Cormedix Inc. — 2019 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter report. Financial comparisons are with fiscal 2018.
Business context and key developments
CorMedix is a development-stage biopharmaceutical company focused primarily on Neutrolin, a taurolidine, citrate and heparin catheter-lock solution intended to prevent catheter-related infections and thrombosis. Neutrolin was commercially available in certain European and Middle Eastern markets, but had not received U.S. FDA approval. The company reported no significant product revenue and depended on external financing.
- In the completed Phase 3 LOCK-IT-100 trial, involving 795 subjects, Neutrolin reduced the risk of catheter-related bloodstream infection by 71% versus heparin; 41 events were adjudicated and the primary endpoint was statistically significant (p=0.0006).
- Secondary endpoint differences were not statistically significant. The reported treatment-emergent adverse-event rate was lower with Neutrolin.
- In January 2020, the FDA granted rolling review for the planned NDA. Priority review remained undecided pending FDA filing review; the agency had not determined whether one trial would suffice.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $0.283 million | $0.430 million |
| Gross profit (loss) | ($0.090 million) | $0.033 million |
| Research and development expense | $11.053 million | $18.822 million |
| Selling, general and administrative expense | $9.865 million | $8.075 million |
| Loss from operations | ($21.008 million) | ($26.864 million) |
| Net loss | ($16.433 million) | ($26.830 million) |
| Net loss attributable to common shareholders | ($43.536 million) | ($26.830 million) |
| Operating cash used | $15.052 million | $23.701 million |
- 2019 net loss included a $5.061 million tax benefit from selling New Jersey net operating loss benefits. The loss attributable to common shareholders also included $26.733 million of deemed dividends from the preferred-stock/debt exchange and $0.370 million from a warrant modification; these are not operating expenses.
- At December 31, 2019, cash and cash equivalents were $16.350 million and short-term investments were $11.984 million; combined, $28.334 million. Restricted cash was an additional $0.175 million. Current assets were $29.349 million versus current liabilities of $5.827 million.
- Total assets were $29.476 million and stockholders’ equity was $23.646 million. The $7.5 million senior secured convertible note outstanding at year-end 2018 was exchanged in 2019; no convertible note remained on the year-end 2019 balance sheet. Series G preferred stock issued in the exchange had an aggregate liquidation preference of approximately $18.736 million and was convertible into approximately 5.56 million common shares, subject to ownership limits.
- Cash provided by financing activities was $25.804 million, chiefly from ATM share sales ($15.235 million), warrant exercises ($8.674 million) and a $2.0 million payment associated with the exchange agreement. Investing activities used $12.020 million, mainly for short-term investments.
- Management said cash and investments at year-end, together with funding raised through March 12, 2020, were expected to fund operations into the second quarter of 2021. That estimate depends on plans and assumptions and does not remove the need for further capital.
Changes versus 2018
- Revenue declined 34%, principally because Saudi Arabian registration expired and sales there stopped; increased EU sales partly offset the decline.
- R&D expense fell 41% as LOCK-IT-100 was wound down and closed out. SG&A rose 22%, including higher stock-based compensation, consulting and personnel costs.
- Operating cash use decreased, reflecting lower R&D spending and the NOL sale, partly offset by working-capital movements. The reported net loss narrowed, but the year-over-year comparison includes the 2019 tax benefit and financing-related preferred-stock deemed dividends.
- The Elliott exchange replaced the related-party convertible note and certain preferred shares and warrants with Series G preferred stock plus a $2.0 million cash payment. Common shares outstanding increased to 25.665 million at year-end, from 21.775 million.
Outlook, risks and contingencies
- Management anticipated a possible U.S. FDA decision in the second half of 2020, but approval was uncertain and not guaranteed. A second Phase 3 trial could be required, delaying development and requiring substantial additional financing.
- Management expected no significant near-term revenue from foreign sales. U.S. commercialization would require FDA approval, adequate reimbursement, market acceptance, manufacturing readiness and potentially additional capital. The filing does not provide a clear numerical revenue or earnings forecast.
- In February 2020, the company said it had been approved to transfer approximately $5.5 million of New Jersey tax benefits and anticipated about $5.2 million in cash proceeds, subject to closing conditions; these proceeds were not reported as received by year-end 2019.
- Other material risks include continued operating losses and financing needs; dilution from equity or convertible securities; reimbursement and pricing uncertainty; reliance on contract manufacturers, distributors and clinical-service providers; heparin supply risk; and patent challenges. The company reported that Saudi registration had expired and renewal was uncertain.
- German patent litigation remained unresolved: the European Patent Office had revoked the company’s Prosl European Patent and an appeal was pending; a separate unfair-competition complaint had been dismissed and appealed, with an expert opinion ordered. The German utility model had been found invalid.
- The filing discussed COVID-19-related economic and regulatory disruption risks, including postponed FDA foreign inspections. These risks were described as uncertain.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded internal controls were effective at December 31, 2019.
Important facts for investors to verify
- Whether the FDA accepts the NDA, grants priority review, and considers LOCK-IT-100 sufficient without another pivotal trial.
- Actual timing, cost and financing for NDA review, any additional trial, and a U.S. commercial launch; compare these with the stated cash runway into Q2 2021.
- Whether the anticipated 2020 New Jersey NOL-sale proceeds closed and were received, and whether subsequent financing materially diluted shareholders.
- Progress in renewing Saudi registration, foreign sales trends, and the reimbursement and market-access outlook for Neutrolin.
- Developments in the European patent appeal and unfair-competition litigation, including potential effects on intellectual-property protection and legal costs.