MediWound - Q4 2023

Transcript

Operator (participant)

Good day and welcome to MediWound's Fourth Quarter and Full Year 2023 earnings call. Today's conference is being recorded. If you require operator assistance, please press star then 0. At this time, I would like to turn the conference over to Gaia Vasiliver-Shamis of LifeSci Advisors. Please go ahead.

Gaia Vasiliver-Shamis (Head of Investor Relations)

Thank you, Operator, and welcome everyone. Today, before the market opened, MediWound issued a press release announcing financial results for the fourth quarter and full year ended December 31st, 2023. You may access that release on the company 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 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 the cautionary note set forth in today's press release, as well as at-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 Ofer Gonen, Chief Executive Officer of MediWound. Ofer?

Ofer Gonen (CEO)

Thank you, Gaia, and good morning, everyone. Welcome to MediWound's fourth quarter and full year 2023 conference call. Joining me today are Hani Luxenburg, our Chief Financial Officer, and Barry Wolfenson, our Executive Vice President of Strategy and Corporate Development. Following our discussion of the financial results and business highlights, we will open the call for questions. I'm excited to share that we had a remarkable year. Our unwavering commitment to executing our commercial strategy of NexoBrid, coupled with our substantial operational excellence, has yielded revenue of $19 million. Furthermore, we are making significant progress towards initiating our phase three trial of EscharEx, a product which targets a $2 billion market. Utilizing the same proven active pharmaceutical ingredient as NexoBrid, EscharEx has demonstrated superiority over the current market leader in phase two studies. Let's begin our discussion with the major milestones we have achieved with NexoBrid in 2023.

NexoBrid had an exciting year on a number of fronts. It generated $19 million in revenue, which was primarily driven by its commercial availability in the United States, Japan, and India. Additionally, it received approval for pediatric use in Europe and is currently under review by the FDA for pediatric use as well. Moreover, NexoBrid continues to benefit from federal funding in the United States, supporting both emergency preparedness and ongoing research and development activities. The demand for NexoBrid currently exceeds our production capabilities. We are actively scaling up our GMP-compliant state-of-the-art facility, which is on schedule for completion by mid-2024. We anticipate achieving full production capacity in 2025. This expansion will enhance our production capabilities six-fold, enabling us to fulfill the increasing global demand for NexoBrid. Now let's discuss each of the drivers for NexoBrid growth in further detail.

NexoBrid was introduced to the U.S. markets by our partner Vericel at the end of the third quarter. Vericel is focused on building a strong foundation for NexoBrid by supporting P&T committee approvals. At the end of 2023, more than 50 burn centers submitted packages to their P&T committees, out of which over 25 centers gained committee approvals and nearly 20 centers placed initial product orders. Most notably, the clinical outcomes and the feedback from burn surgeons regarding the initial patient treated with NexoBrid have been extremely positive. This is a strong indicator of NexoBrid's potential to change the standard of care in eschar removal for patients with severe burns. As for commercial access, CMS granted NexoBrid a permanent J-code and transitional pass-through payment status. This became effective in January 2024.

NexoBrid has also successfully launched in two major markets: Japan through our partnership with Kaken Pharmaceuticals, and in India through BSV. Both launches have been progressing as planned and have generated further demand for NexoBrid. In Europe, we expanded our commercial activity by establishing a collaboration with PolyMedics, which will further facilitate greater NexoBrid usage in Germany, Austria, Belgium, the Netherlands, and Luxembourg. The transformative potential of NexoBrid as the new standard of treating of severe burns in emergency scenarios was highlighted during the war in Israel. Last October, we allocated our entire non-U.S. NexoBrid inventory to meet the critical demand for treating mass casualty burn incidents. NexoBrid proved instrumental in saving lives across both military and civilian sectors. This successful development has sparked increased interest from various global governments in stockpiling NexoBrid for future emergencies. Our partnership with the U.S. government remains solid.

We have secured $13 million R&D grant from the U.S. Department of Defense to develop and to manufacture a new formulation for NexoBrid that is stable at room temperature. This innovation is intended for the U.S. Army as a non-surgical treatment for traumatic burns on the battlefield. Additionally, we have received an extra $10 million from BARDA. This funding is designated for the replenishment of expired products previously procured for emergency readiness, along with supporting further R&D efforts. We have also received European Commission approval to broaden NexoBrid's label in Europe to include patients for all ages. Additionally, a supplemental BLA for pediatric use has been accepted for review by the FDA, with a decision anticipated later this year. Considering the pediatric patients, consider that those patients represent approximately 40% of all burn victims, this approval could substantially expand NexoBrid's market reach.

Overall, we are very pleased with the tremendous progress we have made with NexoBrid this year and the strong global demand we have experienced. As we enter 2024, the influx of orders for the entire year has allowed us to project revenues of $24 million. Looking ahead, we anticipate significant revenue growth exceeding 40% in the coming years, with revenue projections of $30 million for 2025 and $39 million for 2026. Now I would like to discuss EscharEx. We are fully aligned with both FDA and EMA on the phase III protocol evaluating EscharEx in patients with venous leg ulcers. The protocol submission is planned for the first half of this year, and we anticipate initiating the trial in the second half of 2024. This will be a multi-center prospective, randomized, and placebo-controlled global trial.

We aim to enroll 216 patients in over 40 sites that will be randomized 1:1 to receive either EscharEx or placebo. The trial will focus on two co-primary endpoints: the incidence of complete debridement and the indication of the incidence of wound closure. An interim assessment is scheduled after 67% of the patients have completed the trial. The study is estimated to take about 24 months to complete. The design of the trial is very similar to our successful phase two studies, and the chosen sample size provides 90% statistical power. We were excited to recently report the results of a head-to-head comparative analysis of EscharEx versus Santyl, and now I will hand it over to Barry, who will elaborate further. Barry?

Barry Wolfenson (EVP of Strategy and Corporate Development)

Thanks, Ofer. In our phase II study, EscharEx demonstrated superior results. Santyl, collagenase ointment approved in the 1960s, is the current leading treatment for enzymatic debridement of chronic wounds, generating over $360 million in sales in the United States. EscharEx, a complex mixture of enzymes targeting different components of non-viable tissue and wounds, typically works within 1-2 weeks. In contrast, Santyl focuses solely on collagen and often needs 4-8 weeks of debridement, usually alongside sharp debridement. The results of the head-to-head analysis are compelling and were achieved with robust statistical significance. Starting with the incidence of complete debridement, 63% of patients achieved complete debridement within two weeks with EscharEx versus 0% with Santyl.

Importantly, the estimated median time it took for EscharEx to achieve debridement during the full 85 days of the study was 9 days, while patients treated with Santyl didn't achieve the median time to complete debridement. Looking at wound bed preparation, which includes both complete debridement and also having the wound bed completely covered with granulation tissue, a critical step in wound healing, 78.3% of patients treated with EscharEx achieved it during the study versus only 37.5% of patients treated with Santyl. Once again, it was very quick with EscharEx, where the median time to achieve it was only 11 days versus no achievement of a median time with Santyl.

While the incidence of wound closure was favorable to EscharEx but not statistically significant in this small sample size, the average time to complete wound closure was only 48.4 days for EscharEx versus 76 days for Santyl, a full month differential, which reached significance with a p-value of 0.05. The safety profile was comparable between the two. We look forward to sharing this data at three leading congresses in the field that are taking place in May this year: the Wound Healing Society, the Symposium on Advanced Wound Care, and the European Wound Management Association. Thanks to the phase 2 promising results, we have garnered much interest from leading companies in the wound healing space and have established research collaborations to support the EscharEx phase 3 study with 3M, Mölnlycke, and MiMedx.

These three companies represent the top offerings in the product categories integral to venous leg ulcer care: compression therapy, advanced wound dressings, and cell-based products. EscharEx is a potential blockbuster, and the company is focused and committed to the successful execution of the clinical development program and to diligently performing all the pre-commercial activities required to ensure an optimal launch. With that, Ofer, back to you.

Ofer Gonen (CEO)

Thank you, Barry. To summarize, MediWound has made outstanding progress in 2023. NexoBrid was launched in three major markets. Its indication has been expanded to include the pediatric population in Europe, with further potential of pediatric use in the United States later this year. There has been continued commitment in grant funding from the U.S. government. All of these have driven an increased global demand, which we are on track to meet with the scale-up of our manufacturing facility. Our promising drug candidate, EscharEx, is gaining recognition for its potential in revolutionizing chronic wound care with validation from leading global wound care entities. We are eagerly anticipating the commencing of the phase III study in the second half of 2024. I'll now hand it over to Hani to briefly review our financials. Hani?

Hani Luxenburg (CFO)

Thank you, Ofer. Let me begin with our revenue for the first quarter. In the first quarter of 2023, the company reported revenue of $5.3 million, a decrease from $11.6 million in the first quarter of 2022. This decrease is mainly due to the BLA approval milestone payment from Vericel received in the previous year. Gross profit for the quarter was $0.7 million, or 13.5% of total revenue, compared to the $8.2 million, or 70.2% of total revenue, in the first quarter of 2022. The decrease in gross profit is largely attributed to the BLA approval milestone payment from Vericel in prior year. Turning to our operating expenses. The company's research and development expenses amounted to $1.8 million, a decrease from $2.7 million in the first quarter of 2022. This reduction is primarily due to the completion of the EscharEx phase II study in 2022.

Selling, general, and administrative expenses were reported at $2.8 million, slightly less than the $3 million in the same quarter of the previous year. The operating loss of the quarter was $3.9 million, compared to an operating profit of $2.1 million in the first quarter of 2022. The net loss was reported at $1.7 million, or $0.19 per share, which is a decrease from a net loss of $7.5 million, or $1.18 per share, in the first quarter of the previous year. This improvement in net loss is mainly due to a favorable adjustment from the revaluation of warrants. The non-GAAP adjusted EBITDA for the quarter was a loss of $3.2 million, compared to a profit of $3.4 million in the first quarter of 2022. This shift primarily results from the revaluation of the warrants. Now let's discuss the full year 2023 financial highlights.

For the year ended December 31, 2023, the company's revenue totaled $18.7 million, a decrease from $26.5 million for the year ended 2022. This decrease is once again primarily due to the BLA approval milestone payment from Vericel in the previous year. Gross profit for the year was $3.6 million, or 19.1% of total revenue, a decrease from $13.2 million, or 49.7% of total revenue, in prior year. The decrease in gross profit percentage reflects the absence of the significant one-time payment received in 2022. Research and development expenses for the year were $7.5 million, a decrease from $10.2 million in the previous year. This decrease reflects the completion of our EscharEx phase II study in 2022. Selling general and administrative expenses for the year increased slightly to $11.6 million from $10.6 million in the previous year.

The operating loss for the year was $15.3 million, compared to an $8.3 million loss in the previous year. The net loss for the year was $6.7 million, or $0.75 per share, compared to a net loss of $19.6 million, or $3.93 per share, for the year ended December 31, 2022. The non-GAAP adjusted EBITDA showed a loss of $12.3 million, compared to a loss of $4.4 million reported in the previous year. Regarding our balance sheet as of December 31st, 2023, the company's cash, restricted cash, and investments stood at $42.1 million, an increase from $34.1 million reported in the end of 2022. In the first quarter of 2023, the company successfully raised $27.5 million through a public offering. Throughout the year, the company utilized $70.1 million to fund its activity.

With the current financial standing, we believe the company's cash reserve is sufficient to support operations through profitability. With that, I have concluded the financial review and will turn the call back to Ofer. Ofer?

Ofer Gonen (CEO)

Thank you, Hani. To conclude, the company achieved significant milestones in the past quarter and in 2023 overall, and we are confident about 2024 and our future growth. We continue to prioritize increasing our manufacturing capabilities to fulfill both current and future orders and meet the rising demand for NexoBrid, and thereby grow our revenue by greater than 40%. EscharEx has demonstrated superior results over the dominant product in this over $2 billion potential market. As we look forward to initiating the phase 3 trial in the second half of 2024, we are delighted to have 3 research collaborations with the top wound care companies supporting us with this study. I'm excited about what the future holds for us as we stay committed to redefining the standard of care with NexoBrid and EscharEx. Now, I would like to open the call for your questions. Operator?

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one, on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Again, it is star, then one, to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Josh Jennings with TD Cowen. Please go ahead.

Josh Jennings (Managing Director and Senior Equity Research Analyst)

Thanks, and good morning. Congratulations on all the progress and the increased demand for NexoBrid. Ofer, I was just hoping to just a two-part question on NexoBrid first, but it just seems like the demand is surging globally. You're a US partner, but then also in multiple international markets. Capacity constraints are kind of limiting. Is there any way to quantify the increased demand that you're seeing here in 2024 versus 2023? I mean, we're assuming that the $24 million revenue guide would be high without capacity constraints and somewhere in between $24 million and the $39 million for 2026, that target. Any way to just give some incremental details or quantification of the increased demand for NexoBrid currently?

Ofer Gonen (CEO)

Thank you, Josh, for your question. To address that, I will just repeat that currently, we have threefold demand and more than we can actually manufacture. In the first week of 2024, we already got binding orders that actually filled the capacity that we have in 2024. Assuming that this demand continues as planned, we see the 40% growth as something that is very conservative, and our expectations and guidance is only limited by our ability to manufacture. So as long as we repeat our guidance by completing the construction of the facility in 2024 and having it in full scale sometime in 2025, we can meet those demands accordingly, and I hope I answered your question.

Josh Jennings (Managing Director and Senior Equity Research Analyst)

Yes. Thanks for reviewing that. Just one follow-up on EscharEx. Maybe just help us think about the final steps here that are required before getting full sign-off on the phase three study. Then also just on the manufacturing side for EscharEx, where are you there in terms of being able to deliver product for the full study as it kicks off in the second half? Thanks a lot for taking the questions.

Ofer Gonen (CEO)

So that's a very good question. So the reason that we start the trial in the second half of 2024 is primarily due to the fact that we focused on manufacturing NexoBrid, and in order to be able to meet the demands that we have from the United States, Japan, Europe, India, etc. The last thing that we need to do before initiating the trial is making sure that we're manufacturing enough batches of EscharEx. Actually, we are doing it as we speak. And then we need to wait 30 days for stability, submit the protocols that are already aligned with both the FDA and EMA, and then we can start recruiting patients. So for the clinical manufacturing, we don't see any problems. We are now getting ready for the commercial piece.

We don't want to be in a position that once EscharEx is approved, we are in the same situation as we are in NexoBrid. We want to be able to launch successfully EscharEx, supporting $multi-hundreds of millions of demand in the first one or two years of the launch.

Josh Jennings (Managing Director and Senior Equity Research Analyst)

Understood. Thanks so much.

Operator (participant)

The next question comes from François Brisebois with Oppenheimer. Please go ahead.

François Brisebois (Managing Director and Senior Analyst)

Thanks for the question. Just in terms of the design, can you remind us on EscharEx if it's based on the timing of the start of the trial here in the second half? Can you remind us maybe the timing and when it'd be realistic for us to expect the interim readout?

Ofer Gonen (CEO)

Thank you for the question, François. The trial, we need to recruit 216 patients that will be randomized 1:1 EscharEx versus placebo. After 67% of the recruitment and after those participants have completed the trial, we have an interim assessment. I would expect that something like 18 months after the study initiates.

François Brisebois (Managing Director and Senior Analyst)

Okay. Great. Thank you. And then in terms of the you talked about Vericel and the centers, a little bit of metrics there. 50 centers, 25, just the numbers. Can you maybe help us understand how many centers total are there for Vericel, and where do we stand?

Ofer Gonen (CEO)

So again, Vericel is responsible for the U.S. markets, so it's better to ask them that question. But what I can share with you is that there are around 100 centers that treat burn patients for adults. And once we get the approval of the pediatric population, there will be additional 30 centers that will be relevant. So all in all, in the United States, there are around 130 centers. Vericel already reported that by the end of last year, they were approached already 50. They got 50 committee engagements, 25 of them already approved. So I think that yeah, they're doing a very good job with that.

François Brisebois (Managing Director and Senior Analyst)

Okay. And just lastly, quickly, in terms of the shelf life, you talked about expiration, and obviously, demand can change depending on the expiration. How long does it take for your product to expire?

Ofer Gonen (CEO)

The shelf life of NexoBrid currently is almost 3 years. It's 2 years and 9 months. But as you can imagine, due to the fact that the demand for commercial. I'm not speaking about even stockpiling. For commercial use, it's such a significant we don't expect any expiration of NexoBrid product. Everything is going to be used. Everything that we ship, every vial of NexoBrid that is shipped to a customer is being used in the following few months. So expiration at this stage is not something that bothers us.

François Brisebois (Managing Director and Senior Analyst)

Thank you.

Ofer Gonen (CEO)

Thank you.

Operator (participant)

The next question comes from RK with H.C. Wainwright. Please go ahead.

Swayampakula Ramakanth (Managing Director and Senior Healthcare Analyst)

Thank you. Good morning, Ofer, and Hani. So I'm sorry, I mean. I also have a question on capacity in NexoBrid. Just trying to think through some of the projections you put out there for 2025 and 2026. So going to the far end in 2026 and with your projection of $39 million, what are you taking into consideration there? Are you taking that you will be able to handle all the demand that is out there at this point, or you're also including the projected growth from all these territories, whether it is US, Japan, India, pediatric approval, and the governments?

Ofer Gonen (CEO)

Hi, RK. Well, it's a good question. When we looked at the $39, we didn't plan on very significant growth of demand. We are looking at the current demand. We are looking at the performance on specific markets that we are already in. For instance, in Japan, their expectation was that we can increase quite substantially our shipments to them after one quarter of being in the market. So the product was accepted there extremely well. So as for 2026, the $39 million, we do not include all kinds of growth and unexpected positive surprises. It's only based on our ability to know that in 2026, we can meet all the demand that we currently have now. If we have surprises, this specific facility will be able to support more than $80 million in revenue. So we are okay with the scenario of unexpected growth.

Swayampakula Ramakanth (Managing Director and Senior Healthcare Analyst)

Fantastic. Then in terms of on the EscharEx side, Barry was saying there's going to be data presented in three different conferences in May. I just want to understand if there will be any updates in these conferences which can help us kind of figure out what to expect in the pivotal study, in the 216-patient study, which we probably will see some data, as you said, 18 months from the start of the program. It's probably more in 2026, I would think.

Ofer Gonen (CEO)

Let me elaborate a little bit on that. So as you can all figure it out, the strengths of this data of EscharEx versus Santyl were extremely robust. They position EscharEx to become the market leader in enzymatic agents for the treatment of chronic wounds. There is a lot of interest in the industry around this specific data that we have. But the FDA, I want to remind you all, the FDA is focused on the performance of EscharEx versus placebo. So we will issue additional data, and there is a lot of strategic interest about what we are going to present at the Wound Healing Society, at the Symposium on Advanced Wound Care, and at the European Wound Management Association. But it will not give you more color regarding our probability of succeeding in our phase III trial, which is supposed to be easier because it is versus placebo.

Swayampakula Ramakanth (Managing Director and Senior Healthcare Analyst)

Thanks. Thanks for taking all my questions. Talk to you very soon.

Ofer Gonen (CEO)

Thank you, RK.

Operator (participant)

The next question comes from Michael Okunewitch with Maxim Group. Please go ahead.

Michael Okunewitch (Senior Research Analyst)

All right. Thank you very much for taking my questions today, and congratulations on all the progress. I guess the first thing I wanted to ask is just with the acceptance of the pediatric sBLA, is there a similar thesis here for pediatric patients in the U.S. as you had with Europe, where you could see outsized utilization due to the nature of the pediatric burns market, or is that a unique feature of the European market?

Ofer Gonen (CEO)

I hope to understand you correctly. We received the European Commission approval and broadened the NexoBrid label in Europe last quarter, and now it is for all ages. It will not impact our immediate financial outcome because of the limitation of our capacity. So maybe the proportion between the treatments of adults and pediatric will change a little bit, but it won't impact our bottom line. In the United States, we expect the same. We had a very robust phase III study with pediatric patients. We believe that the FDA will not have different requirements than the European had. So as we guided, we expect to get this approval later this year. Again, the impact on future revenue is quite extensive because the proportion of pediatric population in the United States is approximately 30%-40% of the overall burn population.

Therefore, this label extension should significantly increase the addressable markets.

Michael Okunewitch (Senior Research Analyst)

I was asking more in terms of the greater degree of utilization because NexoBrid is more gentle and provides less scarring, as you said, with the European population, not in terms of immediate revenue.

Ofer Gonen (CEO)

I believe that if you look at how the standard of care in the United States was until a quarter ago, it is even painful to watch. Very aggressive, a lot of pain and blood associated. We believe that we have an ideal partner in the United States to take over this market quite swiftly, and it will be also adopted the same in Europe. I don't see a parent prefer that his child will go through a painful operation instead of being applied with a topical drug.

Michael Okunewitch (Senior Research Analyst)

All right. Thank you for that. And then I also wanted to see if you could give me any additional color on the timelines you're expecting for the DOD stabilized formulation. And then would this be limited to DOD sales in the program, or could this be applicable to foreign governments or first responders in more result regions or NGOs? Are there other organizations that might also seek to utilize a temperature-stabilized formulation?

Ofer Gonen (CEO)

So Mike, this is a very good question. So as I mentioned, we got $13 million R&D funding from the DOD to advance this project. We believe it can open the gates for us for additional armies as well as simplify our supply chain costs and administration moving from cold chain to room temperature. So the project is well underway. We have all kinds of very successful or encouraging results, and we are hoping to see the U.S. Army embracing the fruits of our collaborations in the next few years. We plan to have a meeting with the FDA next quarter to discuss the development path and to get some guidance of what is required in order to approve this product. I should also mention here that this product is, of course, under the license agreement with Vericel.

Any implication or any commercial activity in the United States, of course, it's subject to agreement with them.

Michael Okunewitch (Senior Research Analyst)

All right. Thank you very much. Once again, congrats on all the progress you've made.

Ofer Gonen (CEO)

Thank you, Michael.

Operator (participant)

At this time, these are all the questions we will be taking today. I would like to now turn the conference back over to management for closing remarks.

Ofer Gonen (CEO)

Thank you, everyone, for joining us today. We look forward to updating you again on our next call.

Operator (participant)

The conference has now concluded. Thank you for attending.