Good day, ladies and gentlemen. And welcome to the MediWound Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the floor over to [Jeremy Baver], please go ahead.

Thank you, Catherine, and good morning, everyone. Earlier today, MediWound issued a press release announcing third quarter 2017 financial results and business update. You may access that release on the Web site under Investors tab. Leading the call today is Gal Cohen, President and Chief Executive Officer of MediWound, who will provide an update on the Company's programs and review upcoming milestones. Then we will hear from Sharon Malka, Chief Financial Officer, who will summarize the Company's financial results. After the 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 event or otherwise. Participants are directed to the cautionary note 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. This conference call is the property of MediWound and any recording or rebroadcast is expressively prohibited without the written consent of MediWound. At this time, I would like to turn the call over to Gal Cohen. Gal.

Thank you, Jeremy and good morning, everyone. It is a pleasure to stick with you today to provide an update on our business and to review of our third quarter results. We continue to build on our first half momentum, and are progressing in our clinical development programs and commercial plans. During the quarter, we successfully completed a public offering of 5.04 million shares, including the over-allotment, from which we generated total net proceeds of $22.8 million from our major existing shareholders, as well as new investors. This financing provides us with resources to fund our research and development activities, primarily the clinical development of EscharEx. In addition, as communicated, BARDA committed an additional $32 million to fund NexoBrid R&D activities, bringing its total commitment to fund R&D to $56 million. BARDA also has an option to fund an additional $10 million of R&D walk. And in addition to that, the BARDA contract also calls for $16 million procurement commitment for NexoBrid, pending FDA emergence use authorization with an option to procure an additional $50 million. All-in-all, the deal with BARDA provides up to $132 million in non-regulative financing that will fully support our NexoBrid R&D costs up to BLA, including our ongoing Phase 3/b DETECT study in adults, as well as our Phase 3, pediatric study and its planned expansion to include pediatric burn centers in the U.S. Importantly, the upsize BARDA deal allows us to turn NexoBrid into a self funded opportunity as BARDA covers all its R&D program and we intend to correlate the sales and marketing expenses to the growth of NexoBrid sales. This will enable us to divert our liquidity towards our EscharEx opportunity. Moving to our clinical developments. We successfully completed the second cohort of our Phase 2 study evaluating EscharEx, our topical geological…

Thank you, Gal and good morning everyone. We are pleased with our financial performance in the third quarter of 2017, which was highlighted by our improved liquidity position and by growing revenues, combined with disciplined cost management. Most notably, we are thrilled with; one, BARDA’s increased commitment to fund NexoBrid development as part of financing we’ll now fully fund our development programs for NexoBrid; and two, with our recently successful public equity offering, which provided us with an additional $22.8 million in net proceeds to support our EscharEx pivotal program. Looking ahead, as NexoBrid becomes a sales funded product, we expect to focus our resources to fund our development programs for EscharEx. Turning now to our financial results. We are pleased to report that revenues in the third quarter of 2017 increased 43% to $739,000 up from $518,000 in the third quarter of 2016. Gross profit for the third quarter of 2017 was $400,000 compared to a gross profit of $44,000 in the prior year period. Research and development expenses, net of participations for the third quarter of 2017, were $0.8 million compared with $2.4 million for the third quarter of 2016. The decrease in net research and development expenses was primarily due to a decrease of about $0.5 million related to EscharEx clinical trial and non-clinical development, and an increase of about $1 million in participation by BARDA in the Israeli Innovation Authority. Selling, general and administrative expenses in the third quarter of 2017 decreased to $2.4 million from $2.6 million in the third quarter of 2016. Operating loss for the third quarter of 2017 was $2.8 million, down 43% from $4.5 million during the same period last year. The decrease was primarily due to improvements in gross margins and aforementioned decrease of about $1.8 million in operating expenses…

Thank you, Sharon. We look forward to continued progress during the remainder of 2017 as we continue to execute on our commercial and development programs. We will provide further update about our 2018 plans on our fourth quarter earnings call in February. And now operator kindly open the call for questions.

Thank you [Operator Instructions]. We’ll go to Bruce Nudell with SunTrust Robinson Humphrey.

Good morning, Gal. Thanks for taking the question. Clearly, NexoBrid is a very interesting product. It’s getting a lot of attention in the scientific clinical community. I guess, the question is, given the more cohesive reimbursement in the United States and perhaps more cohesive clinical practice pattern. Should we be thinking of NexoBrid worldwide three years post launch in the $50 million or $100 or $75 million range. I mean, where should we be thinking about the mid-term opportunity for NexoBrid, just given the frictions in the market that you've experienced in Europe as a counter-balance by how innovative the product really is?

As you mentioned, we do believe that in the U.S. market, things would look different because of, I would say, mainly four or five reasons. Number one, as you mentioned, it's one market, not 14 or 13 markets with different reimbursement systems. Secondly, by the time that we will come to the U.S. market, there will be about a quarter of the burn centers in the U.S. that have already practiced the use of NexoBrid so they detect other study and the pediatric study, both Phase 3 study are going to be recruiting patients in the U.S. In addition to that, when we will come to the U.S., all the data that has been generated in Europe will always be available, whereas unlike the situation in Europe. So we do agree with you that the situation in the U.S. is different than Europe because it's fragmented different reimbursement systems and different starting points. In terms of the overall, I will say, range that we can find ourselves with NexoBrid, I would say it's difficult to predict the future with all the changes that have been going on in the last two years, just in the U.S. alone. But I would say that in the ranges of tens of dozens of meetings, meaning anything between 50 million to 100 million in the U.S. can be a reasonable assumption based on what you would think about market share, price and things like that.

Perfect. And just to clarify with regards to chronic would trial. Basically you think you'll have enough cash on-hand to fully fund what was communicated and it's likely two trials with DFU and VLU trial. Is that correct?

Yes, I will turn the call to Sharon. Sharon can you please give the details.

So you are correct. We currently plan to have two factories rise, and the estimated cost as of today for those pivotal plan is about $40 million. The rate of that to fund this pivotal plan is as follows. Our cash balance, at the end of the year based on our guidance on cash use for '17, will be around to $35 million to $37 million. In addition, EscharEx is the project that is supported by the Israel Innovation Authority. And the expected support or fund from the Israel Innovation Authority is estimated at about $5 million to $7 million. And the third result is that BARDA procure procurement. As you remember, BARDA have a commitment to procure NexoBrid in the total amount of $16 million, which result as a contribution or a gross profit of about $12 million to $13 million. So overall, we are at cash resources of about $53 million to fund these pivotal plan going forward from the beginning of ’18. And that’s the reason we think we have the sufficient resources to end both the NexoBrid development program by BARDA funding and the EscharEx planned pivotal plan.

I would add that…

I guess it's, would you bootstrap, how you pay selling and marketing expenses in the U.S.? I mean, is that sufficiently self-funding, or is it at a rate anticipated?

The U.S. marketing for NexoBrid, we are considering the two alternatives that we have rather to replicate what we did in the Open hub, our sales force team on-ground and selling to the U.S. market is more focused than the European one. All collaborate with a local distributor, partnering with the local distributor, providing the marketing rights to him and not having investments for this -- building this infrastructure for selling. Anyway, even if we will replicate what we did in the Europe, probably we’ll build this infrastructure on stage wise process in order to correlate the investments we anticipated ramp up in the U.S.

And additional drivers that we haven’t mentioned are. First of all, when we talk about BARDA, Sharon mentioned the gross profit we have to remember that we don’t have sales and marketing expenses for BARDA. So the gross profit is relatively the contribution. And we do have registration files in many, many countries around the world, including Japan, South Korea and Mexico and so on so forth. These are also expected to generate revenues, going forward. And the period in which we will execute the pivotal program for EscharEx that’s in the next two-three years is at a time where we still most probably will not launch NexoBrid yet in the U.S. looking at the 2020 approval. So with this information, I think I hope that we’ll able to address your question.

Thank you. Our next question comes from David Maris from Wells Fargo.

This is Katie Brennan on for David Maris. Thanks for taking the questions. First, on the Polyheal ruling, it seems that part of the reason why you believe you weren’t required to make that milestone payment, was because Teva hadnt made it's milestone payment to you. Have you moved to receive those funds from Teva? And do you have any plans to try and recouperate some of that. And then on EscharEx, given that you think the cash balance will be enough to complete the Phase 3 clinical program. Can you give us any idea of what assumptions you’re making on what that clinical program looks like with the pivotal Phase 3 will entail? Or any expectations or when we might know more about that program? Thank you.

So as for the question about the Polyheal agreement, you rightfully said that we informed Teva of the occurrence of the milestones under the 2010 Polyheal agreements. Upon achievement of which, Teva was acquired to invest an additional $6.75 million in exchange for the company’s ordinary shares. And at this point in time, all we can comment is that we are continuing to evaluate the ruling and its legal accounting implications and looking at our options, including a potential appeal. All the rest, I think will need to be specified at the right values.

One add-on before Gal answer to address your second question, you just have to bear in mind that in terms of cash implication on the short-term probably in the next quarter, the implication of this will be about $1.5 million out of the $7.5 million, and the $6 million provision probably will be pending the appeal resolution and for the midterm -- the assumption of the EscharEx pivotal program…

So the key assumptions for the EscharEx pivotal program, we are looking to conduct two Phase 3 studies, one in DFU and one in VLU. Each study will help about 360 patients approximately also prescriptions are working to build into the study and in term look after about 200 patients. And at this point in time, the prospective statistical plan would tell whether we need to increase the sample size, the full 360 or part of that, or not need to increase, if at all. The primary end point of the study is going to be incidence of complete debridement versus the gel vehicle, the placebo and wound closure would be a safety measurement to assure that we don’t have any debatious effect on wound closure. So practically, we are replicating the Phase 2 study that we successfully completed and reported previously this year.

I have one quick follow-up on that. On the Phase 3, will it be using the EscharEx 2 formulation or the original EscharEx formulation?

So this study is planned for the EscharEx, not the EscharEx 2 formulation. Because as I mentioned, we are building the Phase 3 study on the results of the Phase 2 study that we have reported. So as we can power the end points and replicate the same effect that we did in Phase 2 now into Phase 3.

Our next question will come from Josh Jennings with Cowen.

I just wanted to follow-up with a question on EscharEx. Is there any forthcoming data that we should have in our radar in front of the IV submission and subsequent approval?

With EscharEx, I think that the next upcoming milestone would be the initiation of the pivotal program in the U.S. We are under process of doing all the operational activities that are required in order to do that. And we expect that next year we will be in a position to open the studies in the U.S. And I think that this would be the next -- catalyst or next major step in regards to EscharEx in the U.S.

I just want to make sure we were -- we have that clear and on the NexoBrid, just in terms of the reimbursement picture. Any updates that you can provide in any of the countries where you are commercialized and the cost-effectiveness paper helping this process. Are you digging up any new society support?

So again, in Europe as I mentioned, it's something that has to be looked at form a country-to-country perspective and sometimes even within countries. So I'll just give like a board overview, okay. In Germany, we are not going for a national level reimbursement. We are working through the hospital's budgets by creating, or we've created a budget index tool that shows the hospitals that they are compensated by the DRG. And they save money by using the product, as well as captured in the pharmacoeconomical paper that shows that with the use of NexoBrid, hospitals can save up to 30% of the cost of the DRG. In addition to that, the German Burn Association, so not a company but a German Burn Association submitted their request for what is called an OPS code for NexoBrid. This OPS code once is granted would enable them later on to document the use of NexoBrid and to trigger the DRG just by the use of NexoBrid. So this is a market access or reimbursement activities that are going on in Germany. In Italy, we have full reimbursement on the national level. And in Italy, you have then to go to each region in Italy and get that cleared out on a regional basis. We have started to do that last year. And by now, I would say, we have about two-thirds of the regions in Italy that we pass the whole critical process of getting this thing done and we’re able to generate orders from about two-thirds of burn centers in Italy. In England, we are not going to a national level reimbursement because of the other procedure. I will not go into all the details. So we have to go hospital-by-hospital and put the product on the formulary of the hospital. We are doing this process. And I would say that by now, more than half or about half of the burn centers in the UK are able to procure the product as soon they’ve a local formularies. In Spain, again, we are working through the hospital budgets and we are able to generate revenues of others, from most of the burn centers in Spain. These are the major countries.

And lastly, on potential near-term NexoBrid approvals, we’re thinking about some of those countries you mentioned, I think to answer an earlier question, South Korea, Mexico, Japan, India, Russia, as potential approvals in first half of ‘18. And how you’re thinking about launching in those countries, or do you have distributors lined up in those regions and if anything on the reimbursement front or any easier pathways in any of those territories? Thanks for taking the questions.

So, we do have distribution partners in all the countries that you’ve mentioned. We have distribution partners, in particularly or very large portion of Latin America already, Columbia, Brazil, Peru, Chile and Mexico and so on, Argentina. We have the submission partners in Russia, in India, in South Korea, in Japan, now also in Taiwan. And obviously, we are extending this effort to continue with that. The strategy behind it is that we don’t -- it doesn’t take part of our resources. We aren’t investing our own funds in doing so. This is a responsibility of the local partners. So the local partner is also leading the regulatory -- local regulatory submissions and the obtainment of market access in these countries. And this supports them scientifically. We first of all, provide them with the registration file. We address any questions that the authorities have about that that of the product. So we are relying on the plans of these distributors. The plans are, or according to the information that we got from them, we do expect to get additional approvals during 2018 in countries like you mentioned Russia, South Korea and so on. And as soon as we are informed that we have got that then we will able to report that obviously to the street.

Thank you. Our next question comes from Jay Olson with Oppenheimer.

I was curious about the improvement in gross margins we saw in the third quarter and then one of the earlier comments you made. And just in terms of how we should be modeling this longer term. Would I be right to think that your gross margins eventually for NexoBrid could get up to the 70% or 75% range for gross operating margins -- gross profit margins?

So first of all, yes, on the long-term on a steady state. The gross margin on NexoBrid will be around 75% to 80%. I'd say it’s in our results for the nine months 2017 a gross margin is around 40% for nine months. We believe it will be the same for this full-year 2017, but it will increase modestly between the years as rate or ramp-up of sales. And gradually get to these 75% to 80% on a steady state.

And then congratulations on all the data at the European Burn Association. Is there anything, in particular, you would highlight there that you think could drive growth into some of the European markets that you mentioned or perhaps in new markets, maybe some cost effectiveness or other data that you think could fill growth in those markets?

I think that there is larger value of information coming from so many experts with 43 presentations. But I would highlight two subjects, I would say. One subject is cost effectiveness. As I mentioned, we do have a budget impact too than we have, what is called an HDA model. But the fact that now they are local papers done by third parties that show that NexoBrid is cost effective with a paper from Italy showing reduction of 5,000 cures per patient, with a paper from Germany showing that NexoBrid can save up to 30% of the DRG cost. This is obviously very supportive when you come to discuss with the investment budgets, as well as with regional budget, as well as with local pharmacies and hospitals. So one big element is cost effectiveness. Another big element that I think will also be crucial as we go to the U.S. is long-term data. Long-term data, at the end of the day, is the wholly grail physicians want the patient to have a better long-term outcome, because the patient lives with that outcome for the rest of his life, it's not just the 30 days or 60 day or 40 days that a patient is hospitalized. Long-term data takes time to collect, because it's long-term. And we are starting to see now more and more papers showing that NexoBrid is able to generate better long-term results because these patients have been treated for several years now and now they can -- they are able to collect that. We've seen a paper from Germany that talks about faces and we've seen a paper from Italy comparing different case of long-term benefits that show that NexoBrid was superior to surgical debridement. Last but not least, I would say, one growth driver is the…

Thank you. Our next question will comes from Raj Denhoy with Jefferies.

This is Krishna on for Raj. Wanted to ask maybe the $340 million U.S. debridement market opportunity is certainly significant. But given that ExcharEx is still three years to four years away from market entry. How fast do you see that market growing today on an annual basis? And then how much of that $340 million today you see EscharEx as a specific product being able to address?

So first of all, unfortunately, we see a great growth in this market. It is reported that there is an 8% growth in the U.S. in chronic wounds due to obesity, aging and the diabetes. And practically, this is an epidemic that is going on. There’re $8.7 million Americans that have chronic wounds in the U.S. and we know that just in diabetic foot ulcers and venous leg ulcers, every year there are 1.3 million Americans. So the size of the market is huge and the -- unfortunately, it seems that this market is going to continue to grow, because of the factors that I mentioned. Looking at that market, as you’ve mentioned as the market debridement currently with the current level of efficacy that is that able to provide is already selling $340 million. In a market strategy we have conducted with 230 healthcare professionals sharing with them EscharEx was equal target for the total, what EscharEx is supposed to do was EscharEx actually did in a Phase 2 study, showing that we can remove the EscharEx in particularly less than two weeks and on average in four to five applications, which is particularly in the week. These experts tends to think that we can take a substantial part of the entire market. And when they talk about the entire market, they are not just talking about the market debridement, which is about 20% of the market they are also referring to the sharp debridement, which is about 60% of the market. And they are also referring to the, what we call autolytic debridement, which are the hydrogels and honey dressings and other means to do autolysis. So looking ahead with the way this market is going or the way this market is going to evolve, the need for evidence, going forward, the level of efficacy that EscharEx demonstrated in Phase 2 versus the existing efficacy of the current product, we particularly believe that this could be a very, very substantial opportunity.

Yes. So maybe following-up on that, what gives you -- if you could just remind us, what gives you the confidence to take market share from the incumbent [indiscernible] product? And if you could just remind us of the clinical and powerful economic benefits of using EscharEx in your view?

So the enzymatic debridement that are currently on the market, based on the publications, the scientific publications that have been published to the best of our knowledge take about four or six to eight weeks to debride a wound. In our Phase 2 study, we were able to show that we were able to debride 65% of these patients within, on average four to five application of about a week. And they’re talking about wounds, and if you look at these studies of the existing products, they’re talking about wounds of about 0.5 square centimeter and after 52 weeks of duration, we are talking about wounds that have been included in our studies of over 72 weeks of over 33 square centimeter. So the magnitude of the effect, should it replicate itself in Phase 3 studies and be able to be approved, is a different ball game. Now, let's look at this market, okay. Today, there are more than 100,000 Americans every year that lose a leg because of a small chronic would we can't heal; so physicians don’t want to send patient homes to six to eight weeks with treatment that might not provide them with advancement for weeks and weeks. And this is why 60% of these patients are going through sharp debridement. Despite the fact that these patients are elderly, they don’t heal well, they take anti-coagulated drugs and still physicians are doing sharp debridement. Now, let's look at the reimbursement landscape. What insurance company would like to send a nurse to a patient’s house for six to eight weeks, if they can send a nurse to a patient’s house for week or two weeks. Let's look at patients. What patients would like to apply the point self for six to eight weeks in order the compliance is a big issue in this market. When the progress is slow the patient loses fate. With EscharEx, again I'm just saying this is Phase 2, it's not Phase 3 and it's not approved product yet. But from the existing information as we have currently, if you are able to debride a wound within approximately a week, the patients sees progress almost on a daily basis. So it gives you the hope that it will be give him a hope and will make him more compliant to the treatment. Taking into account that unlike NexoBrid, in which we need to revolutionize the market with EscharEx, physicians in the U.S. are prescribing is the market debridement. Nurses and physicians are used to treat themselves in chronic wounds with enzymatic debridement. There is an existing reimbursement called in the market for debridement. There is a commercial validation with a product selling almost $340 million. It was approved in the 60s. All this information support by the market study that we have done in other information that we have give us confidence that EscharEx is a very exciting opportunity.

Yes. So just to follow-up on those numbers and we can talk about offline as well. So the $340 million of wound debridement for the chronic pain market, you’re saying is 20% is the total opportunity. So would you say, the total addressable market for EscharEx is closer to the $1.5 million or 1.5 billion, or above range? Is that the right way to think about it?

I can just quote the results of the market study that was conducted in 230 healthcare professionals. They believe that the market is divided as 60% sharp debridement, 20% enzymatic debridement and 20% autolytic debridement. They believe that we can take about close to half of this market and they refer to the entire market, the entire market. They don’t think that we are going to replace sharp debridement in the U.S. tomorrow morning but we’re certainly going to be an add-on either before or after and in some cases replacement. In terms of enzymatic debridement, which is $340 million, we discussed it. And as for the autolytic debridement, they also believe that we can take a part of that, because again this product has limited efficacy. And again, subject to the fact that we’ll be able to approve the drug in the U.S. and that the drug will meet in Phase 3 the same result that we met in Phase 2. So this is how they calculated it. They didn’t take into account, by the way, the use of this drug in additional indications because if you look at, for example, pressure source, postsurgical complications, these are not much different than other chronic wounds like diabetic foot ulcers and so on in many [departments] that has to with debridement. So looking at that, there is a huge, huge market out there and the commercial validation by the product itself, hundreds of millions of dollars.

Thank you. We have no additional questions. I’d like to turn the floor back over to management for any additional or closing remarks.

Thank you, Operator. And thank you everyone for joining the call today. We look forward to providing you with further updates on our fourth quarter call. Thank you very much, everyone. Have a good day.