CorMedix Inc. (NASDAQ:CRMD) Q1 2023 Earnings Call Transcript May 15, 2023

CorMedix Inc. misses on earnings expectations. Reported EPS is $-0.24 EPS, expectations were $-0.2.

Operator: Good afternoon, and welcome to the CorMedix First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to [Vanita Kossi] (ph). Please go ahead.

Unidentified Company Representative: Thank you. Good afternoon, everyone, and welcome to the CorMedix first quarter 2023 earnings conference call. Leading the call today is Joe Todisco, Chief Executive Officer of CorMedix; and he is joined by Dr. Matt David, Executive Vice President and CFO; Dr. Phoebe Mounts, EVP and General Counsel and Erin Mistry, EVP and Chief Commercial Officer. 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 company’s prospects, including its clinical development program, manufacturing activities and NDA approval for DefenCath in the U.S. or other product candidates, future financial position, future revenues and projected costs and potential market acceptance of DefenCath or other product candidates.

More specifically, forward-looking statements include any statements about our clinical development plans, the timing, cost, progress, results, estimates and interpretations thereof, projections as to the company’s future capital raising and spending and cash position, expectations 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’s filing with the SEC, including the latest quarterly report on Form 10-Q and 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 these 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 Joe Todisco, Chief Executive Officer of CorMedix. Joe, please go ahead.

Joe Todisco: Thank you, [Vanita] (ph). Good afternoon, everyone, and thank you for joining us on this call. Since our last earnings call in March, the company has achieved a number of key milestones. Most importantly, today’s announcement that the NDA for DefenCath is being resubmitted to the FDA. I’m incredibly proud the team that has worked so hard to ensure the company would achieve this important objective. Phoebe, will provide more color around the substance of our Type A meeting with FDA in April. And as we announced a few weeks ago, we do expect the resubmission to be classified as Class 2 with a six month review and anticipate a target action date in November. We will update investors once we have confirmation from FDA regarding the submission status of the NDA.

In addition to our resubmission, we also announced two key business updates that can be important value drivers for DefenCath. The first, with the following our submission of a duplicate New Technology Add-On Payment, or NTAP, application, in the fourth quarter of 2022 to the Centers for Medicare & Medicaid Services, CMS has issued the Inpatient Prospective Payment System 2024 proposed rule that includes an NTAP of up to $17,111 per hospital stay for DefenCath. This is a meaningful increase above the previously approved NTAP represents reimbursement to inpatient facilities at 75% of the anticipated WAC price of $1,170 per 3 milliliter vial, with an average utilization of 19.5 vials per hospital stay. As we mentioned in our recent update, CorMedix will be migrating to DefenCath from a 5 milliliter to a 3 milliliter vial volume based upon market preferences.

This NTAP application was submitted with that migration in mind. The final IPPS rule will be published in late summer, and we expect this payment amount to be issued in that final rule. This NTAP is conditioned upon the DefenCath NDA obtaining final FDA approval prior to July 1, 2024. The company also recently announced that the U.S. Patent & Trademark office has issued a notice of allowance of patent claims directed to the composition of a catheter lock solution for preventing infection and reduced blood flow in central venous catheters. This newly allowed U.S. Patent Application reflects the unique and proprietary nature of DefenCath, and will extend our current intellectual property protection to an anticipated expiration date in 2042, which is beyond the ten and a half years of marketing exclusivity available upon an FDA approval of the DefenCath NDA.

Once this patent is granted, we plan to seek listing in FDA’s publication approved drug products with Therapeutic Equivalence Evaluations, known as the Orange Book, which identifies approved drug products and includes related patent and exclusivity information, as part of the NDA approval process. While our technical and regulatory teams have been working diligently toward our resubmission and preparing the supply-chain for potential commercialization, our commercial and medical affairs teams have been engaging with key stakeholders across settings of care to ensure CorMedix is in to maximize the value of DefenCath. As the initial phase of our launch will focus on inpatient utilization, we have begun engaging with leadership members of pharmacy and technology committees at multiple health systems, hospitals and integrated delivery networks to better prepare for the formulary process.

We expect to work with health institutions during the upcoming months to establish baseline infection rates at their respective institutions such that the impact of DefenCath utilization in the system can be quantified. On the outpatient side, we’ve also intensified engagements with potential customers and stakeholders as we prepare for discussions with CMS related to outpatient reimbursement. Catheter-related bloodstream infections remain one of the most severe complications associated with receiving hemodialysis through a central venous catheter, and adequate reimbursement to dialysis providers for infection prevention is essential to improving patient outcomes. A formal application for outpatient reimbursement cannot be submitted until after an NDA receives FDA approval.

However, we do expect to begin a dialogue with CMS providing the agency with documentation supporting our reimbursement position over the upcoming months. I will now turn the call over to Phoebe to discuss our Type A meeting with FDA, and potential time lines for FDA approval. Phoebe?

Phoebe Mounts: Thanks, Joe. Good afternoon, everyone. First, I would like to start by expressing my gratitude to the technical and regulatory team that have worked diligently to prepare to resubmit the DefenCath NDA as soon as possible. As you know, CorMedix received a complete response letter in August of 2022. Do solely to deficiencies cited at contract manufacturers of active pharmaceutical ingredient and finished products but citing no DefenCath or clinical related deficiencies. Since August, our technical and regulatory teams have been developing three different pathways, utilizing alternative CMO and API suppliers to ensure NDA resubmission as quickly as possible, which we have discussed during the last two earnings calls.

In March, we submitted a Type A meeting request to FDA to discuss plans for NDA resubmission, and we were gratified, that FDA granted the request for a meeting in April. We’ve provided FDA with significant documentation and compelling justification for Pathway 1 that would utilize our existing CMO and existing API supplier to support a Class 1 resubmission with a 60-day review period. The discussion with FDA related to Pathway 1 was very positive and productive. However, based upon FDA’s feedback, it was apparent that CorMedix would be better served by resubmitting the NDA, not only with our existing CMO, but incorporating multiple sources of heparin API. The inclusion of multiple sources of heparin API necessitated the inclusion of new manufacturing information in the submission, which we expect to result in a Class 2 resubmission with a six-month review period.

We view the discussion with FDA as highly valuable, and following our receipt of the formal meeting minutes from this discussion, CorMedix is now resubmitting the DefenCath NDA in accordance with agency guidance. We believe that when the NDA is accepted for filing, it will be deemed a Class 2 resubmission with a six-month review and receive a PDUFA target action date in November. As Joe mentioned, CorMedix will provide additional updates if and when these milestones are achieved. I would now like to turn the call over to Matt, who will provide a financial update. Matt?

Matt David: Thanks, Phoebe, and good afternoon, everyone. I am pleased to be here today to provide an overview of our first quarter 2023 financial results, as well as an update on CorMedix’s cash position. The company has filed its quarterly report on Form 10-Q for the quarter ended March 31, 2023. I urge you to read the information contained in the report for a more complete discussion of our financial results. With respect to our first quarter of 2023 financial results, our net loss was approximately $10.6 million or $0.24 per share compared with a loss of $7.0 million or $0.18 per share in the first quarter of 2022. The higher net loss recognized in 2023 compared with 2022 included an increase in R&D expenses and SG&A expenses, versus the first quarter of 2022.

Operating expenses in the first quarter of 2023 increased approximately 57% to $11 million compared with $7 million in the first quarter of 2022. R&D expense increased by approximately 49% to $3.4 million driven primarily by an increase in personnel expenses and non-cash charges for stock-based compensation and increases in costs related to medical affairs, activities and costs related to the manufacturing of DefenCath prior to its potential marketing approval. These increases were partially offset by a decrease in consulting fees for the period. SG&A expense increased approximately 60% to $7.6 million in the first quarter of 2023 compared with $4.8 million in the first quarter of 2022. This increase was primarily attributable to an increase in costs related to market research studies and prelaunch activities in preparation for the potential marketing approval of DefenCath, an increase in personnel expenses due to additional hires and an increase in non-cash charges for stock-based compensation.

These increases were partially offset by decreases in legal fees for the period. We recorded net cash used in operations during the first quarter of 2023 of $10.4 million compared with net cash used in operations of $6.7 million for the first quarter of 2022. CorMedix remains in a good position from a balance sheet perspective. The company has cash and cash equivalents of $55.6 million as of March 31, 2023. This includes approximately $7.2 million raised during the first quarter of 2023 through our ATM program, including approximately $3.7 million in net proceeds from our ATM program. Following the end of first quarter 2023, CorMedix has March 31, 2023, pro-forma cash and equivalents of approximately $59.3 million. We believe our cash and cash equivalents gives the company flexibility to fund its operations at least through the first half of 2024.

After taking into consideration, costs related to manufacturing activities and costs related to commercial launch preparation, in anticipation of the potential FDA approval of DefenCath. I will now turn the call back over to Joe, for closing remarks. Joe?

Joe Todisco: Thanks, Matt. As I mentioned earlier, I believe the company is executing well on our key objectives, and will now increase focus on commercial readiness. Over the last few months, we’ve made a number of key leadership hires in both commercial operations and medical affairs, most notably new heads of market access, government affairs, strategic partnerships and trade. We will continue to add additional resources as we progress through milestone events during the year. As we said earlier, we anticipate a target action date in the middle of November and will plan for commercial launch as early as the beginning of 2024. In the upcoming quarters, we will provide more clarity around market opportunities, launch expectations and timing. Thank you for your continued support and an interest in CorMedix.

Q&A Session

Operator: We will now begin our question-and-answer session. [Operator Instructions]. And the first question will be from Joon Lee from Truist Securities. Please go ahead.

Operator: [Operator Instructions]. The next question will be from Serge Belanger from Needham & Company. Please go ahead.

Operator: And ladies and gentlemen, at this time, I’d like to talk turn the call back over to [Vanita Kossi] (ph) for additional questions from our audience.

Unidentified Company Representative: Thank you, operator. We’ll now go — we did get some questions in written questions and I will read those questions here. Okay the first question, there’s a couple parts to it. When would you expect FDA to inspect your CMO 1? And why do you think the outcome will be different this time? What’s changed? And does the CMO have any other NDAs pending? Okay.

Joe Todisco: Thanks, [Vanita]. That’s a good question. I think in terms of what might be different this time, the last eight months, we’ve seen significant increase in engagement of the CMO with external consultants and those consultants have deep FDA experience. So we’re encouraged by what we’ve seen in terms of corrective action implementation and those corrective actions that came out of the original inspection and we’re optimistic they’re ready for potential PAI reinspection now. So that said, we don’t own the CMO, so all we can do is provide support. And once we do have a PAI date, can also use our best efforts to do final prep for inspection and post any inspection help them address any new observations I could arise. But I think we’re optimistic with what we’ve seen from the site in terms of implementing corrective actions.

In terms of other NDA filings, we’ve been told that they have other NDAs pending from different sites in Western Europe that could potentially get a PAI before we do. So we’re certainly going to be in close contact with them to understand any FDA observations at other facilities or anything that could impact our application.

Unidentified Company Representative: Okay. Thank you. Alright. Another question here from the audience, can you provide more color on why the FDA wanted two sources of heparin in the application. And what will happen if the initial supplier of heparin has not resolved its warning letter before your target action date?

Joe Todisco: Okay. Thanks. I think the first part of that question, I think Phoebe did a good job addressing the script. But it’s pretty straightforward. We were hoping to get a Class 1 submission with the original heparin source given that the CMO and the API supplier had rectified the compliance concerns, in our view had rectified the compliance concerns. But during the FDA meeting, I think the agency strongly encouraged us to submit data from our new source of heparin, but also include the existing heparin data to give them more time to evaluate that site’s compliance. I think should we get to our target action date and the FDA is not yet resolved that warning letter, we’re free to withdraw that heparin supplier and only go with the new source if that’s what’s needed to pursue approval.

Unidentified Company Representative: Okay. Thank you, Joe. And last question here from the audience, how are you thinking about the timing of ramp up of field based personnel? And is there a scenario where you hire the field team ahead of NDA approval and how about on the medical side?

Joe Todisco: Okay. Yeah. I guess we think about commercial medical a little bit differently. So let’s assume that we get a PDUFA date that’s in mid-November. There’s going to be milestone events that happen along the course of the summer and early fall that could give us confidence to hire more commercial personnel at risk. I think most importantly any PAI inspection that the FDA could do at our CMO that bolsters our confidence. As I mentioned in the script, we’re already adding key leader positions across functions. But when it comes to the call it the key — the field based key account managers, ideally what we want to do is have those personnel identified and with offer letters in hand around the time of a potential approval and then onboard them immediately after.

And that’s certainly what we’re going to try to do. On the medical side, it’s a bit different. We really need to have the full team staffed up ahead of any potential approval. We have four MSLs on board right now those are medical science liaisons and we’ll probably seek to have around eight at the time of launch. So these roles are critical as they can have medical professional to medical professional types of conversations with physicians around disease state awareness where commercial personnel are much more limited and what they can discuss and we’re not permitted to do any preapproval marketing on the product. Regardless to be successful, we’re going to need to recruit qualified capable people on both sides of the business. Chief formulary access, you know, contract appropriately and then get channel pull through.

Unidentified Company Representative: Okay. Thank you. And that does conclude that — there are no further questions here written online here. I’ll turn it back over to the operator now to close the call.

Operator: Absolutely. Thank you. And this concludes our question-and-answer session and thus concludes today’s call. We thank you very much for attending today’s presentation. At this time, you may now disconnect your lines. Take care.