Nissim Mashiach - President & CEO Mike Molyneaux - CMO Mark Page - CFO.

Ian Somaiya - Nomura Securities Matt Keeler - Credit Suisse Raj Denhoy - Jefferies Steven Lichtman - Oppenheimer.

Welcome to Macrocure's Second Quarter 2015 Financial Results Conference Call. Before we begin, I would like to remind you that forward-looking statements will be made on this call. Forward-looking statements provide the company's current expectations or forecast on future events.

Forward-looking statements include statements about the company's expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts.

Forward-looking statement are subject to known and unknown risks and uncertainties and are based on potentially on accurate assumptions that could cause results to differ materially from those expected or implied by forward-looking statements.

The company's actual results could differ materially from those anticipated in the forward-looking statements for many reasons.

And I encourage you to review the document filed and furnished by the company with or to the Securities and Exchange Commission including without limitation the company's Annual Report on Form 20F then ongoing reports on Form 6-K, which identifies specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Unless required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events that occur after the date of this call. At this time, I would like to turn the conference over to Mr. Nissim Mashiach, Macrocure's President and Chief Executive Officer. You may begin..

Thank you, operator and good morning everyone. Welcome to Macrocure financial results conference call for the second quarter of 2015. Joining me on today's call are Mark Page, our Chief Financial Officer; and Mike Molyneaux, our Chief Medical Officer.

On today's call I provide an overview of the upcoming milestones for our two Phase III clinical trials, and Mark will update you on our second quarter 2015 financial results. We will then open the call for questions.

In the last year as a publicly traded company, we've been laser focused on realizing the potential of our lead product candidate CureXcell for the treatment of all wounds below the knee.

Specifically, we have been preparing for top line results in our two pivotal double blind randomized Phase III clinical trial in Diabetic Foot Ulcers and Venous Leg Ulcers. The reporting of the DFU data is now eminent and we are excited to be nearing this landmark event for Macrocure.

We remain on-track to report top line results in our DFU trial in October and in the first half of 2016 for VLU. In the DFU we are preparing for data base lock and are on-track to complete this in September. In VLU we are currently completing the treatment period and allowable treatment windows and conducting the follow-up for safety and durability.

As previously announced, later this month we will report fertility analysis result in the VLU trial after the data safety monitoring of both ODSMD, review data from 60% or approximately 160 patients that has been randomized and completed treatment.

This event is an important milestone as the main purpose of this analysis is to assess the trials probability of success. As a reminder, the probability of success will be based on three categories; zero to 30% which is the least favorable range, 31% to 45% which is the middle or intermediate zone, and 46% to 100% which is the most promising zone.

Our intention is to disclose the DSMB's recommendation and the probability for success values according to the zone I just outlined. It is our expectation that the recommendation will be favorable and the trial would continue as planned. Moving to few business updates.

It goes without saying that our primary focus is on realizing the successful completion of our clinical trials. To this end, we are preparing the company for successful biological license application or BLA approval, taking initial steps for the subsequent commercialization of CureXcell.

We anticipate securing a commercial manufacturing site in the Greater New Jersey or Philadelphia area in the third quarter of this year. This facility will extend our crime capacity and allow us to produce CureXcell on a commercial scale. It will also support our BLA filing, which is scheduled for the second half of 2016.

As with all of our corporate development, we will continue to disclose critical developments. In summary, our first year as a public company has been very rewarding.

We have worked hard to accelerate patient enrollment, conclude the trials ahead of schedule and increase our presence at industry conferences, to spread awareness of CureXcell as well as strengthen our key opinion leader's relationship, and recruit award class management team.

As I've said before, I'm proud of what we have accomplished and we are excited to be at the cusp of seeing all of our focus and dedication coming to fruition. We continue to believe that CureXcell has the potential to transform the wound care space and help chronic how to heal wounds are treated.

I will now turn it over to Mark to review our financial results..

Thank you, Nissim and hello everyone. Today, I'll review our financial results for the second quarter and six months ended June 30, 2015. For the second quarter of 215, research and development expenses were $4.8 million compared with $3.2 million for the second quarter of 2014.

This increase was primarily due to an increase in our ongoing clinical trial expenses for our DFU and VLU Phase III clinical studies.

General and administrative expenses for the second quarter of 2015 were $1.9 million compared to $1.2 million for the second quarter of 2014, this increase was primarily due to elevated payroll, stock-based compensation for existing and new employees, senior staff recruiting expenses, as well as increased professional expenses and customary costs associated with being a publically traded company.

The company posted a net loss of $6.7 million or $0.37 loss per share, compared with a net loss of $4.4 million or $0.59 loss per share in the second quarter of 2014. For the six months ended June 30, 2015, R&D expenses were $10.1 million compared with $5.9 million for the comparable period in 2014.

This increase was again primarily due to an increase in ongoing clinical trial expenses.

General and administrative expenses for six months ended June 30, 2015 were $3.5 million compared with to $1.8 million for the comparable period of 2014, this increase was again primarily due to elevated payroll, stock-based compensation and increased public company's expenses.

The company posted a net loss of $13.6 million or $0.74 loss per share for the six months ended June 30, 2015, compared with a net loss of $7.8 million or $1.05 loss per share in the comparable period in 2014.

Regarding the balance sheet as of June 30, 2015, our cash and cash equivalents including short-term investments, I should say, were $35.9 million. The company has no debt outstanding.

As of June 30, we had approximately $16.7 million basic shares outstanding, this figure excludes $1.3 million ordinary shares issuable upon exercise of warrants at an average exercise price 0.01 new Israeli shekels per share.

We reiterate that our expected operating expense cash burn for 2015 will be in the range of $21 million to $25 million; this figure includes the $11.5 million of cash we have expanded so as the beginning of this year but excludes anticipated CapEx on commercial manufacturing capabilities that expect to start developing this year.

With that summary, I'll turn the call back to Nissim..

Thank you, Mark. Before we move to Q&A, I want to review the timeline for our clinical milestones. For the DFU, we anticipate reporting top line Phase III clinical trial results in October. For the VLU we anticipate reporting fertility analysis results later and top line Phase III clinical trial results in the first half of 2016.

We are on-track to submit our BLA to the FDA in the second half of 2016. Operator can you please open the call to questions..

[Operator Instructions]. Our first question comes from Ian Somaiya with Nomura Securities..

Yes, thank you for taking my questions, and again it's exciting time for all of us as we anticipate the fertility analysis, I think it will be wonderful to just get your thoughts on how we should interpret the results through the middle area? And just to remind us that there are any opportunities for you to amend the trial protocol, increase enrollment, and maybe drive the probability of success?.

Yes, good morning, Ian. As you know and I said it before, we anticipate being on the 46% to 100%, and this is where we expect to be as the outcome from the fertility analysis and I would say any of the other scenarios would be obviously a disappointment for us.

And the way you can interpret the 31% to 45% probability for success is that there were some separation between the two group, between the control arm and the treatment arm, and we still 40% of the patient that can make the difference and show a strong separation later on and the study will still meet the endpoint.

And this is what I can say at this point of time in terms of other ideas about amending the trials, and whatever you mentioned before, I think it's too early to discuss that because we do believe that eventually we'll be successful and the trial will show, the BSMB will report the third outcome which is 46.5% for probability for success.

Mike, do you want to add anything here?.

Nissim, no. I mean, I think you captured well, the only thing I would add is just an emphasis on the fact that in that grey zone, as Nissim said, there is still separation between the two groups and then it becomes a numbers game.

So, for example, 60% of the population may not be enough to show the statistical significance but there is still no reason to think that once we get fully enrolled that we couldn't get the necessary separation to show the statistically significant value. But it is a great zone, it still says that we're on target endpoint separation..

Will the DSMB be able to provide any information or give you reasons for why you might be in that sort of band? I don't know they will be looking at our baseline characteristics making sure you have the right vision?.

[Cross talks] No, the charter for the DSMB is just to report the three zones that we mentioned before. I don't think that they will be put more on that but obviously if we'll know more, we will be happy to report that.

As you know, the studies still blinded, we are blinded, so I don't think that we'll be able to get or capture any additional information apart from the three zones related to the probability for success..

Okay, thank you for taking my questions..

Thank you, Ian..

The next question comes from Matt Keeler with Credit Suisse..

Hey guys, thanks for taking the question.

First, can you give us any color on your commercial expectations, how long do you think it will take you to get complete or near complete commercial coverage?.

I think that – Matt, good morning. So in terms of commercial coverage, obviously let's – maybe I should go back and let's review the timeline.

You know that we are expecting to file the BLA by the end of second half of 2016, normally BLA review is 10-month review, so we should FDA approval around the end of 2017, and early 2018 should be the product launch, obviously reimbursement approval.

So we believe that in terms of commercialization timelines, we would launch the product in United States in early 2018.

In terms of amount of commercial efforts, salesforce, I think it's too early to give you details about it but what I can say, we believe that this type of product with its own unique attribute, and what the type of data that we are generating, clinical data, modification data and the attribute which is of use in other elements associated with that would play major role in terms of the ease of selling this product, and later on taking a substantial market share in the wound care space.

You want to add anything else?.

No, this is Mark. I would just say that we're working with consultants now, obviously we want to begin a conversation with CMS with data enhance. So you can think sometime next year when we have sort of a clear view on the data that we have to work with.

And then as we approach commercialization, certainly being very focused on making the case as Nissim just pointed out, say sort of everyone that will have input into ultimately through what our reimbursement will look like.

So we'll be very proactive in building efforts, basically that's already started now but that will crescendo basically through next year and through 2017 as we get to launch..

Mike, anything you want to add?.

I think from a reimbursement perspective, the thing to start to differentiate now Matt is that, we're not going to have a similar timeline to some of these products that no regulatory hurdle to markets such as these HEPP product, their time to market is very short but the time to reimbursement is very long because they have no data.

Our reimbursement model will be more comparable to a pharma product that has gone through regular studies, was approved by the FDA and then comes to the commercial.

So from the time of approval to the time of reimbursement, we will have a much shorter cycle with some of the products that maybe some of the MedTech guys are used to in the wound care space..

Okay, thanks. And just one competitive question if I can, at the fix you've shown very high closure rates in a couple of small studies that I'm wondering.

And your conversations with physicians as you think about the data that except that you will have – what kind of feedback you have and how like a successful 20% absolute closure rate difference let's say in CureXcell trial that resonate relative to some of the claims that some of these smaller studies have.

Any thoughts there?.

The feedback we're getting now Matt is, this is really the penultimate study that's on the market now.

There is a lot of Focal and Smith & Nephews product, they did a very rigorous Phase III but they just didn't have success for whatever reason and I assume eventually we'll get that data that will – but the reality is that, the docs now are seeing this as the next great hope for better care.

And if you know, the people know the data, understand that there is really nothing comparable and all those studies that you mentioned had low numbers better than. It's very different when you're doing a double blind Phase III study compared to an open label and all non-blinded study.

So they are very different studies and we're seeing that vary amongst the medical communities that we interacted..

I think Matt, eventually I think physician will appreciate a product which will have a better ease of use, think about CureXcell, that it will take you less than three minutes to apply, there is no need for any preparation comparing to all other wound care product.

And with a much more rigorous and substantial clinical data, I think that would make big difference.

Right now like Mike said before, they put their hopes on one available product but that may change once CureXcell would be launched and I think we have seen that enthusiasm through the clinical trials which was one of the reason why we have been able to accelerate the recruitment in our clinical trials because physicians are really looking for another dimension, another element, another tool that will play the difference, and hopefully we'll be able to give them the tool to reshape half cartwheel of wounds are treated..

That's great. Thanks for taking the questions guys..

[Operator Instructions] Our next question comes from Raj Denhoy with Jefferies..

Hi, good morning..

Hi, good morning..

Wondering I could ask about the – even talk about manufacturing second half – did you notice that wasn't during your cash use expectations.

Any ballpark in terms of what you think that manufacturing build out will ultimately cost?.

Yes, we had previously guided that this year we could spend upto $4 million of CapEx on that facility. And then what we've also guided based between this year and next year, net income somewhere between $6 million $9 million, and it really depends on the type of incentives that we ultimately end up negotiating.

So just to give you a sense, it's going to be consistent with our prior disclosure that is going to be less than $10 million but it's going to be in the range Raj, and again it all depends on the net incentives we get essentially from the focus sights we're currently negotiating with..

Okay, that's helpful. Just one point of clarification [indiscernible]. I think one of the theories about one of the Smith & Nephews product may have failed because that Phase III trial was conducted with products that were in the Phase II trial.

Did you think about scaling it manufacturing for CureXcell, obviously there are regulatory requirements around that but do you perceive that as an applicable risk because you're trying to ramp this product into a larger scale?.

We are not going to rush, we are not going to change by any means the scale. And this is the beauty of this technology and the beauty of the whole commercialization or the manufacturing scale of this product. We are going to keep the same big size as we use for the clinical trials, both for the DFU and VLU.

Basically one batch is 200 ml, as starting materials which then produce between 80 to 100 treatment units to treat 80 to 100 patients. And we are going to keep the same scale of one batch 200 ml in the new manufacturing facility.

So unlike many other companies that are moving for one scale to another from the clinical stage to the commercial stage, we don't have these risks. And this is why we believe that it's going to be very streamlined, very straightforward move from both, regulatory point of view and from a technology point of view from one stage to another..

Raj, I would add, in the America Red Cross right now, we have essentially one clean room that we're producing our clinical trial supply but imagine a facility where we have five plus clean rooms and the ability to run multiple shifts at the same time.

So that's where – because we're not changing anything in terms of the bad sizing, we're using the same closed bag system to manufacture, it's all a question of just capacity and clean room space for us, not a question of going through and changing the scale of the batches..

It's not changing the scale, not changing the quality and quality control system, not changing the procedure, everything will be more or less the same, so this is the beauty and that's why we feel that there is very little risk in moving from the clinical stage to the commercial stage..

Okay, that's helpful. After we get through the next very large, very important data events over the next couple of months, and you start thinking about your plans beyond that, I know talked a bit more about engaging more with care organizations.

But when you think about you're starting to more to a commercial type of company, do you anticipate you will start to do those activities as soon as early next year or do you think you're still allowed to before you really start doing investments in things like sales and marketing and your commercial presence broadly?.

In terms of the reimbursement, and I think I mentioned that before, once we have the data from our pivotal studies from the DFU and the VLU immediately, once we have that we will try to engage with CMS and to open the dialogue and put the growth rate plan for reimbursement, that would be the first thing to do and then at the same time, yes we would prepare the ground for sales and marketing.

So I would say probably by the end of next year, we will start thinking about hiring a senior sales and marketing people that will put the foundation or for a launch of a product.

These people will be also responsible for preparing the ground in terms of promotion, hiring other sales people, and we'll do some additional clinical trials and support a product for reimbursement. So we have a full plan that we are going to augustrate [ph] all the DFU data and between that time point, as well as until the end of 2016..

Yes, and maybe to say it in other way, the focus for next year would into three main things; regulatory, reimbursement and initiated trials as Nissim just mentioned. And then we really kick in at the end of 2016 but through the balance of 2017 with a whole build out of a U.S.

marketing organization but obviously identifying the leadership upfront and then filling in, but seem that would be required to support a launch of the product..

Helpful, just a couple of more if I could.

Now you mentioned you're going to be initiating a couple of additional trials but are you aware of any other interim period as we look forward to prove – were there any other studies conducted by third-party groups and groups of clinicians in any case reports that are expected on CureXcell that might be published in the next couple of years?.

Mike?.

No, I mean none of that would entrap over the database result, you may see a scenario where some of the larger enrolling space, we'll look to do that but that will be after the top line related to the DFU for example..

But really any groups out of Israel front into the publishing time fast on their experience, anymore of those types of publications that might be coming?.

No..

No..

We'll focus on any data – moving forward for the investigator initiated publications will focus on the U.S. data and the data from the Phase III..

Okay, helpful. And my last question was really about Israel.

I'm just curious what the commercial progress is there, I know at times there have been some questions why were – you pushed the product aggressively in Israel, whether you waited until you figured the clinical work you're currently ongoing, started ongoing? Are there still aggressive sign of product in Israel?.

You know Raj, we never actually really fully supported from a proper commercial endpoint, they obviously manufactured the product, currently we're not manufacturing any products in Israel and primarily the reason is as we get into those critical stage of submitting the BLA, we're very focused in the U.S.

and we didn't want to have experience some confounding event in Israel that might potential bust our timeline and progress with the FDA with some problematic event. So current right now we're not – other than internally usage for ourselves, we are not supplying the product to the market in Israel..

Okay, that's helpful. Thank you..

Thank you, Raj..

Our next question comes from Steven Lichtman with Oppenheimer..

Thank you. Hi, guys.

Having both the DFU and VLU indications would certainly be unique, I was wondering whether upon commercialization you look to focus more on one indication initially over the other perhaps DFU or the call point and sales people synergies such that you would be looking to focus on both equally?.

I think you should assume that we are going to focus equally. I think those two markets are big enough and we will try to maximize and leverage the clinical data and capture the maximum output in terms of sales and market share.

However, I think it's too early now to talk about what would be our initial focus but I would say the fact that we'll be – may be the first wound care with a very broad label for all wounds below the knee will enable us and will give us some degree of freedom to operate in terms of promoting the product all over the place, whether it's VLU and DFU..

Great.

And then just on the treatment cost, I know you certainly highlighted before the benefits given if you treatments – does that apply on sides to VLU as well, I know you've given some examples before, I wasn't sure if that was just in DFU and what are some the potential costs advantages on the VLU side as well?.

I think the same assumption would be also in terms of benefit for VLU and DFU. I mean we are talking about once a month injection where you can expect a full enclosure with the three injection and with better compliance, better product compliance, better ease of use with much more significant clinical data.

I would say very attractive price propositions as some of you already assume a price of about $2,000 per injection. So overall a $6,000 for closing a wound, I think it's very attractive, both for VLU and DFU..

Okay, great. Thanks, Nissim..

Thank you, Steven..

Ladies and gentlemen, that concludes today's presentation. You may all disconnect and have a wonderful day. Speakers please standby..