Cormedix Inc. — FY2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone Q4 report. Comparisons below are with FY2019. The filing was signed March 30, 2021.
Business context
CorMedix is a development-stage biopharmaceutical company focused on infectious and inflammatory diseases. Its lead candidate, DefenCath (taurolidine and heparin), is intended to reduce catheter-related bloodstream infections in hemodialysis patients. Neutrolin, the related product name used internationally, has CE Mark approval and limited commercial availability in parts of Europe and the Middle East. The company reported no substantial product revenue and remains dependent on external financing.
Key financial metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $0.239 million | $0.283 million |
| Gross profit (loss) | $0.034 million | $(0.090) million |
| Gross margin | 14.4% | (31.8%) |
| Research and development expense | $13.377 million | $11.053 million |
| Selling, general and administrative expense | $13.878 million | $9.865 million |
| Operating loss | $(27.221) million | $(21.008) million |
| Net loss | $(22.028) million | $(16.433) million |
| Net loss per share | $(0.77) | $(1.80) |
| Operating cash used | $(21.968) million | $(15.052) million |
At December 31, 2020, cash and cash equivalents were $41.905 million and short-term investments were $4.444 million, or $46.350 million combined, excluding $0.191 million of restricted cash. Total current assets were $48.182 million and current liabilities were $4.162 million. Total liabilities were $5.085 million, including $1.033 million of operating lease liabilities; the filing reports no outstanding convertible note at year-end. The company had an accumulated deficit of $217.449 million.
FY2020 investing activities provided $7.426 million, principally reflecting maturities of short-term investments; financing activities provided $40.100 million, including $21.255 million net proceeds from a public offering and $18.433 million from ATM stock sales. The company also reported a $5.169 million tax benefit associated with New Jersey NOL sales. Revenue was too limited for meaningful operating-margin analysis.
Material changes versus FY2019
- Revenue declined 16%, mainly because the company could not sell Neutrolin in Saudi Arabia after its registration expired; higher EU sales partly offset the decline.
- Operating expenses increased 30%. R&D rose 21%, reflecting pre-commercial DefenCath manufacturing and additional personnel, partly offset by lower completed-trial costs. SG&A rose 41%, including hiring and market research ahead of a potential launch.
- Net loss increased 34%, while operating cash use rose by $6.916 million. Lower interest expense partly reflected the prior-year convertible note no longer being outstanding.
- Cash, cash equivalents and short-term investments increased from $28.334 million to $46.350 million, supported by equity financing. Common shares outstanding increased from 25.665 million to 33.558 million during 2020.
Outlook, risks and unusual items
- FDA review: In March 2021, after the fiscal year-end, the FDA informed CorMedix it would not approve the DefenCath NDA in its then-current form. The FDA identified third-party manufacturing-facility concerns and required a manual extraction study to show that the labeled volume could be withdrawn from vials. The FDA did not request additional clinical data or identify efficacy or safety deficiencies in LOCK-IT-100. Resolution, possible inspection requirements and COVID-related inspection delays leave approval timing uncertain.
- Clinical evidence: LOCK-IT-100 enrolled 795 subjects. The filing reports a 71% reduction in CRBSI risk versus heparin (p=0.0006); secondary catheter-patency and removal endpoints did not show statistically significant differences. Draft FDA labeling contemplated an initial indication limited to chronic hemodialysis patients with kidney failure using a central venous catheter.
- Funding outlook: Management estimated that cash resources, including approximately $41.5 million of net ATM proceeds raised in January and February 2021, would fund operations at least into the second half of 2022. The financial-statement note separately describes funding for at least 12 months after the filing date. Additional funding will be needed for commercialization and further development; equity financing may dilute shareholders. At filing, the ATM program had no remaining capacity and $50 million remained under the shelf registration.
- Commercial and operating risks: DefenCath requires FDA approval, manufacturing readiness, market acceptance and adequate reimbursement. The company outsources manufacturing and sales capabilities are limited; Neutrolin sales are not expected to be significant in the near term. The Saudi registration remained expired, and renewal was uncertain.
- Contingencies: German patent and unfair-competition litigation with TauroPharm continued. The European patent had been revoked by the EPO and was under appeal; an expert opinion in the unfair-competition case was unfavorable to CorMedix, with a hearing scheduled for June 2021. Restricted cash for related proceedings was approximately $0.191 million at year-end.
- Other: The company reported no off-balance-sheet arrangements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor issued an unqualified opinion on the financial statements but was not engaged to audit internal controls.
Important facts for investors to verify
- Current status and expected timing of FDA resolution of manufacturing findings, the manual extraction study and any pre-approval inspection.
- Updated cash runway and planned capital needs, including any subsequent financing, dilution and spending required for launch.
- Whether the proposed limited hemodialysis indication and potential reimbursement pathways, including CMS programs, are secured; coverage was not assured.
- Progress in restoring Saudi registration and the contribution of international Neutrolin sales, given low reported revenue and customer concentration.
- Developments in the TauroPharm litigation and the status and scope of CorMedix’s patent protection.