CorMedix Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2013. CorMedix is a development-stage pharmaceutical and medical device company focused on cardio-renal and infectious diseases. It had no product revenue. Its lead candidate, Neutrolin (CRMD003), received European CE Mark approval on July 5, 2013.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | None generated | |||
| Research and development | $760,774 | $255,738 | $1,415,983 | $878,785 |
| General and administrative | $504,528 | $746,653 | $1,965,006 | $1,659,522 |
| Net loss | $2,509,899 | $1,028,172 | $5,727,821 | $2,562,548 |
| Net loss per share, basic and diluted | $0.18 | $0.09 | $0.47 | $0.22 |
| Cash used in operating activities | — | $2,695,295 | $1,747,993 |
At September 30, 2013, cash was $483,052 and restricted cash was $220,500, versus cash of $835,471 at December 31, 2012. Current assets were $1,020,375 and current liabilities were $3,936,870; total liabilities were $3,945,360. Stockholders’ deficit was $2,908,604, and accumulated development-stage deficit was $52,464,245. No operating margin is meaningful because the company had no revenue.
Q3 and nine-month losses included a $945,892 charge on issuing convertible notes and warrants, interest expense of $312,368 and $1,413,933, respectively, and a $33,626 loss on extinguishment. These items reflect financing and accounting effects, not product sales performance. The company reported a $45,934 gain from changes in fair value of notes and warrants.
Changes versus prior comparable periods
- Nine-month net loss increased to $5.73 million from $2.56 million; operating cash use rose to $2.70 million from $1.75 million.
- Nine-month R&D increased $537,198, principally from the $500,000 CE Mark milestone license fee and the value of warrants issued to the licensor. G&A increased $305,484, principally due to stock-based compensation and professional and filing fees.
- Cash declined by $352,419 from year-end 2012. Financing activities provided $2,342,876 in the first nine months of 2013, including proceeds from convertible notes and preferred stock.
- Common shares outstanding increased from 11,408,274 at December 31, 2012 to 15,959,088 at September 30, 2013. The filing reports 16,164,516 shares outstanding as of November 18, 2013.
Outlook, risks, and unusual items
- Management anticipated a German launch of Neutrolin late in Q4 2013, subject to final German regional authority approval, but cautioned that timing was uncertain. It did not expect significant 2013 product sales, if any.
- The company expected operating losses to continue at least through 2014. It estimated that resources, including the October 2013 financing, would fund operations through Q2 2014 assuming no sales or strategic partnerships. Additional funding will be needed; the filing states that substantial doubt exists about the company’s ability to continue as a going concern.
- On October 22, 2013, the company raised $3.0 million gross through preferred stock and warrants, and exchanged certain investor-held notes for preferred stock. The financing included dilution and affected anti-dilution terms on outstanding notes and warrants.
- The July 2013 8% secured convertible notes had $1,048,750 principal outstanding at September 30, 2013, with $1,113,900 fair-value carrying amount; associated warrant liability was $582,800. The notes included installment redemption provisions and potential share settlement, creating financing and dilution exposure.
- The company planned to defer CRMD004 development until after European Neutrolin launch and commencement of the U.S. approval process. Following an FDA meeting on November 14, management expected the U.S. pathway to involve a Phase 3 trial; meeting minutes were pending.
- A European Patent Office proceeding concerning the Sodemann patent was reopened. The office’s preliminary opinion was favorable to the amended patent claims, but the outcome remained uncertain; comments were due by February 10, 2014.
- Management reported ineffective disclosure controls as of September 30, 2013. The filing describes an accounting-expertise material weakness and a spreadsheet formula error that led to restatements of the March and June 2013 quarterly filings; it says the spreadsheet weakness was identified in the fourth quarter. Remediation measures were described, but effectiveness was not established.
- Stock-based compensation was $753,476 for the first nine months, compared with $183,177 in the prior-year period. Fair-value measurements for the new notes and warrants relied on Level 3 estimates and modeling assumptions.
Key facts for investors to verify
- Whether German approval and the anticipated Neutrolin launch occurred on schedule, and whether commercial uptake produces meaningful revenue.
- Actual cash runway and financing needs after the October 2013 $3.0 million financing, including the timing and terms of any additional capital raises.
- Outstanding debt, installment redemptions, conversion terms, warrant liabilities, and potential dilution from securities and anti-dilution provisions.
- Current status and consequences of the European patent proceeding, and the FDA’s confirmed U.S. regulatory pathway and trial requirements.
- Whether the disclosed material weaknesses were remediated and whether subsequent filings or financial statements required further correction.