Good day ladies and gentlemen and welcome to the MediWound Q4 2018 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will be given at that time. If anyone should require operator assistance, please press star and then zero on your touchtone telephone. As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Jeremy Feffer, Investor Relations. Please go ahead.

Thank you Candace and good morning everyone. Earlier today, MediWound issued a press release announcing its fourth quarter and year end 2018 financial results and business update. You may access that release on the website under the Investors tab. With us today are Steve Wills, Active Chairman of the Board; Gal Cohen, President and Chief Executive Officer; and Sharon Malka, Chief Financial and Chief Operations Officer. Steve will share an update on the discussions regarding a potential strategic transaction, Gal will provide an update on the company’s programs, and Sharon will summarize the company’s financial remarks and review upcoming milestones. 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 statement 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 the risk factors set forth in MediWound’s annual report with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. At this time, I will turn the call over to Steve Wills, Active Chairman of the Board. Steve?

Thank you, Jeremy, and good morning everyone. Before we commence with our operational and financial review, I would like to update everyone on our ongoing strategic discussions. As we have discussed in our prior earnings call, we’ve received approaches and engaged in discussions and diligence with several strategic parties on different strategic transaction scenarios. Following the DETECT positive top line results announced earlier this year, we continue to move ahead with the strategic process related to a potential transaction or collaboration which is in advanced stages in order to generate the highest possible value for our shareholders. The board continues to be advised by Moelis & Company regarding evaluation and assessment of all strategic options and avenues. We cannot give specific guidance as to how long these discussions will take nor can there be any assurance that a definitive agreement between the parties or any other agreement will be reached. We will be happy to answer questions during the Q&A session at the completion of our team’s remarks, but it is important to note that I’m limited in what I can say about this topic. Earlier this month, we announced that Gal Cohen will step down as President and CEO by the end of May. Gal has led this company for more than 12 years, during which MediWound has moved to the forefront of burn care worldwide. His leadership and dedication are worthy of our great appreciation, and before I turn the call over to him, I would like to thank him for his years of service and commitment to MediWound. We are fortunate to have Sharon Malka, our esteemed COO and CFO who has been with us for 12 years, ready to step into the role and take over the reins. I am confident that Sharon’s outstanding skills and deep history with and knowledge of the company will allow for a smooth transition to his new role as CEO. I will serve as Active Chairman of the company and will continue to lead the ongoing strategic process. We wish Gal well in his future endeavors and thank him for all that he has done. With that, I will now turn the call over to Gal. Gal?

Thank you, Steve, greatly appreciated. Good morning everyone. It is a pleasure to speak with you today. We appreciate you joining our call to review our fourth quarter and year end 2018 financial earnings and corporate update. As Steve mentioned, I have decided to step down after 12 years as the CEO of MediWound. It has been an exciting ride and a tremendous honor to work with this talented and committed group of people. I leave the company in very good hands. Sharon is a great fit and knows the company very well. I’m certain that Sharon will guide MediWound to the next level, and I wish him, Steve, and MediWound great success. Now for a review of our programs. We are progressing in our commercial plans and making significant progress on our clinical front. First, we announced positive top line results in January from our pivotal Phase III DETECT study in NexoBrid for eschar removal, where we met our primary endpoint and all secondary endpoints in patients with deep-partial thickness and full thickness thermal burns. Our DETECT Phase III study was one of the most comprehensive, randomized, controlled studies ever conducted in burn care with 175 patients randomized with a NexoBrid standard of care or the gel vehicle and involved 44 burn centers. We are looking forward to further advancing NexoBrid as it will meaningfully impact patients’ lives and has the potential to change the practice of medicine. We plan to ask the FDA in a pre-BLA meeting to allow for the submission of a BLA based on the acute results as they include the primary, the secondary, and the safety acute data. Subject to FDA concurrence, we plan to submit a BLA in the second half of 2019 and supplement the filing with 12-month long-term follow-up safety data…

Thank you Gal, and good morning everyone. I am excited for the opportunity to become MediWound’s CEO and to lead our talented team at this important time for our company. I would also like to thank Gal for his long tenure of leadership and dedication to MediWound and to our employees and shareholders. I have enjoyed working with him and wish him the best in his future endeavors. Turning now to our fourth quarter and year-end financial results, we are pleased with our financial performance in the fourth quarter of 2018 which was highlighted by growing revenues combined with disciplined cost management and with the continued support by BARDA. We reported revenues in the fourth quarter of 2018 of $1 million, an increase of 87% over the last fourth quarter. Revenues for the full year 2018 were $3.4 million, an increase of 36% compared with $2.5 million for the full year 2017. Gross profit was $0.3 million for the fourth quarter of 2018 and $1.3 million for the full year, reflecting a gross margin of about 40% compared to a gross profit of $0.1 million for the fourth quarter of 2017 and $0.9 million for the full year 2017. Research and development expenses for the fourth quarter of 2018 were $0.3 million, a decrease of 77% compared to last year as a result of a decrease of $0.5 million in gross research and development expenses and an increase of $0.4 million in participation by BARDA and the Israeli Innovation Authority. For the full year 2018, research and development expenses net of participation were $4.1 million compared with $5.5 million last year. The decreased compared to the prior year was as a result of an increase of $3.3 million primarily in NexoBrid clinical trial expenses and by an increase of $4.7…

[Operator instructions] Our first question comes from Raj Denhoy of Jefferies. Your line is now open.

Hi, good morning. Maybe I could start with the commentary around the cash burn for next year. I’m just trying to understand some of the moving parts around whether you’re going to be receiving any revenues from BARDA, and then how to think about the spending in the middle of the income statement. Are you imagining it’s going to continue sort of similar to what we’ve seen now in 2018 or do you expect that we’ll see actually a tick up in maybe R&D spending as you start to support some of the EscharEx trial work?

Hi Raj, it’s Sharon. Basically the 2019 [ph] estimated cash use is taking into consideration a part of the procurement of BARDA during the second half of 2018 [ph]. Regarding the R&D expenses, we believe that as we begin the EscharEx development plan in the U.S., the R&D expenses will increase and it will take part of our estimation for next year, while SG&A expenses will be around the same level as it was in 2018.

To put a finer point on that, so second half of the year, you’ll start to receive BARDA revenue. Are you thinking $4 million to $6 million? We had previously modeled $8 million in revenue from BARDA this year. How do we think about that now?

It probably will be around $4 million to $6 million in second half of this year.

Okay, that’s helpful. Maybe Steve, I could ask you some questions about the strategic process. I’m curious if there’s anything more you can describe about where we are in terms of the stage. Is it a question of still narrowing down potential suitors? Is it a question of what assets are being talked about? Is it simply a question on valuation? Is there anything more you can give us in terms of helping us understand the stage of the process?

Sure. At this stage, there is absolutely no question we’re in advanced discussions. I’m also at this stage not comfortable with stating exactly what those discussions are around. Nothing is finalized, nothing is absolute, Nostradamus has not called me back. We are still looking at all the assets - I mean obviously, NexoBrid being the most advanced asset is probably the cleanest and clearest because we have an approval in Europe and the Phase III results were quite positive, EscharEx being a bit further behind, from a development standpoint, not through Phase III, but definitely a very strong asset with a lot of interest. We really only have two primary assets with NexoBrid and EscharEx. We have a little bit more in the pipeline but those are absolutely even earlier stage. Last year, I think the first half of the year, whether it was in the second or third quarter, as we were advancing it came to the point that with the NexoBrid Phase III results just around the corner, it made sense to let’s just wait and see how strong the results are, and that, frankly, garnered a bit more activity, whether it was people that were interested and we were in current discussions, they were enhanced and advanced, and we actually had a few other people come over the wall to talk about doing something with us. At this stage, I’m comfortable that we’ve run a very comprehensive process, we’ve had some excellent assistance from the Moelis & Company investment banking folk, and we’re going to remain data driven and take a measured approach because we have options. I do look forward to giving very specific guidance, whether it’s next quarter or the quarter after. I think that’s the way I would frame it. I think at some point, you just have to decide which avenue you’re going to go forward with and get excited with that. I’m sure it’s not as responsive or as comprehensive as you would like, but at this stage, it’s really the best I can do.

No, it’s helpful. Maybe just my last question is sort of related to that, and while certainly sad to see Gal moving on, but when you think about Sharon now taking the CEO, CFO and COO role, it’s kind of unique to have all those concentrated within one person. Is that a reflection of your views that maybe this isn’t going to be a long-term situation perhaps?

No, no. We’re doing this in a sequential manner because we have some options. Because of Sharon’s history, greater than 12 years with the company and being the existing CFO and COO, we can transition Sharon into the CEO role very smoothly. Gal, as we’ve mentioned, is going to be available through May, and we’re starting the process to bring in a new CFO. But again from a sequential standpoint, we thought it’s absolutely best to let’s get the transition, Sharon moving in, Gal moving -- evolving there, and over the next several months, we’ll be advancing the process to bring in a new CFO at MediWound.

Okay, great. Thank you.

Thank you. Our next question comes from Bruce Nudell, SunTrust. Your line is now open.

Thank you for taking the question. I have two brief questions. First, would this new BARDA arrangement, if the data proves to be good, how should we think about kind of inventory stocking similar to the mass casualty event? Is this going to be a separate inventory stocking amount that the government will likely take on?

Hi Bruce, this is Gal. According to our discussions with the BARDA currently, since the current stock is being produced under what we call emergency authorization, rather than the commercial labelling, then BARDA will stockpile this inventory and once the product will become commercially available once we get the BLA approval or subject to FDA BLA approval, new stock will need to be produced for the market, which at this point in time can also serve under what we call a VMI to support a mass casualty event. In short, our expectations are that the $16.4 million that BARDA is committed to procure would be not with a commercial label product, and thereafter the commercial label product would replace it.

If I may add, Bruce, the second agreement, the new contract with BARDA currently does not include a procurement section, and probably this will be discussed later on when we advance our development plan of this contract.

Perfect, and Steve, just a quick follow-up, it almost seems as though an external gating event or some sort of thing is going on beyond the normal course of negotiations. Am I mis-apprised of that assumption? Is this just a regular but just protracted negotiation?

It’s actually the latter. There’s nothing special here. Since we’ve had both somewhat smaller, somewhat regional companies to very large global companies, they have different types of autonomy from an operations standpoint. The only reset that I think I would characterize as a little bit special is that we started discussions, negotiations after the initial approach in the first quarter of 2018. Since something didn’t happen very quickly, and it didn’t happen very quickly because we wanted to run a comprehensive process and, I mean, if somebody would have come in with a very significant pre-emptive outlier bid, we might have pursued it differently, but once we started getting into the comprehensive process, we were several months into the process and then the NexoBrid results were going to be announced. We weren’t going to be able to sign something and ascribe the value that we were looking for until those results came in, so you had a little bit of a reset when those--when that announcement came in, in December-January timeframe, and that has slowed it down a bit, not because of anything else or anything special, whether it’s internal or external.

Just a follow-up on that, in response to Raj’s question, it almost seemed as though the ball is in your court and you’re not waiting for other things, and you just need to decide what’s in the best interest of the company and shareholders, or am I mis-apprised of that as well?

No, that one I’ll give you. You’re one for two - that one’s accurately reflective. We have options, we have multiple options, and again I look forward to, whether it’s within the next quarter or the quarter after that, I think that’s the time frame I would bracket that we will announce what MediWound’s doing going forward regarding strategic process-slash-collaborations.

Thanks so much.

Thank you. Our next question comes from Josh Jennings of Cowen. Your line is now open.

Good morning. Gal, good luck on your next chapter and congratulations Sharon on your new seat. I was hoping to just start with Gal. I know we had a discussion two weeks when the announcement was made that you were stepping down, and I guess it might be just helpful to just hear again your decision to leave when a strategic event could be imminent, you just said maybe in the next quarter or two. It might be just helpful to review your decision process.

Absolutely, thank you. I feel at this point comfortable with where the company is today because of several reasons. One, I waited to see the DETECT results, and we were very, very happy to see that we practically met all endpoints - primary, secondary, the DS&B issued a report saying that the safety profile looks good, which practically paves the way for the BLA and lifts a little bit of weight off my shoulders. I think that the collaboration with BARDA is going very, very well now, very fruitful, very strong, and I think that we’re going to hear more about that going forward. Sharon has been working with me for many, many years, for 12 years. He knows the company very well. I did it on purpose - you know, he was the CFO, I appointed him as the COO, and I gave him more and more tasks and responsibilities to have a nice process going forward, succession process. I think at this point, the strategic process is going well, it’s in advanced stages, Steve knows well how to manage it - he did it already twice in Palatin and Derma Sciences. The company now is well funded - you know, we didn’t spend a lot of money in 2018. If you look at our initial guidance on spending and our final results, we saved a little bit of money, so we have enough money to go forward. After about a quarter of my life and based on the above, I feel comfortable to go to the next chapter of my life and pursue other opportunities, and at the same time, as Steve mentioned, I’m going to still be here until up to the end of May. MediWound is very, very dear to me so I’m not going away, I’m always one phone call away if my assistance is needed in any way. I’m available to contribute, so this is why I decided that this is a good time to do this move.

Thanks for that, Gal. I just wanted to follow up on EscharEx. I understand NexoBrid is front and center here just from a timeline perspective. I just want to make sure that you guys aren’t de-emphasizing the EscharEx opportunity, that you still look at that asset as the real long-term value creating asset in the portfolio. Maybe you could just help us understand with the timing with the FDA, it sounds like you’re going to start the trial in the first half, but anything you can share on the secondary endpoints and how that decision process played out would be helpful as well. Thanks for taking the questions.

Thank you, Josh. Thank you for the questions. So regarding EscharEx, you are absolutely right - we do not believe--we didn’t change our mind for one second that EscharEx is a great asset. We truly believe that this potentially, once approved if we meet what we want to gain with this product, we can get a product that can sell hundreds of millions of dollars. We have discussed with the FDA, as I mentioned in previous calls, we agree with FDA on the primary endpoint being incidents of complete eschar removal, like we did in the Phase II studies before, like we have in the Phase III program with NexoBrid. We agreed with FDA that wound closure would be a safety measurement that we need to show that we don’t have any impairment or deleterious effect on wound healing, as we had in previous Phase II studies with ExcharEx, as we had with NexoBrid in the Phase III program. Then we provide all the pre-clinical information or the [indiscernible] information which FDA already knows for NexoBrid and they--I think all the feedback is good, it doesn’t seem to say that we need to do any more pre-clinical work or the [indiscernible] is fine. Then we had a discussion with them and we offered them several secondary endpoints. Now, because this is a novel treatment and there’s not a lot of precedents and history with that, FDA asked for some more information on the secondary efficacy endpoints, and we have provided this information recently to the FDA as they requested. Subject to FDA concurrence, if we don’t see any surprise, we are prepared to initiate the program in the second half of this year. Does that address your question?

Thank you. Once again ladies and gentlemen, if you’d like to ask a question at this time, please press star, one. Our next question comes from Jay Olson of Oppenheimer. Your line is now open.

Hello, thanks for taking my questions, and thanks to Gal for all of his work. I wish you all the best and look forward to continue working with Sharon. You described the NexoBrid BLA filing, which is planned for the second half of this year. Is that something that’s well defined at this point in time or is that still subject to further discussions with the FDA?

Thank you, Jay, for the question. Thank you for your warm words. As we mentioned, we believe that based on the acute data that is available, that includes the primary, all the secondaries, practically all the safety information up to three months follow-up plus wound closure, which is in accordance with FDA guidance, their guidance was we had to do three months follow-up for wound closure, all this valuable information is available. The product is approved in Europe. FDA knows how we manufacture and control it, they saw the pre-clinical work. We already have a study in Europe that includes 89 patients that documents the cosmesis and function of the NexoBrid patients, showing that NexoBrid has at least as good, if not better cosmesis and function results. Because we don’t see any issues currently with infections and we don’t see any issues with wound closure in the results, we don’t think that there should be a big concern about long-term outcomes. With all this medical and regulatory logic, we intend to meet with the FDA in the second quarter and to discuss with the FDA the possibility to submit the BLA based on all this valuable information and to supplement the 12-month follow-up of the study during the early stages of review by the FDA. The 12-month follow-up, as I mentioned, mainly includes three things: cosmesis, function, and quality of life, which we already have data on from previous studies and which FDA should be able to receive very early on in their review process. This is our plan. If FDA concurs, we submit the file in the second half of ’19, the BLA, and we supplement the 12-month in the first half of 2020. If FDA will insist to get the 12 months, then we have to delay the process by about a quarter or two. This is where we are coming from and we hope that FDA will see eye to eye with us. We obviously cannot commit because we cannot speak on behalf of the FDA, and FDA has the tendency to have its own mind, so we have to see.

Okay, thanks for those additional details. When should we expect to see the full publication and presentation of the Phase III NexoBrid data?

As you know, FDA doesn’t work with what we call top line data. We have to submit the full clinical study report according to ICH [indiscernible] and we are preparing that, and the teams are practically working now to already generate the BLA. We believe that we will have this information for the FDA in the second quarter, and this is why we timed the meeting for the second quarter of this year. Now regarding what you call scientific publication, obviously out of that we need to write a publication or investigate and we need to write the publication, and we’ve got to go through a scientific publication process with a reputable journal, which takes time, that it takes to publish a paper about that on the review process of a reputable journal.

Okay, all right. Maybe if I could, just one financial question. It seems like your gross profit margins came down in the fourth quarter compared to the third quarter. Can you just help us understand how we should think about the gross profit margins for NexoBrid in the long term?

Hi Josh. Basically in 2018, the average gross profit during the early year was around 40%, and the situation between the different quarters is a result of the number of batches manufactured per quarter. Going forward, our gross margin will be comprised of two elements: the commercial gross margin and the BARDA procurement gross margin, which will be probably higher than the commercial one. Looking forward to 2019, we believe that we be around 50% on average, comprised of about 40% for the commercial part and about 60% for BARDA. On a steady state when we will utilize the full capacity of our manufacturing capabilities, we will end up with about 35% gross margin.

Great, thank you very much.

Thank you. That concludes our question and answer session. I’d now like to turn the conference back over to Sharon Malka for closing remarks.

Thank you. Thank you everyone for joining the call today. We look forward to updating you further on our progress in the near future. Have a good day. Thank you.

Thank you, everybody.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.