CorMedix Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2016; financial statements are unaudited. CorMedix is a development-stage biopharmaceutical company focused primarily on Neutrolin, a catheter-lock solution intended to prevent infections and thrombosis. It had CE Mark approval and limited sales in certain overseas markets, while U.S. use remained under clinical development.
Financial results and position
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $44,451 | $35,947 | $102,390 | $187,184 |
| Gross profit (loss) | $529 | $551 | ($178,952) | $32,670 |
| Research and development | $6.84 million | $1.76 million | $11.70 million | $4.80 million |
| Selling, general and administrative | $2.32 million | $2.95 million | $6.45 million | $8.00 million |
| Operating loss | ($9.16 million) | ($4.71 million) | ($18.33 million) | ($12.76 million) |
| Net loss | ($9.13 million) | ($4.69 million) | ($18.24 million) | ($14.32 million) |
| Basic and diluted loss per share | ($0.23) | ($0.14) | ($0.49) | ($0.48) |
- At September 30, cash and cash equivalents were $9.83 million and short-term investments were $16.83 million, totaling $26.65 million; restricted cash of $172,000 was additional. Total current assets were $28.76 million and current liabilities were $5.04 million.
- Cash used in operating activities was $15.77 million for the first nine months, versus $8.89 million in 2015. Investing activities provided $6.70 million, chiefly from sales of short-term investments; financing activities provided $7.07 million, mainly from common-stock sales and option exercises. Cash declined $1.99 million from year-end 2015.
- The balance sheet reported no borrowings or other debt. Total liabilities were $5.06 million, including accrued expenses of $3.15 million.
- Common shares outstanding increased from 35.96 million at year-end 2015 to 40.41 million at September 30, 2016. Net proceeds from the existing at-the-market program were approximately $6.22 million for the nine-month period.
Changes versus prior period
- Nine-month revenue fell 45%, attributed to lower Neutrolin sales in Germany and the Middle East during the first two quarters. Third-quarter revenue rose 24% year over year, but remained very small.
- Nine-month R&D expense rose 144%, mainly reflecting the U.S. hemodialysis Phase 3 trial, manufacturing and clinical supply development, and exploratory studies. Third-quarter R&D also included increased trial and product-development spending.
- Nine-month net loss increased 27%. The 2015 comparison included a $1.58 million non-cash warrant charge related to backstop financing; 2016 losses instead reflected substantially higher R&D spending.
- Nine-month SG&A declined 19%, partly because 2015 included higher stock-based compensation and former-CEO severance-related costs. An inventory reserve increase of $166,000 contributed to higher 2016 cost of sales.
Outlook, risks and unusual items
- Management stated existing cash and short-term investments would not fund operations for at least the next 12 months and would not be sufficient to complete the ongoing hemodialysis Phase 3 trial. The company will need additional capital; failure to obtain it could force delays, reductions or termination of development programs.
- LOCK-IT-100, the U.S. Phase 3 hemodialysis trial, began in December 2015. Management projected enrollment completion in Q4 2017 and estimated trial costs of approximately $26 million to $30 million. The planned oncology Phase 3 trial remained subject to FDA discussions and funding; no cost estimate was provided.
- Approximately $4.1 million remained available under the existing ATM program. A new ATM agreement permits up to $40 million of stock sales, but was not accessible until Elliott participation rights were resolved or waived and its registration statement became effective. Future equity financing could dilute shareholders.
- CorMedix appointed Khoso Baluch CEO effective October 3, 2016. His employment agreement includes a $375,000 annual base salary, bonus eligibility up to 80% of base salary, and options for 1.85 million shares subject to vesting conditions. Former CEO Randy Milby’s departure also carried a 12-month salary and benefits obligation; $325,000 had been accrued and remained unpaid at quarter-end.
- German patent and unfair-competition disputes with TauroPharm remained unresolved. A German court had found infringement but stayed relief pending validity proceedings; the German Patent Office found the expired utility model invalid, and CorMedix appealed. The separate European patent validity matter remained ongoing.
- After quarter-end, on October 27, 2016, a U.S. securities class action was dismissed with prejudice. A related shareholder derivative action was stayed. The company reported no off-balance-sheet arrangements and stated disclosure controls were effective.
Important facts for investors to verify
- Current cash runway, cash burn, and whether the existing or new ATM financing conditions have been satisfied.
- LOCK-IT-100 enrollment progress, updated trial cost and completion estimates, and funding needs for the planned oncology trial.
- Neutrolin sales trajectory and the basis for inventory valuation, including the $466,000 inventory reserve at September 30, 2016.
- Developments in the TauroPharm litigation and the validity of the European patent.
- Share-count and dilution implications of ATM sales, outstanding options and warrants, and the new CEO’s equity awards.