CorMedix (NASDAQ:CRMD) Q2 2020 Earnings Call

0:01 Greetings and welcome to the Core Medix Inc. second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Ferry of LifeSci Advisors. Thank you, Mr. Ferry. You may begin.

0:26 Good afternoon and welcome to the CoreMedix Second Quarter 2020 Earnings Conference Call. Leading the call today is Koso Baloche, Chief Executive Officer of CoreMedix. He is joined by Phoebe Mounts, Executive Vice President and General Counsel, and Matt David, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone that during the call, management may make what are known as forward-looking statements within the meeting set forth in the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and include, but are not limited to, any of the following. Any statements other than statements of historical fact regarding management's expectations, beliefs, goals, and plans about the company's prospects, including its clinical development program and marketing approval for DefendCath, in the U.S. and other product candidates, future financial position, future revenues and projected costs, and potential market acceptance of DefendCath, Neutralin, and other product candidates. More specifically, forward-looking statements include any statements about our clinical development plans and the timing, cost, results, and interpretations thereof, projections as to the company's future capital raising and spending cash positions, Expectations as to the timing and nature of anticipated regulatory actions,

1:58 possible product licensing, business development, or other transactions, any commercial plans and expectations, market projections for our audit candidates, and expectations as to manufacturing and product component costs. Actual results may differ materially from these projections or estimates due to a variety of important factors, including, but not limited to, Uncertainties related to clinical development, regulatory approvals, and commercialization. These risks are described in greater detail in CoreMedix filings with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from CoreMedix.

2:43 CoreMedix may not actually achieve the goals or plans described in these forward-looking statements, and investors should not place undue reliance on these statements. Please note that CoreMedix does not intend to update these forward-looking statements except as required by law. At this time, it is now my pleasure to turn the call over to Koso Belosh, Chief Executive Officer of CoreMedix. Koso, please go ahead.

3:08 Thank you, Dan. Good afternoon, everyone, and thank you for joining us on this call. On today's earnings call, we will discuss several topics with you on the overall progress CoreMedix is making in bringing Depencast to the U.S. market for its first indication for use as a catheter rock solution for hemodialysis patients to prevent catheter-related bloodstream infections with subsequent expansion into other indications. Joining me on this call are Phoebe and Matt. The three topics I will cover fall in the regulatory, financing, and commercial area. First, as we disclosed several weeks ago, I am very pleased that the submission to the FDA of the new drug application, or NDA, for Defend-Cas was completed in June.

3:59 This submission was completed using the rolling submission format granted by the FDA, which we started in March. Completing this filing was a major undertaking as the team had to work through the Chemistry, Manufacturing, and Control Information, CMC, and a large volume of data generated due to the size of LOCKIT 100 trials and the underlying health issues of the hemodialysis patient group. This was the first NDA submitted by CoreMedix and our goals obviously are to secure acceptance for filing of the NDA submission and then to obtain NDA approval from the FDA. I'm proud of the team at CoreMedix for bringing their collective experience to bear and completing a high-quality submission.

4:49 Phoebe will provide more color during this call. We're also pleased to have recently completed an equity financing consisting of $23 million in gross proceeds, including a full execution of the green shield. The proceeds from this financing provide CoreMedix the cash needed to continue the preparation required to launch DependCast into the U.S. hemodialysis market. following approval from the FDA. CoreMedix is appreciative of the effort from the team handling the financing and the opportunities to continue broadening our banking relationships. We were also pleased to see new life science focused investors become shareholders as part of this transaction.

5:36 We believe that completing an institutional financing, bringing in life science focused investors and expanding our relationship with investment banking firms will serve to further strengthen CoreMedX appeal to a broader audience of institutional finance investors. During this call, Matt will share more details about the goals we set out to achieve with this financing and additional details of what we have accomplished. I'd also like to provide an update on several work efforts that are moving forward with a goal of being prepared when we receive NDA approval so that DefendCat can be launched into the U.S. hemodialysis market as soon as possible.

6:23 In terms of market preparation, the team has been working on understanding DefendCat product characteristics that best draw the attention of fair, large dialysis organizations, LDLs, and healthcare professionals. Extensive primary market research and qualitative testing has been completed, and the value proposition for DefendCat is now being finalized for quantitative testing. The team has also defined the effort to properly size the Salesforce Market Access Organization that will be required to best address the targeted LDOs, healthcare professionals, and payer markets. This effort continues and will identify the national and regional accounts that CoreMedix will target for the greatest returns.

7:11 The market access team has been working with external payers to build a budgeting model that best addresses our respective needs. This outreach is ongoing with many dialysis service providers, both healthcare providers and payers. That is why we're so excited about the opportunity to bring our data to the Center of Medicare and Medicaid Services, CMS, which pays the healthcare costs for the majority of patients who are receiving hemodialysis. CMS pays for a significant amount of the cost of hemodialysis under its basic reimbursement program for end-stage renal disease patients, referred to as the bundle. A fixed dollar reimbursement arrangement which has historically acted as an unfortunate impediment to the adoption of new technology and better case strategy for patients undergoing hemodialysis.

8:09 However, in recognition of this issue, CMS now has a relatively new program to accelerate the adoption of new treatments that can both improve patient care and or reduce the cost of treating end-stage renal disease patients. This program is called TDAPA. which stands for Transitional Drug Add-on Payment Adjustment, which allows for reimbursement of a new technology outside the bundle while the necessary utilization data are collected to determine how best to permanently incorporate the cost of these products in the CMS reimbursement regime. Now that the NDA is submitted, CoreMedix will continue interacting with CMS to further our discussions about defense care inclusion into the DDAPA program.

9:00 The official application requesting to be added to DDAPA can only occur after the FDA approval of the NDA. CoreMedix has also focused on its goal of becoming a contributor member of several key patient healthcare providers advocacy organizations focused on kidney care. The first one is The group that we are focused with is called KCP, which stands for Kidney Care Partners, which is a national nonprofit alliance of patient advocates, healthcare professionals, and providers and managers seeking to develop community-wide policy positions in an effort to ensure strong and unified advocacy on capital health and with federal agencies, including kidney-related issues.

9:50 The second one is GPC, which stands for Dialysis Patient Citizens, which is a non-profit patient-led membership organization founded in April 2004 by end-stage renal disease patients who saw the need for an organization focused on advocacy and education for dialysis patients and their families. The effort will focus on sponsoring patient ambassadors who are dialysis patients, who advocate for the need of dialysis patients with their legislation. Laters, both at the federal level in Congress and at the state legislative level for including new drugs, devices, and services. And the third organization is ANA, which stands for American Nephrology Nurses Association, which is a nonprofit organization established in 1969 that has a membership of about 8,500 nephrology nurses.

10:44 Members include registered nurses and other healthcare professionals professionals with varied experiences and expertise in hemodialysis, home therapy, chronic kidney disease, continual renal replacement therapies, acute care, and transplantation. CoreMedix will continue to push ahead in preparation for the commercialization of DefendCast by reaching out to all the important stakeholders in the hemodialysis market to ensure that once DefendCast is approved by the FDA, It would be in the best possible position to successfully launch in the U.S. market. With that, now let me move to the second topic, which is the regulatory update.

11:29 Phoebe? Thank you, Koso. It is a pleasure to be here again to report on our continuing efforts to bring DefendCast to the U.S. market and address the continuing need to reduce catheter-related bloodstream infections. As we've previously announced, We had requested and been granted by FDA a rolling submission and review of the modules for the new drug application, which is intended to expedite the review process for new products intended to address an unmet medical need. The rolling submission was started in March and completed in June. Consistent with the rolling submission and review process, FDA began an ongoing dialogue with us on the submission as it was in progress.

12:15 As noted by COSO, We are very grateful for the effort of the CoreMedix team in preparing the high-quality submissions. Now that the submission of modules is completed, the FDA has 60 days from the date of submission of the final module to review the submission and decide if it is sufficiently complete and in the correct electronic format for substantive review. If the FDA finds the submission complete, it will be accepted for filing. If it is not complete, we will need to provide the missing information and resubmit the NDA. In the submission, we also requested priority review of the NDA.

13:00 As we previously reported, the DefendCAS NDA is eligible for priority review as a result of fast track and qualified infectious disease product designations. At the pre-NDA meeting with FDA, We confirm the eligibility for priority review. If FDA accepts the NDA submission for filing and awards priority review, then the goal for the review period consistent with the Prescription Drug User Fee Amendments, or PDUFA, will be six months from the filing date instead of the standard review period of 10 months. It is important to note that the goal for completing the review is truly a goal. and can be shorter or longer than the six or 10 months.

13:49 We intend to announce the FDA's decisions on filing the NDA and priority review when the information is received from FDA. We expect to hear by the end of August, but it can come at any time before then. We have previously discussed our intention to request NDA approval pursuant to the limited population pathway Thank you. Thank you. Thank you. Recent guidance from FDA states that a product approved pursuant to LPAD may follow a streamlined clinical development program that may involve fewer clinical trials.

14:53 In the same guidance document, FDA stated that, quote, if an applicant submits a request for approval of an application under the LPAD pathway, but the drug instead can be approved under the traditional approval pathway alone, FDA will approve the application, but not under the LPAD pathway. Accordingly, we have requested that, if needed, FDA consider approving the CENCAS under LPAD for reducing catheter-related bloodstream infections in the limited population of adult hemodialysis patients using central venous catheters. On a final note, we are continuing to focus on our goals of developing the protocols for use in pediatric hemodialysis patients, and for expanding the indications for use of defend-casts in oncology patients and for patients requiring total parenteral nutrition, or TPS, who are using central venous casters and are at risk for life-threatening catheter-related bloodstream infections.

15:58 With that update, let me pass before to Matt to cover financial results in our recent financing. Matt?

16:06 Thanks, Phoebe. I am pleased to be here today to provide my first financial report for Chromedix. The company just filed its report on Form 10-Q for the second quarter and six months ended June 30, 2020. I urge you to read the information contained in this report for a more complete discussion of our financial results. With respect to our second quarter of 2020 financial results, our net loss was approximately 3.8 million, or 14 cents per share, compared with the loss of 0.7 million, were $0.03 per share in the second quarter of 2019. The higher net loss recognized in 2020 compared with 2019 was due to increased expenses related to our preparations for DefendCat's commercial launch.

16:51 We recorded significant increases in both R&D and SG&A expenses. We recognized the tax benefit of $5.2 million in 2020 from the sale of our New Jersey net operating losses compared with the $5.1 million Operating expenses in the second quarter of 2020 increased approximately 61% to $8.9 million, compared with $5.6 million in the second quarter of 2019. R&D expense increased by approximately 91% to $5.7 million, including a $3.4 million purchase of raw material that will be used in the production of the FENCAST. for sale in the U.S. upon receipt of FDA marketing approval, partially offset by a 12% decrease in other R&D expenses.

17:40 SG&A expense increased approximately 26% to $3.2 million, compared with $2.6 million in the second quarter of 2019. Higher staffing, marketing, and insurance expenses were primarily responsible for the increase, partially offset by reductions in several areas, particularly legal and accounting fees. We recorded net cash used in operations during the second quarter 2020 of $0.3 million, primarily as a result of the cash received from the sale by New Jersey NOLs and the refund of the NDA filing fee offset by the raw material purchased and higher SG&A expenses. This compares with net cash from operations of $0.2 million we recorded in the second quarter of 2019. We reported $22.4 million in cash and short-term investments at June 30th, Approximately $1 million below the amount we reported on our balance sheet at March 31, 2020.

18:35 Pro forma cash, including the cash on our balance sheet at June 30, 2020, and net proceeds from the recent financing is $43.9 million. We believe we have the funds necessary to continue our operations beyond the current 12 months. We were very pleased to have completed our recent equity financing, raising approximately $21.5 million after expenses. When we set out to execute on this transaction, we had several goals in mind. One, complete a financing of at least $20 million. Two, include primarily institutional investors, including life sciences specialists. And three, expand our investment banking relationships by working with some highly respected teams with capabilities that align informatically stage and needs.

19:21 We believe the recent financing accomplished each of these goals. We believe it is important to have this additional cash on our balance sheet now because it is essential for us to continue to advance our preparation for the commercial launch of the FENCAS once it is approved by the FDA. We plan to continue to refine and finalize our marketing strategy to have sufficient quantities of the FENCAS ready to fill the sales channels at launch and to lay the groundwork for what will become a modest-sized sales force around the time of regulatory approval. With that, I would like to pass the floor back to Joseph.

19:58 Thank you, Max. As I've stated, this is to maximize shareholders' value. Because hemodialysis is a very concentrated peer provider market, we continue our preparations to commercialize the FinCAP in the U.S., whether on our own or with a commercial partner or other party if a favorable transaction is available. All options are on the table and will be evaluated with the maximizing shareholders' value in mind. We have now stepped up and are focusing a great deal of our energy on engaging specifically with the various stakeholders within the dialysis market through direct contact both with the large dialysis providers and with payers, including CMS.

20:44 This will provide CoreMedix with strong foundation required for an efficient and successful launch. Once again, let me remind you that this significant market represents a very large unmet medical need. as today there is no pharmacological agent approved in the U.S. for the prevention of CRBSI in central venous catheters. I believe that should DefendCap be approved by the FDA, it can rapidly become the standard of care in the U.S. So in summary and the key takeaway, what Sadie and Matt covered with you hopefully provide you with the insight into the effort on which we are focused and that have been accomplished over the last two and a half months.

21:29 I am pleased about the progress we are making despite challenges imposed by the coronavirus pandemic. I'd like to reemphasize I'm delighted that the NDA was submitted. We eagerly look forward to the FDA decision on the acceptance for filing and priority review. We are pleased that we successfully completed financing, bringing several Healthcare Focus Institutional Investors, and Building New Investment Banking Relationships. We are continuing to ramp up our outreach efforts and are establishing the foundation required for co-merit to launch DEFEND-CAP into the hemodialysis market in the U.S. upon FDA approval. Finally, a reminder that while we are initially focused on the hemodialysis market, we are determined to seek additional indications for DEFEND-CAP use Thank you.

22:23 Thank you. Updates going forward will be around the key events. FDA decision on the acceptance of filing the NDA, including priority review for the day, NDA approval by the FDA, Tdapa submission, DefendCast launch.

23:11 I look forward to being able to provide you with material development updates via the CoreMedix website, press release, and conference calls.

23:20 Thank you for your continued support of Core Medix. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Andrew De Silva with C. Reilly FDR. Please proceed with your question.

23:59 Hey, good afternoon. Thank you very much for taking my questions. Just a few quick ones for me, and sorry if you mentioned this. I was bouncing between calls. Did you recognize the NDA filing fee during the second quarter, or what exactly just led to the substantial increase Thank you for the question. Matt, would you take the question?

24:30 Thank you.

24:32 I'm sorry, it didn't come across as clearly. Could you please repeat the question?

24:40 Yeah, just what was the reason for the sequential uptick in R&D?

24:46 Oh, yeah, no problem. I think, as we mentioned briefly, and you'll see in some of the filings that should be posted by now, we had an additional $3.4 million expense that fell under R&D as part of raw materials that are going into, specifically for heparin, that are going into the production of the FENCAS that we intend to be able to use for commercial supply following an FDA approval.

25:12 Okay. Thank you. Thank you. What you're hearing as of late or what needs to take place after you obtain approval for CoreMedix to obtain reimbursement from CMS? I'm looking for a timing and what can be done in the interim while there is no CMS reimbursement, assuming you have approval.

26:06 Yeah, so let me answer that, Andy. Thanks for the question. As I had indicated in the prepared remarks, you know, CMS Thank you very much. are filing to get the healthcare common procedure codes that take place. And usually the process takes about a quarter.

26:52 They do a quarterly review, so depending exactly on the approval timing, it takes a quarter for CMS to approve it. And then basically you're able to move forward with that reimbursement.

27:05 So theoretically next year you could have a mid-year... A lot depends on exactly what the FDA is going to give us.

27:26 Are they going to give us a priority review, a standard review? What is the do-for-date? And as soon as we get clarity on that, that would help guide us. provide us the opportunity to guide further in terms of the exact timing when we expect to get then the PDAP approval. But we need to first get that feedback from the FDA in terms of are we getting a priority review or a standard review and what to do for that.

27:54 Fair enough. That makes sense. Well, thank you very much. Congrats on getting the NDA filed and good luck going forward. Thanks, Andy. Thank you. Our next question comes from the line of Ram Silduraru with H.C. Wainwright. Please proceed with your question. Thanks so much for taking my question.

28:15 So, firstly, with respect to the regulatory process, I was wondering if you could comment on if the DefendCast PA is accorded priority reviews, does that, by definition, accord a six-month review timeframe? to the NPA, or could it potentially be approved in a faster timeframe than that? I mean, we have seen examples of this kind of thing happening before, but just wanted to clarify whether getting priority review ties into a six-month clock, or if it could potentially be approved faster.

28:48 Thanks, Ron.

28:49 Amy, would you take that? Sure, absolutely. Thank you, Ron. That's a good question. The PDUH date, which will reflect a six-month Review Goal, if we get a priority review, is a goal. And as you know, the review may occur and the approval may occur faster than that or it can take longer than that. It really depends on how long it takes FDA to work through the information in the NBA. And that's why we put a premium on making sure that we understood X FDA's expectations and what they want to see in the NDA, doing those analyses and making sure that the NDA had the information that we wanted to get in there.

29:43 And so we're hoping that we've helped FDA have an efficient review period and get the review process faster.

29:53 You're absolutely right. If you go in and look at the review times, You can find priority review for products that take longer than six months, and you can find standard review times that take a lot shorter than 10 months. So it's purely a reflection on how long it takes the FDA to work through the material.

30:11 Okay, and just to clarify, you have fast-track designation but not breakthrough therapy designation. Is that correct?

30:19 We have fast-track designation as well as qualified infectious disease product designations. Both of those designations confer eligibility for priority review. FastTrack, because we're developing an indication for use that addresses a life-threatening medical need. And the Qualified Infectious Disease product, because we're addressing antibiotic use and reduction of a pathogen that causes serious infection. So we talked to FDA at our pre-NDA meeting.

30:53 about our intention to request priority review, and FDA agreed we were eligible to make that request.

31:02 Okay, and then just on the commercial side, if I may, one item is with respect to what you think the commercial environment is going to look like at the time that you introduce DefendCast, and if any of the restrictions that might hypothetically be in place regarding specific kinds of promotional activities due to COVID-19 would have any impact on your ability to commercialize defend cap effectively, and if you have identified any potential strategies to potentially overcome these considerations. And also, if you could perhaps comment on the sales preparations, specifically what you expect the Salesforce composition to look like, what kinds of people you anticipate hiring and their backgrounds, that would be very helpful.

31:48 Thank you.

31:50 Okay, thank you. So in terms of commercial, on the commercial side and taking into account COVID-19, clearly the situation is evolving and we will need to look as we get closer to the timing of approval and launch as to what the environment will be as it relates to COVID-19. Clearly there are restrictions right now in clinics and in centers about individuals Entering those places, so clearly that in itself will have its challenges if it remains into next year. So we're going to closely monitor that, but that would be the only item that I would see that could have an impact. And therefore, our focus has been with a lot of the advocacy groups that I outlined in the prepared remarks, that we are finding different ways to begin to communicate both with the healthcare providers.

32:52 We'll have those channels to communicate with the healthcare providers in order to ensure that the message of defend cap gets out. In terms of sales post composition, assuming that we get back to a more traditional model, we have indicated that an organization no greater than about 50 people is what would be required that would cover both the sales force, the market access, and also medical affairs would be required to provide the coverage that we need because of the concentration of the providers for hemodialysis, but also the concentration of the payers. And so it is, again, a very concentrated, small organization, and most of those individuals would come on board closer to the time of approval and launch. So we will clearly be watching the situation raised by your first point, how COVID-19 will take place. Clearly, we're going to look to get individuals that have experienced the hemodialysis phase.

34:02 That would add a lot of benefits in terms of the learning curve that one would require. So hopefully that answers your question.

34:15 Yep, and then just two very quick financial housekeeping items. Can you confirm that the over-allotment was exercised in full in your most recent financing? And then also, do you have any perspectives regarding the timeframe within which the Series G preferred stock might be converted to common stock by its holders? Thank you.

34:34 Thanks, Ron. Matt?

34:36 Yes, I think that for the first part of your question, we can confirm that the over-allotment of the green shoe was executed in full. So we're pleased to be able to share that with you. On the second point, I don't have any information that we can share at this point about the series G for first.

34:55 Thank you. Thank you. We have no further audio questions at this time. I'd like to turn the floor over to Mr. Ferry for written questions.

35:05 Thank you, operator. So my first one is for Matt. Matt, given your previous cash runway guidance, of NT2Q21. Can you comment on the timing of the most recent raise?

35:24 Sure, no problem. Thank you for the question. As we have said in the past, it is our responsibility to make sure that the company is appropriately capitalized to execute on our plans to commercialize the FENCAS in the U.S. We don't believe it's good corporate finance practice to wait until there's just a few months of cash on the balance sheet in order to account for unexpected market turbulence, setbacks, and other unexpected circumstances such as COVID-19. Ultimately, our decision is driven by our goals of, one, having sufficient capital to execute on our plans, two, broadening our institutional shareholder base, and three, expanding our investment banking relationship.

36:07 Thanks, Matt. I now have one for Phoebe. Phoebe, is there still a risk? that the FDA would reject the NDA for filing because there is only a single study?

36:23 Thanks, Dan. That's a good question. We think we've risked the process as much as possible at this point. It should properly now be an NDA review issue, not a filing decision. The acceptance for filing is based on the completeness of the submission to enable a review. The review itself will determine whether there is substantial evidence of safety and effectiveness of DefendCast in reducing CRPSIs in hemodialysis patients based on the data in Locket 100. There are examples of FDA requiring additional clinical data for NDA approval, even when there are two physical trials based on a review of the information in the NDA.

37:11 So it's not a completeness issue. Thanks, Phoebe.

37:22 And as a follow-up, if you believe that lock at 100 is sufficient, why request approval under LPAD?

37:36 Again, good question. I think most folks would agree that it's prudent to have alternatives or a plan B. I like to think of LPAD as our plan B. Our goal has always been to bring defend counts to the market as fast as possible to help address the unmet medical needs. If FDA needs additional flexibility to approve the NDA, which as we just talked about is based on a single study, by relying on LPAD, then it will be fulfilling the purpose of LPAD as enacted by Congress in the 21st Century Cures Act.

38:15 Thanks, Phoebe. And Koso, if I might. Koso, is a partnership still on the table? Are you in active discussions? Did you raise more cash because you don't have an interested partner?

38:33 Thanks, Dan, for your question. In terms of a partnership on the table, we have never publicly said that there's any discussion going on. But all options will be evaluated with maximizing shareholder value in mind. And to that effect, you know, we will actively pursue all options, whether on our own or with a commercial partner or other party if a favorable transaction is available. And clearly those discussions remain confidential till the moment that we would require to disclose it and it would be appropriate to disclose.

39:11 Great. Thank you, Koso. Operator, that concludes the written questions that I have from the audience. Thank you. I'd now like to turn the floor back over to Koso for closing comments.

39:22 Thank you, Operator. CoreMedix has an experienced team of executives that have taken pharmaceuticals through the various phases of clinical studies, registration, and successfully launched products in the U.S. market. And we remain very committed to bringing DependCats to the U.S. market. As I've said previously, Thank you for your time, attention, and have a good evening. Thank you. This does conclude today's teleconference You may disconnect your lines at this time Thank you for your participation and have a wonderful day