MediWound Ltd.
Q4 2016 Earnings Call Transcript

Published: 21 Feb 2017

[Operator:]

Good day ladies and gentlemen, and welcome to the MediWound Q4 2016 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 given at that time. [Operator Instructions]. As a reminder this conference is being recorded. I would now like to turn the call over to Anne Marie Fields. You may begin.

[Anne Marie Fields:]

Thank you, Michelle. Good morning. This is Anne Marie Fields with LHA. Thank you all for participating in today's call. Joining me from MediWound are Gal Cohen, Chief Executive Officer; and Sharon Malka, Chief Financial Officer. Before the opening of the US stock market today MediWound announced financial results for the fourth quarter and year ended December 31, 2016. If you have not received this news release or if you would like to be added to the company's distribution list, please call LHA in New York at 212-838-3777 and speak with [Karen]. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of MediWound. I encourage you to review the company's filings with the Securities and Exchange Commission including without limitation, the company's Forms 20-F and 6-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 21, 2017. MediWound undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I would like to turn the call over to Gal Cohen. Gal?

[Gal Cohen:]

Thank you, Anne Marie. And thank you all for your interest in MediWound and for participating in today's call. Throughout 2016, we made considerable commercial and clinical progress which positions us well for 2017 and beyond, as we build MediWound in to a global leader in burn and wound care. Let me begin with my remarks with a discussion of EscharEx, our product in late stage development for the debridement of chronic and hard-to-heal wounds. At the end of last month, we were happy to report that a final study results affirmed the positive topline data recorded earlier in 2016, which showed that the incidence of complete debridement in up to 10 once daily treatment of EscharEx was significantly higher and was achieved every year compared with the control board. The overall safety was comparable between the study groups. The results were even more prominent in the prospective sub-group of diabetic foot ulcers and venous leg ulcers which is in line with the [technologies] we are focused on following a comprehensive market research study that we undertook. The topical treatment currently on the market requires daily applications for weeks and even months to achieve complete debridement. A post-hoc analysis of our Phase 2 data showed that 93% of the wounds with complete debridement with EscharEx were debrided within seven once-daily applications after four to five applications on average. That’s about a week, instead of weeks or months. In addition to the efficacy, safety and cost effectiveness, we believe that convenience and compliance are very important for chronic wound-care in the out-patient and home use settings. To achieve substantial market share, we aim to position EscharEx in a way that fixes the existing and future treatment flow and the reimbursement program while providing superior efficacy. Following the successful completion of this first cohort, we initiated a second cohort of 32 patients to demonstrate safety over extended period of application of 24 to 48 hours, which we believe will enhance convenience and compliance. Patients with DFUs and VLUs are being randomized to either EscharEx or the gel vehicle at a ratio of 2 to 1. We expect to complete the second cohort of EscharEx patients in this second Phase 2 study and to report the topline results around mid-2017. Data from the second Phase 2 study are important, because there is a long-standing unmet medical need for an effective and rapid non-surgical debridement for chronic wounds. The presence of eschar is a frequent cause of wound cornification and the removal of eschar is a key step to commence healing. If not effectively treated, these wounds can lead to severe complications including further infections and even amputation and mortality. Debridement is a critical first step to facilitate wound management and is complimentary to the large and growing number of wound healing products, all of which require a clean wound bed. We see a number of potential synergies with this product and expect they will be used sequentially with ours in clinical practice. With more than 1.3 million patients with DSU or VLU will undergo debridement each year. In the US alone EscharEx represents a very meaningful market opportunity, which is one of the reasons we are so very excited to be advancing our clinical plan. Towards that end, we have submitted this data to the US FDA as part of our request for a meeting to discuss the US pivotal program and we will meet with the agency in the coming months. Subject to agreement with the FDA, we plan to initiate the next EscharEx US study during 2017. In addition, we are in the process of validating and dedicated production line for EscharEx which we expect will be completed during 2017 as well. EscharEx continues to be a key component in our strategy to build shareholder value by leveraging our proprietary technology and we look forward to updating you on our progress. Let me turn now to a review of our ongoing commercial and clinical progress with NexoBrid. We made great progress, advancing NexoBrid towards becoming the stand of care in burns centers across Europe. This is evidenced by the growing revenues, the number of patients treated with NexoBrid, the increasing number of [stem cells] treating and able to procure NexoBrid, additional countries establishing reimbursement for NexoBrid and a significant number of abstract and award winning presentation premiere burn conferences that highlight NexoBrid benefits. As expected, the conversion of usage in to revenues is enhanced by our market access and reimbursement efforts. We were gratified to have the authorities in Belgium and Italy approve pricing and reimbursement conditions for NexoBrid for the removal of eschar in patient with deep partial- and full-thickness thermal burns, with pricing in line with European list price. With national reimbursement now in place, we continue to work on formulary inclusion at the hospital and regional level. While these local processes seems to be taking longer than expected, we see continued progress, as we gain access region by region and expect to complete this process in these territories during 2017. We recognize that the key factor for widespread adoption of any new [decisive] technology is reimbursement and a significant part of our market access as well remains focused on securing funding. We continue to make meaningful progress and seeing more centers starting to buy NexoBrid across Europe. We also know that to enhance adoption, it is important to integrate NexoBrid in to the workflow of the burn center. We have made great in-holes as evidenced by the increasing number of patients treated in those centers, by the lower percentage of NexoBrid units used for sampling and by the gradually increasing total body surface area treated by these centers. As physicians gain more experience and confidence in the use of our products, they move from experimenting to usage and from usage to procurement. Speaking of TBSA, I would like to highlight the significance of the recently announced favorable data from our Phase 2 pharmacokinetic study with NexoBrid to treat severe burns with 4% to 30% TBSA. In this study, NexoBrid was applied to burns of up to 15% TBSA in one session and when the wound area to be treated was more than 15% TBSA, NexoBrid was applied in two separate sessions each up to 15% TBSA. The trial result showed that the usage of NexoBrid was safe and effective. Importantly, the PK profile following NexoBrid’s first and second topical application was comparable, a finding that suggest that no concerns with the formulation are existing following a second topical application. This is important as you know that we have reported that we’ve already amended the US Phase 3 trial protocol which we call DETECT from debride and protect to include burns of up to 30% of total body surface area. As the DETECT study is also a post-approval commitment in Europe, we also obtained the European Medicine Agency endorsement for the increasing TBSA in the DETECT study. We intend to use the data from the PK effective study, as well as the PK data in large burns that we will collect during the DETECT study to support a request to the FDA and to EMA to expand the label of NexoBrid to include larger burns. This will broaden the scope of eligible patients, which from a commercial standpoint increases the number of NexoBrid unit sold as a function of the larger surface area requiring debridement. Our commercial efforts continue to be supported by significant presence at international and regional medical conferences for burns specialists where we continue to gain strong support from KOLs and physicians while generating clinical and pharmacoeconomical data and sharing their hands-on experience. Since the initial European launch, we are proud to note NexoBrid merit has been highlighted in hundreds of poster and oral presentations at these important meetings. Leading physicians have been demonstrating the benefit of NexoBrid in debriding severe burns to the [appeal] and highlighting its potential as the new standard of care in the treatment of severe burns. Just in the few recent months, I had the privilege of attending the Italia Burns Association Conference, the German speaking countries Burn Association Conference and the Israeli Burn Association Conference, where a substantial portion of the scientific problem over and above the sponsored symposium were about NexoBrid. We see the same widespread interest in other international and European conferences as well. The magnitude of this presentation and the share of voice NexoBrid occupies in meetings illustrate the evolution taking place at European burn centers as NexoBrid is transitioning to become the new standard of care for severe burns. Those of you that plan to attend a local burn conference in Europe or better to join us at the European Burns Conference in early September in Barcelona would be able to obtain first-hand impression on the revolution that burn care is going through Europe since we introduced NexoBrid. We’ll continue to support international and national conferences as well as user meetings and centers of excellence gathering among other initiatives knowing that field-to-field discussion directly influence the adoption of the static technology such as NexoBrid. We expect that the European experience and the magnitude of the growing clinical body of evidence in support of NexoBrid in the treatment severe burns will be of great value when we launch NexoBrid in other markets such as the US market. The presentations and publications provide a substantial volume of clinical reference, as well as peer for reference and knowledge base that did not exist when we launched NexoBrid in Europe, which leads to me to our progress expanding NexoBrid in to other global markets. In addition to obtaining marketing authorization and NexoBrid in Argentina earlier this year, we signed a new dissolution agreement for NexoBrid in important countries such as Japan, India and several South American countries like Columbia, Chile and Peru. Our distributors have submitted registration file in countries such as Mexico, South Korea, Indian and Russia, with preparation underway for additional countries in Latin America and Japan. We expect some of these filings should provide for marketing approval already in 2017. We will continue to work with our partners in each of these markets to support the regulatory submissions and launches and in parallel we will continue our efforts to expand the product at global commercial rates to additional important countries. Now, let’s turn to the progress we’ve made with our clinical programs for NexoBrid, starting with our ongoing US DETECT clinical study which is fully founded by BARDA as you remember. As a recap, the Phase 3 DETECT study is a prospective, controlled, multi-national, assessor blinded Phase 3 study with 175 patients randomized to either NexoBrid standard-of-care or the gel vehicle in the ratio of 3 to 3 to 1. There will be a follow-up period of 12 months and 24 months. The study is expected to involve approximately 30 burn centers. The objective is to evaluate the efficacy and safety of NexoBrid in removing burn and scars every year and reducing surgical needs in hospitalized patients with severe burns. Complete eschar removal is the primary endpoint of the study, and it will be tested against the vehicle arm. It is important to note that in the European Phase 3 study, the incidence of complete debridement of EscharEx was 96.3%, whereas the incidence of complete debridement of the gel vehicle in two Phase 2 studies conducted in the US was zero. The study also includes secondary end points such as reduction in surgical burdens, early eschar removal and blood loss, which will be tested against the standard of care arm in order to generate not only clinical data but also pharmacoeconomical data which is important for CMS and other. Wound closure and long term cosmesis will be [EscharEx’s] safety end point and they will be tested against the standard-of-care as well. We expect to have the acute supplying data which includes the primary, the secondary and the safety end points in the first half of 2018. Subject to a successful completion of the acute phase of the study, we plan to approach the FDA to allow us to submit the BLA with the acute data and to supplement the 12 and 24 months follow-up data once it is available. As I mentioned earlier, we recently amended the protocol of this study with the FDA to allow inclusion of patients with severe burns of up to 30% of total body surface area. Beyond the clear commercial advantage of expanding the TBSA, there are also clear clinical benefits. In burns which [loves] TBSA, the early non-surgical removal of eschar has many potential benefits especially since the presence of a large surface of contaminate eschar on the patient for a longer period of time can result in wound determination, infections, scars and other sequel. Today, surgical excision of large surfaces of eschar result in substantial surgical burden, which includes a number of co-morbidities such as for example, massive blood loss, excision to remove large surfaces of eschar is often limited by the availability of extensive donor size or by such severe conditions that prohibit the patient from tolerating general anesthesia or the surgical procedure. In these cases, being able to non-surgically remove the eschar early may offer patients and physicians a real (inaudible). Going now to the pediatric study, in connection with our European approval NexoBrid, we committed to pediatric investigation [incident] to generate data to support use of NexoBrid in children. Our Children Innovative Debridement Study, which we call CIDS, Children Innovative Debridement Study is a Phase 3 multi-center, multi-national, randomized, controlled, open label study in children with thermal burns. The objective of the study is how to evaluate the efficacy and safety of NexoBrid, compared with sound of care in hospitalized children with severe thermal burns of 1% to 30% total body surface area. The study is underway in Europe, in accordance with the design endorsed by EMA, with pre-defined stages. Stage one, included patients from the age of four to 18; stage two, include patients from the age of 1 to 18; and stage three, include patients from birth to age 18. Most recently, we were very delighted to report that based on the recommendation of the study of Data Safety Monitoring Board after blindly reviewing the accumulated kid study data and after obtaining the EMA endorsement, we initiated a second stage of the study that allows inclusion of younger pediatric patients beginning at the minimum age of 1 instead of four years old. This is the age bracket where there is the largest incident of pediatric burns. The current management of pediatric burns requires intensive medical therapy, and typically necessitating several traumatic surgical procedures to remove the eschar and prevent secondary complications. However, burns surgery in pediatric patients is even more demanding than in others for a variety of reasons. For example, pediatric anesthesia is difficult due to limited particular access, small body and fluid volume, proneness to respiratory tract problem and acute heat loss and narrow safety margin for all anesthetic parameters. Children thinner skin and smaller structure leaves narrow safety margin for physical intervention. So excision and debridement often results in sacrificing the entire skin and can even cause harm to underlying structures. The smaller body surface offers less skin graft donor site area to cover the surgically excised eschar and because burn patients tend to suffer from scalding burns that are not easily diagnosed, definitive treatment is often further delayed. By now with NexoBrid, nearly 100 children have been treated in complete and clinical studies. NexoBrid demonstrated multiple clinical benefits in children, including earlier eschar removal, reduced number and extent of surgical excision, reduced incidence of grafting and extent of grafting area, reduction in eschar removal blood loss with no deleterious effect on time to wound closure, and showed comparable long-term cosmesis and function scores. In addition, the overall safety profile of pediatric patients treated with NexoBrid did not indicate any specific safety concern and was similar to that of adult patients. Our clinical results to date support the use of NexoBrid in such patients and we are looking forward to advance in the clinical development of NexoBrid to enable future minimal invasive treatment for these delicate patients. Another market we are developing for NexoBrid is preparedness for mass casualty incidents. We were delighted to have the eschar highlighting NexoBrid as the treatment for burn in mass casualties, awarded again best poster at the International Conference on Disaster in Military Medicines earlier this year as it underscores the important role NexoBrid can play in the management of such events. We continue to promote NexoBrid role in managing burns in mass casualties, with the support and recognition for the important government agencies and official such as BARDA in the US and the President and Government of Romania following the collective night club disaster in Bucharest last year that resulted in severe burn injuries in over 150 young people. We continue to pursue opportunities with government and military groups worldwide, as we this as an important commercial market where we can build a big customer base and make a difference in the ability of these governments to manage casualty events. With that overview of our commercial and clinical program, let me turn the call over Sharon Malka for a review of our 2016 fourth quarter and year-end financial. Sharon?

[Sharon Malka:]

Thank you Gal and good morning everyone. As you have heard from Gal, throughout 2016 we made important in-roads in transitioning NexoBrid to becoming the standard of care and in expanding commercially. This is illustrated by our growing revenue as NexoBrid adoption is increasing and the use of NexoBrid starts converting into sales following obtainment of reimbursement. Looking ahead, we enter 2017 well positioned, due to the growing NexoBrid pace, a continued support of our US clinical program by BARDA and our commitment to ongoing financial discipline. Moving forward, we expect to advance NexoBrid commercial expansion and to fund our own client development program for NexoBrid, EscharEx and our pipeline products. Turning now to our financial results, we were pleased to report that revenues in the fourth quarter of 2016 increased about 60% to $430,000, up from $267,000 in the prior year fourth quarter. Revenues for the full year of 2016 increased about 160% to approximately 1.6 million, up from 0.6 million for 2016. Operating expenses for the fourth quarter of 2016 down $2.3 million, from 6.4 million a year ago to 4.1 million. The decrease was primarily due to an increase of participation by BARDA and Israel Innovation Authority compared with fourth quarter of 2015, resulting about 1.5 million reduction in research and development expenses net of participation and 0.8 million decrease in selling, general and administrative expenses. The operating expenses for 2016 were 19.6 million in line with our budget and up slightly from 19.3 million for 2015. More specifically, research and development expenses net of participation in 2016 increased about $1.1 million to $7.1 million from 6 million in 2015. The increase was comprised of an increase of about 3.8 million related to NexoBrid clinical trial, and an increase of 2.8 million related to EscharEx and product candidate 003 development which was partially offset by an increase of about 5.6 million of participation from BARDA and the Israel Innovation Authority. Selling, general and administrative expenses in 2016 decreased 0.8 million to 12.5 million from 13.3 million in 2015. The net loss for the first quarter of 2016 was 1.9 million or $0.09 per share compared with a loss of 7.8 million or $0.36 per share for the fourth quarter of 2015. The decrease in net loss was as a result of the aforementioned decrease in operating expenses and of non-cash financial income from the revaluation of contingent liabilities recorded in 2016. The net loss of 2016 was 18.9 million or $0.86 per share compared with a net loss of 22.1 million or $1.02 per share in 2015. The decrease in net loss was attributed to higher revenues in 2016 as well as non-cash financial income from the revaluation of contingent liability which was recorded in 2016. Adjusted EBITDA for the fourth quarter of 2015 was a loss of 3.5 million compared with a loss 6 million for the same quarter last year. The adjusted EBITDA for the full year of 2016 was a loss of 16.4 million down 9% from a loss of 18.1 million for 2015, primarily due to increase in revenues. A reconciliation of the adjusted EBITDA to the GAAP net loss is included in our press release and 6-K we filed with the SEC earlier this morning. Turning now to our balance sheet, as of December 31, 2016 the company had cash and short-term deposit of approximately 30 million and had no debt. During 2016, we remained on budget and utilized approximately 15.7 million in cash to fund operating activities which was below our guidance of 17 million as further offset by certain license repayment from distributors. Our BARDA contract continued to positively affect our financials by offsetting NexoBrid development cost and at a later stage we expect it to contribute to revenues as a result of procurement commitment. Throughout 2017, the company will continue to invest primarily in research and development both for NexoBrid, which is predominantly funded by BARDA and for EscharEx as well as in certain marketing activities in order to advance the adoption of NexoBrid in Europe. As a result, cash for 2017 is expected to be in the range of 15 million to 17 million. With that financial overview, let me turn the call back to Gal.

[Gal Cohen:]

Thank you Sharon. We have an exciting year ahead, which we expect will be highlighted by a number of value creating milestones and achievements. We expect topline data from the second cohort of our Phase 2 clinical trial of EscharEx in chronic wound. We look forward to FDA guidance on the US pivotal development program for EscharEx to treat chronic wound and subject to agreement with FDA, we expect to initiate the next phase of our US EscharEx clinical program this year. We expect continued commercial adoption of NexoBrid in Europe. We look forward to global expansion of NexoBrid, and certain of our international distributors may gain regulatory approval and launch the product, and we also look forward to continued publication and presentation of data highlighting the clinical benefits of NexoBrid, as well as the cost effectiveness of NexoBrid. We will keep you in the price of our progress on all of these undertakings, and we would like to thank you for your continued interest and support, as we build MediWound in to a leading burn and wound care company. And now operator kindly open the call for questions.

[Operator:]

[Operator Instructions] our first question comes from Jason Wittes of Aegis Capital. Your line is open.

[Jason Wittes:]

First up in terms of the European experience, are you finding that doctors are treating patients limited to 15% total body surface area coverage or are they going beyond that at this point?

[Gal Cohen:]

Well, currently I would say in most centers physicians are starting to treat small burns, not even 15% TBSA which is also reflected in the revenue. So, most (inaudible) start with a small burn like the palm of a hand of 1% TBSA that can go to 3% TBSA and we see a continued extension and growth in this process as they gain more experience and they start to use the product on larger areas. At the same time, in certain countries I would say or in certain centers I would say, we see physicians attempting obviously without our promotion to treat patients of larger areas, even pediatrics. In Italy, they’ve treated a child with 70% TBSA and saved his life and body. And we see additional centers inconsistence presenting the data where they treat large surface areas of burns, because as I said in large surface area of burns, you have such an inflammatory process going on in the body with such large portion of the body scoured by a burn by eschar. So they see these patients as good candidates for NexoBrid because if they take them to the operating room, they’re going to suffer such a trauma, they’re going to lose so much blood, some of them cannot even go through a surgery. So their hope is something like NexoBrid. So we already see physicians doing that as well. But if I would like to say on general note, usually physicians start small and they grow a little bit as they gain more experience.

[Jason Wittes:]

And also was curious, the pediatric trial is part of funding that or is that something you’re still funding.

[Gal Cohen:]

Currently we are funding this study ourselves because this study is not being conducted in the US. But I think your question is a good question, because as you know, I would say a couple of sentences about that. There are pediatric patients in the US and the pediatric centers are not always the center that also treats others. We cannot or no one can predict and hopefully will never happen. But nobody can preclude a situation where pediatrics will be involved in a mass casualty event. So it is important to prepare most of the pediatric centers in the US for such an event. In the US we are exempted from a pediatric investigational plan because we are an orphan drug. In Europe we had to sign on a pediatric investigational plan as a condition to being able to submit a file for others. So although we have data in more than 100 children and the data in children is even better than in others, still we have to do this, what you call the CIDS study. But because the study is currently is not being performed in the US, BARDA obviously is not participating.

[Jason Wittes:]

And one last question, in terms of formulation for EscharEx and the conversation you’re going to have with the FDA. I think you said mid-year are you going to discuss multiple formulations or you’re going to go stick with one and go with that for the pivotal trials.

[Gal Cohen:]

We have shared with the FDA both formulations for EscharEx. We believe that our second formulation of EscharEx 2 entails a lot of advantages, because we are able to get greater efficacy in lower doses. It’s very easy to use and we get extended exclusivity. Our patents will cover the product for at least 2037. FDA is aware of both formulations we’ve provided. All the data on both formulation both in terms of a clinical work and (inaudible) work and our intention is following FDA advice to engage or to commence the pivotal program with only one formulation obviously.

[Jason Wittes:]

Do you have a sense of which formulation that’s going to be at the lower concentration or the higher dose?

[Gal Cohen:]

We would hope that this would be with the advanced formulation, but we are waiting to see FDA feedback on that, and based on that feedback we will know how to proceed.

[Operator:]

Our next question comes from David Maris of Wells Fargo. Your line is open.

[Katie Brennan:]

This is Katie Brennan on for David. Do you expect any rest of world approvals and launches in 2017, and when do you expect that revenues from those regions will begin to contribute meaningfully to the topline? And on that same line, are there any further reimbursement approvals in Europe that you expect will also contribute meaningfully to revenue in 2017?

[Gal Cohen:]

So for the first question, our partners have submitted the registration files in several countries in international markets. These include Mexico, South Korea, India, as well as others. We do expect to gain approval in some of these markets in 2017. Again we are dependent on regulatory process; we don’t always have full control of the authorities. But looking at the expected time lines we would expect to get approval in 2017 in some of these markets. Once they have an approval, they have to prepare for a launch. So they have to build to buy initial stock. Unlike in Europe where we are selling five by five to each centers, in these countries we are supplying them with the entire stock once they go to launch. So we do believe that hopefully with everything working out, they will issue such orders in 2017. As for your other question, regarding Europe, as you know Europe is very fragmented in the different reimbursement process I would say. So if you are referring to a national level reimbursement, than after obtaining Italy and Belgium, we are looking for decisions let’s say in Israel. It’s not in Europe, but it another country that we are very interested in, and we are working to generate local pharmacoeconomic data in Spain, for example, because some of the authorities they see the international pharmacoeconomic data but they want the local pharmacoeconomic data. So in 2017, we are working to generate and there are some work being done. And I think that you will also see some publications coming in the future of local pharmacoeconomic data. Once this data will be available, then we would try to approach the forces that’s there in Spain and see if we can go in to a national level reimbursement, because currently in Spain we are sending out national level reimbursement, we are sending at the hospital level and doing not too bad I would say in that country. In addition to that, as I said in other countries, it’s not always the national level reimbursement pathway that we can follow or we need to follow. So when we try to work with all kind of local initiatives, for example, we try to work with the German Burns Association to go for what is called an [OPS] code, which is similar to, I would say CPT code in the US, maybe. Again, this has to be led by the physicians. But we are working closely with them to submit such a request on OPS code. We are working with them every year to submit what we call a [NUB] application. NUB application is an application where you get extra payment over and above the DRG. The challenge that we have with it sometimes is that these (inaudible) say if NexoBrid is cost effective, why do the centers need an extra payment. But we are working on all these initiatives to do that. And in England, for example, we have to go a center-by-center formulary process there’s no national reimbursement process. And the way we work in the UK is that we don’t want to do a big sampling program, because you are not allowed to supply product to the center before you have formulary inclusion. So we trying to sell them. We are willing to do all the efforts that you would like training, centers of excellence, you name it, but you need to place an order. So in some centers we already started to get orders and initiated commercial activities in the UK. And in some centers we are still working on that. That’s putting the pressure or building the pressure in the center by the physicians on the administration to get these local processes ongoing so that they can start experimenting and using NexoBrid. I hope this is answers your question.

[Operator:]

Our next question comes from Jay Olson of Oppenheimer. Your line is open.

[Jay Olson:]

Just in terms of fourth quarter sales, they were down a little bit from the third quarter. Is there any additional details you can provide to help us understand why sales declined in the fourth quarter, and then looking ahead to 2017 any financial guidance you can give us as we forecast sales for this year?

[Sharon Malka:]

As to revenues in the fourth quarter versus the revenues in the third quarter, we know that during the fourth quarter one of the hospitals in specific countries already utilized the overall budget in 2016. So basically at least the last two months of the year they cannot buy additional product. So this is one factor that impact fourth quarter versus third quarter, while the other one is in fact specifically for orders that were in between Q3 and Q4 and by accounting decision it was part of Q3 instead of Q4 and classified as revenue in Q3. So it’s nothing which we can identify specifically. As to the guidance for 2017, I don’t know, because we are in the launch phase yet, we do not provide a guidance in terms of revenues. But we provide our guidance in terms of cash used. And as we said before, we expect that the cash used in 2017 taking in to account the RevPar in the revenue and financing by BARDA and the R&D activities that Gal mentioned in his detailed discussion before will be about 15 million to 17 million for the 2017.

[Gal Cohen:]

And just to provide a little bit more color on the same thing or maybe specific example. So one center with such example is Madrid, Madrid is one of our leading centers in Europe. And Madrid continued to treat patients in November and December, but could not purchase NexoBrid because we already exhausted in 2016, because there was not national level reimbursement in Spain once the hospital budget was exhausted. We continued to treat patients but could pay or couldn’t buy the product. This is maybe one example of why (inaudible) was a little bit lower than tree. And as for the timing, some of the orders came, I would say in the last few days of the third quarter. So since these centers had a little bit of stock, but just before Q4, they did not issue an order during Q4 and this might be another reason for a small offset between Q3 and Q4.

[Jay Olson:]

And then just on the cost of goods, it seemed like there was a significant increase in the cost of goods, can you help us understand what was going on there?

[Sharon Malka:]

It was decrease in the cost of goods plus the flexibility of - 2015 cost of goods in our financials were 2.5 million versus 2.1 million in 2016. The reason basically behind this reduce in the cost of goods is, first of all, to support that manufacturing cost which was allotted to R&D activities during 2017. And if we analyze this cost of goods as a percentage of revenues, we see that the loss is decreasing towards a breakeven in the financial. If we analyze the cost in terms of adjusted EBITDA means we excluded amortization, depreciation and share based compensation. I can show you that it was gross profit in 2016; it was the first time that we had gross profit.

[Jay Olson:]

I was looking specifically at the cost of goods in the fourth quarter versus this third quarter, and how should we think about that as we forecast 2017?

[Sharon Malka:]

So between the quarter this is all a matter of allotment of manufacturing cost to the R&D, and based on the R&D activities that the manufacturing is doing versus a quarter. However, looking forward to 2017, we believe that we will have a transition from a gross loss that we have in 2016 and we will get to a gross profit in 2017. It will be at the beginning in terms of financial gross profit, a minimal gross profit, but it will increase as revenue is increasing.

[Jay Olson:]

And then just one question on EscharEx, can you please remind us what the European regulatory process is?

[Sharon Malka:]

Obviously when we develop EscharEx we do it on a global level. I would say that our main focus in the US. In the US there is an enzymatic debridement that sells $350 million to the best of our knowledge. The US physicians are more used to prescribing an enzymatic debridement. There is an investment coding place, the work flows are in place. So obviously when we need to weigh the priority I would say, so our first priority would be the US market. But doing that, we’ll be looking at the global development. So our intentions are first to gain the FDA feedback and once we gain the FDA feedback to adjust whatever needs to be adjusted and then to approach EMA and to seek their advice to see if they would be inclined to include this plan also for the European or whether we will meet with some adjustment. Throughout our development plan I would say in general, also with NexoBrid, we always have to go through the effort of harmonizing between the FDA and the EMA. And I think as a small company, to be honest, we were quite successful in doing that, let’s say maybe tech savvy. It was a big challenge to have both EMA and the FDA agree on a protocol in an indication that the drug was never been developed for at least in the last 50 years. So, we will seek first the FDA approach, the FDA feedback, and once we get it, we would share it with EMA to see whether EMA can further contribute to the protocol and we’ll go from there.

[Operator:]

Our next question comes from Anthony Petrone of Jefferies. Your line is open.

[Anthony Petrone:]

For NexoBrid I think in France there was still a process that was ongoing, so any update there would be helpful. And then in terms of sort of the regions in Belgium and Italy, as you continue to discuss formulary processes there, is there any potential for stocking orders once regional coverage is secured and then I have a couple of follow-up, thanks.

[Gal Cohen:]

So just to make sure I heard all your questions because at the beginning it was muted I think. You had one question about France, you had about divisions in Italy, any other questions that you asked?

[Anthony Petrone:]

No those two specifically so what is the update on France and then regionally in Italy and Belgium. Is there the potential for stocking orders once the formulary coverage is secured?

[Gal Cohen:]

So starting with France. France is a special country I would say, because although we have a centralized procedure approval, so we have approved to sell the product in France. In order to be able to supply a product to the public system in France, you have to be included in the, it’s like a collective exhibit let’s say with the French government and it’s the only country that we are aware of that you are not allowed to physically supply the product to a hospital without having first - even for free, without even first have this agreement. Now we had a long discussion, we had a long discussion with the French Ministry of Health. Initially they said, okay, you can start selling the product in private hospitals, but perhaps one should have thought about that there are no private hospitals in France treating burns. Burns are treated in the public sector, not at the private sector. I think part of the challenges that we are facing are because there are no specialists sitting on these committees that are evaluating this thing. And we got a burn association in France aware of the situation, and they are also trying to make some contact with the special services and try to explain to them that one, all Europe is marching forward and France is staying behind. I think the challenge of managing mass casualties is something to think about as we see things that happen in the region. And I hope that our discussions with them, the burn association discussions with them, the patient physician discussion with them would accelerate the very bureaucratic processes that we under go in France and it would enable us to provide a product in France and start moving forward there. As for Italy, we got a national reimbursement in June and started to go province by province to have the product listed in the province level. By now I think we have about two-thirds of the country actually because Sicily which was a good - Sicily usually is a region where it takes a very long time to finish the processes and we actually this week got the green light from Sicily and we believe that by the end of this year, we will finish all the regions in Italy. And once they have green lights on the region, usually they put in all the (inaudible). So, we hope that Italy would be much more prominent let’s say in ’16 and we are hopeful that Italy will be prominent in ’17 as well.

[Anthony Petrone:]

That’s helpful. And maybe a follow-up on NexoBrid would be in the US just as it relates to the amended DETECT study. Can you provide an update I guess on time of entry for the US? It sounds like the data submission will be 1Q ’18, just an update maybe on timing for entry in to the US and then one last question around EscharEx, thanks.

[Gal Cohen:]

So in the ’18 we believe that we will have the topline data in the first half of 2018. Assuming that we have the topline data, as I said, if it’s positive, classically we have the primary, the secondary and the safety data of this patient. What we will be missing is a 12 month follow-up. Now if the acute data is positive, there is no reason to believe that a lonesome data will not be positive because we just need to show not that it [does] affect. And we already have an 89 patient study that the long-term effect of NexoBrid is at least as good if not better in terms of cosmesis and function. So with that we would go to FDA and ask the FDA to submit the file already at the acute data stage. If this would walkout then we plan most probably to submit the file let’s say in early ’19 if the FDA gets an approval within 12 months then that would be 2020 to get the approval and go to the market.

[Anthony Petrone:]

And then the last one from me would be on EscharEx in terms of the data that was recently presented. One of the nuances of the study was that the wound size is treated by EscharEx was larger and the age of the wounds was older. So I’m just wondering is this product being positioned sort of as an alternative for the most severe cases or is this just deliberately designed this way to increase the attractiveness of EscharEx?

[Gal Cohen:]

I think EscharEx should be used in any wound that is indicated for and this could be beneficial. Unlike other products, I would say without going in to details what other enzymes that’s in the US that has conducted eight clinical studies and seem to be successful in one, which was a small 27 patient study conducted in one center, open-label against the gel vehicle, where they show that after 42 days they were able to successfully complete a wound. If you look at all this wound, in most studies by the way, the minimum wound size was 0.5 square centimeter which is very small. In the EscharEx study, the minimum wound size was 33.6 square centimeter and the age of the wound was more than 72 weeks old and we did that because we want to show that unlike other products that have to show wound closure, and therefore are target a very small wound so it will be possible to close such wounds let’s say in 12 or 14 weeks. EscharEx can be used in any size of wounds, in any duration of time of this wound. We will try to focus on DFUs and VLUs, but our first phase of study show that the product can be effective in (inaudible), it can be effective in post-surgical complications. It can be effective in traumatized thick skin, it can be effective in infected, even (inaudible) or things like that. So, what we would try to do. We have to focus, when we do the development plan. Based on our market research, we see that there is a great opportunity in DFUs and VLUs. As I said, 1.3 million American, if the cost of treatment is amounted to $1,000 that’s over $1 billion opportunity just in the US alone, forget about Europe and all the rest that we discussed before. So this is where we’ll start. But I would say the sky is the limit.

[Operator:]

There are no further questions. I’d like to turn the call back over to Mr. Cohen for any closing remarks.

[Gal Cohen:]

Thank you for your questions and for your continued interest in MediWound. We look forward to updating you again, when we report our first quarter 2017 financial results in early May. Thank you very much.

[Operator:]

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