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Edited Transcript of MDWD earnings conference call or presentation 14-Nov-19 1:30pm GMT

Q3 2019 Mediwound Ltd Earnings Call

Yavne Dec 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Mediwound Ltd earnings conference call or presentation Thursday, November 14, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Boaz Gur-Lavie

MediWound Ltd. - CFO

* Sharon Malka

MediWound Ltd. - CEO

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Conference Call Participants

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* Bryan C. Bergin

Cowen and Company, LLC, Research Division - Director

* Yoon-Seo Kang

H.C. Wainwright & Co, LLC, Research Division - Associate

* Jeremy Feffer

LifeSci Advisors, LLC - MD

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the MediWound Third Quarter 2019 Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Mr. Jeremy Feffer of Investor Relations. Please go ahead, sir.

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Jeremy Feffer, LifeSci Advisors, LLC - MD [2]

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Thank you, Olivia, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the third quarter of 2019. You may access that release on the website under the Investors tab. With us today are Sharon Malka, Chief Executive Officer of MediWound; and Boaz Gur-Lavie, Chief Financial Officer. Following management's prepared remarks, we will open the calls for Q&A.

Before we begin, I would like to remind everyone that statements made during the call, including the Q&A session relating to MediWound's expected future performance, future business products, prospects or future events or plans are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecasts due to the impact of many factors beyond the control of MediWound.

The company assumes no obligation to update or supplement any forward-looking statements, whether as a result of new information, future events or otherwise. Participants are directed to cautionary notes set forth in today's press release as well as the risk factors set forth in MediWound's annual report filed with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. The conference call is the property of MediWound, and any recording or rebroadcast is expressly prohibited without the written consent of MediWound.

Now I would like to turn the call over to Sharon Malka, Chief Executive Officer of MediWound. Sharon?

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Sharon Malka, MediWound Ltd. - CEO [3]

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Thank you, Jeremy. Good morning, everyone, and good afternoon to the Israeli listeners.

Thank you for joining us today on our third quarter earnings call. We are excited to be here this morning to update you on the progress we have made this quarter as we prepare for an eventful upcoming year. We have meaningful events coming up for both NexoBrid and EscharEx. We expect to initiate patient treatment in our adaptive Phase II study in EscharEx this quarter and are on track with plans for NexoBrid BLA filing in the second quarter of 2020.

Let me now go into more details on each of our programs. Starting with NexoBrid. We had a productive pre-BLA meeting with the FDA at the end of July and now have a clear pathway for a BLA filing for NexoBrid planned for the second quarter of 2020. We received FDA concurrence that the existing safety and efficacy data, including the 2 Phase III clinical studies and the 12 months follow-up safety data from the DETECT are adequate to allow for a BLA submission and review.

Moreover, FDA concurred that the DETECT 24 months follow-up safety data could be submitted at the safety update report as part of the post-approval commitment. We are pleased to report that we completed the analysis of the DETECT follow-up safety data collected in the 12 months follow-up period, and found it was comparable across all study arms, the NexoBrid arm, Gel Vehicle placebo and the Standard of Care arm.

First, the cosmesis and function data measured by mVSS, modified Vancouver Scar Scale, was comparable between the NexoBrid and the Standard of Care arm, demonstrating that the treatment with NexoBrid does not have any deleterious effect on the quality of burn scar. Those results were confirmed by additional cosmesis and function data measured by POSAS, patient and observer scar assessment scale.

Second, additional long-term functionality evaluation, including lower and upper extremities and range of motion was comparable between all study arms. Third, the long-term quality of life data measured by 2 separate questionnaire was comparable between all study arms. And finally, the overall safety profile of NexoBrid was consistent with previous data and no new safety signals were observed.

Also this quarter, we initiated the NexoBrid Expanded Access Treatment protocol, NEXT, in the U.S. to treat up to 150 patients with deep partial and full-thickness burns of up to 30% of total body surface area during the preparation and review of the NexoBrid BLA. The NEXT program, which is supported and funded by BARDA, allows for the continued clinical use of NexoBrid for U.S. patients prior to NexoBrid approval by the FDA as well as the use of NexoBrid in a nondeclared emergency event. NEXT is designed to be consistent with the current realized treatment practices in U.S. under the FDA expanded access program, which allows access to investigational products to treat patients outside of clinical trials where no comparable or satisfactory alternative treatments are available. We believe the NEXT program will enhance national preparedness for burn mass casualty incidences and will further extend the number of burn centers trained and familiar with NexoBrid in the U.S. Our commercial partner in the U.S., Vericel, continues to prepare for launch upon approval of NexoBrid. With a clear regulatory pathway for BLA submission and the ongoing NEXT program, we are highly confident in our ability to bring NexoBrid to the U.S. market where it has the potential to meaningfully impact patients' lives.

Moving on to EscharEx, the primary focus of our strategy going forward. Following the launch of the next stage of the U.S. clinical development program for EscharEx earlier this year, we have submitted an adaptive design protocol for our second-generation EscharEx to the FDA and to Institutional Review Boards, IRBs, and we are on track to initiate patient treatment in our U.S. Phase II adaptive design study for EscharEx this year -- this quarter.

The study will be multicenter, prospective, randomized, adequately controlled, assessor-blinded study to evaluate the safety and efficacy of EscharEx in debridement of venous leg ulcers in about 30 clinical sites primarily in the U.S. The study will involve 174 patients randomized to either EscharEx, Gel Vehicle or nonsurgical Standard of Care of either SANTYL or hydrogel at a ratio of 1:1:1 with a 3-month follow-up. The study includes a preplanned interim assessment for futility analysis and sample size adjustment once approximately 100 patients enrolled and treated which we plan to have by year-end 2020. As agreed with the FDA, the primary endpoint will be incidence of complete debridement versus the Gel Vehicle placebo while incidence and time to achieve wound closure will be assessed as a safety measurement. Secondary endpoints will include reduction of pain, time to achieve complete debridement, reduction of wound area, granulation tissue and quality of life and will be compared with Gel Vehicle placebo and Standard of Care. The study design enables us the ability to demonstrate efficacy, safety and clinical benefits of both placebo and Standard of Care as required by the FDA to address the market needs and other stakeholders' interest such as payers and health care professionals and allows us a head-to-head comparison of EscharEx with the current U.S. nonsurgical Standard of Care, including the current available enzymatic debridement agents.

Most importantly, if successful, it provides the ability to have a data-driven discussion with the FDA that this study will be considered as 1 of the 2 pivotal studies required for BLA submission. We believe EscharEx has the ability to be a game changer, addressing a significant unmet medical need for a nonsurgical rapid and effective debridement therapy with a sizable market opportunity. We are encouraged by the strong interest expressed by the clinical community for participating in this study, and we look forward to working closely with both physicians and patients as we advance this exciting therapy. In summary, we are very excited as we actively progress towards several meaningful upcoming milestones in both programs.

Now it is my pleasure to turn the call over to Boaz for a summary of our financials this quarter. Boaz?

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Boaz Gur-Lavie, MediWound Ltd. - CFO [4]

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Thank you, Sharon, and good morning, everyone. We are pleased with our financial performance in the third quarter of 2019, which was highlighted by growing revenues combined with disciplined cost management and with the continued support by BARDA.

The financial results of the third quarter and the 9 months of 2019 were significantly driven by the license agreement with Vericel and the revenue recognition of the multiple elements of this deal. NexoBrid has become a cash-positive product in 2019, and we expect it to continue to support our balance sheet going forward. Additionally, we have strengthened our balance sheet with the PolyHeal settlement, writing off the $6 million provision, which netted in a profit of $2.8 million from discontinued operations.

Turning now to our financial results. Revenues for the third quarter of 2019 were $5.1 million, an increase of $4.2 million versus $0.9 million in the third quarter of 2018, primarily driven by revenues from development services.

Gross profit for the third quarter of 2019 was $0.7 million compared with $0.5 million in the third quarter of 2018. Research and development expenses, net of participation, for the third quarter of 2019 were $1.4 million compared with $1.2 million for the third quarter of 2018. Selling, general administrative expenses for the third quarter of 2019 were $2 million compared with $1.5 million for the third quarter of 2018 primarily due to nonrecurring costs.

Operating loss for the third quarter of 2019 was $2.7 million compared with a loss of $2.2 million in the parallel period. The company's net loss for the third quarter of 2019 was $0.2 million or a loss of $0.01 per share compared with a net loss of $2.9 million or a loss of $0.11 per share for the third quarter of 2018. The decrease in net loss was primarily due to settlement with certain PolyHeal shareholders, which resulted with onetime profit from discontinued operations of $2.8 million. Adjusted EBITDA for the third quarter of 2019 was a loss of $2 million, flat to the third quarter of 2018. A reconciliation of adjusted EBITDA to GAAP net income is included in the press release we filed with the SEC earlier today.

Moving now to financial results for the first 9 months of 2019. Revenues for the first 9 months of 2019 were $26.3 million compared with the $2.4 million in the same period last year driven by the $17.5 million upfront license payment from the Vericel's agreement and revenues from development services of $6.3 million.

Operating profit for the first 9 months of 2019, which includes a $15.8 million upfront license payment net of deal-related costs was $7.6 million. Excluding the upfront license payment net, operating loss for the first 9 months of 2019 was $8.2 million, which reflects an improvement of 12% from the $9.2 million loss in the first 9 months of 2018.

The company's net profit for the first 9 months of 2019, which includes a $15.8 million (sic) [$17.5 million] net upfront license payment and $2.8 million profit from discontinued operation was $8.4 million or a profit of $0.31 per share compared with a net loss of $11.7 million or a loss of $0.43 per share in the first 9 months of 2018.

As of September 30, 2019, the company had cash, cash equivalents and short-term bank deposits of $32.9 million compared with $23.6 million at December 31, 2018. The company remained on budget, utilizing $9.2 million in the first 9 months of 2019 for its operational activities. Throughout the remainder of the year, the company will continue to invest primarily in research and development efforts for EscharEx while NexoBrid research and development program will be funded by BARDA. As a result, the company updates its cash use for 2019 to be in the range of $10 million to $12 million versus the previously reported guidance of $12 million to $14 million, including NexoBrid license-related payments and repayment of contingent liabilities.

With that, I have concluded the report of the financial results and will now turn the call back to Sharon. Sharon?

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Sharon Malka, MediWound Ltd. - CEO [5]

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Thank you, Boaz. Looking ahead, we anticipate initiating patient treatment in our Phase II adaptive design study for EscharEx in this quarter of 2019. Additionally, we anticipate NexoBrid BLA filing in the second quarter of 2020. We also will continue executing our plans and moving our programs forward.

With that, it is my pleasure to open the call for Q&A. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question coming from the line of Raj Denhoy with Jefferies.

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Unidentified Analyst, [2]

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This is [Zach] in for Raj. Just one question on BARDA payments. Last quarter, you had received roughly $35 million in R&D reimbursement. Just curious what that number looks like this quarter. And then moving forward, what are the triggers and timing for next payments?

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Sharon Malka, MediWound Ltd. - CEO [3]

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So a -- starting from -- first of all, thank you for the question, Anthony. Starting from the Vericel deal on May 2019, the reinvestment from BARDA was classified as revenues from development services as part of the revenue was the actual cost of development is part of the cost of goods in our financials. In quarter 2, the actual development services revenues was about $2.3 million while now we have for the 9 months around -- we have additional 6 -- or general total $6 million of revenues from development services, and the average value of these services is about $1 million to $1.5 million per month.

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Operator [4]

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And our next question coming from the line of Josh Jennings with Cowen.

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Bryan C. Bergin, Cowen and Company, LLC, Research Division - Director [5]

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This is Bryan here for Josh. On the DETECT study, have you analyzed the primary endpoint at 12 months? And are those results needed for the BLA filing? Or is the filing sufficient with the acute primary endpoint data and the longer-term safety data you've generated?

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Sharon Malka, MediWound Ltd. - CEO [6]

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Thank you for the question, Bryan. So I'll split the answer into 2. Regarding the primary endpoint, so the primary endpoint as well as all secondary endpoints and safety -- general safety endpoints, they are all measured only in the acute phase at the end of the treatment of patients. The 12-month follow-up data is mainly safety measurement related to the scar quality, cosmesis and function, functionality and quality of life. This is the first part of your question.

Regarding the second part of your question, we received the FDA concurrence that the BLA submission will be -- will include the 2 Phase III clinical studies and the 12-month follow-up safety data collected from the DETECT study, and this will be adequate for a BLA submission as well as for the BLA review by the agency. The FDA concurred that the DETECT 24 months follow-up safety data will be submitted at the safety update report as part of the post-approval commitment. Does that answer your question?

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Bryan C. Bergin, Cowen and Company, LLC, Research Division - Director [7]

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It does. That's helpful. And can I ask one on the NEXT protocol? Is it your expectation that BARDA will fulfill its procurement obligations mainly through activity at these NEXT trial sites? And I guess, will there be any inventory build for readiness purposes at these sites?

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Sharon Malka, MediWound Ltd. - CEO [8]

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So the NEXT protocol clinical supply is a separate procurement from BARDA, which is not part of the $16.5 million commitment for stockpiling, and this clinical supply for the NEXT will be achieved throughout the period of this study as part of our revenue. Regardless this clinical supply for the NEXT, BARDA commitment -- is committed to procure $16.5 million of NexoBrid for stockpiling, which we believe, based on discussion that we have with BARDA, that they can or will trigger throughout the end of this year, enable us to start recognizing revenues upon deliveries from the first quarter of next year.

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Operator [9]

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(Operator Instructions) And our next question coming from the line of Sean Kang with H.C. Wainwright.

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Yoon-Seo Kang, H.C. Wainwright & Co, LLC, Research Division - Associate [10]

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This is Sean for RK at H.C. Wainwright. Could you provide a little bit more color on EscharEx launch timing? So pending the successful Phase II study, should we expect a similar duration for the Phase III? Because you said you only need one pivotal study.

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Sharon Malka, MediWound Ltd. - CEO [11]

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So regarding the upcoming Phase II adaptive design study, which we plan to enroll 174 patients, as we already provided guidance, we plan to have the interim assessment after treating about 100 patients around year-end 2020. Means this study should be finalized and concluded by year-end 2021. The next pivotal study, Phase III study, will be probably in the same duration because we believe it will be the same ballpark of sample size, around 150 to 200 patients.

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Yoon-Seo Kang, H.C. Wainwright & Co, LLC, Research Division - Associate [12]

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I see. And regarding the $16.5 million procurement of BARDA, in terms of booking, is it going to be spread out over a certain period or it'll be more like a lump sum payment?

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Sharon Malka, MediWound Ltd. - CEO [13]

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So BARDA will -- the [rate] work that BARDA will provide us with the purchase order for all the 16,000 units, which is 16.5 million units (sic) [$16.5 million]. In terms of revenue recognitions of -- in our financial, it will be based on deliveries of actual products to BARDA's warehouses in the U.S. and in accordance with the delivery schedule agreed with BARDA, which is based on our capacity and manufacturing plan. It will be recognized upon 6 quarters, starting from the quarter after they will trigger this procurement and will be recognized throughout those -- this period.

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Operator [14]

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And I'm not showing any further questions at this time. I would like to turn the conference call back over to Sharon Malka for closing remarks.

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Sharon Malka, MediWound Ltd. - CEO [15]

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

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Operator [16]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may all disconnect.