Cormedix Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. CorMedix is a development-stage biopharmaceutical company focused primarily on Neutrolin, a catheter-lock solution intended to prevent catheter-related infections and thrombosis. The unaudited statements include its wholly owned German subsidiary.
Financial performance and liquidity
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $16,511 | $119,973 | $57,939 | $151,237 |
| Gross profit (loss) | ($170,681) | $18,175 | ($179,482) | $32,120 |
| Research and development | $2.77 million | $1.80 million | $4.86 million | $3.03 million |
| Selling, general and administrative | $1.97 million | $2.36 million | $4.13 million | $5.05 million |
| Net loss | ($4.89 million) | ($4.14 million) | ($9.12 million) | ($9.63 million) |
| Net loss per common share | ($0.13) | ($0.13) | ($0.25) | ($0.35) |
- At June 30, cash and cash equivalents were $12.02 million and short-term investments were $16.59 million; combined, $28.61 million, excluding $171,553 of restricted cash. Total current assets were $31.18 million and current liabilities $3.12 million.
- Total liabilities were $3.14 million, primarily accounts payable and accrued expenses; the filing reports no material debt balance. Stockholders’ equity was $28.07 million.
- Six-month operating cash use was $9.22 million, compared with $5.95 million in 2015. Investing activities provided $7.00 million, principally from sales of short-term investments; financing provided $2.42 million. Cash increased $204,000 during the period.
- Management said available cash and investments should fund operations for at least 12 months after June 30, but not complete the ongoing hemodialysis Phase 3 trial or fund the planned oncology trial. The ATM program had approximately $8.4 million available at quarter-end. Subsequent to quarter-end through August 1, the company raised approximately $1.8 million through the ATM, issuing 1,040,684 shares.
Changes versus prior comparable periods
- Q2 revenue declined 86% and six-month revenue declined 62%, mainly because of lower Neutrolin sales in Germany and the Middle East. Cost of sales rose, including a $166,000 increase in the inventory reserve; gross results shifted from profit to loss.
- R&D expense increased 54% in Q2 and 60% for the first half, primarily reflecting the U.S. hemodialysis Phase 3 program and other development work. SG&A declined 16% in Q2 and 18% for the first half, partly due to lower commercialization, business-development and stock-compensation costs, offset in part by higher legal and consulting expenses.
- Q2 net loss widened from $4.14 million to $4.89 million. First-half net loss improved from $9.63 million to $9.12 million, largely because 2015 included a $1.58 million non-cash expense for warrants issued under a backstop agreement. First-half weighted-average shares rose to 36.23 million from 27.79 million, reflecting equity issuance and exercises.
Outlook, risks and notable items
- LOCK-IT-100, the U.S. hemodialysis Phase 3 trial, began in December 2015. Management projected a safety review in Q4 2016, enrollment completion in Q1 2017 and top-line data in Q3 2017. The trial is expected to enroll up to 632 patients at approximately 70 sites. Management estimated total trial costs of $26–30 million; a related PPD work order is described as $19.2 million.
- The planned oncology Phase 3 trial (LOCK-IT-200) remained under discussion with the FDA; its design was not finalized, and the company could not provide a cost estimate. Initiation depends on funding.
- Management expects increased cash use for clinical development, commercialization, business development and intellectual-property defense. Future financing is not assured and may dilute shareholders or require debt, strategic arrangements, or licensing of valuable rights. Management does not anticipate significant product-sales revenue in the foreseeable future.
- The company recorded a $166,000 inventory-reserve increase in the first half; inventory net of reserves fell to $157,500 from $376,569 at year-end. The filing identifies inventory realizability and product shelf life as estimation risks.
- Legal matters include German patent and unfair-competition disputes with TauroPharm, a U.S. securities class action and a shareholder derivative action. A German PTO panel affirmed a preliminary finding that an expired utility model was invalid; the separate Prosl European Patent validity proceeding remained pending. The securities-case dismissal motion was under advisement, and the derivative case was stayed. The company said it intends to defend the U.S. actions.
- CorMedix reported that it ended its strategic-alternatives engagement with Evercore in July 2016, while remaining open to strategic partnerships. It also reported effective disclosure controls and no material changes in internal control over financial reporting.
Key investor verification points
- Confirm subsequent ATM proceeds, remaining issuance capacity and resulting share-count dilution; 38,337,207 common shares were outstanding on August 1, 2016.
- Track LOCK-IT-100 enrollment, the projected interim safety review and data timing, as well as actual trial costs versus the $19.2 million work order and $26–30 million estimate.
- Assess whether the company can secure sufficient capital to finish the hemodialysis trial and start the oncology trial, given management’s stated runway and financing uncertainty.
- Monitor Neutrolin sales, inventory reserves and shelf-life exposure, and the legal outcomes that could affect intellectual-property protection or incur additional costs.