Cormedix Inc. — Q1 2020 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2020; balance-sheet comparisons are with December 31, 2019. CorMedix is a development-stage biopharmaceutical company focused principally on Neutrolin, a catheter-lock solution being developed to prevent catheter-related bloodstream infections in hemodialysis patients. The company also sells Neutrolin in certain foreign markets.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 / prior date |
|---|---|---|
| Revenue | $74,000 | $164,000 |
| Gross profit (loss) | $26,000 | $(63,000) |
| Research and development | $2.47 million | $2.87 million |
| Selling, general and administrative | $3.17 million | $1.98 million |
| Operating loss | $5.61 million | $4.92 million |
| Net loss | $5.56 million | $5.17 million |
| Net loss per share, basic and diluted | $0.21 | $0.22 |
| Net cash used in operating activities | $7.97 million | $7.37 million |
| Cash, cash equivalents and short-term investments | $23.19 million at March 31, 2020 | $28.33 million at December 31, 2019 |
| Total liabilities | $5.81 million at March 31, 2020 | $5.83 million at December 31, 2019 |
Restricted cash of $172,000 is excluded from the cash-and-investments total. The balance sheet reports no borrowings; the filing notes that the prior-year convertible note is no longer outstanding. Current assets were $27.28 million and current liabilities $5.80 million at quarter-end.
Material changes versus the prior comparable period
- Revenue declined 55%, primarily because Middle East sales fell after the Saudi registration expired; higher EU sales partly offset the decline.
- R&D expense decreased 14%, mainly as LOCK-IT-100 trial costs wound down, partly offset by manufacturing, staffing and NDA-preparation costs.
- SG&A increased 59%, reflecting higher legal, personnel, recruiting, insurance, accounting, consulting and board costs.
- Operating loss widened 14% and net loss widened 8%. Lower interest expense, as the 2018 convertible debt-related charges no longer applied, partly offset operating-loss growth.
- Operating cash use increased by about $600,000. Financing proceeds were $2.83 million, versus $15.97 million in Q1 2019, including substantially lower ATM issuance proceeds ($2.47 million versus $15.23 million).
- Common shares outstanding rose to 26.13 million from 25.67 million at year-end, including ATM sales and warrant exercises.
Outlook, risks and unusual items
- CorMedix began modular NDA submission for Neutrolin in March 2020 and anticipated possible FDA approval in the second half of 2020. Management reported no FDA review delay at filing, but warned that COVID-19 restrictions, including limits on inspections and travel, could delay review or approval.
- Management estimated funding through the second quarter of 2021, taking into account subsequent proceeds from the New Jersey NOL sale and FDA fee refund, as well as NDA and initial launch costs. This runway estimate is conditional; the company expects continued operating cash deficits and says additional capital will likely be needed, especially to establish U.S. commercial infrastructure.
- After quarter-end, the company received approximately $5.2 million net from selling part of its New Jersey NOLs and received a $2.94 million FDA NDA application-fee refund.
- COVID-19 could disrupt clinical, regulatory, manufacturing, vendor and hiring activities, and could make capital raising more difficult or costly. The company identified possible trial delays, enrollment and site difficulties, supply interruptions and FDA review delays.
- Neutrolin’s LOCK-IT-100 trial reported a 71% reduction in CRBSI versus heparin across 41 cases and 795 subjects (p=0.0006); the FDA had accepted a rolling NDA review. Approval remains uncertain and depends on regulatory review and required manufacturing inspections.
- Key contingencies include German litigation with TauroPharm. The European patent has been revoked by the EPO and is under appeal; an unfair-competition complaint was dismissed at trial and is on appeal, with an expert opinion unfavorable to CorMedix. The company withdrew its utility-model complaint in April 2020 and estimated related expense below EUR 40,000.
- The Saudi product registration expired, preventing sales there until renewed; timing and renewal are uncertain. The company also entered a seven-year New Jersey office lease in March, expected to commence in Q3 2020, with average monthly rent of about $17,000.
Important facts for investors to verify
- Progress and timing of FDA NDA review, including completion of manufacturing-site inspections and any COVID-19-related delays.
- Actual cash burn and whether the stated runway through Q2 2021 remains achievable, including the effect of launch preparations and any further financing.
- Whether Neutrolin receives FDA approval and whether the company can fund and execute a U.S. launch.
- Developments in TauroPharm litigation and the patent appeal, along with renewal of the Saudi registration.
- Future dilution and financing capacity: approximately $2.1 million remained under the ATM program and $30.3 million under the shelf registration at March 31, 2020.