CorMedix Inc. (CRMD) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon and welcome to the CorMedix's Third Quarter Earnings Conference Call. Today's conference call is being recorded. There will be a question-and-answer session At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the conference call over to Daniel Ferry from LifeSci Advisors. Please go ahead.

Good afternoon and welcome to the CorMedix’s third quarter 2021 earnings conference call. Leading the call today is Matt David, Interim Chief Executive Officer and Executive Vice President, and Chief Financial Officer of CorMedix. He is joined by Dr. Phoebe Mounts, Executive Vice President and General Counsel. Before we begin, I would like to remind everyone that during the call, management may make what are known as forward-looking statements within the meaning set forth in the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and include, but are not limited to, any of the following; any statements other than statements of historical fact regarding management’s expectations, beliefs, goals, and plans about the company’s prospects, including its clinical development program and marketing approval for DEFENCATH in the U.S. and other product candidates; future financial position; future revenues and projected costs; and potential market acceptance of DEFENCATH, Neutrolin, and other product candidates. More specifically, forward-looking statements include any statements about our clinical development plans and the submissions and timing, cost, results, interpretations thereof; projections as to the company’s future capital raising and spending and cash position; expectations as to the timing and nature of anticipated regulatory actions; possible product licensing, business development or other transactions; any commercial plans and expectations; market projections for our product candidates; and expectations as to manufacturing and product component costs. Actual results may differ materially from these projections or estimates due to a variety of important factors, including, but not limited to, uncertainties related to clinical development, regulatory approvals and commercialization. These risks are described in greater detail in CorMedix filings with the SEC, 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 these forward-looking statements and investors should not place undue reliance on these statements. Please note that CorMedix does not intend to update these forward-looking statements except as required by law. At this time, it is now my pleasure to turn the call over to Mr. Matt David, Interim Chief Executive Officer of CorMedix. Matt, please go ahead.

Good afternoon everyone and thank you for joining us on this call. Today marks the first earnings call since Phoebe and I have taken on additional roles within the company, as we announced on October 4th. While it has been incredibly busy month, we are pleased to be here this afternoon to discuss CorMedix updates, as well as reflect on our priorities as a company over the coming months. On today's earnings call, we will discuss the third quarter 2021 financial information and the overall progress CorMedix is making in bringing DEFENCATH to the U.S. market for its first indication for use as a catheter lock solution for hemodialysis patients to reduce catheter-related bloodstream infections. Let's begin with the topics for discussion today. In September, we announced that CorMedix had encountered delays at its third party contract manufacturer or CMO. And we were informed by the CMO that there were issues that are unrelated to DEFENCATH manufacturing activities. We also indicated that the timelines for CorMedix and the CMO to address deficiencies at the facility that are required for resubmission of the defense cap NDA became uncertain. The defense tech team, including a group of specialized consultants, has continued to work closely with our CMO and we are pleased to share with you that we are making progress on this front. Phoebe will provide information on our progress here since the last update. Also, we are balancing our preparations for launching DEFENCATH, while limiting our cash burn so that financially, we have the resources required to efficiently bring DEFENCATH to patients in the U.S. market when FDA approval is received. I will provide an update on our third quarter 2021 financials and provide color regarding the strength of CorMedix's balance sheet. A couple of weeks ago in October, we shared some abstracts that the CorMedix team has now presented a two recent conferences, Association of Managed Care Pharmacy and American Society of Nephrology. The analyses described in these abstracts and the epidemiologic data that stem from this work are incredibly important. As they underscore the purpose of the work we are doing here at CorMedix. I will provide some additional color on these items and how we plan to use these data as we prepare to bring DEFENCATH to patients in hemodialysis community who are at risk for life-threatening catheter-related bloodstream infections. Now, let's move to the first topic. Phoebe will provide the regulatory and manufacturing update Phoebe?

Thank you, Matt and good afternoon, everyone. I am pleased to report that CorMedix and the third party contract manufacturer, have been able to resume work on validation of the DEFENCATH manufacturing process. As noted by Matt, and as we disclosed in early September, there was a delay as a result of issues that the CMO that were unrelated to the manufacture of DEFENCATH. We have been able to resume manufacturing activities and are continuing to complete the work that is required to address the deficiencies identified by the FDA. Specifically, we have discussed previously that FDA had identified deficiencies involving activities associated with the vial filling line for DEFENCATH at the CMO, in particular, to target filling up volumes. After analyzing available data, parameters of the filling operation were adjusted, and we determined that qualification of the filling operation was required. It will require some time to complete testing and preparation of documentation to resubmit the manufacturing module of the new drug application or NDA for DEFENCATH. Until we have completed all of the testing, we will not be able to give specific guidance regarding the timing of resubmission. As a reminder, CorMedix has not been asked to resubmit any information relating to the clinical data from the LOCK-IT-100 study. I can assure you that we will continue working diligently to resubmit the DEFENCATH NDA. As we have stated previously, we are committed to providing updates over the coming months and we will provide an update on resubmission when we have clarity on the timeline. We have been extremely fortunate to have well-qualified and experienced consultants who also have been working with us to ensure the CMC module to be resubmitted by CorMedix will meet FDA's regulatory requirements. Approval of the NDA require sufficient data and documentation to demonstrate to FDA that the manufacturing facilities are ready to support commercial operation for DEFENCATH. As we have explained, FDA informs CorMedix and the CMO that resolution of all six of the deficiencies of the manufacturing facility identified by FDA in the post-application action letter sent to the CMO will be required for resubmission of the NDA. Corrective actions to address the deficiencies at the manufacturing facility will be submitted to FDA by the CMO. FDA also informed us that corrective actions may be verified during an on-site evaluation of the manufacturing facility subsequent to resubmission of the NDA. To model our goal is to resubmit sufficient data and documentation to convince FDA that the manufacturing facility is ready to support commercial operation for DEFENCATH without the need for an inspection. We intend for the CMO to be prepared for an in-person or remote interactive evaluation by FDA. We are hopeful that FDA will work quickly to review and approve the NDA consistent with the recognition by FDA of the potential for DEFENCATH to address an unmet medical need in reducing life-threatening catheter-related bloodstream infections. Thank you and I will now turn the call back to Matt to cover financial results, cash guidance, and our recent industry conference activity. Matt?

Thanks Phoebe. Next, I'll provide an overview of our third quarter 2021 financial results, as well as an update on CorMedix's cash position. The company has filed its report on Form 10-Q for the third quarter ended September 30th, 2021. I urge you to read the information contained in the report for a more complete discussion of our financial results. With respect to our third quarter of 2021 financial results, the company has cash and equivalents of $72 million as of September 30th, 2021. Our net loss was approximately $8.6 million or $0.22 per share compared with a net loss of $6.6 million or $0.22 per share in the third quarter of 2020. The higher net loss recognized in 2021 compared with 2020 included increased R&D costs, associated with our manufacturing efforts, as well as increased personnel expenses and increased non-cash charges for stock-based compensation. We recorded an increase in SG&A and an increase in R&D expenses. Operating expenses in the third quarter of 2021 increased approximately 30% to $8.6 million compared with $6.6 million in the third quarter of 2020. R&D expense increased by approximately 62% to $4.7 million, driven primarily by an increase in costs related to the manufacturing of the DEFENCATH prior to its potential marketing approval and to a lesser extent, by an increase in personnel expenses and an increase in non-cash charges for stock-based compensation. SG&A expense increased approximately 4% to $3.8 million compared with $3.7 million in the third quarter of 2020. This increase was driven by an increase in non-cash charges for stock-based compensation and an increase in personnel expenses as a result of additional hires, partially offset by a decrease in costs related to market research studies in preparation for the potential marketing approval of DEFENCATH and a decrease in consulting fees. With respect to our year-to-date 2021 financial results, total operating expenses during the nine months of 2021 amounted to $21.7 million compared with $21.2 million in the first nine months of 2020, an increase of 2%. R&D expense declined 11% to $9.9 million, driven primarily by a net decrease in costs related to the manufacturing of DEFENCATH prior to its potential marketing approval. SG&A expense increased approximately 17% compared with the first nine months of 2020 as a result of higher non-cash charges for stock-based compensation and higher personnel expenses. We recorded net cash used in operations during the first nine months of 2021 of $15.3 million compared with net cash used in operations of $16 million in the nine months of 2020. The difference was primarily driven by an increase in accrued expenses compared to a larger decrease for the same period in 2020, partially offset by an increase in net loss, mainly attributable to lower cash received from the NOL sale in the nine months of 2021 versus the same period in 2020. CorMedix remains in a strong position from a balance sheet perspective. We believe our cash and equivalents of $72 million gives the company flexibility to fund its operations at least through 2022 after taking into consideration the costs for resubmission of the DEFENCATH NDA and initial preparations for the commercial launch for DEFENCATH . We remain optimistic about our continued progress toward the goal of resubmission of the NDA to the FDA. As highlighted previously, we believe that our current cash and equivalents as well as the potential mechanisms available to us for capital raising, allow us to be prepared for the future, given we are approaching what we hope and believe will be a pivotal year ahead for CorMedix as we seek to bring DEFENCATH to patients in the hemodialysis setting. As a third topic today, I would like to highlight our efforts to expand our understanding of catheter-related bloodstream infections or CRBSIs in the hemodialysis setting. We announced in October that CorMedix had three abstracts accepted for presentation at two industry conferences. These include one abstract presented in October at the Association of Managed Care Pharmacy Nexus Conference, and two abstracts presented last week at the American Society of Nephrology Conference. The presentations highlight retrospective analyses that were conducted integrating multiple clinical and claims databases that CMS and dialysis organizations use to track patient care and quality metrics in end stage renal disease or ESRD patients. The conclusions from these retrospective studies underscore the significant incidence and mortality related to CRBSIs and economic costs related to these infections. These findings are especially important since approximately 80% of patients undergoing hemodialysis start with a central venous catheter or CVC as their first vascular access. Key findings include approximately 29% of the 56,000 hemodialysis patients in the cohort had an occurrence of CRBSIs post-CVC insertion; over 54% of the first CRBSIs occurred within three months following CVC insertion. Approximately 17% of these patients died within 30 days and 30% died within three months of the CRBSIs event. Not only are these infections common, but they are also associated with significant mortality. CRBSIs lead to more hospital admission, longer stays, and a more complicated clinical course. There is significantly higher incremental risk in CRBSIs patient of dysrhythmias, endocarditis, heart failure, myocardial infarction, and stroke. Analysis estimates $2.3 billion in direct cost from CVC CRBSIs annually. The feedback from clinicians caring for hemodialysis patients has been incredibly supportive, as they see firsthand the challenges and complications stemming from CRBSIs in this patient population. As there had been minimal comprehensive data available regarding the incidence and associated mortality of CRBSIs among CVC hemodialysis patients in the U.S., we are incredibly proud of the work that our team has been doing to elucidate the magnitude of CRBSI as a significant burden to patients, providers, and payers alike. As we continue to prepare to bring DEFENCATH to patients in the U.S. following this approval, we will seek to leverage these data and similar work to inform our messaging, as we speak with hemodialysis providers and payers, including CMS across the continuum of care. Although we have encountered unexpected delays in our pathway to bring DEFENCATH to market, the CorMedix team remains steadfast in our commitment to these patients who are in need of alternatives that can reduce CRBSIs that contribute to such a significant level of morbidity and mortality. To summarize what Phoebe and I have discussed today, we continue to focus our efforts on the following. First, we intend to expeditiously resolve the third-party manufacturing deficiencies, so that the DEFENCATH NDA can be resubmitted as soon as possible. In addition, we are carefully balancing our cash burn, while preparing for the commercial introduction of DEFENCATH once we have approval of the NDA by FDA. Also, we are continuing to plan to broaden the opportunity for DEFENCATH following its approval and continue to expand our understanding of opportunities such as hemodialysis across a variety of settings TPN, and oncology. Finally, we continue to aim to maximize the value of our [indiscernible] technology in areas where it may benefit patients. In conclusion, we remain confident that we have a strong team and appropriate resources in place to resolve the third-party manufacturing deficiencies that have been identified by the FDA and bring DEFENCATH to hemodialysis patients in the U.S. We will continue to provide updates throughout this process. Thank you for your continued support of and interest in CorMedix. Operator, please open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from line of Jason Butler with JMP Securities. Please proceed with your question.

Hi, thanks for taking the questions and congrats on the progress and appreciate the updates. I guess first question, as you mentioned that -- you first announced the CMOs delay back in September. Should we read into that as essentially a two-month delay in the work that you had to either complete or are there other factors that we should think about? And then I asked you guys this question before, but I think it's important to keep interesting, are you still in full alignment with the CMO on the work that needs to be completed and how it is -- and how that work needs to be done to be to address the CRL items?

This is Phoebe. Yes, thanks for the question, Jason. The delay over the past couple of months, didn't affect us in terms of our product, but it did affect the facility. And so it was not possible for us to continue our DEFENCATH manufacturing activities. However, there was obviously other work that was ongoing to address some of the other aspects of the deficiencies. So, we were continuing to work, but unfortunately, it was the specific manufacturing activities that we're delayed. And so the good news now is, he's out, the manufacturing has resumed. And so we're in the process of doing the testing from those batches to make sure that they meet specifications, and that we have, in fact, the validated manufacturing process. And yes, we remain in full alignment with the CMO. Both entities are working very hard. The CMOs team is very dedicated and conscientious on working with us and addressing the issues. So, we're cautiously optimistic that, and once we have all of the information that we need to resubmit the NDA and respond to FDA.

Great. And then just one more for me. But the data you presented recently, in terms of the economic and health burden of infections and patients with catheters, you mentioned, Matt, that you've got positive feedback from physicians, have you already shared this data with payers or had any feedback on this data with payers or dialysis providers?

Yes, I think we're not prepared to give specifics on that front. But as we have mentioned before, Jason, the company is in continuous dialogue with folks across the spectrum of the industry, right, KOLs, providers, payers, and the like. So, as part of the work we're doing to make sure that we're prepared for a launch of DEFENCATH once it's approved.

Okay, great. Thanks again, and congrats again on the progress.

Thank you, Jason.

Thanks Jason.

Our next question comes from Joon Lee with Truist Securities. Please proceed with your question.

Good evening. This is Les on for Joon. Thank you for taking my questions. Just regarding the resumption of manufacturing and seems like you resolved the vial filling deficiency. What does the qualification process on that consists of? And how long in your opinion has that typically taken? Has FDA semi guidelines in this regard? And also, -- and do you plan for the new batches or manufacture to be re-inspected prior to distribution?

What I should clarify for you is that -- thank you, Les for the questions. The vial filling activities that we're currently undertaking involve manufacturing of DEFENCATH and it's during that process that we are doing the testing that FDA requires to demonstrate that the process is in fact qualified. So, it's a validation process that's ongoing that actually requires the manufacturing activities, which is why when there was a delay, we had a problem in doing the manufacturing. So, now that the manufacturing has resumed, we can continue generating the data and the documentation that we need to submit to FDA. And the new batches are part of that process. So, obviously, we're manufacturing batches as we go and analyzing those batches to collect the data and can generate documentation.

Got it. That is helpful. And then lastly, have the delay -- FDA resubmission, has that impacted your progress with payer reimbursement strategy and kind of, provided more details there?

Yes, no, I think -- I appreciate the question. I think the short answer is no. Look, we've had delays that have been unexpected as you all know, but we've continued forward. Part of that is elucidated and we wanted to highlight today for everyone with the abstracts and what the commercial team is doing and how they're using that to really help gear the market for once we get on the other side of the approval.

Great, that's helpful. Maybe I can squeeze one more in regards to the abstract presentations you just presented. How's the Nuvi presented former economic data gear your pricing strategy forward? Just kind of your outlook on that? Thank you.

Well, no, it's a great question and I appreciate. Look, it definitely feeds into it as you can imagine. Part of what was presented talks about the real costs of these on a big picture basis and just how common and how significant the mortality and morbidity is related to this infection. So, it absolutely feeds into it. We've always said in the past that our price discussions that will stem from the pharm economics the cost that are going to be saved to the system, from use of DEFENCATH, but beyond that, we're not prepared to talk about pricing until we're closer to the approval.

Thank you.

Our next question comes from line of Rohit Bhasin with Needham & Company. Please proceed with your question.

Hi, this is Rohit on for [indiscernible]. Thanks for taking my question. Just in regards to -- across the Board heparin pricing increases. Have there been any talks of any shortages or any issues in terms of supply chain issues where you see that possibly being an issue down the line?

None that I'm aware. Phoebe, do you have anything to add to that?

Yes, actually, we have experienced in the past, as you're probably aware in the genesis for your question. There have been shortages of heparin for various reasons. And so we have been very conscientious of making sure that we have adequate inventory to go forward with our activity. So, that has been an area of concern in the past. We've learned our lessons and we're making sure that we're covered.

Great. Thank you.

Ladies and gentlemen, at this time, there are no further audio questions. I'd like to turn the call over to Dan Ferry for pre-submitted written questions.

Thanks operator. Okay, our first question is, CorMedix referred to specialized consultants in a recent press release? Can you elaborate on this and discuss how they are assisting the company with the resubmission process?

Thanks for that question. I think it's a good question. Obviously, we have CorMedix specialists, but because of the importance of these activities and the need to have everything done as quickly as possible, we have engaged the team of external consultants to provide additional expertise on FDA's expectations for addressing the specific deficiencies at the manufacturing facility, and to assist in preparations for a pre-approval inspections. So, we wanted to make sure that we had adequate resources and sufficient knowledge of what FDA will be looking for to make sure that we were being comprehensive and complete in all of our activities.

Okay, thank you, Phoebe. Has the company focused on securing an additional CMO?

Yes, as we have discussed in the past, CorMedix continues to pursue the identification of additional manufacturing capacity in the United States. We are continuing that process and we intend to announce detail when we have finalized contracts in hand.

Okay. Thank you. Next question is what is CorMedix's plan regarding other potential indications for DEFENCATH, for example, pediatrics, TTM, oncology?

No, no problem. Thanks Dan. The company remains interested, as I think I alluded to, in pursuing additional indications for DEFENCATH and potential uses for our quality and technology. We have said in the past that we would aim to pursue a clinical trial program on a post-approval basis with an emphasis on safety.

Okay, great. Thanks Matt. Next question is are commercial launch activities contemplated in your current cash guidance?

Yes, I'll take that one as well. As we've described cash guidance includes spending for the initial stages of launch.

Okay, great. Have there been any changes to headcount at CorMedix?

Thanks. Thanks for that one, too Dan. Among the areas where we have been focused, making sure that we have stability among our highly experienced team at CorMedix, and also making sure we have the relevant talent to keep things moving forward with DEFENCATH. In addition to seeing those significant changes in headcount, we're also seeing interest from highly experienced professionals who seek to join the CorMedix team.

Okay, great. And last question here. Can you comment on the pending litigation?

While we cannot comment on pending litigation, I can assure you that CorMedix intends to vigorously contest the claim. Thank you.

Okay, great. Matt, I'd like to pass the call back to you for closing remarks.

Thanks Dan and Thanks Phoebe. CorMedix has an experienced team of professionals who have taken pharmaceuticals through the various phases of clinical studies registered and successfully launched products in the U.S. market. CorMedix remains committed to bringing DEFENCATH to the U.S. market to help patients in need of protection from life-threatening infections. The importance of reducing the incidence of infections and keeping patients out of the hospital is even more apparent during the ongoing COVID 19 pandemic. I thank you for your time and attention and have a good evening.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.