MediWound Ltd. (MDWD) on Q2 2023 Results - Earnings Call Transcript
Operator: Good day, and welcome to MediWound Second Quarter 2023 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Monique Kosse of LifeSci Advisors. Please go ahead.
Monique Kosse: Thank you, operator, and welcome, everyone. Yesterday after the market closed, MediWound issued a press release announcing financial results for the second quarter ended June 30, 2023. You may access that release on the company's website under the Investors tab. With us today are Ofer Gonen, Chief Executive Officer of MediWound; Hani Luxenburg, Chief Financial Officer; and Barry Wolfenson, Executive Vice President of Strategy and Corporate Development. Following our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that statements made during this call, including the Q&A session, relating to MediWound's expected future performance, future business prospects or future events or plans are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecast due to the impact of many factors beyond the control of MediWound. The company assumes no obligation to update or supplement any forward-looking 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'd like to take -- turn the call over to Ofer Gonen, Chief Executive Officer of MediWound. Ofer?
Ofer Gonen: Thank you, Monique, and good morning, everyone. By the way, this call is not recorded, although the operator said so. So I'm live. It's a pleasure to welcome all of you to the second quarter earnings conference call. Joining me today are Hani Luxenburg, our Chief Financial Officer; and Barry Wolfenson, our Executive Vice President of Strategy and Corporate Development. After our prepared remarks, we will open the call for a Q&A session. I'd like to begin with a comprehensive overview of MediWound's recent progress. We are focused on advancing our commercial product portfolio, expanding our pipeline, strengthening our strategic partnership, building new alliances and expanding our manufacturing capabilities. With a solid financial foundation, we are well positioned to achieve our goals and ultimately become a profitable global biopharmaceutical company. Let's start with a more detailed update on NexoBrid. We received approval in the United States last December. Since the achievement of this important milestone, we are focused on manufacturing and delivering products to our partner Vericel for their U.S. commercial launch. We shipped NexoBrid to Vericel in June 2023. However, at this time, Vericel is unable to release the product for commercial distribution due to a deviation associated with a third-party testing lab used during the manufacturing process. We have conducted extensive testing and completed a detailed risk assessment determining that this deviation presents no incremental risk to finished product quality and for patient safety. Vericel and MediWound continue to engage constructively with the FDA concerning NexoBrid, and we remain hopeful that the product will be commercially available in the United States in the near term. Vericel has guided its NexoBrid commercial launch in the United States market to the first quarter of 2024. This timing will not affect our expected NexoBrid revenues in 2023 and 2024 as there are multiple other partners to whom we can sell the inventory. In the meantime, we are in the process of manufacturing the next batches of NexoBrid for delivery to Vericel. These batches will not be impacted by this variation. Prelaunch activities remain on track and Vericel team has generated significant interest and enthusiasm for NexoBrid in the burn care community. Additionally, we are on track to submit our sBLA for the pediatric indication in the second half of 2023. Our relationship with BARDA remains strong as we are awarded with additional $10 million in funding to support the $3 million replenishment, the sBLA submission for the pediatric indication and the enrollment of an additional 50 patients into our NEXT program. To date 237 burn patients have been treated across 26 sites in the United States in this expanded access program. Moving to the rest of the world. In Japan, Kaken Pharmaceutical has successfully launched NexoBrid commercially. Kaken is a notable pharmaceutical company and hold an exclusive partnership with us. The Japanese market is very substantial with over 6,000 patients annually receiving treatment for severe burns. A majority of these patients undergo eschar removal as a crucial initial step. Notably, Japan is the first territory where NexoBrid is approved for both adult and pediatric patients. In Europe, we continue to see the demand for NexoBrid EscharEx as it is adopted more broadly. We are also awaiting a decision for the European Commission on pediatric indication, which we anticipate in the second half of this year. In response to the increasing demand of NexoBrid and the upcoming products, we have finalized a long-term lease for the production sites. This guarantees continuous manufacturing of NexoBrid and EscharEx. We have also initiated a project to expand our current facility to accommodate the rising global need of NexoBrid. We anticipate completing the expansion of this facility by mid-2024 and reaching full manufacturing capacity in 2025. Moving now to our EscharEx program. We are gearing up for the launch of our Phase III study, focusing on venous leg ulcers. Our carefully structural trial adopt a multicenter prospective, randomized and placebo-controlled methodology to rigorously evaluate EscharEx's potential. The study aims to enroll 244 patients who will be equally distributed between EscharEx and placebo treatments. Given the study's manageable size and the lack of a direct competition, we are optimistic about expedited patient enrollment. Encouraging feedback from both EMA and the FDA has solidified our confidence in EscharEx global approval trajectory. We are in the process of qualifying the study sites, selecting all the vendors, including CRO, data management and central labs. And of course, we are manufacturing the final batches of EscharEx for the clinical study. These activities are expected to be completed by the fourth quarter of 2023 with patient enrollment in the Phase III study expected to begin in early 2024. Furthermore, EscharEx has been a focal point of interest among potential partners in the advanced wound care domain, who are interested in game-changing modalities. The fact that the largest players in the market today are eager to take part in this venture is yet another indication for the great promise of our study. I would like to hand over the call to Barry, who will provide more color around our strategic opportunities, including two announcements that we made just yesterday. Barry?
Barry Wolfenson: Thanks, Ofer. One of the most important aspects of running a study in order to achieve the desired positive outcome is to, as much as possible, reduce variability between study [wounds] (ph). Towards this goal, we are limiting the various products that sites will be able to use as they manage the wounds to closure, while still providing best-in-class options for them and their patients. For a venous leg ulcer study, there are three key product categories that are essential to driving positive wound outcomes: compression therapy, wound dressings that provide optimal moisture management and most importantly, a cell-based product that could drive active closure. After reviewing available options, we set our sights on the best manufacturers and brands for each of these to offer sites and their patients the best-in-class products, while also making the protocol and product fulfillment as easy as possible. As we announced yesterday, two of these manufacturers are MIMEDX and Molnlycke, both of whom are leaders in their respective categories. MIMEDX will provide EPIFIX, their placental tissue allograft to be used on study subjects as soon as the wound is completely debrided and has 100% granulation tissue. EPIFIX is one of the most widely studied products in its category with strong evidence on venous leg ulcers. Additionally, being a room temperature stable product, it is easy to ship, store and use. Molnlycke will provide the new Mepilex up dressing, a recent line extension to their category-leading brand Mepilex, specifically designed to handle the unique fluid management demands of venous leg ulcers. They will also be providing their novel Exufiber and Exufiber-Ag for additional fluid management, as well as for coverage when high levels of bioburden are present. Importantly, both companies will also provide training as required for the investigators and their clinical research teams. This is of great benefit to the study, not only keeping variability of products to a minimum, but also ensuring that each product is used as per the manufacturers guidelines and instructions. We are close to having a finalized agreement with our third research collaboration partner, and we expect this to be announced in the coming weeks. With that, I'll hand it back to you, Ofer.
Ofer Gonen: Thank you, Barry. So before concluding, I would like to emphasize some pivotal updates regarding MW005. We have recently released promising results from our Phase I/II study on basal cell carcinoma. The data validates our clinical efficacy, as demonstrated by clearance of target lesions. Impressively, 11 out of 15 trial participants achieved total lesion removal with a significant number of these clearances being histologically confirmed. This is an addition to the previously published results of seven out of seven lesions that were totally cleared. Furthermore, MW005's impressive safety profile and positive patient feedback are notable. And with these encouraging results, we are confident about forming strategic partnerships for next clinical development stages of MW005. Finally, I would like to welcome Mr. Milky Rubinstein to our Board as an Independent Director. Milky brings a distinguished record of pharmaceutical and biotech leadership, experience and he will add much to our Board. Milky is joining as Assaf Segal is stepping down after six years with us. I would like to thank him for all his contributions over those years. In summary, we are diligently progressing with our strategic long-term visions, ensuring that we remain poised for future success. As we gear up to initiate our Phase III study for EscharEx targeting venous leg ulcers, we take pride in collaborating with distinguished partners in the industry. Concurrently, we are expanding our manufacturing capacities and are ready to launch NexoBrid in the United States. Encouraging data from MW005 further solidified our position for upcoming business development endeavors. Our robust balance sheet with over $51 million in cash enable us to execute these pivotal initiatives. With that said, I now hand over to Hani for a brief review of our financials. Hani?
Hani Luxenburg: Thank you, Ofer. Let me begin with our revenue. For the second quarter of 2023, we recorded revenues of $4.8 million, a slight uptick from the $4.7 million in the same quarter last year. Gross profit for both Q2 2023 and Q2 2022 remain consistent at $1.1 million representing 24% of our total revenues. Now turning to our expenditure -- to our operating expenses. Our R&D expenses for the quarter amounted to $2 million, slightly down from the $2.2 million in Q2 2022. Selling, general and administrative expenses saw an uptick to $3.1 million, mainly attributed to the additional of full-time employees to support future growth, along with an increase in share-based compensation expenditure. This is an increase from the $2.3 million reported in Q2 2022. Operating results for the quarter demonstrated an operating loss of $4 million, a modest increase from the $3.7 million loss in the same period last year. The net profit of the quarter was $0.9 million or $0.10 per share, a positive shift from the net loss of $4.4 million or $0.29 per share in Q2 2022. This favorable turns may result on revaluation of our warrants. Our adjusted EBITDA for the quarter was a loss of $3 million, slightly more than the $2.8 million loss in Q2 2022. Moving to our year-to-date highlights. Revenues summed up to $8.6 million in comparison to the $9.1 million recorded during the first half of 2022. This decline is primarily due to BARDA's emergency stockpile order in 2022. Our operating loss for the quarter reached $8.4 million higher than the $7 million loss from the first half of 2022. The net loss for the period was $2.8 million or $0.32 per share compared to the $7.9 million loss or $1.79 per share during the same period last year. Adjusted EBITDA for the first half of 2023 was a loss of $6.4 million, up from the $5.4 million loss in the first half of 2022. Balance sheet overview. As of June 30, 2023, our cash and short-term deposits amounted to $51.3 million. This is a positive client from the $34.1 million reported on December 31, 2022. In the first quarter of this year, we raised a gross amount of $27.5 million from our February 2023 offering. The second quarter demonstrated use of $6 million to fund our ongoing operations. Based on our current financial standing, we anticipate that the existing cash will sustain our operations through profitability. With that, I will now turn the call back to Ofer. Ofer?
Ofer Gonen: Thank you, Hani. So we remain committed to our strategic execution and encouraged by increasing industry-wide interest in our product. NexoBrid, EscharEx and MW005 are not only additions to the market, they also hold promise to redefine the norms of medical practice. As we progress, we eagerly anticipate several milestones events, including the launch of our pivotal Phase III trial of EscharEx, which is slated for the first quarter of 2024. This is more than a clinical milestone. It targets a lucrative $1 billion niche. Our partnerships with the world's leading advanced wound care companies fortify our unwaving drive to achieve positive results in this study. Also, we anticipate a rise in NexoBrid revenues, supported by our strategic commercial initiatives in the primary markets. This momentum is expected to be further strengthened by a U.S. launch and by an expansion of the label to include pediatric population. To match the increasing or the escalating demand of NexoBrid, we are increasing our manufacturing capabilities. Our state-of-the-art facility is on track to be constructed by mid-2024 and should be active full-scale production by 2025. Thank you all for joining our promising journey. And now we will open the call for a Q&A session. Operator?
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Josh Jennings with TD Cowen. Please go ahead.
Josh Jennings: Hi. Good morning. Thank for taking the questions and I appreciate the thorough update. I wanted to just ask about the Phase III EscharEx, VLU trial and the enrollment kick off early next year. I was hoping you guys made a lot of progress. It seems like the start of that enrollment, the start of that trial has been nearly fully derisked. But maybe Ofer, if you could just line up what remaining boxes need to be [kicked] (ph) before that trial kicks off? I know you listed a couple of them on the call, but just to make sure we're clear.
Ofer Gonen: Yes. Okay. Thank you, Josh, for this question. So this Phase III study is the largest and the most comprehensive trial in VLU patients in the past more than 10 years. It's a very complicated and big study. It includes multiple collaborations throughout all the program levels. For example, we have multiple collaborations with PIs, with study sites, with all kinds of, say, wound care companies. We exposed only two collaborations, but there are more to come. We are collaborating with CROs with all kind of complex data management. These metrics or collaborations is highly complex, and it comes at the price of agility. So we want to make sure that in this trial, we are going to hit the endpoints. Therefore, we are not going -- there is the number of patients in -- VLU patients are big, they are more than $1 million -- 1 million patients in the United States every year. We don't want to recruit them very quickly in six months and then making mistakes in recruiting patients that are not ideal for hitting the endpoints. So we are planning for a conservative trial, and we know that we are able to execute and to hit all the endpoints.
Josh Jennings: Thank for that. And -- Sorry, go ahead.
Ofer Gonen: No, I just wanted to ask if I answered your question.
Josh Jennings: Yes. I appreciate that. The -- also, you've had success drawing interest from partners. Vericel now, MIMEDX and I'm going to [indiscernible] the pronunciation, but Molnlycke and all of that. And you mentioned in the -- in your prepared remarks and the press release just about being actively engaged with additional prominent companies for further collaboration opportunities. Is that referencing similar collaborations for the Phase III trial? Or are there other collaborations and potential partnership opportunities outside of the Phase III trial? Thanks for taking the question.
Ofer Gonen: So Barry, can you step in and address that?
Barry Wolfenson: Yes. We do have one or more within the Phase III study. But I would say outside of it that given the size of the enzymatic debridement market in the U.S. and its unique competitive landscape, EscharEx has definitely gained the attention of most of the key strategic players in the market. A topical debridement agent with the competitive advantages of EscharEx will be a significant step forward for patients and caregivers. And we, as a company are thrilled to have the funding to advance this program as quickly as possible and are confident that EscharEx has incredible potential to unlock significant shareholder value. And to maximize this value, we are committed ourselves to launching EscharEx in the U.S. upon its approval by the FDA. And so concurrent with the execution of the Phase III program over these next several years, we'll be taking every step necessary to prepare us for this meaningful launch. So that's where our focus is right now. And if there's anything additional to report about EscharEx, We will. I know Ofer mentioned with regard to MW005. We've got a good package of data right now, and we're confident that at some point here soon, we'll initiate a program to get some collaboration partners commercialization and research and development partners on that asset. And when we make progress on that, we'll report that as well.
Josh Jennings: Excellent. Thanks again.
Operator: The next question comes from Francois Brisebois with Oppenheimer. Please go ahead.
Francois Brisebois : Hi. Thanks for taking the question. Just a few here. So in terms of not necessarily enrolling, if you go too fast in the enrollment and you mentioned not enrolling the ideal patients, can you just help us understand what that would mean in terms of wound maybe?
Ofer Gonen: So we have successful robust three Phase II studies. And in those Phase II studies, we saw that EscharEx is very active. It deprives a wound within a week. It prepares the wounds for closure for 11 days. If you compare it to the gel vehicle, you see that it's a comparison for one week versus, I don't know, 30 days, and 11 days versus 85 days. So the gaps are huge. So we are quite confident that we are able to meet the milestones. Having said that, we don't want to recruit patients that decided, okay, I have a chronic wound, maybe I'll join the trial. And the wound is not that severe. And suddenly, the gel vehicle arm suddenly closes the wound. We don't want to be in a position. We want to be in a position that the results are very robust, very strong, and we are hitting all the relevant milestones. So we -- although we think and we can finish the trial quite quicker we will focus on enrolling the right patients with the right size of wounds that we saw in the Phase II trials that are -- that we are the best, the gaps between us and the gel vehicle is the largest, making sure that we hit the study because we saw in this market that once you have an approval, the numbers are amazing.
Francois Brisebois : Understood. And then in terms of the Vericel kind of issue, you mentioned that you don't expect an impact even if they don't expect to sell until 2024 on your revenues based on the potential to sell to the inventory to other partners. Is that an easy thing to do? Is that something that will require a lot of work? And then why do -- why should we feel comfortable that the next batches will not be affected by these variations? Thank you.
Ofer Gonen: Okay. So let me start with the last question, which is the easiest one. The next batches that will be manufactured will be tested directly by MediWound, not by this lab in Taiwan. MediWound is an approved testing site by the FDA. So there will be no issues. So therefore, there is 100% confident that the next batches will be fine. As for as for the revenues in 2023, 2024, currently, we have between 2 times to 3 times or two to threefold more demand of NexoBrid than we can supply. We are all time shifting between customers. Currently, we're keeping aside enough NexoBrid in order to support a successful launch in the United States. But if we see, in the coming weeks, that the issue with the FDA is not resolved. We are going to sell it elsewhere. We have the demand for that, and you can feel very comfortable about it.
Francois Brisebois: Thank you.
Operator: The next question comes from Swayampakula Ramakanth with H.C. Wainwright. Please go ahead.
Swayampakula Ramakanth: Thank you. Good afternoon, Ofer and Hani. A couple of quick questions from me. In your prepared remarks, you stated that Vericel [indiscernible] in discussions with the FDA to see if some of these concerns of theirs would be taken care of with the current batch. What do you -- where does -- where are those discussions? And do you think there's a decent probability that you could get through FDA on the current batch?
Ofer Gonen: Okay. So since Vericel and MediWound announced the recent announcement regarding the deviation, we have been engaged constructively with the FDA concerning NexoBrid. But of course, it is an agency so I cannot disclose what the discussions are. The only thing that I can say very confidently that we remain hopeful that the product will be commercially available in the near term. Other than that, I cannot disclose more details, but we are still engaged constructively with them.
Swayampakula Ramakanth: Thank you for that. And then in terms of the commercialization in Japan through your partner, what -- how is that going? And when do you think commercialization over there would start becoming meaningful to your top line?
Ofer Gonen: So, we believe 2024 will be meaningful for our top line. Again, as I said to Francois before, if you look at the orders from Japan, they are quite significant, we could sell all our inventory to Kaken if we wanted to. So let's see how they delivered. They just launched. We have orders lined up for 2023 and 2024. And in 2024, the numbers are quite significant.
Swayampakula Ramakanth: Very good. And then in terms of the manufacturing capacity expansion that you're planning to get started in 2024, would this capacity be sufficient to manufacture not only NexoBrid, but also EscharEx, once you have a successful Phase III study and going to commercialization of EscharEx.
Ofer Gonen: So it's a good question. Well deliberating about that all the time. So the current -- as I said earlier, we have at least two to threefold demand now more than we can produce. This is before we launched in the United States and before we launched in Japan. The new manufacturing facility will have the capacity of 6 times more than we manufacture now. If I need to guess and if NexoBrid’s revenues is going to be as significant as we expect, we might need to build another facility for the EscharEx launch, but we have some time for that.
Swayampakula Ramakanth: Thank you. And then one last question from me on EscharEx. Congratulations on having two partnerships in terms of having material from them for your VLU trial. Do you need the third partner also to sign up for this trial to get started? Or even if the third partner doesn't sign up before you get started in early 2024, you could still go ahead and initiate the trial?
Ofer Gonen: So before Barry jumps in, I will just say that as we said earlier, there are three components that are crucial for the trial. On all three, there was a very big competition between the largest and the most prominent advanced wound care players. I don't see -- it's a very theoretical question because we will sign another agreement in the coming few weeks. And we have a few backup plans, but I don't see a risk there. Barry?
Barry Wolfenson: Yes. To answer the question directly, no, the start of the study is in no way linked to whether or not we -- as Ofer said, we will have a collaboration. But regardless of that, the initiation of the study is in no way linked to securing that collaboration. If we wanted to just buy the product on our own and provide the education on our own, we certainly could do that.
Swayampakula Ramakanth: Okay. Thank you for taking the questions.
Ofer Gonen: Thank you.
Operator: The next question comes from Michael Okunewitch with Maxim Group. Please go ahead.
Michael Okunewitch: Hi, guys. Thank you so much for taking my question. Congrats on the progress this quarter.
Ofer Gonen: Thank you.
Michael Okunewitch: I guess to kick off, I'd like to follow up a little bit on the collaborations for the Phase III, in particular, could you talk about the nature of these collaborations. Does this -- is the benefit largely confined to the Phase III study and that consistency? Or are there additional commercial and/or marketing benefits to these collabs with leading products? And then, does it offset any trial costs?
Ofer Gonen: So Barry, maybe you jump in, and I will add.
Barry Wolfenson: Sure. Let's go in reverse. There are no -- if the question is, have we as part of these collaborations agreed upon any potential future current marketing rights to EscharEx, the answer to that is no. The collaborations are uniformly within the Phase III study. Our benefit is that, it helps to reduce our cash expense for the study, but more importantly, we have the best products in each of the categories and we'll get the training directly from the manufacturers. We as MediWound and our CRO will provide the training with everything related to the protocol and the running of the study. But when it comes to use of the products, specifically, they'll get direct training from the manufacturers, which again, in as much as we're trying to minimize any inconsistency or any variability that will be really helpful.
Ofer Gonen: If I may add, the fact that the largest players in the industry today are eager to take part in this venture, for us, it's a -- it's a great -- it shows a great promise of this study. We believe that success in this trial is set to propose the treatment scheme for the standard of care for many years going forward. And naturally, everyone wants to be part of this treatment scheme because we are speaking about billions of dollars. So no, we are not granting rights. But yes, all of them wanted to participate because they identify the promise of this study.
Michael Okunewitch: Yes. Thank you. That addresses my questions. Then I guess just one more follow-up. It's kind of a housekeeping question. Can you talk a little bit about where you are with the India launch, how that's going?
Ofer Gonen: Yes. We communicated last quarter that we got an Indian approval. It's a process that took us something like seven years. We have a strong partner there that already started training of physicians across India. We hope we got the first orders. We are -- we started to ship products to India as well. Having said that, the official launch in India is expected in the next few weeks.
Michael Okunewitch: All right. Thank you very much.
Ofer Gonen: Thank you.
Operator: The next question comes from Harold Weber with Aegis Capital. Please go ahead.
Harold Weber: Yes. Hello. Good morning, good afternoon. I'm just curious to hear some further stuff you had announced. You had over 40 approvals around the world and in Europe, how is that going forward?
Ofer Gonen: Hi, how are you. It's -- again, it's a very good question. We have 44 approvals around the world. It's quite a headache for our regulatory department in MediWound. As I said earlier, the demand is too big for our current manufacturing facility. We decided to prioritize, which means that we are focusing only on the big five countries in Europe. We are focusing on Japan and on the United States. We are still, as I said, engage with the FDA. As for the smaller countries, we let them know that unless we get a certain order of -- with certain magnitude, each territory is a little bit different. We are not going to ship them at this stage, and they will need to wait for another year at least until they can get the NexoBrid.
Harold Weber: Okay. Are you thinking about some alternative supply that you might be able to create in the interim between now and the new facility ramp-up?
Ofer Gonen: So unfortunately, construction of a manufacturing facility is only a year, and we are going to finish in the middle of 2024. But then we have some regulatory requirements, stability, all kind of validation of the manufacturing facility. It's not something that you can -- it's not a standard manufacturing process. It's a botanical drug. It is very complicated. No one in the world can do it without MediWound and MediWound's know-how. This means that we don't need at all to invest in marketing. We have the demand. Unfortunately, we are capped in 2024, in 2023 and most of 2024. Hopefully, after that we can supply all the demand that is needed. Currently, we are looking at it as if we are educating the market and creating the demand for the coming years.
Harold Weber: Thank you.
Ofer Gonen: Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ofer Gonen for any closing remarks.
Ofer Gonen: So thank you, everyone, for joining us today. We look forward to update you again on our next call. Thank you.
