Cormedix Inc. 10-Q Summary: Quarter Ended September 30, 2010
Business Context and Reporting Period
Cormedix Inc. is a development-stage pharmaceutical company focused on treating cardiorenal disease. The company has generated no revenue since its inception in July 2006. This report covers the quarterly period ended September 30, 2010. In March 2010, the company completed its Initial Public Offering (IPO) and converted all outstanding convertible debt into equity.
Key Financial Metrics
| Metric | 9 Months Ended Sep 30, 2010 | 9 Months Ended Sep 30, 2009 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(9,402,433) | $(3,580,987) |
| Net Loss Per Share (Basic/Diluted) | $(1.10) | $(4.25) |
| Cash and Cash Equivalents (Sep 30, 2010) | $9,522,241 | $24,093 (Sep 30, 2009) |
| Total Assets | $9,732,813 | $2,225,652 (Dec 31, 2009) |
| Total Liabilities | $956,031 | $16,934,551 (Dec 31, 2009) |
| Accumulated Deficit | $(34,733,476) | $(25,331,043) (Dec 31, 2009) |
Operating Expenses (9 Months 2010): Research and Development (R&D) was $4,417,884; General and Administrative (G&A) was $1,906,872.
Cash Flow (9 Months 2010): Net cash used in operating activities was $(2,429,847). Net cash provided by financing activities was $10,457,270, primarily from the IPO.
Material Changes vs. Prior Period
- Debt Elimination: As of September 30, 2010, the company had zero senior convertible notes, related party notes, or Galenica notes outstanding. All such debt was converted to equity in March 2010 during the IPO. Consequently, interest expense dropped to $0 for the quarter ended September 30, 2010, compared to $422,499 in the same period in 2009.
- Liquidity Improvement: Cash balances increased from $1.5 million at year-end 2009 to $9.5 million at September 30, 2010, driven by net IPO proceeds of approximately $10.5 million.
- Expense Increases: R&D expenses increased by $3.4 million year-over-year, largely due to a $2.6 million non-cash charge for stock issued to licensors and increased clinical trial costs. G&A expenses increased by $0.8 million due to stock-based compensation and costs associated with becoming a public company.
- Share Count: The number of common shares outstanding increased significantly from 787,010 at December 31, 2009, to 11,408,288 at September 30, 2010, following a reverse stock split and the IPO/debt conversions.
Outlook, Risks, and Management Commentary
Outlook: Management believes current capital resources are sufficient to fund operations through the end of the first quarter of 2012. The company expects to continue incurring substantial operating losses as it advances its product candidates, specifically CRMD003 (Neutrolin) and CRMD001 (Deferiprone).
Development Status:
- CRMD003: Intends to submit an Investigational Device Exemption by the end of 2010 to begin a pivotal clinical trial in 2011.
- CRMD001: Initiated patient dosing in a Phase II biomarker study in June 2010 for contrast-induced nephropathy.
Risks and Contingencies:
- Capital Needs: The company has no revenue and will require additional financing to complete clinical trials and commercialization. Failure to secure funding could force delays or elimination of programs.
- Going Concern: While the IPO improved liquidity, the company has a history of losses and no assurance of future profitability.
- Regulatory Risk: Success depends on FDA approval, which is costly and uncertain.
Subsequent Event: On October 29, 2010, the company was awarded two federal grants totaling $488,959 under the QTDP program for its Neutrolin and Deferiprone programs.
Key Facts for Investor Verification
- Cash Runway: Verify if the $9.5 million cash balance is sufficient to meet the projected burn rate through Q1 2012 without further dilution.
- Non-Cash Expenses: Note that a significant portion of the 2010 net loss ($2.6M to licensors, $1.1M beneficial conversion feature, $0.8M stock-based comp) was non-cash, meaning cash burn was lower than the reported net loss.
- Dilution: Confirm the impact of the 11.4 million shares outstanding and the 2.8 million warrants outstanding on future earnings per share.
- Clinical Milestones: Monitor the submission of the Investigational Device Exemption for CRMD003 and the results of the Phase II study for CRMD001 as critical value drivers.