UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period
ended
For the transition period from ________ to ________
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
The number of shares outstanding of the issuer’s
common stock, as of March 31, 2024 was
CORMEDIX INC. AND SUBSIDIARIES
INDEX
- i -
PART I
FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements.
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Short-term investments | ||||||||
| Inventories | ||||||||
| Prepaid research and development expenses | ||||||||
| Other prepaid expenses and current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| License intangible asset | ||||||||
| Restricted cash, long-term | ||||||||
| Operating lease right-of-use asset | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Operating lease liability, short-term | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 4) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock - $ | ||||||||
| Common stock - $ | ||||||||
| Accumulated other comprehensive gain | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
- 1 -
CorMedix Inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues, net | $ | $ | ||||||
| Cost of revenues | ( | ) | ||||||
| Gross loss | ( | ) | ||||||
| Operating Expenses | ||||||||
| Research and development | ( | ) | ( | ) | ||||
| Selling, general and administrative | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss From Operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | ||||||||
| Foreign exchange transaction (loss) gain | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income | ||||||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ||||
| Tax benefit | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Other Comprehensive (Loss) Income | ||||||||
| Unrealized (loss) gain from investment | ( | ) | ||||||
| Foreign currency translation gain | ||||||||
| Total other comprehensive (loss) income | ( | ) | ||||||
| Other Comprehensive Loss | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
- 2 -
CorMedix Inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN
STOCKHOLDERS’ EQUITY
(Unaudited)
For the three months ended March 31, 2024
| Common Stock | Preferred Stock- Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of vested restricted stock, net of shares withheld for employee withholding taxes | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Cancellation of shares held in escrow | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
For the three months ended March 31, 2023
| Common Stock | Preferred Stock- Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | - | |||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive gain | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
- 3 -
CORMEDIX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Change in right-of-use assets | ||||||||
| Depreciation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in inventory | ( | ) | ||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Decrease in accounts payable | ( | ) | ( | ) | ||||
| Decrease in accrued expenses | ( | ) | ( | ) | ||||
| Decrease in operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of short-term investments | ( | ) | ( | ) | ||||
| Maturity of short-term investments | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payment of employee withholding taxes on vested restricted stock units | ( | ) | ||||||
| Proceeds from sale of common stock from at-the-market program, net | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Foreign exchange effect on cash | ( | ) | ||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing Activities: | ||||||||
| Liability related to license agreement | $ | - | ||||||
| Unrealized gain (loss) from investments | $ | $ | ( | ) | ||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
- 4 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization, Business and Basis of Presentation:
Organization and Business
CorMedix Inc. (“CorMedix”
or the “Company”) was incorporated in the State of Delaware on
The Company’s primary focus is on the commercialization of its lead product, DefenCath® in the United States, or U.S. The Company has in-licensed the worldwide rights to develop and commercialize DefenCath. The name DefenCath is the U.S. proprietary name approved by the U.S. Food and Drug Administration, or FDA.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Quarterly Reports on Form 10-Q and Article 8 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary to fairly state the interim results. Interim operating results are not necessarily indicative of results that may be expected for the full year ending December 31, 2024 or for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 12, 2024. The accompanying consolidated balance sheet as of December 31, 2023 has been derived from the audited financial statements included in such Annual Report on Form 10-K.
Note 2 - Summary of Significant Accounting Policies and Liquidity and Uncertainties:
Liquidity and Uncertainties
The condensed consolidated financial statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. To date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. Based on the Company’s current commercial plans and development plans for DefenCath and its other operating requirements, the Company’s existing cash, cash equivalents and short-term investments at March 31, 2024 are expected to fund its operations for at least twelve months from the issuance of this Quarterly Report on Form 10-Q.
In March 2024, the Company
received $
The Company may raise additional
capital through various potential sources, such as equity and/or debt financings, strategic relationships, potential strategic transactions
and/or out-licensing. Management can provide no assurances that such financing or strategic relationships will be available on acceptable
terms, or at all. As of March 31, 2024, the Company has $
The Company’s operations are subject to a number of other factors that can affect its operating results and cash flow projections over the next twelve months from the issuance of these financial statements. Such factors include, but are not limited to: the ability to market DefenCath and generate necessary revenue in the time periods required; ability to manufacture successfully; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, Company products; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products; and the Company’s ability to raise capital to support its operations.
- 5 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities and disclosure of contingent assets and liabilities in the Company’s consolidated balance sheets and the reported amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.
Reclassifications
Certain reclassifications were made to the prior year’s amounts to conform to the 2024 presentation.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Financial Instruments
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts, the balances of which, at times, may exceed federally insured limits.
| March 31, 2024 | March 31, 2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Investments in marketable debt classified as available-for-sale and equity securities are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported in other comprehensive income. Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. There were no deemed permanent impairments at March 31, 2024 or December 31, 2023.
- 6 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company’s marketable
securities are highly liquid and consist of U.S. government agency securities, high-grade corporate obligations and commercial paper with
original maturities of more than 90 days. As of March 31, 2024 and December 31, 2023, all of the Company’s investments had contractual
maturities of less than one year.
| Amortized Cost | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value | |||||||||||||
| March 31, 2024: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ( | ) | ||||||||||||||
| Commercial Paper | ( | ) | ||||||||||||||
| Subtotal | ( | ) | ||||||||||||||
| Total March 31, 2024 | $ | $ | ( | ) | $ | $ | ||||||||||
| December 31, 2023: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ( | ) | ||||||||||||||
| Subtotal | ( | ) | ||||||||||||||
| Total December 31, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||
Fair Value Measurements
In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, disclosures of fair value information about financial instruments is required, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. The Company’s financial instruments recorded in the consolidated balance sheets include cash and cash equivalents, accounts receivable, investment securities, accounts payable and accrued expenses. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their estimated fair values based upon the short-term nature of their maturity dates.
The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value on the Company’s condensed consolidated balance sheets are categorized as follows:
| ● | Level 1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs— Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). |
| ● | Level 3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
- 7 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| March 31, 2024: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ||||||||||||||||
| Subtotal | $ | |||||||||||||||
| Total March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| December 31, 2023: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ||||||||||||||||
| Subtotal | ||||||||||||||||
| Total December 31, 2023 | $ | $ | $ | $ | ||||||||||||
Inventories
The Company engages third
parties to manufacture and package inventory held for sale and warehouse such goods until packaged for final distribution and sale. Costs
related to the manufacturing of DefenCath incurred prior to FDA approval in order to support the preparation for commercial launch of
its product were expensed as research and development expenses (“R&D”) as incurred. Upon FDA approval, costs related to
the manufacturing of inventory are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis.
Inventories expensed as R&D prior to FDA approval that can be used for commercial purposes amounted to approximately $
Inventory is valued utilizing the standard cost method, which approximates costs determined on the first-in first-out basis. The Company records an inventory reserve for losses associated with dated, expired, excess or obsolete items. This reserve is based on management’s current knowledge with respect to inventory levels, planned production and sales volume assumptions. As of March 31, 2024 and December 31, 2023, no reserves were deemed necessary.
| March 31, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
License Agreement
The Company’s rights under the License and Assignment Agreement with ND Partners, LLP are capitalized and stated at cost and will amortize using the straight-line method over estimated economic life of the intangible asset. The Company will amortize the intangible asset over its useful life, based on its assessment of various factors impacting estimated useful lives and cash flows of the acquired rights. Such factors include the launch date of DefenCath, the strength of the intellectual property protection of DefenCath and various other competitive, developmental and regulatory considerations, and contractual terms. See Note 4 – Commitments and Contingencies for further discussion.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities (included in accrued expenses), and operating lease liabilities, net of current portion, on the consolidated balance sheet (see Note 6).
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
- 8 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has elected, as an accounting policy, not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis over the lease term.
The Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components and, instead, account for them as a single component.
Loss Per Common Share
Basic loss per common share
excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period.
The weighted average number of common shares outstanding during the period included
The Company’s outstanding shares of Series E preferred stock entitle the holders to receive dividends on a basis equivalent to the dividends paid to holders of common stock. As a result, the Series E preferred stock meet the definition of participating securities requiring the application of the two-class method. Under the two-class method, earnings available to common shareholders, including both distributed and undistributed earnings, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted earnings per share to be more dilutive than the calculation using the treasury stock method. No loss has been allocated to these participating securities since they do not have contractual obligations that require participation in the Company’s losses.
Since the Company has only
incurred losses, potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect
would be anti-dilutive, and therefore basic and diluted loss per share are the same for all periods presented.
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Number of Shares of Common Stock Issuable) | ||||||||
| Series C-3 non-voting preferred stock | ||||||||
| Series E non-voting preferred stock | ||||||||
| Series G non-voting preferred stock | ||||||||
| Shares issuable for payment of deferred board compensation | ||||||||
| Shares underlying outstanding stock options | ||||||||
| Shares underlying restricted stock units | ||||||||
| Total potentially dilutive shares | ||||||||
Stock-Based Compensation
Share-based compensation cost is measured at grant date, based on the estimated fair value of the award using the Black-Scholes option pricing model for options with service or performance-based conditions. Stock-based compensation is recognized as expense over the requisite service period on a straight-line basis or when the achievement of the performance condition is probable.
- 9 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Research and Development
Research and development costs are charged to expense as incurred. Research and development include fees associated with operational consultants, contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations, contract central testing laboratories, licensing activities, and allocated executive, human resources and facilities expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial and the invoices received from its external service providers. As actual costs become known, the Company adjusts its accruals in the period when actual costs become known. Costs related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of research and development expense.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe the adoption of recently issued standards have or may have a material impact on its consolidated financial statements or disclosures.
ASU No. 2023-09
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures (Topic 740). The standard requires disaggregation of the effective rate reconciliation into standard categories, enhances disclosure of income taxes paid, and modifies other income tax-related disclosures. The standard will be effective for CorMedix beginning in annual reporting period ending December 31, 2025, with early adoption permitted. CorMedix is currently assessing the impact of adopting this guidance on its consolidated financial statements.
ASU No. 2023-07
In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (Topic 280). The standard requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The standard is effective for CorMedix beginning in annual reporting period ending December 31, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. CorMedix is currently assessing the impact of adopting this guidance on its consolidated financial statements.
Note 3 - Accrued Expenses:
Accrued Expenses
| March 31, 2024 | December 31, 2023 | |||||||
| Professional and consulting fees | $ | $ | ||||||
| Accrued payroll and payroll taxes | ||||||||
| License agreement payable (see Note 4 – Commitments and Contingencies) | ||||||||
| Manufacturing related | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
- 10 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 - Commitments and Contingencies:
Contingency Matters
In re CorMedix Inc. Securities Litigation, Case No. 2:21-cv-14020 (D.N.J.)
On October 13, 2021, the United States District Court for the District of New Jersey consolidated into In re CorMedix Inc. Securities Litigation, Case No. 2:21-cv 14020-JXN-CLW, two putative class action lawsuits filed on or about July 22, 2021 and September 13, 2021, respectively, and appointed lead counsel and lead plaintiff, a purported stockholder of the Company. The lead plaintiff filed a consolidated amended class action complaint on December 14, 2021, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, along with Rule 10b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933. On October 10, 2022, the lead plaintiff filed a second amended consolidated complaint that superseded the original complaints in In re CorMedix Securities Litigation. On March 21, 2024, the court denied Defendant’s motion to dismiss without prejudice and granted lead plaintiff leave to amend the complaint. On April 22, 2024, lead plaintiff filed a third amended consolidated complaint that superseded the second amended consolidated complaint. In the third amended complaint, the lead plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired CorMedix securities between October 16, 2019 and August 8, 2022, inclusive. The third amended complaint names as defendants the Company and six (6) current and former officers of CorMedix, namely Khoso Baluch, Robert Cook, Matthew David, Phoebe Mounts, John L. Armstrong, and Joseph Todisco (the “Officer Defendants” and collectively with CorMedix, the “CorMedix Defendants”). The third amended complaint alleges that the CorMedix Defendants violated Section 10(b) of the Exchange Act (and Rule 10b-5) and that the Officer Defendants violated Section 20(a). In general, the purported bases for these claims are allegedly false and misleading statements and omissions related to the NDA submissions to the FDA for DefenCath, subsequent complete response letters, as well as communications from the FDA related and directed to the Company’s contract manufacturing organization and heparin supplier. The Company intends to vigorously contest such claims. Defendants’ motion to dismiss the third amended complaint is due on or before June 6, 2024. Lead plaintiff’s opposition is due on or before July 22, 2024. Defendants’ reply is due on or before August 21, 2024.
In re CorMedix Inc. Derivative Litigation, Case No. 2:21-cv-18493-JXN-LDW (D.N.J.)
On or about October 13, 2021, a purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled Voter v. Baluch, et al., Case No. 2:21-cv-18493-JXN-LDW (the “Derivative Litigation”). The complaint names as defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Greg Duncan, Matthew David, Phoebe Mounts and Joseph Todisco along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties, abuse of control, and waste of corporate assets against the defendants and a claim for contribution for purported violations of Sections 10(b) and 21D of the Exchange Act against certain defendants. The individual defendants intend to vigorously contest such claims. On January 21, 2022, pursuant to a stipulation between the parties, the Court entered an order staying the case while the motion to dismiss the class action lawsuit described in the foregoing paragraph is pending. The stay may be terminated before the motion to dismiss is resolved according to certain circumstances described in the stipulation available on the Court’s public docket.
On or about January 13, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled DeSalvo v. Costa, et al., Case No. 2:23-cv-00150-JXN-CLW. Defendants Paulo F. Costa, Janet D. Dillione, Greg Duncan, Alan Dunton, Myron Kaplan, Steven Lefkowitz, Joseph Todisco, Khoso Baluch, Robert Cook, Matthew David, Phoebe Mounts, and John L. Armstrong along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duty and unjust enrichment against the individual defendants.
On or about January 25, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled Scullion v. Baluch, et al., Case No. 2:23-cv-00406-ES-ESK. Defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Gregory Duncan, Matthew David, and Phoebe Mounts, along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties.
On or about April 18, 2023, the Court entered an order consolidating the above-mentioned shareholder derivative complaints for all purposes, including pretrial proceedings, trial and appeal. The consolidated derivative action is entitled, In re CorMedix Inc. Derivative Litigation, C.A. No. 2:21-cv-18493-JXN-LDW. The individual defendants intend to vigorously contest the claims set forth in the consolidated derivative action. The provisions of the Order to Stay entered in the Voter Action on January 21, 2022, apply to the consolidated derivative action. On April 20, 2023, the consolidated derivative action was administratively terminated and removed from the Court’s docket until the motion to dismiss the class action is resolved and the Private Securities Litigation Reform Act, or PSLRA, stay is lifted. As noted above, on April 22, 2024, the lead plaintiff in the class action filed a third amended complaint. The class action remains stayed under the PSLRA.
Demand Letter
On or about June 23, 2022, the Company’s Board received a letter demanding it investigate and pursue causes of action, purportedly on behalf of Company, against certain current and former directors, officers, and/or other employees of the Company (the “Letter”), which the Board believes are duplicative of the claims already asserted in the Derivative Litigation. As set forth in the Board’s response to the Letter, the Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor the progress of the Derivative Litigation.
- 11 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
License and Assignment Agreement
In 2008, the Company entered
into a License and Assignment Agreement (the “ND License Agreement”) with ND Partners, LLP (“NDP”). Pursuant to
the ND License Agreement, NDP granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes
for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States
and foreign patents and applications (the “NDP Technology”). As consideration in part for the rights to the NDP Technology,
upon execution of the ND License Agreement, the Company paid NDP an initial licensing fee of $
Under the ND License Agreement, the Company is required to make cash payments to NDP upon the achievement of certain milestones. In 2014, a certain milestone was achieved resulting in the release of
The license intangible asset will be amortized as cost of goods sold over its estimated economic life, beginning in the second quarter of 2024, correlating with the product launch of DefenCath and the first period in which revenue will be recognized.
The ND License Agreement will expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim under the ND License Agreement in a given country, or (ii) the payment of all milestone payments. Upon the expiration of the ND License Agreement in each country, we will have an irrevocable, perpetual, fully paid-up, royalty-free exclusive license to the NDP Technology in such country. The ND License Agreement also may be terminated by NDP if the Company materially breaches or defaults under the ND License Agreement and that breach is not cured within 60 days following the delivery of written notice to the Company, or by the Company on a country-by-country basis upon 60 days prior written notice in the event the Company’s Board determines not to proceed with the development of the NDP Technology. If the ND License Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.
Note 5 - Stockholders’ Equity:
Common Stock
On August 12, 2021, the Company
filed a shelf registration statement (the “2021 Shelf Registration Statement”) for the issuance of up to $
On June 28, 2023, the Company
entered into an underwriting agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Truist Securities,
Inc., as representatives of the several underwriters named therein, relating to the issuance and sale of an aggregate of
The offering pursuant to
the 2021 Shelf Registration Statement closed on July 3, 2023. Upon closing, the Company issued and sold an aggregate of
During the quarter ended March
31, 2023, the Company sold an aggregate of
The Company did not sell any common stock during the quarter ended March 31, 2024.
- 12 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Restricted Stock Units
In January 2024, the Company
granted
As of March 31, 2024 and
2023, the Company has
Preferred Stock
The Company is authorized
to issue up to
| As of March 31, 2024 and December 31, 2023 | ||||||||||||
| Preferred Shares Outstanding | Liquidation Preference (Per Share) | Total Liquidation Preference | ||||||||||
| Series C-3 | $ | $ | ||||||||||
| Series E | $ | $ | ||||||||||
| Series G | $ | $ | ||||||||||
| Total | $ | |||||||||||
Stock Options
During the three months ended
March 31, 2024 and 2023, the Company granted ten-year qualified and non-qualified stock options covering an aggregate of
During the three months ended
March 31, 2024 and 2023, stock-based compensation expense for stock options issued to employees, directors, officers and consultants
was $
As of March 31, 2024, there
was approximately $
| Expected term (in years) | ||||
| Volatility weighted average | % | |||
| Dividend yield weighted average | % | |||
| Risk-free interest rate weighted average | % | |||
| Weighted average grant date fair value of options granted during the period | $ |
- 13 -
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
During the three months ended
March 31, 2024, the Company uses the simplified method to calculate the expected term which takes into account the vesting term and the
expiration date of the stock options. The expected term of the stock options granted to consultants, if any, is based upon the full term
of the respective option agreements. The expected stock price volatility for the Company’s stock options is calculated based on
the historical volatility of the Company’s stock price for the expected term. The expected dividend yield of
Note 6 - Leases:
The Company entered into
a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The
lease agreement, with a monthly average cost of approximately $
The Company entered into
an operating lease for office space in Germany that began in July 2017 that is set to expire in June 2024. The rental agreement has a
three-month term which automatically renews and includes a monthly cost of
Operating lease expense in
the Company’s condensed consolidated statements of operations and comprehensive loss for each of the three months ended March 31,
2024 and 2023 was approximately $
At March 31, 2024, the Company
has a total operating lease liability of $
For the three months ended
March 31, 2024 and 2023, cash paid for amounts included in the measurement of lease liabilities in operating cash flows from operating
leases was $
The weighted average remaining
lease term as of March 31, 2024 and 2023 were
| 2024 (excluding the three months ended March 31, 2024) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ |
- 14 -
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and our audited 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 12, 2024.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. All statements, other than statements of historical facts, regarding management’s expectations, beliefs, goals, plans or CorMedix’s prospects should be considered forward-looking statements. Readers are cautioned that actual results may differ materially from projections or estimates due to a variety of important factors, and readers are directed to the Risk Factors identified in CorMedix’s filings with the SEC, including its most recent Annual Report on Form 10-K, copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from CorMedix. CorMedix may not actually achieve the goals or plans described in its forward-looking statements, and such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Investors should not place undue reliance on these statements. CorMedix assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Risks Related to our Financial Position and Need for Additional Capital
| ● | We have a history of operating losses, expect to incur additional operating losses in the future and may never be profitable |
| ● | We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, which may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights |
Risks Related to the Commercialization of DefenCath
| ● | We are highly dependent on the successful commercialization of our only approved product, DefenCath |
| ● | The successful commercialization of DefenCath will depend on obtaining coverage and reimbursement for use of DefenCath from third-party payors |
| ● | The expected outpatient demand for DefenCath is highly concentrated, with two large customers accounting for more than 70% of total expected market volume. The failure of one or both of these large dialysis providers to utilize DefenCath is likely to adversely impact the commercial launch of DefenCath |
| ● | If we are unable to effectively recruit, train, retain and equip our sales force, our ability to successfully commercialize DefenCath will be harmed |
Risks Related to the Development and Commercialization of our Other Products
| ● | Successful development and commercialization of our product candidates is uncertain |
| ● | Final approval by regulatory authorities of our product candidates for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues |
- 15 -
Risks Related to Healthcare Regulatory and Legal Compliance Matters
| ● | DefenCath, and our product candidates (if approved), will be subject to extensive post-approval regulation |
| ● | Current healthcare laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. healthcare system may affect our ability to commercialize DefenCath and future marketed products profitably |
| ● | We are subject to laws and regulations relating to privacy, data protection and the collection and processing of personal data. Failure to maintain compliance with these regulations could create additional liabilities for us |
| ● | Clinical trials required for our new product candidates or for expanded uses of DefenCath will be expensive and time-consuming, and their outcome is uncertain |
Risks Related to Our Business and Industry
| ● | Healthcare institutions, physicians and patients may not accept or use our products |
| ● | Competition and technological change may make our products and technologies less attractive or obsolete |
| ● | Healthcare policy changes, including reimbursement policies for drugs and medical devices, may have an adverse effect on our business, financial condition and results of operations |
| ● | If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in compensation costs, our business may materially suffer |
| ● | Changes in funding for the FDA and other government agencies or future government shutdowns or disruptions could cause delays in the submission and regulatory review of marketing applications, including supplements, which could negatively impact our business or prospects |
| ● | If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed |
| ● | We may not successfully manage our growth |
| ● | We face the risk of product liability claims and the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities we might incur |
| ● | We may be exposed to liability claims associated with the use of hazardous materials and chemicals |
| ● | If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business |
| ● | Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators |
Risks Related to Our Intellectual Property
| ● | If we materially breach or default under the ND License Agreement with NDP, NDP would have the right to terminate the ND License Agreement, which would materially harm our business |
| ● | If we do not obtain protection for and successfully defend our respective intellectual property rights, competitors may be able to take advantage of our research and development efforts to develop competing products |
| ● | Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights |
| ● | If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages and defend against litigation |
- 16 -
Risks Related to Dependence on Third Parties
| ● | If we or our collaborators are unable to manufacture our products in sufficient quantities or experience quality or manufacturing problems, we may be unable to meet demand for our products and we may lose potential revenues |
| ● | We depend on third party suppliers and contract manufacturers for the manufacturing of DefenCath and all key active pharmaceutical ingredients (“APIs”), which subjects us to potential cost increases and manufacturing delays that are not within our control |
| ● | We currently have one FDA approved supplier for each of our key APIs, taurolidine and heparin, respectively, as well as one currently FDA approved manufacturing site for DefenCath finished dosage. We are actively working to qualify an alternative manufacturing site for finished dosage as well as making preparations to qualify alternative sources of both APIs. There is no guarantee we will be successful in these endeavors. |
| ● | Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of new development products or expanded uses of DefenCath |
| ● | Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading or incomplete |
| ● | We may rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our product candidates may not advance in a timely manner or at all |
Risks Related to Our Common Stock
| ● | Our executive officers and directors may sell shares of their stock, and these sales could adversely affect our stock price |
| ● | Our common stock price has fluctuated considerably and is likely to remain volatile, and you could lose all or a part of your investment |
| ● | A significant number of additional shares of our common stock may be issued at a later date, and their sale could depress the market price of our common stock |
| ● | Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult |
| ● | If we fail to comply with the continued listing standards of the Nasdaq Global Market, it may result in a delisting of our common stock from the exchange |
| ● | Laws, rules and regulations relating to public companies may be costly and impact our ability to attract and retain directors and executive officers |
| ● | Our internal control over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur |
| ● | Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer |
| ● | We do not currently pay dividends on our common stock so any returns on our common stock may be limited to the value of our common stock |
| ● | We are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to such companies could make our common stock less attractive to investors. |
- 17 -
Overview
CorMedix Inc. (collectively, with our wholly owned subsidiaries, referred to herein as “we,” “us,” “our” or the “Company”) is a biopharmaceutical company focused on developing and commercializing therapeutic products of life-threatening diseases and conditions.
Our primary focus is on the commercialization of our lead product, DefenCath, in the U.S. The name DefenCath is the U.S. proprietary name that was approved by the FDA.
DefenCath is an antimicrobial catheter lock solution (“CLS”) (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) indicated to reduce the incidence of catheter-related bloodstream infections (“CRBSI”) in adult patients with kidney failure receiving chronic hemodialysis through a central venous catheter (“CVC”). It is indicated for use in a limited and specific population of patients. CRBSIs can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the CVC, related treatment costs, as well as increased mortality. We believe DefenCath can address a significant unmet medical need.
On November 15, 2023, we announced that the FDA approved the NDA for DefenCath to reduce the incidence of CRBSI in adult patients with kidney failure receiving chronic hemodialysis through a CVC. DefenCath is indicated for use in a limited and specific population of patients. DefenCath is the first and only FDA-approved antimicrobial CLS in the U.S. and was shown to reduce the risk of CRBSI by up to 71% in a Phase 3 clinical study. As a result of the November 2023 FDA approval, CorMedix is in the process of launching the product commercially.
DefenCath is listed in the Orange Book as having NCE exclusivity (5 years) expiring on November 15, 2028, and the Generating Antibiotic Incentives Now or GAIN exclusivity extension of the NCE exclusivity (an additional 5 years) expiring on November 15, 2033. The GAIN exclusivity extension of 5 years is the result of the January 2015 designation of DefenCath as a Qualified Infectious Disease Product (“QIDP”).
We announced on April 26, 2023 that following the submission of a duplicate New Technology Add-On Payment (“NTAP”) application in the fourth quarter of 2022 to Centers for Medicare and Medicaid Services (“CMS”), CMS has subsequently issued the Inpatient Prospective Payment System (“IPPS”) 2024 proposed rule that includes a NTAP of up to $17,111 per hospital stay for DefenCath. This NTAP represents reimbursement to inpatient facilities of 75% of the anticipated wholesaler acquisition cost price of $1,170 per 3 mL vial, and an average utilization of 19.5 vials per hospital stay. The final IPPS rule was published in early August 2023 and confirmed this payment amount in that final rule. This NTAP was conditioned upon the DefenCath NDA obtaining final FDA approval prior to July 1, 2024. As the NTAP was calculated by CMS based upon an anticipated wholesale acquisition price (“WAC”) of $1,170, and following FDA approval of the DefenCath NDA, an actual WAC of $249.99 per 3ml vial was established, we anticipate that CMS will revise the amount of the NTAP payment to reflect the actual WAC price in the next IPPS rulemaking, effective October 1, 2024. Upon the listing in the compendia of the actual WAC price of $249.99 per 3ml vial, the Company notified CMS of the new lower WAC pricing and recommended that CMS make an off-cycle adjustment to the NTAP to reflect the current lower WAC pricing amount. CMS subsequently communicated to the Company that they do not intend to update the NTAP reimbursement amount until the next review cycle in October 2024.
On January 25, 2024, CMS determined that DefenCath should be classified as a renal dialysis service that is subject to the Medicare end-stage renal disease prospective payment system (“ESRD PPS”). The ESRD PPS provides bundled payment for renal dialysis services, but also affords a transitional drug add-on payment adjustment, or TDAPA, which provides temporary, additional payments for certain new drugs and biologicals. We submitted an application for TDAPA on January 26, 2024, and received confirmation that our application was approved on April 18, 2024. We also submitted a HCPCS application for a J-code to CMS on December 8, 2023, for DefenCath, which is relevant to billing and the TDAPA application. The HCPCS J-code for DefenCath was published by CMS on April 2, 2024. TDAPA reimbursement is calculated based on 100 percent ASP (or 100 percent of wholesale acquisition price or else manufacturers’ list price, respectively, if such data is unavailable). TDAPA and post-TDAPA add-on payment adjustments for DefenCath apply for five years (with such add-on payments applying to all ESRD PPS payments for years three through five). CMS confirmed a July 1, 2024 implementation date for HCPCS and TDAPA as described below.
- 18 -
We may pursue additional indications for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially significant market opportunities. While we are continuing to assess these areas, potential future indications may include use as a CLS to reduce CRBSIs in total parenteral nutrition patients using a central venous catheter and in certain oncology patients using a central venous catheter. In 2024, the Company anticipates discussing with the FDA potential pathways for expanded indications.
We currently have one FDA approved source for each of our two key APIs for DefenCath, taurolidine and heparin sodium, respectively. With regards to taurolidine, we have a DMF filed with the FDA. There is a master commercial supply agreement between a third-party manufacturer and us in place from August 2018. We are currently in the process of identifying and qualifying an alternate third-party manufacturer for taurolidine under our existing DMF. With respect to heparin sodium API, we have identified an alternate third-party supplier and intend to qualify such supplier under the DefenCath NDA over the next twelve months.
We received FDA approval of DefenCath with finished dosage production from our European based CMO Rovi Pharma Industrial Services. We believe this CMO has adequate capacity to produce the volumes needed to meet near-term projected demand for the commercial launch of DefenCath.
We previously announced a commercial arrangement with Siegfried Hameln to qualify their site as an additional finished dosage manufacturing site for DefenCath. The Company submitted the NDA supplement to FDA on May 7, 2024 as described below.
We announced on May 1, 2023 that the USPTO allowed our patent application directed to a locking solution composition for treating and reducing infection and flow reduction in central venous catheters. This application was granted on August 29, 2023 as U.S. Patent No. 11,738,120. Our newly granted U.S. Patent reflects the unique and proprietary formulation of our product, DefenCath, for which we received FDA approval on November 15, 2023. This patent supplements the coverage of our existing licensed U.S. Patent No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath through 2042.
As part of the DefenCath approval letter, the FDA communicated the existence of a required pediatric assessment under the Pediatric Research Equity Act, or PREA. PREA requires sponsors to conduct pediatric studies for, among other things, NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. FDA deferred submission of the pediatric study for DefenCath because the product is ready for approval for use in adults and the pediatric study has not been completed. We are currently obligated to conduct the study communicated in the approval letter: an open-label, two-arm (DefenCath vs. standard of care) study to assess safety and time to CRBSI in subjects from birth to less than 18 years of age with kidney failure receiving hemodialysis via a central venous catheter. CorMedix intends to address the design and requirements for the pediatric study during our Type C meeting with the FDA during 2024. Because this is a required post-marketing study, we would be required to make annual reports to the FDA. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which, if granted, provides an additional six months of exclusivity that attaches to the end of existing marketing exclusivity and patent periods for DefenCath. Depending on the timing of final report submission, DefenCath could potentially receive a total marketing exclusivity period of 10.5 years. However, there are factors that could affect whether this exclusivity is received or the duration of exclusivity, and DefenCath may or may not ultimately be eligible for the additional 0.5 years of exclusivity associated with this pediatric study.
The Company previously marketed and sold Neutrolin, a CLS product where we received CE-Mark approval for commercial distribution in the EU and other territories. The Company previously elected to discontinue sales of Neutrolin for lack of commercial viability. The winding down of our operations in the EU is nearly complete and Neutrolin sales in both the EU and the Middle East have been discontinued since 2022.
In addition, the following events have occurred subsequent to March 31, 2024:
| ● | CMS HCPCS Determination. CMS published its HCPCS coding decision for DefenCath on April 2, 2024, establishing a new HCPCS Level II code for DefenCath. |
| ● | DefenCath Development Plan. The FDA granted the Company’s Type C meeting request to discuss an updated development plan for DefenCath and pediatric study requirements. The Company expects to receive feedback from the FDA by the end of the second quarter of 2024. |
| ● | First Customer Announcement. On April 8, 2024, the Company announced it had entered into a 5-year commercial supply contract with ARC Dialysis, LLC, a Florida-based dialysis provider, for the supply of DefenCath. |
| ● | Inpatient Commercial Launch. On April 15, 2024, the Company announced that DefenCath is commercially available for U.S. inpatient use. |
| ● | Outpatient Reimbursement. On April 18, 2024, CMS notified the Company of its determination that DefenCath meets the criteria for a Transitional Drug Add-On Payment (referred to herein as “TDAPA”) and will be effective July 1, 2024. The TDAPA program currently provides for five years of additional payment reimbursement beyond the ESRD bundled rate to outpatient providers. |
| ● | PAS Submission for Alternate Manufacturing. On May 7, 2024 the Company submitted to FDA a supplement to the CorMedix NDA adding Siegfried Hameln as an alternate finished dosage manufacturing site for DefenCath. Pending FDA review and approval, the Company anticipates approval of the supplement by the end of 2024. |
- 19 -
Financial Operations Overview
Revenues
We have not generated substantial revenue since our inception. Our ability to generate future revenue and become profitable depends on our ability to successfully commercialize DefenCath beginning in the second quarter of 2024 and any product candidates that we may advance in the future. If we fail to successfully commercialize DefenCath, or any other product candidates we advance in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, could be adversely affected. Through March 31, 2024, we have funded our operations primarily through debt and equity financings.
Cost of Revenues
Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance.
Research and Development Expense
Research and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock–based compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and pre-clinical studies and clinical trials; (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies; and (viii) manufacturing-related costs, including previously expensed pre-NDA approval inventory amounting to approximately $6,400,000. All R&D is expensed as incurred.
The process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our future product candidates.
Development timelines, probability of success and development costs vary widely. We are currently focused on the commercialization of DefenCath in the U.S.
Selling, General and Administrative Expense
Selling, general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.
Foreign Currency Exchange Transaction Gain (Loss)
Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional currency and is reported in the consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our New Jersey-based subsidiary and our Germany-based subsidiary will not be repaid and the nature of the funding advanced was of a long-term investment nature. As such, unrealized foreign exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss).
Interest Income
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.
Interest Expense
Interest expense consists of interest incurred on financing of expenditures.
- 20 -
Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following is a tabular presentation of our consolidated operating results for the three months ended March 31, 2024 and 2023 (in thousands):
| For the Three Months Ended March 31, | % of Change Increase | |||||||||||
| 2024 | 2023 | (Decrease) | ||||||||||
| Revenues, net | $ | - | $ | - | - | |||||||
| Cost of revenues | (819 | ) | - | 100 | % | |||||||
| Gross loss | (819 | ) | - | - | ||||||||
| Operating Expenses: | ||||||||||||
| Research and development | (838 | ) | (3,407 | ) | (75 | )% | ||||||
| Selling, general and administrative | (15,048 | ) | (7,610 | ) | 98 | % | ||||||
| Total operating expenses | (15,886 | ) | (11,017 | ) | 44 | % | ||||||
| Loss from operations | (16,705 | ) | (11,017 | ) | 52 | % | ||||||
| Interest income | 857 | 446 | 92 | % | ||||||||
| Foreign exchange transaction (loss) gain | (4 | ) | 12 | (132 | )% | |||||||
| Interest expense | (10 | ) | (9 | ) | 12 | % | ||||||
| Net loss before income taxes | (15,862 | ) | (10,568 | ) | 50 | % | ||||||
| Tax benefit | 1,395 | - | - | |||||||||
| Net loss | (14,467 | ) | (10,568 | ) | 37 | % | ||||||
| Other comprehensive (loss) income | (10 | ) | 19 | (158 | )% | |||||||
| Comprehensive loss | $ | (14,477 | ) | $ | (10,549 | ) | 37 | % | ||||
Cost of Revenues. Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance. We expect these relatively fixed costs to become less significant as a percentage of net sales with anticipated sales volume increases. There were no direct costs of product sales during the three months ended March 31, 2024 as commercial launch of DefenCath occurred in the second quarter of 2024. Indirect costs of $819,000 for the three months ended March 31, 2024 represent the proportion of salaries, benefits and insurance expenses representing excess capacity pertaining to pre-launch related activities. Certain pre-approval validation batch product previously expensed as R&D will improve margins throughout 2024 or until such inventory is depleted.
Research and Development Expense. R&D expense was $838,000 for the three months ended March 31, 2024, a decrease of $2,569,000, or 75%, from $3,407,000 for the same period in 2023. The decrease was driven by the approval of DefenCath. As a result of the post FDA approval commercial operations, costs related to medical affairs and certain personnel expenses that supported R&D efforts prior to the FDA approval of DefenCath have been recognized in selling, general and administrative expense during the three months ended March 31, 2024, as compared to the same period last year that were recognized in R&D. In addition, a portion of the costs related to the manufacturing of DefenCath, previously recognized in R&D, are now capitalized as a result of the FDA approval. There was also a decrease in non-cash charges for stock-based compensation of $339,000.
Selling, General and Administrative Expense. SG&A expense was $15,048,000 for the three months ended March 31, 2024, an increase of $7,438,000 or 97%, from $7,610,000 for the same period in 2023. The increase was primarily attributable to increases in personnel expenses of $3,756,000, due to the hiring of sales force, medical affairs and marketing personnel. The increase in costs related to medical affairs, market research studies and launch activities in preparation for the commercial marketing of DefenCath of $2,679,000 was a result of the post FDA approval operations that supported R&D efforts prior to the FDA approval, which are now recognized in selling, general and administrative expense during the three months ended March 31, 2024. There were also increases in non-cash charges for stock-based compensation of $449,000, consulting fees of $281,000 and business development activities of $218,000.
Interest Income. Interest income was $857,000 for the three months ended March 31, 2024 compared to $446,000 for the same period last year, an increase of $411,000, or 92%. The increase was attributable to higher interest rates and higher average balance in short-term investments during this period as compared to the same period last year.
- 21 -
Foreign Exchange Transaction Gain (Loss). Foreign exchange transaction gain (loss) were due to the re-measuring of transactions denominated in a currency other than our functional currency. For the quarter ended March 31, 2024, there was a loss of $4,000 and a gain of $12,000 for the same period in 2023.
Interest Expense. Interest expense was $10,000 for the three months ended March 31, 2024 as compared to $9,000 for the same period in 2023, an increase of $1,000, primarily due to higher interest rates on expenses that were financed this year as compared to the same period last year.
Other Comprehensive (Loss) Income. Unrealized foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to U.S. dollars and unrealized movements related to short-term investment are recorded in other comprehensive (loss) income which resulted in the loss of $10,000 for the three months ended March 31, 2024 and a gain of $19,000 for the three months ended March 31, 2023.
Liquidity and Capital Resources
Sources of Liquidity
As a result of our R&D and SG&A expenditures and the lack of substantial product sales revenue, our ongoing operations have not been profitable since our inception. During the three months ended March 31, 2024, we did not have any sales of common stock as compared to $7,200,000 net proceeds for the same period in 2023 from the issuance of 1,684,592 shares of common stock. We will continue to be reliant on external sources of cash for the foreseeable future until we are able to generate profits.
In March 2024, we received $1,395,000, net of expenses, from the sale of our unused New Jersey net operating losses (“NOL”), that was eligible for sale under the State of New Jersey’s Economic Development Authority’s New Jersey Technology Business Tax Certificate Transfer program (“NJEDA Program”). The NJEDA Program allowed us to sell our available NOL tax benefits for the state fiscal year 2023 in the amount of approximately $1,529,000.
Net Cash Used in Operating Activities
Net cash used in operating activities for the three months ended March 31, 2024 was $17,310,000 as compared to $10,394,000 for the same period in 2023, an increase of $6,916,000. The increase is primarily driven by an increase in net loss of $3,899,000, attributable to a net increase in operating expenses of $4,869,000. As a result of the approval of DefenCath, cost of revenues of $819,000, which are indirect fixed costs related to the manufacturing and distribution of DefenCath were recognized, as compared to the same period last year, these costs were recognized as R&D. There was also an increase in prepaid expenses and other current assets of $1,226,000 and decreases in accrued expenses of $2,416,000 and accounts payable of $1,453,000, among others of lesser significance.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the year ended March 31, 2024 was $8,945,000 as compared to $14,687,000 of net cash used in investing activities for the same period in 2023. The net cash provided during the three months ended March 31, 2024, was mainly driven by an increase in maturity of the amount invested in short-term investments, partially offset by lower purchase of short-term investments in 2024 as compared to the same period in 2023.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities for the three months ended March 31, 2024 was $97,000 due to the payment of employee withholding taxes as a result of the issuance of shares for vested restricted stock units. Net cash provided by financing activities for the three months ended March 31, 2023 was $7,200,000, attributable to the net proceeds generated from the sale of our common stock in our at-the-market program, or ATM program.
- 22 -
Funding Requirements and Liquidity
Our total cash, cash equivalents and short-term investments as of March 31, 2024 was $58,552,000, excluding restricted cash of $179,000, compared with $76,031,000 for the year ended December 31, 2023, excluding restricted cash of $181,000. As of March 31, 2024, we have $104,400,000 available under our 2021 Shelf Registration Statement for the issuance of equity, debt or equity-linked securities.
Because our business has not generated positive operating cash flow, we may need to raise additional capital in order to continue to fund our research and development activities, as well as to fund operations generally. Our continued operations are focused on the commercial launch of DefenCath and we can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, if additional funds are needed.
We expect to continue to fund operations from cash, cash equivalents and short-term investments and through capital raising sources as previously described, which may be dilutive to existing stockholders, through revenues from the sale of our products or through strategic alliances. We expect to implement an ATM program, which may be utilized to support our ongoing funding requirements. Additionally, we may seek to sell additional equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness would result in increased fixed obligations and could contain covenants that would restrict our operations. Raising additional funds through strategic alliance arrangements with third parties may require significant time to complete and could force us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. Our actual cash requirements may vary materially from those now planned due to a number of factors, including any change in the timing of the commercial launch of DefenCath or the focus and direction of our research and development programs, any acquisition or pursuit of development of new product candidates, competitive and technical advances, the costs of commercializing any of our product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights.
We expect to generate product sales for DefenCath in the U.S. In the absence of significant revenue, we are likely to continue generating operating cash flow deficits. We will continue to use cash as we increase other activities leading to the commercialization of DefenCath and pursue business development activities.
We currently estimate that as of March 31, 2024, we have sufficient cash, cash equivalents and short-term investments to fund operations for at least twelve months from the issuance of this Quarterly Report on Form 10-Q. These estimates are based upon the commercial launch in the second quarter of 2024, and other base case assumptions for market penetration, average selling price, research and development expense and commercial infrastructure cost. Additional financing may be needed to build out our commercial infrastructure and to continue our operations. If we are unable to raise additional funds when needed, we may be forced to slow or discontinue the commercial launch of DefenCath. We may also be required to delay, scale back or eliminate some or all of our research and development programs. Each of these alternatives would likely have a material adverse effect on our business.
Contractual Obligations
We entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000, commenced on September 16, 2020.
- 23 -
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about revenue and the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
For the three-month period ended March 31, 2024, there were no significant changes to our critical accounting estimates as identified in our Annual Report on Form 10-K for the year ended December 31, 2023, except for the intangible asset probability assessment (see Note 2, “Summary of Significant Accounting Policies,” of the Notes to our Unaudited Condensed Consolidated Interim Financial statement contained in Item 1 of Part 1 of this Quarterly Report on Form 10-Q) and the assessment of going concern uncertainty. The intangible asset probability assessment is based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing of DefenCath launch in the outpatient setting, uptake of our product in the inpatient and outpatient settings and commercial contract terms that align with our internal assumptions. Based on this assessment, as necessary or applicable, we make certain assumptions around revenue. The assessment of going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least one year from the date our condensed consolidated financial statements are issued (the “look-forward period”). As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing of DefenCath launch in the outpatient setting, uptake of our product in the inpatient and outpatient settings and commercial contract terms that align with our internal assumptions. Based on this assessment, as necessary or applicable, we make certain assumptions around revenue, gross profit, operating expenses, inventory build and working capital needs to the extent we deem probable those implementations can be achieved within the look-forward period. For additional information, refer to Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.
Item 4. Controls and Procedures.
Disclosure controls and procedures are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of March 31, 2024. Based on the foregoing evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
- 24 -
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
For information regarding our legal proceedings, see Note 4, Commitments and Contingencies, included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.
Item 1A. Risk Factors.
There were no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
- 25 -
Item 6. Exhibits.
The exhibit index set forth below is incorporated by reference in response to this Item 6.
| Exhibit Number |
Description | |
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| + | Indicates management contract or compensation plan. |
- 26 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CORMEDIX INC. |
| Date: May 9, 2024 | By: | /s/ Joseph Todisco | |
| Name: | Joseph Todisco | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
- 27 -