compares with $36.1 million as of December 31, 2017. We remain on plan and utilized $3.2 million in cash to fund operating activities in the first quarter of 2018. For full year 2018, we reiterate our previous guidance and expect that cash used for ongoing operating activity will be in the range of $14 million to $16 million. Looking ahead, as NexoBrid becomes a self-funded product, we expect to concentrate our resources to fund our development programs for EscharEx. With that financial overview, let me turn the call back to Gal. Gal?

[Gal Cohen:]

Thank you, Sharon. We look forward to 2018, and we have several important milestones, including completion of the enrollment of our Phase III DETECT trial for NexoBrid, initiation of recruitment of our pediatric Phase III study in the U.S. in Pediatric Burn Center, initiation of our clinical program for EscharEx in the U.S., further global expansion of NexoBrid as seven of our international distributors are expecting to gain regulatory approval and launch, and the potential initiation of a development program for NexoBrid for the treatment of sulfur mustard injuries, which we will seek to collaborate on with governmental entities. With the completion of our prepared remarks, Steve, Sharon and I will take your questions now. Operator, kindly open the call for questions.

[Operator:]

Thank you. [Operator Instructions] And we’ll go first to Anthony Petrone at Jefferies.

[Anthony Petrone:]

Thanks and good morning. Maybe just to start on the new information, strategically that you can share as much at this stage, maybe just a makeup of the other parties that have shown interest here. Is it mainly strategics or is it more financial buyers? And then I’ll have a couple of follow-ups.

[Steve Wills:]

Sure, this is Steve. Due to confidentiality considerations, I just can’t get overly specific or granular regarding the stage of these strategic discussions, the types or specifics of any potential strategic transactions, or the probability of closing a potential transaction. The – I can’t expand little bit in that. These are not financial approaches, they are strategic companies. And I just want to stress that we’re not running a process with the objective to sell the company. We’re very excited and enthusiastic with our assets. We fully expect to deliver significant shareholder value as we advance these assets and hit our related milestones. And as we stated last quarter, Moelis & Company was engaged as specialty advisers to the Board post the approach by a third-party last quarter regarding potential strategic transaction. We’re frankly not surprised that we’ve had other approaches. We’re – we believe we’re well prepared to analyze these potential strategic transactions and come to a good conclusion or assessment, and if it makes sense for the MediWound shareholders from a value perspective, then we move forward. If it doesn’t, then we are very comfortable with the organic assets we have and the milestones that we expect to deliver.

[Anthony Petrone:]

That’s helpful. And maybe just one quick follow-up there. I mean, just to clarify, these are sort of bona fide offers for the company? Or is it more they’re looking at either one of the two assets, NexoBrid or EscharEx?

[Steve Wills:]

There is definitely some interest. At any given time, whether it’s the board or senior management, we’re very cognizant of the competitive landscape. And we’re constantly looking at ways to, say, enhance the value of organic programs. So we do have discussions regarding NexoBrid, the rest of the world sales, what’s maybe an approach where there’s more distributors, possibly a larger company with a larger dedicated sales force. So we’re constantly having those types of discussions. The approaches are primarily more with a strategic combination as opposed to a specific asset.

[Anthony Petrone:]

Helpful. Maybe just turn gears – switch gears to just NexoBrid. Maybe just a little bit on timing for the pediatric study for NexoBrid. What is the target enrollment? When will enrollment be completed? And then just to recap, again, on the funding split between the company and BARDA on the pediatric indication for NexoBrid.

[Gal Cohen:]

Thank you, Anthony. So the pediatric study is a 160-patient study, and we are now extending it to the U.S. As I said, we have submitted the protocols to the IR business, the clinical sites. We’re just waiting for clearance and we can start. So we practically are geared to start this quarter as soon as we get an IRD approval, we’ll start. This program is funded fully by BARDA. So BARDA funds all the pediatric study, all the DETECT study and, particularly today, all the R&D expenses of NexoBrid are on BARDA.

[Operator:]

And we’ll go next to Josh Jennings at Cowen.

[Josh Jennings:]

Hi, thanks so much for taking the questions. I was hoping to just start off on EscharEx and I just – I’m sorry if I missed this. But has there been any change regarding your plans to submit a protocol with the FDA in the second half of ‘18? And how should we think about the timing of the started enrollment for the EscharEx Phase III?

[Gal Cohen:]

Thank you, Josh. Now we are on plan. We maintain our plan to submit a protocol to the FDA in the second half of this year. And following all the approvals, FDA, IRBs and so on to initiate the study. We currently believe that the study recruitment will start in the late – in the second half of this year or early next year, depending on how these procedures are moving forward, with IRBs and all these kind of things.

[Josh Jennings:]

Great. I just want to be clear, it sounds like from Steve’s comments that you guys are moving forward independently of these strategic offers. But I just wanted to just check the box and make sure that the development work you’re doing for NexoBrid and EscharEx – nothing’s changed since these offers have kind of arisen.

[Steve Wills:]

This is Steve. That’s absolutely correct.

[Josh Jennings:]

Great. And then – sorry, go ahead. My last question is just, the press release characterize the newer approaches as preliminary. Can you discuss like what that means, and in terms of comparison between the newest proposals to the one that you previously received and announced on the fourth quarter call?

[Steve Wills:]

This is Steve. I missed just the beginning of that question. So I’m not sure if it was related the potential strategic discussion. So if you could just repeat that?

[Josh Jennings:]

Sure. I guess, in terms of – I guess you characterized the new approaches today as preliminary versus the offer that you referenced in the fourth quarter call? Can you just help us to understand what that means by preliminary versus the previous offer?

[Steve Wills:]

Sure. The initial approach prior quarter was in an offer form – format. I don’t want to get overly granular and specific, again, due to confidentiality considerations. Additional approaches have been made. They start off as preliminary. As I’ve stated, we are in ongoing discussions with multiple parties, and some of those discussions are at an advanced stage.

[Josh Jennings:]

Thank you.

[Steve Wills:]

Thank you, Josh.

[Operator:]

And we’ll go next to Bruce Nudell at SunTrust.

[Stan Fediuk:]

This is Stan Fediuk on the line for Bruce Nudell. Thank you for taking my questions. First, I was just curious about the NexoBrid for sulfur mustard. How big is the market opportunity? And what would be the development commercialization time line?

[Gal Cohen:]

Thank you, Stan. So the market opportunity, obviously, this is – as human beings, we hope that there would be no market, particularly, because we don’t know how many casualties can be affected by sulfur mustard. I can tell you that there is a growing concern about it. As you saw, the only two times that – the recent two times that the U.S. striked Syria was after the usage of the chemical warfare agent. The size of the market will be determined by the governmental bodies in determining how much they we like to stockpile against this kind of a threat. The thing with sulfur mustard is that it’s not too complicated to manufacture, it’s not too complicated to transfer, and therefore, in – it is considered an imminent threat. We’ve presented this data at the European Burns Association conference, and there was interest from governmental bodies looking at ways to get prepared to a situation that such a threat would become imminent. So regarding the side of the market, again, it’s mainly an internal decision of the government how much they would like to procure in order to get themselves ready. In terms of timeline, first of all, obviously this is not something that you can test in humans, right? We are not going to subject any human to such an agent. So it’s animal studies usually. We are now working with experts exactly to see what will be the size of this study and how much time they will take. Again, it’s not something that you can do in every CRO. Not every CRO has access to such agents. And following that, we will approach FDA to get FDA guidance, what would the FDA expect here. And thereafter, we would have a bona fide development plan that we will seek to collaborate with potential customers on, because it’s not something that you develop for the civilian market.

[Stan Fediuk:]

Okay. And are there any updates for the reimbursements in Europe for NexoBrid?

[Gal Cohen:]

In terms of reimbursements in Europe, I mean, I can update you that in Romania, as you know, there was a disaster about two years ago. And after the disaster, when the Romanian government saw that they are not prepared, they started to work on a plan, under which there will be a special budget to fund burn care. And this budget was formally announced in the end of the first quarter. And now, locally, we are working with the burn centers to see how they can access the – what is the procedure to access this budget. So this is one development. Other than that, there are no new developments in the last two months since our recent call.

[Stan Fediuk:]

Thank you for taking my questions.

[Gal Cohen:]

Thank you.

[Operator:]

[Operator Instructions] And we will go next to David Maris at Wells Fargo.

[David Maris:]

Good morning. And I think I speak for all the analysts that we’re happy that strategic partners are recognizing what we’ve all been saying for a while, that the stock is undervalued. Maybe you could just – I know that these things are fluid and organic and that they depend on other partners, so you can’t put a specific date on when you will have an answer. But I think, Steve, you’d also agree in Gal that these types of things that if they’re prolonged is not good for an organization. So would you think that based on what you know today that by the end of this quarter that you should have, barring any new partner, strategic interests coming in, that you should have some resolution on the path forward?

[Steve Wills:]

It’s Steve. Yes, I think that’s a fair assessment. I mean, our expectation is definitely prior to the next conference call or at that next conference call we’ll, depending on what transpires, we’ll have more specificity and granularity. And you’re right, Dave, these types of things have a certain life. And we’re trying to minimize any distractions to senior management because we’re running a business here. So I’d agree with that assessment. It’s – no later than the next conference call, we would anticipate having a lot more specificity and granularity on what we’re doing going forward, either with somebody new or remaining the way we are currently with our current assets.

[David Maris:]

Great. Thank you very much.

[Operator:]

And we’ll move next to Jay Olson at Oppenheimer.

[Jay Olson:]

Thank you for the additional clarity you provided with regards to the steps that will be taken to submit a regulatory filing for NexoBrid in the U.S. Can you confirm that you’re still on track for a 2020 launch of NexoBrid in the U.S.? And will you have all the steps put in place, such as manufacturing and commercial infrastructure, to support a U.S. launch in 2020?

[Gal Cohen:]

Thank you, Jay, for the question. So in terms of timelines, according to our plan, should we successfully complete the Phase III study and towards the end of this year, around the end of this year, we’ll have the primary, secondary and safety acute data available, we’re going to ask FDA for pre-BLA meeting and discuss with the FDA the possibility to submit the file based on this data. Because we believe that if the acute data is positive, there’s no reason to believe that there will be an issue in the long term. In addition to that, we have already an 89-patient study that has been published that shows that our long-term data is at least as good, if not better, than standard of care. And even if we submit the file at the second half of ‘19, as we expect, we’ll be able to supplement this 12-month data very shortly after the FDA starts to assess the BLA. So they will still have this data while they are – before they’re giving us what we call the list of questions or their feedback. So should the FDA agree to that, because, again, it is the FDA and it’s always impossible to predict how FDA will react. But should FDA agree to that, then our plan is to submit the file in the second half of ‘19. FDA states that it takes about 10 to 12 months to get an approval on a BLA, so this should come in the second half of 2020. So with this plan, these are the timelines. If FDA will say no, I want to wait for the 12 months follow-up, then we will be delayed until the availability of that data, which should be some months, some quarters thereafter. Regarding the manufacturing capacity, we do have the manufacturing capacity to support U.S. market. And regarding the other infrastructures, obviously this can be built towards approval. So if we see that we successfully complete the study and the pre-BLA meeting says that we can submit the file, it doesn’t take too long to get yourself prepared. At the end of the day, there are 128 burn centers in the U.S., about 30 of them will already use NexoBrid in the DETECT and kids’ study, so I think this will all fit into these timelines. Whether, by the way, we do it alone or we do it with partner.

[Jay Olson:]

Okay. Great. And then also with regards to the additional work you’ll be doing with NexoBrid for the treatment of sulfur mustard injuries, as long as you’re expanding the potential applications of NexoBrid, have you looked at such injuries as severe abrasion wounds or deep lacerations for potential application of NexoBrid?

[Gal Cohen:]

Well, we did had a study with EscharEx that looked at what we call postsurgical complications or how to heal wounds, wounds that have been – of healthy patients that went to a surgical procedure and had some complication and the wound did not heal. Obviously, EscharEx was effective in that study in debriding such wounds. I think if one looks to the literature, there are so many properties that have been reported in the literature that bromelain or NexoBrid can be potentially beneficial there, being known as the anti-inflammatory drug. So there are reports on some various etiologies and indications including cancer, anti-inflammatory indications, and so on. We are a limited scale company, so we can’t pursue everything in parallel. And we do the – we do run the development programs that we find that we can with other resources.

[Jay Olson:]

Okay, great. Thanks for taking the questions.

[Operator:]

And it appears we have no additional questions at this time. So Mr. Cohen, I’ll turn things back to you, sir.

[Gal Cohen:]

Thank you very much. Thank you, everyone, for joining the call today and thank you for your questions. We look forward to providing you with further updates on our second quarter call. Thank you.

[Operator:]

And ladies and gentlemen, once again, that does conclude today’s conference. Again, I’d like to thank everyone for joining us today.