CorMedix Inc. Q2 FY2023 Earnings Call

Greetings and welcome to the CorMedix, Inc. Second Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Ferry from LifeSci Advisors. Thank you, Mr. Ferry, you may begin.

Good morning, and welcome to the CorMedix Second 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; Liz Hulbert, EVP of Clinical and Medical Affairs; 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 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 reimbursement 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, cost, progress, results, estimates and interpretations thereof; projections as to the Company's future capital raising and spending and cash position; including projections regarding the sufficiency of the Company's current cash resources to potentially bring the Company through to breakeven profitability, expectations as to the timing and nature of anticipated regulatory actions, reimbursement decisions, possible product licensing, business development or other transactions; any commercial plans and expectations; intellectual property protections for our product candidates, 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 on CorMedix filings with the SEC, including the latest quarterly report on Form 10-Q and the annual report on Form 10-K copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from CorMedix. CorMedix may not actually achieve the goals or plans described in 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.

Thanks, Dan. Good morning, everyone, and thank you for joining us on this call. Over the last three months, the Company has announced a number of key milestone achievements. Most importantly, the announcement that the NDA for DefenCath had been resubmitted to the FDA following a Type A meeting and was subsequently accepted for review with a target action date of November 15, 2023. Phoebe will provide a brief update today on regulatory affairs activities leading up to our action date. In addition to the resubmission, we announced that the Center for Medicare and Medicaid Services, or CMS, issued its inpatient prospective payment system proposed 2024 rule that included an NTAP of up to $17,111 per hospital stay for reimbursement of DefenCath. We are happy to now announce that this past week, CMS published its final rule in this regard, providing for final approval of the NTAP of up to $17,111 per hospital stay for DefenCath reimbursement conditioned upon the DefenCath NDA obtaining FDA approval prior to July 1, 2024. The Company also announced that the U.S. Patent and Trademark Office has issued a notice of allowance of patent claims directed to the composition of the catheter lock solution for preventing infection and reduced blood flow in central venous catheters. CorMedix has paid the issue fee, and the application has now moved to issuance. 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 10.5 years of marketing exclusivity available upon an FDA approval of the DefenCath NDA. As a reminder, the 10.5 years of marketing exclusivity anticipates five years of new chemical entity exclusivity plus five years of QIDP exclusivity but six months of additional exclusivity of conducting a post-approval pediatric study. During that 10.5 year exclusivity period, the FDA would be barred from approving any ANDA that references DefenCath as its comparator drug. More recently, the Company announced the pricing of an underwritten public offering of its common stock and prefunded warrants in which the total gross proceeds before fees and expenses were approximately $40 million. In addition, we are pleased to announce today that the underwriters fully exercised the overallotment option of approximately 1.5 million shares yielding additional gross proceeds of roughly $6 million before fees and expenses. The successful completion of this financing provides CorMedix with considerable medium- to long-term financial resources. The proceeds from the offering, together with our existing cash, cash equivalents, short-term investments and available resources will enable us to fund the launch of DefenCath through to anticipated profitability, assuming we are able to obtain a timely approval of the DefenCath NDA on our target action date and commence commercial launch in the first quarter of 2024, as well as achieve other internal base case assumptions. This financing also added new institutional investors to our shareholder base and broadened our relationships across Wall Street. I will now turn the call over to Phoebe for a brief regulatory update and to discuss progress towards potential FDA approval. Phoebe?

Thanks, Joe. Good morning, everyone. As Joe mentioned, following the resubmission of the DefenCath NDA, the FDA accepted the application for review and granted a target action date of November 15, 2023. Over the past few months, we have received standard communications and requests for information from the agency related to our application consistent with the normal NDA review process as well as notifications from various vendors of pre-approval inspections being scheduled for the product by the FDA. As part of the review process, we anticipate an FDA pre-approval inspection of our primary contract manufacturing organization site in the coming months, which will be critical to the approvability of the product. CorMedix technical operations, regulatory and quality teams as well as multiple external CGMP consultants with deep FDA experience are in regular communication with the primary CMO team working towards the goal of preparedness for an upcoming pre-approval inspection. Ahead of any API, we are heavily focused on verifying the effectiveness of past corrective actions and working with the CMO team to confirm the readiness of the site for FDA inspection. Going forward, the Company will share additional regulatory updates when appropriate. I would now like to turn the call over to Matt, who will provide a financial update. Matt?

Thanks, Phoebe, and good morning, everyone. I am pleased to be here today to provide an overview of our second quarter and first half of 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 June 30, 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 second quarter 2023 financial results. Our net loss was approximately $11.3 million or $0.25 per share compared with a loss of $7.6 million or $0.19 per share in the second 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 second quarter of 2022. Operating expenses in the second quarter of 2023 increased approximately 43% to $11.8 million compared with $8.3 million in the second quarter of 2022. R&D expense increased by approximately 49% to $4.8 million driven primarily by an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval, an increase in personnel expenses and an increase in costs related to medical affairs activities. SG&A expense increased approximately 39% to $7 million in the second quarter of 2023 compared with $5.1 million in the second 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 and an increase in personnel expenses due to additional hires, partially offset by a decrease in legal fees for the period. With respect to our first half of 2023 financial results, total operating expenses for the first half of '23 amounted to $22.8 million compared with $15.3 million in the first half of 2022, an increase of 49%. R&D expense increased 49% to $8.2 million, driven primarily by an increase in personnel expenses, an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval and an increase in costs related to medical affairs activities. SG&A expense increased approximately 49% to $14.6 million compared with the first half of 2022, primarily driven by 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 and an increase in noncash charges for stock-based compensation. These increases were partially offset by a decrease in legal fees for the period. We recorded net cash used in operations during the first half of 2023 of $19 million compared with net cash used in operations of $12.2 million in the first half of 2022. The increase is primarily driven by an increase in net loss primarily attributable to an increase in operating expenses as compared to the same period in 2022. With the recent closing of our announced equity offering, CorMedix is in a strong position from a balance sheet perspective. The Company has cash and cash equivalents of $52.4 million as of June 30, 2023. This includes approximately $5.3 million raised during the second quarter of 2023 through our ATM program, including approximately $43.2 million in net proceeds from our equity financing that closed during July, CorMedix has June 30, 2023, pro forma cash and equivalents of approximately $95 million. We believe our cash, cash equivalents, short-term investments and available resources give the Company flexibility to fund the potential commercial launch of DefenCath through to anticipated profitability, assuming we are able to obtain a timely approval of the DefenCath NDA on our target action date and commence commercial launch in the first quarter of 2024, as well as achieve other internal base case assumptions. I will now turn the call back over to Joe for closing remarks. Joe?

Thanks, Matt. Certainly, it's been a busy quarter for CorMedix, a pace we expect to continue over the next few months. While our technical and regulatory teams are working diligently to help prepare our CMO for an upcoming pre-approval inspection, our commercial and medical affairs teams are engaging with key stakeholders across settings of care in an effort to ensure CorMedix is well positioned for a potential launch of DefenCath in early 2024. We were happy to announce last quarter our strategic partnership with Boston Medical Center and we hope to announce similar arrangements with other health systems in the upcoming months. We are also pleased to have secured inpatient reimbursement via the conditional NTAP published by CMS last week and we are preparing for an expected discussion with CMS in late 2023 around outpatient reimbursement. As we have discussed on prior calls, we do not believe that DefenCath should be classified as a renal dialysis service. It is an infection preventative, which is not currently captured by any functional categories inside the existing ESRD bundle. Congress created the transitional drug add-on payment or TDAPA framework to incentivize innovation in treating ESRD. We were pleased to see that CMS recently proposed expanding TDAPA from two years to five years as adequate reimbursement of innovative therapies is essential to improving health outcomes. Though, we do believe TDAPA is an adequate reimbursement structure for products that treat ESRD, we feel strongly that as an infection preventative, we intend to make our case to CMS that our product should always remain outside the bundle and should be reimbursed as an outpatient Part B drug product with a unique J-code. A formal application for outpatient reimbursement cannot be submitted until after an NDA receives FDA approval. However, we do expect to engage in a dialogue with CMS ahead of that submission, providing the agency with documentation supporting our reimbursement position. CorMedix is squarely focused on operational execution at this point in time, and I look forward to updating shareholders as we approach our target action date in November. Thank you for your continued support of and interest in CorMedix.

Should I open the floor for questions?

Yes, please.

Thank you. The first question comes from Jason Butler with JMP Securities. Please go ahead.

Hi. Thanks for taking the questions, and congrats on the progress. I think Phoebe mentioned that there were multiple vendors that have been informed of or scheduled pre-approval inspections. Can you just give us any color as to whether any inspections have already occurred? And if there's any update on the status of your primary API provider? And then secondly, now you have the final NTAP approval, is there any work that you can do pre-approval in preparation of those reimbursement discussions with institutions, and what are the priorities post-approval? Thanks.

All right. Thanks, Jason. So on the NTAP, we'll hold that question second. Let's start with your question around the primary API vendor. As of today, we don't have any update on the compliance status of that API vendor. I think what we said on the last earnings call remains the case. The feedback from our Type A meeting was that should the warning letter remain in place at the time of our action date, we have the ability to withdraw them as a vendor until we learn otherwise on the compliance status of the facility. That's what the discussion we would intend to have with the agency as we approach the action date. Phoebe, do you want to comment on any of the PIAs for other vendors?

Yes, sure. And thanks for the question, Jason. As you know, when you submit the NDA, there are a number of contract manufacturers, API suppliers, and testing labs that are listed and are inspected by the FDA as part of the pre-approval process. The FDA is working through contacting all of those entities to schedule timing for the inspections. That does not go through CorMedix. So we're not involved in the coordination of the timing. We are aware that testing lab has been inspected and the inspection went well without any issues for DefenCath. So we do hope to get updates from all of the various vendors as the inspections occur. But as I said, that's not something that we're directly involved with.

So Jason, on the NTAP side, that's specific to inpatient reimbursement. As we mentioned in the script, we've got a lot of ongoing, call them pre-commercial activities, both on the commercial side and on the medical side, ahead of approval, looking to put us in a stronger position as we would expect to ramp up for a launch. On the inpatient side, each health system has its own P&T process, right. So, we're doing a lot of work now to put us in a stronger position with each health system. Liz Hulbert is on the line. I'm going to ask her to comment a little bit about what's going on in the medical affairs side, right, specific to inpatient as we prepare for commercialization.

Thanks, Joe. In the past quarter, the field medical team has had numerous interactions with clinical stakeholders in nephrology, infectious disease, patient safety and outcomes, and infection prevention. And we are diligently learning the current protocols for hospitals and health systems and what they have in place when it comes to catheter care so we can best educate the clinical community based on their current practices. Along with the commercial team, we've also engaged in several MAC P&T or pharmacy and therapeutics meetings. These meetings have provided us the opportunity to learn firsthand what is valuable to decision-makers and has really underscored the clinical unmet need that remains for these patients.

Great. Thank you for taking the questions and that's in the progress.

Thanks, Liz. Thanks, Jason.

Next question comes from the line of Joon Lee with Truist Securities. Please go ahead.

Hi, thanks for the updates and particular questions. As you look to the initial approval and launch, how should we be thinking about the ramp in SG&A? How many sales reps are you going to onboard and the cadence of that; and I have a follow-up.

You broke up a little bit while you were asking that question, but was this less?

This is Joon.

Sorry, I couldn't hear you. But you asked about the ramp of SG&A and the cadence for hiring reps? Is that correct?

Exactly.

Okay. So our perspective on this hasn't changed much over the past quarter. We won't be providing specific dollar ramp guidance at this time. However, you should consider that we've increased our team from approximately 30 employees last year to about 46 or 47 today. We are currently hiring at the management level in key areas, including building our medical affairs team and field medical team, and filling leadership positions on the commercial side. We don't plan to onboard field-based personnel until we secure approval. Our goal is to identify key candidates, issue offer letters, and then onboard them shortly after receiving approval, aiming for a launch in the first quarter of 2024, assuming we receive approval on the action date. We've mentioned an inpatient field team of around 30, and that estimate still stands. On the outpatient side, we anticipate a smaller team due to a more concentrated customer base, projecting around 12 to 14 at the time of outpatient launch. The rollout for outpatient will be delayed as we need to wait for the outpatient reimbursement decision before we can implement a more comprehensive launch. Once we have approval, we will be able to provide more precise guidance on timing and costs.

Perfect. The follow-up question is your strategic initiative with Boston Medical. That's really interesting. It's sort of a real-world study and so how will you be disclosing results of that study? Can you just elaborate a little bit more on that?

Yes, sure. Thanks, Joon. I'd like to ask Erin to talk a little bit about the Boston Medical partnership.

Sure. Thanks, Joe. So for BMC, we do plan on publishing in collaboration with them and any additional future partnerships that we have. The current data initiative is focused on just the retrospective data related to hemodialysis patients and catheter-related infections, and then we'll implement a second Phase II to this as post-approval to evaluate the real-world utilization of DefenCath and then compare that to what we looked at prior to the approval. So this is very important for us from a commercial perspective. One, we get into the institution as we learn about the patient population a bit more. We learn how dialysis is provided by other organizations like our Dialysis Organizations that are in there. So that is very important and we actually will have the data that we need to further support the product and driving.

Got it. And my final question, congratulations on securing the NTAP reimbursement of approximately $17,000 per hospital space. To confirm, is that specifically limited to the hospital space related to dialysis, or are there other opportunities for it?

So the NTAP reimbursement is specific to utilization on label. Erin, do you want to elaborate a little bit more?

Yes, in response to your question, Joe, it is per label. So it is restricted to hemodialysis patients for CVCs in the inpatient setting. It’s important to note that it only applies to the inpatient side. However, the agency CMS has acknowledged that obtaining an NTAP is not straightforward, and we have met that criteria, allowing us to leverage this benefit for outpatient payment separation as well. This is advantageous from a strategic perspective for both sides. With the NTAP secured, we have a unique opportunity to engage with these institutions earlier and have meaningful discussions regarding financial and procurement matters. Most companies typically have to wait until they receive approval to set their pricing, at which point the reimbursement landscape becomes clearer. Our approach allows us to streamline this process and initiate it sooner.

Fantastic. Just a follow-up on that. Is there like a cap on how much from any hospital stay that they will reimburse for? Or if you do meet the criteria, they will reimburse $17,000 for all eligible dialysis-related hospital stays?

Erin, go ahead.

Yes. The NTAP applies on top of the DRG. Once the DRG is maximized, for example, if the DRG is $10,000 for an inpatient stay, the NTAP is additional to that amount. The total maximum that can be received per hospital stay is $17,111, and a patient may have multiple stays within a year. If they reach their maximum DRG, hospitals have different methods for calculations, but they can receive that full amount for each stay.

Next question comes from the line of Rohit Bhasin with Needham & Company. Please go ahead.

Hi, thanks for taking our questions. This is Rohit on for Serge. Can you talk about what the current treatment guidelines are at hospitals to reduce CRBs size, and do you expect DefenCath to be a part of them? And then second question, are there any similar recent drug launches that could provide a proxy for a potential launch trajectory of DefenCath?

Thanks, Rohit. In terms of the first question on kind of current treatment guidelines, I'm going to have Liz to comment.

Sure. Thanks, Joe. So there are a variety of national guidelines that are available from the CDC and SHEA and a number of other national organizations. And then on an institutional level, they are coming up with their own protocols based on the needs of their patients, and the way they take care of certain types of catheters can vary. Currently, what we've learned is in addition to performing hand hygiene and cleaning the skin with an antiseptic and ensuring that healthcare providers are gloved, and there's not cross-contamination and all of the regular precautions that are taken to keep the lines safe. There are a number of different unapproved catheter locks that may be utilized at different times. They tend to be more reactive than proactive or preventive in most cases, but there are a variety of different things institutions are doing. But unfortunately, that is one of the gaps right now is there is not a clear consistent guideline on how to best reduce infections in this population.

Right. And in terms of your question on similar drug launches, I think this is something that we struggle to find a pure play comparable, and we think that's actually a good thing, right. So what we're looking to launch here is truly a first-in-class therapy. It is a preventative, right. We're not a product that's out treating infections. We're looking to prevent infection. And to our knowledge, no real similar product has launched either in the inpatient space or in the outpatient space. So we think that that's certainly a good thing. We think there's a lot of reasons why our NTAP will be meaningful on the inpatient side, where perhaps it wasn't as meaningful for some next-generation cephalosporins and antibiotics that got approved that we're competing against five or six different products for the same therapy. Right now, there are no currently FDA-approved drug products for the prevention of CRBSIs in any population, including the hemodialysis population. So we're looking at this truly as a first-in-class therapy.

Thank you. I will now turn the call over to Dan Ferry for additional written questions from the audience.

Thank you, operator. Joe, we have a couple of questions here from the audience. The first one is, can you elaborate on the recent changes regarding TDAPA in extending the program?

Sure. And obviously, I'm going to want to reiterate the comment that while we do think TDAPA is adequate for reimbursement innovative products that treat ESRD, right, a lot of our focus is working with CMS for separate reimbursement. That said, we were happy to see them extend TDAPA, right. It was two years. They've added an additional three years of reimbursement, and I think that that recognizes that longer reimbursement is necessary to begin addressing a lack of innovation in that ESRD space. Right. So beyond that, Erin, is there anything else you'd want to add on the changes?

I think you covered it. I mean, I think the additional three years just helps create a better incentive for providers to utilize new therapies, right? So good thing for us, the agency has recognized the innovation post-TDAPA, and we look forward to working with them on the payment specifics, if we go that route.

Excellent. All right. Thank you, Joe. Thank you, Erin. Joe, another one here. Can you comment on future financing strategy, especially in light of the disclosure around this recent financing, having the possibility to take the Company to breakeven profitability?

Thanks, Dan. Matt, do you want to comment on financing?

Sure. Sure. Thanks, Joe. Yes, as in the past, we can't really comment on plans for future financing. CorMedix management and our Board regularly evaluates our needs, market conditions, and various strategies as we proceed. I will say that we completed the recent equity offering to really put the Company in a strong financial position as we plan for and ramp-up toward the potential commercial launch of DefenCath.

Excellent. Thanks, Matt. Thanks, Joe. Operator, this concludes the question-and-answer session. You may now close the call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.