Cormedix Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019. CorMedix is a clinical-stage biopharmaceutical company focused primarily on Neutrolin, a catheter-lock solution intended to prevent catheter-related infection and thrombosis. Neutrolin has CE Mark approval and is sold in certain foreign markets; U.S. commercialization depends on FDA approval.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $59,530 | $372,514 | $258,488 | $403,274 |
| Gross profit (loss) | $(19,496) | $60,080 | $(68,621) | $28,602 |
| Operating expenses | $5.15 million | $10.30 million | $15.56 million | $29.03 million |
| Operating loss | $(5.17) million | $(10.24) million | $(15.63) million | $(29.00) million |
| Net loss | $(5.26) million | $(10.24) million | $(11.13) million | $(28.98) million |
| Net loss attributable to common shareholders | $(32.37) million | $(10.24) million | $(38.23) million | $(28.98) million |
| Basic and diluted loss per share | $(1.35) | $(0.54) | $(1.62) | $(1.73) |
- At September 30, 2019, cash and cash equivalents were $20.15 million and short-term investments were $12.29 million; restricted cash was $0.17 million. Total cash, cash equivalents and short-term investments were approximately $32.4 million, excluding restricted cash.
- For the first nine months, operating cash use was $11.17 million; investing cash use was $12.32 million, primarily for purchases of short-term investments; financing provided $26.01 million. Cash, cash equivalents and restricted cash ended the period at $20.32 million.
- Total liabilities were $5.01 million, including $5.01 million of current liabilities. The related-party convertible note was exchanged and no longer appeared as debt at quarter-end; operating lease liabilities were approximately $5,000.
- Management estimated the available cash and investments would fund operations into the first quarter of 2021, including Neutrolin NDA submission and initial launch preparations. The company reported an accumulated deficit of $190.1 million and has not achieved profitability.
Material changes and unusual items
- Revenue fell 84% year over year in Q3 and 36% for the nine-month period, mainly because Saudi Arabian registration expired and sales there declined; higher EU sales partly offset the decrease. CorMedix said it intended to pursue renewal, but timing and outcome were uncertain.
- R&D expense declined 70% in Q3 and 64% year to date, principally as LOCK-IT-100 wound down. SG&A increased 31% in Q3 and 23% year to date, reflecting higher stock compensation, insurance, personnel, recruitment consulting and other costs.
- The September exchange with major investor Elliott retired the 10% secured convertible note and specified preferred shares and warrants in return for 100,000 Series G preferred shares and $2.0 million cash to CorMedix. The exchange generated a $26.73 million deemed dividend, sharply increasing loss attributable to common shareholders, but did not increase reported net loss. Series G carries an aggregate liquidation preference of approximately $18.74 million and is convertible into about 5.56 million common shares at $3.37 per share, subject to ownership limits.
- In September, holders exercised Series B warrants after the exercise price was reduced from $5.25 to $4.00, generating approximately $4.9 million net proceeds and issuance of 1.22 million common shares. The modification produced a $369,500 deemed dividend.
- The company received a $5.06 million tax benefit in the nine-month results from selling New Jersey net operating losses; related net cash proceeds were approximately $5.1 million.
Outlook, risks and contingencies
- LOCK-IT-100 was stopped early after its interim analysis met the prespecified efficacy threshold; the DSMB reported no safety concerns. FDA feedback indicated it would review the trial data in an NDA to determine whether one study is sufficient. CorMedix believed a second Phase 3 trial was not required before submission; FDA approval was not assured.
- Management anticipated potential FDA marketing approval in the second half of 2020 and said the NDA could qualify for priority and rolling review and the LPAD pathway. These are expectations, not confirmed outcomes or approval commitments.
- CorMedix said it would need additional capital to support operations and potentially build commercial infrastructure. It reported approximately $4.6 million remaining under its ATM program and $30.3 million available under its shelf registration. Additional financing may be dilutive or unavailable on acceptable terms.
- Risks include regulatory and manufacturing outcomes, continued operating cash burn, competition, and the need to raise capital. The company also faces German litigation with TauroPharm: a court affirmed invalidity of an expired utility model, the European patent validity appeal remained ongoing, and the unfair-competition case was appealed, with an expert opinion ordered. Approximately $170,000 was held as restricted cash for legal-cost security.
- Foreign sales were concentrated among a small number of customers. The filing also noted that further development of taurolidine medical-device candidates may require a PMA pathway.
Investor verification points
- Track NDA submission, FDA review of whether LOCK-IT-100 supports approval, and any changes to the anticipated review or approval timeline.
- Monitor quarterly operating cash burn, financing needs, and the stated runway; verify whether new equity, debt or strategic funding is obtained.
- Review the Series G preferred stock’s liquidation, voting and conversion terms and the resulting potential dilution to common shareholders.
- Check whether Saudi registration is renewed and whether foreign product sales recover or remain concentrated.
- Follow the TauroPharm patent and unfair-competition proceedings, including the expert opinion and European patent appeal.