CorMedix Q2 2023 Earnings Call Transcript

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August 8, 2023

There are 9 speakers on the call.

Operator

Thanks and welcome to CorMedix Inc. 2nd Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad.

Operator

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.

Speaker 1

Good morning, and welcome to the CorMedix Second Quarter 2023 Earnings Conference Call. Leading the call today is Joe Tedisco, Chief Executive Officer of CorMedix, he is joined by Doctor. Matt David, Executive Vice President and CFO Doctor. Phoebe Mounts, EVP and General Counsel Liz Hurlburt, EVP of Clinical and Medical Affairs and Aaron Mystery, 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 we are now in the Private Securities Litigation Reform Act of 1995.

Speaker 1

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 an 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 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 we will be conducting a review of our financial results.

Speaker 1

These risks are described in greater detail in Chromatic's filings with the SEC, including the latest quarterly report on Form 10 Q and the annual report on Form 10 ks, copies of which are available free of charge at the CorMedix's website at www.sec.gov or upon request from CorMedix. CorMedix may not actually achieve the goals or plans described in these forward we will not be conducting any forward

Speaker 2

looking statements and investors

Speaker 1

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 Tedisco, Chief Executive Officer of CorMedix. Joe,

Speaker 3

please go ahead.

Speaker 2

Thanks, Dan. Good morning, everyone, and thank you for joining us on this call. Over the last 3 months, the company has announced a number of key milestone achievements. Most importantly, the announcement that the NDA for DefendCast 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.

Speaker 2

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 they included an NTAP of up to $17,111 per hospital stay for reimbursement of Defencat. We're 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 Defend Kath reimbursement conditioned upon the Genkaph NDA obtaining FDA approval prior to July 1, 2024. The company also announced the U. S. Patent and Trademark Office had issued a notice of allowance of patent claims directed to the composition of the catheter lock solution we're preventing infection and reduced blood flow in central venous catheters.

Speaker 2

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 Defencast and will extend our current intellectual property protection to an anticipated expiration date in 2,040 2, 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 5 years of new chemical entity exclusivity, plus 5 years of QIDP exclusivity, plus 6 months additional exclusivity for conducting a post approval pediatric study.

Speaker 2

During that 10.5 year exclusivity period, the FDA would be barred from approving any ANDA that references the FenCAS 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 $40,000,000 In addition, we are pleased to announce today that the underwriters fully exercised the over allotment option of approximately 1,500,000 shares, yielding additional gross proceeds of roughly $6,000,000 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 Defencast through to anticipated profitability, assuming we are able to obtain a timely approval of the DefendCath NDA on our target action date and commence commercial launch in the Q1 of 2024, as well as achieve other internal base case assumptions. This financing also added new institutional investors to our shareholder base we have broadened our relationships across Wall Street.

Speaker 2

I will now turn the call over to Phoebe for a brief regulatory update and to discuss progress toward potential FDA approval. Pavi?

Speaker 4

Thanks, Joe. Good morning, everyone. As Joe mentioned, following the resubmission of the DefendCath 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 we

Operator

will be conducting a

Speaker 4

reconciliation of our primary contract manufacturing organization site in the coming months, which will be critical to 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 I'm 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, we will provide a financial update.

Speaker 4

Matt?

Speaker 3

Thanks, Phoebe, and good morning, everyone. I'm pleased to be here today to provide an overview of our second quarter and first half of twenty twenty three 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 Q2 2023 financial results, our net loss was approximately 11,300,000 or $0.25 per share compared with a loss of $7,600,000 or $0.19 per share in the Q2 of 2022.

Speaker 3

The higher net loss recognized in 2023 compared with 2022 included an increase in R and D expenses and SG and A expenses versus the Q2 of 2022. Operating expenses in the Q2 of 2023 increased approximately 43% to $11,800,000 compared with $8,300,000 in the Q2 of 2022. R and D expense increased by approximately 49 percent to $4,800,000 driven primarily by an increase in costs related to the manufacturing of Defendcap prior to its potential marketing approval, an increase in personnel expenses and an increase in costs related to medical affairs activities. SG and A expense increased approximately 39% to $7,000,000 in the Q2 of 2023 compared with $5,100,000 in the Q2 of 2022. This increase was primarily attributable to an increase in costs related to market research studies and pre launch activities in preparation for the potential marketing approval of Defencast an increase in personnel expenses due to additional hires, partially offset by a decrease in legal fees for the period.

Speaker 3

With respect to our first half of twenty twenty three financial results, total operating expenses for the first half of twenty twenty three amounted to $22,800,000 compared with $15,300,000 in the first half of twenty twenty two, an increase of 49%. R and D expense increased 49 percent to $8,200,000 driven primarily by an increase in personnel expenses, an increase in costs related to the manufacturing of Defencat prior to its potential marketing approval and an increase in costs related to medical affairs activity. SG and A expense increased approximately 49 percent to $14,600,000 compared with the first half of twenty twenty two, primarily driven by an increase in costs related to market research studies and pre launch activities in preparation for the potential marketing approval of Defencat, an increase in personnel expenses and an increase in non cash charges for stock based compensation. These increases were partially We recorded net cash used in operations during the first half of twenty twenty three of $19,000,000 compared with net cash used in operations of $12,200,000 in the first half of twenty twenty two. 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.

Speaker 3

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 $52,400,000 as of June 30, 2023. This includes approximately 5 dollars 3,000,000 raised during the Q2 of 2023 through our ATM program. Including approximately $43,200,000 in net proceeds from our equity financing that closed during July, CorMedix has June 30, 2023 pro form a cash and equivalents of approximately $95,000,000 We believe our cash, cash equivalents, short term investments and available resources it gives 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 Defenkaf NDA on our target action date and commence commercial launch in the Q1 of 20 24 as well as achieve other internal base case assumptions.

Speaker 3

I will now turn the call back over to Joe for closing remarks. Joe?

Speaker 2

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 Medex is well positioned for a potential launch of DefendCast in early 2024. We were happy to announce last quarter our strategic partnership with Boston Medical 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.

Speaker 2

As we have discussed on prior calls, we do not believe that Defencast 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 2 years to 5 years as adequate reimbursement of innovative therapies is essential to improving health outcomes. Though we do believe TDAP 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.

Speaker 2

A formal application for outpatient reimbursement cannot be submitted until after an NDA we are confident that we are in support of 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.

Operator

Should I open the floor for questions?

Speaker 2

Yes, please.

Operator

Thank you. We will now be conducting a question and answer session. It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from the line of Jason Butler with JMP Securities.

Operator

Please go ahead.

Speaker 5

Hi, thanks for taking the questions and congrats on all the progress. I think Phebe 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 of the status of your primary API provider. And then secondly, now you have the final NTAP approval. Is there anything that you any work that you can do pre approval, in preparation of those reimbursement discussions with institutions? And what are the priorities post approval?

Speaker 5

Thanks.

Speaker 2

All right. Thanks, Jason. So on the NTAP, we'll hold that second, let's start with the question around the primary API 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 date, we have the ability to withdraw them as a vendor and until we learn otherwise on the compliance status of the facility, that's what we The discussion we would intend to have with the agency as we approach the action date.

Speaker 2

Phebe, do you want to comment on any of the PAIs for other vendors?

Speaker 4

Yes, sure. Thanks for the questions, Jason. As you know, when you submit the NDA, there are a number of contract manufacturers, API suppliers, testing labs that are listed and are inspected by FDA as part of the pre approval process. FDA is working through contacting all of those entities to schedule the timing for the inspections. That does not go through CorMedix.

Speaker 4

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 the FenCap. 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.

Speaker 6

Great.

Speaker 2

Thanks, Sibi. 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 and T process, right? So we're doing a lot of work now to put us in a stronger position with each health system.

Speaker 2

Now Liz Hurlburt 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 on specific to inpatient as we we'll prepare for commercialization.

Speaker 7

Thanks, Joe. In the past quarter, 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 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. And along with the commercial team, we've also engaged in several mock P and T or pharmacy and therapeutics meetings. And these meetings have provided us the opportunity to learn firsthand what is valuable to decision makers

Speaker 3

Great. Thank you for taking the

Speaker 5

questions and congrats on the progress.

Speaker 2

Thanks, Louis. Thanks, Jason.

Operator

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

Speaker 6

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

Speaker 2

You broke up a little bit while you're asking that question, but it was just less?

Speaker 6

This is Jim. So Yes.

Speaker 2

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

Speaker 3

Exactly.

Speaker 2

Okay. So I think we our thinking on this hasn't really changed much over the last quarters since we talked, we're not going to give specific dollar ramp guidance at this point in time, but the way you should be thinking about it, we've grown over the last couple of months from 30 some odd employees last year to 46, 47 today. We're adding employees at the management level right now in key functions. We've built out our medical affairs team, our field medical team. We're hiring leadership roles on the commercial side.

Speaker 2

When it comes to field based personnel, we wouldn't expect to actually onboard those personnel till we have an approval in hand. The goal would be to identify kind of key candidates and have done with offer letters and then do the onboarding shortly after approval and work toward a launch in the Q1 of 20 4, assuming we get approval on the action date. We've talked about an inpatient field team in the range of around 30%. And I think that that assumption still holds. On the outpatient side, it's we think it's a leaner team.

Speaker 2

We've got a much more consolidated customer base on Outside of the business, so we've I think publicly talked about 12 to 14 on that side at around the time we launch on the outpatient side. And the outpatient is going to lag a little bit, right? We're waiving enough to wait on that outpatient reimbursement decision before we can really roll out a more robust outpatient launch. So as we get approval in hand or if we get approval in hand, we'll be able to provide a little bit more Specific guidance around timing and costs.

Speaker 3

Perfect. And the final

Speaker 6

question is, Yes, your strategic initiative with Boston Medical, that's really interesting. It's sort of a real world study. And if so, how will you be disclosing results of BEST study? Can you just elaborate a little bit more on that?

Speaker 2

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

Speaker 8

Sure. Thanks, Joe. So for BMC, we do plan on publishing we are 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 2 to this is post approval to evaluate the real world utilization Of the FENCAP and then compare that to what we looked at prior to the approval. So this is very important from a commercial perspective, when we get into the institution, we learn about the patient population a bit more, we learn how dialysis is provided by other organizations like our sales organizations that are in there.

Speaker 8

So that is very important. And then we Actually, we'll have the data that we need to further support the product and drive the growth.

Speaker 6

Got it. And my final question, Congrats on getting that NTAP reimbursement in place for $17,000 some odd for hospital space. Too much to confirm, that's strictly restricted to limited to the hospital stays related to dialysis or is there any other

Speaker 2

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

Speaker 8

Yes. But just to that point, Joe, it is Per label, so it will be it's restricted to hemodialysis patients with CVCs on the inpatient side. Yes, just on the inpatient side. But the they've recognized that the agency CMS, It's not easy to get an NTAP. And so we've met that criteria.

Speaker 8

And so we're utilizing that for our benefit on the outpatient We look to separate payment as well. So that's it's very helpful from us on both sides from a strategic standpoint. But with the NTAP already secured, we have the ability, it's a very unique ability to go into these institutions earlier, Right. And have robust conversations from a financial and procurement perspective. Most companies have to wait to approval Where you have your price at that point and then they understand the reimbursement a little bit better.

Speaker 8

So we are able to make that process more efficient and earlier.

Speaker 6

Fantastic. Just a follow-up on that. Is there like the cap on how many hospital stays that they will reimburse Forward, if you do meet the criteria, they'll reimburse $17,000 for all eligible The analysis related hospital stays.

Speaker 8

Yes. So the NTAP works, it's over and above the DRG. So Once a DRG is maximized, so let's just take a DRG, let's say it's $10,000 for an inpatient stay and NTAP is over and above that amount. And so the maximum amount that they can get per stay, per hospital stay is 17,111 and that maybe that patient goes in several times In the year, if they maxed out their DRG and there's every hospital has different calculations for this on how they do it, But they can the hospital can receive up to that amount for each day.

Speaker 6

Great. Thank you. And looking forward to your update.

Speaker 2

Thanks, Jun.

Operator

Thank you. Next question comes from the line of Rohit Bassam with Needham and Company, please go ahead.

Speaker 6

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 CRBSIs? And do you expect Defencat to be a part of them?

Speaker 6

And then second question, are there any similar recent drug launches that could provide a proxy for a potential launch trajectory of Defend cats? Thanks.

Speaker 2

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

Speaker 7

Sure. Thanks, Joe. So there are a variety of national guidelines that are available from CDC and Shea, and a number of other national organizations and then on

Speaker 2

an institutional basis,

Speaker 7

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 any antiseptic Ensuring that healthcare providers are gloved and there's not cross contamination and all of the regular precautions that are taken to keep the line 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.

Speaker 2

Thanks, Liz. 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 1st in class therapy.

Speaker 2

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 some it wasn't as meaningful There are some next generation cephalosporins and antibiotics that got approved that were competing against 5, 6 different products for the same therapy, right?

Speaker 2

So we are right now there is 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.

Speaker 6

Great. Thank

Operator

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

Speaker 1

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 I'm extending the program.

Speaker 2

Sure. And obviously, I'm going to want to reiterate the comment that While we do think TDAP is adequate for reimbursing innovative products that treat ESRD, right, a lot of our focus is working with CMS force for separate reimbursement. Now that said, we were happy to see them extend to DAPA, it was 2 years, they've added an additional 3 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? Beyond that, Erin, is there anything else you'd want to add on the changes?

Speaker 8

I think you covered it. I mean, I think the additional 3 years just helps Better incentive for providers to utilize new therapies, right? So good thing for us, the agency has recognized that The innovation posted around the innovation posted after and we look forward to working with them on the payment specifics if we go that route.

Speaker 1

Excellent. All right. Thank you, Joe. Thank you, Aaron. Joe, another one here.

Speaker 1

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.

Speaker 2

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

Speaker 3

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 in various strategies as we proceed.

Speaker 3

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 TafenCap.

Speaker 1

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

Operator

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

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