美國
證券交易委員會
華盛頓特區20549
表格
（標記一）
截至季度結束日期的財務報告
過渡期從________到_________
佣金文件號
（按其章程規定的確切註冊人名稱）
| (所在地或其他司法管轄區 公司註冊或組織 | （IRS僱主 | |
| (主要領導機構的地址) | (郵政編碼) |
（註冊人，包括區號的）電話號碼
根據法案第12（b）項註冊的證券：
| 每一類的名稱 | 交易標誌 | 在其上註冊的交易所的名稱 | ||
請勾選：
（1）註冊人在過去12個月內（或註冊人在應當提交此類報告的更短期間內，提交所有根據1934年證券交易法第13或15(d)條規定提交的報告，並且，（2）在過去90天內已經受到應當提交此類報告的規定的約束。
請勾選是否：
該註冊人是否已在過去的12個月內（或在該註冊人需要提交這些文件的期限較短的時間）遞交了根據S-T法規第405條規定需要遞交的每個交互式數據文件（本章第232.405條）。
請勾選以下選項，表明註冊者是否爲大型快速提交者、快速提交者、非快速提交者、小型報告公司或新興成長公司。請參閱證券交易所120億.2號規則中「大型加速提交者」、「加速提交者」、「小型報告公司」和「新興成長公司」的定義。
| 大型加速歸檔人 | ☐ | 加速報告人 | ☐ |
| ☒ | 小型報告公司 | ||
| 新興成長型企業 |
如果註冊人是新興增長型企業，勾選「☐」以確認註冊人選擇不使用符合《證券法》第13(a)條規定的、符合任何新的或修訂後的財務會計標準的過渡期延長。
請勾選是否：
該註冊人是否爲外殼公司（如交易法規則12b-2所定義）。是 ☐ 否
截至2024年10月28日，發行人普通股的流通股總數爲
科麥迪克斯股份有限公司及其子公司
指數
| 第一部分 財務信息 | 1 | |
| 項目1。 | 未經審計的簡明合併財務報表。 | 1 |
| 截至2024年9月30日和2023年12月31日的精簡合併資產負債表 | 1 | |
| 截至2024年9月30日的三個月和九個月的簡明合併收支表和綜合損失表，截至2023年 | 2 | |
| 截至2024年9月30日的三個月和九個月的簡明合併股東權益變動表，截至2023年 | 3 | |
| 截至2024年9月30日和2023年的現金流量簡明綜合報表 | 5 | |
| 簡明聯合財務報表附註(未經審計) | 6 | |
| 事項二 | 分銷計劃 | 19 |
| 第3項。 | 定量和質量市場風險披露 | 30 |
| 事項4。 | 控制和程序 | 30 |
| 第二部分 其他信息 | 31 | |
| 項目1。 | 法律訴訟 | 31 |
| 1A項目。 | 風險因素 | 31 |
| 事項二 | 未註冊的股票股權銷售和籌款用途 | 31 |
| 第3項。 | 對優先證券的違約 | 31 |
| 事項4。 | 礦山安全披露。 | 31 |
| 第5項。 | 其他信息 | 31 |
| 項目6。 | 展示資料 | 31 |
| 簽名 | 32 | |
i
第一部分
財務信息
項目1.未經審計的彙編財務報表。
CorMedix股份有限公司及其子公司
簡明合併資產負債表
| 九月三十日 2024 （未經審計） | 十二月三十一日 2023 | |||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金和現金等價物 | $ | $ | ||||||
| 受限制的現金 | ||||||||
| 短期投資 | ||||||||
| 貿易應收賬款，淨額 | ||||||||
| 庫存，淨額 | ||||||||
| 預付研發費用 | ||||||||
| 其他預付費用和流動資產 | ||||||||
| 流動資產總額 | ||||||||
| 財產和設備，淨額 | ||||||||
| 許可無形資產，淨額 | ||||||||
| 長期限制性現金 | ||||||||
| 經營租賃使用權資產 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債 | ||||||||
| 應付賬款 | $ | $ | ||||||
| 應計費用 | ||||||||
| 經營租賃負債，短期 | ||||||||
| 流動負債總額 | ||||||||
| 經營租賃負債，扣除流動部分 | ||||||||
| 負債總額 | ||||||||
| 承諾和意外開支（注5） | ||||||||
| 股東權益 | ||||||||
| 優先股-$ | ||||||||
| 普通股-$ | ||||||||
| 累積其他綜合收益 | ||||||||
| 額外的實收資本 | ||||||||
| 累計赤字 | ( | ) | ( | ) | ||||
| 股東權益總額 | ||||||||
| 負債總額和股東權益 | $ | $ | ||||||
請參見附註未經審計的概括財務報表。
1
CorMedix股份有限公司及其子公司
簡明合併利潤表
以及綜合損失
(未經審計)
| 截至三個月的時間 2023年9月30日 | 截至九個月結束的日期 2023年9月30日 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 營業收入： | ||||||||||||||||
| 淨銷售額 | $ | $ | $ | $ | ||||||||||||
| 銷售成本 | ( | ) | ( | ) | ||||||||||||
| 毛利潤 | ||||||||||||||||
| 營業費用： | ||||||||||||||||
| 研發 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 銷售和營銷 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ZSCALER, INC. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 總營業費用 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 業務損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收益（費用）： | ||||||||||||||||
| 利息收入 | ||||||||||||||||
| 匯率期貨交易損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收入 | ||||||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他總收入 | ||||||||||||||||
| 稅前虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 稅收優惠 | ||||||||||||||||
| 淨虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他全面收益（虧損）： | ||||||||||||||||
| 投資的未實現盈虧 | ( | ) | ( | ) | ||||||||||||
| 貨幣翻譯損失（盈利） | ( | ) | ( | ) | ( | ) | ||||||||||
| 其他綜合收益（稅後淨額）總額 | ( | ) | ( | ) | ||||||||||||
| 綜合虧損 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 每股普通股基本和稀釋淨虧損 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 基本和攤薄平均股份外流通數量 | ||||||||||||||||
請參見附註未經審計的概括財務報表。
2
CorMedix股份有限公司及其子公司
綜合變動表
股東權益
(未經審計)
截至2024年9月30日三個月的數據
| Common Stock | Preferred
Stock- Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at July 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | ||||||||||||||||||||||||||||||||
| Stock issued in connection with options exercised | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive gain | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
For the nine months ended September 30, 2024
| Common Stock | Preferred
Stock- Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | ||||||||||||||||||||||||||||||||
| Stock issued in connection with options exercised | ||||||||||||||||||||||||||||||||
| Issuance of vested restricted stock, net of shares withheld for employee withholding taxes | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Cancellation of shares held in escrow | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
3
CorMedix Inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(Unaudited)
For the three months ended September 30, 2023
| Common Stock | Preferred
Stock – Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income (Loss) | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at July 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock and pre-funded warrants issued in connection with public offering, net | ||||||||||||||||||||||||||||||||
| Stock issued in connection with options exercised | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
For the nine months ended September 30, 2023
| Common Stock | Preferred
Stock – Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income (Loss) | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | ||||||||||||||||||||||||||||||||
| Stock and pre-funded warrants issued in connection with public offering, net | ||||||||||||||||||||||||||||||||
| Stock issued in connection with options exercised | ||||||||||||||||||||||||||||||||
| Issuance of vested restricted stock, net of shares withheld for employee withholding taxes | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive gain | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
4
CORMEDIX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Change in right-of-use assets | ||||||||
| Depreciation | ||||||||
| Amortization of intangible | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in trade receivables | ( | ) | ||||||
| Increase in inventory | ( | ) | ||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| (Decrease) increase in accounts payable | ( | ) | ||||||
| Increase in accrued expenses | ||||||||
| Decrease in operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of short-term investments | ( | ) | ( | ) | ||||
| Maturity of short-term investments | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock from at-the-market program, net | ||||||||
| Payment of employee withholding taxes on vested restricted stock units | ( | ) | ( | ) | ||||
| Proceeds from public offering of common stock and pre-funded warrants, net | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Foreign exchange effect on cash | ( | ) | ||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing Activities: | ||||||||
| Liability related to license agreement | $ | |||||||
| Unrealized gain (loss) from investments | $ | $ | ( | ) | ||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
5
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization, Business and Basis of Presentation:
Organization and Business
CorMedix Inc. (“CorMedix”
or the “Company”) was incorporated in the State of Delaware on
The Company’s primary focus is on the commercialization of its lead product, DefenCath® (taurolidine and heparin) in the United States, or U.S. The Company has in-licensed the worldwide rights to develop and commercialize DefenCath. The name DefenCath is the U.S. proprietary name approved by the U.S. Food and Drug Administration, or FDA.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Quarterly Reports on Form 10-Q and Article 8 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary to fairly state the interim results. Interim operating results are not necessarily indicative of results that may be expected for the full year ending December 31, 2024, or for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 12, 2024. The accompanying consolidated balance sheet as of December 31, 2023 has been derived from the audited financial statements included in such Annual Report on Form 10-K.
Note 2 - Summary of Significant Accounting Policies and Liquidity and Uncertainties:
Liquidity and Uncertainties
The condensed consolidated financial statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. To date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. The Company’s current commercial and development expenses for DefenCath and its other operating requirements are expected to be funded for at least twelve months from the issuance of this Quarterly Report on Form 10-Q by the Company’s existing cash, cash equivalents and short-term investments at September 30, 2024 and its expected liquidity from commercial operations.
The Company may raise additional
capital through various potential sources, such as equity and/or debt financing, strategic relationships, potential strategic transactions
and/or out-licensing. Management can provide no assurances that such financing or strategic relationships will be available on acceptable
terms, or at all. As of September 30, 2024, approximately $
The Company’s operations are subject to a number of other factors that can affect its operating results and cash flow projections over the next twelve months from the issuance of these financial statements. Such factors include, but are not limited to: the ability to market DefenCath and generate necessary revenue in the time periods required; ability to manufacture successfully; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, Company products; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products; and the Company’s ability to raise capital to support its operations.
6
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities and disclosure of contingent assets and liabilities in the Company’s consolidated balance sheets and the reported amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.
Reclassifications
Certain reclassifications were made to the prior year’s amounts to conform to the 2024 presentation.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Trade Accounts Receivable and Allowances
The Company complies with ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which requires the Company to recognize an allowance that reflects a current estimate of credit losses expected to be incurred over the life of a financial asset, including trade receivables. The allowance for credit losses reflects the best estimate of expected credit losses of the accounts receivable portfolio determined on the basis of current information, forecasts of future economic conditions, industry knowledge and to some extent our historical experience. The Company determines its allowance methodology by pooling receivable balances at the customer level. The Company considers various factors, including individual credit risk associated with each customer, the current and future condition of the general economy and industry knowledge. These credit risk factors are monitored on a quarterly basis and updated as necessary. To the extent any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such customer. The Company makes concerted efforts to collect all outstanding balances due, however account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its customers. There are no significant allowances recorded for credit losses as of September 30, 2024.
Concentrations
The major customers of the
Company are defined as those constituting greater than 10% of its total revenue. In the three and nine months ended September 30, 2024,
the Company had sales to one customer that accounted for
Financial Instruments
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and accounts receivable. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts, the balances of which, at times, may exceed federally insured limits.
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
7
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Investments in marketable debt classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported in other comprehensive income. Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. There were no deemed permanent impairments at September 30, 2024 or December 31, 2023.
The Company’s marketable
securities are highly liquid and consist of U.S. government agency securities, high-grade corporate obligations and commercial paper with
original maturities of more than 90 days. As of September 30, 2024 and December 31, 2023, all of the Company’s investments had contractual
maturities of less than one year.
| Amortized Cost | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value | |||||||||||||
| September 30, 2024: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ( | ) | ||||||||||||||
| Commercial Paper | ||||||||||||||||
| Subtotal | ( | ) | ||||||||||||||
| Total September 30, 2024 | $ | $ | ( | ) | $ | $ | ||||||||||
| December 31, 2023: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ( | ) | ||||||||||||||
| Subtotal | ( | ) | ||||||||||||||
| Total December 31, 2023 | $ | $ | ( | ) | $ | $ | ||||||||||
Fair Value Measurements
In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, disclosures of fair value information about financial instruments is required, whether or not recognized in the consolidated balance sheet, for which it is practicable to estimate that value. The Company’s financial instruments recorded in the consolidated balance sheets include cash and cash equivalents, accounts receivable, investment securities, accounts payable and accrued expenses. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their estimated fair values based upon the short-term nature of their maturity dates.
The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value on the Company’s condensed consolidated balance sheets are categorized as follows:
8
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
| ● | Level 1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs— Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). |
| ● | Level 3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| September 30, 2024: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ||||||||||||||||
| Subtotal | $ | |||||||||||||||
| Total September 30, 2024 | $ | $ | $ | $ | ||||||||||||
| December 31, 2023: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | $ | $ | $ | ||||||||||||
| U.S. Government Agency Securities | ||||||||||||||||
| Commercial Paper | ||||||||||||||||
| Subtotal | ||||||||||||||||
| Total December 31, 2023 | $ | $ | $ | $ | ||||||||||||
Inventories
The Company engages third
parties to manufacture and package inventory held for sale and warehouse such goods until packaged for final distribution and sale. Costs
related to the manufacturing of DefenCath incurred prior to FDA approval in order to support the preparation for commercial launch of
its product were expensed as research and development expenses (“R&D”) as incurred. Upon FDA approval, costs related to
the manufacturing of inventory are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis.
Remaining pre-commercial inventory previously expensed as R&D prior to FDA approval, consists of certain raw materials and inventory
at various stages of completion with a value approximating $
Inventory is valued utilizing the standard cost method, which approximates costs determined on the first-in first-out basis. The Company records an inventory reserve for losses associated with dated, expired, excess or obsolete items. This reserve is based on management’s current knowledge with respect to inventory levels, planned production and sales volume assumptions. As of September 30, 2024 and December 31, 2023, no reserves were deemed necessary.
Inventories consist of raw
materials (including labeling and packaging), work-in-process, and finished goods for DefenCath.
| September 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
9
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Revenue Recognition
The Company recognizes revenue from the sale of its product, DefenCath, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company recognizes revenue when it believes that it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer. The Company’s product revenue is recognized at a point in time when the performance obligation is satisfied by transferring control of the promised goods or services to a customer. In accordance with the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is received by a customer. The Company’s customers are located in the United States and consist primarily of outpatient service providers and wholesale distributors.
Variable Consideration
The Company includes an estimate of variable consideration in its transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes:
| ● | Distribution service fees; |
| ● | Prompt pay and other discounts; |
| ● | Product returns; |
| ● | Chargebacks; |
| ● | Rebates; |
| ● | Volume incentive rebates; |
The Company assesses whether or not an estimate of variable consideration is constrained based on the probability that a significant reversal in the amount of cumulative revenue may occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. Actual amounts of consideration ultimately received may vary from our estimates. If actual results in the future vary from estimates, the Company adjusts these estimates, which would affect product sales and earnings in the period such variances become known.
The specific considerations that the Company uses in estimating these amounts related to variable considerations are as follows:
Distribution services fees – The Company pays distribution service fees primarily to its wholesale distributors. The Company reserves these fees based on actual net sales and the contractual fee rates negotiated with the customers in the distribution channel. The Company records these fees as contra accounts receivable on the balance sheet.
Prompt pay and other discounts – The Company provides customers with prompt pay discounts. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are expected to be taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale based on the invoice price. Prompt pay discount estimates are recorded as contra accounts receivable on the balance sheet.
Product returns – Customers have the right to return product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than six months. The Company determines its estimate for product returns based on: (i) data provided to the Company by its distributors (including weekly reporting of distributors’ sales and inventory held by distributors that provided the Company with visibility into the distribution channel in order to determine what quantities were sold to both inpatient and outpatient facilities), and (ii) the estimated remaining shelf life of DefenCath held by the wholesale distributors and outpatient service providers. Since the returns primarily consist of expired and short dated products that will not be resold, the Company does not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of revenue is deferred due to the anticipated return). Estimated product returns are recorded as accrued expenses on the balance sheet.
10
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Chargebacks – Certain covered entities, group purchasing organizations (“GPO”) and government entities will be able to purchase the product at a price discounted below wholesaler acquisition cost (“WAC”). The difference between the GPO, government or covered entity purchase price and the wholesale distributor purchase price of WAC will be charged back to the Company. The Company estimates the amount in chargebacks based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra accounts receivable on the balance sheet.
Rebates – The Company is or may become subject to negotiated discount obligations to different GPO, direct purchasers, other commercial organizations or government programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after the product has been dispensed to an end user and the Company has been invoiced. Rebates are typically invoiced in arrears. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter based on expected product utilization, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as accrued expenses on the balance sheet.
Volume Incentive Rebates – The Company is subject to negotiated volume incentive rebates with certain direct and indirect customers (primarily outpatient service providers). Rebates are owed based on predetermined volume levels and payable per the terms in the customer contracts. The Company estimates and records volume incentive rebates based on anticipated purchase volume with specific customers based on communications with the customer. Volume incentive rebates are recorded as accrued expenses on the balance sheet. See Note 4 – Accrued Expenses.
Provisions for the revenue reserves described above totaled $
License Agreement
The Company’s rights under the License and Assignment Agreement with ND Partners, LLP are capitalized and stated at cost and amortizes using the straight-line method over estimated economic life of the intangible asset. The Company will amortize the intangible asset over its useful life, based on its assessment of various factors impacting estimated useful lives and cash flows of the acquired rights. Such factors include the launch date of DefenCath, the strength of the intellectual property protection of DefenCath and various other competitive, developmental and regulatory considerations, and contractual terms. See Note 5 – Commitments and Contingencies for further discussion.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion, on the consolidated balance sheet (see Note 7).
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company has elected, as an accounting policy, not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis over the lease term.
The Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components and, instead, account for them as a single component.
11
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Loss Per Common Share
Basic loss per common share
excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period.
The weighted average number of common shares outstanding during the period included
The Company’s outstanding shares of Series E preferred stock entitle the holders to receive dividends on a basis equivalent to the dividends paid to holders of common stock. As a result, the Series E preferred stock meet the definition of participating securities requiring the application of the two-class method. Under the two-class method, earnings available to common shareholders, including both distributed and undistributed earnings, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted earnings per share to be more dilutive than the calculation using the treasury stock method. No loss has been allocated to these participating securities since they do not have contractual obligations that require participation in the Company’s losses.
Since the Company has only
incurred losses, potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect
would be anti-dilutive, and therefore basic and diluted loss per share are the same for all periods presented.
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| (Number of Shares of Common Stock Issuable) | ||||||||
| Series C-3 non-voting preferred stock | ||||||||
| Series E non-voting preferred stock | ||||||||
| Series G non-voting preferred stock | ||||||||
| Shares issuable for payment of deferred board compensation | ||||||||
| Shares underlying outstanding stock options | ||||||||
| Shares underlying restricted stock units | ||||||||
| Total potentially dilutive shares | ||||||||
Stock-Based Compensation
Stock-based compensation cost is measured at grant date, based on the estimated fair value of the award using the Black-Scholes option pricing model for options with service or performance-based conditions. Stock-based compensation is recognized as expense over the requisite service period on a straight-line basis or when the achievement of the performance condition is probable.
Research and Development
Research and development costs are charged to expense as incurred. Research and development include fees associated with operational consultants, contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations, contract central testing laboratories, licensing activities, and allocated executive, human resources and facilities expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial and the invoices received from its external service providers. As actual costs become known, the Company adjusts its accruals in the period when actual costs become known. Costs related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of research and development expense.
12
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe the adoption of recently issued standards have or may have a material impact on its consolidated financial statements or disclosures.
ASU No. 2023-09
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes - Improvements to Income Tax Disclosures (“Topic 740”). The standard requires disaggregation of the effective rate reconciliation into standard categories, enhances disclosure of income taxes paid, and modifies other income tax-related disclosures. The standard will be effective for CorMedix beginning in annual reporting period ending December 31, 2025, with early adoption permitted. CorMedix is currently assessing the impact of adopting this guidance on its consolidated financial statements.
ASU No. 2023-07
In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (“Topic 280”). The standard requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The standard is effective for CorMedix beginning in annual reporting period ending December 31, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. CorMedix is currently assessing the impact of adopting this guidance on its consolidated financial statements.
Note 3 – Other Prepaid Expenses and Current Assets:
Other Prepaid Expenses and Current Assets
| September 30, 2024 | December 31, 2023 | |||||||
| API deposit | $ | $ | ||||||
| FDA filing fee | ||||||||
| Commercial | ||||||||
| Subscriptions | ||||||||
| Medical affairs | ||||||||
| Insurance | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
Note 4 - Accrued Expenses:
Accrued Expenses
| September 30, 2024 | December 31, 2023 | |||||||
| Accrued gross-to-net deductions | $ | $ | ||||||
| Accrued payroll and payroll taxes | ||||||||
| Manufacturing related | ||||||||
| License agreement payable (see Note 5 – Commitments and Contingencies) | ||||||||
| Professional and consulting fees | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
13
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Commitments and Contingencies:
Contingency Matters
In re CorMedix Inc. Securities Litigation, Case No. 2:21-cv-14020 (D.N.J.)
On October 13, 2021, the United States District Court for the District of New Jersey consolidated into In re CorMedix Inc. Securities Litigation, Case No. 2:21-cv 14020-JXN-CLW, two putative class action lawsuits filed on or about July 22, 2021 and September 13, 2021, respectively, and appointed lead counsel and lead plaintiff, a purported stockholder of the Company. The lead plaintiff filed a consolidated amended class action complaint on December 14, 2021, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, along with Rule 10b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933. On October 10, 2022, the lead plaintiff filed a second amended consolidated complaint that superseded the original complaints in In re CorMedix Securities Litigation. On March 21, 2024, the court denied Defendant’s motion to dismiss without prejudice and granted lead plaintiff leave to amend the complaint. On April 22, 2024, lead plaintiff filed a third amended consolidated complaint that superseded the second amended consolidated complaint. In the third amended complaint, the lead plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired CorMedix securities between October 16, 2019 and August 8, 2022, inclusive. The third amended complaint names as defendants the Company and six (6) current and former officers of CorMedix, namely Khoso Baluch, Robert Cook, Matthew David, Phoebe Mounts, John L. Armstrong, and Joseph Todisco (the “Officer Defendants” and collectively with CorMedix, the “CorMedix Defendants”). The third amended complaint alleges that the CorMedix Defendants violated Section 10(b) of the Exchange Act (and Rule 10b-5) and that the Officer Defendants violated Section 20(a). In general, the purported bases for these claims are allegedly false and misleading statements and omissions related to the NDA submissions to the FDA for DefenCath, subsequent complete response letters, as well as communications from the FDA related and directed to the Company’s contract manufacturing organization and heparin supplier. The Company intends to vigorously contest such claims. The Company filed its motion to dismiss the third amended complaint on June 6, 2024, and received from Plaintiffs their opposition to the Company’s motion to dismiss on July 22, 2024. The Company filed its response on August 21, 2024.
In re CorMedix Inc. Derivative Litigation, Case No. 2:21-cv-18493-JXN-LDW (D.N.J.)
On or about October 13, 2021, a purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled Voter v. Baluch, et al., Case No. 2:21-cv-18493-JXN-LDW (the “Derivative Litigation”). The complaint names as defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Greg Duncan, Matthew David, Phoebe Mounts and Joseph Todisco along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties, abuse of control, and waste of corporate assets against the defendants and a claim for contribution for purported violations of Sections 10(b) and 21D of the Exchange Act against certain defendants. The individual defendants intend to vigorously contest such claims. On January 21, 2022, pursuant to a stipulation between the parties, the Court entered an order staying the case while the motion to dismiss the class action lawsuit described in the foregoing paragraph is pending. The stay may be terminated before the motion to dismiss is resolved according to certain circumstances described in the stipulation available on the Court’s public docket.
On or about January 13, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled DeSalvo v. Costa, et al., Case No. 2:23-cv-00150-JXN-CLW. Defendants Paulo F. Costa, Janet D. Dillione, Greg Duncan, Alan Dunton, Myron Kaplan, Steven Lefkowitz, Joseph Todisco, Khoso Baluch, Robert Cook, Matthew David, Phoebe Mounts, and John L. Armstrong along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duty and unjust enrichment against the individual defendants.
On or about January 25, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint in the United States District Court for the District of New Jersey, in a case entitled Scullion v. Baluch, et al., Case No. 2:23-cv-00406-ES-ESK. Defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Gregory Duncan, Matthew David, and Phoebe Mounts, along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties.
14
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
On or about April 18, 2023, the Court entered an order consolidating the above-mentioned shareholder derivative complaints for all purposes, including pretrial proceedings, trial and appeal. The consolidated derivative action is entitled, In re CorMedix Inc. Derivative Litigation, C.A. No. 2:21-cv-18493-JXN-LDW. The individual defendants intend to vigorously contest the claims set forth in the consolidated derivative action. The provisions of the Order to Stay entered in the Voter Action on January 21, 2022, apply to the consolidated derivative action. On April 20, 2023, the consolidated derivative action was administratively terminated and removed from the Court’s docket until the motion to dismiss the class action is resolved and the Private Securities Litigation Reform Act, or PSLRA, stay is lifted. On April 22, 2024, the lead plaintiff in the class action filed a third amended complaint. The class action remains stayed under the PSLRA.
Demand Letter
On or about June 23, 2022, the Company’s Board received a letter demanding it investigate and pursue causes of action, purportedly on behalf of the Company, against certain current and former directors, officers, and/or other employees of the Company (the “Letter”), which the Board believes are duplicative of the claims already asserted in the Derivative Litigation. As set forth in the Board’s response to the Letter, the Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor the progress of the Derivative Litigation.
License and Assignment Agreement
In 2008, the Company entered
into a License and Assignment Agreement (the “ND License Agreement”) with ND Partners, LLP (“NDP”). Pursuant to
the ND License Agreement, NDP granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes
for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States
and foreign patents and applications (the “NDP Technology”). As consideration in part for the rights to the NDP Technology,
upon execution of the ND License Agreement, the Company paid NDP an initial licensing fee of $
Under the ND License Agreement,
the Company is required to make cash and equity payments to NDP upon the achievement of certain milestones. In 2014, a certain milestone
was achieved resulting in the release of
Beginning in the second quarter
of 2024, the license intangible asset is amortized as cost of goods sold over its estimated economic life of approximately
15
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The ND License Agreement will expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim under the ND License Agreement in a given country, or (ii) the payment of all milestone payments. Upon the expiration of the ND License Agreement in each country, we will have an irrevocable, perpetual, fully paid-up, royalty-free exclusive license to the NDP Technology in such country. The ND License Agreement also may be terminated by NDP if the Company materially breaches or defaults under the ND License Agreement and that breach is not cured within 60 days following the delivery of written notice to the Company, or by the Company on a country-by-country basis upon 60 days prior written notice in the event the Company’s Board determines not to proceed with the development of the NDP Technology. If the ND License Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.
Note 6 - Stockholders’ Equity:
Common Stock
On June 28, 2023, the Company
entered into an underwriting agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Truist Securities,
Inc., as representatives of the several underwriters named therein, relating to the issuance and sale of an aggregate of
On May 9, 2024, the Company
filed a shelf registration statement (the “2024 Shelf Registration Statement”) for the issuance of up to $
During the three and nine
months ended September 30, 2024, the Company sold an aggregate of
Restricted Stock Units
In January 2024, the
Company granted
16
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
In May 2024 and 2023,
As of September 30, 2024,
the Company has
Preferred Stock
The Company is authorized
to issue up to
| As of September 30, 2024 and December 31, 2023 | ||||||||||||
| Preferred Shares Outstanding | Liquidation Preference (Per Share) | Total Liquidation Preference | ||||||||||
| Series C-3 | $ | $ | ||||||||||
| Series E | $ | $ | ||||||||||
| Series G | $ | $ | ||||||||||
| Total | $ | |||||||||||
Stock Options
During the three and nine
months ended September 30, 2024, the Company granted ten-year qualified and non-qualified stock options covering an aggregate of
During the three and nine
months ended September 30, 2024, the Company issued
Subsequent to September 30, 2024, through the filing of this Quarterly Report on Form 10-Q for the period ended September 30, 2024, the
Company issued
During the three and nine
months ended September 30, 2024, stock-based compensation expense for stock options issued to employees, directors, officers and consultants
was $
As of September 30, 2024,
there was approximately $
17
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Expected term (in years) | ||||
| Volatility weighted average | % | |||
| Dividend yield weighted average | % | |||
| Risk-free interest rate weighted average | % | |||
| Weighted average grant date fair value of options granted during the period | $ |
The Company uses the simplified
method to calculate the expected term which takes into account the vesting term and the expiration date of the stock options. The expected
term of the stock options granted to consultants, if any, is based upon the full term of the respective option agreements. The expected
stock price volatility for the Company’s stock options is calculated based on the historical volatility of the Company’s stock
price for the expected term. The expected dividend yield of
Note 7 - Leases:
The Company entered into a
seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease
agreement, with a monthly average cost of approximately $
The Company entered into an
operating lease for its office space in Germany that began in July 2017 and terminated in June 2024. The agreement had a monthly cost
of
Operating lease expense in
the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September
30, 2024 was approximately $
At September 30, 2024, the
Company has a total operating lease liability of $
For each of the three and
nine months ended September 30, 2024, cash paid for amounts included in the measurement of lease liabilities in operating cash flows from
operating leases was $
The weighted average remaining
lease term as of September 30, 2024 and 2023 was
| 2024 (excluding the nine months ended September 30, 2024) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less imputed interest | ( |
) | ||
| Total | $ |
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and our audited 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 12, 2024.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. All statements, other than statements of historical facts, regarding management’s expectations, beliefs, goals, plans or CorMedix’s prospects should be considered forward-looking statements. Readers are cautioned that actual results may differ materially from projections or estimates due to a variety of important factors, and readers are directed to the Risk Factors identified in Part II, Item 1A of this Quarterly Report on Form 10-Q and in CorMedix’s other filings with the SEC, including its most recent 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, and a summary of which is copied below. CorMedix may not actually achieve the goals or plans described in its forward-looking statements, and such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Investors should not place undue reliance on these statements. CorMedix assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Risks Related to our Financial Position and Need for Additional Capital
| ● | We have a history of operating losses, may incur additional operating losses in the future and may never be profitable. |
| ● | We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, which may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights. |
Risks Related to the Commercialization of DefenCath
| ● | We are highly dependent on the successful commercialization of our only approved product, DefenCath. |
| ● | The successful commercialization of DefenCath will depend on obtaining coverage and reimbursement for use of DefenCath from third-party payors. |
| ● | Our current sales of DefenCath is highly concentrated with one customer. We have signed additional agreements with new customers that have not yet begun purchasing DefenCath. The failure of one or more of these customers to purchase the product may adversely impact the commercial success of DefenCath. See the risk factor under the heading “We have significant customer concentration, with a limited number of customers accounting for a large portion of our revenues” in Part II, Item 1A of this Quarterly Report on Form 10-Q for additional information. |
| ● | If we are unable to effectively retain and equip our sales force, our ability to successfully commercialize DefenCath will be harmed. |
Risks Related to the Development and Commercialization of our Other Products
| ● | Successful development and commercialization of our product candidates is uncertain. |
| ● | Final approval by regulatory authorities of our product candidates for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues. |
19
Risks Related to Healthcare Regulatory and Legal Compliance Matters
| ● | DefenCath, and our product candidates (if approved), will be subject to extensive post-approval regulation. |
| ● | Current healthcare laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. healthcare system may affect our ability to commercialize DefenCath and future marketed products profitably. |
| ● | We are subject to laws and regulations relating to privacy, data protection and the collection and processing of personal data. Failure to maintain compliance with these regulations could create additional liabilities for us. |
| ● | Clinical trials required for our new product candidates or for expanded uses of DefenCath will be expensive and time-consuming, and their outcome is uncertain. |
Risks Related to Our Business and Industry
| ● | Healthcare institutions, physicians and patients may not accept or use our products. |
| ● | Competition and technological change may make our products and technologies less attractive or obsolete. |
| ● | Healthcare policy changes, including reimbursement policies for drugs and medical devices, may have an adverse effect on our business, financial condition and results of operations. |
| ● | If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in compensation costs, our business may materially suffer. |
| ● | Changes in funding for the FDA and other government agencies or future government shutdowns or disruptions could cause delays in the submission and regulatory review of marketing applications, including supplements, which could negatively impact our business or prospects. |
| ● | If we are unable to hire additional qualified personnel or maintain existing personnel, our ability to grow our business may be harmed. |
| ● | We may not successfully manage our growth. |
| ● | We face the risk of product liability claims and the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities we might incur. |
| ● | We may be exposed to liability claims associated with the use of hazardous materials and chemicals. |
| ● | If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business. |
| ● | Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators. |
Risks Related to Our Intellectual Property
| ● | If we materially breach or default under the ND License Agreement with NDP, NDP would have the right to terminate the ND License Agreement, which would materially harm our business. |
| ● | If we do not obtain protection for and successfully defend our respective intellectual property rights, competitors may be able to take advantage of our research and development efforts to develop competing products. |
| ● |
Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights.
|
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| ● | If we infringe the rights of third parties, we could be prevented from selling products and forced to pay damages and defend against litigation. |
Risks Related to Dependence on Third Parties
| ● | If we or our collaborators are unable to manufacture our products in sufficient quantities or experience quality or manufacturing problems, we may be unable to meet demand for our products and we may lose potential revenues. |
| ● | We depend on third party suppliers and contract manufacturers for the manufacturing of DefenCath and all key active pharmaceutical ingredients (“APIs”), which subjects us to potential cost increases and manufacturing delays that are not within our control. |
| ● | We currently have one FDA approved supplier for each of our key APIs, taurolidine and heparin, respectively, as well as two currently FDA approved manufacturing sites for DefenCath finished dosage. |
| ● | Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of new development products or expanded uses of DefenCath. As our product is a new chemical entity (“NCE”) and the first and only in its class, we may depend on nationally-recognized disease management guidelines to assist in the adoption and implementation of DefenCath. |
| ● | Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading or incomplete. |
| ● | We may rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our product candidates may not advance in a timely manner or at all. |
Risks Related to Our Common Stock
| ● | Our executive officers and directors may sell shares of their stock, and these sales could adversely affect our stock price. |
| ● | Our common stock price has fluctuated considerably and is likely to remain volatile, and you could lose all or a part of your investment. |
| ● | A significant number of additional shares of our common stock may be issued at a later date, and their sale could depress the market price of our common stock. |
| ● | Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult. |
| ● | If we fail to comply with the continued listing standards of the Nasdaq Global Market, it may result in a delisting of our common stock from the exchange. |
| ● | Laws, rules and regulations relating to public companies may be costly and impact our ability to attract and retain directors and executive officers. |
| ● | Our internal control over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur. |
| ● | Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. |
| ● | We do not currently pay dividends on our common stock so any returns on our common stock may be limited to the value of our common stock. |
| ● | We are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to such companies could make our common stock less attractive to investors. |
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Overview
CorMedix Inc. (collectively, with our wholly owned subsidiaries, referred to herein as “we,” “us,” “our” or the “Company”) is a biopharmaceutical company focused on developing and commercializing therapeutic products of life-threatening diseases and conditions.
Our primary focus is on commercializing our lead product, DefenCath® (taurolidine and heparin), in the U.S. The name DefenCath is the U.S. proprietary name approved by the FDA.
DefenCath is an antimicrobial catheter lock solution (“CLS”) (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) indicated to reduce the incidence of catheter-related bloodstream infections (“CRBSI”) in adult patients with kidney failure receiving chronic hemodialysis through a central venous catheter (“CVC”). It is indicated for use in a limited and specific population of patients. CRBSIs can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the CVC, related treatment costs, as well as increased mortality. We believe DefenCath can address a significant unmet medical need.
On November 15, 2023, we announced that the FDA approved the NDA for DefenCath to reduce the incidence of CRBSI in adult patients with kidney failure receiving chronic hemodialysis through a CVC. DefenCath is indicated for use in a limited and specific population of patients. DefenCath is the first and only FDA-approved antimicrobial CLS in the U.S. and was shown to reduce the risk of CRBSI by up to 71% in a Phase 3 clinical study. As a result of the November 2023 FDA approval, CorMedix launched the product commercially in April 2024 in the inpatient setting and July 2024 in the outpatient hemodialysis setting.
DefenCath is listed in the Orange Book as having NCE exclusivity (5 years) expiring on November 15, 2028, and the Generating Antibiotic Incentives Now or GAIN exclusivity extension of the NCE exclusivity (an additional 5 years) expiring on November 15, 2033. The GAIN exclusivity extension of 5 years is the result of the January 2015 designation of DefenCath as a Qualified Infectious Disease Product (“QIDP”).
We announced on April 26, 2023 that following the submission of a duplicate New Technology Add-On Payment (“NTAP”) application in the fourth quarter of 2022 to Centers for Medicare and Medicaid Services (“CMS”), CMS has subsequently issued the Inpatient Prospective Payment System (“IPPS”) 2024 proposed rule that includes a NTAP per hospital stay for DefenCath. This NTAP represents reimbursement to inpatient facilities of 75% of the wholesaler acquisition cost (“WAC”) price per 3 mL vial, and an average utilization of 19.5 vials per hospital stay. The final IPPS rule was published in early August 2023 and subsequently amended as of October 1, 2024 to reflect the current WAC of $249.99 per 3ml vial.
On January 25, 2024, CMS determined that DefenCath should be classified as a renal dialysis service that is subject to the Medicare end-stage renal disease prospective payment system (“ESRD PPS”). The ESRD PPS provides bundled payment for renal dialysis services, but also affords a transitional drug add-on payment adjustment, or TDAPA, which provides temporary, additional payments for certain new drugs and biologicals. We submitted an application for TDAPA on January 26, 2024, and received confirmation that our application was approved on April 18, 2024. We also submitted a HCPCS application for a J-code to CMS on December 8, 2023, for DefenCath, which is relevant to billing and the TDAPA application. The HCPCS J-code for DefenCath was published by CMS on April 2, 2024. TDAPA reimbursement is calculated based on 100 percent ASP (or 100 percent of wholesale acquisition price or manufacturers’ list price, respectively, if such data is unavailable). TDAPA and post-TDAPA add-on payment adjustments for DefenCath apply for five years (with such add-on payments applying to all ESRD PPS payments for years three through five). CMS confirmed a July 1, 2024 implementation date for HCPCS and TDAPA.
We announced on June 6, 2024 that the CMS has determined that DefenCath qualified for pass-through status under the hospital Out-Patient Prospective Payment System (“OPPS”). Pass-through status provides for separate payment under Medicare Part B for the utilization of DefenCath in the outpatient ambulatory setting for a period of at least two years, and up to a maximum of three years. While vascular access for hemodialysis can be initiated in an inpatient setting, ambulatory surgical centers or vascular access centers offer a less-invasive, outpatient-based alternative for patients. We estimate that up to 100,000 HD-CVC placements occur each year, and pass-through status offers providers a separate reimbursement mechanism in this setting of care administration of DefenCath.
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Subsequent to the launch of DefenCath in April 2024, the Company announced U.S.-based multi-year commercial supply agreements consisting of a large and several mid-sized dialysis organizations. Each provider has customized an implementation plan to provide access to patients based on a variety of clinical and other factors. The Company believes the currently contracted customer base represents roughly 60% of the outpatient dialysis centers in the U.S.
We may pursue additional indications for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially significant market opportunities. While we are continuing to assess these areas, potential future indications may include use as a CLS to reduce CRBSIs in total parenteral nutrition patients using a central venous catheter and in certain oncology patients using a central venous catheter. In June 2024, we announced that the FDA provided feedback to our request to discuss development plans for additional indications for DefenCath. In response to these comments, we created and submitted three clinical protocols specifically, the post-marketing requirement of a pediatric hemodialysis (“HD”) study as an obligation under the Pediatric Research Equity Act (“PREA”) a Phase 3 study protocol to reduce the risk of central-line associated bloodstream infections (“CLABSI”) for adult patients receiving total parenteral nutrition (“TPN”) through a CVC and Expanded Access Program (“EAP”) to FDA that allows for pediatric and adult patients, utilizing a CVC for the treatment or maintenance of many serious illness, to access DefenCath to protect their central line from serious infection. The Company expects the EAP to be available to patients at the end of 2024 and to begin enrollment for the adult TPN and pediatric HD studies in early 2025.
We currently have one FDA approved source for each of our two key APIs for DefenCath, taurolidine and heparin sodium, respectively. With regards to taurolidine, we have a drug master file (“DMF”) filed with the FDA. There is a master commercial supply agreement between a third-party manufacturer which has been in place since August 2018. We are currently in the process of identifying potential alternate third-party manufacturers for taurolidine under our existing DMF. In addition, we are working with our existing manufacture to source sufficient quantities of taurolidine API to cover at least 24 months of potential future demand. With respect to heparin sodium API, we have identified an alternate third-party supplier and intend to qualify such supplier under the DefenCath NDA over the next twelve months.
We received FDA approval of DefenCath with finished dosage production from our European based contract manufacturing organization (“CMO”) Rovi Pharma Industrial Services. We believe this CMO has adequate capacity to produce the volumes needed to meet near-term projected demand for the commercial launch of DefenCath. We have also qualified Siegfried Hameln as an alternate finished dosage manufacturing site.
We announced on May 1, 2023 that the USPTO allowed our patent application directed to a locking solution composition for treating and reducing infection and flow reduction in central venous catheters. This application was granted on August 29, 2023 as U.S. Patent No. 11,738,120. Our newly granted U.S. Patent reflects the unique and proprietary formulation of our product, DefenCath, for which we received FDA approval on November 15, 2023. This patent supplements the coverage of our existing licensed U.S. Patent No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath through 2042.
As part of the DefenCath approval letter, the FDA communicated the existence of a required pediatric assessment under the PREA. PREA requires sponsors to conduct pediatric studies for, among other things, NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. FDA deferred submission of the pediatric study for DefenCath because the product is ready for approval for use in adults and the pediatric study has not been completed. We are currently obligated to conduct the study communicated in the approval letter: an open-label, two-arm (DefenCath vs. standard of care) study to assess safety and time to CRBSI in subjects from birth to less than 18 years of age with kidney failure receiving hemodialysis via a central venous catheter. We announced in June 2024 that the FDA confirmed its requirement that we conduct a study in pediatric HD patients under the PREA. Because this is a required post-marketing study, we would be required to make annual reports to the FDA. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which, if granted, provides an additional six months of exclusivity that attaches to the end of existing marketing exclusivity and patent periods for DefenCath. Depending on the timing of final report submission, DefenCath could potentially receive a total marketing exclusivity period of 10.5 years. However, there are factors that could affect whether this exclusivity is received or the duration of exclusivity, and DefenCath may or may not ultimately be eligible for the additional 0.5 years of exclusivity associated with this pediatric study.
We previously marketed and sold Neutrolin, a CLS product where we received CE-Mark approval for commercial distribution in the EU and other territories. We previously elected to discontinue sales of Neutrolin for lack of commercial viability. The winding down of our operations in the EU is nearly complete and Neutrolin sales in both the EU and the Middle East have been discontinued since 2022.
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Financial Operations Overview
Revenues
Our ability to continue to generate revenue and become profitable depends on our ability to successfully commercialize DefenCath and achieve gross profits from DefenCath sales that are greater than our ongoing operating costs. If we fail to successfully commercialize DefenCath, or any other product candidates we advance in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, could be adversely affected. Through September 30, 2024, we have funded our operations primarily through equity financings.
Cost of Revenues
Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, amortization of the license intangible asset and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance.
Research and Development Expense
Research and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock–based compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and pre-clinical studies and clinical trials; (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies; and (viii) comparative period costs include certain pre-NDA manufacturing-related costs expensed as R&D. All R&D is expensed as incurred.
The process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our future product candidates.
Development timelines, probability of success and development costs vary widely. We are currently focused on the commercialization of DefenCath in the U.S.
Selling and Marketing Expense
Selling and marketing, or S&M, expense includes the cost of salaries and related costs for personnel in sales and marketing, brand building, advocacy, market research and consulting. Selling and marketing expenses are expensed as incurred.
General and Administrative Expense
General and administrative, or G&A, expenses consist principally of salaries and related costs for personnel in executive, finance and administrative functions including payroll taxes and health insurance, stock-based compensation and travel expenses. Other general and administrative expenses include facility-related costs, insurance and professional fees for legal, patent review, consulting, and accounting services. General and administrative expenses are expensed as incurred.
Foreign Currency Exchange Transaction Gain (Loss)
Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional currency and is reported in the consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our New Jersey-based company and our subsidiaries will not be repaid and the nature of the funding advanced was of a long-term investment nature. As such, unrealized foreign exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss).
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Interest Income
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.
Interest Expense
Interest expense consists of interest incurred on financing of expenditures.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023
The following is a tabular presentation of our consolidated operating results for the three months ended September 30, 2024 and 2023 (in thousands):
| For the Three Months Ended September 30, | % Increase | For the Nine Months Ended September 30, | % Increase | |||||||||||||||||||||
| 2024 | 2023 | (Decrease) | 2024 | 2023 | (Decrease) | |||||||||||||||||||
| Revenue | $ | 11,456 | $ | - | - | $ | 12,262 | $ | - | - | ||||||||||||||
| Cost of sales | (686 | ) | - | - | (2,015 | ) | - | - | ||||||||||||||||
| Gross profit | 10,770 | - | - | 10,247 | - | - | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Research and development | (727 | ) | (2,664 | ) | (73 | )% | (2,215 | ) | (10,866 | ) | (80 | )% | ||||||||||||
| Selling and marketing | (6,749 | ) | (4,058 | ) | 66 | % | (20,473 | ) | (9,956 | ) | 106 | % | ||||||||||||
| General and administrative | (6,581 | ) | (3,745 | ) | 76 | % | (22,851 | ) | (12,467 | ) | 83 | % | ||||||||||||
| Total operating expenses | (14,057 | ) | (10,467 | ) | 34 | % | (45,539 | ) | (33,289 | ) | 37 | % | ||||||||||||
| Loss from operations | (3,287 | ) | (10,467 | ) | (69 | )% | (35,292 | ) | (33,289 | ) | 6 | % | ||||||||||||
| Interest income | 553 | 765 | (28 | )% | 2,068 | 1,762 | 17 | % | ||||||||||||||||
| Foreign exchange transaction loss | (33 | ) | (29 | ) | 14 | % | (39 | ) | (30 | ) | 28 | % | ||||||||||||
| Other Income | - | - | - | 500 | - | - | ||||||||||||||||||
| Interest expense | (10 | ) | (13 | ) | (24 | )% | (26 | ) | (28 | ) | (5 | )% | ||||||||||||
| Total other income | 510 | 723 | (29 | )% | 2,503 | 1,704 | 47 | % | ||||||||||||||||
| Loss before income taxes | (2,777 | ) | (9,744 | ) | (72 | )% | (32,789 | ) | (31,585 | ) | 4 | % | ||||||||||||
| Tax benefit | - | - | - | 1,395 | - | - | ||||||||||||||||||
| Net loss | (2,777 | ) | (9,744 | ) | (72 | )% | (31,394 | ) | (31,585 | ) | (1 | )% | ||||||||||||
| Other comprehensive (loss) income | 4 | (6 | ) | (154 | )% | (5 | ) | 2 | (401 | )% | ||||||||||||||
| Comprehensive loss | $ | (2,773 | ) | $ | (9,750 | ) | (72 | )% | $ | (31,399 | ) | $ | (31,583 | ) | (1 | )% | ||||||||
Revenues. Revenue increased by $11.5 million and $12.3 million for the three and nine months ended September 30, 2024. Revenue consists of sales of DefenCath, which was approved by the FDA in November 2023 and launched in the U.S in April 2024 and reflects the shipment of DefenCath to direct customers and specialty distributors, net of estimates for applicable variable consideration, which consists primarily of distribution service fees, prompt pay and other discounts, product returns, chargebacks, rebates and volume incentive rebates.
Cost of Revenues. Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, amortization of the license intangible asset and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance. We expect these relatively fixed costs to become less significant as a percentage of net sales with anticipated sales volume increases. Direct costs of product sales during the three and nine months ended September 30, 2024 are minimal as DefenCath sold to date, represents validation lot units previously expensed as R&D. The pre-approval validation batch product previously expensed as R&D will positively impact margins throughout 2024 or until such inventory is depleted. Indirect costs of approximately $0.6 million for the three months and $1.9 million for the nine months ended September 30, 2024, respectively, represent the proportion of salaries, benefits and insurance expenses representing excess capacity pertaining to pre-launch related activities. Included in the indirect costs previously expensed as a component of R&D were $0.2 million and $0.7 million of personnel expenses for the three and nine months ended September 30, 2023, respectively.
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Research and Development Expense. R&D expense was $0.7 million for the three months ended September 30, 2024, a decrease of $2.0 million, or 73%, from $2.7 million for the same period in 2023. For the nine months ended September 30, 2024, R&D expense was $2.2 million, compared to $10.9 million for the nine months ended September 30, 2023, a decrease of $8.7 million, or 80%. The decrease for both comparison periods was driven by the approval of DefenCath. As a result of the post FDA approval commercial operations, costs related to medical affairs and certain personnel expenses that supported R&D efforts prior to the FDA approval of DefenCath have been recognized in cost of revenue or general and administrative expense during the three and nine months ended September 30, 2024, as compared to the same period last year that were recognized in R&D. In the prior three and nine month periods, there were $0.1 million and $1.5 million, respectively, of costs related to the manufacturing of DefenCath validation batches previously expensed as a component of R&D prior to the FDA approval. These types of costs are now capitalized in inventory as DefenCath is a commercialized product. Additionally, there were $1.9 million and $5.8 million in personnel and consulting expenses for the three and nine months ended September 30, 2023, respectively, previously expensed as a component of R&D prior to FDA approval, are now expensed in cost of revenue and G&A.
Selling and Marketing Expense. S&M expense was $6.7 million for the three months ended September 30, 2024, an increase of $2.7 million, or 66%. For the nine months ended September 30, 2024, S&M expense increased $10.5 million to $20.5 million, an increase of 106%. The increase in both periods was due primarily to increased marketing efforts and new personnel, inclusive of our sales force and support for the commercial launch of DefenCath in the third quarter of 2024.
General and Administrative Expense. G&A expense was $6.6 million for the three months ended September 30, 2024, an increase of $2.9 million, or 76%, from $3.7 million for the same period in 2023. For the nine months ended September 30, 2024, G&A expense was $22.9 million, compared to $12.5 million for the nine months ended September 30, 2023, an increase of $10.4 million, or 83%. The increase for both comparison periods was driven by the approval of DefenCath. As a result of the post FDA approval commercial operations, certain personnel and consulting expenses that supported R&D efforts prior to the FDA approval of DefenCath have been recognized in G&A expense during the three months and nine months ended September 30, 2024, as compared to the same period last year that were recognized in R&D. In the prior three and nine month periods, certain personnel and consulting expenses previously expensed as a component of R&D prior to the FDA approval of $1.7 million and $5.1 million, respectively, are now expensed in G&A. Additionally, there were increases in personnel expenses of $0.7 million and $2.6 million for the three and nine months ended September 30, 2024, respectively, in preparation for support activities pertaining to commercial launch, as well as increases in legal and compliance of $0.2 million and $1.5 million and, consulting fees of $0.1 million and $0.6 million for the three and nine month periods ended September 30, 2024, respectively.
Interest Income. Interest income for the three months ended September 30, 2024 was $0.6 million a decrease of $0.2 million, or 28%, compared to $0.8 million for the same period last year, due to lower short-term investments. For the nine months ended September 30, 2024, interest income was $2.1 million compared to $1.8 million for the same period last year, an increase of $0.3 million, or 17%, attributable to higher interest rates in short-term investments during this period as compared to the same period last year.
Foreign Exchange Transaction Loss. Foreign exchange transaction losses were due to the re-measuring of transactions denominated in a currency other than our functional currency. Balances and changes were immaterial for all periods presented.
Other Income. Other income relates to a settlement with a previously utilized vendor, occurring during the nine month period ended September 30, 2024.
Interest Expense. Interest expense pertains to certain liabilities we chose to finance. Balances and changes were immaterial for all periods presented.
Other Comprehensive (Loss) Income. Unrealized foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to U.S. dollars and unrealized movements related to short-term investment are recorded in other comprehensive (loss) income. Income and (loss) is considered immaterial for all periods presented.
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Liquidity and Capital Resources
Sources of Liquidity
As a result of our R&D, S&M and G&A expenditures and the lack of substantial product sales revenue, our ongoing operations have not been profitable since our inception. During the nine months ended September 30, 2024, we received net proceeds of $13.4 million from the issuance of 2,521,121 shares of common stock under our at-the-market-issuance sales agreement, or ATM program, as compared to $12.5 million net proceeds for the same period in 2023 from the issuance of 2,866,421 shares of common stock. Also, for the same period in 2023, we received net proceeds of $42.0 million from the issuance of 9,000,093 shares of common stock and pre-funded warrants to purchase 2,500,625 shares of common stock in connection with the public offering. We may continue to be reliant on external sources of cash until we are able to generate sufficient working capital to fund operations.
In March 2024, we received $1.4 million, net of expenses, from the sale of our unused New Jersey net operating losses (“NOL”), that was eligible for sale under the State of New Jersey’s Economic Development Authority’s New Jersey Technology Business Tax Certificate Transfer program (“NJEDA Program”). The NJEDA Program allowed us to sell our available NOL tax benefits for the state fiscal year 2023 in the amount of approximately $1.5 million.
Net Cash Used in Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2024, was $45.0 million compared to $27.7 million for the same period in 2023, an increase of $17.3 million. The increase is primarily driven by an increase in trade receivables of $17.4 million and inventories of $4.5 million offset by a net increase in the change of accrued expenses and accounts payable of $3.7 million.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2024, was $21.5 million as compared to $17.7 million of net cash used in investing activities for the same period in 2023. The net cash provided during the nine months ended September 30, 2024, was mainly driven by an increase in maturity of the amount invested in short-term investments to help fund operations, partially offset by lower purchase of short-term investments in 2024 as compared to the same period in 2023.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2024, was $15.0 million as compared to $55.4 million for the same period in 2023, a decrease of $40.4 million. The decrease was mainly attributable to $42.9 million of net proceeds from a public offering completed in the three month period ended September 30, 2023 offset by increased ATM net proceeds of $0.9 million and increases in proceeds from the exercise of stock options of $1.6 million during the nine month period ended September 30, 2024.
Funding Requirements and Liquidity
Our total cash, cash equivalents and short-term investments as of September 30, 2024, was $46.0 million, excluding restricted cash of $0.1 million, compared with $76.0 million for the year ended December 31, 2023, excluding restricted cash of $0.2 million. As of September 30, 2024, $36.0 million of the Company’s common stock remains available for sale under the ATM program. Additionally, we have $100 million of remaining capacity available under our 2024 Shelf Registration Statement for the issuance of Company securities.
Because our business has not generated positive operating cash flow, we may need to raise additional capital in order to continue to fund our research and development activities, as well as to fund operations generally. Our continued operations are focused on the commercial launch of DefenCath and we can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, if additional funds are needed.
We expect to continue to fund operations from cash collections from accounts receivable, plus cash, cash equivalents and short-term investments and through capital raising sources as previously described, which may be dilutive to existing stockholders. In May 2024, we implemented an ATM program, which may be utilized to support our ongoing funding requirements. Additionally, we may enter into a credit facility in case necessary to support ongoing working capital needs. We may seek to sell additional equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness would result in increased fixed obligations and could contain covenants that would restrict our operations. Raising additional funds through strategic alliance arrangements with third parties may require significant time to complete and could force us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. Our actual cash requirements may vary materially from those now planned due to a number of factors, including any change in the timing of the commercial launch of DefenCath or the focus and direction of our research and development programs, any acquisition or pursuit of development of new product candidates, competitive and technical advances, the costs of commercializing any of our product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights.
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We expect to generate product sales for DefenCath in the U.S. In the absence of significant revenue, we may continue generating operating cash flow deficits. We will continue to use cash as we increase other activities relating to the commercialization of DefenCath and pursue business development activities.
We currently estimate that as of September 30, 2024, we have sufficient cash, cash equivalents and short-term investments to fund operations for at least twelve months from the issuance of this Quarterly Report on Form 10-Q. These estimates are based upon the Company’s base case assumptions for market penetration, average selling price, gross-to-net discounts, research and development expense and commercial infrastructure cost. Additional financing may be needed to build out our commercial infrastructure and to continue our operations. If we are unable to raise additional funds when needed, we may be forced to slow or discontinue the commercial launch of DefenCath. We may also be required to delay, scale back or eliminate some or all of our anticipated research and development programs. Each of these alternatives would likely have a material adverse effect on our business.
Contractual Obligations
We entered into a seven-year operating lease agreement in March 2020 for our office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000, commenced on September 16, 2020.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities, and revenues and expenses that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates. While our significant accounting policies are described in more detail in “Note 2 – Summary of Significant Accounting Policies and Liquidity and Uncertainties,” to our consolidated financial statements included in Item 1, “Unaudited Condensed Consolidated Financial Statements,” of this Quarterly Report on Form 10-Q, we believe that the following accounting policies require the application of significant judgments and estimates.
For the nine months period ended September 30, 2024, there were no significant changes to our critical accounting estimates as identified in our Annual Report on Form 10-K for the year ended December 31, 2023, except as noted below:
| ● | Litigation contingencies are assessed to determine if an unfavorable outcome is reasonably possible, and if so, the contingency is disclosed along with an estimate of the possible loss or range of loss. If a liability is possible or probable, but no reasonable estimation of loss can be made, we will disclose the nature of the contingency and state that such an estimate cannot be made. |
| ● | The assessment of going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least one year from the date our condensed consolidated financial statements are issued (the “look-forward period”). As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the uptake of our product in the inpatient and outpatient settings and commercial contract terms that align with our internal assumptions. Based on this assessment, as necessary or applicable, we make certain assumptions around revenue, gross profit, operating expenses, inventory build and working capital needs to the extent we deem probable those implementations can be achieved within the look-forward period. For additional information, refer to Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. |
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| ● | We account for product revenue from the sale of our product, DefenCath, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. We only recognize revenue when we believe that it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be transferred to the customer. In accordance with ASC 606, revenue is recognized at a point in time when the performance obligation is satisfied by transferring control of the promised goods or services to a customer. In accordance with our contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is received by a customer. Our customers are located in the United States and consist primarily of wholesale distributors and outpatient service providers. |
We include an estimate of variable consideration in our transaction price at the time of sale when control of the product transfers to the customer. Variable consideration includes:
| ● | Distribution service fees; |
| ● | Prompt pay and other discounts; |
| ● | Product returns; |
| ● | Chargebacks; |
| ● | Rebates; |
| ● | Volume incentive rebates. |
We assess whether or not an estimate of our variable consideration is constrained based on the probability that a significant reversal in the amount of cumulative revenue may occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. Actual amounts of consideration ultimately received may vary from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect product sales and earnings in the period such variances become known.
The specific considerations that we use in estimating certain amounts related to variable considerations are as follows:
Distribution services fees – We pay distribution service fees primarily to our wholesale distributors. We reserve these fees based on actual net sales and the contractual fee rates negotiated with the customers in the distribution channel.
Prompt pay and other discounts – We provide customers with prompt pay discounts. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are expected to be taken by our customers, so an estimate of the discount is recorded at the time of sale based on the invoice price.
Product returns – Customers have the right to return the product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than six months. An estimate for product returns is made based on: (i) data provided to us from our distributors and (ii) the estimated remaining shelf life of DefenCath previously shipped and currently being shipped to distributors.
Chargebacks – Certain covered entities, group purchasing organizations (“GPO”) and government entities will be able to purchase the product at a discounted price. The difference between the GPO, government or covered entity purchase price and the wholesale distributor purchase price will be charged back to us. We estimate the amount in chargebacks based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period.
Rebates – We are subject to negotiated discount obligations to different GPO’s, direct purchasers, other commercial organizations or government programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Our liability for these rebates consists of invoices received for claims that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter are based on expected product utilization, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel at the end of each reporting period.
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Volume Incentive Rebates – Volume incentive rebates are provided to certain customers. Rebates are owed based on predetermined volume levels and payable per the terms in the customer contracts. We estimate and record volume incentive rebates based on anticipated purchase volume with specific customers based on communications with the customer.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.
Item 4. Controls and Procedures.
Disclosure controls and procedures are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of September 30, 2024. Based on the foregoing evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART
II
OTHER INFORMATION
Item 1. Legal Proceedings.
For information regarding our legal proceedings, see Note 5, Commitments and Contingencies, included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.
Item 1A. Risk Factors.
We have significant customer concentration, with a limited number of customers accounting for a large portion of our revenues.
We derive a large portion of our revenues from a few major customers. These customers have no purchase commitments and may cancel, change or delay purchases with little or no notice or penalty. As a result of these customer concentrations, our revenue could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of these customers or any other significant customer. These customers may decide to purchase less DefenCath from us than management anticipates, may alter purchasing patterns at any time with limited notice, or may decide not to continue to purchase DefenCath at all, any of which could cause our revenue to decline materially and materially harm our financial condition and results of operations. If we are unable to diversify and grow our customer base, we will continue to be susceptible to risks associated with customer concentration.
See Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits.
The exhibit index set forth below is incorporated by reference in response to this Item 6.
| Exhibit Number |
Description | |
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| + | Indicates management contract or compensation plan. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CORMEDIX INC. | |||
| Date: October 30, 2024 | By: | /s/ Joseph Todisco | |
| Name: | Joseph Todisco | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
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