Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter Mediwound 2019 Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeremy Feffer with Investor Relations. Please go ahead, sir.

Thank you, Sydney, and good morning, everyone. Earlier today, MediWound issued a press release announcing financial results and provided a business update for the fourth quarter and full year of 2019. 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 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 the 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 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. 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 expressly prohibited without the written consent of Mediwound. Now I would like to turn the call over to Sharon Malka, Chief Executive Officer. Sharon.

Thank you, Jeremy. Good morning to our U.S. listeners, and good afternoon to our listeners in Israel. We appreciate you joining our call to review our fourth quarter and year-end 2019 financial earnings and corporate update. 2019 was an extremely productive year. And we are very encouraged as we look back at our accomplishments for the year. We are very pleased to be here today to provide an update on our progress. To begin, we generated total revenues of $31.8 million in 2018, a testament to our execution with a Vericel license and supply agreements, data development services and sales in Europe and other international markets. We are also proud to report that NexoBrid has become a cash flow positive product in 2019, and we expect it to continue support our balance sheet going forward. In our NexoBrid program, we had meaningful progress forward with the signing of commercial license and supply agreements in the U.S. with our partner, Vericel, which we believe is well positioned to leverage the medical need and to maximize the commercial potential of NexoBrid in North America. We are looking forward to filing a BLA with the FDA targeted for midyear 2020, in tandem with a commercial launch preparation. We expanded access in the U.S. with an NexoBrid expanded treatment protocol is up and running, allowing for the continued clinical use of NexoBrid for U.S. patients during the preparation and review of NexoBrid BLA. Recently, BARDA has begun procuring NexoBrid for emergency stockpile as part of the U.S. Department of Health and Human Services mission to build national preparedness for public health, medical emergencies. The initial BARDA procurement is valued at $16.5 million and the purchased inventory will be managed by MediWound under vendor managed inventory. We are currently manufacturing the emergency stock with the…

Thank you, Sharon, and good morning to our U.S. listeners and good afternoon to our listeners in Israel. We are pleased to provide you with an update on our fourth quarter of 2019 financial performance, which was highlighted by growing revenues combined with disciplined cost management and with the continued support by BARDA. The financial results of 2019 was significantly driven by the license and supply agreements with Vericel, for which we received $17.5 million upfront license payment that was recognized as revenues from license agreements. As a result of the Vericel license and supply agreement, we now generate also revenues from development services provided to BARDA as funding by BARDA is classified as revenues from development services. We're also very proud to report that NexoBrid has become a cash positive product in 2019, and we expect it to continue to support our balance sheet going forward. Turning now to our financial results. Revenues for the first quarter of 2019 were $5.4 million, an increase of $4.4 million versus $1 million in the fourth quarter of 2018, primarily driven by revenues from development services. Gross profit for the fourth quarter of 2019 was $1.1 million compared to a gross profit of $0.3 million for the first quarter of 2018 due to the increase in revenues. Research and development expenses, net of participation for the first quarter of 2019 were $1.7 million compared with $0.3 million for the first quarter of 2018. The increase is primarily driven by the initiation of our U.S. Phase II adaptive design study of EscharEx for the treatment of venous leg ulcers. Selling, general and administrative expenses for the first quarter of 2019 were $2.4 million compared with $2.2 million for the fourth quarter of 2018. Operating loss was $3.1 million compared with the loss from…

Thank you, Boaz. Looking ahead, we will continue actively enrolling patients in our U.S. Phase II adaptive design study for EscharEx, and we expect to report interim assessment data by the end of 2020. And we are targeting NexoBrid BLA submission for mid-year 2020. We also will continue executing our plans and moving our program forward. With that, it is now my pleasure to open the call for Q&A. Operator?

[Operator Instructions]. And our first question comes from Josh Jennings with Cowen.

So I'll just start off on the NexoBrid platform of program and submission for BLA midyear. Can you just help us understand what's remaining on your side in front of the submission? What are the remaining steps that MediWound needs to take before finalizing that submission?

Thank you for the question. We are currently crafting the BLA, different models. And what we are mainly dealing with is the authoring of certain sections of the BLA models, which takes somewhat longer than we originally projected, mainly due to the fact that currently, 3 parties are involved in this review of the BLA models, which are MediWound team, Vericel team and BARDA team. But what we believe is instead of compressing the time line, we believe that we want to ensure an appropriate amount of time for QA and review about all of those parties. And that is why we believe that the submission is targeted for midyear.

And just on the -- just the $50 million of option that NexoBrid has to procure -- sorry, excuse me, that BARDA has to procure NexoBrid. What do you think you will -- BARDA will inform MediWound or Vericel of the decision relating to this option? Is that maybe later this year? Or is that a 2021 event? Or how does that communication get passed on? How the decision may get made? And how is that communicated?

So first of all, in terms of expiration of this option. So I believe that the expiration of this option is at least, 3, 4 years from now. Regarding the timing, we have to take one step back. The reason for this option is for several alternatives. One is to increase the level of stock that currently is incorporated in the initial procurement, currently it's the $16.5 million. If SNS will decide the level of emergency stock of NexoBrid should be higher than what they calculated back in 2015, so this is one scenario in which they will utilize or exercise part of the $50 million option. The second alternative is to rotate expiry stock. We will provide BARDA with $16.5 million initial stock emergency stock our product has a shelf life of two years. And after two years, they will have to rotate this emergency stock. So this is another reason for them to exercise part of all of this option. And the third one is, we have additional contract, separate contract with BARDA for the development of NexoBrid to treat burns caused from sulfur mastered gas. In this contract, BARDA no procurement claim or no procurement option. And they can use this option, the $50 million option also, to have a supplier of emergency stock for this sulfur mustard indication.

Great. Can i just squeeze one in on EscharEx. It sounds like you're still on track to have the interim analysis ready for the -- by the end of this year. Any other color you can give to investors around just where patient enrollment stand? I know it's still very early, or how many centers are up and running and enrolling? And where do you expect that center number to be by the end of next quarter? Or any of those metrics would be just helpful.

So currently, as I said, we are in an early stage of this study, what we call the set-up phase of this study, which we anticipate to complete by end of March. And what I mean to complete, is having the -- about 25 to 30 clinical sites, primarily in the U.S., active and enrolling. We have to date, about 17 sites already opened and after SIVs. And I assume that during the second quarter, towards the end of the second quarter, the first quarter that the study will be active in all sites, we will start sharing some metrics with investors and analysts regarding the enrollment phase and other parameters. And regarding to the time line, yes, we are still believe or anticipate to add the interim assessment by year-end 2020 following the completion of this set-up phase by March -- by end of March 2020.

Our next question comes from Raj Denhoy with Jefferies.

This is Brianna on Raj. I was just hoping you could further characterize the complexion of the 4Q revenue. So what percent of revenue was attributed to NexoBrid sales that the U.S. in the quarter? And then, can you just provide any detail on demand you're seeing for NexoBrid outside the U.S.?

Yes, thank you for the question. So regarding the revenue breakdown, I will turn over to Boaz to share with you the breakdown of the Q4 revenues. And he will provide it in a moment, please.

Yes. So thank you for the question. So the revenues breakdown was a 4.4 -- yes, $4.4 million of services.

The overall revenues for the fourth quarter was $4.4 million. It was comprised of two elements. About $1 million was as a result of revenues from sales of product and $3.4 million from revenues from development services provided to BARDA.

Okay. And then if I could, so none of that revenue was actually recognized from BARDA sales during the quarter as part of the initial procurement, correct?

No, that was not -- it is expected to happen in 2020, with the first delivery as said in Q1 2020.

So then what are your expectations for BARDA sales in 2020?

So as we already shared the -- after the initiation of the procurement, we believe or we expect that the first delivery will occur towards the end of this quarter, the first quarter. As a reminder, the initial BARDA procurement is valued at $16.5 million, while the revenues net $10.5 million, net of Vericel portion, which is $10.5 million will be equally recognized in 2020 and 2021. And it will be linear spread across 6 quarters starting from Q2 2020.

Our next question comes from Swayampakula Ramakanth with H.C. Wainwright.

This is RK from H.C. Wainwright. Sharon, most of my questions have been answered, but I just have quick couple ones. On the NexoBrid EAP, has there been any recruitment of patients in 2019 into this program? And could you provide us any commentary on how that is helping increase awareness, as you suggested?

Yes. So as a reminder, we plan to have about 30 sites in the U.S. participating in the next program by the end of 2019, we have about 10 to 12 sites opened and active and we have several patients already treated in the last month of 2019, what the goal for 2020 is to open additional sites up to 30 sites. And we have currently a quarter of about 150 patients that can be treated under this protocol, still the BLA will be reviewed by the FDA so our plan is to recruit around 60 to 80 patients throughout 2018 in those sites in the U.S.

The next question is on EscharEx. So you gave very detailed -- I mean, a lot of details on your first EscharEx study, which you have initiated. Do you need -- do you plan to wait for this study to complete before you have to start the second study. As you said, your required two studies to file for the regulatory submission.

Yes, correct. So as you said, regulatory wise, we need to adequately control study for a bit to support BLA submissions. We believe that this study if successful can be considered as one of those two studies, but in order to discuss this with the FDA, we, first of all, have to have -- need to have the data. And assuming that data will be robust or will replicate what we had in the previous phase II study with EscharEx's first generation, it will enable us to discuss with the FDA. But as you know, any discussion with the FDA should be -- it's better to have it based on data as a data-driven discussion and not theoretical discussion. So yes, we will wait for the results of this study and then start the discussion with the FDA.

One last question. In the last couple of months, you've been putting out as -- certain announcements regarding collaborations outside of the U.S., especially in Australia, I guess, Ukraine and other countries. How meaningful are these collaborations for NexoBrid commercialization? And what are your expectations in terms of timing in these regions?

So these collaboration agreements or distribution agreements signed in several countries such as Australia, Ukraine and other EU countries, is part of our strategy to expand the global outreach of NexoBrid. As a reminder, we are signing distribution agreements with local distributors that have the relevant expertise, both in terms of regulatory requirement in this -- in the country, as well as market access expertise. Those distributors are responsible for; one, get the product approved and then commercialize it in the territory. In some countries, it can take faster in some countries, the regulatory passthrough -- regulatory approval takes 1 to 2 years. Usually, this build is about 1 to 2-year, still they get the products approved. And then, they can launch the product in those countries. As we mentioned in some of those distribution agreements, our distributor managed to get a specific program, like in Australia, in which you can treat patients before getting the approval, the marketing approval of NexoBrid.

And our next question comes from Kevin DeGeeter with open Harmer.

This is Susan covering for Kevin DeGeeter. So I wanted to follow-up on the next protocol. Do you guys have any feedback from surgeons on ease of use? And just any sort of qualitative feedback on the product?

Not yet. As I mentioned before, we have several patients with -- under this protocol. The first 10 sites that were opened already are sites that already have hands-on experience from either the DETECT study or previous studies that we are running in the -- we ran in the U.S., so they are familiar with the NexoBrid. What I can show you in the next quarter call is based on the routine practice of -- in the experience center as opposed to the DETECT study, which has much more complex protocol and comprehensive protocol in the next study. So I assume that the ease of use in terms of overload in those centers will be better or will be easier as opposed to what they have in the detect study.

One more question. So as the EscharEx study ramps up in 2020, do you have the guidance on cash burn rate going up or anything like that?

Yes. So as mentioned by Boaz at the end of the financial review, we will continue to invest in -- primarily in research and development associated with EscharEx as NexoBrid is expected to continue to be cash positive, cash flow positive going forward. And as a result, we expect the cash use for 2020 to be in the range of $11 million to $13 million, including repayment of contingent liabilities.

And I'm not showing any further questions at this time. I will now turn the call to Sharon Malka for any further remarks.

Thank you very much. Thank you, everyone, for joining us today. And thank you to our team, who have done so much this past year and who continues to execute at a very high level. We look forward to an exciting year and to updating you again on our next quarterly update call. Thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.