CorMedix(CRMD) - 2023 Q4 - Annual Report

PART I Business CorMedix focuses on commercializing DefenCath, its FDA-approved antimicrobial catheter lock solution, for hemodialysis patients, with market exclusivity until 2033 and established reimbursement pathways - The company's primary focus is the U.S. commercialization of its lead product, DefenCath, an antimicrobial catheter lock solution (CLS)[26] - On November 15, 2023, the FDA approved the New Drug Application (NDA) for DefenCath to reduce catheter-related bloodstream infections (CRBSI) in adult kidney failure patients on hemodialysis via a central venous catheter (CVC)[28] - DefenCath has been granted New Chemical Entity (NCE) exclusivity until November 2028 and an additional 5-year GAIN exclusivity, extending its market protection to November 2033[29] - The company has secured a New Technology Add-On Payment (NTAP) for inpatient hospital use of DefenCath and has applied for a Transitional Drug Add-on Payment Adjustment (TDAPA) for outpatient dialysis settings, with a target implementation date of July 1, 2024[32][33] - CorMedix relies on third-party contract manufacturing organizations (CMOs) for production and is in the process of qualifying alternative manufacturing sites and suppliers for its key active pharmaceutical ingredients (APIs)[54][55][57] Risk Factors The company faces significant risks including operating losses, high dependence on DefenCath's commercialization, reimbursement uncertainties, market concentration, and reliance on third-party manufacturers - The company has a history of operating losses, incurring a net loss of $46.3 million in 2023 and an accumulated deficit of $321.7 million as of December 31, 2023; future profitability is uncertain[118] - CorMedix is highly dependent on the successful commercialization of its only approved product, DefenCath; failure to successfully launch and market the product would severely limit revenue generation[123] - Successful commercialization hinges on obtaining adequate coverage and reimbursement from third-party payors like Medicare and private insurers; a pending TDAPA application for outpatient use is critical, and any delay or denial would adversely impact the launch[126][128] - The outpatient dialysis market is highly concentrated, with two large providers accounting for over 70% of treatments; failure to secure utilization from these key customers could significantly harm the commercial launch[129] - The company relies on single FDA-approved suppliers for its key APIs (taurolidine and heparin) and a single approved manufacturing site for the finished product, creating risks of supply chain disruption[187][188] Cybersecurity The company manages cybersecurity threats through its Audit Committee, implementing annual employee training, threat simulations, and cyber liability insurance, with no material incidents reported - The Board's Audit Committee has primary oversight responsibility for cybersecurity risk management[227] - The company's cybersecurity strategy includes annual mandatory employee training, regular simulation modules, and carrying cyber liability insurance[225] - No cybersecurity threats or incidents have materially affected the company during the period covered by this report[226] Properties CorMedix's principal executive office is in Berkeley Heights, New Jersey, under a seven-year lease, supplemented by a small leased office in Germany, both deemed adequate for current needs - The company's main office is in Berkeley Heights, NJ, under a seven-year lease that began in September 2020 with an average monthly cost of approximately $17,000[230] Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business operations - Management does not believe any current legal proceedings will have a material adverse effect on the business[232] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities CorMedix's common stock trades on Nasdaq under "CRMD," and the company has never paid dividends, intending to retain earnings for business growth - The company's common stock is listed on the Nasdaq Global Market under the symbol "CRMD"[236] - The company has never paid dividends and does not intend to in the foreseeable future, retaining earnings for business growth[237] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2023, CorMedix reported a net loss of $46.3 million, driven by increased SG&A and R&D expenses, ending the year with $76.0 million in cash, sufficient to fund operations for at least twelve months and support DefenCath's launch Selected Financial Data | | 2023 ($) | 2022 ($) | % Change | | :--- | :--- | :--- | :--- | | Revenue | 0 | 65,000 | (100)% | | Research and development | (13,155,000) | (10,680,000) | 23% | | Selling, general and administrative | (35,803,000) | (20,006,000) | 79% | | Loss from operations | (48,958,000) | (30,625,000) | 60% | | Net loss | (46,339,000) | (29,702,000) | 56% | - The increase in R&D expense was primarily due to higher personnel costs from increased headcount, increased medical affairs activities, and costs related to manufacturing operations for DefenCath prior to its approval[264] - The significant increase in SG&A expense was mainly driven by $12.2 million in costs for market research and pre-launch activities for DefenCath, along with a $3.7 million increase in personnel expenses from new hires in preparation for the launch[265] - Net cash used in operating activities increased to $38.4 million in 2023 from $24.4 million in 2022, driven by the higher net loss and increased operating expenses for DefenCath's pre-launch activities[272] - The company raised net proceeds of $42.9 million from a public offering and $12.9 million from its ATM program in 2023; as of December 31, 2023, cash, cash equivalents, and short-term investments totaled $76.0 million[271][275] - Management estimates that current cash is sufficient to fund operations for at least twelve months and support the commercial launch of DefenCath through to anticipated profitability, assuming a launch in Q2 2024[279] Controls and Procedures The CEO and CFO concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes reported - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[286] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[293] PART III Directors, Executive Officers, and Corporate Governance The report details the company's directors and executive officers, noting that most directors are independent and the Board maintains key committees with independent members - The Board of Directors consists of seven members, with Myron Kaplan serving as Chairman of the Board[299][303] - The Board has determined that all directors are independent under Nasdaq rules, with the exception of CEO Joseph Todisco[309] - The Board has established Audit, Compensation, and Nominating and Governance committees, all composed of independent directors[310] Executive Compensation Non-employee directors receive cash and stock options, while CEO Joseph Todisco's 2023 total compensation was approximately $2.46 million, with executive agreements including severance provisions Executive Compensation Summary | Name and Principal Position | Year | Salary ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Joseph Todisco, CEO | 2023 | 616,962 | 1,388,400 | 401,700 | 2,459,342 | | Matthew David, CFO | 2023 | 389,135 | 433,875 | 156,000 | 1,031,150 | | Erin Mistry, CCO | 2023 | 389,577 | 694,200 | 156,800 | 1,240,577 | | Phoebe Mounts, Former General Counsel | 2023 | 375,000 | 433,875 | 112,500 | 1,254,582 | - Non-employee directors receive an annual cash fee of $55,000, additional fees for chair and committee roles, and an annual grant of 20,000 stock options (increased to 30,000 in March 2024)[330][331] - CEO Joseph Todisco's employment agreement provides for an annual salary of $618,000 and a target bonus of 65% of base salary[336] - Executive employment agreements contain severance provisions, including salary continuation (12 months for the CEO) and accelerated equity vesting upon termination without cause or for good reason, with enhanced benefits following a corporate transaction[342] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 7, 2024, directors and executive officers collectively owned 4.8% of common stock, with Blackrock and Nomura as major institutional shareholders, and the company maintains an equity compensation plan - As of March 7, 2024, Blackrock, Inc. was the largest beneficial owner with 6.4% of common stock, followed by Nomura Global Financial Products, Inc. with 5.4%[359] - All current executive officers and directors as a group beneficially owned approximately 2.73 million shares, representing 4.8% of the outstanding common stock[359] Equity Compensation Plan Information | Plan Category | Securities to be issued upon exercise (a) | Weighted average exercise price (b) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 6,365,243 | $5.44 | 3,108,929 | Principal Accounting Fees and Services For 2023, CorMedix paid Marcum LLP $225,225 in audit fees, an increase from 2022, with all services pre-approved by the Audit Committee Audit Fees | Fee Type | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Audit Fees (Marcum LLP) | 225,225 | 127,000 | | Audit Fees (Friedman LLP) | 0 | 42,400 | | Total | 225,225 | 169,400 | - All audit and permissible non-audit services provided by the independent registered public accounting firm were pre-approved by the Audit Committee[367] PART IV Exhibits, Financial Statement Schedules This section provides an index of consolidated financial statements and all exhibits filed with the Form 10-K, including various corporate and contractual documents - This section contains the index of financial statements and a list of all exhibits filed with the Form 10-K[370][371] Financial Statements Consolidated Financial Statements The 2023 consolidated financial statements show a net loss of $46.3 million, increased assets and liabilities, and higher stockholders' equity, reflecting financing activities Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents, and short-term investments | $76,031 | $58,792 | | Total Assets | $82,060 | $62,038 | | Total Liabilities | $11,918 | $6,979 | | Total Stockholders' Equity | $70,142 | $55,060 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Revenue | $0 | $65 | | Loss From Operations | $(48,958) | $(30,624) | | Net Loss | $(46,339) | $(29,702) | | Net Loss Per Share | $(0.91) | $(0.74) | Notes to Consolidated Financial Statements The notes detail accounting policies, liquidity, ongoing securities litigation, 2023 financing proceeds, and the full valuation allowance against deferred tax assets - The company's existing cash, cash equivalents, and short-term investments are expected to fund operations for at least twelve months from the report's issuance date[415] - The company is a defendant in a consolidated securities class action lawsuit and shareholder derivative lawsuits alleging false and misleading statements related to the DefenCath NDA submission process; the company intends to vigorously contest these claims[466][467] - In 2023, the company raised approximately $42.9 million (net) from a public offering of common stock and pre-funded warrants, and $12.9 million (net) from its ATM program[478][481] - The company maintains a full valuation allowance of $70.8 million against its net deferred tax assets as of December 31, 2023, as it is more likely than not that these assets will not be realized[456][462] - Upon FDA approval of DefenCath, costs related to manufacturing inventory are capitalized; inventory previously expensed as R&D prior to approval amounted to $6.4 million[432]