UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number 001-34673

  

CORMEDIX INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   20-5894890  
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)
     
300 Connell Drive, Suite 4200, Berkeley Heights, NJ   07922
(Address of Principal Executive Offices)   (Zip Code)

 

(908) 517-9500

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, $0.001 par value   CRMD   Nasdaq Global Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer   Smaller reporting company   
  Emerging Growth Company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares outstanding of the issuer’s common stock, as of August 8, 2022 was 41,111,277.

 

 

 

 

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

INDEX

 

PART I FINANCIAL INFORMATION 1
     
Item 1. Unaudited Condensed Consolidated Financial Statements 1
     
  Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 1
     
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021 2
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 3
     
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 5
     
  Notes to Unaudited Condensed Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
     
Item 3. Quantitative and Qualitative Disclosure About Market Risk 34
     
Item 4. Controls and Procedures 35
     
PART II OTHER INFORMATION 36
     
Item 1. Legal Proceedings 36
     
Item 1A. Risk Factors 38
     
Item 5. Other Information 38
     
Item 6. Exhibits 39
     
SIGNATURES   40
     

i

 

 

PART I
FINANCIAL INFORMATION

 

Item 1. Unaudited Condensed Consolidated Financial Statements.

 

CorMedix Inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

    June 30,
2022
    December 31,
2021
 
ASSETS            
Current assets            
Cash and cash equivalents   $ 48,929,895     $ 53,317,405  
Restricted cash     121,214       131,567  
Short-term investments     15,692,548       12,149,003  
Trade receivables    
-
      45,368  
Inventories     1,720       3,008  
Prepaid research and development expenses     28,451       51,993  
Other prepaid expenses and current assets     585,141       770,485  
Total current assets     65,358,969       66,468,829  
Property and equipment, net     1,448,305       1,474,937  
Restricted cash, long-term     102,308       102,305  
Operating lease right-of-use assets     838,121       899,505  
TOTAL ASSETS   $ 67,747,703     $ 68,945,576  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable   $ 2,496,074     $ 2,209,552  
Accrued expenses     2,648,626       3,014,156  
Current portion of operating lease liabilities     127,408       121,368  
Total current liabilities     5,272,108       5,345,076  
Operating lease liabilities, net of current portion     736,855       802,433  
TOTAL LIABILITIES     6,008,963       6,147,509  
                 
COMMITMENTS AND CONTINGENCIES (Note 4)    
 
     
 
 
                 
STOCKHOLDERS’ EQUITY                
Preferred stock - $0.001 par value:  2,000,000 shares authorized; 181,622 shares issued and outstanding at June 30, 2022 and December 31, 2021     182       182  
Common stock - $0.001 par value:  160,000,000 shares authorized; 41,106,777 and 38,086,437 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively     41,107       38,086  
Accumulated other comprehensive gain     39,519       87,130  
Additional paid-in capital     321,956,046       308,331,750  
Accumulated deficit     (260,298,114 )     (245,659,081 )
TOTAL STOCKHOLDERS’ EQUITY     61,738,740       62,798,067  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 67,747,703     $ 68,945,576  

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

1

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS
(Unaudited)

 

    For the Three Months Ended
June 30,
   

For the Six Months Ended

June 30,

 
    2022     2021     2022     2021  
Revenue:                        
Net sales   $ 21,253     $ 8,191     $ 28,889     $ 96,451  
Cost of sales     (332 )     (14,426 )     (1,859 )     (75,765 )
Gross profit (loss)     20,921       (6,235 )     27,030       20,686  
Operating Expenses:                                
Research and development     (3,209,471 )     (2,520,203 )     (5,497,058 )     (5,156,535 )
Selling, general and administrative     (5,051,895 )     (3,355,790 )     (9,802,778 )     (7,956,896 )
Total Operating Expenses     (8,261,366 )     (5,875,993 )     (15,299,836 )     (13,113,431 )
Loss From Operations     (8,240,445 )     (5,882,228 )     (15,272,806 )     (13,092,745 )
Other Income (Expense):                                
Interest income     35,342       3,340       49,094       7,014  
Foreign exchange transaction gain (loss)     18,232       (4,233 )     8,026       (9,144 )
Interest expense, including amortization of debt discount     (3,585 )     -       (8,964 )     (5,184 )
Total Other Income (Expense)     49,989       (893 )     48,156       (7,314 )
Loss before income taxes     (8,190,456 )     (5,883,121 )     (15,224,650 )     (13,100,059 )
Tax benefit     585,617       1,250,186       585,617       1,250,186  
Net Loss     (7,604,839 )     (4,632,935 )     (14,639,033 )     (11,849,873 )
Other Comprehensive Income (Loss):                                
Unrealized loss from investments     (1,316 )     (662 )     (35,488 )     (315 )
Foreign currency translation gain (loss)     (9,086 )     1,017       (12,123 )     (2,510 )
Total Other Comprehensive Income (Loss)     (10,402 )     355       (47,611 )     (2,825 )
Comprehensive Loss   $ (7,615,241 )   $ (4,632,580 )   $ (14,686,644 )   $ (11,852,698 )
Net Loss Per Common Share – Basic and Diluted
  $ (0.19 )   $ (0.12 )   $ (0.38 )   $ (0.32 )
Weighted Average Common Shares Outstanding – Basic and Diluted
    39,761,754       38,083,842       39,008,590       37,211,233  

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

2

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY

(Unaudited)

 

For the three months ended June 30, 2022

 

    Common Stock    

Preferred Stock
– Series C-3,
Series E and
Series G

   

Accumulated
Other
Comprehensive
Income

    Additional
Paid-in
   

 

 Accumulated

    Total
Stockholders’
 
    Shares     Amount     Shares     Amount     (Loss)     Capital     Deficit     Equity  
Balance at March 31, 2022     38,727,979     $ 38,728       181,622     $ 182     $ 49,921     $ 312,473,623     $ (252,693,275 )   $ 59,869,179  
                                                                 
Stock issued in connection with ATM sale of common stock, net     2,378,798       2,379       -       -       -       8,408,777       -       8,411,156  
Stock-based compensation     -       -       -       -       -       1,073,646       -       1,073,646  
Other comprehensive loss     -       -       -       -       (10,402 )     -       -       (10,402 )
Net loss     -       -       -       -       -       -       (7,604,839 )     (7,604,839 )
Balance at June 30, 2022     41,106,777     $ 41,107       181,622     $ 182     $ 39,519     $ 321,956,046     $ (260,298,114 )   $ 61,738,740  

 

For the six months ended June 30, 2022

 

    Common Stock  

Preferred Stock
– Series C-3,
Series E and
Series G

   

Accumulated
Other
Comprehensive
Income

    Additional
Paid-in
   

 

 


Accumulated

    Total
Stockholders’
 
    Shares     Amount     Shares     Amount     (Loss)     Capital     Deficit     Equity  
Balance at December 31, 2021     38,086,437     $ 38,086       181,622     $ 182     $ 87,130     $ 308,331,750     $ (245,659,081 )   $ 62,798,067  
                                                                 
Stock issued in connection with ATM sale of common stock, net     3,020,340       3,021       -       -       -       11,412,351       -       11,415,372  
Stock-based compensation     -       -       -       -       -       2,211,945       -       2,211,945  
Other comprehensive loss     -       -       -       -       (47,611 )     -       -       (47,611 )
Net loss     -       -       -       -       -       -       (14,639,033 )     (14,639,033 )
Balance at June 30, 2022     41,106,777     $ 41,107       181,622     $ 182     $ 39,519     $ 321,956,046     $ (260,298,114 )   $ 61,738,740  

 

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 June 30, 2021

 

    Common Stock    

Preferred Stock
– Series C-3,
Series E and
Series G

   

Accumulated
Other
Comprehensive
Income

    Additional
Paid-in
   

 

 Accumulated

    Total Stockholders’  
    Shares     Amount     Shares     Amount     (Loss)     Capital     Deficit     Equity  
Balance at March 31, 2021     38,046,092     $ 38,046       181,622     $ 182     $ 98,826     $ 304,843,806     $ (224,665,793 )   $ 80,315,067  
                                                                 
Stock issued in connection with warrants exercised, cash     7,611       7       -      
-
     
-
      39,950      
-
      39,957  
Stock issued in connection with options exercised     32,734       33       -      
-
     
-
      137,002      
-
      137,035  
Stock-based compensation     -      
-
      -      
-
     
-
      1,010,066      
-
      1,010,066  
Other comprehensive income     -      
-
      -      
-
      355      
-
     
-
      355  
Net loss     -      
-
      -      
-
     
-
     
-
      (4,632,935 )     (4,632,935 )
Balance at June 30, 2021     38,086,437     $ 38,086       181,622     $ 182     $ 99,181     $ 306,030,824     $ (229,298,728 )   $ 76,869,545  

 

For the six months ended June 30, 2021

 

    Common Stock    

Preferred Stock
– Series C-3,
Series E and
Series G

   

Accumulated
Other
Comprehensive
Income

    Additional
Paid-in
   

 

 Accumulated

    Total Stockholders’  
    Shares     Amount     Shares     Amount     (Loss)     Capital     Deficit     Equity  
Balance at December 31, 2020     33,558,096     $ 33,558       241,623     $ 242     $ 102,006     $ 261,536,061     $ (217,448,855 )   $ 44,223,012  
                                                                 
Stock issued in connection with ATM sale of common stock, net     3,737,862       3,738       -      
-
     
-
      41,451,892      
-
      41,455,630  
Stock issued in connection with warrants exercised, cash     31,407       31       -      
-
     
-
      164,855      
-
      164,886  
Stock issued in connection with warrants exercised, cashless     70,269       70       -      
-
     
-
      (70 )    
-
     
-
 
Stock issued in connection with options exercised     32,734       33       -      
-
     
-
      137,002      
-
      137,035  
Conversion of Series G preferred shares to common stock     556,069       556       (10,001 )     (10 )    
-
      (546 )    
-
     
-
 
Conversion of Series C-3 preferred shares to common stock     100,000       100       (50,000 )     (50 )    
-
      (50 )    
-
     
-
 
Stock-based compensation     -      
-
      -      
-
     
-
      2,741,680      
-
      2,741,680  
Other comprehensive loss     -      
-
      -      
-
      (2,825 )    
-
     
-
      (2,825 )
Net loss     -      
-
      -      
-
     
-
     
-
      (11,849,873 )     (11,849,873 )
Balance at June 30, 2021     38,086,437     $ 38,086       181,622     $ 182     $ 99,181     $ 306,030,824     $ (229,298,728 )   $ 76,869,545  

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

4

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

   

For the Six Months Ended

June 30,

 
    2022     2021  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (14,639,033 )   $ (11,849,873 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation     2,211,945       2,741,680  
Change in right-of-use assets     61,383       56,350  
Depreciation     40,819       24,277  
Changes in operating assets and liabilities:                
Decrease in trade receivables     43,738       72  
Decrease in inventory     1,288       75,737  
Decrease in prepaid expenses and other current assets     208,535       265,019  
Increase (Decrease) in accounts payable     287,011       (184,681 )
Decrease in accrued expenses     (362,604 )     (857,924 )
Decrease in operating lease liabilities     (59,539 )     (52,983 )
Net cash used in operating activities     (12,206,457 )     (9,782,326 )
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of short-term investments     (14,279,033 )     (7,595,280 )
Maturity of short-term investments     10,700,000       6,879,685  
Purchase of equipment     (14,187 )     (18,698 )
Net cash used in investing activities     (3,593,220 )     (734,293 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from sale of common stock from at-the-market program, net     11,415,372       41,455,630  
Proceeds from exercise of warrants    
-
      164,886  
Proceeds from exercise of stock options    
-
      137,035  
Net cash provided by financing activities     11,415,372       41,757,551  
Foreign exchange effect on cash     (13,555 )     (4,500 )
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (4,397,860 )     31,236,432  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD     53,551,277       42,096,783  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD   $ 49,153,417     $ 73,333,215  
Cash paid for interest   $ 8,964     $ 5,184  
Supplemental Disclosure of Non-Cash Financing Activities:                
Conversion of Series G preferred stock to common stock   $
-
    $ 10  
Conversion of Series C-3 preferred stock to common stock   $
-
    $ 50  
Unrealized loss from investments   $ (35,488 )   $ (315 )

 

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”) is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases. The Company was incorporated in the State of Delaware on July 28, 2006 and its principal executive office is located in Berkeley Heights, New Jersey. In 2013, the Company formed a wholly-owned subsidiary, CorMedix Europe GmbH and in May 2020, the Company formed a wholly-owned Spanish subsidiary, CorMedix Spain, S.L.U.

 

The Company’s primary focus is to develop its lead product candidate, DefenCath™, for potential commercialization in the United States, or U.S., and other key markets. The Company has in-licensed the worldwide rights to develop and commercialize DefenCath/Neutrolin®, which is a novel anti-infective solution (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) intended for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters, or CVCs, in clinical settings such as hemodialysis, total parenteral nutrition, and oncology. Infection and thrombosis represent key complications among hemodialysis, total parenteral nutrition and cancer patients with CVCs. These complications can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for intravenous, or IV, antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the CVC, related treatment costs and increased mortality. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug Administration, or FDA, while the name Neutrolin is currently used in the European Union, or EU, and other territories where the Company has received CE-Mark approval for the commercial distribution of Neutrolin as a catheter lock solution, or CLS, regulated as a medical device.

 

In January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood stream infections, or CRBSIs, in patients with end stage renal disease receiving hemodialysis through a CVC. CRBSIs and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to the five years granted for a New Chemical Entity, or NCE, upon approval of a New Drug Application, or NDA. In addition, in January 2015, the FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides the Company with the opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority review of the marketing application.

 

In December 2015, the Company launched its Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, in patients with hemodialysis catheters in the U.S. The clinical trial was designed to demonstrate the safety and effectiveness of DefenCath compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tissue plasminogen activating factor, or tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.

 

As previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study that occurred through early December 2017. Based on these first 28 cases, there was a highly statistically significant 72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a total of 795 subjects. In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly statistically significant (p=0.0006), with a good safety profile.

 

6

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

The FDA granted the Company’s request for a rolling submission and review of the NDA which is designed to expedite the approval process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial with a broad range of subjects and investigation sites with procedures to ensure trial quality that has demonstrated a clinically meaningful and statistically very persuasive effect on prevention of a disease with potentially serious outcome.

 

In March 2020, the Company began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted the Company’s request for priority review, which provides for a six-month review period instead of the standard ten-month review period. As announced in March 2021, the FDA informed in its Complete Response Letter, or CRL, to the Company that it could not approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after a review of records requested by the FDA and provided by the contract manufacturing organization, or CMO. Additionally, the FDA required a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications.

 

In April 2021, the Company and the CMO met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to the Company and the Post-Application Action Letter, or PAAL, received by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol for the manual extraction study identified in the CRL, which has been successfully completed. Addressing the FDA’s concerns regarding the qualification of the filling operation necessitated adjustments in the process and generation of additional data on operating parameters for manufacture of DefenCath. The Company and the CMO determined that additional process qualification was needed with subsequent validation to address these issues. The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with the Company’s request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. The Company believes that LPAD will provide additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a CVC.

 

On February 28, 2022, the Company resubmitted the NDA for DefenCath to address the CRL issued by the FDA. In parallel, the Company’s third-party manufacturer submitted responses to the deficiencies identified at the manufacturing facility in the PAAL issued by the FDA concurrently with the CRL. The FDA had stated that it expected all corrections to facility deficiencies to be complete at the time of resubmission so that all corrective actions may be verified during an onsite evaluation of the manufacturing facility in the next review cycle. On March 28, 2022, the Company announced that the resubmission of the NDA for DefenCath has been accepted for filing by the FDA. The FDA considers the resubmission as a complete, Class 2 response with a six-month review cycle. The CMO has notified the Company that an onsite inspection by the FDA was conducted that resulted in FORM FDA 483 observations that are being addressed. The CMO submitted responses to the inspectional observations along with a corrective action plan and requested a meeting with the FDA to discuss. The Company also has been notified by its supplier of heparin, an active pharmaceutical ingredient, or API, for DefenCath, that an inspection by the FDA for an unrelated API, has resulted in a Warning Letter due to deviations from good manufacturing practices for the unrelated API.

 

On August 8, 2022, the Company announced receipt of a second CRL from the FDA regarding its DefenCath NDA. The FDA stated that the DefenCath NDA cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There were no other requirements identified by the FDA for the Company prior to resubmission of the NDA. As part of the NDA review process, the FDA has also notified the Company that although the tradename DefenCath was conditionally approved, the FDA now has identified potential confusion with another pending product name that is also under review. The ultimate acceptability of the Company’s proposed tradename is dependent upon which application is approved first. As a precaution, the Company has already submitted an alternative proprietary name to the FDA which will undergo review.

 

The Company also announced that it has finalized an agreement with Alcami Corporation, or Alcami, a U.S. based contract manufacturer with proven capabilities for manufacturing commercial sterile parenteral drug products. Alcami will function as a manufacturing site for DefenCath for the U.S. market, and the Company expects to be able to submit a supplement to its NDA application around the end of the first quarter of 2023 to request approval from FDA for DefenCath manufacturing. As part of the technology transfer and validation of the manufacturing process at Alcami, the Company also expects to qualify an alternate source of heparin API sourced from a major U.S. supplier.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

The Company intends to pursue additional indications for DefenCath use as a CLS in populations with an unmet medical need that also represent potentially significant market opportunities. While the Company is 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 oncology patients using a central venous catheter.

 

In addition to DefenCath, the Company has sponsored a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. The Company intends to seek one or more strategic partners or other sources of capital to help develop and commercialize taurolidine for the treatment of neuroblastoma in children. The Company is also evaluating opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management. The Company will seek to establish development/commercial partnerships as these programs advance.

 

The Company was granted a deferral by the FDA under the Pediatric Research Equity Act, or PREA, that requires sponsors to conduct pediatric studies for 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. The Company has made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which if granted would provide an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period of 10.5 years, including exclusivity pursuant to NCE and QIDP.

 

The FDA regards taurolidine as a new chemical entity and therefore, it is currently an unapproved new drug. In the future, the Company may pursue product candidates that would involve devices impregnated with taurolidine, and the Company believes that at the current time such products would be combination products subject to device premarket submission requirements (while subject also, under review by the FDA, to the standards for drug approvability). Consequently, given that there is no appropriate predicate medical device currently marketed in the U.S. on which a 510(k) approval process could be based and that taurolidine is not yet approved in any application, the Company anticipates that it would be required to submit a premarket approval application (“PMA”) for marketing authorization for any medical device indications that we may pursue for devices containing taurolidine. In the event that an NDA for DefenCath is approved by the FDA, the regulatory pathway for these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de novo Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness.

 

In the EU, Neutrolin is regulated as a Class 3 medical device. In July 2013, the Company received CE Mark approval for Neutrolin and commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients using a tunneled, cuffed central venous catheter for vascular access in December 2013. To date, Neutrolin is registered and may be sold in certain European Union countries for such treatment.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

In September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin to include use in oncology patients receiving chemotherapy, IV hydration and IV medications via CVC for the EU. In December 2014, the Company received approval from the Hessian District President in Germany to expand the label for these same expanded indications. The expansion also adds patients receiving medication and IV fluids via CVC in intensive or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved.

 

In September 2019, the Company’s registration with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, the Company cannot sell Neutrolin in Saudi Arabia and does not intend to pursue renewal of the Company’s registration with the SFDA.

 

As announced in May 2022, the Company has begun the process of winding down its operations in the EU and expects to discontinue Neutrolin sales in both the EU and the Middle East.

 

Note 2 — Summary of Significant Accounting Policies:

 

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 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, 2022 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 29, 2022. The accompanying consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements included in such Form 10-K.

 

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. As of June 30, 2022, the Company had an accumulated deficit of $260.3 million, and incurred net losses of $7.6 million and $4.6 million for the three months ended June 30, 2022 and 2021, respectively, and $14.6 million and $11.8 million for the six months ended June 30, 2022 and 2021, respectively. Based on the Company’s current development plans for DefenCath/Neutrolin in both the U.S. and foreign markets and its other operating requirements, the Company’s existing cash and cash equivalents and short-term investments at June 30, 2022 are expected to fund its operations at least through the third quarter of 2023.

 

The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, potential strategic transactions or out-licensing of its products in order to commercially launch DefenCath upon NDA approval and until profitability is achieved, if ever. Management can provide no assurances that such financing or strategic relationships will be available on acceptable terms, or at all. As of June 30, 2022, the Company has $38.2 million available under its At-the-Market Issuance Sales Agreement (the “ATM program”) and has $150.0 million available under its current shelf registration for the issuance of equity, debt or equity-linked securities (see Note 3).

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

The Company’s operations are subject to a number of other factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s product candidates; the ability to obtain regulatory approval to market the Company’s products; 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.

 

The COVID-19 pandemic and government measures taken in response to the pandemic have had a significant impact, both direct and indirect, on businesses and commerce. In response to the COVID-19 pandemic, “shelter in place” orders and other public health guidance measures were implemented across much of the United States, Europe and Asia, including in the locations of the Company’s offices, clinical trial sites, key vendors and partners. A resurgence of the COVID-19 pandemic may impact the Company’s program timelines which could materially and adversely affect its business, financial conditions and results of operations.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Reclassifications

 

Certain reclassifications were made to the prior year’s amounts to conform to the 2022 presentation. Non-cash lease expense, as presented on the Company’s condensed consolidated statement of cash flows for the six months ended June 30, 2021, is now presented as change in right-of-use assets and change in operating lease liabilities.

 

Basis of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company, CorMedix Europe GmbH and CorMedix Spain, S.L.U., its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Financial Instruments

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. 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.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

The following table is the reconciliation of the accounting standard that modifies certain aspects of the recognition, measurement, presentation and disclosure of financial instruments as shown on the Company’s condensed consolidated statement of cash flows:

 

    June 30,
2022
    December 31,
2021
 
Cash and cash equivalents   $ 48,929,895     $ 53,317,405  
Restricted cash     223,522       233,872  
Total cash, cash equivalents and restricted cash   $ 49,153,417     $ 53,551,277  

 

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 and equity securities 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 the condensed consolidated statement of operations. Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). For declines in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to other income (expense), net. 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 June 30, 2022 or December 31, 2021.

 

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 June 30, 2022 and December 31, 2021, all of the Company’s investments had contractual maturities of less than one year. As of June 30, 2022, no allowance for credit loss was recorded. The following table summarizes the amortized cost, unrealized gains and losses and the fair value at June 30, 2022 and December 31, 2021:

 

 

  Amortized
Cost
    Gross
Unrealized
Losses
    Gross
Unrealized
Gains
    Fair Value  
June 30, 2022:                        
Money Market Funds included in Cash Equivalents   $ 6,950,998     $ (695 )   $     -     $ 6,950,303  
U.S. Government Agency Securities     9,122,516       (14,117 )     -       9,108,399  
Corporate Securities     4,015,563       (17,398 )     -       3,998,165  
Commercial Paper     2,594,919       (8,935 )     -       2,585,984  
Subtotal     15,732,998       (40,450 )     -       15,692,548  
Total June 30, 2022   $ 22,683,996     $ (41,145 )   $ -     $ 22,642,851  
December 31, 2021:                                
Money Market Funds included in Cash Equivalents   $ 10,462,877     $ (23 )   $ -     $ 10,462,854  
U.S. Government Agency Securities     2,806,597       (1,261 )     -       2,805,336  
Corporate Securities     7,548,493       (4,467 )     1       7,544,027  
Commercial Paper     1,799,548       -       92       1,799,640  
Subtotal     12,154,638       (5,728 )     93       12,149,003  
Total December 31, 2021   $ 22,617,515     $ (5,751 )   $ 93     $ 22,611,857  

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Fair Value Measurements

 

The Company’s financial instruments recorded in the condensed 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:

 

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.

 

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:

 

  Carrying
Value
    Level 1     Level 2     Level 3  
June 30, 2022:                        
Money Market Funds and Cash Equivalents   $ 6,950,303     $ 6,950,303     $ -     $ -  
U.S. Government Agency Securities     9,108,399       9,108,399       -      
 
 
Corporate Securities     3,998,165       -       3,998,165       -  
Commercial Paper     2,585,984       -       2,585,984       -  
Subtotal     15,692,548       9,108,399       6,584,149     $ -  
Total June 30, 2022   $ 22,642,851     $ 16,058,702     $ 6,584,149     $ -  
December 31, 2021:                                
Money Market Funds and Cash Equivalents   $ 10,462,854     $ 10,462,854     $ -     $ -  
U.S. Government Agency Securities     2,805,336       2,805,336       -          
Corporate Securities     7,544,027       -       7,544,027       -  
Commercial Paper     1,799,640       -       1,799,640       -  
Subtotal     12,149,003       2,805,336       9,343,667       -  
Total December 31, 2021   $ 22,611,857     $ 13,268,190     $ 9,343,667     $ -  

 

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Foreign Currency Translation and Transactions

 

The condensed consolidated financial statements are presented in U.S. Dollars, or USD, the reporting currency of the Company. For the financial statements of the Company’s foreign subsidiaries, whose functional currency is the EURO, foreign currency asset and liability amounts, are translated into USD at end-of-period exchange rates. Foreign currency income and expenses are translated at average exchange rates in effect during the period in which the income and expenses were recognized. Translation gains and losses are included in other comprehensive income (loss). The Company had a foreign currency translation loss of $9,000 and a gain of $1,000 for the three months ended June 30, 2022 and 2021, respectively.

 

The Company has intercompany loans between the parent company based in New Jersey and its German subsidiary. The intercompany loans outstanding are not expected to be repaid in the foreseeable future and unrealized foreign exchange movements related to long-term intercompany loans are recognized in other comprehensive income (loss).

 

Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than the functional currency of the entity recording the transaction.

 

Restricted Cash

 

As of June 30, 2022 and December 31, 2021, the Company has restricted cash in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 4).  The Company was required by the District Courts of Mannheim to provide security deposit to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company furthermore had to provide a deposit for the first and second instances, respectively, in connection with the unfair competition proceedings in Cologne. As of June 30, 2022 and December 31, 2021, restricted cash in connection with the patent and utility model infringement proceedings were $121,000 and $132,000, respectively.

 

As of June 30, 2022, the Company had $102,000 in long-term restricted cash for a lease security deposit.

 

Prepaid Research and Development and Other Prepaid Expenses

 

Prepaid expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing, preclinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period using the straight-line method.

 

Inventories

 

Inventories are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods, if any, for the DefenCath/Neutrolin product. Inventories consist of the following:

 

    June 30,
2022
    December 31,
2021
 
Finished goods   $ 1,720     $ 3,008  

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Leases

 

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use, or ROU, assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion, on the condensed consolidated balance sheet.

 

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.

 

Accrued Expenses

 

Accrued expenses consist of the following:

 

    June 30,
2022
    December 31,
2021
 
Professional and consulting fees   $ 589,885     $ 311,408  
Accrued payroll and payroll taxes     1,787,260       2,508,398  
Manufacturing development related     186,539       99,614  
Other     84,942       94,736  
Total   $ 2,648,626     $ 3,014,156  

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers.” ASC 606 prescribes a five-step model for recognizing revenue which includes (i) identifying contracts with customers; (ii) identifying performance obligations; (iii) determining the transaction price; (iv) allocating the transaction price; and (v) recognizing revenue.

 

The Company recognizes net sales upon shipment of product and upon meeting the five-step model prescribed by ASC 606 outlined above.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Loss Per Common Share

 

Basic loss per common share excludes any potential dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. However, since their effect is anti-dilutive, the Company has excluded potentially dilutive shares. The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

 

    Six Months Ended
June 30,
 
    2022     2021  
    (Number of Shares of Common Stock Issuable)  
Series C non-voting preferred stock     4,000       4,000  
Series E non-voting preferred stock     391,953       391,953  
Series G non-voting preferred stock     5,004,069       5,004,069  
Shares issuable for payment of deferred board compensation     48,909       48,909  
Shares underlying outstanding warrants     56,455       56,455  
Shares underlying outstanding stock options     4,433,285       3,765,746  
Restricted stock units     207,469       -  
Total potentially dilutive shares     10,146,140       9,271,132  

 

Stock-Based Compensation

 

Share-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. For options with market-based vesting, share-based compensation cost is measured at grant date using the Monte Carlo option pricing model and the expense is recognized over the derived service period. For each restricted stock units, the fair value was estimated to be the closing price of the Company’s common stock on each date of grant.

 

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, facilities expenses and costs related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval. The Company accrues for costs incurred as the services are being provided by monitoring the status of the activities and the invoices received from its external service providers. 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.

 

Note 3 — Stockholders’ Equity:

 

Common Stock

 

In November 2020, the Company filed a shelf registration statement (the “2020 Shelf Registration”), under which the Company could issue and sell up to an aggregate of $100.0 million of shares of its common stock. On November 27, 2020, the Company entered into an Amended and Restated At Market Issuance Sales Agreement (“Amended Sales Agreement”) with FBR Securities, Inc. (formerly known as B. Riley FBR Inc.) and Needham & Company, LLC, as sales agents. The Amended Sales Agreement relates to the sale of shares of the Company’s common stock under its at-the-market program (“ATM program”), of which the Company may issue and sell common stock from time to time through the sales agents, subject to limitations imposed by the Company and subject to the sales agents’ acceptance, such as the number or dollar amount of shares registered under the 2020 Shelf Registration to which the offering relates. The sales agents are entitled to a commission of up to 3% of the gross proceeds from the sale of common stock sold under the ATM program. The Company allocated to its ATM program an aggregate of $50.0 million out of the $100.0 million total under the 2020 Shelf Registration leaving a balance of $50.0 million as of June 30, 2021.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

On August 12, 2021, the Company entered into an At Market Issuance Sales Agreement with Truist Securities, Inc. and JMP Securities LLC, as sales agents, pursuant to which the Company may sell, from time to time, an aggregate of up to $50.0 million, which was the remaining balance under the 2020 Shelf Registration, of its common stock through the sales agents under its ATM program, subject to limitations imposed by the Company and subject to the sales agent’s acceptance, such as the number or dollar amount of shares registered under the 2020 Shelf Registration to which the offering relates. The sales agents are entitled to a commission of up to 3% of the gross proceeds from the sale of common stock sold under the ATM program. Additionally, on August 12, 2021, the Company filed a new shelf registration statement (the “2021 Shelf Registration”) for the issuance of up to $150.0 million of shares of its common stock.

 

During the six months ended June 30, 2022 and 2021, the Company sold an aggregate of 3,020,340 and 3,737,862 shares of its common stock under the ATM program, respectively, and realized net proceeds of $11,415,000 and $41,456,000, respectively.

 

As of June 30, 2022, the Company has $38.2 million available under its ATM program with Truist Securities, Inc. and JMP Securities LLC, and it has $150.0 million available under the 2021 Shelf Registration for the issuance of equity, debt or equity-linked securities.

 

During the six months ended June 30, 2021, the Company issued an aggregate of 656,069 shares of its common stock upon conversion of 50,000 Series C-3 preferred shares by an unrelated party and 10,001 Series G preferred shares by a related party.

 

During the six months ended June 30, 2021, the Company issued an aggregate of 31,407 shares of its common stock, upon cash exercise of warrants, resulting in net proceeds to the Company of $165,000.

 

During the six months ended June 30, 2021, the Company issued an aggregate of 70,269 shares of its common stock upon cashless exercise of 95,286 warrants.

 

During the six months ended June 30, 2021, the Company issued an aggregate of 32,734 shares of its common stock upon exercise of stock options, resulting in net proceeds to the Company of $137,000.

 

Preferred Stock

 

The Company is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. The Company’s board of directors (the “Board”) has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares of preferred stock authorized and designated by the Company’s Board, all with par value of $0.001 per share, the following are outstanding:

 

    As of June 30, 2022     As of December 31, 2021  
    Preferred
Shares
Outstanding
    Liquidation
Preference
(Per Share)
    Total
Liquidation
Preference
    Preferred
Shares
Outstanding
    Liquidation
Preference
(Per Share)
    Total
Liquidation
Preference
 
Series C-3     2,000     $ 10.00     $ 20,000       2,000     $ 10.00     $ 20,000  
Series E     89,623     $ 49.20     $ 4,409,452       89,623     $ 49.20     $ 4,409,452  
Series G     89,999     $ 187.36     $ 16,862,213       89,999     $ 187.36     $ 16,862,213  
Total     181,622             $ 21,291,665       181,622             $ 21,291,665  

 

During the six months ended June 30, 2021, 50,000 Series C-3 preferred shares was converted into 100,000 shares of the Company’s common stock by an unrelated party and 10,001 Series G preferred shares was converted into 556,069 shares of the Company’s common stock by a related party.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Stock Options

 

During the six months ended June 30, 2022 and 2021, the Company granted ten-year qualified and non-qualified stock options covering an aggregate of 1,377,850 and 1,389,700 shares of the Company’s common stock under the 2019 Stock Incentive Plan, respectively. The weighted average exercise price of these options is $3.73 and $8.48 per share, respectively.

 

During the three and six months ended June 30, 2022, total compensation expense for stock options issued to employees, directors, officers and consultants was $1,024,000 and $2,162,000, respectively, and $1,010,000 and $2,742,000 for the three and six months ended June 30, 2021, respectively.

 

As of June 30, 2022, there was approximately $5,962,000 in total unrecognized compensation expense related to stock options granted, which expense will be recognized over an expected remaining weighted average period of 1.6 years.

 

The fair value of each stock option award estimated on the grant date is determined using the Black-Scholes option pricing model. The following assumptions were used for the Black-Scholes option pricing model for the stock options granted during the six months ended June 30, 2022:

 

Expected term   5 years  
Volatility weighted average     101.17 %
Dividend yield weighted average     0.0 %
Risk-free interest rate weighted average     2.30 %
Weighted average grant date fair value of options granted during the period   $ 2.82  

 

The Company estimated the expected term of the stock options granted based on anticipated exercises in future periods. 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. The expected dividend yield of 0.0% reflects the Company’s current and expected future policy for dividends on the Company’s common stock. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards which is 5 years for employees and 10 years for non-employees.

 

Restricted Stock Units

 

On May 10, 2022, the Company granted 207,469 restricted stock units (“RSUs”) to its chief executive officer under its 2019 Omnibus Stock Incentive Plan with a weighted average grant date fair value of $3.38 per share. The fair market value of the RSUs was estimated to be the closing price of the Company’s common stock on the date of grant. These RSUs vest as to 50% on the first anniversary of the grant date, as to 30% on the second anniversary of the grant date, and as to 20% on the third anniversary of the grant date, subject to continued service as an employee or consultant through the applicable vesting date.

 

During the three and six months ended June 30, 2022, compensation expense recorded for the RSUs was $50,000. Unrecognized compensation expense for these RSUs amounted to $651,000. The expected weighted average period for the expense to be recognized is 1.6 years.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Warrants

 

During the six months ended June 30, 2021, the Company issued an aggregate of 31,407 shares of its common stock, upon cash exercise of warrants, resulting in net proceeds to the Company of $165,000. There were no cash exercises of warrants during the six months ended June 30, 2022.

 

During the six months ended June 30, 2021, the Company issued an aggregate of 70,269 shares of its common stock upon cashless exercise of 95,286 warrants. There were no cashless exercises of warrants during the six months ended June 30, 2022.

 

As of June 30, 2022, there were 56,455 outstanding warrants with a weighted average exercise price of $5.25 per share and a weighted average remaining contractual life of 0.11 years.

 

Note 4 — Commitments and Contingencies:

 

Contingency Matters

 

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-cv014020-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. The complaint names as defendants the Company, Khoso Baluch, Matthew David, Phoebe Mounts, John L. Armstrong, Robert Cook, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, and Greg Duncan, as well as two underwriters of the Company’s secondary stock offering, B. Riley Securities, Inc. and Needham & Company, LLC. The purported bases for these claims are alleged misstatements and omissions in connection with the NDA submitted to the FDA for DefenCath, and the subsequent notification by the FDA that the NDA could not be approved in its present form. The lead plaintiff purports to assert the Exchange Act claims on behalf of persons that purchased or otherwise acquired shares of the Company’s securities between October 16, 2019, and September 6, 2021, and purports to assert the Securities Act claims on behalf of persons that purchased shares of the Company’s securities pursuant or traceable to a secondary offering of stock that commenced on November 27, 2020. The Company intends to vigorously contest such claims and filed a motion to dismiss the current complaint in full, with prejudice, on February 21, 2022. As of this filing, the parties are adhering to the current schedule set by the Court: the Company and the other defendants refiled their motions to dismiss on March 28, 2022, the lead plaintiff filed an opposition to the Defendants’ motions to dismiss on April 27, 2022 and Defendants filed their reply brief on May 26, 2022.

 

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, and Phoebe Mounts 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 Company intends 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.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

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 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. The Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor the progress of the Derivative Litigation.

 

On September 9, 2014, the Company filed in the District Court of Mannheim, Germany, a patent infringement action against TauroPharm GmbH and Tauro-Implant GmbH as well as their respective CEOs (the “Defendants”) claiming infringement of the Company’s European Patent EP 1 814 562 B1, which was granted by the European Patent Office (the “EPO”) on January 8, 2014 (the “Prosl European Patent”).  The Prosl European Patent covers the formulation of taurolidine and citrate with low dose heparin in a catheter lock solution for maintaining patency and preventing infection in hemodialysis catheters. In this action, the Company claims that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent they are covered by the claims of the Prosl European Patent.  The Company believes that its patent is sound and is seeking injunctive relief and raising claims for information, rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step.  The Company cannot predict the ultimate outcome of either of these related matters. At present, the EPO has revoked the Prosl European Patent as invalid, and the Company has filed an appeal, which is currently pending.

 

In the same complaint against the same Defendants, the Company also alleged an infringement (requesting the same remedies) of ND Partners’ utility model DE 20 2005 022 124 U1 (the “Utility Model”), which the Company believes is fundamentally identical to the Prosl European Patent in its main aspects and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims were tried separately. TauroPharm has filed a cancellation action against the Utility Model before the German Patent and Trademark Office (the “German PTO”) based on the similar arguments as those in the opposition against the Prosl European Patent.

 

The Court issued its decisions on May 8, 2015, staying both proceedings. In its decisions, the Court found that the commercialization by TauroPharm in Germany of its TauroLock catheter lock solutions Hep100 and Hep500 infringes both the Prosl European Patent and the Utility Model and further that there is no prior use right that would allow TauroPharm to continue to make, use or sell its product in Germany. However, the Court declined to issue an injunction in favor of the Company that would preclude the continued commercialization by TauroPharm based upon its finding that there is a sufficient likelihood that the EPO, in the case of the Prosl European Patent, or the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically, the Court noted the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such, the District Court determined that it will defer any consideration of the request by the Company for injunctive and other relief until such time as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and the Utility Model.

 

The opposition proceeding against the Prosl European Patent before the EPO is ongoing. The EPO held a hearing in the opposition proceeding on November 25, 2015. However, the EPO did not issue a decision at the end of the hearing but adjourned the matter due to the fact that the panel was of the view that Claus Herdeis, one of the managing directors of TauroPharm, had to be heard as a witness in a further hearing in order to close some gaps in the documentation presented by TauroPharm as regards the publication of the prior art.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

The German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated with adding heparin to a taurolidine based solution. The Company filed an appeal against the ruling on September 7, 2016. An oral hearing was held on September 17, 2019 in which the German Federal Patent Court affirmed the first instance decision that the Utility Model was invalid. The decision has only a declaratory effect, as the Utility Model had expired in November 2015. On April 28, 2020, the Company filed a withdrawal of the complaint on the German utility model, thereby waiving its claims on these proceedings. The proceedings were closed and during the year ended December 31, 2020, final reimbursement of approximately $30,000 for the costs in connection with the utility model infringement were paid to TauroPharm.

 

On November 22, 2017, the EPO in Munich, Germany held a further oral hearing in this matter. At the hearing, the panel held that the Prosl European Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European intellectual property law. The Company disagrees with this decision and has appealed the decision. The Company continues to believe that the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that the Company will prevail in this matter. A hearing has been scheduled for October 27, 2022 by the EPO Board of Appeals.

 

 On January 16, 2015, the Company filed a complaint against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany.  In the complaint, the Company alleged violation of the German Unfair Competition Act by TauroPharm and that TauroPharm is improperly and unfairly using its proprietary information relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100 and TauroLock-HEP500. The Company sought a cease and desist order against TauroPharm from continuing to manufacture and sell any product containing taurolidine (the active pharmaceutical ingredient (“API”) of Neutrolin) and citric acid in addition to possible other components, damages for any sales in the past and the removal of all such products from the market. Hearings in this matter were held in the District Court of Cologne, Germany on November 19, 2015, on November 15, 2016 and on November 20, 2018. A decision was rendered by the court on December 11, 2018, dismissing the complaint in its entirety. The Company therefore appealed in January 2019. An oral hearing was held on September 6, 2019. In view of new arguments brought forward in this hearing, the Court issued an evidentiary order on September 27, 2019 ordering an expert opinion. The expert opinion was not in the Company’s favor. In a supplementary expert opinion submitted after the Company had brought forward arguments against the first expert opinion, the expert confirmed his view. In an oral hearing held on June 18, 2021, the Court only heard from the expert, and the Court, as well as both parties, asked further questions to the expert around his expert opinion. At the end of the hearing and internal deliberation among the panel of judges, the Court indicated that it would dismiss the complaint of the Company, if the Company did not withdraw the appeal. As there were no advantages to further pursuing the matter in view of the Court’s statements, the Company withdrew the appeal and the proceedings are therefore now closed. TauroPharm requested an increase of the value in dispute determined by the Court in order to receive a higher reimbursement of costs (as this is based on the value in dispute under German law) but the request was rejected in view of arguments brought forward against it by legal counsel of the Company. The Company reimbursed costs in the amount of approximately $41,000 plus interest to TauroPharm.

 

 In connection with the aforementioned patent and utility model infringement and unfair competition proceedings against TauroPharm, the Company was required by the District Courts of Mannheim and Cologne to provide security deposits to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. As of June 30, 2022, the aggregate deposit was approximately $121,000, which the Company recorded as restricted cash on the condensed consolidated balance sheets.

 

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CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Commitments

 

In-Licensing

 

In 2008, the Company entered into a License and Assignment Agreement (the “NDP License Agreement”) with ND Partners, LLP (“NDP”). Pursuant to the NDP 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”). The Company acquired such licenses and patents through its assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann and Dr. Johannes Reinmueller. As consideration in part for the rights to the NDP Technology, the Company paid NDP an initial licensing fee of $325,000 and granted NDP a 5% equity interest in the Company, consisting of 7,996 shares of the Company’s common stock.

 

The Company is required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone payments are to be made in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be paid in cash. The maximum aggregate number of shares issuable upon achievement of milestones is 29,109 shares. In 2014, a certain milestone was achieved resulting in the release of 7,277 shares held in escrow. The number of shares held in escrow as of June 30, 2022 is 21,832 shares of common stock. The maximum aggregate amount of cash payments due upon achievement of milestones is $3,000,000 with the balance being $2,500,000 as of June 30, 2022 and 2021. Events that trigger milestone payments include but are not limited to the reaching of various stages of regulatory approval and upon achieving certain worldwide net sales amounts. There were no milestones achieved during the quarters ended June 30, 2022 and 2021.

 

The NDP License Agreement may be terminated by the Company on a country-by-country basis upon 60 days prior written notice. If the NDP License Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.

 

Note 5 — 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 $17,000 commenced in September 2020.

 

The Company entered into an operating lease for office space in Germany that began in July 2017. The rental agreement has a three-month term which automatically renews and includes a monthly cost of 400 Euros. The Company elected to apply the short-term practical expedient to the office lease. The Company also has an operating lease for office equipment.

 

21

 

 

CORMEDIX INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued

 

Operating lease expense in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months and six months ended June 30, 2022 was approximately $52,000 and $104,000, respectively, and $52,000 and $105,000 for the three and six months ended June 30, 2021, respectively, which includes costs associated with leases for which ROU assets have been recognized as well as short-term leases.

 

At June 30, 2022, the Company has a total operating lease liability of $864,000, of which $127,000 was classified as operating lease liabilities, short-term and $737,000 was classified as operating lease liabilities, net of current portion, on the condensed consolidated balance sheet. At December 31, 2021, the Company’s total operating lease liability was $924,000 of which $122,000 was classified as operating lease liabilities, short-term and $802,000 was classified as operating lease liabilities, net of current portion, on the condensed consolidated balance sheet. Operating ROU assets as of June 30, 2022 and December 31, 2021 are $838,000 and $900,000, respectively.

 

For the three and six months ended June 30, 2022, cash paid for amounts included in the measurement of lease liabilities in operating cash flows from operating leases was $50,000 and $100,000, respectively, and $45,000 and $97,000 for the three and six months ended June 30, 2021, respectively.

 

The weighted average remaining lease term as of June 30, 2022 and 2021 were 5.3 and 6.3 years, respectively, and the weighted average discount rate for operating leases was 9% at June 30, 2022 and 2021.

 

As of June 30, 2022, maturities of lease liabilities were as follows:

 

2022 (excluding the six months ended June 30, 2022)   $ 100,000  
2023     202,000  
2024     205,000  
2025     208,000  
2026 and thereafter     380,000  
Total future minimum lease payments     1,095,000  
Less imputed interest     (231,000 )
Total   $ 864,000  

 

Note 6 — Concentrations:

 

At June 30, 2022, there were no net accounts receivable from a customer that exceeded 10% of the Company’s accounts receivable and at December 31, 2021, one customer had exceeded 10% of the Company’s accounts receivable (100%). During the three months ended June 30, 2022, the Company had revenue from two customers that exceeded 10% of its total sales, 79% and 14%. During the six months ended June 30, 2022, the Company had revenue from two customers that each exceeded 10% of its total sales 66% and 23%. During the three months ended June 30, 2021, the Company had revenue from two customers that exceeded 10% of its total sales, 64% and 32%. During the six months ended June 30, 2021, the Company had revenue from three customers that each exceeded 10% of its total sales 43%, 26% and 13%.

 

Note 7 — Subsequent Events:

 

On August 8, 2022, the Company announced receipt of a second CRL from the FDA regarding its DefenCath NDA. The FDA stated that the DefenCath NDA cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There were no other requirements identified by the FDA for the Company prior to resubmission of the NDA. As part of the NDA review process, the FDA has also notified the Company that although the tradename DefenCath was conditionally approved, the FDA now has identified potential confusion with another pending product name that is also under review. The ultimate acceptability of the Company’s proposed tradename is dependent upon which application is approved first. As a precaution, the Company has already submitted an alternative proprietary name to the FDA which will undergo review.

 

The Company also announced that it has finalized an agreement with Alcami Corporation, or Alcami, a U.S. based contract manufacturer with proven capabilities for manufacturing commercial sterile parenteral drug products. Alcami will function as a manufacturing site for DefenCath for the U.S. market, and the Company expects to be able to submit a supplement to its NDA application around the end of the first quarter of 2023 to request approval from FDA for DefenCath manufacturing. As part of the technology transfer and validation of the manufacturing process at Alcami, the Company also expects to qualify an alternate source of heparin API sourced from a major U.S. supplier. Alcami, as well as the alternate supplier of heparin, have a robust history of U.S. FDA GMP inspections and approvals.

 

On August 1, 2022, the Center for Medicare & Medicaid Services, or CMS, published in the Federal Register the conditional New Technology Add on Payment, or NTAP, reimbursement for DefenCath of $4,387.50 per average hospital stay, which assumes 3 vials of DefenCath utilized for catheter locks following 3 dialysis sessions. The NTAP is conditioned upon DefenCath obtaining final FDA approval of the NDA prior to July 1, 2023, and would take effect in the first calendar quarter following the FDA approval of the NDA. NTAP reimbursement would be specific to hospital inpatient utilization of DefenCath, and the $1,462.50 per vial reimbursement is derived from an expected wholesale acquisition cost, or WAC, price of $1,950.00 per vial. The WAC price of a pharmaceutical is essentially the gross list price for a drug product, and not necessarily representative of the ultimate net price charged to a hospital, institution or clinic. The Company intends to submit a duplicate NTAP application to CMS this October, in order to preserve its ability to obtain a new NTAP, should final FDA approval not be obtained prior to July 1, 2023.

 

22

 

 

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 our 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 29, 2022.

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to herein as the Exchange Act. 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. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in our most recent annual report on Form 10-K, as well as any amendments thereto, as filed with the SEC and which are incorporated herein by reference. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Set forth below is a summary of the principal risks we face:

 

We have a history of operating losses, expect to incur additional operating losses in the future, and may never be profitable;
     
Our cost of operations could increase significantly more than what we expect depending on the costs to complete our development program for DefenCath and Neutrolin;
     
We will need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights;
     
The NDA for DefenCath, our lead product candidate, cannot be resubmitted for FDA approval, until the CMO and our heparin supplier address inspectional observations to the satisfaction of the FDA, which may be delayed and cannot be guaranteed;
     
  Our third-party contract manufacturers and suppliers are subject to regulatory inspections and any compliance action taken by the FDA, even if unrelated to our product, could impact the timing of DefenCath approval or ongoing commercial supply and may be unable to address the deficiencies identified by the FDA;

 

Our only product Neutrolin is only approved in Europe and is still in development in the United States, we do not have, and may never obtain, the regulatory approvals we need to market our product candidates outside of the European Union;
     
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;
     
Successful development and commercialization of our other products is uncertain;
     
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;
     
The successful commercialization of DefenCath will depend on obtaining coverage and reimbursement for use of DefenCath from third-party payors;
     
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, which could negatively impact our business or prospects;

 

23

 

 

The ongoing COVID-19 pandemic, or other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials;
     
Clinical trials required for our product candidates may be expensive and time-consuming, and their outcome is uncertain;
     
Even if approved, our products will be subject to ongoing government regulation and regulatory approvals;
     
Competition and technological change may make our product candidates 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;
     
If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed;
     
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;
     
Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators;
     
If we materially breach or default under any of our license agreements, the licensor party to such agreement will have the right to terminate the license agreement, which termination may materially harm our business;
     
If we and our licensors 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;
     
Ongoing and future intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights;
     
The decisions by the European and German patent offices may affect patent rights in other jurisdictions;
     
If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages and defend against litigation;
     
We currently have limited internal marketing and sales personnel and currently rely and intend to continue to rely on third parties to market, sell, and distribute Neutrolin outside of the U.S. We may seek a sales partner in the U.S. if DefenCath receives FDA approval or we may undertake marketing and sales of DefenCath in the U.S. on our own. If we are unable to enter into or maintain agreements with third parties to market and sell DefenCath or any other product after approval or are unable to find a sales partner or establish our own marketing and sales capabilities, we may not be able to generate significant or any product revenues;
     
If we or our collaborators are unable to manufacture our products in sufficient quantities or are unable to obtain or maintain regulatory approvals for a manufacturing facility, we may be unable to meet demand for our products and we may lose potential revenues;
     
Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of our products;

 

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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 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;
     
We will depend on third party suppliers and contract manufacturers for the manufacturing of our product candidates and have no direct control over the cost of manufacturing our product candidates. Increases in the cost of manufacturing our product candidates would increase our costs of conducting clinical trials and could adversely affect our future profitability;
     
We will need additional financing to fund our activities in the future, which likely will dilute our stockholders;
     
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, in part due to the limited market for our common stock 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;
     
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer; and
     
Because do not intend to pay cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless the value of our common stock appreciates and they sell their shares.

 

Overview

 

CorMedix Inc. and our wholly owned German subsidiaries, CorMedix Europe GmbH and CorMedix Spain, S.L.U. (collectively referred to herein as “we,” “us,” “our” and the “Company”), is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases.

 

Our primary focus is on the development of our lead product candidate, DefenCath™, for potential commercialization in the United States, or U.S., and other key markets as a catheter lock solution, or CLS. We have in-licensed the worldwide rights to develop and commercialize DefenCath and Neutrolin®. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug Administration, or FDA, while the name Neutrolin is currently used in the European Union, or EU, and other territories where we received CE-Mark approval for the commercial distribution of Neutrolin as a CLS regulated as a medical device. DefenCath/Neutrolin is a novel anti-infective solution (a formulation of taurolidine 13.5 mg/mL and heparin 1000 USP Units/mL) intended for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters in clinical settings such as hemodialysis, total parenteral nutrition, and oncology. Infection and thrombosis represent key complications among hemodialysis, total parenteral nutrition and oncology patients with central venous catheters. These complications can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for intravenous, or IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the central venous catheter, related treatment costs and increased mortality. We believe DefenCath addresses a significant unmet medical need and a potential large market opportunity.

 

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In January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood stream infections in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related blood stream infections and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to the five years granted for a New Chemical Entity upon approval of a New Drug Application, or NDA. In addition, in January 2015, the FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides us with the opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority review of the marketing application.

 

In December 2015, we launched our Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, in patients with hemodialysis catheters in the U.S. The clinical trial was designed to demonstrate the safety and effectiveness of DefenCath compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.

 

As previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study that occurred through early December 2017. Based on these first 28 cases, there was a highly statistically significant 72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a total of 795 subjects. In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly statistically significant (p=0.0006), with a good safety profile.

 

The FDA granted our request for a rolling submission and review of the NDA, which is designed to expedite the approval process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial with a broad range of subjects and study sites that has demonstrated a clinically meaningful and statistically very persuasive effect on a disease with potentially serious outcome.

 

In March 2020, we began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which provides for a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the FDA informed us in its Complete Response Letter, or CRL, that it could not approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after a review of records requested by the FDA and provided by the contract manufacturing organization, or CMO. Additionally, the FDA required a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications.

 

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In April 2021, we and the CMO met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to us and the Post-Application Action Letter, or PAAL, received by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol for the manual extraction study identified in the CRL, which has been successfully completed. Addressing the FDA’s concerns regarding the qualification of the filling operation necessitated adjustments in the process and generation of additional data on operating parameters for manufacture of DefenCath. We and the CMO determined that additional process qualification was needed with subsequent validation to address these issues. The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a central venous catheter.

 

On February 28, 2022, we resubmitted the NDA for DefenCath to address the CRL issued by the FDA. In parallel, our third-party manufacturer submitted responses to the deficiencies identified at the manufacturing facility in the PAAL issued by the FDA concurrently with the CRL. On March 28, 2022, we announced that the resubmission of the NDA for DefenCath has been accepted for filing by the FDA. The FDA considers the resubmission as a complete, Class 2 response with a six-month review cycle. The CMO has notified us that an onsite inspection by the FDA was conducted that resulted in FORM FDA 483 observations that are being addressed. The CMO submitted responses to the inspectional observations along with a corrective action plan and requested a meeting with the FDA to discuss. We also have been notified by our supplier of heparin, an active pharmaceutical ingredient, or API, for DefenCath, that an inspection by the FDA for an unrelated API has resulted in a Warning Letter due to deviations from good manufacturing practices for the unrelated API.

 

On August 8, 2022, we announced receipt of a second CRL from the FDA regarding our DefenCath NDA. The FDA stated that the DefenCath NDA cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There were no other requirements identified by the FDA for us prior to resubmission of the NDA. As part of the NDA review process, the FDA has also notified us that although the tradename DefenCath was conditionally approved, the FDA now has identified potential confusion with another pending product name that is also under review. The ultimate acceptability of our proposed tradename is dependent upon which application is approved first. As a precaution, we have already submitted an alternative proprietary name to the FDA which will undergo review.

 

We also announced that we have finalized an agreement with Alcami Corporation, or Alcami, a U.S. based contract manufacturer with proven capabilities for manufacturing commercial sterile parenteral drug products. Alcami will function as a manufacturing site for DefenCath for the U.S. market, and we expect to be able to submit a supplement to our NDA application around the end of the first quarter of 2023 to request approval from FDA for DefenCath manufacturing. As part of the technology transfer and validation of the manufacturing process at Alcami, we also expect to qualify an alternate source of heparin API sourced from a major U.S. supplier.

 

We intend to pursue additional indications for DefenCath use as a CLS in populations with an unmet medical need that 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 oncology patients using a central venous catheter.

 

The FDA regards taurolidine as a new chemical entity and therefore an unapproved new drug. Consequently, there is no appropriate predicate medical device currently marketed in the U.S. on which a 510(k) approval process could be based. As a result, we will be required to submit a premarket approval application, or PMA, for marketing authorization for any medical device indications that we may pursue. In the event that an NDA for DefenCath is approved by the FDA, the regulatory pathway for these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de novo Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness.

 

In the European Union, or EU, Neutrolin is regulated as a Class 3 medical device. In July 2013, we received CE Mark approval for Neutrolin. In December 2013, we commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients using a tunneled, cuffed central venous catheter for vascular access. To date, Neutrolin is registered and may be sold in certain European Union countries for such treatment.

 

In September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin to include use in oncology patients receiving chemotherapy, intravenous, or IV, hydration and IV medications via CVC for the EU. In December 2014, we received approval from the Hessian District President in Germany to expand the label for these same expanded indications. The expansion also adds patients receiving medication and IV fluids via CVC in intensive or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved.

 

In September 2019, our registration with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, we cannot sell Neutrolin in Saudi Arabia and we do not intend to pursue renewal of our registration with the SFDA.

 

In May 2022, we announced that we expect to begin winding down our operations in the EU and discontinue Neutrolin sales in both the EU and the Middle East.

 

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In April 2022, we received approximately $586,000, 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 all of our available NOL tax benefits for the state fiscal year 2021 in the amount of approximately $626,000.

 

The COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce. In response to the COVID-19 pandemic, public health measures to reduce the spread of the virus were implemented across much of the United States, Europe and Asia, including in the locations of our offices, clinical trial sites, key vendors and partners. Such public health measures, including “shelter-in-place” orders, were previously lifted, at least partially, in many locations. However, an increase in the spread of COVID-19 and variants has led, and may continue to lead, to the re-imposition by many nations and U.S. of quarantine requirements for travelers from other regions and may lead to the re-imposition of “shelter-in-place” or other similar orders. Our program timelines may be negatively affected by COVID-19, which could materially and adversely affect its business, financial conditions and results of operations.

 

Since our inception, our operations have been primarily limited to conducting clinical trials and establishing manufacturing for our product candidates, licensing product candidates, business and financial planning, research and development, seeking regulatory approval for our products, initial commercialization activities for DefenCath in the U.S. and Neutrolin in the EU and other foreign markets, and maintaining and improving our patent portfolio.  We have funded our operations primarily through debt and equity financings.  We have generated significant losses to date, and we expect to use substantial amounts of cash for our operations as we prepare our pre-launch commercial activities for DefenCath for the U.S. market and commercialize Neutrolin in the EU and other foreign markets, pursue business development activities, and incur additional legal costs to defend our intellectual property.  As of June 30, 2022, we had an accumulated deficit of approximately $260.3 million.  We are unable to predict the extent of any future losses or when we will become profitable, if ever.

 

Financial Operations Overview

 

Revenue

 

We have not generated substantial revenue since our inception. Through June 30, 2022, we have funded our operations primarily through debt and equity financings.

 

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, or CRO, 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 the advancement of our product candidates through preclinical 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) costs related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval. All R&D is expensed as incurred.

 

Conducting a significant amount of development is central to our business model. Product candidates in later-stage clinical development generally have higher development costs than those in earlier stages of development, primarily due to the significantly increased size and duration of the clinical trials.

 

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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 current or 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 product candidates.

 

Development timelines, probability of success and development costs vary widely. We are currently focused on securing the marketing approval for DefenCath in the U.S. as well as on continuing sales in foreign markets where Neutrolin is approved. In December 2015, we signed an agreement with a clinical research organization, or CRO, to help us conduct our LOCK-IT-100 Phase 3 clinical trial in hemodialysis patients with central venous catheters to demonstrate the efficacy and safety of DefenCath in preventing catheter-related bloodstream infections and blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease. Our LOCK-IT-100 study was completed and all costs related to the agreement with the CRO has been paid.

 

We were granted a deferral by the FDA under the Pediatric Research Equity Act, or PREA, that requires sponsors to conduct pediatric studies for 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. We have made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which if granted would provide an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period of 10.5 years, including exclusivity pursuant to NCE and QIDP.

 

In addition to DefenCath, we are involved in a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. We are also evaluating opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management. Based on initial feasibility work, we are advancing pre-clinical studies for taurolidine-infused surgical meshes, suture materials and hydrogels. We will seek to establish development and commercial partnerships if these programs advance.

  

We are pursuing additional opportunities to generate value from taurolidine, an active component of DefenCath. Based on initial feasibility work, we have completed an initial round of pre-clinical studies for taurolidine-infused surgical meshes, suture materials, and hydrogels.

 

Selling, General and Administrative Expense

 

Selling, general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.

 

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 condensed consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our company based in New Jersey and our subsidiary based in Germany are not expected to be repaid in the foreseeable future and the nature of the funding advanced is 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 our convertible debt, amortization of debt discount and on financing of expenditures.

 

Results of Operations

 

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021

 

The following is a tabular presentation of our condensed consolidated operating results (in thousands):

 

    For the Three Months Ended     %     For the Six Months Ended     %  
    June 30,     Increase     June 30,     Increase  
    2022     2021     (Decrease)     2022     2021     (Decrease)  
Revenue   $ 21,253     $ 8,191       159 %   $ 28,889     $ 96,451       (70 )%
Cost of sales     (332 )     (14,426 )     (98 )%     (1,859 )     (75,765 )     (98 )%
Gross profit (loss)     20,921       (6,235 )     (436 )%     27,030       20,686       31 %
Operating Expenses:                                                
Research and development     (3,209,471 )     (2,520,203 )     27 %     (5,497,058 )     (5,156,535 )     7 %
Selling, general and administrative     (5,051,895 )     (3,355,790 )     51 %     (9,802,778 )     (7,956,896 )     23 %
Total operating expenses     (8,261,366 )     (5,875,993 )     41 %     (15,299,836 )     (13,113,431 )     17 %
Loss from operations     (8,240,445 )     (5,882,228 )     40 %     (15,272,806 )     (13,092,745 )     17 %
Interest income     35,342       3,340       958 %     49,094       7,014       600 %
Foreign exchange transaction gain (loss)     18,232       (4,233 )     (531 )%     8,026       (9,144 )     (188 )%
Interest expense     (3,585 )     -       100 %     (8,964 )     (5,184 )     73 %
Total other income (expense)     49,989       (893 )     (5,695 )%     48,156       (7,314 )     (758 )%
Loss before income taxes     (8,190,456 )     (5,883,121 )     39 %     (15,224,650 )     (13,100,059 )     16 %
Tax benefit     585,617       1,250,186       (53 )%     585,617       1,250,186       (53 )%
Net loss     (7,604,839 )     (4,632,935 )     64 %     (14,639,033 )     (11,849,873 )     24 %
Other comprehensive income (loss)     (10,402 )     355       (3,036 )%     (47,611 )     (2,825 )     1,586 %
Comprehensive loss   $ (7,615,241 )   $ (4,632,580 )     64 %   $ (14,686,644 )   $ (11,852,698 )     24 %

 

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Revenue. Revenue for the three months ended June 30, 2022 was $21,000 as compared to $8,000 in the same period last year, an increase of $13,000. The increase was attributable to higher sales in the European Union countries in 2022 as compared to the same period in 2021.

 

Revenue for the six months ended June 30, 2022 was $29,000 as compared to $96,000 in the same period last year, a decrease of $67,000. The decrease was attributable to lower sales in the Middle East and European Union countries in 2022 as compared to the same period in 2021.

 

Cost of Sales. Cost of sales was $300 for the three months ended June 30, 2022 compared to $14,000 in the same period last year, a decrease of $14,000. The decrease was primarily attributable to sales of inventory that was previously reserved in prior periods due to short shelf life.

 

Cost of sales was $2,000 for the six months ended June 30, 2022 compared to $76,000 in the same period last year, a decrease of $74,000. The decrease was primarily attributable to the net decrease in cost of materials as a result of lower sales in 2022 as compared to the same period in 2021.

 

Research and Development Expense. R&D expense was $3,209,000 for the three months ended June 30, 2022, an increase of $689,000, or 27%, from $2,520,000 for the same period in 2021. The increase was driven by an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval of $1,260,000, offset by net decreases in personnel expenses, consulting fees and clinical trial expenses of $191,000, $160,000 and $157,000, respectively. There was also a decrease in non-cash charges for stock-based for stock-based compensation of $52,000.

 

R&D expense was $5,497,000 for the six months ended June 30, 2022, an increase of $340,000, or 7%, from $5,157,000 for the same period in 2021. The increase was driven by an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval of $1,423,000, offset by net decreases in personnel expenses, clinical trial expenses and consulting fees of $494,000, $209,000 and $134,000, respectively. There was also a decrease in non-cash charges for stock-based compensation of $231,000.

 

Selling, General and Administrative Expense. SG&A expense was $5,052,000 for the three months ended June 30, 2022, an increase of $1,696,000, or 51%, from $3,356,000 for the same period in 2021. The increase was primarily attributable to an increase in costs related to market research studies and pre-launch activities in preparation for the potential marketing approval of DefenCath of $681,000, net increase in personnel expenses of $450,000 and increases in legal fees and non-cash charges for stock-based compensation of $477,000 and $116,000, respectively. These increases were partially offset, among others of lesser significance, by a decrease in consulting fees of $103,000.

 

SG&A expense was $9,803,000 for the six months ended June 30, 2022, an increase of $1,846,000, or 23%, from $7,957,000 for the same period in 2021. The increase was primarily attributable to an increase in legal fees of $956,000, mainly due to the securities litigation, an increase in personnel expenses of $720,000, an increase in costs related to market research studies and pre-launch activities in preparation for the potential marketing approval of DefenCath of $431,000, increases in general office expenses of $210,000, and an increase in recruitment fees of $135,000. These increases were partially offset, among others of lesser significance, by a decrease in consulting fees of $328,000 and a decrease in non-cash charges for stock-based compensation of $299,000.

 

Interest Income. Interest income was $35,000 for the three months ended June 30, 2022 compared to $3,000 for the same period last year, an increase of $32,000. The increase was attributable to higher interest rates on our interest-bearing cash equivalents and short-term investments during the second quarter of 2022 as compared to the same period in 2021.

 

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Interest income was $49,000 for the six months ended June 30, 2022 compared to $7,000 for the same period last year, an increase of $42,000. The increase was attributable to higher interest rates on our interest-bearing cash equivalents and short-term investments during the first half of 2022 as compared to the same period in 2021.

 

Foreign Exchange Transaction Gain (Loss). A foreign exchange transaction gain of $18,000 was recorded for the three months ended June 30, 2022 compared to a loss of $4,000 for the same period last year. These losses occur due to the re-measuring of transactions denominated in a currency other than our functional currency.

 

A foreign exchange transaction gain of $8,000 was recorded for the six months ended June 30, 2022 compared to a loss of $9,000 for the same period last year. These losses occur due to the re-measuring of transactions denominated in a currency other than our functional currency.

 

Interest Expense. Interest expense was $4,000 for the three months ended June 30, 2022 as compared to $0 for the three months ended June 30, 2021, an increase of $4,000.

 

Interest expense was $9,000 for the six months ended June 30, 2022 as compared to $5,000 for the six months ended June 30, 2021, an increase of $4,000.

 

Tax Benefit. Tax benefits for the three and six months ended June 30, 2022 and 2021 of $586,000 and $1,250,000, respectively, was an income tax benefit due to the sale of our unused NOL for the state fiscal years 2021 and 2020, respectively, through the NJEDA Program.

 

Other Comprehensive Income (Loss). 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 resulted in a loss of $10,000 and a gain of $400 for the three months ended June 30, 2022 and 2021, respectively.

 

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 resulted in losses of $48,000 and $3,000 for the six months ended June 30, 2022 and 2021, respectively.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

As a result of our cost of sales, R&D and SG&A expenditures and the lack of substantial product sales revenue, our ongoing operations have not been profitable since our inception. During the six months ended June 30, 2022, we received net proceeds of $11,415,000 from the issuance of 3,020,340 shares of common stock under our at-the-market-issuance sales agreement, or ATM program, as compared to $41,456,000 net proceeds for the same period in 2021 from the issuance of 3,737,862 shares of common stock. For the same period in 2021, we also received $165,000 from the exercise of warrants. We will continue to be reliant on external sources of cash for the foreseeable future until we are able to generate revenue.

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities for the six months ended June 30, 2022 was $12,206,000 as compared to $9,782,000 for the same period in 2021, an increase of $2,424,000, primarily driven by an increase in net loss of $2,789,000, primarily attributable to an increase in operating expenses as compared to the same period in 2021.

 

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 Net Cash Used in Investing Activities

 

Net cash used in investing activities for the six months ended June 30, 2022 was $3,593,000 as compared to $734,000 for the same period in 2021. The increase in the net cash used in investing activities during the six months ended June 30, 2022 was mainly driven by the higher amount invested in short-term investments as compared to the same period in 2021.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2022 was $11,415,000 as compared to $41,758,000 for the same period in 2021, a decrease of $30,343,000. During the six months ended June 30, 2022, we generated net proceeds of $11,415,000 from the sale of our common stock in our ATM program as compared to $41,456,000 net proceeds during the same period in 2021. Additionally, during the same period in 2021, we generated net proceeds of $165,000 and $137,000 from the exercise of warrants and stock options, respectively.

 

Funding Requirements and Liquidity

 

Our total cash on hand and short-term investments as of June 30, 2022 was $64,622,000, excluding restricted cash of $224,000, compared with $65,466,000 at December 31, 2021, excluding $234,000 restricted cash. As of June 30, 2022, we have approximately $38,199,000 available under our ATM program and $150,000,000 under the 2021 Shelf Registration statement for the issuance of equity, debt or equity-linked securities.

 

Because our business has not generated positive operating cash flow, we will 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 primarily in activities leading to the pre-launch and commercialization for DefenCath and will depend on our ability to raise sufficient funds through various potential sources, such as equity, debt financings, and/or strategic relationships and potential strategic transactions. We can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all.

 

We expect to continue to fund operations from cash on hand and through capital raising sources as previously described, which may be dilutive to existing stockholders, through revenues from the licensing of our products, or through strategic alliances. We expect to continue to utilize our ATM program, if conditions allow, to support our ongoing funding requirements. Additionally, 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, any change in 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.

 

Sales of Neutrolin outside the U.S. are not expected to generate significant product revenues for the foreseeable future, and we expect to grow product sales for DefenCath in the U.S., should we receive FDA approval. In the absence of significant revenue, we are likely to continue generating operating cash flow deficits. We will continue to use cash as we increase other activities leading to the commercialization of DefenCath upon approval, pursue business development activities, and incur additional legal costs to defend our intellectual property.

 

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We currently estimate that we have sufficient cash on hand to fund operations at least through the third quarter of 2023. Additional financing may be required to build out our commercial infrastructure should we receive FDA approval and to continue our operations should we decide to market and sell DefenCath in the U.S. on our own. If we are unable to raise additional funds when needed, we may be forced to slow or discontinue our preparations for the commercial launch of DefenCath. We may also be required to delay, scale back or eliminate some or all of our 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 an 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 Policies and 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 accounting principles generally accepted in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. 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 that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

 

For the six-month period ended June 30, 2022, there were no significant changes to our critical accounting policies and estimates as identified in our Annual Report on Form 10-K for the year ended December 31, 2021.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

 

Interest Rate Risk

 

We are exposed to market risks in the ordinary course of our business. Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, financing, exchange rates or other factors. These market risks are principally limited to interest rate fluctuations.

 

We had cash, cash equivalents and short-term investments of $64,600,000 and $65,500,000 at June 30, 2022 and December 31, 2021, respectively, consisting primarily of funds in cash, money market accounts, U.S. government agency securities, high-grade corporate obligations and commercial paper with original maturities of more than 90 days. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

 

Our results of operations and cash flows are subject to fluctuations due to changes in interest rates. We do not believe that we are materially exposed to changes in interest rates. We do not currently use interest rate derivative instruments to manage exposure to interest rate changes. We estimate that a 1% unfavorable change in interest rates would not have a material effect on interest expense for the six months ended June 30, 2022.

 

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Inflation Risk

 

Inflation generally affects us by increasing our cost of labor and pricing of contracts and agreements. We do not believe that inflation had a material effect on our business, financial condition, or results of operations during the six months ended June 30, 2022. 

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure 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 June 30, 2022.  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

 

Joseph Todisco joined the Company as our Chief Executive Officer effective May 10, 2022, and Dr. Matthew David continues to serve as our Chief Financial Officer. Aside from Mr. Todisco joining as our Chief Executive Officer, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2022, or in other factors that could significantly affect these controls, that 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.

 

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-cv014020-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. 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. The complaint names as defendants the Company, Khoso Baluch, Matthew David, Phoebe Mounts, John L. Armstrong, Robert Cook, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, and Greg Duncan, as well as two underwriters of the Company’s secondary stock offering, B. Riley Securities, Inc. and Needham & Company, LLC. The purported bases for these claims are alleged misstatements and omissions in connection with the NDA submitted to the FDA for DefenCath, and the subsequent notification by the FDA that the NDA could not be approved in its present form. The lead plaintiff purports to assert the Exchange Act claims on behalf of persons that purchased or otherwise acquired shares of our securities between October 16, 2019, and September 6, 2021, and purports to assert the Securities Act claims on behalf of persons that purchased shares of our securities pursuant or traceable to a secondary offering of stock that commenced on November 27, 2020. We intend to vigorously contest such claims and filed a motion to dismiss the current complaint in full, with prejudice, on February 21, 2022. As of this filing, the parties are adhering to the current schedule set by the Court: we and the other defendants refiled their motions to dismiss on March 28, 2022, the lead plaintiff filed an opposition to the Defendants’ motions to dismiss on April 27, 2022 and Defendants filed their reply brief on May 26, 2022.

 

On or about October 13, 2021, a purported shareholder, derivatively and on our behalf, 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 complaint names as defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Greg Duncan, Matthew David, and Phoebe Mounts, along with us 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. We 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 June 23, 2022, the Board received a letter demanding it investigate and pursue causes of action, purportedly on our behalf, against certain current and former directors, officers, and/or other employees of our company (the “Letter”), which the Board believes are duplicative of the claims already asserted in the Derivative Litigation. The Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor the progress of the Derivative Litigation.

 

On September 9, 2014, we filed in the District Court of Mannheim, Germany a patent infringement action against TauroPharm GmbH and Tauro-Implant GmbH as well as their respective CEOs, referred to as the Defendants claiming infringement of our European Patent EP 1 814 562 B1, which was granted by the EPO on January 8, 2014, or the Prosl European Patent. The Prosl European Patent covers a low dose heparin catheter lock solution for maintaining patency and preventing infection in a hemodialysis catheter. In this action, we claim that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent they are covered by the claims of the Prosl European Patent. We believe that our patent is sound and are seeking injunctive relief and raising claims for information, rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step. We cannot predict the ultimate outcome of either of these related matters. At present, the EPO has revoked the Prosl European Patent as invalid, and we have filed an appeal, which is currently pending.

 

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In the same complaint against the same Defendants, we also alleged an infringement (requesting the same remedies) of NDP’s utility model DE 20 2005 022 124 U1, referred to as the Utility Model, which we believe is fundamentally identical to the Prosl European Patent in its main aspects and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims were tried separately. TauroPharm has filed a cancellation action against the Utility Model before the German Patent and Trademark Office, or German PTO based on the similar arguments as those in the opposition against the Prosl European Patent.

 

The Court issued its decisions on May 8, 2015, staying both proceedings. In its decisions, the Court found that the commercialization by TauroPharm in Germany of its TauroLock catheter lock solutions Hep100 and Hep500 infringes both the Prosl European Patent and the Utility Model and further that there is no prior use right that would allow TauroPharm to continue to make, use or sell its product in Germany. However, the Court declined to issue an injunction in favor of us that would preclude the continued commercialization by TauroPharm based upon its finding that there is a sufficient likelihood that the EPO, in the case of the Prosl European Patent, or the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically, the Court noted the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such, the District Court determined that it will defer any consideration of the request by us for injunctive and other relief until such time as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and the Utility Model.

 

The opposition proceeding against the Prosl European Patent before the EPO is ongoing. Oral proceedings before the Opposition Division at the EPO were held on November 25, 2015, at which the three-judge patent examiner panel considered arguments related to the validity of the Prosl European Patent. The hearing was adjourned due to the fact that the panel was of the view that Claus Herdeis, one of the managing directors of TauroPharm, had to be heard as a witness in a further hearing in order to close some gaps in the documentation presented by TauroPharm as regards the publication of prior art.

 

The German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated with adding heparin to a taurolidine based solution. We filed an appeal against the ruling on September 7, 2016. An oral hearing was held on September 17, 2019 in which the German Federal Patent Court affirmed the first instance decision that the Utility Model was invalid. The decision has only a declaratory effect, as the Utility Model had expired in November 2015. On April 28, 2020, we filed a withdrawal of the complaint on the German utility model, thereby waiving our claims on these proceedings. The proceedings were closed and during the year ended December 31, 2020, final reimbursement of approximately $30,000 for the costs in connection with the utility model infringement were paid to TauroPharm.

 

On November 22, 2017, the EPO in Munich, Germany held a further oral hearing in this matter. At the hearing, the panel held that the Prosl European Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European intellectual property law. We disagree with this decision and have appealed the decision. We continue to believe that the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that we will prevail in this matter. A hearing has been scheduled for October 27, 2022 by the EPO Board of Appeals.

 

37

 

 

On January 16, 2015, we filed a complaint against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany. In the complaint, we allege violation of the German Unfair Competition Act by TauroPharm for the unauthorized use of our proprietary information obtained in confidence by TauroPharm. We allege that TauroPharm is improperly and unfairly using our proprietary information relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100 and TauroLock-HEP500. We seek a cease and desist order against TauroPharm from continuing to manufacture and sell any product containing taurolidine (the API of Neutrolin) and citric acid in addition to possible other components, damages for any sales in the past and the removal of all such products from the market. An initial hearing in the District Court of Cologne, Germany was held on November 19, 2015 to consider our claims. On January 14, 2016, the Court issued an interim decision in the form of a court order outlining several issues of concern that relate primarily to the court’s interest in clarifying the facts and reviewing any and all available documentation, in particular with regard to the question which specific know-how was provided to TauroPharm by whom and when. A further oral hearing in this matter was held on November 15, 2016. In this hearing, the Court heard arguments from CorMedix and TauroPharm concerning the allegations of unfair competition. On March 7, 2017, the Court issued another interim decision in the form of a court order outlining again several issues relating to the argumentation of both sides in the proceedings. Both parties have submitted further writs in this matter and the Court had scheduled a further hearing for May 8, 2018. After having been rescheduled several times, the hearing took place on November 20, 2018. A decision was rendered by the Court on December 11, 2018, dismissing the complaint in its entirety. However, we intend to continue to pursue this matter, and still believe firmly that our claims are well-founded. We have therefore appealed in January 2019 and filed our grounds of appeal in March 2019. An oral hearing was held on September 6, 2019 in which our legal counsel brought forward further arguments for the fact that the manufacturing process of the respective catheter locking solution is indeed protectable as a trade secret. In view of these new arguments, the Court issued an evidentiary order on September 27, 2019 ordering an expert opinion. The expert opinion was not in our favor, but we have filed a response to the expert opinion in reaction to which the Court asked the expert to supplement his opinion to address the issues brought forward in our submission. In the supplementary expert opinion, the expert confirmed his view. In an oral hearing held on June 18, 2021, the Court only heard from the expert, and the Court, as well as both parties, asked further questions to the expert around his expert opinion. At the end of the hearing and internal deliberation among the panel of judges, the Court indicated that it would dismiss our complaint, if we did not withdraw the appeal. As there were no advantages to further pursuing the matter in view of the Court’s statements, we withdrew the appeal and the proceedings are therefore now closed. TauroPharm requested an increase of the value in dispute determined by the Court in order to receive a higher reimbursement of costs (as this is based on the value in dispute under German law) but the request was rejected in view of arguments brought forward against it by our legal counsel. We reimbursed costs in the amount of approximately $41,000 plus interest to TauroPharm.

 

Item 1A. Risk Factors.

 

There were no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

 

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Item 5. Other Information

 

On August 8, 2022, we announced receipt of a second CRL from the FDA regarding our DefenCath NDA. The FDA stated that the DefenCath NDA cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There were no other requirements identified by the FDA for us prior to resubmission of the NDA. As part of the NDA review process, the FDA has also notified us that although the tradename DefenCath was conditionally approved, the FDA now has identified potential confusion with another pending product name that is also under review. The ultimate acceptability of our proposed tradename is dependent upon which application is approved first. As a precaution, we have already submitted an alternative proprietary name to the FDA which will undergo review.

 

We also announced that we have finalized an agreement with Alcami Corporation, or Alcami, a U.S. based contract manufacturer with proven capabilities for manufacturing commercial sterile parenteral drug products. Alcami will function as a manufacturing site for DefenCath for the U.S. market, and we expect to be able to submit a supplement to our NDA application around the end of the first quarter of 2023 to request approval from FDA for DefenCath manufacturing. As part of the technology transfer and validation of the manufacturing process at Alcami, we also expect to qualify an alternate source of heparin API sourced from a major U.S. supplier.

 

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.

  

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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: August 11, 2022 By:

/s/ Joseph Todisco

    Name: Joseph Todisco
    Title: Chief Executive Officer
      (Principal Executive Officer)

 

 

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