CorMedix Inc. (NASDAQ:CRMD) Q4 2022 Earnings Call Transcript

CorMedix Inc. (NASDAQ:CRMD) Q4 2022 Earnings Call Transcript March 30, 2023

Operator: Greetings, and welcome to the CorMedix Inc. Fourth Quarter and Full Year 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you host, Dan Ferry. Thank you, Dan. You may begin.

Dan Ferry: Good morning, and welcome to the CorMedix fourth quarter and full year 2022 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 the 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 and the timing, costs, progress, results, estimates and 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 current 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, including the latest 10-K filing, 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, 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: Thanks, Dan. Good morning everyone, and thank you for joining us on this call. Since our last earnings call in November, the company has continued to make excellent progress toward our goal of resubmitting the DefenCath NDA as well as preparing for commercialization, following a potential approval. We have made a number of key hires on the commercial leadership team in the areas of marketing, market access and distribution, as well as on the medical affairs team. We’re building out a knowledgeable team of medical science liaisons or NFLs to engage in disease state awareness and medical education. As the initial focus of our potential launch is targeted to the inpatient segment, we have begun engaging in discussions with key stakeholders at hospitals, health systems and IDNs, and the feedback we have received has further validated our decision to pursue launch in this segment.

Catheter-related bloodstream infections or CRBSIs are a critical unmet medical need, both from the hospital inpatient as well as outpatient dialysis setting, and there is a vital need for preventative therapy that can meaningfully reduce the incidence of CRBSIs across multiple settings of care. Our February report from the CDC has further emphasized that CRBSIs has pervasive risk for hemodialysis patients, highlighting the 10000% increased risk of contracting of bloodstream infection when receiving hemodialysis through a CVC versus the non-dialysis population. We believe that DefenCath if approved can have a meaningful impact on reducing CRBSIs across multiple settings of care. Earlier this month, we announced our intention to submit a Type A meeting request to the FDA seeking guidance for resubmission using Pathway 1, which is our existing CMO and our existing Heparin API supplier or Pathway 2, which is our existing CMO and a new Heparin API supplier.

Both pathways, number one and number two potentially allow for the fastest means to resubmission and hopefully final approval. I’m pleased to announce that we submitted the request to FDA for the Type A meeting in mid-March and the FDA has granted our request with the meeting scheduled for mid-April. Phoebe will provide a more detailed update on our meeting with FDA as well as potential timeline for Pathways number one and number two in short. With respect to Pathway number three, which we view as our backup manufacturing site. We announced in early March a delay in the availability of submission data until at least the third quarter of 2023. This shift was due to delays in our ability to complete our manufacturing validation and validation of analytical methods at Alchemy.

Photo by National Cancer Institute on Unsplash

While we continue to work through these hurdles with our partner Alchemy in order to shore up our backup plan, we’ve also signed an agreement with Siegfried AG to utilize their site in Hameln, Germany as an additional backup CMO. This site previously manufacture the product for Europe as a medical device under the trade name Neutrolin. And to that extent, we have already completed the tech transfer of our manufacturing process and analytical methods to the Siegfried site. In addition, the Hameln site has been inspected multiple times by FDA and has an excellent track record for quality supply, ensuring the resubmission of our DefenCath NDA is the company’s top priority, and we will mobilize all resources required to do so. Data availability for Pathway 3 is still targeted for the end of the third quarter of 2023.

At this point in time, it’s our expectation to qualify a backup site as a post-approval supplement and we’re hopeful to pursue initial NDA approval using Pathway 1 or Pathway 2, depending on the outcome of April’s meeting with the FDA. I’ll now turn the call over to Phoebe to discuss our Type A meeting with FDA and Pathways number one and number two in more detail. Phoebe?

Phoebe Mounts: Thanks, Joe, and good morning, everyone. As you know, CorMedix received a complete response letter or CRL in August of 2022 in which FDA stated that deficiencies identified during FDA inspections of our primary CMO and at our primary Heparin API supplier required satisfactory resolution before the DefenCath NDA may be approved. As we announced earlier this month, our primary CMO has advised CorMedix that all corrective actions for the inspectional observations issued by FDA in June of 2022 have been implemented and a closeout report has been submitted to FDA that includes data to demonstrate the effectiveness of the corrective actions. Subsequent to our March 2nd announcement, the FDA has acknowledged receipt of that closeout report.

Additionally, our primary Heparin API supplier has informed CorMedix that they too have completed implementation of corrective actions arising from their June, 2022 warning letter for a non-heparin API. Although, the timing of formal resolution of the warning letter by FDA is unclear, we believe that updates made by the API supplier to a Heparin drug master file or DMF filed with the FDA and the absence of any deficiencies with heparin or the heparin manufacturing process should not continue to block resubmission of the DefenCath NDA. Given these developments, we felt it was prudent to seek FDA’s guidance on these two critical pathway blocking issues prior to resubmission of the DefenCath NDA. As Joe indicated, we requested a Type A meeting with FDA to discuss timing of resubmission of the DefenCath NDA and these potential pathway blocking issues.

As you know, meetings are discretionary for FDA and we are very pleased that FDA granted the meeting request and grateful that it has been deemed a Type A meeting, which means it is scheduled in mid-April, which is within 30 days of the submission date of our request. We are seeking FDA’s concurrence on two questions. The first question asks for FDA agreement on resubmission of the DefenCath NDA at this time, now that our primary CMO has addressed the deficiencies and submitted the closure report for the inspectional observations from the pre-approval inspection. The second question asks for FDA agreement that CorMedix can resubmit the DefenCath application utilizing our primary heparin API supplier without the formal resolution of the outstanding Warning Letter because the heparin DMF has been updated and no deficiencies were cited in the Warning Letter for the manufacturing process or quality of heparin.

Heparin sodium is manufactured to comply with the USP monograph for heparin, which sets strict standards on impurities, contamination and structural parameters, all of which are confirmed with a 100% batch testing by the API manufacturer. Furthermore, the CMO conducts testing to confirm compliance with the USP requirements as part of the receiving process. If FDA raise on both questions, CorMedix intends to resubmit the application quickly with no new manufacturing information and requests designation as a Class 1 resubmission for a 60-day review. An affirmative answer to only the first question on our primary CMO would clear CorMedix to resubmit the DefenCath NDA, utilizing data generated with a new source of heparin API at our primary CMO.

As this type of submission would require additional manufacturing information to be reviewed by the FDA, we would expect it to be classified as a Class 2 submission with a six-month review period. CorMedix has already completed the validation of manufacturing with this new source of heparin API and expects to have data available for submission by the end of April. As I said, CorMedix intends to resubmit the application as soon as possible following FDA’s guidance on these two pathway blocking issues. I would now like to turn the call over to Matt, who will provide a financial update. Matt?

Matt David: Thanks, Phoebe. Good morning, everyone. I’m pleased to be here today to provide an overview of our fourth quarter and full year 2022 financial results, as well as an update on CorMedix’s cash position. The company has filed its report on Form 10-K for the year ended December 31, 2022. I urge you to read the information contained in the report from more complete discussion of our financial results. With respect to our fourth quarter of 2022 financial results, the company has cash and equivalents and short-term investments of $58.8 million as of December 31, 2022. Our net loss was approximately $8.2 million or $0.20 per share compared with a net loss of $7.8 million or $0.20 per share in the fourth quarter of 2021.

The higher net loss recognized in the fourth quarter of 2022 compared with the same period in 2021 was driven by increases in spend related to market research and other pre-launch activities. We recorded an increase in SG&A and a decrease in R&D expenses. Operating expenses in the fourth quarter of 2022 increased approximately 8% to $8.4 million compared with $7.8 million in the fourth quarter of 2021. R&D expense decreased by approximately 12% to $2.8 million, driven primarily by lower personnel costs and consulting costs, partially offset by higher costs related to the manufacturing of DefenCath prior to its potential marketing approval. SG&A expense increased approximately 22% to $5.6 million compared with $4.6 million in the fourth quarter of 2021.

This increase was driven by an increase in cost related to market research and pre-launch activities partially offset by lower personnel costs, recruiting fees, and lower non-cash charges for stock-based compensation. With respect to our full year 2022 financial results, our net loss for 2022 was approximately $29.7 million or $0.74 per share compared with a net loss of $28.2 million or $0.75 per share in 2021. The higher net loss recognized in 2022 compared with 2021 was due to higher SG&A costs as well as a smaller tax benefit received in 2022. Operating expenses in 2022 increased approximately 4% to $30.7 million compared with $29.5 million in 2021. R&D expense decreased by approximately 19% to $10.7 million compared with $13.1 million in 2021, driven by a decrease in personnel costs, net decreases in costs related to the manufacturing of DefenCath prior to its potential marketing approval and a decrease in consulting fees.

SG&A expense increased approximately 22% to $20 million compared with $16.3 million in 2021. This increase was driven by an increase in costs related to market research and pre-launch activities in preparation for the potential marketing approval of DefenCath and an increase in legal fees, mainly due to securities litigation, partially offset by decreases in non-cash stock-based compensation and consulting fees. We recorded net cash used in operations during 2022 of $24.4 million compared with net cash used in operations of $21.2 million in 2021. The increase was primarily driven by an increase in net loss, lower net proceeds from the NOL sale versus the prior year. And a net decrease in accounts payable partially offset by an increase in accrued expenses compared to the prior year.

CorMedix remains in a good position from a balance sheet perspective. The company has cash and cash equivalents of $58.8 million as of December 31, 2022. This includes approximately $17.8 million raised during 2022 through our ATM program, and approximately $0.6 million from the sale of unused New Jersey NOLs. Including approximately $7.2 million in net proceeds from our ATM program in 1Q of 2023, CorMedix has December 31 pro forma cash and equivalents of $66 million. We believe our cash and cash equivalents gives the company flexibility to fund its operations for at least 12 months from filing after taking into consideration costs related to manufacturing activities and cost related to the potential commercial launch for DefenCath. I’ll now turn the call back over to Joe for closing remarks.

Joe?

Joe Todisco: Thanks, Matt. As I look toward our next few months, I believe the company is in a strong position to execute on its key objectives. We are making great progress on our commercial strategy as well as showing up our supply chain to hopefully secure final NDA approval during 2023. As Phoebe mentioned, we are anxious to resubmit the NDA and hopefully obtain FDA approval as soon as possible. So the DefenCath may be provided to patients to help in reducing the incidence of CRBSIs, which result in significant morbidity, increased rates of hospital admission, and readmission and mortality. The importance of addressing CRBSI growth even more critical given the increasing resistance in bacteria and fungi to antimicrobial agents.

In the study published in February by the CDC, it is estimated that 34% of bloodstream infections in the dialysis population are attributed to methicillin-resistant Staphylococcus aureus, commonly referred to as MRSA. And as I mentioned earlier, the dialysis population has a 10,000% increased risk of developing a bloodstream infection compared to the non-dialysis population. Although the impact of bloodstream infections is held broadly across the dialysis community, the morbidity and mortality of CRBSI is disproportionately felt in the Black and Hispanic population. The FDA has recognized the potential of DefenCath to help combat the threat of CRBSI in its grant of qualified infectious disease product status or QIDP and CorMedix is working hard to avoid any further delay in making the DefenCath available to dialysis patients and eventually expand into other therapeutic segments such as oncology and total parental nutrition, where CRBSIs also pose an imminent health threat.

I remain confident in our ability to bring this product to market in order to address the significant unmet medical need. Thank you for your continued support of and interest in CorMedix.

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Q&A Session

Operator: Thank you. We will take your first question from the line of Jason Butler with JMP Securities. Please go ahead.

Jason Butler: Hi, thanks for taking the question. And then congrats on the progress. I just have one on the second topic for the FDA meeting, the heparin supplier. Do you have a sense of how long it would generally be expected for FDA to fully resolve the Warning Letter now that they have the information? I guess what I’m asking here is there a scenario where even if FDA says you need to wait for full resolution, that it could come in a timeframe that makes it worthwhile waiting to resubmit the NDA if it gets you the 60-day review period? Thanks.

Joe Todisco: Thanks, Jason. In terms of timing, I’m not sure that we can really speculate. You can look back historically at other Warning Letters, but I don’t think that that’s really going to be indicative of each individual situation. I can say that we don’t currently expect them to reinspect the site until probably June or later. That’s just our current estimation. But that’s a decision that we would have to make depending on the feedback we get from FDA, Jason, whether we are better off from a timing standpoint, resubmitting with the new source of heparin or with the original, and we’ll make that decision after we hear from the agency.

Jason Butler: Great. Thanks. Thanks for taking the question and congrats on the progress.

Joe Todisco: Thank you.

Operator: Thank you. We will take our next question from the line of Joon Lee with Truist Securities. Please go ahead.

Joon Lee: Hi. Thanks for the updates and congrats on all the progress. I have a couple of questions. If Siegfried originally produced neutral and why could you have used Siegfried as a primary supplier for DefenCath to begin with? And what would be the advantage of your undisclosed primary CMO over Siegfried? And I’ve follow-ups.

Joe Todisco: Yes, thanks, Joon. Look, I’m not going to comment on decisions that were made probably multiple years ago, but before I came on board. What I can say is the agreement with Siegfried was no longer enforced. When we came on board last year, we built a relationship and now I’m thankful we’re in a position to move forward with validation. But yes, I’m not going to comment on historical decisions.

Joon Lee: Fair enough. Okay. And then assuming the FDA agrees to both questions one and two as laid out by Phoebe, you would submit under Class 1 resubmission and that would even €“ that would happen even before the minutes are available. And because I would assume that it takes them about 30 days to get the minutes back. And if you do resubmit, we would, the Street will find out probably after you have already resubmit the NDA. Is that a fair statement?

Joe Todisco: Well, I guess a couple of things there, Joon. I think as Phoebe said, it’s in our intention to request a Class 1, right, if we get affirmative answers to the two questions. Whether or not we have to wait to resubmit until we get the minutes will really depend upon the meeting and how the meeting goes.

Joon Lee: So if you do it under Class 1, you could see an approval as early as third quarter. And if you are resubmitting under Class 2 and you have the heparin supplier ready by April €“ late April, as Phoebe mentioned, you will still have possibly an approval after six-month review by the end of this year or early next year. Is that a fair statement?

Joe Todisco: Yes, those are the timelines that we would expect if we resubmitted and had the six-month review. That’s correct.

Joon Lee: Great. Thank you and all the best.

Joe Todisco: Thank you, Joon.

Operator: Thank you. We’ll take your next question from the line of Serge Belanger with Needham & Co. Please go ahead.

Serge Belanger: Hi, good morning. A couple questions for us. First on the regulatory front. Regarding the existing CMO, now that they’ve completed the corrective actions and the FDA has acknowledged receiving a close out report. Just curious what the next step is from an FDA standpoint? And coming out of your upcoming meeting with FDA, assuming the first question is answered positively, curious if you’ll get clarity on whether you get a Class 1 or Class 2 resubmission? Thanks.

Joe Todisco: Thanks, Serge. I’m going to let Phoebe comment on both parts of that question. Phoebe?

Phoebe Mounts: Thanks for the question, Serge. As you know, difficult to predict how FDA will react. They obviously have received a lot of material from our CMO. They’re in the process of reviewing that material. Best case scenario, they’re satisfied with the corrective actions and the effectiveness data, and feel that no inspection is required, in which case the issues are closed from an FDA perspective, and the review of the DefenCath NDA would proceed. If you want to know about the worst case scenario, the FDA can decide, it wants to do an onsite inspection to evaluate the corrective actions and the effectiveness for itself. So I think those are the two extremes. Obviously, we believe the company has put together an extremely robust set of corrective actions.

The effectiveness data looks very good. So we’re cautiously optimistic that FDA will agree with that assessment. And in the upcoming meeting, except that we can come in with our primary CMO and the data that we have submitted previously with our primary heparin API supplier, because as I said, there are no issues with the quality of heparin. The Warning Letter addressed another API manufactured its facility in different parts of the facility with different personnel, different systems. So again, we think we have a strong case for a Class 1 60-day review.

Serge Belanger: Okay. And Joe, in the past, you’ve talked about taking a two-pronged approach to potential outpatient reimbursement to TDAPA and the path through via J-code. Any updates on any progress on which path you may take?

Joe Todisco: Yes, look we’ve talked about moving both pathways in parallel, but really we are working to obtain separate payment. It’s our primary objective. In terms of progress, right, I’d say there’s a lot of work going on behind the scenes and as we’re preparing to make those arguments into CMS, but those discussions really can’t take place until we have final approval in hand, right. That’s the point at which we can really engage with CMS. But I think it also kind of bellies our decision to move into the inpatient segment first as the initial stage of our launch because very rarely do you have your reimbursement ahead of approval, right. And I think it’s unique and kind of bolsters our case for moving into the inpatient segment.

Serge Belanger: Thank you.

Operator: Thank you. We take the next question from the line of Joon Lee with Truist Securities. Please go ahead.

Joon Lee: Hey guys, thanks for taking the follow up question. Based on the commentaries that you’re making today, Class 1 seems like a very reasonable possibility, in which case you’re looking at a potential approval in third quarter of the share. How quickly would you be able to launch if it is approved in third quarter and in what form would you be looking to launch, you have some options there. Thank you.

Joe Todisco: Thanks Joon. Well, look, I mean, if we found ourselves, I guess, with an approval earlier than what maybe had been expected previously, certainly it’s still going to take a couple of months, right for us to ramp up with field force training. I would say we do feel we’re in a good position from an inventory standpoint, or we’ll be in a good position from an inventory standpoint, but it’s certainly going to have to be a soft launch into a rolling, more robust launch after a couple of months. On the inpatient side, Erin can maybe speak to it, right. There’s going to be a process of getting the inpatient institutions right through P&T, getting the product on formulary. And on the outpatient side, we’re not going to know our reimbursement for at least six months. So there’s going to have to be a little bit of slow ramp in the beginning while that outpatient reimbursement gets sorted out.

Joon Lee: Thank you.

Operator: Thank you. I will now turn the call over to Dan Ferry for written questions. Dan?

Dan Ferry: Thank you, operator. Joe, I have a few written questions from the audience. The first one, and, and I think we touched on this a little bit earlier, is if and when the NDA is resubmitted, will you announce at the time of resubmission or once the NDA has been accepted?

Joe Todisco: Thanks, Dan. It would be my intention to announce, once we resubmit and then again likely communicate more if and when the application is accepted for filing and we know if it’s a Class 1 or Class 2 resubmission, that’s my current intention.

Dan Ferry: Okay. Thanks Joe. And another one, this is a two part question that you just touched on a bit earlier is, are there any updates that can be shared on your commercial efforts in the inpatient segment and the outpatient segment? And then the follow up there would be, as you think about the inpatient launch, what are the main challenges as you see that must be navigated during the lead up to and through commercial introduction?

Joe Todisco: Okay. Thanks Dan. I’m going to give Erin an opportunity to comment on the activities that have been going on, on the outpatient side and kind of how we’re navigating this right now. Erin?

Erin Mistry: Sure. Thanks Dan. So the progress from the inpatient perspective, I’ll take it that one first is we’ve been building relationships with key health systems, working through what’s required for the formulary package itself, budget impact models, cost offset models, those types of things. We’ve made some big hires recently internally within the organization to help make that progress move that progress forward. And then we’re also looking at potential strategic partnerships to manage the patient population. On the outpatient side, we are working with €“ continuing to work with dialysis organizations and with policymakers at both CMS and politically. And we are going to continue those efforts in hopes to gain separate reimbursement on the outpatient side.

And as Joe said, that timing is simultaneous as we’re launching the inpatient segment. But I think that the biggest thing here as Joe mentioned earlier, the reimbursement on the inpatient segment has taken off the table, right. We were able because of our regulatory designations to go through an alternative NTAP pathway where we now have that reimbursement and make those conversations much easier.

Dan Ferry: Excellent. Thanks, Erin. So Joe, have a few more here. What is your current thinking on building the field force, is CorMedix going to wait until around the time of approval to avoid taking on overhead at risk?

Joe Todisco: Thanks. I think we’ve communicated consistently we’re going to be prudent about how we utilize our cash and how we build out our infrastructure ahead of launch. We’ve started to build out leadership roles on the commercial side as well as probably let’s say deeper roles on the medical affair side where they can be out in the field now, having a lot of those disease state medical education type discussions with KOL. As we look at building out, right, the commercial field team, I think we’ll make that decision around timing as we see how the FDA meeting goes, get our resubmission and we’re not going to look to overburden the company in SG&A before we have a high level of confidence on final approval.

Dan Ferry: All right. Great. Joe, and our final question is, can you comment on the activity in recent months at conferences or medical meeting attendance and does the company have any upcoming presentations at scientific meetings or other activities worth noting?

Joe Todisco: Yes, look, I think our attendance have actually been pretty robust over the last few months both on the commercial and the medical affairs side at various meetings. I’d say, we’re probably averaging about two to three a month. We’ve had sponsorships and group presence at FSN, at ASH, at ASHP, we’ve got some upcoming in April and May, a lot of different acronyms RPA, NKF, FMDR so we’ll be out there and I think fairly aggressive and communicating, and getting the message about CRBSIs and critical unmet medical need kind of out into the marketplace.

Dan Ferry: Excellent. Thanks, Joe. Operator, this concludes the written question portion of the Q&A session.

Operator: Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.