MediWound Ltd.
Q2 2015 Earnings Call Transcript

Published: 4 Aug 2015

[Operator:]

Good day. And welcome to the MediWound Second Quarter Financial Results 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, Daniel. 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. After the closing of stock market yesterday, MediWound announced financial results for the three months ended June 30, 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 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, August 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. The first half of 2015 was very productive as we continue to make meaningful progress with our clinical and commercial programs. Let me begin with the review of the progress we have made in Europe, commercializing NexoBrid for the treatment of severe burns. Our programs to enhance awareness and interest in NexoBrid have been successful as evidence by the growing number of burn centers strength, the increasing number of burn centers using NexoBrid and the growing number of patients treated. Previously, we reported that during the first quarter of 2015, we trained nearly as many -- we treated nearly as many patients as we treated during all 2014. And the number of centers using NexoBrid has more than doubled. The positive momentum is continuing. And I’m very happy to report that the number of patients treated in the second quarter was almost doubled the number of patients treated in the first quarter of 2015. In addition, the overall number of burn centers trained by the end of the second quarter increased by 30% compared with the first quarter of 2015. And the number of burn centers treating patients grew by 40% in comparison to the first quarter of 2015. Those advantages are significant and mark important progress towards market adoption. We are also seeing signs of NexoBrid integration into Standard-Of-Care in centers where automatic reorder for NexoBrid are being generated based on the center’s inventory level and centers where NexoBrid is already considered Standard-Of-Care, for certain for certain burns such as burns to extremities. In addition, to closely walking with the teams at the burn centers, a key to the success of our marketing efforts has been our extensive participation in regional and national burn association meetings and the significant support from the key opinion leaders and burn experts representing clinical data, highlighting the positive outcome using NexoBrid to treat their severe burn patients. In particular, during the second quarter, we were key sponsors at the Spanish, British, French and Polish burn society meetings, where more than 10 presentations highlighted the clinical benefit of NexoBrid to the bride severe thermal burn. These important conferences provide an excellent opportunity for European burn experts to present a boost [ph] of positive hands on experience before an audience of the local pills, demonstrating the clinical benefits of NexoBrid as a non-surgical debridement for severe thermal burns and encouraging other local centers to initiate their simulation of NexoBrid in their respective centers. These local early adopters are also an important point of reference for pill concentration and eventually become a local center of excellence that supports the overall integration of NexoBrid in a given country. We are now looking forward to the upcoming European Burn Association meeting, taking place in mid September in Hannover, Germany. This is the largest burn conference in Europe that takes place every two years. As the platinum sponsors of the EBA, MediWound will have a prominent presence at this key congress for burn specialists. To boost our presence at the meeting, we will have an interactive booth on the exhibition floor and we’re supporting an educational symposium as well as a practical clinical workshop, both dedicated for NexoBrid and led by local key opinion leaders. In addition, prominent burn specialists from more than 10 European countries will be sharing experience with NexoBrid in more than 25 expected scientific presentations. We are confident that volume of data and NexoBrid activity at the EBA will continue to drive further use and adoption of NexoBrid and will be supportive of our market access efforts throughout Europe. The growing patient experience and increasing number of medical reference points in the burn centers throughout Europe will further increase physician confidence in use and support our aim to establish NexoBrid as the Standard-Of-Care. Our goal is to convert the growing usage of NexoBrid into revenue. And we know that reimbursement is an important driver for such a widespread market adoption. We have made meaningful progress in this regard and submitted the required clinical and pharmacoeconomical data to initiative the national review processes for reimbursement in the relevant key European markets. Our teams are focused and closely monitoring the local processes addressing any inquiries from the assessment committees with the support of local champions in medical community. For example, in Italy, where NexoBrid is being used almost all burn centers, the Italian Burn Association itself sent a consensus letter to the Ministry of Health that was endorsed in writing by nearly all Italian burn centers, stressing their professional support for making NexoBrid available in Italy. The growing body of positive clinical data from real world experience along with a compelling clinical and economic benefit of NexoBrid should support a favorable payment determination in this territory. We believe that positive payment decisions from several countries in the coming quarters will enable us to translate the increasing use, into sell. In addition, we continue to pursue our broader international strategy. Our partners in Argentina, Russia, South Korea and Mexico are advancing the registration process in their respective markets. And we expect to have marketing authorization in at least one of these territories by year-end 2015. As previously communicated introduction of an innovative treatment paradigm takes time to integration into the hospital and the physicians’ longstanding routine practices. We’re pleased with our continued progress in advancing, both the usage and reimbursement processes, and expect to see further commercial progress throughout the balance of the year. Shifting gears now to our clinical development program let me give you an update on our recently initiated U.S. Phase 3 study. We were very excited to initiate our U.S. Phase 3 clinical trial with NexoBrid to treat severe thermal burns. The study was named DETECT because it is an abbreviation of DE bride and Pro TECT. As a recap DETECT is a prospective, controlled, multicenter, multinational assessor blinded Phase 3 study in 175 burn 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 particularly pleased to see that the investments in our market awareness programs are bearing fruit, especially with a number of patients treated nearly doubling during the second quarter compared with the first quarter of 2015 and the number of sites that have used NexoBrid increased by 40%. As Gal stated, we remain committed to ensuring that we convert this growing usage to drive revenue. For the balance of the year, we will continue funding, training and sampling programs throughout Europe. We are also investing in markets access initiatives in Europe that we expect to result in favorable reimbursement that will help to accelerate market adoption and will enable us to translate the increasing use and the continued momentum into sale. Now let me turn to our financial results for the second quarter of 2015. Revenues for the second quarter of 2015 totaled $165,000, compared with $39,000 for the same quarter last year. R&D and SG&A expenses for the second quarter of 2015 were in line with our budget, $1.5 million and $3.4 million respectively, compared with $1.4 million and $3.1 million for the second quarter of 2014. The increase in SG&A was driven primarily by an increase of $0.8 million in commercial activities associated with the continued build-out of the European marketing infrastructure, which was offset by $0.4 million decrease in non-cash share-based compensation expense. Net loss for the second quarter of 2015 was $4.1 million or $0.19 per share compared to a net loss of $6 million or $0.28 per share for the second quarter of 2014. The decrease in loss was primarily due to net financial income which was comprised of non-cash revaluation of contingent liabilities and exchange rate differences. Adjusted EBITDA for the second quarter of 2015 was a loss of $4.8 million, compared with a loss of $3.9 million for the same quarter last year. As noted in our 6-K, we believe that these non-IFRS measures are useful for investors and provide meaningful supplemental information regarding our operating results. Moving to our six-month financial results. During the first half of 2015 we shipped about 1,800 PPSA [ph] units to burn centers throughout Europe, of which approximately 70% were part of our investment in the sampling program. Revenues for the first six months of 2015 totaled $232,000 compared with $89,000 for the same period last year. R&D and SG&A expenses for the first half of 2015 were $2.9 million and $6.4 million respectively compared with $2.8 million and $6 million for the same period of 2014. The increase in SG&A was driven primarily by an increase of $1.3 million in commercial activities associated with a continued build out of the European marketing infrastructure which was offset by $0.9 million decrease in non-cash share-based compensation expense. Net loss for six months ended June 2015 was $10.6 million or $0.49 per share compared with a loss of $6.8 million or $0.37 per share for the first half of 2014. The increase was primarily due to one-time non-cash financial income in 2014 resulted from revolution of derivative instruments. Adjusted EBITDA for the first half of 2015 was a loss of $8.5 million compared with a loss of $7 million for the same period last year. Turning now to our balance sheet. As of June 30, 2015, cash, cash equivalents and short-term bank deposits were $55.2 million and the net working capital was $55.2 million as well. We remained on budget utilizing $9.5 million in cash during the first half of 2015 to fund ongoing operating activities, of which $4.7 million was used in the second quarter of 2015. As discussed, we’ll continue to make investments in our sales and marketing activities to advance the adoption of NexoBrid across Europe. We’ll also invest in our research and development efforts including our clinical ongoing programs to develop products for additional territories and indications. As a result, we reiterate that expected cash use to support ongoing operating activities in 2015 will be 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?

[Gal Cohen:]

Thank you, Sharon for the financial overview. The second half of 2015 is expected to be a time of continued progress, highlighted by the achievement of several key milestones such as the completion of devolvement to our EscharEx Phase 2 study, the top-line data result from our Phase 2 clinical trial of EscharEx, the opening of balance of clinical sites in the U.S. for the NexoBrid study and number of important payment decisions in European markets for NexoBrid as well as the potential expansion into new territories. In particular, we’re looking forward to a positive reaction to our prominent showing at the upcoming European Burn Associating meetings after which we’ll be sure to update you on the bullets of data presented. And now operator, please open the call for questions.

[Operator:]

[Operator Instructions]. We can now take our first question; it comes from Matthew Keeler of Credit Suisse. Please go ahead.

[Matthew Keeler:]

First, I was wondering if you could give us an update on reimbursement in France, Italy and Spain; you talked about some milestones there. Just wondering what’s the timeline in each of those countries where you expect to hear on reimbursement and then once you potentially do have reimbursement, how quickly do you think that might turn into revenues; are there any indicators in those countries that helps you gauge how fast the ramp might be or do you think you’ll face and until [ph] data like in Germany where you’ve got adequate reimbursement but standard of care is relative a trench. And then I have one follow-up.

[Operator:]

Pardon the interruption. It appears our speaker has disconnected, just bear with me a moment. One moment, our speaker has disconnected please standby for the moment. Thank you.

[Gal Cohen:]

Matthew, can you me?

[Matthew Keeler:]

Yes. Can you hear me Gal?

[Gal Cohen:]

Yes, I can hear you. Sorry for this discontinuation of the call. The call was disconnected. Can you please ask the question again?

[Matthew Keeler:]

Just on France, Italy and Spain, just wondering if you could remind us when you think you’ll have decisions on reimbursement there and just how we should think about -- if you do get reimbursement or positive decisions there, how we should think about the ramp? Just keeping in mind in Germany, I know it’s being kind of a slog to get -- to change standard of care?

[Gal Cohen:]

Thank you for the question and sorry I did not disconnect, because of the question -- I haven’t heard the question. So, this is now the first time, I hear the question. And I apologize again for this inconvenience. Well, the reimbursement processes in general in these countries are similar in a way that the first submitting of your dossier, then it’s being assessed by what we call scientific or more scientific committee and after scientific committee grants a decision then it goes to a commercial negotiation with another committee. In all this respective markets, we have submitted the dossier. And what we don’t have control over? Is which committee meeting, we are going to be discussed; we don’t have any control on the agenda. So, we anticipate that we will finalize the process in this market sometime most probably around the end of this year or at the beginning of next year. As far the uptake in this market, after the decision, it differs from country to country. I will start with Italy. In Italy today, practically almost every burn center in Italy is treating patient with NexoBrid. There are centers in Italy that are treating patients almost as standard of care. And so, many patients are being treated in Italy; they are treated on a daily basis but by almost all the centers in Italy and we’re seeing great support from the Italian key opinion leaders. And I said, up to a point that they have initiated a letter from the Italian Burn Association to the Ministry of Health, asking the Ministry of Health to grant the reimbursement. And this letter was signed by practically almost every burn center in Italy. So, we anticipate that once we are able to charge for the product that is supplied, we will be able to ramp up the sales in Italy quite rapidly. As for Spain, in Spain, until May this year, there was no need at all to go for national level reimbursement. So, all this national level reimbursement for hospital product is quite a new thing from them as well. And we have submitted the files and everything, we’re being assessed. What will most probably happen because this country is not as structured as in other countries yet is that in some provinces in Spain, once we have a national level reimbursement decision, they will be able to procure the product and in some provinces, we might need to in parallel to go also to a decision at the province level. So, in Spain today, again, most of the burn centers or the prominent burn centers in Spain are treating patients with NexoBrid. We had a conference in Spain; the awareness is high; we are seeing good cases; they are presenting cases in the EBA and so on. So, I would expect that once we get the reimbursement in Spain, we will see a pick-up of the revenues as well. France as usual is a special case because France is the only country in Europe, where you are not allowed to physically supply the product to the centers before we have a discussion at the committee, regardless of whether the decision of the committee will be to reimburse or not to reimburse. So, we are not able to generate this usage in France at the moment. We are hopeful that once the committee makes a decision, if it is a positive one, then for sure this will be a good sign to -- for the uptake of the product but even if it’s not a positive one and as you know, most of the wound care products or particularly all of the wound care products in France are not reimbursed, still we will be able the supply the product to the hospital and then go to a hospital level, present our budget impact tool and convince the hospital that it makes financial sense as well as clinical sense for the hospital to use the product. I hope that I’ve addressed your question.

[Matthew Keeler:]

And then second quarter sales picked up nicely versus the last couple of quarters, just wondering what countries are driving that and is there any stocking in the quarter?

[Gal Cohen:]

Well, we don’t know exactly, what is stock level in each hospital but obviously, this pickup in sales is driven by Germany, by the Nordics, by the Central Eastern countries, which are the main countries that are now in a position to order the product. We are also seeing uptake in centers themselves. I mean, I don’t know if you remember, in the last call, we’ve talked about Dr. Schulze from Germany that was awarded a price in the EBA for the best person in the category. When Dr. Schulze returned to Germany, she is particularly treating patients almost on a -- almost daily basis. So, we do see also some uptake in countries that have been treating patients for several months as well.

[Operator:]

We can now take our next question; it comes from David Maris from BMO Capital Markets. Your line is open sir. Please go ahead.

[Katie Brennan:]

Hi. It’s Katie Brennan in for David Maris. Thank you for taking the questions. Two, first on the NexoBrid U.S. Phase 3. With half the site open at this point, is that on track with your anticipated plan? I remember at ABA it sounded like you guys were talking to a lot of physicians that were interested in being involved in this study. So curious if that’s on track? Also we’ve seen encouraging growth in use and you mentioned the potential, positive pricing actions expected in the coming months. When do you think these changes will lead to a meaningful inspection in revenue?

[Gal Cohen:]

Well, in terms of the U.S. study, we’re on track as planned. The centers that we have discussed with ABA are centers that have potential for additional sites. And the first centers that we are opening through the last month are centers that we have submitted the files with the IRB a month ago and they are already approved and so on. So, we are on track to open the centers. We believe that in the coming months we’ll be able to open all the study centers; we have already started to recruit patients. So everything is on course, up and running. In regards to Europe, as we mentioned before, I think that as time elapses, we’ll see more and more conversion of usage into sale and the inflection point would be as we discussed, the ability to obtain reimbursement in countries where we are not able to practically sell without it. So as we discussed, for example, when Italy gets reimbursement and we can convert all this usage into sales, this is most probably we’ll see a big ramp up or something of that sort.

[Katie Brennan:]

If I can ask one more, when you are referring to these scientific committee meetings and not having control over when they’ll discuss NexoBrid reimbursement, do you have any indication of where you are in the queue for each of these countries and are they going product-by-product so you can keep track on when you would expect to be discussed?

[Gal Cohen:]

We don’t have exact monitoring of that but the resolution of the data is not in terms of like several quarters. We don’t know if it’s going to be in June or July or August or something around that. So, our estimate is that in these countries, most probably we’ll be able to conclude these processes around the end of the year. Whether it’s going to be towards the end of the fourth quarter or the first quarter of next year or getting into such a resolution is not always in our control because we’re not controlling their agenda. And for example in Italy, now they dispersed the committee and they will reconvene the committee only in September. So these are the level of accuracy that we can predict this timeline.

[Operator:]

We can now take our next question; it comes from Akiva Felt of the Oppenheimer & Co. Please go ahead.

[Carlos Solorzano:]

This is Carlos Solorzano on behalf of Akiva. And my question is, would you please remind us what the addressable markets are for EscharEx? And which of those markets would be the top priority at launch?

[Gal Cohen:]

In terms of territories, obviously our primary focus is on the U.S. and this will be our primary focus for launching EscharEx; obviously we’re also aiming at Europe and other markets but U.S. is obviously the first one. In terms of indications, our ongoing Phase 2 study has recruited patients in diabetic foot ulcers, in venous ulcers and post-surgical complications. So, we can go and continue our development trend in either of these indications or in some of them. So, we can decide to do a study in a VLUs and DSUs or just DSUs or just VLUs, and we’ll do that based on the results of the study that we’ll have the data for around the end of this year. And I can also tell you that in our previous Phase 2 study and the first Phase 2 study, we have treated patients from all those indications and we saw positive clinical data on all of them. So, this is where we stand in terms of indications and in terms of territories.

[Operator:]

We have no further questions at this time. [Operator Instructions] As there are no further questions, I would now like to hand the call back to Mr. Cohen for any final remarks. Thank you.

[Gal Cohen:]

Thank you for the questions and for your continued interest in MediWound. We look forward to updating you again when we report our first quarter results. Thank you very much for the call. And sorry for the incontinence with the telephone.

[Operator:]

That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.