MDWD - MediWound: Gaining Traction

Summary

• Today, we take a deeper look at MediWound, an Israeli-based biopharma with some recent marketing application approvals.
• Those 'wins' has triggered a 50% rally in the stock, and the company continues to develop its pipeline as well.
• An investment analysis follows in the paragraphs below.

"Some wounds run too deep for the healing ." - J.K. Rowling

Today, we put MediWound Ltd. ( MDWD ) in the spotlight. The small healthcare concern provides bio-therapeutic solutions for tissue repair and regeneration and has garnered some new marketing approvals recently. The shares have moved up strongly in response. Can the rally continue?

Company Overview:

MediWound is a small biopharma based in Israel. The company has NexoBrid approved and on the market. NexoBrid is a biopharmaceutical product for the removal of eschar, a dead or damaged tissue in adults with deep partial- and full-thickness thermal burns to burn centers and hospital burn units. NexoBrid is approved in Europe and has been authorized via BARDA emergency use in the United States. The company NexoBrid could have an eventual $200 million market in the U.S. It has a contract with BARDA worth up to $211 million. The first phase of that contract provided $16.5 million for procurement to treat chemical and thermal burns.

NexoBrid was approved by the FDA for use in this country at the very end of 2022. This approval triggered a $7.5 million payment from Vericel ( VCEL ) , which has partnered with MediWound to commercialize NexoBrid in North America. MediWound can receive up to $125 million in sales milestones and tiered royalties on net sales ranging from single-digit to low-double-digit percentages via this arrangement. The company is also looking to have NexoBrid approved for the pediatric population in Europe sometime in 2023.

MediWound also has a couple of other products in development. Currently, the stock trades at just over $13.00 a share and sports an approximate $80 million market capitalization.

A potentially much more important product for the company is called EscharEx®. This product candidate under development for the debridement of chronic and hard-to-heal wounds is based on the same active pharmaceutical ingredient as NexoBrid. Phase II studies showed EscharEx was significantly more effective and faster than standard of care or placebo control in treating these conditions.

Management believes this could be a potential $1 billion market.

A phase 3 trial should initiate sometime this year.

Finally, the company is also working on a topical enzymatic therapy for the treatment of non-melanoma skin cancers dubbed MW005. This candidate is in a much earlier stage of development.

Recent Developments:

On November 15th, the company announced third quarter numbers . MediWound posted a GAAP loss of 13 cents a share, three cents worse than the consensus. Revenues fell nine percent on a year-over-year basis to $5.8 million. Expectations were only for $4.6 million in sales for the quarter.

The company announced a reverse 1 to 7 stock split in early December that took effect on December 20th. In addition to being approved by the FDA in the United States in late 2022, NexoBrid was greenlighted in both Switzerland and Japan in December.

Analyst Commentary & Balance Sheet:

Over the past two weeks, Maxim Group initiated the shares as a new Buy with a $25 price target. Both Oppenheimer ($63 price target) and Cowen & Co. ($25 price target) also reissued Buy ratings of their own.

Less than one percent of the outstanding float is currently held short. The company ended the third quarter with $17.6 million of cash and marketable securities on its balance sheet before the payout from Vericel. MediWound also will continue to benefit from its relationships with BARDA and the Department of Defense. The company raised $17.2 million via private placement on October 6th. Management states these events will provide sufficient cash to fund its expected operations through 2025.

Verdict:

The current analyst firm consensus has the company losing just over three bucks a share as revenues shrink nine percent in FY2022 to just over $21 million. They project losses with shrink by approximately 40% in FY2023 on revenue growth in the low teens.

MediWound had a nice little string of victories in December, which has propelled an approximate 50% rally in the stock in recent weeks. MDWD probably merits a ' watch item ' holding for now, but I would not be chasing it wholeheartedly after the share's big rise since mid-December.

The company seems to have significant potential given the possible addressable markets for NexoBrid and EscharEx, especially the latter. However, MediWound is far away from profitability, and it is yet to be known how successful the initial rollout of NexoBrid will be in the States or how Phase III studies for EscharEx will unfold. That said, MediWound's story is one worth following.

"The lessons of life amount not to wisdom, but to scar tissue and callus ." - Wallace Stegner

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