Cormedix Inc. — 2017 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2017, filed March 19, 2018. CorMedix is a development-stage biopharmaceutical company whose lead product, Neutrolin (taurolidine, citrate and heparin), is intended to reduce catheter-related infections and clotting. Neutrolin had CE Mark approval and limited sales in Europe and the Middle East, but no U.S. marketing approval. The company reported no significant commercial revenue and relied primarily on financing to fund operations.
Key financial metrics
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | $329,000 | $224,000 |
| Gross profit (loss) | $214,000 | ($143,000) |
| Research and development expense | $24.5 million | $15.7 million |
| Selling, general and administrative expense | $8.7 million | $8.9 million |
| Loss from operations | ($32.9 million) | ($24.8 million) |
| Net loss | ($33.0 million) | ($24.6 million) |
| Basic and diluted loss per share | ($0.60) | ($0.65) |
- Revenue increased 47%, mainly from higher European sales, including France. The reported gross profit reflects a $327,000 reduction in the inventory reserve; 2016 included a reserve increase.
- R&D rose 56%, primarily due to higher LOCK-IT-100 trial costs and personnel. Operating expenses rose 35%, and net loss widened 34%.
- Net cash used in operations was $28.6 million, versus $22.3 million in 2016. Net cash provided by financing was $20.5 million, mainly from equity and preferred-stock issuances. Audited cash-flow statements report $10.4 million provided by investing activities.
- At year-end, cash and cash equivalents were $10.4 million and short-term investments were $1.6 million; restricted cash was $172,000. Current assets were $13.3 million and current liabilities $6.3 million. Total liabilities were $6.3 million; the balance sheet lists current payables, accruals and deferred revenue, with no debt balance shown.
- Stockholders’ equity fell to $7.2 million from $17.8 million. Accumulated deficit was $152.2 million. Common shares outstanding increased to 71.4 million at year-end; 81.5 million were reported outstanding as of March 14, 2018.
Material developments and outlook
- LOCK-IT-100, the U.S. Phase 3 hemodialysis trial, remained ongoing. FDA-agreed protocol changes included independent adjudication of suspected infections and a revised treatment-effect assumption; the required event count was reduced from 161 to 56. The company expected an interim efficacy analysis in Q2 2018, enrollment completion around mid-2018 and the required events around year-end 2018. An interim analysis showing sufficient efficacy could allow earlier completion.
- The FDA required two pivotal trials for U.S. approval. The second Phase 3 trial’s design was not determined, and financing was required for both ongoing and planned development. Neutrolin had QIDP and Fast Track designations, but these do not guarantee approval.
- Management estimated funding would support operations into Q3 2018, including approximately $3.2 million raised through the ATM program through March 9, 2018 and a proposed $3 million Elliott backstop facility. The backstop was subject to a definitive agreement; a new ATM agreement for up to $14.1 million was also subject to registration effectiveness. The auditor highlighted substantial doubt about the company’s ability to continue as a going concern.
- In 2017, CorMedix raised approximately $12.8 million in a public offering, $5.5 million through its ATM program and $1.9 million through Series F preferred stock, in addition to an insider common-stock sale. These financings and outstanding warrants, options and convertible preferred stock create material potential dilution.
- The company reported a $32.7 million PPD contract for LOCK-IT-100, with approximately $14.7 million remaining at year-end, and $8.9 million in RC2 manufacturing service agreements. Trial costs and timelines could rise further.
- In November 2017, the European Patent Office panel indicated it would invalidate a CorMedix European patent for lack of novelty; CorMedix planned to appeal. Separate German unfair-competition litigation remained pending, with a hearing scheduled for November 20, 2018. The company also disclosed that a German court had previously found infringement but stayed proceedings pending patent-validity decisions and did not issue an injunction.
- Other risks include dependence on one lead product, trial enrollment and event-rate uncertainty, regulatory and reimbursement uncertainty, outsourced manufacturing and commercial partners, competition, and limited cash runway. The company also reported a February 2018 orphan drug designation for taurolidine in neuroblastoma and a 2017 NIH grant for hydrogel research.
Most important facts for investors to verify
- Whether the proposed Elliott backstop became a definitive, drawable facility, and whether ATM proceeds or other financing extended the stated Q3 2018 runway.
- LOCK-IT-100 enrollment, adjudicated infection-event count, interim-analysis outcome and final efficacy and safety results; also the design, cost and funding plan for the second pivotal trial.
- Regulatory requirements and timing for an NDA, including whether the trial program and manufacturing package will satisfy FDA requirements.
- Actual Neutrolin sales, customer concentration, inventory and product shelf-life exposure, and the prospects for reimbursement and distribution in approved markets.
- Outcome of the European patent appeal and German unfair-competition case, and the potential effect on intellectual-property protection and commercial competition.
- Potential dilution and financing constraints from Series F conversion terms, warrants, options and other convertible securities.