MediWound Ltd.
Q1 2015 Earnings Call Transcript

Published: 4 May 2015

[Operator:]

Good day and welcome to the MediWound 1Q 2015 Conference Call. Today’s conference is being recorded. At this time’ I would like to turn the conference over to Anne Marie Fields. Please go ahead.

[Anne Marie Fields:]

Thank you, Adie. 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, President and Chief Executive Officer and Sharon Malka, Chief Financial Officer. Earlier this morning, MediWound announced financial results for the three months ended March 31, 2015. If you have not received this new 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 Carolyn Curran. 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 full results of MediWound. I encourage you to review the Company’s filings with the Securities and Exchange Commission including without limitation, the Company’s Form 20-F and 6-K, which identifies 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 May 4, 2015. 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. Good morning to our listeners in the U.S. and good afternoon to those joining us from Israel. Thank you all for your interest in MediWound and for participating in today’s call. During the first quarter of 2015, we have made significant progress in both the commercial and clinical aspects of our business that supports our long-term growth strategy. With NexoBrid now launched throughout Europe, we continue to focus on increasing use and gaining market adoption. Our clinical programs are moving forward with the initiation of the U.S. Phase 3 study of NexoBrid to treat to treat severe thermal burns, and with the increasing involvement into our Phase 2 clinical study of EscharEx to treat to treat chronic wounds. First, let me review the progress we are making with the ongoing commercial effort with NexoBrid throughout Europe. As of the end of 2014, we had completed the initial launches into nearly every target country in the Europe. Since that time, our medical and sales teams have been busy educating and training clinicians at the leading burn centers in the respective markets. We have been very successful at generating interest in NexoBrid. This interest has translated into trainings and use as evidenced by the growing number of patients treated and the number of burn centers that have started to use NexoBrid. The number of patients treated in 2015 is already close to the number of patients treated during all 2014 and the number of centers using NexoBrid has more than doubled. We have trained nearly half of the leading burn centers in our target markets in Europe and we planned to have the balance of the centers trained by the end of 2015. Our marketing efforts have been significantly enhanced by the number of presentations given by growing number of different burn experts at key burn symposia such as the International Society of Burn Injuries and the recent American Burn Association. In fact, one paper on NexoBrid by Dr. Schulze from Germany won best-in category in wound care at the ABA. These real-time experiences which are not only based on clinical studies but the real-time experiences provides further evidence of the clinical benefit of using NexoBrid as a non-surgical debridement for severe thermal burns increases the physician’s confidence and drives interest from burn specialists attending these conferences to experiment and integrate this innovative minimal invasive modality into their own practices. We are committed to maintaining a strong presence at the regional and European medical conferences for burn specialists where we will continue to showcase NexoBrid and highlight its benefits in scientific and clinical sessions. This month, we will be the major sponsor at the Spanish and at the British burn treatment society meetings and in June, next month, at the French and the Polish burn treatment society meetings. Our prominence at these national conferences will culminate in our platinum sponsorship of the European Burn Association Meeting which takes place in September in Hanover, Germany later this year. We are anticipating a significant number of presentations on NexoBrid by numerous physicians throughout Europe at that conference. In addition, to boost presence and at the exhibition floor, MediWound will sponsor a symposium and a workshop on Enzymatic Debridement with NexoBrid. During the recent ABA Meeting, we convened a small panel of key opinion leaders to discuss the clinical experience using NexoBrid. The dialogue was highly encouraging with the physicians’ expressing confidence that over time, NexoBrid will become the standard of care changing protocols which has been in the practice without significant changes for the last 4o years. In the interim, they noted that clinicians are gaining more experience in how to best utilize NexoBrid and are working with their teams to integrate NexoBrid into their specific country’s work flows. Of note, the physicians panel discussed the value discussed the value of NexoBrid in timely eschar in allowing direct assessment of burn death and for treating hands, feet and facial burns, where physical excision can be very challenging due to the complex structure that leads the skin. Clearly, as more physicians use the product, the more confident they become and the more likely they are to continue and increase the use on more and more patients and on larger wound areas. The growing patient experience and the increasing number of medical reference points in burn centers throughout Europe will further increase physicians’ confidence and use and support our aim to assimilate NexoBrid as standard of care. We understand that the reimbursement in the specific markets in Europe will enable us to convert this increasing use into revenues. Towards this end, we have been very active in executing our plans to obtain payments across Europe on a country-by-country basis. These undertakings have been and remain a focus of our team and we have made considerable progress. We have submitted the locally required reimbursement dossier in the relevant target European markets, such as Italy, Belgium, France, Slovakia Public, Czech Republic and other and initiated the review process. We expect that accompanying clinical and pharmacoeconomic benefits of NexoBrid will provide the basis for a favorable payment determination at the end of the evaluation process in these markets. We are in the process of obtaining formulary inclusion at the hospital level in additional countries such as the UK, with our proprietary budget impact tool which demonstrates to the hospital the positive economic impact of NexoBrid on their institutions and how it can enable them to save cost. We expect to complete our market access processes on the individual hospital, regional or national level in our target markets in Europe in the second half of this year. As we said before, introduction of an innovative treatment paradigm takes time to integrate into the hospitals and the physician’s longstanding routine practices. This was expressed by the key opinion leaders who spoke at our panel at the ABA. They expressed their belief which is consistent with ours that over time, NexoBrid will become the standard of care. A growing number of patients treated along with the increasing number of treating centers and the papers submitted for conferences demonstrates the progress we have made towards that goal as burn teams gain experience as centers assimilates the treatment into their workflows and our market access effort continue to unfold throughout Europe, we expect sales to build in 2015 In tandem with our reimbursement efforts, during the first quarter, we also expanded into other geographies such as Romania. In addition, we continue to pursue our broader international strategy and we are pleased to expand distribution in Latin America with a signing of an agreement in Mexico. We now have distribution agreements in Mexico, Argentina, Russia and South Korea and expect to have marketing authorization in at least one of these territories by the end of 2015. Turning now to our clinical development program, let me begin with our recently initiated U.S. Phase 3 program. We were very excited to begin our U.S. Phase 3 clinical trial with NexoBrid to treat severe thermal burns. We call this study the DETECT study as NexoBrid debrides the dead eschar and protects the healthy tissue. As a recap, DETECT is a prospective, controlled, multi-center, multinational, assessor blinded Phase 3 study in 175 patients randomized to either NexoBrid, Standard-Of-Care or the Gel Vehicle at a ratio of 3

[Sharon Malka:]

Thank you Gal. Good morning everyone and thank you for joining us for our quarterly financial review. We are pleased with our performance this quarter as we demonstrated continuous progress in our commercial and clinical programs while remaining on-budget with our disciplined financial management. In the near-term, we are funding training and sampling programs throughout Europe and are confident that this investment will translate into growing clinical adoption of NexoBrid. As Gal outlined, we are also investing in marketing access initiatives that we expect to result in favorable reimbursement that will help to accelerate market adoption and will enable us to convert the increasing use into revenues. Lastly, we continue to make progress in expanding our indications and geographies through the clinical development programs just reviewed. And we will continue to fund this investment in the coming years. Let me turn now to our financial results for the first quarter of 2015. Revenues for the first quarter of 2015 totaled $67,000, compared with $50,000 for the same quarter last year. Operating expenses for the first quarter of 2015 totaled $4.4 million, in line with our budget, compared with $4.3 million in the first quarter of 2014. For the first quarter of 2015, the Company posted a net loss of $6.4 million, compared with a net loss of $0.8 million, in the first quarter of 2014. The increase was primarily due to non-cash financial expenses, resulted from revaluation of contingent liabilities and exchange rate differences. Adjusted EBITDA, for the first quarter of 2015 was a loss of $3.7 million, compared with a loss of $3.1 million for the same quarter last year. The increase was primarily due to an increase of $0.6 million in commercial activities associated with our European marketing infrastructure. Turning now to our balance sheet. Cash and short-term deposits balance was $59.4 million as of March 31, 2015 and the net working capital totaled $59.6 million. We remained on budget utilizing $4.8 million in cash during this quarter to fund operating activities. As mentioned before, throughout 2015, we will continue to invest in commercial activities to advance the sales and marketing of NexoBrid across Europe. We also will invest in research and development efforts, mainly clinical activities to develop products for additional territories and indications. As a result, cash usage for the year 2015 is expected to remain in the range of $20 million to $22 million as previously communicated. With that financial overview, let me turn the call back to Gal.

[Gal Cohen:]

Thank you, Sharon for the financial overview. We are pleased with our progress this quarter and believe we are on track to achieve a number of important milestones throughout 2015. We are executing our commercial strategy for NexoBrid according to plan and are confident that we time NexoBrid will become the standard-of-care for severe burns as we see more and more centers and more and more countries using the product and starting to integrate it into their workflows. Our U.S. Phase 3 studies are up and running and our Phase 2 Study with the EscharEx is on track and should report top-line data by year-end. We are very excited about the future of MediWound and appreciate your continued support as we make inroads in changing the treatment paradigm for severe burns and chronic wounds. And now operator, please open the call for questions.

[Operator:]

Thank you. [Operator Instructions] We will now take our first question from Raj Denhoy from Jefferies. Please go ahead.

[Raj Denhoy:]

Hi, good morning.

[Gal Cohen:]

Good morning.

[Raj Denhoy:]

I wonder if I could ask you a little bit about what’s your learning in terms of how centers and clinicians using the product. Are you finding that they are using it more broadly, or is it being really relegated to those non-specific kinds of second-degree burns? And I have a couple of follow-ups as well.

[Gal Cohen:]

From what we see, as we said previously, usually they can start with a limited area like a hand or a leg, but in different countries they are using that on different severities of burns because most of the burns, I would say about 70% of the burns are indeterminant. So, in most of the burns, it’s not something that you can really know in advance if it’s a second or third-degree burns. I think that in cases where the burn is a – or in their mind I would say, a clear third-degree burn or a clear superficial burn, then this would not be the first patient that they would try the product on. I also feel that we find every time in the clinical studies, physicians by using NexoBrid realize that what is perceived as a entirely third-degree burn or what is perceived as a more superficial burn is not always the case because there is a well documented overestimation and underestimation of the burn depth.

[Raj Denhoy:]

Okay, that’s helpful. And then, as you roll this out into other geographies in Europe, Latin America, other places as well, have you found certain geographies or markets are perhaps more receptive to adopting the product and using it, perhaps more so than the Germans have been thus far?

[Gal Cohen:]

Well, cautiously, I would say that we do have such an impression. I see that the German system is very – SOP-oriented or rigid in a sense that they first want to prepare everything and be ready for any situation, whereas in other countries, sometimes and what I am saying is a general thing, so, it’s not a specific position or anything or to say anything about any specific physician or with any specific center. In other centers, we saw – in Belgium, in Italy, in Spain, in the Nordics, that they are more easily adopting to a different situation. For example, in the Nordics they are treating the patients in the middle of the night. In Italy, there was just a disaster and close with the cost of Italy, and two centers that never use the product treated a large number of patients which was the first time that they use the product. So, we do see these kind of – we saw in Belgium, a leading center treating very severe patients, and in the first patient that they have treated. So we do see that and we do see some differences in approaches and customs between the markets and I think that this is also one of the reasons why see such a huge increase in the number of patients treated because, in additional markets, physicians feel more comfortable to treating without having a very long preparatory period.

[Raj Denhoy:]

Okay, my last question is really, just as you are trying, think about the what’s clearly clinical demand here, clinical interest in the product, but it’s reimbursement, perhaps on headwinds, but just seeing reimbursement challenges in terms of getting reimbursement established. Are you willing to offer sort of any sort of guidance when do you we will start to see the commercial revenue start to match the clinical usage such that the reported revenues actually start to turn upwards a little bit?

[Gal Cohen:]

Yes, I think that, one of the things that we see, as I mentioned before, it’s a method of integration into the workflows of the center. So we time and with more patients I think this hurdle will be less of a less of a hurdle. The second thing in many countries is really the national level reimbursement. We see centers in several countries that particularly ordering the product, but the order does not get approved at the national level or the municipal, regional level. We saw that in several countries. So I think that, for these specific countries where the national level reimbursement is required, we believe that once we get this national level reimbursements which is now an ongoing process, because we have submitted this part and this part really takes between let’s say six to 12 months to get through this process. So as this process will mature, we believe that the revenues will match the use. And this is exactly why we are driving the use now with giving a free product because we want to be in a situation where once these prices will be agreed in these countries like, France, Italy, Belgium, Spain now, which is a new law that is going to be legislated. They will pick up the gap in ordering based on the number of patients that they are treating on a routine basis.

[Raj Denhoy:]

You won’t offer anything in terms of when you think those that will start to happen at this point? I mean, just for modeling purposes.

[Gal Cohen:]

Yes, I think, as I said, I think, we believe that the sales will ramp up towards the end of this year and most probably the next year will be a year where we believe that the reimbursement in all these countries should be in place and this is where we will be able to see how this gets on a natural basis.

[Raj Denhoy:]

Okay, that’s helpful, thank you.

[Operator:]

We will now take our next question from David Maris from BMO Capital Markets. Please go ahead.

[David Maris:]

Good morning, Gal. A few questions. First, when you talk about the number of patients and since, I think we all understand that you are trying to lay the groundwork and provide a lot of free products that people get used to it and you know what they are doing. But, you mentioned that the number of patients so far this year is about, what you treated all of last year. Can you give us some numbers around that and is that a metric that we can start to use, rather than just trying to attract the sales as what it points to for next year and the year after?

[Gal Cohen:]

As we said, during the last year, I think we treated last year more patients than we treated in the entire clinical study and this was predominantly in Germany because last year we – most of the use was in Germany. And this year in the first few months, we have treated over – one second we see, we have treated almost 100 patients, I think almost 100 patients in this few months now. So, this is approximately the number that we are talking about.

[David Maris:]

Okay, and do you have for that group what the average TBSA might have been?

[Gal Cohen:]

I don’t have this information, what I can tell you is that, as we saw in the NBR and as we saw in our clinical studies, when the average TBSA was about 10% TBSA, we now see that in the first year in the market, I would say that the average TBSA is about half of that because, as I mentioned before, physicians are tending to start treating small wounds like, face, hands, legs, whatever, these small wounds and then, when they get more experienced, they try to go to larger and larger wounds. So, I think this is also one of the parameters why we see lack or less – the level of revenues is less, because the wounds are smaller. So even if they treat the patient, they treat the small patients, so they buy less that’s viable to treat the patient.

[David Maris:]

Okay, yes, what I was trying to get out is, I mean, first of all, the exponential growth of the patients is great, but trying to figure out what would that have translated if everyone are paying, what would that have translated for the quarter, what does that look like later in the year and for next year as the paying – the payment system gets more regimented or at least gets in place?

[Gal Cohen:]

I think that it’s a – let me do – if you can bear with me for a one second.

[David Maris:]

I mean, if we are going to do it offline, that’s fine too, you want to just.

[Gal Cohen:]

No, that’s okay. I think that if all patients, if all patients that have been treated would have paid, then we would have seen in this quarter, a sales over a quarter of a million dollar.

[David Maris:]

Okay. And then separately, you mentioned that, remaining of the new market, for these secondary or territory markets does it makes sense to be going into or why do you thin k it makes sense going into those markets, rather than just conserving resources and focusing on as you mentioned, Spain, or Italy and the UK and Germany?

[Gal Cohen:]

This is a very good question and initially, we didn’t think to go to Romania at this point in time, but we are evaluating the market all the time. We were trying to do the best thing that we can do for the business. What we learned about Romania is that, first of all, in our clinical study, Romania was particularly the third largest center in recruiting patients and our business manager in Central and Eastern Europe had a large experience in Romania. And it seems that in Romania there are many patients. There is also a way for the hospital to get reimbursed on the national level already. We only need one person to cover Romania and we were able to identify such a person in a relatively easy way. So, just, then the view of the market made sense to make the investment, that’s the main reason.

[David Maris:]

Great. Thank you very much.

[Gal Cohen:]

Thank you very much.

[Operator:]

We will now take our next question from Bruce Nudell. Please go ahead.

[Matthew Keeler:]

Thanks. Guys, this is Matt in for Bruce. Can you hear me okay?

[Gal Cohen:]

Yes, thank you, Matt. How are you?

[Matthew Keeler:]

I am good. Thanks. I just wanted to clarify a couple of things on the other key acute endpoints in the U.S. pivotal trial. So first, I think one of those endpoints is whether debridement with NexoBrid is better than with the carrier alone? And on that endpoint, how many NexoBrid applications do you allow to have and what degree of debridement is considered success?

[Gal Cohen:]

Well, first of all you are allowed – this endpoint is going to measured between, as you mentioned, between NexoBrid or compared with the NexoBrid and the vehicle. And you are allowed to have up to two applications, okay. Now, what is considered a – a successful debridement is a situation where the physician that treats the patient marks clearly in the CRS system that debridement has been completed and he can now move to the next stage of healing the wound. This is practically the current practice in burn care. In burn care today, whether if the physician goes to the surgical theater, he would excise the patient until a point in time where he believes that the debridement or the eschar removal is complete, and then he would go and graph the patient and the same thing, so we are just following the same – the standard-of-care the way that patients are being treated in real life, in the US, in Europe and in other markets. Did I address both of your questions or just one of them?

[Matthew Keeler:]

Yes, yes, perfect. And then, I think the FDA needs to see wound healing at four months what considered success there?

[Gal Cohen:]

Sorry, can you repeat the question?

[Matthew Keeler:]

At the – I think the FDA needs to see wound healing at four months. Is that – am I correct in that assumption?

[Gal Cohen:]

In terms of wound healing, the FDA usually requires to get to wound healing and then to follow-up with the patients for at least three months to reconfirm that the wound remains close. Now, wound closure usually, based on the regulatory definitions takes approximately a month and then you follow-up the patient for another three months. So that will be approximately four months.

[Matthew Keeler:]

Okay, and so, I guess, on that metric, if you look at, say three months post wound healing, is that when the FDA looks at that data could that be enough for a complete approval or accelerate the submission with a check at one year to get follow-up approved, if everything looks good there?

[Gal Cohen:]

I think that, whenever we will discuss it with the FDA, the FDA, well it’s a review issue. So it depends on the data and we have no way of controlling or anticipating what the FDA’s reaction would be. What I can say is that, with this study design, when the long-term follow-up of cosmesis, which requires at least 12 months is no longer a primary endpoint. We will practically have – let’s say four months after the patient will – that patient will finish the treatment, we will particularly have all the primary, all the secondary results and also all the wound closure results and as well as all the safety measurements of adverse events and lab test and everything. So, what we are thinking of is to- assuming that this data will be positive to pose the FDA and to discuss together with the FDA the possibility of submitting all this information already at this stage and supplementing the long-term follow-up thereafter when it’s becoming available, because I believe that, if all the efficacy endpoints will be positive and if there will be no safety signals in AEs, in the lab results, in the wound closure durations, and having already patients being treated in Europe and having already a long-term follow-up on patients with cosmesis conducted and published, it makes sense to discuss that with the FDA and see what would be the FDA’s response in following such a plan.

[Matthew Keeler:]

Okay, thanks and just one last quick one. Are there any other acute endpoints in the trial that we need to be thinking about?

[Gal Cohen:]

Well, in terms of the secondary endpoints, as I mentioned, I mean, the primary endpoint is complete eschar removal, the secondary endpoint is the ability to reduce a surgical burden. The ability to show that we are not only removing the eschar, but we are doing that significantly earlier and our ability to save eschar removal related blood loss. And in addition to these secondary endpoints, we have many, many pharmacoeconomical measurements that we are measuring in the study. And based on the discussion that we had with our market access advisory board, that of importance when you try to do what is called the value dossier to show your cost benefit. Timing the OR, the number of nurses, the number of dressing changes, very long leads including quality of life measurement, functionality measurement, and many, many, many other measurements.

[Matthew Keeler:]

Okay, great. Thanks very much.

[Gal Cohen:]

Thank you.

[Operator:]

I would like to turn the call back to Mr. Cohen.

[Gal Cohen:]

Thank you. Thank you for your questions and for your continued interest in MediWound. If there no more questions, we would like to thank you very much for your time. And we look forward to updating you again when we meet or when we report our second quarter results. Have a good day.

[Operator:]

This would conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.