CorMedix Inc. (CRMD) CEO Joe Todisco on Q1 2022 Results – Earnings Call Transcript

CorMedix Inc. (NASDAQ:CRMD) Q1 2022 Earnings Conference Call May 12, 2022 4:30 PM ET

Company Participants

Daniel Ferry – Investor Relations

Joe Todisco – Chief Executive Officer

Matt David – Executive Vice President and Chief Financial Officer

Erin Mistry – Senior Vice President and Head, Payer Strategy, Government Affairs and Trade

Conference Call Participants

Jason Butler – JMP Securities

Rohit Bhasin – Needham & Company

Operator

Hello and welcome to the CorMedix Inc. First Quarter 2022 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Daniel Ferry with LifeSci Advisors. Please go ahead.

Daniel Ferry

Good afternoon and welcome to the CorMedix first quarter 2022 earnings conference call. Leading the call today is Joe Todisco, newly appointed Chief Executive Officer of CorMedix and Dr. Matt David, Executive Vice President and CFO. They are joined by Dr. Phoebe Mounts, EVP, General Counsel and Head of Technical Operations and Erin Mistry, SVP and Head of Payer Strategy, Government Affairs and Trade.

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 marketing approval for DefenCath in the U.S. and other product candidates; future financial position; future revenues and projected costs; 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 submission and timing, cost, 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 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. The 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 afternoon, everyone and thank you for joining us on this call. I am excited to begin my tenure this week as the Chief Executive Officer of CorMedix. I’d like to start by thanking Dr. Matt David for his continued leadership while I fulfilled my contractual obligations to my previous employer. I look forward to working with Matt more closely as our growth and commercial strategy must be aligned with our financial strategy.

In addition, I would like to thank the broader CorMedix team, who have worked tirelessly over the last year to complete the DefenCath NDA resubmission. These past 2 months during my transition, I have had the opportunity to meet with each CorMedix employee individually and have been incredibly impressed with the knowledge, skill and commitment of the current team. I have also developed a deeper understanding of the operational, commercial, financial and regulatory hurdles of the company and our lead product, DefenCath face in the near to medium term. While my first 100 days will include continued evaluation and understanding, the company must make several key operating and commercial decisions over the next several months in order to be ready to commercialize DefenCath as soon as possible, after securing anticipated FDA approval of the NDA.

To that extent, I will not have the luxury of delaying many key decisions related to supply chain planning, distribution, commercial strategy or personnel. As such, this morning, we announced certain key management and reporting changes within the leadership team of CorMedix and operational changes with our international business. Liz Herbert, EVP of Clinical Operations, will take on an expanded role as EVP of Clinical and Medical Affairs, assuming oversight of medical affairs, drug safety and pharmacovigilance in addition to our existing clinical operations responsibilities.

Donna Ucci has been appointed to the role of SVP and Head of Global Quality reporting directly to me. Donna joins us after most recently serving as VP, Global Quality Management at Amneal Pharmaceuticals and with more than 20 years’ quality leadership experience in previous roles that Impax, Allergan and Pfizer. Frank Rafael has been appointed to the role of VP of Supply Chain, joining the company with more than 30 years of supply chain experience, including previous roles at Teva and Quotient Sciences. I am excited to have Donna and Frank join the organization as they together add meaningful quality, manufacturing, supply chain expertise, and I look forward to bolstering the organization with other key additions as we aim the transition from a development stage company to a commercial organization.

Lastly, the company and Tom Nusbickel, EVP and Chief Commercial Officer, have mutually agreed to part ways. I want to thank Tom for his commitment and dedication to CorMedix and wish him success in his future endeavors. Until such time as a permanent Chief Commercial Officer is appointed, I will be taking a more active role in the day-to-day activities of the commercial team as we build out our commercial strategy.

We have also made the decision to wind down our operations in Europe. The company had previously made neutral and available-for-sale in France, Germany and some Middle Eastern countries as a medical device. Going forward, the company will focus on our U.S. commercialization and launch strategy and after securing FDA approval may pursue with international expansion via larger regional partnership.

During our year end earnings call in March, Matt and Phoebe communicated that FDA has accepted for review our DefenCath NDA resubmission and informed CorMedix that the resubmission is complete and considered a Class 2 response to the action letter with a 6-month review cycle from the date of submission and an action date in the third quarter. It is important to keep in mind that the PDUFA goal date – PDUFA goal of 6 months is merely an internal FDA target for the review of 90% of this type of resubmission and FDA is not compelled or obligated to act on the application within the 6-month timeframe.

As Phoebe mentioned on the prior earnings call, we expect FDA to conduct a pre-approval inspection of the company’s CMO as part of the review cycle. We have been notified by our CMO that FDA has provided a date for that inspection and that scheduled date is prior to our goal date. It is important to note that any FDA inspection of our CMO will assess the commercial readiness of the facility and manufacturing operations beyond those specific to DefenCath and CorMedix will only have visibility to FDA observations related to our product.

It is also worth noting that any planned inspection from FDA could always be delayed or rescheduled as a result of the ongoing COVID-19 pandemic. We also disclosed in our March earnings call an ongoing work stream to identify U.S.-based CMOs that could be utilized for expanded manufacturing capacity to support commercial launch and for development of a pre-filled syringe format. That work stream is progressing on schedule, and we will provide updates later in the year.

Lastly, from a supply chain standpoint, we’re also continuing initiatives to dual source key components and active ingredients in order to de-risk potential global supply chain disruptions as well as potential governmental regulatory actions at any key supplier. Over the next few months, I will be working closely with the commercial team as we build out our launch strategy for DefenCath, including critical decisions around pricing, reimbursement, messaging, staffing and sales deployment.

Certain roles will need to be filled and decisions made prior to securing FDA approval of the DefenCath NDA. However, it is not my intention to hire or train field-based sales personnel until we have our FDA approval firmly in hand. A core part of our market access strategy, we’ll be working to secure favorable reimbursement for DefenCath in both the inpatient and outpatient dialysis settings.

Based on our expanded understanding of the market opportunity for DefenCath gleaned from our discussions with key stakeholders such as dialysis providers, hospitals, CMS and patient efficacy groups, we see market potential for DefenCath beyond the outpatient dialysis clinics with a meaningful market opportunity for utilization in the hospital inpatient setting. This past Tuesday, May 10, the Center for Medicare and Medicaid Services, CMS, published in the Federal Register, the fiscal year 2023 hospital inpatient prospective payment system or IPPS, for short, a proposed rule to update IPPS hospital policies, which includes the agency’s thoughts on new technology add-on payment or NTAP applications. And NTAP provides a hospital with additional reimbursement for novel therapeutics beyond the bundled payment associated with the DRG for inpatient care in a particular diagnosis code.

CorMedix has submitted its application for DefenCath to receive NTAP designation. It has been reviewed favorably by CMS against eligibility criteria and a final rule will be published by CMS in the Federal Register no later than August 1. Typically, in order for an NTAP to be effective October 1 of a current year, the product NDA must be approved by July 1 of that year. However, because the DefenCath has received qualified infectious disease product designation or QIDP, from FDA, we are eligible for a more flexible start date. Specifically, we expect our NTAP to take effect in the first quarter following the anticipated FDA approval of the NDA provided such approval occurs before July 1, 2023 in the NTAP application, which was submitted in October of 2021, to ensure a start date as early as possible. We stated that DefenCath NDA had received a complete response letter and was pending resubmission without being able to provide CMS with information on the anticipated approval timeline. In the federal registered notice published this week, CMS has incorrectly stated that CorMedix expects the FDA to approve the DefenCath NDA prior to July 1 of this year. We have advised CMS of this error and requested the agency publish a correction.

On the outpatient side, we remain committed to exploring all avenues for product reimbursement, including our efforts to secure a transitional drug add-on payment adjustment, or TDAPA, as soon as practicable after securing our anticipated FDA approval. That said, we are also employing a dual strategy with CMS to simultaneously petition the agency to exclude DefenCath from the ESRD payment bundle entirely. We believe there are compelling arguments that DefenCath does not fall within the scope of products and services calculated as part of the dialysis bundle under the current statute and therefore, should be reimbursed separately by CMS as an outpatient drug product with a unique J-code.

To be clear, any decision to separately reimburse DefenCath, order grant DefenCath TDAPA is ultimately at the sole discretion of CMS, but we will be working diligently over these next few months, along with other key stakeholders such as hospital systems, dialysis clinics and patient advocacy groups to make these arguments to CMS.

We will disclose more about our market access reimbursement and pricing strategy once we receive anticipated FDA approval and we get closer to our potential commercial launch date. While the company has been focused on obtaining FDA approval of and commercializing DefenCath, I believe it will be equally important to establish a medium- to long-term strategic growth plan that involves not only pursuing new indications for DefenCath, but potentially new uses of taurolidine as well as potential product in-licensing and acquisitions of products, both commercial and pre-commercial that will be synergistic with our expected sales deployment in hospitals or dialysis centers.

To bolster these efforts, the company recently announced the formation of a new Scientific Advisory Board, or SAB, comprised of experts in nephrology, infectious disease, medical nutrition and oncology. The SAB’s mission is to provide strategic and scientific advice at CorMedix as we advance toward a potential commercial launch as well as evaluate life cycle expansion and business development opportunities for the company.

I’ll now turn the call over to Matt to cover financial results and cash guidance. Matt?

Matt David

Thanks, Joe. I’m pleased to be here today to provide an overview of our first quarter 2022 financial results as well as an update on our cash position. The company has filed its report on Form 10-Q for the first quarter ended March 31, 2022. 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 2022 financial results, our net loss was approximately $7 million or $0.18 per share compared with a loss of $7.2 million or $0.20 per share in the first quarter of 2021. The marginally lower net loss recognized in 2022 compared with 2021 included a decrease in R&D expenses versus the first quarter of 2021, offset by slight increases in SG&A expenses.

Operating expenses in the first quarter of 2022 decreased approximately 3% to $7 million compared with $7.2 million in the first quarter of 2021. R&D expense decreased by approximately 13% to $2.3 million, driven primarily by net decreases in personnel expenses and non-cash charges for stock-based compensation, offset by an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval.

SG&A expense increased approximately 3% to $4.8 million compared with $4.6 million in the first quarter of 2021. This increase was primarily attributable to an increase in legal fees, mainly due to the securities litigation and an increase in personnel expenses, partially offset by a decrease in non-cash charges for stock compensation, reduced costs related to market research in preparation for the potential approval of DefenCath and a decrease in consulting fees.

We recorded net cash used in operations during the first quarter of 2022 of $6.7 million compared with net cash used in operations of $6.7 million in the first quarter of 2021. As we have discussed on our year end earnings call, CorMedix remains in a good position from a balance sheet perspective. The company has cash and equivalents and short-term investments of $61.7 million as of March 31, 2022, inclusive of approximately $2.2 million raised since the quarter close from our ATM program and approximately $0.6 million from the sale of unused New Jersey NOLs. CorMedix has pro forma cash and equivalents of approximately $64.5 million. We believe our pro forma cash and equivalents gives the company flexibility to fund its operations at least through the first half of 2023 after taking into consideration costs related to commercial supply and costs related to the initial stages of the potential commercial launch for DefenCath.

We remain optimistic about our progress towards an anticipated FDA approval for DefenCath in 2022. 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 facing what we hope and believe will be a pivotal time ahead for CorMedix as we seek to bring DefenCath to patients in the hemodialysis setting.

I will 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’m excited about the opportunities and optimistic about the challenges that lay ahead. If approved by the FDA, DefenCath has the potential to significantly improve patient outcomes while also having an impact on the health equity disparity that is pervasive in our healthcare system. Catheter-related bloodstream infections or CRBSIs, places a heavy financial burden on the U.S. healthcare system, estimated at roughly $2.6 billion per year of incremental cost. Hemodialysis patients with a CRBSI have double the rate of hospitalization as non-infected HD patients with an average duration of stay that is 4x longer and a 3x higher fatality rate.

In addition, African-Americans represent under 14% of the U.S. population, but account for more than 35% of the patients undergoing hemodialysis. To that extent, African-Americans are disproportionately at risk for a catheter-related bloodstream infection compared to other demographic groups. DefenCath in clinical trials reduced CRBSI occurrence by 71% in hemodialysis patients compared to the existing standard of care. Taken in totality, the strong clinical profile of DefenCath and potential to significantly improve patient outcomes and health equity, while also potentially decreasing the overall cost burden on the health care system, I see DefenCath as a strong platform asset for growth from which CorMedix can build.

So thank you for your continued support of and interest in CorMedix. And this concludes management’s presentation. Operator, you can open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today is coming from Jason Butler from JMP Securities. Your line is now live.

Jason Butler

Hi, thanks for taking the question. And congrats on all the progress and the new hires. Joe, congrats on the start here. Maybe just as a start from a high level. Can you just maybe – you started to touch on this in the prepared comments, but talk to us about what attracted you to CorMedix and how you think your prior successes can set the company up for a successful launch to DefenCath? And then I have a follow-up. Thanks.

Joe Todisco

Sure. Thanks, Jason, and I appreciate the question. So look, when I think about what I bring to CorMedix, right? I think I bring a long track record of building and managing commercial organizations across different therapeutic categories and different geographies as well as deep expertise in business development and strategy. And in terms of kind of why I’m excited about CorMedix, I saw in CorMedix a unique opportunity to lead a company whose primary product has the potential to make a meaningful impact on patient outcomes. And when I think about patient outcomes, I’m talking about saving lives, right? So DefenCath has, in my opinion, exceptional Phase 3 data, and I see strong potential to expand into additional indications while also adding new products to CorMedix, right, beyond the taurolidine platform. So especially given recent markets, their impact on our valuation and market cap, I see a lot of potential for growth in CorMedix from where we are today. So in my view, I really saw this as a perfect opportunity and an ideal fit between what CorMedix needed as a company and the skills I bring as a leader.

Jason Butler

Great. That’s helpful. And then just on reimbursement, you talked about both the TDAPA program as well as petitioning to have the products excluded from the bundle. Are these mutually exclusive processes? Or is there any crosstalk between the two? And then just following on from that, can you speak to how you think DefenCath aligns with the dialysis providers from a health economic perspective?

Joe Todisco

Okay. Thanks. So, let me say unequivocally, first. This is going to be a dual strategy that we pursue simultaneously, right. So, TDAPA is absolutely an adequate pathway to drive reimbursement and build value for DefenCath. But in pursuing separate reimbursement and pursuing a J-code, we saw the potential to create, let’s say, a more sustainable long-term approach. And ultimately, the CMS that makes that distinction, right. CMS and its sole authority, and it is the same decision maker at CMS essentially that’s going to work on this parallel pathway. So – those are not mutually exclusive. I am actually going to defer the question on ATR to Erin Mistry, who is here with me. And Erin?

Erin Mistry

Sure. The health economics component of it certainly plays a big role in how we are going for reimbursement and how we go about it. First of all, it’s a health population issue, and we have identified the health disparities and health equity components of this that make up a large portion of that health economic play. So, we feel that we have got the right combination of data to support that. And we are doing health economics work on across settings of care both inpatient and the outpatient to identify where we can put DefenCath in where we can have the most value to get out of the products.

Jason Butler

Great. Thanks for taking the question and congrats again on products.

Joe Todisco

Thank you, Jason.

Operator

Thank you. Your next question today is coming from Joon Lee from Truist Securities. Your line is now live.

Unidentified Analyst

Yes. Good evening. This is Les on for Joon. Thanks for taking my questions. I will start off with on the EU wind down. Can you just talk about the costs associated with that? How long it might take? And then the impact it the CMO that has currently been producing the product there in EU., is that going to be a closure of that CMO as you look for a new CMO in the U.S.? And what will happen to that relationship?

Joe Todisco

Okay. Yes. Thanks for the question, Les. Let me clarify that the CMO that was being utilized for production of the product as a medical device is completely different from the CMO we would utilize to commercialize for the United States. So, there is absolutely no overlap between the manufacturing for Neutrolin and that for DefenCath. In terms of the EU wind down and cost, I will defer to Matt in a moment, if he has any estimates. But look, this is just a decision that’s been made. We are starting that process. We are not setting a timeline. I can tell you that we are in the process of discontinuing distribution of the product, the sales as they were, were not overly meaningful in the near-term. So, it’s – we will have a better sense for that over the next quarter, I would believe. Matt, any clarity on wind out costs?

Matt David

Yes. I will just add only that the costs related to Europe will be de minimis. As you can see, the sales have been relatively insignificant in recent quarters and therefore, the costs that we had been spending have also been de minimis. So, this is more of a strategic decision as Joe walked through.

Unidentified Analyst

Great. Makes sense. Thank you. And then just a follow-up to that, on the CMO selection side. It appears that you have identified and a number of manufacturers in the U.S. Can you just talk about the progress there on your due diligence process? And when can we, I guess, perhaps hear some announcement on that front?

Joe Todisco

Yes. I think we are going to probably be in a position to update on the next call. We have got a couple of work streams that are still ongoing, and we are working through those. But the project is moving forward really well, and we will be able to provide an update in a couple of months.

Unidentified Analyst

Great. And I guess I will squeeze one more in. With your current guidance of cash through first half of ‘23, with the new hires and bringing in a scientific advisory board, has that impacted any of your cash guidance? Thank you.

Joe Todisco

I am going to defer that to Matt. Go ahead, Matt.

Matt David

Thanks, Joe. Yes. No problem, Joe. So yes, no, it is included. Look, our cash guidance assumes the assumption of increasing spend related to preparing for the potential commercial launch of DefenCath, as we have said before. And so we have anticipated for things to increase, was anticipated to be able to spend on launch supply in the initial stages of a commercial launch. And so we have not changed our guidance that we put out a few weeks back as well.

Unidentified Analyst

Got it. Thank you.

Operator

Thank you. Your next question today is coming from Rohit Bhasin from Needham & Company. Your line is now live.

Rohit Bhasin

Hi. This is Rohit on for Serge. Thanks for taking my question. Can you talk us a little bit about how you see the market opportunity for DefenCath? And what do you think is the main competition based on what hospitals are currently using? And then what kind of preparations are you guys making in terms of launch in terms of commercial prep and manufacturing supply ahead of time? Thanks.

Joe Todisco

Okay. Thanks for the question, Rohit. So, obviously, we see a market opportunity in two segments, right, both on the outpatient and inpatient side. And I think the outpatient side is clearly well known, largely controlled by the large dialysis operators. On the inpatient side, it’s a little bit different of a market opportunity, and we are somewhat dependent on the final label from the FDA as to what that total market opportunity will be. We do – it’s a smaller market than the outpatient in terms of let’s say, total lumen locks, right. But we do think there is the potential for possibly higher net pricing and a more favorable reimbursement landscape, again, depending on the outcome of our discussions with CMS. On the launch prep side, when – in terms of activities that we are currently undertaking, we are doing right now all the typical prelaunch planning. We are building out our commercial plan, building out our core messaging, doing our pricing studies, building our staffing plans. But most importantly, we are engaging those reimbursement activities and engaging key stakeholders to work with CMS, and we see that as one of the most critical components of our launch strategy.

Rohit Bhasin

Great. Thanks.

Operator

Thank you. I would like to turn the floor back over to Dan for further Q&A.

Daniel Ferry

Thank you, operator. I do have a few written questions from the audience. So, let me pull those up here. I appreciate it. First, can you provide any updates on plans for additional indications like pediatrics, TPN, oncology?

Joe Todisco

Okay. Thanks Dan. I guess first, we need to separate, I would say, pediatrics from what we will call new indications, right. So, we have an obligation to FDA to pursue a pediatric study with the initial indication that we commence once we have a final FDA approval of the NDA. So, that is a separate clinical trial that will commence expected shortly after we get final approval. On the other side, on TPN, oncology and potentially some other areas that we are taking a look at, I think the team has done some really good initial analysis of those kind of market segments. And we are in the process of kicking off over the next few weeks, what I will call it a deeper evaluation process. That’s really going to build out a market landscape for both TPN and oncology as well as a couple of other potential options. We are going to look at reimbursement landscape. We are going to look at the clinical trial or expected clinical trial pathway cost and timing as well as evaluate whether we would need to make any modifications to the formulation for those respective indications. So, I would like to be in a position by the back part of the year to make a decision on a pathway forward from a return on investment standpoint.

Daniel Ferry

Okay. Thanks Joe. And the final question is, what do you see as launch timing relative to your potential approval?

Joe Todisco

Yes. Thanks. That’s a good question, Dan. So, there is a couple of rate-limiting factors when we are thinking about launch timing relative to approval. First, on the reimbursement side, from an outpatient standpoint, whether we end up ultimately going to taper out or getting separate reimbursement, both of those processes really kick off when you get your final approval, you submit your application to CMS and it’s – on average, I think it’s about six months depending on the pathway that we will get a final decision. That said, we would look to kick off our inpatient launch strategy or launch initiative a bit earlier. And depending on the time it would take to, let’s say, higher train a field-based team as well as get our core messages those preapproved by FDA with some in our marketing materials, I would be thinking somewhere between three months, four months post approval for really a full-scale launch.

Daniel Ferry

Thanks a lot. Thank you, Joe. Operator, this concludes our question-and-answer session. You may now close the call.

Operator

Thank you. That does conclude today’s teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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