Cormedix Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. CorMedix is a biopharmaceutical company focused primarily on DefenCath, a catheter-lock solution intended to reduce catheter-related infections and thrombosis. The interim financial statements are unaudited.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $7,636 |
| Research and development expense | $3.41 million | $2.29 million |
| Selling, general and administrative expense | $7.61 million | $4.75 million |
| Operating loss | $11.02 million | $7.03 million |
| Net loss | $10.57 million | $7.03 million |
| Net loss per share, basic and diluted | $0.24 | $0.18 |
| Net cash used in operating activities | $10.39 million | $6.74 million |
Gross margin is not meaningful because there were no sales in Q1 2023. Interest income was $446,000, compared with $14,000 a year earlier, partly offsetting the higher operating loss. Management attributed the increased expenses mainly to pre-launch activities, market research, added personnel and stock-based compensation.
Financial position and period changes
- At March 31, 2023, cash and cash equivalents were $25.27 million and short-term investments were $30.33 million, totaling $55.60 million; restricted cash was an additional $229,000. The comparable unrestricted total at December 31, 2022 was $58.79 million.
- Total assets were $59.23 million and total liabilities were $5.31 million. Liabilities included $770,000 of operating lease obligations. The balance sheet does not present a material conventional borrowing balance.
- Investing activities used $14.69 million, primarily reflecting purchases of short-term investments net of maturities; this should be distinguished from operating cash burn. Financing provided $7.20 million from the at-the-market (ATM) share program.
- CorMedix issued 1,684,592 ATM shares during the quarter, raising net proceeds of approximately $7.20 million. Common shares outstanding increased to 44,499,788 from 42,815,196 at year-end. The accumulated deficit was $285.93 million.
- R&D expense rose 49% and SG&A expense rose 60% year over year. Revenue fell from a very small prior-year amount to zero as the company wound down European operations and discontinued Neutrolin sales in Europe and the Middle East.
Outlook, regulatory status and risks
- Management estimated that cash and short-term investments at March 31, 2023 would fund operations at least through the first half of 2024, including NDA resubmission costs and initial DefenCath launch preparations. The company expects ongoing operating losses and says additional capital will likely be required; financing may dilute shareholders or be unavailable on acceptable terms.
- After an April 2023 FDA meeting, CorMedix said it planned to resubmit the DefenCath NDA at its discretion, targeting mid-May after receiving meeting minutes. It expected a Class 2 resubmission and a six-month review. The filing describes unresolved manufacturing-related issues involving the contract manufacturer and heparin supplier, and the possibility of an FDA pre-approval inspection. The company planned to include heparin from both its existing and an alternative supplier.
- CMS’s proposed 2024 inpatient payment rule included a potential NTAP of up to $17,111 per hospital stay for DefenCath, based on an anticipated price and utilization. The proposed payment was not final and was conditional on FDA approval before July 1, 2024.
- The filing notes potential confusion with another pending product name; the FDA’s ultimate acceptance of “DefenCath” depends on which application is approved first. CorMedix submitted an alternative name for review.
- Material risks include regulatory or manufacturing delays, uncertain commercialization and reimbursement, continued financing needs, reliance on third parties, and product competition. Securities class-action and shareholder derivative litigation remained pending; the company said it would contest the claims. The filing does not provide a clear estimate of potential financial exposure.
- In separate German patent and competition disputes, CorMedix withdrew actions or appeals, and certain proceedings were closed or nearing closure. The company reported that approximately $50,000 of a roughly $126,000 restricted-cash security deposit was in the process of being refunded.
- Management reported disclosure controls and procedures were effective as of March 31, 2023 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether and when the DefenCath NDA was resubmitted, and the FDA’s classification, review timeline and inspection requirements.
- Progress resolving manufacturing observations and qualifying the alternate heparin source and manufacturing sites.
- Whether DefenCath receives final FDA approval and an acceptable proprietary name, and whether CMS finalizes the proposed NTAP.
- Cash use and financing needs against management’s first-half-2024 runway estimate, including further ATM issuance and resulting dilution.
- Developments in the securities and derivative litigation and any resulting financial exposure.