Cormedix Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2013. CorMedix is a development-stage pharmaceutical and medical-device company focused primarily on Neutrolin (CRMD003), a catheter-lock product intended to prevent infections and maintain catheter patency. It had no product revenue.
Financial performance and position
| Metric | Q2 2013 / June 30, 2013 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $1.299 million for Q2; $2.116 million for first half | Q2 2012: $0.625 million; first half 2012: $1.536 million |
| Net loss | $1.961 million for Q2; $3.218 million for first half | Q2 2012: $0.624 million; first half 2012: $1.534 million |
| Loss per share | $0.15 for Q2; $0.28 for first half | Q2 2012: $0.05; first half 2012: $0.13 |
| Cash and cash equivalents | $158,405 | $835,471 at December 31, 2012 |
| Operating cash used | $1.177 million for first half | $1.076 million for first half 2012 |
| Total liabilities | $2.589 million | $1.629 million at December 31, 2012 |
| Stockholders’ deficit | $2.194 million | $0.475 million at December 31, 2012 |
Gross margin is not meaningful because the company had no product sales. First-half R&D expense was $655,209, up modestly from $623,046; G&A was $1.460 million, up from $912,871. Q2 interest expense was $661,162, and first-half interest expense was $1.102 million, mainly from debt-discount and financing-cost amortization and accrued interest. At June 30, convertible notes were carried at $696,386 net of debt discounts, plus accrued interest; the filing reports $867,000 of related and non-related note principal outstanding.
Changes, outlook, and risks
- Losses increased substantially year over year, reflecting higher G&A and significant interest expense. Management attributed increased G&A mainly to stock-based compensation, professional services, and filing fees. R&D spending shifted toward Neutrolin’s European approval and launch.
- After the reporting date, CorMedix received Neutrolin CE Mark approval on July 5, 2013. Management planned a European hemodialysis launch in the second half of 2013, initially focusing on Germany. It expected no significant 2013 product-sales revenue, if any, and anticipated losses at least through 2014. U.S. development and the CRMD004 program were deferred or dependent on resources; a Phase 3 trial may be needed for U.S. approval.
- Following CE Mark approval, the company received $1.425 million gross ($1.3725 million net) under secured convertible notes. On July 30 it also raised $500,000 gross through a preferred-stock and warrant placement. Management stated that available resources, including post-quarter financing, were expected to fund operations through Q4 2013; further capital would be required, with no assurance it could be raised on acceptable terms.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern. If funding is unavailable, CorMedix may have to delay, reduce, or stop programs or relinquish rights.
- NYSE MKT had granted extensions through October 20, 2013 to regain compliance with financial-condition and stockholders’ equity listing standards; failure to meet the requirements could lead to delisting. A European patent opposition appeal had upheld the Neutrolin-related patent but remanded the matter to consider restricting certain claims; the company planned to defend the patent, with outcome uncertain.
- Management disclosed a material weakness identified in Q1 2013 concerning accounting expertise for complex, non-routine matters. Remediation included an oversight committee and an external GAAP adviser. Management concluded disclosure controls were effective at June 30, 2013.
Key investor verification points
- Confirm post-quarter cash, cash burn, financing terms, and whether additional capital is needed sooner than management’s Q4 2013 estimate.
- Track European launch timing, commercialization progress, sales, and any required U.S. clinical and regulatory pathway.
- Monitor NYSE MKT compliance status and the October 20, 2013 deadline.
- Review the Neutrolin patent proceeding and any impact of potential claim restrictions.
- Assess dilution and repayment obligations from convertible notes, warrants, preferred stock, and equity compensation, and verify remediation of the disclosed material weakness.