MediWound: Managing A Position Ahead Of NexoBrid's PDUFA
Summary
- MediWound is preparing for NexoBrid's PDUFA date that is scheduled in June of this year. If approved, NexoBrid will be entering a $200M TAM with numerous benefits over the standard-of-care.
- I provide some background on NexoBrid and point out some key data points that support approval.
- FDA PDUFA events are binary events that create extreme volatility in the weeks leading up to the action date and after the FDA decision. I discuss my strategy for MDWD.
MediWound (NASDAQ:MDWD) continues to execute in the clinic, in the C-Suite, and on the balance sheet. Now, the company is waiting to see if the FDA will give them the green light to start executing commercially in the United States. The company’s lead product candidate, NexoBrid, has a PDUFA goal date of June 29th. If approved, NexoBrid will be pushed by MediWound’s commercial partner, Vericel (VCEL), which is actively preparing for a commercial launch to ensure a quick launch. Not only would an FDA approval be a major win in terms of the financials, but it would also validate the company’s technology. As a result, I expect to see an increase in volatility as we approach the PDUFA date. Investors need to have a game plan to manage their position around this binary event and possibly take advantage of the volatility.
I intend to provide some background on NexoBrid and what an FDA approval means for MediWound. In addition, I will discuss my strategy for managing a position around a PDUFA and will reveal my plans for MDWD as we move closer to June.
NexoBrid (Source: MDWD)
NexoBrid
NexoBrid is intended to be used to remove eschar in adults with deep partial- and full-thickness thermal burns. NexoBrid’s mechanism of action is a specific protolytic action that reduces the eschar, which is one of the primary hurdles in the healing process. NexoBrid is designed to prevent the shortcomings of surgical and non-surgical debriding procedures or treatments, which are inefficiently slow at removing the eschar and may involve complications. NexoBrid has been shown to significantly decrease the time to eschar exclusion which will allow the patient to advance to the next stage of wound closure faster than the standard of care. In fact, NexoBrid demonstrated its ability to remove only the burn eschar 4 hours after a single topical application. In addition, NexoBrid is able to outperform other options without damaging the adjacent dermis. What is more, NexoBrid is cost-effective by removing eschar earlier which could significantly diminish the requirement for expensive surgeries.
Figure 1: Eschar Review (Source: MDWD)
Essentially, NexoBrid has the potential to be a paradigm product in the management of severe burns with noteworthy benefits over the present standard of care.
Clinical Background
NexoBrid has been studied in over 550 patients in Phase II and Phase III clinical studies. A NexoBrid Phase III trial where patients were treated with either NexoBrid or standard of care. The study successfully demonstrated NexoBrid’s superiority to debride the wounds, much earlier than in the standard of care (2.2 days vs. 8.7 days from injury). In addition, NexoBrid was able to expressively reduce the number of excisions performed (24.5% vs. 70.0%), percentage of wound area excised (13.1% vs. 56.7%), reduce the number of autografts (17.9% vs. 34.1%), and percent of wound area autograft in deep partial-thickness wounds (8.4% vs. 21.5%).
Basically, NexoBrid crushes the standard of care in every key metric (Figure 2).
Figure 2: NexoBrid Data (Source: NexoBrid.com)
Commercial Outlook
Back in 2012, the EMA approved NexoBrid for removal of eschar in adults with deep partial- and full-thickness thermal burns, which has provided respectable revenue growth. The U.S. territory will be the top prize for NexoBrid with a total addressable market that is in excess of $200M (Figure 3). In addition, an FDA approval will trigger a $7.5M milestone from their North American commercial partner, Vericel.
Figure 3: NexoBrid Commercial Strategy (Source: MDWD)
Furthermore, the company has a strategic partnership with BARDA for NexoBrid, which the company and Vericel will continue to deliver throughout 2021. However, BARDA has the option to procure an additional $50M of NexoBrid.
It is important to note that NexoBrid has orphan drug statuses in the U.S. and EU that offer 7 and 10 years respectively of market exclusivity following approval. What is more, MediWound is looking to expand NexoBrid into the pediatric arena and expects top-line data in the second half of this year.
To sum it up… NexoBrid is expected to be a premier product in a large addressable market where it has roughly seven years of market exclusivity.
Downside Risks
MediWound has a few notable downside risks that investors need to consider. Firstly, is the potential of a secondary offering or another form of dilution. The company has a $21.6M cash position and expects its cash use in 2021 to be only $5M to $7M, so an offering is not imminent. However, the company just announced a new pipeline program, MW005, for basal cell carcinoma. Consequently, we don’t what the expenses will look like in the coming years and we won’t know if or when the company will become profitable. As a result, investors should accept the likelihood that the company could execute a secondary offering at some point in the future.
My last significant downside risk comes from the company's market segment and the lack of hype from investors. Wound healing isn’t exactly a headline generator and probably won’t demand the imposing valuations that we see in oncology, or gene editing companies.
Forming A Strategy
It is imperative that every investor have some sort of strategy for PDUFAs/approvals. These binary events can be a make or break for a small-cap biotech/pharma ticker because they are essentially the deciding vote whether the company gets to sell their product and generate some revenue.
My first step is to assess the product's likelihood of being approved and how important is that product to the company’s outlook. If the product has good prospects for approval and is the company’s first product on the market, I move my attention to the charts to determine if the market has “priced-in” an approval. By determining the likelihood of approval and examining market conditions, I can decide whether to buy, sell, or hold, heading into the PDUFA date.
It can be a great opportunity to buy when a ticker is being sold off ahead of a PDUFA despite the product having a strong likelihood of approval. On the other hand, if the ticker is hitting 52-week highs ahead of the PDUFA, and the likelihood of approval is slim, it might be a good time to sell just in case the company gets a CRL. The tough set-up is when the stock is coming into the PDUFA date with a neutral technical setup but the product looks like a shoo-in for approval. In this case, investors should evaluate their cost basis and long-term plan for the investment.
Admittedly, these ideas are fairly obvious but they help investors avoid “sell the news” events and getting caught in a “FOMO” incident. Or even worse, being a deer caught in headlights and watching a buying or selling opportunity dissipate. A great way to avoid missing out on some opportunities is to place some extreme limit orders to the advantage of both upside and downside moves.
"Beware Of" Scenarios
There are two scenarios that MDWD investors should be prepared for… one, the FDA announces their decision ahead of the PDUFA date, which can catch both longs and shorts off-guard. This can generate a drastic move in either direction as headline algorithms attempt to inflict max-pain to either bulls or bears. The second scenario is the possibility the FDA misses the PDUFA or informs the company they will not meet their deadline. Public health protocols due to the pandemic have delayed several manufacturing inspections, which in turn, has delayed FDA decisions/PDUFA dates. Obviously, these tickers were pummeled for the setback. Again, these could be great opportunities to manage a position or they could blindside you if you aren’t prepared.
My Plan For The PDUFA
I believe NexoBrid is extremely likely to be approved by the FDA. Of course, this will have a positive impact on the company's fundamentals but it may not bode well for the share price. Why? Well, because the potential approval has already been accepted by the market. I haven't seen any data that indicates NexoBrid will be rejected based on clinical data. So, I don't suspect there is a large mass of investors who are waiting for approval to click the buy button. Consequently, I am not anticipating a huge move in the share price following an approval announcement. Therefore, I am willing to make some small exchanges ahead of the PDUFA date.
At this time, MDWD is approaching the PDUFA date with a neutral trend (Figure 4), so, I am going to wait to see if there is going to be a PDUFA run-up or if bears want to do a front-side short. Either way, I am going to remain vigilant so I don’t miss an opportunity to book profits on a run-up or add on a "short attack."
Figure 4: MDWD Daily (Source: Trendspider)
Long-term, I am still looking to hold most of my MDWD position for the next five years in anticipation NexoBrid is able to become the standard of care and MediWound is able to get their remaining pipeline programs (Figure 5) across the finish line.
Figure 5: MediWound Portfolio (Source: MDWD)
If all goes well, MDWD could experience some significant growth in the coming years (Figure 6), which should have a positive effect on the share price. 
Figure 6: MDWD Revenue Estimates (Source: Seeking Alpha)
Admittedly, I don't expect MDWD to become a large portion of my speculative portfolio, however, it could be a great way to add some variety into my portfolio that is crowded with oncology, immunology, and gene therapy tickers.
This article was written by
Biologics is a full-time healthcare investor who developed a passion for biotech and life saving therapies after working in the medical field for years. His trade focus is around innovative companies developing breakthrough therapies and/or pharmaceuticals with catalysts for potential acquisitions.
He is the leader of the investing group Compounding Healthcare. Features of the group include: Several model healthcare portfolios, a weekly newsletter, a daily watchlist, and chat for dialogue and questions. Learn more.Analyst’s Disclosure: I am/we are long MDWD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (30)
No, I did not. In my case, about 40% of my meniscus was cut out in the middle. It ended the pain, but also ended my long-distance running. :-(As far as I can understand, MACI doesn't treat meniscus.
