CorMedix Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2015; filed November 12, 2015. CorMedix is a development-stage commercial pharmaceutical and medical-device company focused on infection prevention. Its lead product, Neutrolin, is a catheter lock solution sold in certain international markets and under development for U.S. approval.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $35,947 | $52,441 | $187,184 | $104,373 |
| Gross profit (loss) | $551 | $15,766 | $32,670 | $(67,807) |
| Operating expenses | $4.71 million | $1.88 million | $14.38 million | $6.62 million |
| Net loss | $4.69 million | $5.04 million | $14.32 million | $18.24 million |
| Loss per common share | $0.14 | $0.23 | $0.48 | $0.87 |
- Quarterly revenue fell 31%; nine-month revenue increased 79%, but sales remained very small and were primarily Neutrolin sales in Germany and Middle East markets. Gross profit was minimal in Q3; nine-month gross profit improved from a prior-year gross loss.
- R&D expense rose to $1.76 million in Q3 and $4.80 million year to date, primarily reflecting U.S. trial preparation and manufacturing development. SG&A rose to $2.95 million in Q3 and $9.58 million year to date.
- Cash and cash equivalents were $14.25 million and short-term investments were $23.60 million at September 30, for combined resources of approximately $37.85 million, excluding $172,000 restricted cash. Current liabilities were $2.88 million; total liabilities were $2.91 million. The filing reports no debt balance.
- For the first nine months, operating cash use was $8.89 million, investing cash use was $23.62 million (mostly purchases of short-term investments), and financing provided $42.42 million. Financing included $27.24 million of ATM stock-sale proceeds and $14.66 million from warrant exercises. Common shares outstanding increased from 22.46 million at year-end 2014 to 35.38 million at September 30, 2015.
Changes, outlook, and key risks
- Management expected to initiate a U.S. Phase 3 hemodialysis trial in Q4 2015, estimated to cost $19–22 million and take 18 months after initiation. A second Phase 3 oncology/total parenteral nutrition trial was planned for Q2 2016; its cost estimate was not yet available.
- Management stated existing cash was expected to fund operations for at least 12 months after September 30, 2015, based on current plans and revenue assumptions. Additional financing would be needed thereafter and for the second trial. Management cautioned that financing or strategic partnerships might not be available on acceptable terms or at all; future equity financing could dilute shareholders.
- Neutrolin had European CE Mark approval and was registered in several European and Middle Eastern markets. The FDA had granted Fast Track and Qualified Infectious Disease Product designations for the hemodialysis indication. These designations do not assure approval or commercial success.
- CorMedix continued patent and commercial disputes with TauroPharm in Germany. A court found infringement of a patent and utility model but stayed proceedings and deferred injunctive relief pending validity proceedings; the filing notes preliminary concerns about prior art and no assurance the company would prevail. A separate unfair-competition case was pending.
- A putative U.S. securities class action filed in July 2015 alleges misleading statements concerning Neutrolin, stock promoters, and insider stock sales; the company said it intended to defend the case. The filing does not quantify potential damages.
- The company reported that disclosure controls were ineffective at September 30, 2015 because a previously identified material weakness in financial-reporting controls had not been fully remediated.
- Q3 expenses included CEO-related severance accrual of $325,000 and non-cash stock-option modification expense of approximately $507,000. A $1.58 million non-cash warrant charge related to a backstop agreement also increased year-to-date SG&A. The backstop loan expired unused.
- Subsequent to quarter-end, CorMedix gave notice on November 5, 2015 to terminate the CRMD004 gel license, citing limited market potential and the investment required to strengthen related patents; rights were to revert to the originators.
Important facts for investors to verify
- Whether the hemodialysis Phase 3 trial actually began on schedule, its enrollment and costs, and whether trial results support FDA approval.
- Cash use against the stated 12-month funding outlook, remaining ATM capacity, and the availability and terms of financing for the planned second trial.
- Neutrolin sales growth, market uptake, pricing, and manufacturing cost progress; current revenue is not sufficient to support profitability.
- Developments and outcomes in the TauroPharm patent-validity and infringement matters and the U.S. securities class action.
- Remediation of the material weakness in internal controls and the effects of further equity issuance on shareholder dilution.