CorMedix Inc. — Q1 2021 Form 10-Q
Business context and reporting period: Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. CorMedix is a biopharmaceutical company whose lead candidate, DefenCath, is intended to prevent catheter-related infections and thrombosis; Neutrolin is sold in certain non-U.S. markets. The company had not achieved substantial revenue or profitability.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Net sales | $88,000 | $74,000; up 19% |
| Gross profit | $27,000 | $26,000; gross margin about 31% versus 34% |
| Research and development | $2.64 million | $2.47 million; up 7% |
| Selling, general and administrative | $4.60 million | $3.17 million; up 45% |
| Operating loss | $7.21 million | $5.61 million |
| Net loss | $7.22 million | $5.56 million; loss per share was $0.20 versus $0.21 |
| Net cash used in operations | $6.69 million | $7.97 million |
| Cash, cash equivalents and short-term investments | $81.2 million | $46.3 million at December 31, 2020; excludes restricted cash |
At March 31, cash and cash equivalents were $76.2 million and short-term investments were $5.0 million. Total liabilities were $3.94 million, including $1.01 million of operating lease liabilities; the balance sheet reports no borrowings. The company reported an accumulated deficit of $224.7 million.
Changes versus prior comparable period
- Revenue rose by $14,000, primarily from higher Middle East sales; cost of sales rose alongside those sales.
- SG&A increased $1.44 million, mainly due to stock-based compensation, marketing research for a potential U.S. launch, and higher personnel costs. R&D increased modestly as personnel and stock-based compensation costs were partly offset by lower manufacturing and completed-trial costs.
- Operating and net losses widened, while loss per share improved because the weighted-average share count increased substantially.
- Operating cash use declined by $1.28 million, but the company raised $41.46 million net through its at-the-market stock offering, compared with $2.47 million in Q1 2020. Common shares outstanding increased from 33.56 million at year-end to 38.05 million at quarter-end.
Outlook, commentary and risks
- In March 2021, the FDA issued a Complete Response Letter and said it could not approve the DefenCath NDA in its then-current form. The cited issues concerned the contract manufacturing facility and a manual extraction study; the FDA did not request further clinical data or identify efficacy or safety deficiencies from LOCK-IT-100.
- After quarter-end, CorMedix reported that it had met with the FDA in April and completed the agreed manual extraction study. The company and its manufacturer were assessing whether additional manufacturing-process qualification and validation would be needed. Timing for review would be determined upon NDA resubmission; an inspection, if required, could delay approval.
- Management estimated available cash and investments would fund operations at least into the second half of 2022, including initial DefenCath launch preparations. The company said additional capital may be needed; $50 million remained under its shelf registration, while no capacity remained under the ATM program at quarter-end. Further equity financing could dilute shareholders.
- Key uncertainties include FDA approval and manufacturing readiness, ability to raise capital, limited product revenue, competition, COVID-19 effects on suppliers and regulatory timelines, and ongoing German patent and unfair-competition litigation. The company’s European patent appeal was pending; its utility-model claims had been withdrawn. A hearing in the unfair-competition appeal was scheduled for June 18, 2021.
- Neutrolin’s Saudi registration had expired, preventing sales there; renewal was uncertain. Management also described exploratory taurolidine programs, which may require partners and additional funding.
Important facts for investors to verify
- Whether and when the DefenCath NDA was resubmitted, and the FDA’s subsequent review, inspection, and manufacturing requirements.
- Whether additional manufacturing qualification or validation was required and whether the contract manufacturer resolved the cited deficiencies.
- Actual cash burn and runway relative to management’s estimate, and any subsequent financing, dilution, or new debt.
- Commercial sales trends, customer concentration, and progress in Neutrolin markets, including Saudi registration status.
- Developments and potential financial effects of the German litigation and COVID-19-related operational risks.