CorMedix Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020; filed November 5, 2020. CorMedix is a biopharmaceutical company developing and commercializing products for infectious and inflammatory diseases. Its lead U.S. product candidate, Defencath, is under FDA review for preventing catheter-related bloodstream infections in hemodialysis patients. Neutrolin is sold in certain non-U.S. markets.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $93,000 | $60,000 | $184,000 | $258,000 |
| Gross profit (loss) | $13,000 | $(19,000) | $36,000 | $(69,000) |
| Operating expenses | $6.62 million | $5.15 million | $21.17 million | $15.56 million |
| Operating loss | $(6.60) million | $(5.17) million | $(21.14) million | $(15.63) million |
| Net loss | $(6.60) million | $(5.26) million | $(15.94) million | $(11.13) million |
| Net loss per share | $(0.22) | $(0.22) excluding prior-year deemed dividends; $(1.35) attributable to common shareholders | $(0.58) | $(0.47) excluding prior-year deemed dividends; $(1.62) attributable to common shareholders |
Gross margin was approximately 14% in Q3 2020 and 20% for the first nine months of 2020; the comparable 2019 periods had gross losses. The nine-month net loss includes a $5.17 million tax benefit from selling New Jersey net operating losses; the comparable 2019 period included a $5.06 million benefit.
- Cash and liquidity: At September 30, cash and cash equivalents were $34.36 million, short-term investments $2.67 million, and restricted cash $0.18 million. Unrestricted cash and short-term investments totaled approximately $37.0 million. Current assets were $38.87 million and current liabilities $4.60 million.
- Cash flows: Nine-month operating cash use was $16.03 million, investing activities provided $9.27 million, and financing activities provided $24.78 million. Cash, cash equivalents and restricted cash increased $18.02 million.
- Debt and obligations: No borrowing debt was reported on the September 30 balance sheet; the filing says the prior convertible note is no longer outstanding. Total liabilities were $5.55 million, including $1.05 million of operating lease liabilities. The new office lease is for seven years, with average monthly rent of approximately $17,000.
- Capital raised: The July public offering generated $21.32 million net from 5.11 million shares at $4.50 per share. The ATM program raised $3.05 million net during the first nine months; an additional $4.6 million was raised in October. Common shares outstanding were 31.35 million at quarter-end and 32.13 million on November 4.
Material changes versus prior comparable periods
- Q3 revenue increased 56% year over year, reflecting sales in Middle Eastern countries other than Saudi Arabia. Nine-month revenue fell 29%, primarily because the Saudi registration expired, preventing sales there; renewal was pending.
- Nine-month R&D expense rose 32%, mainly due to $3.76 million of additional pre-launch manufacturing costs and increased personnel expense. The company expensed approximately $4.8 million for commercial pre-launch inventory during the period.
- Nine-month selling, general and administrative expense rose 40%, reflecting additional hiring, market research for a potential Defencath launch, insurance and other commercial-readiness costs.
- Operating cash use increased by $4.87 million year over year. The company also completed a public offering, while ATM and warrant proceeds were lower than in the prior-year period.
Outlook, commentary, risks and unusual items
- The FDA accepted the Defencath NDA for filing and granted Priority Review. The stated PDUFA date was February 28, 2021; an advisory committee meeting was tentatively scheduled for January 14, 2021. FDA had not identified potential review issues at the time of the filing, but required manufacturing-site inspections and COVID-19 travel limits could affect timing.
- Management estimated that available funds, including October ATM proceeds and initial launch-preparation costs, would fund operations for at least 12 months after the filing date. The company remains loss-making and expects to need external capital for launch and ongoing operations; additional financing is not assured and could dilute shareholders or involve restrictive debt terms.
- LOCK-IT-100’s final analysis reported a 71% reduction in CRBSIs versus heparin across 795 subjects (41 cases; p=0.0006), with a reported good safety profile. The filing notes that FDA approval remains uncertain.
- COVID-19 could disrupt regulatory review and inspections, manufacturing and supply, staffing, and other business timelines. The company also cited uncertainty around reimbursement, commercial uptake and the ability to manufacture successfully.
- Legal matters include a pending appeal concerning a European patent that was revoked as invalid, and ongoing unfair-competition litigation in Germany. An expert opinion in the latter matter was unfavorable to CorMedix; the company filed a response and requested a hearing.
- The company sold most eligible New Jersey NOL tax benefits for approximately $5.2 million net and received a $2.9 million FDA application-fee refund after a small-business fee waiver.
Important facts for investors to verify
- FDA review milestones, the advisory committee outcome, the PDUFA decision and any required manufacturing inspections.
- Actual cash burn and funding runway, including the impact of launch spending, October ATM proceeds and any subsequent capital raises.
- Saudi registration renewal and the resulting effect on Neutrolin sales; sales concentration was high, with three customers accounting for 90% of Q3 revenue.
- Defencath manufacturing readiness, reimbursement eligibility and commercial-launch costs if approved.
- Developments in the German patent and unfair-competition proceedings, and the status of COVID-19-related operational or regulatory disruption.