Cormedix Inc. — Form 10-Q Summary
Business context and reporting period
Unaudited results for the quarter and six months ended June 30, 2018. CorMedix is a development-stage biopharmaceutical company focused on Neutrolin, an anti-infective catheter-lock solution. Neutrolin is approved in certain overseas markets; U.S. approval remains dependent on FDA requirements and the company’s ability to finance further development.
Financial performance and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $7,551 (2017: $136,168) | $30,760 (2017: $175,727) |
| Gross profit (loss) | $(26,112) (2017: $118,116) | $(31,478) (2017: $64,103) |
| Research and development expense | $6.60 million (2017: $5.09 million) | $14.88 million (2017: $10.01 million) |
| Selling, general and administrative expense | $1.95 million (2017: $2.05 million) | $3.85 million (2017: $4.69 million) |
| Net loss | $(8.56) million (2017: $(5.15) million) | $(18.74) million (2017: $(12.74) million) |
| Loss per common share, basic and diluted | $(0.10) (2017: $(0.10)) | $(0.24) (2017: $(0.27)) |
Six-month operating cash use was $11.39 million, versus $14.51 million in 2017. Investing activities provided $1.57 million and financing activities provided $4.15 million, primarily from ATM stock sales. Cash, cash equivalents and restricted cash totaled $4.87 million at June 30; unrestricted cash was $4.70 million. The company had no short-term investments at quarter-end.
Total assets were $5.93 million and current liabilities were $12.40 million at June 30. Stockholders’ equity was a deficit of $6.48 million. Accounts payable rose to $7.31 million from $1.81 million at year-end, principally because CorMedix suspended payments to its CRO during negotiations. The filing reports no material debt balance; it does disclose preferred stock and substantial potential dilution from warrants, options and convertible preferred shares.
Material changes versus the prior comparable period
- Revenue dropped sharply, reflecting lower European sales and the adoption of ASC 606. For the first half, reported revenue under ASC 606 was $30,760; the filing states it would have been $68,429 under the previous guidance, a $37,669 difference.
- R&D expense increased 49% for the first half, mainly because of higher LOCK-IT-100 trial costs. Net loss increased 47%, partly because the prior-year comparison included a $1.85 million gain from a change in the fair value of a derivative liability.
- CorMedix issued 13.43 million shares under its ATM program during the first half for approximately $4.15 million net proceeds. From July through August 10, it issued a further 13.81 million shares for approximately $6.9 million net proceeds.
Outlook, risks and unusual items
- On July 25, 2018, after quarter-end, the DSMB reported that the prespecified statistical efficacy threshold had been reached in the interim LOCK-IT-100 analysis and recommended early termination; it reported no safety concerns. Management planned to discuss the next development steps with the FDA. The FDA may still require another pivotal trial before an NDA.
- Management stated that June 30 cash plus ATM proceeds through August 10 should cover trial closeout and a planned FDA meeting. A successful CRO negotiation might enable operations into 2019; absent an agreement, additional financing may be required in the fourth quarter of 2018. The filing identifies substantial doubt about the company’s ability to continue as a going concern.
- The CRO contract was approximately $33 million, up from an original $19.2 million; approximately $29.7 million had been incurred. CorMedix was negotiating financial considerations with the CRO, and the contract could be modified further.
- The company disclosed an NYSE American continued-listing deficiency related to stockholders’ equity and submitted a compliance plan targeting compliance by December 16, 2019. Failure to regain compliance could lead to delisting.
- German patent and unfair-competition disputes with TauroPharm remain unresolved. The EPO panel indicated in November 2017 that it would invalidate the relevant European patent for lack of novelty; CorMedix planned to appeal. A further unfair-competition hearing was scheduled for November 20, 2018.
- ASC 606 adoption accelerated recognition of certain deferred revenue and related costs and recorded a $52,900 warranty obligation. The company also had $171,553 of restricted cash related to litigation security deposits.
Important facts for investors to verify
- FDA feedback on the Neutrolin development path, including whether a second pivotal trial or additional financing is required.
- Outcome and cash impact of CRO negotiations, trial closeout costs, and any remaining contract or accrued obligations.
- Cash runway, further ATM or other financing, and the dilutive impact of new share issuance and outstanding convertible securities and warrants.
- Progress under the NYSE American compliance plan and the status of the German patent and unfair-competition litigation.