CorMedix Inc. — FY 2014 Form 10-K
Reporting period: Year ended December 31, 2014. The filing is an annual report; it does not provide clear standalone financial results for the fourth quarter. CorMedix is a development-stage commercial biopharmaceutical and medical-device company. Its lead product, Neutrolin, is a catheter-lock solution intended to help prevent catheter-related infections and thrombosis. The company began selling it in Europe in late 2013; CRMD004 remains preclinical.
Financial performance and liquidity
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $189,000 | $2,000 |
| Cost of sales / gross loss | $446,000 / $257,000 loss | $202,000 / $200,000 loss |
| Research and development | $1.32 million | $1.23 million |
| Selling, general and administrative | $7.33 million | $3.49 million |
| Operating loss | $8.90 million | $4.92 million |
| Net loss | $20.45 million | $9.13 million |
| Net loss per common share | $0.96 | $0.69 |
| Cash used in operating activities | $6.32 million | $3.62 million |
| Cash and cash equivalents at year-end | $4.34 million | $2.37 million |
- Gross margin was negative in both years: cost of sales exceeded revenue. The filing reports 2014 revenue primarily from Germany and Saudi Arabia; sales remain very small relative to operating costs.
- Cash provided by financing was $8.36 million, principally from a March 2014 common-stock offering and a preferred-stock financing. Investing cash outflow was $25,000.
- At year-end, total assets were $5.10 million, total liabilities $1.46 million, and stockholders’ equity $3.63 million. The balance sheet reported no derivative liability at year-end following financing-instrument amendments. Convertible preferred stock and warrants remain relevant to potential dilution and financing restrictions; the filing does not show conventional debt outstanding at December 31, 2014.
- The auditor cited an accumulated deficit of $76.2 million and substantial doubt about the company’s ability to continue as a going concern. Management estimated cash runway into the third quarter of 2015 only after approximately $2 million of post-year-end warrant and option proceeds and access to up to $2.5 million under the Manchester backstop. Additional financing would be needed thereafter.
Material changes versus FY 2013
- Revenue rose from approximately $2,000 to $189,000 following the European launch, but remained immaterial relative to expenses.
- SG&A increased by $3.84 million, including European commercialization, stock-based compensation, intellectual-property litigation, personnel and consulting, and business-development costs. Operating loss widened by about $3.99 million.
- Net loss more than doubled, largely reflecting non-cash financing-accounting charges: an $8.85 million increase in the fair value of derivative liabilities and a $2.46 million loss on modifying equity instruments and extinguishing derivative liabilities. These instruments were reclassified to equity after September 2014 amendments. Cash used in operations also increased.
- In March 2014, the company raised approximately $6.72 million net from a common-stock and warrant offering. Common shares outstanding increased from 16.6 million at year-end 2013 to 22.5 million at year-end 2014; further conversion and exercise could dilute shareholders.
Outlook, developments and risks
- Commercial and regulatory: Neutrolin had CE Mark approval and expanded European indications in 2014, including oncology, critical care and total parenteral nutrition. The company reported authorization to sell in Austria, Germany, Italy, Malta, Saudi Arabia and the Netherlands. The FDA accepted the hemodialysis Phase 3 protocol and determined the IND was not on clinical hold, but the company said it was seeking a strategic partner or capital to start the U.S. trial. It expected at least one Phase 3 trial in hemodialysis and one in oncology/TPN; a Phase 2b ICU trial was also anticipated. FDA Fast Track designation was granted in January 2015, following QIDP designation; neither designation is approval to market.
- Guidance: Management did not expect significant product-sales revenue in 2015 and said substantial Neutrolin revenue might not occur until late 2015 at the earliest. It expected cash use to rise as commercialization, U.S. development, business-development and legal costs continued. No quantified sales or earnings guidance was provided.
- Financing and strategic alternatives: The board began evaluating strategic alternatives in March 2015, including partnering, licensing, a merger, or a sale of the company or assets. There is no assurance a transaction will result. The Manchester backstop provides potential financing subject to conditions and limits; its convertible terms and associated warrant may be dilutive.
- Supply and execution: Manufacturing is outsourced. CorMedix did not meet the Navinta agreement’s required 2014 purchase amount and lost exclusive manufacturing rights; the agreement expires March 31, 2015, and a replacement agreement was being negotiated. Product availability depends on suppliers, contract manufacturers and distributors.
- Legal and intellectual property: The company is involved in German patent and unfair-competition litigation with TauroPharm, including challenges to patent rights; outcomes and potential remedies are uncertain. It also reported a European patent opposition proceeding. Litigation creates cost and execution risk.
- Other risks and unusual items: The company reported ineffective disclosure controls and a material weakness in internal control over financial reporting at year-end, which it said was not fully remediated. A $175,000 inventory reserve was recorded, including pre-launch build-up and manufacturing inefficiencies. Revenue concentration was notable: one sale represented 29% of 2014 sales, and one customer accounted for about 68% of year-end receivables. The company has no history of significant product revenue and expects continuing losses.
Most important facts for investors to verify
- Current cash, actual access to the Manchester backstop, financing needs, and the company’s ability to fund operations beyond the disclosed runway.
- Whether U.S. Phase 3 trials have started, their funding and enrollment status, and subsequent FDA decisions; Fast Track and QIDP designations do not guarantee approval.
- Neutrolin sales, customer concentration, reimbursement, adoption, and progress in each approved market.
- Whether the Navinta supply agreement was renewed or alternative qualified manufacturing capacity was secured.
- Developments and potential financial consequences of the German litigation and patent challenges.
- Progress remediating the material weakness, and the potential dilution and restrictions associated with outstanding warrants and convertible preferred stock.