Cormedix Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2011; filed November 10, 2011. CorMedix is a development-stage pharmaceutical company focused on cardiac and renal disease and reported no product revenue since inception.
Financial performance and position
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $1.725 million | $0.761 million | $4.483 million | $4.048 million |
| General and administrative | $0.877 million | $0.642 million | $2.610 million | $1.907 million |
| Net loss | $2.600 million | $1.392 million | $7.052 million | $9.033 million |
| Loss per share, basic and diluted | $0.23 | $0.12 | $0.62 | $1.06 |
At September 30, 2011, cash and cash equivalents were $2.890 million, down from $8.284 million at December 31, 2010. Current assets were $3.003 million and current liabilities $2.278 million, implying working capital of approximately $0.725 million. Total liabilities were $2.293 million; the balance sheet lists no debt at period-end. Accumulated deficit was $43.288 million and stockholders’ equity was $0.738 million. Gross margin is not applicable because the company had no revenue.
For the first nine months, operating cash outflow was $5.392 million, investing cash outflow was $1,625, and there was no financing cash inflow. The comparable 2010 period included $10.457 million of net IPO proceeds and operating cash outflow of $2.430 million. No cash interest was paid in 2011.
Material changes versus comparable periods
- Q3 net loss increased year over year, principally alongside higher R&D spending and higher G&A. R&D rose due to CRMD001 patient recruitment and CRMD003 development costs; G&A included approximately $214,000 of CEO separation-related charges.
- Nine-month net loss improved year over year, largely because 2010 included $3.094 million of interest expense associated with convertible notes that converted at the March 2010 IPO. Nine-month R&D and G&A expenses both increased in 2011.
- Cash fell substantially during 2011 with operating expenditures and no financing proceeds. Nine-month weighted-average shares were 11,408,274 versus 8,546,248 in 2010; shares outstanding at November 10, 2011 were 11,408,274.
Outlook, strategy, risks and unusual items
- Management shifted most resources to pursuing European CE marking and commercialization of Neutrolin (CRMD003), a catheter-lock product intended to prevent catheter-related bloodstream infections and maintain catheter patency. A design dossier had been submitted; management targeted possible CE approval and European launch in the first half of 2012, but cautioned that approval and timing were not assured. The FDA assigned CRMD003 to CDER; the filing reports no U.S. approval.
- Management estimated existing capital would fund operations into the fourth quarter of 2012 under the revised spending plan. The company expects no product revenue in 2011 and will need additional financing before cash is exhausted; availability and terms are uncertain. Financing could dilute shareholders or impose debt obligations and restrictions.
- CorMedix completed a 61-patient Phase 2 study of CRMD001 (deferiprone) for contrast-induced kidney injury. Top-line results suggested reduced acute increases in some injury biomarkers, but kidney-function measures trended modestly worse in the treatment group; no safety signal was identified. The company decided not to pursue further development at this time and was discussing revised license terms with Shiva Biomedical.
- Former CEO John Houghton separated effective September 30, 2011. The agreement provided about $118,000 of four-month salary continuation, approximately $21,000 of health benefits, and an approximately $75,000 non-cash option-modification charge. Richard M. Cohen became interim CEO on November 4, 2011, at $7,500 per month.
- The company corrected an immaterial prior-period error involving unearned licensor escrow shares. The correction reduced previously reported 2010 nine-month R&D expense by $369,652 and loss per share by $0.04; the shares remained unearned at September 30, 2011.
- Key risks include dependence on regulatory and clinical success, limited liquidity and need for financing, reliance on licensors and outsourced manufacturers, commercialization and reimbursement uncertainty, and potential dilution. Management reported disclosure controls were effective and no material change in internal control during the quarter. No legal proceedings were reported.
Important facts for investors to verify
- Cash-burn assumptions behind the projected runway into Q4 2012, and the timing, terms and availability of additional financing.
- CE-mark review progress, quality-system audit requirements, and whether Neutrolin can meet the stated 2012 approval and launch targets.
- Complete CRMD001 study results, implications of the kidney-function trends, and the outcome of negotiations with Shiva Biomedical.
- Outstanding accrued expenses, including the disclosed $900,000 licensor expense related to the CRMD001 study, and any related payment or license obligations.
- Leadership transition costs and execution of the Europe-focused strategy with reduced capital and no commercial revenue.