Cormedix Inc. 10-Q Summary: Quarter Ended March 31, 2011
Business Context and Reporting Period
Cormedix Inc. is a development-stage pharmaceutical company focused on treating cardiorenal disease. The company has generated no revenue since its inception in July 2006. This report covers the quarterly period ended March 31, 2011. The company is classified as a smaller reporting company and a shell company status is denied. As of May 9, 2011, there were 11,408,274 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2011 | Q1 2010 | Cumulative (Inception to Mar 31, 2011) |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net Loss | $(1,975,038) | $(6,467,587) | $(38,211,317) |
| Loss Per Share (Basic/Diluted) | $(0.17) | $(6.06) | N/A |
| Cash and Cash Equivalents (End of Period) | $6,564,212 | $11,724,713 | $6,564,212 |
| Net Cash Used in Operating Activities | $(1,719,472) | $(230,937) | $(17,239,549) |
| Total Assets | $6,818,929 | N/A | N/A |
| Total Liabilities | $1,459,079 | N/A | N/A |
| Stockholders' Equity | $5,359,850 | N/A | N/A |
Debt and Liquidity: The company had no interest expense in Q1 2011 as all convertible notes were converted to equity during the IPO in March 2010. Total current liabilities were $1,442,891, primarily consisting of accounts payable ($1,293,550) and accrued expenses ($149,341).
Material Changes vs. Prior Period
- Net Loss Reduction: Net loss decreased significantly from $6.47 million in Q1 2010 to $1.98 million in Q1 2011. This improvement was primarily driven by the absence of a $2.22 million non-cash charge in Q1 2010 related to the issuance of shares to licensors for anti-dilution adjustments, which expired after the IPO.
- Interest Expense: Interest expense dropped to $0 in Q1 2011 from $3.09 million in Q1 2010 due to the full conversion of convertible notes into equity during the IPO.
- Operating Expenses: Total operating expenses decreased from $3.37 million in Q1 2010 to $2.01 million in Q1 2011. Research and Development (R&D) expenses fell by $1.55 million, while General and Administrative (G&A) expenses increased by $187,638 due to higher stock-based compensation and public company compliance costs.
- Cash Position: Cash and cash equivalents decreased by approximately $1.72 million during the quarter, reflecting net cash used in operating activities.
Guidance, Outlook, and Risks
Outlook and Guidance: Management believes current capital resources ($6.56 million) are sufficient to fund operations into the first quarter of 2012. The company expects to continue incurring substantial operating losses as it advances its product candidates. No product revenue is anticipated for 2011.
Product Pipeline Status:
- CRMD003 (Neutrolin): Intended to prevent catheter-related bloodstream infections. The company expects to submit an amendment to its Investigational Device Exemption (IDE) to the FDA by the end of the first half of 2011. CE mark approval in Europe is now expected in the first half of 2012, delayed from original timelines.
- CRMD001 (Deferiprone): Intended for Contrast-Induced Nephropathy (CIN). A Phase II study initiated in June 2010 had 47 patients enrolled as of May 5, 2011, with full enrollment (60 patients) expected by the end of the first half of 2011.
Risks and Contingencies:
- Liquidity Risk: The company requires additional financing to continue operations beyond early 2012. Failure to raise capital could force delays or elimination of R&D programs.
- Regulatory Risk: There is no assurance of FDA or CE mark approval for product candidates. Delays in regulatory reviews (e.g., CE mark for Neutrolin) impact commercialization timelines.
- Accounting Correction: The company corrected an immaterial error in Q1 2010 financial statements regarding the recording of licensor escrowed shares, which had overstated R&D expenses and net loss per share in that prior period.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $6.56 million cash balance to fund operations through Q1 2012 given the burn rate of ~$1.7 million per quarter.
- Regulatory Timelines: Monitor the status of the IDE amendment submission for CRMD003 and the revised CE mark approval timeline for Europe.
- Capital Needs: Assess the likelihood and terms of future equity or debt financing required to sustain operations post-2012.
- Stock-Based Compensation: Review the impact of future stock option grants and forfeitures on operating expenses, as seen in the Q1 2011 reversal of $209,647 due to executive departures.
- Accumulated Deficit: Note the cumulative deficit of $38.2 million, indicating the company is in a pre-revenue, development stage.