Cormedix Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2017. Financial statements are unaudited. CorMedix is a development-stage biopharmaceutical company whose lead candidate, Neutrolin, is in U.S. Phase 3 development; limited product sales are made in certain foreign markets.
Financial performance and position
- Revenue: Third-quarter revenue was $61,075, up 37% from $44,451. Nine-month revenue was $236,801, up 131% from $102,390. Revenue remains immaterial relative to operating costs; much of the nine-month increase reflected recognition of previously deferred sales and an initial shipment under the Hemotech distribution agreement.
- Profit and margins: Third-quarter net loss was $9.96 million ($0.17 per share), versus $9.13 million ($0.23 per share) a year earlier. Nine-month net loss was $22.70 million ($0.44 per share), versus $18.24 million ($0.49 per share). Gross loss in Q3 was $5,577; nine-month gross profit was $58,525, compared with a $178,952 gross loss in 2016. Operating expenses were $8.01 million for Q3 and $22.71 million for nine months.
- Costs: Nine-month R&D expense rose 37% to $16.03 million, primarily due to LOCK-IT-100 and personnel costs. Q3 R&D fell 12% to $6.01 million as certain other development and manufacturing activities declined. Nine-month SG&A increased 4% to $6.68 million.
- Cash flow and liquidity: Operating cash use was $21.31 million for the first nine months, compared with $15.77 million in 2016. Investing activities provided $5.29 million, and financing activities provided $13.15 million. At September 30, cash and cash equivalents were $5.21 million and short-term investments were $6.80 million, totaling about $12.01 million; restricted cash was $0.17 million. Current assets were $13.85 million and current liabilities $4.25 million.
- Debt and equity: The balance sheet reports no debt; total liabilities of $4.25 million consist of current liabilities. May’s public offering generated $12.8 million in net proceeds. Common shares outstanding increased from 40.43 million at year-end 2016 to 61.98 million at September 30, 2017; 67,019,794 were outstanding on November 7, 2017.
- Other unusual financial item: A $1.97 million Q3 non-cash loss resulted from remeasuring May offering warrants before reclassifying them from derivative liability to equity after the company increased authorized shares.
Changes, outlook, and risks
- FDA-agreed changes to LOCK-IT-100 include independent adjudication of suspected infections, capture of events outside dialysis centers, and revised efficacy assumptions. The required event count was reduced from 161 to 56. The company anticipated an interim analysis early in Q1 2018, conditional on 28 events, and said the changes could support trial completion by year-end 2018. Enrollment was expected to continue into Q2 2018.
- Two pivotal U.S. Phase 3 trials are required for approval. CorMedix was reassessing the design of the second trial and had no cost estimate for it. PPD’s existing contract had been increased to $26.4 million; a further modification was being negotiated, with expected cost described in the filing as approximately $6.3 million in the notes and approximately $8.0 million in MD&A. The filing text does not reconcile these estimates.
- Going concern: Management said September 30 cash and investments, October ATM proceeds, and anticipated proceeds from subsequent financing were expected to fund operations through Q1 2018. The filing states that substantial doubt exists about the company’s ability to continue as a going concern. Without additional capital, it may have to delay, reduce, or stop LOCK-IT-100 and other development work.
- In October, the company raised approximately $3.1 million net through its ATM, issuing 5.04 million shares at an average $0.64. On November 9, it agreed to sell Series F convertible preferred stock and entered a backstop arrangement with the same investor; gross proceeds could total $5.0 million if the backstop is fully used. Conversion pricing and backstop warrants could result in additional dilution.
- Key risks include the need for further financing, clinical and regulatory uncertainty, limited commercial revenue, inventory obsolescence, and competition. German patent and unfair-competition disputes with TauroPharm remain unresolved; the patent validity hearing was scheduled for November 22–23, 2017, and the unfair-competition hearing for May 8, 2018. The utility model had been found invalid by the German PTO, subject to appeal; no injunction had been granted.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter. The company reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the expected financing was completed on the disclosed terms and whether it extended the cash runway beyond Q1 2018.
- LOCK-IT-100 enrollment, infection-event accumulation, interim-analysis timing and outcome, and the revised trial completion timetable.
- The design, timing, and funding requirements of the second pivotal trial, including reconciliation of the disclosed PPD cost estimates.
- Actual sales growth and customer concentration: two customers represented 90% of Q3 sales, and three represented 92% of nine-month sales.
- Potential dilution from outstanding warrants, preferred shares, stock options, and subsequent equity or equity-linked financing.
- Outcomes of the TauroPharm proceedings and any resulting effect on Neutrolin’s intellectual-property position or commercialization.