MediWound Ltd. (NASDAQ:MDWD) Q4 2021 Earnings Conference Call March 17, 2022 8:30 AM ET
Monique Kosse - Investor Relations
Sharon Malka - Chief Executive Officer
Boaz Gur-Lavie - Chief Financial Officer
Conference Call Participants
Josh Jennings - Cowen
Kevin DeGeeter - Oppenheimer
Ryan Zimmerman - BTIG
Swayampakula Ramakanth - H.C. Wainwright
Nathan Weinstein - Aegis Capital
Good day and thank you for standing by. Welcome to MediWound Fourth Quarter and Year End 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to Monique Kosse with LifeSci Advisors. Please go ahead.
Thank you, operator and good morning everyone. Earlier today, MediWound issued a press release announcing financial results for the fourth quarter and year ended December 31, 2021. You may access that release on the company’s 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 call 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 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 that 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 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 turn the call over to Sharon Malka, Chief Executive Officer of MediWound. Sharon?
Thank you, Monique. Good morning to our U.S. listeners and good afternoon to our listeners in Israel. Welcome to our fourth quarter and year end 2021 conference call to discuss our financial and operational highlights. We continue to execute well across all operating areas of the business in 2021, setting up 2022 to be a transformational year as we approach several important milestones throughout the year.
Starting with EscharEx, in January, we announced a robust top line data from our EscharEx U.S. Phase 2 study. The study met its primary endpoint with a high degree of statistical significance, showing a p-value of 0.004. Patients treated with EscharEx demonstrated a high incidence of complete debridement compared to the patients treated with the Gel Vehicle, 63% for EscharEx versus 30% with the Gel Vehicle. The incidence of complete debridement in the non-surgical standard of care arm, which was either autolytic or enzymatic modalities during the same measurement period, was 13%.
We are heading towards patient follow-up completion and expect to have the full dataset from the study next quarter. This will include secondary and exploratory endpoints as well as additional safety measurements, which will be used to guide and develop our Phase 3 program. In addition to the Phase 2 data, we also announced a preliminary positive data from the ongoing Phase 2 pharmacology study of EscharEx. EscharEx demonstrated safe and effective debridement of lower leg ulcers, both therapeutic foot ulcers and venous leg ulcers within few daily applications. Moreover, an evaluation of the tissue samples and fluorescence images indicated a reduction of biofilm and bacterial load following the treatment with EscharEx. We expect to have the full dataset from this study in the next quarter as well. We plan to present these results from those two recent trials at the Wound Care Scientific Conference soon. In the meantime, we are advancing in our preparation for an end of Phase 2 meeting with the FDA planned for the second half of 2022 in order to discuss the program results and the potential Phase 3 pivotal plan for EscharEx.
We are excited to bring EscharEx clinical development plan forward given the magnitude of its commercial opportunity, which is based on the following: first, we know that debridement is a critical component of wound care; there are about 2 million patients with VLUs and DFUs that undergo debridement every year in the U.S. alone; third, the two most commonly used non-surgical debridement method, enzymatic or autolytic, generates several hundreds of millions in sales every year, yet it can take weeks to show effect, leaving much room for improvement; and lastly, EscharEx, on the other hand, has shown in every trial we conducted to date to be safe and effective in debridement of hard to heal wounds with a few daily applications. EscharEx clearly has the potential to become a game-changing therapy and we are committed to bringing it to market. We believe EscharEx is well positioned to potentially become a best-in-class debridement option for millions of patients suffering from hard-to-heal wounds and transforming wound management.
Moving to NexoBrid program, we remain on track for a midyear resubmission of NexoBrid BLA, and we anticipate a 6-month review process, which would position NexoBrid for a potential approval by year-end and commercial launch in the U.S. in the first half of 2023. We continue to partner with BARDA and Vericel for the approval of NexoBrid and look forward to bringing this innovative product to the U.S. market as expeditiously as possible. To that end, BARDA expanded its contract, providing us with supplemental funding of $9 million to support the NexoBrid BLA resubmission and the ongoing expanded access treatment protocol which will run through approval. In Europe, we gained clarity on a regulatory path towards a pediatric label extension for NexoBrid from the European Medicines Agency through a scientific advice. We plan to submit a pediatric label extension for NexoBrid next quarter, which will be based on the robust available safety and efficacy results of the pivotal Phase 3 pediatric clinical study with its 12 months follow-up.
Commercially, we continue to see burn centers across Europe embrace NexoBrid as their standard of care. As a result, we have seen NexoBrid revenue showing consistent growth and are now achieving profitability in our commercial operations. Our commercial efforts will continue to grow as we continue adding marketing approval worldwide. In this year, we anticipate additional marketing approvals in Japan, India, among others. Lastly for NexoBrid, we were encouraged by the U.S. Department of Defense research grant for the development of NexoBrid as a non-surgical solution for field care burn treatment for the U.S. Army. This research project, if successful, could open the gate for armies all over the world as well as simplify our supply chain for NexoBrid. For us, it was yet another vote of confidence in our technology platform, and NexoBrid in specific.
Our cash balance is sound with the additional of $10 million rate recently in a public equity offering. The funding improves our liquidity as we approach our planned near-term catalyst and facilitate our efforts as we realize the potential of our pipeline. The current cash balance is sufficient to fund currently anticipated operating activities for at least the next 24 months.
Before I turn the call over to Boaz to discuss the details of our financial results, I want to thank our study participants, their families, and our clinicians for their participation in our EscharEx clinical trials. I also want to thank our Board and our shareholders for their commitment and support. We are looking forward to the coming months as we approach several important milestones. And now I would like to turn the call over to Boaz for a summary of our financials. Boaz?
Thank you, Sharon, and good morning, everyone. First, I’d like to reiterate our continued product revenue growth from both the U.S. and the ex-U.S. market as NexoBrid continues to gain traction into new territories and increased its operational profitability in 2021. We also improved significantly on our liquidity position with the addition of BARDA funding and the recent fundraising.
Moving now to our financial results. Total revenues for the fourth quarter of 2021 were $5.5 million compared to $6.6 million for the first quarter of 2020 due to decrease in BARDA’s emergency stockpile procurement and decrease in revenues from services to BARDA, resulting from the completion of the tech and pediatric clinical programs. Total revenues for the year of 2021 were $23.8 million compared to $21.8 million in 2020, an increase of 9%. Product revenues in 2021 were $11.4 million, which reflects an increase of 46% compared to product revenues of $7.8 million in 2020, primarily driven by BARDA emergency stockpile procurement and increased sales in Europe.
Gross profit for the fourth quarter of 2021 was $1.5 million with a gross margin of 28% compared to a gross profit of $2.3 million and gross margin of 35% for the fourth quarter of 2020. Gross profit for the full year of 2021 was $8.8 million with a gross margin of 37% compared with a gross profit of $7.5 million, with a gross margin of 35% in 2020.
Operating expenses for the quarter were $5.1 million compared to $4.7 million for the prior year period. For the full year, Operating expenses were $20 million compared to $16.4 million in 2020, primarily driven by $2.5 million of R&D investment in EscharEx Phase 2 study and one-time G&A expenditure of $0.6 million. Operating loss for the quarter was $3.5 million compared to a loss of $2.4 million in the fourth quarter of last year. For the full year of 2021, operating loss was $11.2 million compared to a loss of $8.8 million in 2020, primarily due to increase in research and development expenses.
Net loss for the quarter was $4.2 million or $0.15 per share compared to a net loss of $1.7 million or $0.06 per share for the first quarter of 2020. For the full year of 2021, net loss was $13.5 million or $0.50 per share compared to a net loss of $9.2 million or $0.34 per share for the prior year period. Adjusted EBITDA reflected a loss of $2.9 million compared to a loss of $1.8 million for the fourth quarter of last year. For the full year of 2021, adjusted EBITDA was a loss of $8.3 million compared to a loss of $6.4 million in 2020.
Moving to our balance sheet highlights. As of December 31, 2021, cash and short-term investments were $11 million, and in 2021 the company utilized $10.6 million to fund its ongoing operating activities. The company recently completed an equity financing of $10 million in gross proceeds, strengthening its cash position, and we expect it to be sufficient to support the currently anticipated operating activities for at least the next 24 months. For 2022, we expect cash yield to be in the range of $11 million to $13 million.
With that, I have concluded my financial overview. And we now turn the call back over to Sharon. Sharon?
Thank you, Boaz. This year has started off positively for us already with the announcement of EscharEx Phase 2 topline data, and we look forward to continued good news throughout this year, as we near several important milestones, including: Our full dataset from U.S. Phase 2 studies in EscharEx; the clarity on the Phase 3 study design for EscharEx; our resubmission of NexoBrid BLA; and the potential approval of NexoBrid BLA towards the year-end.
With that, it is my now pleasure to open the call for your questions. Operator?
Thank you. [Operator Instructions] Our first question comes from Josh Jennings with Cowen. Your line is now open.
Hi, good morning, Sharon and Boaz, thanks for taking the question. And congratulations on those Phase 2 EscharEx results. I wanted to ask about the EscharEx path forward here. Just with this upcoming meeting with the FDA, how should investors think about the profitability still existing that the U.S. trial data that you’ve generated or mostly the files also in this year of the Phase 2 study will potentially be able to be used as one of the two pivotal studies you need for FDA approval? And then following this, meaning do you expect to know definitive scope of the Phase 3 program? Is that – how we should think about this FDA meeting? And I have one follow-up on the Phase 2 trial. Thanks.
Sure. Thank you for your question, and good morning, Josh. As communicated before, we are heading towards the study completion, the follow-up completion and anticipate the full dataset in the coming quarter. The additional data, of course, will include the full dataset, including secondary exploratory and all additional safety. And based on that, we expect to reach out to FDA. And as for an end of Phase 2 meeting to discuss the next stage based on the results. Currently, it’s yet premature to share information about the next stage, given the fact that we did not have yet the discussion with the FDA. And as a data-driven company, I think that the discussion will be based on the data we will generate from the ongoing two Phase 2 studies, which will enable us to either use and leverage the ongoing Phase 2 study to be deemed as one of the adequately controlled studies for a registration, or to have two Phase 2 studies that we will conduct probably with two indications, if you file in tandem. But again, it’s premature yet to share this information.
Understood. Thanks for that. And then just last question on the Phase 2 trial, we just wanted to see if you could remind us on what we will see for the head-to-head comparison with non-surgical enzymatic debridement. Can you just remind us how many – roughly how many patients will be in the sample group, and as the comparison EscharEx being run for non-inferior superiority in terms of that sales to group versus EscharEx? Thanks again for talking the questions.
Yes, sure. No problem. So in general, we treated 119 patients in this study, of which 46 patients was in the EscharEx arm, 43 patients in the Gel Vehicle arm and 30 patients in the non-surgical standard of care arm. The non-surgical standard of care arm was comprised of either autolytic and enzymatic, as you know, enzymatic stands for the SANTYL ointment and autolytic stands for hydrogel, hydrofilms etcetera. The current information that we reported was that during the 14 days of measurement for debridement, the non-surgical standard of care achieved 13% as opposed to the 63% we achieved with EscharEx in the same period after maximum 8 daily application. What I can share with you is that SANTYL is probably one-third of the non-surgical standard of care comprised of one-third of the non-surgical standard of care. And looking forward, we expect to analyze time-to-complete debridement, number of applications between the different arms and, of course, all secondary endpoints, wound area reduction, granulation tissue and quality of knife will be also compared to the non-surgical standard of care arm.
That’s great. Thanks, Sharon.
Thank you. Our next question comes from Kevin DeGeeter with Oppenheimer. Your line is now open.
Hi, great. Thanks for taking my question. I want to start with the pharmacology data and specifically the biofilm finding. First off, do you have a specific venue in mind for the second quarter in terms of where that data may be presented? And in terms of interactions with regulatory agencies in the second half of 2022, I mean how should we think about the potential biofilm findings here in terms of – do you think there is a specific secondary endpoint that is amenable to capturing that potential benefit or should we, on a comparative basis – or should we think about that as primarily data that could be presented in the clinical data section, the pharmacology section, but not necessarily on the label – but not necessarily a primary or secondary endpoint in a registration strategy?
Thank you, Kevin, for the question. So as you know, we reported initial data from this study that on top of the debridement, the effective and safety brand and demonstrated reduction in the biofilm and microbial load, we will continue to analyze the additional patients that were treated to date, and we plan to treat up to 15 patients and also measure fluid for biomarkers for wound progression. We believe that the data, first of all, will be supportive of pharmacology data to be included in the clinical part of the EscharEx. But considering the results and if we will replicate it with the full dataset, I assume that we can incorporate it in the Phase 3 program as part of the endpoint of the Phase 3 program.
Great. And then just maybe one housekeeping question. Boaz, your cash burn guidance, just clarify that includes or excludes a potential milestone from your partner, Vericel on a NexoBrid approval?
So, the cash that we indicated, together with the BARDA funding and the recent fundraising will surpass with the next 24 months. It is including the BLA milestone payment from Vericel of 715, which is expected to be received in Q1 of 2023.
Great. Thanks for that.
Thank you. Our next question comes from the line of Ryan Zimmerman with BTIG. Your line is open.
Good afternoon. Thanks for taking the questions Sharon and Boaz. I want to start with actually NexoBrid and just ask, international has grown – the adoption internationally has grown nicely. What kind of expectation and ramp should we think about potentially when NexoBrid is cleared in the U.S. and how fast that could that start to achieve scale potentially in the U.S.?
Thank you, Ryan and good morning. So, as you know, for the U.S. market, we do have the collaboration, the commercial collaboration with Vericel, which are responsible for commercializing NexoBrid upon approval. And we do believe that the U.S. market is the primary market for NexoBrid. Given the data coming from Europe and NexoBrid becoming standard of care in key brands such as in Europe, given the fact that we are running now an expanded access program in the U.S., where we treated already more than 140 patients and generated a lot of positive data and hands-on experience with NexoBrid, we do believe that the uptick in the U.S. will be quicker and faster compared to what we had in Europe, enabling Vericel to achieve substantial share from this market pretty fast. Regarding out – ex-U.S., we will continue to see growth in EU and other international markets, while we are expecting to get more and more marketing approvals. And as mentioned before, we expect to have additional marketing approval in key markets, i.e., Japan and India during 2022 that can boost the revenues worldwide. To that end, we can also add the fact that we plan to submit the pediatric label expansion in the second half of this year. And given the fact that the pediatric population is accounting for about 25% to 30% of the overall burn population, this can be another growth factor for revenues ramp-up.
Got it. And that pediatric label expansion, you are referring to the U.S., not internationally, in Europe?
So, we will start, of course, with the pediatric label expansion in countries where NexoBrid is already approved for adult, then we can extend the indication to include also pediatric is, of course, Europe and all countries that are based on the European file where we – next with already approved. And in the U.S., it will follow the approval. First, we have to get the approval after the resubmission of the BLA. And following – receiving the approval for adults, we will ask for label expansion also in the U.S.
Got it. And Boaz, just on the gross margin this year and this quarter specifically, if you could just speak to kind of what kind of led to that pressure and how you think about gross margins as we move into next year? Thank you for taking the question.
Yes. Hi Ryan. Thanks for the questions. So, overall gross margin for 2021 was 37%, which had a slight improvement from the 35% which we had in 2020. That was driven by revenues increase of 9%. If you are drilling down from gross margin for the product and – it decreased to 55% from the overall 60%, and that was even from a composition of revenues. We had a higher portion of revenues from BARDA procurement, which as you know we are paying royalties to Vericel. That impacted as a gross margin slightly by 500 basis points to the 55%. Looking into 2022, as Sharon indicated, we are in completion with BARDA procurement throughout the first half. And we are expecting the rest of the world, ex-U.S. revenues to ramp up. So, we believe we should keep the gross margin at around 60%.
Okay. Got it. Thank you. Appreciate it.
[Operator Instructions] Our next question comes from Swayampakula with H.C. Wainwright. Your line is open.
Thank you. Good afternoon Sharon and Boaz. This is RK. A couple of quick questions. The first one is on EscharEx. Just trying to understand a little bit more about the market potential in the United States. Is there some commentary you can give us on how – on what do you think the market is? As you said, the current SOC doesn’t really work. So, I am just trying to understand where could you come in, in terms of pricing? How do you expect growth in the U.S. market? Thank you.
Sure. Thank you, RK, for the question. In general, we are very excited with the EscharEx potential, given the magnitude of its commercial opportunity. And the key reason for that is as follows. First of all, we all know that debridement of those wounds and necrotic tissue is a critical component of wound care. In the U.S. alone, there are about 2 million patients with various venous leg ulcers and DFUs that undergo debridement every year. And given the current cost of treatment of the enzymatic debridement product available in the market, the addressable market is estimated at about $1.5 billion. The two most commonly used non-surgical debridement methods are either enzymatic, which is the Santyl ointment and the autolytic debridement, which can take weeks to show effect. Yet, it generates several hundreds of millions in sales every year, leaving much room for improvement. And EscharEx, on the other hand, are shown in every trial to-date to be effective and safe in debridement of those wounds in less than a week in few daily applications. That is why we believe EscharEx has the potential to become a game-changing therapy. And we believe that EscharEx cannot only replace the current enzymatic product, but also expand the current enzymatic use across all sites of care and take a big portion of this segment. And we do believe that EscharEx is well positioned to potentially become the best-in-class debridement option for those millions of patients suffering from hard-to-heal wounds.
Thank you for that. Then on NexoBrid, in general, your utilized distributors of third-parties to commercialize your product in Europe and elsewhere. So, when we think about these new geographies that you are talking about, Japan and India, is that the same strategy you would be utilizing, or do you plan to forge any relationships with somebody who can co-promote with you in these new geographies?
So, our international – our global strategy for NexoBrid is based on collaboration with local distribution. Internationally, we are collaborating with local distribution worldwide we are focusing with LatAm, Asia Pacific, in the CEE countries and the GCC. The local distributor is responsible to get the product approved and leverage his local expertise with market – with reimbursement market access as well as with the regulatory process to get the product approved. And then commercialize the product, while we imply a cost or price revenue share mechanism between the distributor and MediWound.
Okay. Thanks. And the last question for me, with Israel opening up in terms of travel into the country with little or no restrictions, is – are you seeing any FDA inspections going on in Israel right now? And so you feel comfortable that when it comes time for NexoBrid, we should not have any issues.
Yes. So, it’s a little premature at this point to speak on behalf of the FDA. But what I can show you is as follows. We do believe that travel restoration, as you said have eased, worldwide, and in Israel. And we do know that some inspections outside the U.S. are now occurring. We are also familiar with one inspection in Israel. So, we are optimistic looking forward.
Perfect. Thank you very much for taking all my questions.
Thank you. Our next question comes from Nathan Weinstein with Aegis Capital. Your line is open.
Thank you. Good morning Sharon and Boaz. Thanks for taking my question. I just had one question this morning, and that was about MWPC005 in non-melanoma skin cancer. Any updates you could share? Just remind us what the outlook could be in that product?
Sure, Nathan. Good morning. So, as you know, we initiated a Phase 1/2 clinical study for the treatment of basal cell carcinoma on low-risk basal cell carcinoma in the U.S. This study is designed to evaluate the safety and tolerability of 005 using different schedules of administration as well as to provide us with the preliminary evaluation of its efficacy as will be measured by the percentage of target lesion with complete histological clearance. The design of this study is based on clinical case series that was published in a peer-reviewed paper. And we are looking forward to have the data from the first cohort of patients by mid-year 2022.
Great. Thanks so much.
Thank you. And I am currently showing no further questions in the queue. I would like to hand the conference back over to Sharon Malka for closing comments.
Thank you. Thank you everyone for joining us today. We look forward to updating you again on our next call. Thank you and have a great day.
Ladies and gentlemen, thank you for your participation. You may now disconnect. Everyone, have a wonderful day.