Exhibit 99.2
MEDIWOUND LTD. AND ITS SUBSIDIARIES
INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2019
IN U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
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MEDIWOUND LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
June 30, | December 31, | |||||||||||
2019 | 2018 | 2018 | ||||||||||
Unaudited | Audited | |||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | 24,667 | 5,659 | 6,716 | |||||||||
Restricted deposits | 175 | 91 | 89 | |||||||||
Short‑term bank deposits | 13,870 | 21,254 | 16,828 | |||||||||
Trade receivables | 570 | 779 | 560 | |||||||||
Inventories | 1,535 | 1,871 | 1,680 | |||||||||
Other receivables | 4,079 | 4,445 | 6,840 | |||||||||
44,896 | 34,099 | 32,713 | ||||||||||
LONG‑TERM ASSETS: | ||||||||||||
Long term deposits and prepaid expenses | 19 | 65 | 48 | |||||||||
Property, plant and equipment, net | 2,183 | 2,051 | 2,020 | |||||||||
Right of-use assets | 2,315 | - | - | |||||||||
Intangible assets, net | 462 | 528 | 495 | |||||||||
4,979 | 2,644 | 2,563 | ||||||||||
49,875 | 36,743 | 35,276 | ||||||||||
CURRENT LIABILITIES: | ||||||||||||
Current maturities of long-term liabilities | 896 | 514 | 146 | |||||||||
Trade payables and accrued expenses | 4,073 | 3,327 | 2,715 | |||||||||
Other payables | 5,889 | 1,825 | 2,036 | |||||||||
10,858 | 5,666 | 4,897 | ||||||||||
LONG‑TERM LIABILITIES: | ||||||||||||
Deferred revenues | 1,144 | 1,178 | 1,158 | |||||||||
Liabilities in respect of IIA grants | 6,919 | 7,793 | 7,568 | |||||||||
Contingent consideration for purchase of shares | 4,412 | 14,737 | 6,330 | |||||||||
Liability in respect of discontinued operation | 6,003 | 6,003 | 6,003 | |||||||||
Lease liabilities | 2,022 | - | - | |||||||||
Severance pay liability, net | 338 | 336 | 348 | |||||||||
20,838 | 30,047 | 21,407 | ||||||||||
SHAREHOLDERS' EQUITY: | ||||||||||||
Ordinary shares of NIS 0.01 par value: | ||||||||||||
Authorized: 37,244,508 shares as of June 30, 2019, December 31, 2018 and June 30, 2018; Issued and Outstanding: 27,178,839 as of June 30, 2019, December 31, 2018 and June 30, 2018 | 75 | 75 | 75 | |||||||||
Share premium | 140,236 | 139,359 | 139,637 | |||||||||
Foreign currency translation adjustments | (23 | ) | (30 | ) | (25 | ) | ||||||
Accumulated deficit | (122,109 | ) | (138,374 | ) | (130,715 | ) | ||||||
18,179 | 1,030 | 8,972 | ||||||||||
49,875 | 36,743 | 35,276 |
The accompanying notes are an integral part of the interim financial statements.
F - 2
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE PROFIT (LOSS)
U.S. dollars in thousands (except share data and per share data)
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
Revenues from sale of products | 1,309 | 1,466 | 895 | 988 | 3,225 | |||||||||||||||
Revenues from development services | 2,301 | - | 2,301 | - | - | |||||||||||||||
Revenues from license agreements | 17,597 | 85 | 17,550 | 43 | 176 | |||||||||||||||
Total revenues | 21,207 | 1,551 | 20,746 | 1,031 | 3,401 | |||||||||||||||
Cost of revenues from sale of products | 917 | 988 | 617 | 614 | 2,017 | |||||||||||||||
Cost of revenues from development services | 2,169 | - | 2,169 | - | - | |||||||||||||||
Cost of revenues from license agreements | 702 | 22 | 695 | 15 | 71 | |||||||||||||||
Total cost of revenues | 3,788 | 1,010 | 3,481 | 629 | 2,088 | |||||||||||||||
Gross profit | 17,419 | 541 | 17,265 | 402 | 1,313 | |||||||||||||||
Research and development, gross | 6,075 | 9,027 | 1,893 | 4,987 | 17,915 | |||||||||||||||
Participations by BARDA and IIA | (4,624 | ) | (6,298 | ) | (1,721 | ) | (3,451 | ) | (13,843 | ) | ||||||||||
Research and development, net of participations | 1,451 | 2,729 | 172 | 1,536 | 4,072 | |||||||||||||||
Selling and marketing | 2,134 | 2,319 | 1,101 | 1,248 | 4,188 | |||||||||||||||
General and administrative | 2,574 | 1,831 | 1,242 | 842 | 3,799 | |||||||||||||||
Other income from settlement agreement | - | - | - | - | (7,537 | ) | ||||||||||||||
Other expenses | 901 | 662 | 812 | 62 | 751 | |||||||||||||||
Total operating expenses | 7,060 | 7,541 | 3,327 | 3,688 | 5,273 | |||||||||||||||
Operating profit (loss) | 10,359 | (7,000 | ) | 13,938 | (3,286 | ) | (3,960 | ) | ||||||||||||
Financial income | 153 | 182 | 92 | 115 | 412 | |||||||||||||||
Financial expense | (1,956 | ) | (1,898 | ) | (1,314 | ) | (994 | ) | (2,117 | ) | ||||||||||
Profit (loss) from continuing operation | 8,556 | (8,716 | ) | 12,716 | (4,165 | ) | (5,665 | ) | ||||||||||||
Profit from discontinued operation | 50 | - | - | - | 4,608 | |||||||||||||||
Net Profit (loss) | 8,606 | (8,716 | ) | 12,716 | (4,165 | ) | (1,057 | ) | ||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation adjustments | 2 | 8 | (2 | ) | 18 | 13 | ||||||||||||||
Total comprehensive income (loss) | 8,608 | (8,708 | ) | 12,714 | (4,147 | ) | (1,044 | ) | ||||||||||||
Basic and diluted net profit (loss) per share from continuing operations | 0.32 | (0.32 | ) | 0.47 | (0.15 | ) | (0.21 | ) | ||||||||||||
Basic and diluted net loss per share from discontinued operations | (* | ) | - | - | - | 0.17 | ||||||||||||||
Total Basic and diluted net profit (loss) per share | 0.32 | (0.32 | ) | 0.47 | (0.15 | ) | (0.04 | ) | ||||||||||||
Weighted average number of ordinary shares used in the computation of basic and diluted loss per share (in thousands) | 27,179 | 27,050 | 27,179 | 27,052 | 27,114 |
The accompanying notes are an integral part of the interim consolidated financial statements.
(*)Represents an amount lower than $0.01.
F - 3
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share capital | Share premium | Foreign currency translation reserve | Accumulated deficit | Total Equity | ||||||||||||||||
Balance as of December 31, 2018 | 75 | 139,637 | (25 | ) | (130,715 | ) | 8,972 | |||||||||||||
Profit for the period | - | - | - | 8,606 | 8,606 | |||||||||||||||
Other comprehensive income | - | - | 2 | - | 2 | |||||||||||||||
Total comprehensive income | - | - | 2 | 8,606 | 8,608 | |||||||||||||||
Share-based compensation | - | 599 | - | - | 599 | |||||||||||||||
Balance as of June 30, 2019 (unaudited) | 75 | 140,236 | (23 | ) | (122,109 | ) | 18,179 |
Share capital | Share premium | Foreign currency translation reserve | Accumulated deficit | Total Equity | ||||||||||||||||
Balance as of December 31, 2017 | 75 | 138,992 | (38 | ) | (129,409 | ) | 9,620 | |||||||||||||
Accumulated effect of adopting IFRS 15 | - | - | - | (249 | ) | (249 | ) | |||||||||||||
Balance as of January 1, 2018 | 75 | 138,992 | (38 | ) | (129,658 | ) | 9,371 | |||||||||||||
Loss for the period | - | - | - | (8,716 | ) | (8,716 | ) | |||||||||||||
Other comprehensive income | - | - | 8 | - | 8 | |||||||||||||||
Total comprehensive (loss) income | - | - | 8 | (8,716 | ) | (8,708 | ) | |||||||||||||
Exercise of options | (* | ) | (* | ) | - | - | - | |||||||||||||
Share-based compensation | - | 367 | - | - | 367 | |||||||||||||||
Balance as of June 30, 2018 (unaudited) | 75 | 139,359 | (30 | ) | (138,374 | ) | 1,030 |
(*) Represents less than $ 1.
The accompanying notes are an integral part of the interim consolidated financial statements.
F - 4
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share capital | Share premium | Foreign currency translation reserve | Accumulated deficit | Total Equity | ||||||||||||||||
Balance as of April 1, 2019 | 75 | 139,912 | (21 | ) | (134,825 | ) | 5,141 | |||||||||||||
Profit for the period | - | - | - | 12,716 | 12,716 | |||||||||||||||
Other comprehensive loss | - | - | (2 | ) | - | (2 | ) | |||||||||||||
Total comprehensive (loss) income | - | - | (2 | ) | 12,716 | 12,714 | ||||||||||||||
Share-based compensation | - | 324 | - | - | 324 | |||||||||||||||
Balance as of June 30, 2019 (unaudited) | 75 | 140,236 | (23 | ) | (122,109 | ) | 18,179 |
Share capital | Share premium | Foreign currency translation reserve | Accumulated deficit | Total Equity | ||||||||||||||||
Balance as of April 1, 2018 | 75 | 139,210 | (48 | ) | (134,209 | ) | 5,028 | |||||||||||||
Loss for the period | - | - | - | (4,165 | ) | (4,165 | ) | |||||||||||||
Other comprehensive income | - | - | 18 | - | 18 | |||||||||||||||
Total comprehensive (loss) income | - | - | 18 | (4,165 | ) | (4,147 | ) | |||||||||||||
Exercise of options | (* | ) | (* | ) | - | - | - | |||||||||||||
Share-based compensation | - | 149 | - | - | 149 | |||||||||||||||
Balance as of June 30, 2018 (unaudited) | 75 | 139,359 | (30 | ) | (138,374 | ) | 1,030 |
(*) Represents less than $ 1.
The accompanying notes are an integral part of the interim consolidated financial statements.
F - 5
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share capital | Share premium | Foreign currency translation reserve | Accumulated deficit | Total equity | ||||||||||||||||
Balance as of December 31, 2017 | 75 | 138,992 | (38 | ) | (129,409 | ) | 9,620 | |||||||||||||
Accumulated effect of adopting IFRS 15 | - | - | - | (249 | ) | (249 | ) | |||||||||||||
Balance as of January 1, 2018 | 75 | 138,992 | (38 | ) | (129,658 | ) | 9,371 | |||||||||||||
Loss for the period | - | - | - | (1,057 | ) | (1,057 | ) | |||||||||||||
Other comprehensive income | - | - | 13 | - | 13 | |||||||||||||||
Total comprehensive (loss) income | - | - | 13 | (1,057 | ) | (1,044 | ) | |||||||||||||
Exercise of options | (* | ) | (* | ) | - | - | (* | ) | ||||||||||||
Share-based compensation | - | 645 | - | - | 645 | |||||||||||||||
Balance as of December 31, 2018 | 75 | 139,637 | (25 | ) | (130,715 | ) | 8,972 |
(*) Represents less than $ 1.
The accompanying notes are an integral part of the interim consolidated financial statements.
F - 6
MEDIWOUND LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net Profit (loss) | 8,606 | (8,716 | ) | 12,716 | (4,165 | ) | (1,057 | ) | ||||||||||||
Adjustments to reconcile net profit (loss) to net cash provided by (used in) continuing operating activities: | ||||||||||||||||||||
Adjustments to profit and loss items: | ||||||||||||||||||||
Profit from discontinued operation | (50 | ) | - | - | - | (4,608 | ) | |||||||||||||
Depreciation and amortization | 552 | 305 | 278 | 170 | 577 | |||||||||||||||
Share-based compensation | 599 | 367 | 324 | 149 | 645 | |||||||||||||||
Revaluation of liabilities in respect of IIA grants | (392 | ) | 404 | (466 | ) | 218 | 287 | |||||||||||||
Revaluation of contingent consideration for the purchase of shares | 1,322 | 1,112 | 1,081 | 569 | 758 | |||||||||||||||
Other income from settlement agreement | - | - | - | - | (7,537 | ) | ||||||||||||||
Revaluation of lease liabilities | 194 | - | 91 | - | - | |||||||||||||||
Increase (decrease) in severance pay liability, net | (10 | ) | 6 | 13 | (5 | ) | 19 | |||||||||||||
Net financing income | (149 | ) | (182 | ) | (87 | ) | (115 | ) | (412 | ) | ||||||||||
Un-realized foreign currency (gain) loss | (70 | ) | 126 | 60 | 85 | 182 | ||||||||||||||
1,996 | 2,138 | 1,294 | 1,071 | (10,089 | ) | |||||||||||||||
Changes in asset and liability items: | ||||||||||||||||||||
Increase in trade receivables | (9 | ) | (421 | ) | (318 | ) | (494 | ) | (211 | ) | ||||||||||
Decrease (increase) in inventories | 146 | 15 | (62 | ) | 149 | 206 | ||||||||||||||
Decrease (increase) in other receivables | 2,744 | (1,572 | ) | 2,482 | (1,690 | ) | (306 | ) | ||||||||||||
Increase (decrease) in trade payables and accrued expenses | 1,357 | 74 | 1,076 | (51 | ) | (536 | ) | |||||||||||||
Increase (decrease) in other payables and deferred revenues | 529 | (336 | ) | 77 | (507 | ) | (161 | ) | ||||||||||||
4,767 | (2,240 | ) | 3,255 | (2,593 | ) | (1,008 | ) | |||||||||||||
Net cash flows provided by (used) in operating activities | 15,369 | (8,818 | ) | 17,265 | (5,687 | ) | (12,154 | ) | ||||||||||||
Net cash provided by discontinued operating activities | 50 | - | - | - | - | |||||||||||||||
Net cash provided by (used) in operating activities | 15,419 | (8,818 | ) | 17,265 | (5,687 | ) | (12,154 | ) |
The accompanying notes are an integral part of the interim consolidated financial statements.
F - 7
MEDIWOUND LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Purchase of property and equipment | (433 | ) | (313 | ) | (194 | ) | (197 | ) | (522 | ) | ||||||||||
Purchase of intangible assets | - | (13 | ) | - | (13 | ) | (12 | ) | ||||||||||||
Interest received | 44 | 2 | 14 | 2 | 106 | |||||||||||||||
Proceeds from (investment in) short term bank deposits, net | 2,977 | (21,165 | ) | 412 | 1,680 | (16,612 | ) | |||||||||||||
Net cash provided by (used in) investing activities | 2,588 | (21,489 | ) | 232 | 1,472 | (17,040 | ) | |||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Repayment of leases liabilities | (312 | ) | - | (157 | ) | - | - | |||||||||||||
Proceeds from exercise of options | - | (* | ) | - | (* | ) | (* | ) | ||||||||||||
Proceeds of IIA grant, net of repayments | 193 | 30 | 248 | - | 46 | |||||||||||||||
Net cash (used in) provided by financing activities | (119 | ) | 30 | 91 | (* | ) | 46 | |||||||||||||
Exchange rate differences on cash and cash equivalent balances | 63 | (133 | ) | (55 | ) | (117 | ) | (205 | ) | |||||||||||
Cash and cash equivalents: | ||||||||||||||||||||
Increase (decrease) in cash and cash equivalents from continuing activities | 17,901 | (30,410 | ) | 17,533 | (4,332 | ) | (29,353 | ) | ||||||||||||
Increase in cash and cash equivalents from discontinued activities | 50 | - | - | - | - | |||||||||||||||
Balance of cash and cash equivalents at the beginning of the period | 6,716 | 36,069 | 7,134 | 9,991 | 36,069 | |||||||||||||||
Balance of cash and cash equivalents at the end of the period | 24,667 | 5,659 | 24,667 | 5,659 | 6,716 | |||||||||||||||
(*) Represents less than $ 1.
The accompanying notes are an integral part of the interim consolidated financial statements.
F - 8
MEDIWOUND LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
NOTE 1: | GENERAL |
a. | General description of the Company and its operations: |
MediWound Ltd. (the "Company" or "MediWound"), is a fully integrated biopharmaceutical company focused on developing, manufacturing and commercializing novel products to address unmet needs in the fields of severe burns, chronic and other hard to heal wounds, connective tissue disorders and other indications.
The Company's innovative biopharmaceutical product, NexoBrid, received marketing authorization from the European Medicines Agency ("EMA") as well as the Israeli, Argentinean, South-Korean, Russian and Peruvian Ministries of Health, for removal of dead or damaged tissue, known as eschar, in adults with deep partial and full thickness thermal burns. The Company sells NexoBrid in Europe and in Israel through its commercial organizations and in other territories throughout local distributers.
On May 6, 2019, the Company entered into exclusive license and supply agreements with Vericel Corporation (“Vericel”) to commercialize NexoBrid in North America (see also Note 3d).
The Company second investigational innovative product, EscharEx, is a topical biological drug being developed for debridement of chronic and other hard-to-heal wounds.
The Company's securities are listed for trading on NASDAQ since March 2014.
b. | The Company has two wholly owned subsidiaries: MediWound Germany GmbH, acting as Europe (“EU”) marketing authorization holder and EU sales and marketing arm and MediWound UK Limited, an inactive company. In addition, the Company owns approximately 8% of PolyHeal Ltd., a private life sciences company ("PolyHeal"). |
c. | The Company awarded two contracts with the U.S. Biomedical Advanced Research and Development Authority ("BARDA"), for the advancement of the development and manufacturing, as well as the procurement of NexoBrid, as a medical countermeasure as part of BARDA preparedness for mass casualty events (see also Note 3c). |
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES |
The following accounting policies have been applied consistently in the financial statements for all periods presented unless otherwise stated.
a. | Basis of presentation of financial statements: |
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
F - 9
MEDIWOUND LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
b. | Basis of preparation of the interim consolidated financial statements: |
The interim condensed consolidated financial statements for the six months ended June 30, 2019 have been prepared in accordance with IAS 34 "Interim Financial Reporting".
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as of December 31, 2018 that were included in the Annual Report on Form 20-F filed on March 25, 2019.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2018 that were included in the Annual Report on Form 20-F filed on March 25, 2019, except than the changes discussed below.
c. | Changes in significant accounting policies: |
IFRS 16, "Leases" ("the new Standard") replaces IAS 17, Leases and its related interpretations. The standard's instructions supersede IAS 17 requirement from lessees to classify leases as operating or finance leases. The new standard presents a unified model for the accounting treatment of all leases according to which the lessee has to recognize a right-of-use asset and a lease liability in its financial statements.
On the inception date of the lease, the Company determines whether the arrangement is a lease or contains a lease, while examining if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
In the event of change in variable lease payments that are CPI-linked, lessees are required to re-measure the lease liability and record the effect of the re-measurement as an adjustment to the carrying amount of the right-of-use asset.
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it is reasonably certain that the lessee will exercise or not exercise the option, respectively.
The right-of-use asset is subsequently depreciated in a similar way to other assets such as tangible assets, i.e. typically in a straight-line basis over the shorter of the lease term (including the extension option held by the Company and intended to be exercised) and the expected life of the lease.
Commencing January 1, 2019, the Company implements the Modified retrospective approach of the Standard. As for the measurement of the right-of-use asset, the Company chose to apply the alternative of recognize the asset in an amount equal to the lease liability, with certain adjustments.
At the initial application date, the Company recognized a lease liability in the amount of about $2,522 under Long term debt and current maturity, according to the present value of the future lease payments discounted using the Company's incremental interest rate at that date, and concurrently recognized a right-of-use asset in the same amount with certain adjustments. The Company's incremental interest rates used for measuring the lease liability are in the range of 0.1% to 6.7%. Depreciation is calculated on a straight-line basis over the remaining contractual lease period.
F - 10
MEDIWOUND LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2: | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
In the first six months of 2019, the Company recognized depreciation expenses in the amount of $280 in respect of amortization of the right-of-use asset and $68 finance expenses in respect of the lease liability, in place of the lease expenses in the amount of $312 which would have been recorded according to the previous standard.
d. | Reclassification: |
Certain amounts previously reported in the consolidated financial statements have been reclassified to conform to current year presentation. Such reclassifications did not affect net loss, shareholders’ equity or cash flows.
NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS
a. | On September 15, 2014, a Statement of Claim was filed against the Company by some shareholders of Polyheal (the "Plaintiffs"). The Plaintiffs allege that the Company is obligated to pay them a total amount of $1,475 in exchange for their respective portion of PolyHeal's shares, following the commencement of a feasibility study for the next generation of the PolyHeal Product in November 15, 2012, which constituted a milestone under a buyout option agreement between the Company, PolyHeal and its shareholders. |
On March 24, 2019, the Company entered into a settlement agreement and mutual general release with the Plaintiffs (the "Polyheal Settlement Agreement"), which settles any and all debts, obligations or liabilities that the Plaintiffs and MediWound had, has or may have to the other party in connection with the agreements among MediWound, Teva, PolyHeal, the Plaintiffs and other shareholders of PolyHeal.
Pursuant to the terms of Polyheal Settlement Agreement, the Plaintiffs repaid to MediWound a portion of the amount that was ruled in their favor under the Tel Aviv District Court Ruling, and it resulted in the acceptance of the Company’s appeal that was filed on December, 2017, and the cancellation of the 2017 Ruling that was issued by the District Court against MediWound.
b. | Beginning in 2007, the Company entered into a number of agreements with Teva Pharmaceutical Industries Limited (“Teva”) related to collaboration in the development, manufacturing and commercialization of solutions for the burn and chronic wound care markets. In consideration for these agreements, Teva made investments in the Company's ordinary shares and agreed to fund certain research and development expenses and manufacturing costs and perform all marketing activities for both NexoBrid, under the 2007 Teva Agreement, and the PolyHeal Product, under the 2010 PolyHeal Agreements. As of December 31, 2012, all of these agreements were terminated. |
On March 24, 2019, the Company entered into a settlement agreement and mutual general release with Teva (the “Teva Settlement Agreement”), which settles any and all debts, obligations or liabilities that each party or any of its controlled affiliates had or has to the other party or any of its controlled affiliates under, in connection with or arising out of certain transactions and agreements entered into between Teva and the Company from 2007 to 2012 (collectively, the “Collaboration Agreements”), which have terminated effective as of December 31, 2012 and September 2, 2013, as applicable, and which related to the Company's product, NexoBrid, and to PolyHeal Ltd. product, PolyHeal.
F - 11
MEDIWOUND LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
During the recent years, the Company has been engaged in discussions with Teva regarding payments the Company believes Teva was obligated to make to the Company pursuant to these Collaboration Agreements.
Pursuant to the terms of the Teva Settlement Agreement, Teva has agreed to pay the Company $4,000 in cash, and to reduce the contingent consideration that is payable to Teva pursuant to the Company's repurchase of its shares from Teva in 2013, so that the Company will be obligated to pay Teva annual payments at a reduced rate of 15% of its recognized revenues from the sale or license of NexoBrid after January 1, 2019, up to a reduced aggregate amount of $10,200. As a result of Teva Settlement Agreement, a one-time net income from settlement agreement of $7,537 was recorded as other income and a one-time income of $4,608 was recorded within the profit from discontinued operation in the fourth quarter and the year ending December 31, 2018.
In addition, the Company also agreed to indemnify, defend and hold harmless Teva and its directors, officers, agents and employees from and against claims relating to a certain milestone related to PolyHeal under an agreement associated with the Collaboration Agreements, up to an amount of $10,200, if a notice of such claim has been received by the Company prior to December 31, 2023.
c. | On September 30, 2015 BARDA has awarded MediWound a contract, which was modified in July 2017, for the advancement of the development and manufacturing, as well as the procurement of NexoBrid, as a medical countermeasure as part of BARDA preparedness for mass casualty events. In May 2019, BARDA upsized the contract, providing additional funding of $21,000 to support additional activities towards Biologics License Application (BLA) approval, including the new NexoBrid expended access treatment protocol (NEXT). The modified contract includes $77,000 of funding to support development activities to complete the U.S. Food and Drug Administration (FDA) approval process for NexoBrid for use in thermal burn injuries, as well as $16,475 for procurement of NexoBrid, which is contingent upon FDA Emergency Use Authorization (EUA) and/or FDA marketing authorization for NexoBrid. In addition, the contract includes options for further funding of up to $10,000 for expanding NexoBrid’s indications and of up to $50,000 for additional procurement of NexoBrid. |
On September 28, 2018, BARDA has awarded MediWound an additional contract to develop NexoBrid for the treatment of Sulfur Mustard injuries.
The contract provides $12,000 of funding to support research and development activities up to pivotal studies in animals under the U.S. Food and Drug Administration (FDA) Animal Rule. The contract also contains options for additional funding of up to $31,000 for additional development activities, animal pivotal studies, and the FDA BLA submission for approval of NexoBrid for the treatment of Sulfur Mustard injuries.
As of June 30, 2019 the Company recorded $ 34,255 in funding from BARDA under the contracts.
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MEDIWOUND LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
d. | On May 6, 2019, the Company entered into exclusive license and supply agreements with Vericel to commercialize NexoBrid in North America (the “Collaboration Agreements”). |
Pursuant to the Collaboration Agreements, Vericel will obtain the authority over and control of the development, regulatory approval and commercialization of licensed products in the North America territory. MediWound will be responsible for the development of the product through BLA approval, supported and funded by BARDA, as well as the manufacture and supply of NexoBrid. In addition, MediWound retains the commercial rights to NexoBrid in non-North American territory.
Under the terms of the license agreement, Vericel has made an upfront payment to MediWound of $17,500 and agreed to make an additional $7,500 payment contingent upon BLA approval and up to $125,000 in payments contingent upon meeting certain annual sales milestones. Vericel has also agreed to pay MediWound tiered royalties on net sales ranging from high single-digit to low double-digit percentages, a split of gross profit on committed BARDA procurement orders and a double-digits royalty on any additional future BARDA purchases of NexoBrid. Under the terms of the supply agreement, Vericel will procure NexoBrid from MediWound at a transfer price of cost plus a fixed margin percentage.
According to IFRS 15, the Collaboration Agreements transaction price should be allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
The Collaboration Agreements have multiple performance obligations, due to the contract covering multiple phases of the product lifecycle. The Company identified three distinct performance obligations: (i) license rights (ii) development services for BLA approval and (iii) manufacturing and supply of NexoBrid.
The Company allocated the Collaboration Agreements transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.
The Company determined the license to the Intellectual Property ("IP") to be a right to use the IP, which has significant standalone functionality. Since Vericel has sublicensing rights and also entitled to generate revenues from BARDA procurement prior to BLA approval, the license is a distinct performance obligation and as such revenues are recognized at the point in time that control of the license is transferred to the customer. Since the manufacturing and development services are at market value, then the upfront payment was fully attributed to the license performance obligation. Consequently, as of June 30, 2019, the Company has recognized revenues in the amount of $17,500.
Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable considerations are resolved). Therefore, as the milestone payments are not probable, revenues were not recognized in respect to such milestone payments.
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MEDIWOUND LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 3: CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
Sales related royalties to be received in exchange for license are recognized at the later of when (i) the subsequent sale occurs or (ii) the performance obligation to which some or all of the sales royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on future commercial sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties.
Revenues from the sale of products to Vericel will be recognized when all the significant risks and rewards of ownership of the products have passed to the buyer and the seller no longer retains continuing managerial involvement. The delivery date of the products is usually the date of which ownership passes.
NOTE 4: EQUITY
On March 24, 2019, the Company granted to its incoming CEO and chairman of the board 60,000 options to purchase ordinary shares, for an exercise price of $ 4.92 per share, and 40,000 RSU's, under the "2014 Share Incentive Plan". The options are exercisable in accordance with the terms of the plan and will vest over three-four years. The fair value of the options and RSU's granted, as of the grant date, was estimated at approximately $164 and $156, respectively.
On May 2, 2019, the general meeting of the Company approved the abovementioned grants.
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