CorMedix (NASDAQ:CRMD) Q3 2020 Earnings Call

0:00 Greetings and welcome to the Core Medix Incorporated third quarter 2020 earnings call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Thursday, November 5th, 2020. I would now like to turn the conference over to Dan Ferry from LifeSci Advisors. Please go ahead. Good afternoon and welcome to the CoreMedix third quarter 2020 earnings conference call. Leading the call today is Kosa Baloch, Chief Executive Officer of CoreMedix.

0:46 He is joined by Dr. Phoebe Mounts, Executive Vice President and General Counsel, and Dr. 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, and the U.S.

1:31 and other product candidates, future financial position, future revenues and projected costs, and potential market acceptance of DefendCath, Nutralyn, 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, and projections as to the company's future capital raising and spending and cash position. Expectations as to the timing and nature of anticipated regulatory actions, possible product licensing, business development or other transactions, any commercial plans and expectations, market projections for our product candidates and expectations as to manufacturing and product component costs.

2:23 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. CoreMedx may not actually achieve the goals or plans described in these forward-looking statements, and investors should not place due reliance on these statements. Please note that CoreMedx 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 Mr. Koso Baloche, Chief Executive Officer of CoreMedx.

3:16 Koso, please go ahead. 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 defense cats to the U.S. market for its first indication for use as a catheter rock solution for hemodialysis patients to prevent cat-related bloodstream infections with subsequent expansion into other indications. Joining me on this call are Phoebe and Matt. The four topics I will cover are regulatory, our board of directors update, commercial planning, and our annual meeting logistics. So let me begin with the first point, which is regulatory.

4:10 As we disclosed on August 31st, 2020, the submission to the FDA of the new drug application or NDA for , which was completed in June, have been accepted for filing. In addition, the FDA granted priority review and set a prescription drug use of the Act, PDUFA, date of February 28, 2021. We are delighted to have a review period that is shorter than the 10-month standard review and appreciate the hard work of the core medics team to achieve this accomplishment. As mentioned in our August 31st, 2020 press release, the FDA also noted that it is planning to hold an advisory committee meeting to discuss the application and that it had not identified any potential review issues at that time.

5:11 During this call, Phoebe will provide you an update on the advisory committee. The second item that I'd like to update you on is the changes at the board level. As you saw in our press release of September 17th, Paolo Costa joined the Corps Medics Board. Paolo is a tremendous addition to our board, given his decades of leadership experience in the pharmaceutical sector and significant strategic experience gained in part during his time spent as chairman of Amlin Pharmaceuticals through its successful sale to BMS and AstraZeneca. Paolo's leadership experience included time as president and CEO of Novartis U.S.

6:00 Corporation from 2005 to 2008 and presidency of Novartis Pharmaceuticals U.S. from 1999 to 2005. Prior to joining Novartis, Paulo spent 30 years at Johnson & Johnson, including as president of his pharmaceutical business. We also announced on November 2nd that Mahmoud Khan, who has been a board member for the last three years, has stepped down due to policies related in his new role and responsibilities within an investment organization. While I'm disappointed that Mehmood had to step down, I very much appreciated the insight and advice Mehmood had provided over the years.

6:51 I wish Mehmood continued success and thank him both personally and on behalf of Core Medix. Replacing Mehmood is another pharmaceutical industry veteran, Greg Duncan, who brings decades of senior executive commercial experience across a range of medicines as well as strategic leadership experience. Greg has spent the majority of his career in senior leadership roles in commercial stage pharmaceutical companies, including having served as president of UCB's North American business. In addition to acting on the executive committee and guiding the strategic direction for the company's specialty biopharma business, Greg was responsible for managing A multi-billion dollar global business and overseeing the launch of multiple new products.

7:47 Prior to his roles with UCB, Greg spent approximately 18 years at Pfizer, where he gained significant experience across sales and marketing functions, including serving as Senior Vice President of U.S. Marketing and later as President of Pfizer's Latin American business. The addition of Paolo and Greg to our CoreMedix board further augments the expertise in commercial and corporate strategy at the board level and will be invaluable to CoreMedix as we plan our progression into a commercial stage company over the year ahead. On the third item, during the last quarter, the CoreMedix team has continued to prepare for DefendCat's anticipated commercial launch and continue to have discussions with many key players in the dialysis space, including the dialysis organizations and CMS.

8:47 The interactions have been positive and clearly positions CoMedix to ensure that once defendCAT is approved by the FDA, it will be in the best possible position to successfully launch in the U.S. market. And finally on the fourth topic, I'd like to highlight that our upcoming annual meeting is scheduled for December 16th. Due to the ongoing pandemic, we are planning to hold it virtually. The agenda will include directors reelection and reconfirmation of our auditors. With that, now let's move on to the first topic, regulatory update. Phoebe. Thank you, Koso. I'm happy to report that FDA's review of the DefendCaf new drug application is continuing expeditiously due to the engagement of FDA's review team and the tremendous effort of the CoreMedix team.

9:46 As noted by COSO, we are very grateful for the dedication and ongoing efforts of the CoreMedix team to bring DefendCaf to the U.S. market and address the unmet medical need of reducing catheter-related bloodstream infections. As I have stated on the previous earnings call, it is important to remember that the goal for completing the priority review by the PDUFA date is truly a goal and can be shorter or longer than the February 28, 2021 PDUFA date for the priority review. As noted by COSO, FDA intends to consult an advisory committee during the review of the defend cap NDA. FDA has now tentatively scheduled the meeting of the Antimicrobial Drugs Advisory Committee for January 14, 2021 to discuss the DEFENCAST-MDA.

10:41 When FDA accepted the submitted DEFENCAST-MDA for filing, it informed CoreMedix that it intended to consult an advisory committee and that it had not identified any review issues at that time. During review of initial product approvals, Supplemental Indications, or Safety Actions, FDA can rely on a panel of independent external experts to respond to specific FDA questions. The decision to involve an advisory committee is usually at the discretion of the division director and is intended to help FDA make appropriate scientific decisions. FDA reviewers complete the review of a new drug application and identify questions for the advisory committee.

11:29 However, as the name implies, it is an advisory committee and FDA may or may not follow the advisory committee's recommendations. Because of the ongoing coronavirus pandemic, this meeting will not be face-to-face, but rather will be conducted using FDA's online teleconferencing platform, which is currently in use for advisory committee meetings. Because of the COVID-19 pandemic, FDA has been employing video conferencing for advisory committees and we have been discussing the parameters of the meeting with the staff at FDA who are responsible for conducting advisory committee meetings. Information for this meeting has not yet been made publicly available by FDA.

12:16 An announcement by FDA will be made in a Federal Register notice and will be available on FDA's website. No information on questions to be posed to the Advisory Committee is available now and will be publicly available within a few days before the meeting. These meetings are open to the public and information on connecting to the meeting will also be posted by FDA on its website, which is www.fda.gov. We, of course, have begun preparing briefing materials that will be provided in advance to the Advisory Committee. FDA will similarly prepare a briefing package for the Advisory Committee. Briefing materials from both CoreMedix and FDA will be posted on FDA's website before the meeting.

13:07 We have also begun preparing individuals who will be presenters at the meeting and will be responders to questions. The Advisory Committee meeting is a critical part of the FDA approval process for new drugs. and will be an important focus of the CoreMedix regulatory team going forward. With that update, let me pass the floor to Matt to cover financial results in our recent financing activities. Matt? Thanks, Phoebe. I am pleased to be here today to provide an overview of our third quarter financial results as well as an update on recent financing activity. The company has just filed its report on Form 10-Q for the third quarter and nine months ended September 30th, 2020. I urge you to read the information contained in the report for a more complete discussion of our financial results.

14:01 With respect to our third quarter 2020 financial results, our net loss was approximately 6.6 million or 22 cents per share compared with a loss of 5.3 million or 22 cents per share in the third quarter of 2019. excluding the impact of one-time items in 3Q19. A higher net loss recognized in 2020 compared with 2019 was due to increased expenses related to our preparations for DefendCat's commercial launch. We recorded increases in both SG&A as well as R&D expenses. Operating expenses in the third quarter of 2020 increased approximately 28% to $6.6 million compared with 5.2 million in the third quarter of 19.

14:48 R&D expense increased by approximately 16% to 2.9 million, driven primarily by additional staffing costs and an increase in costs related to the purchase of raw materials and manufacturing of defend caps for commercial launch. SG&A expense increased approximately 40% to 3.7 million compared with 2.6 million in the third quarter of 2019. This increase was driven by increased costs related to market research in preparation for the potential approval of DefendCast and higher staffing costs due to additional hires. We recorded net cash used in operations during the third quarter of 2020 of $7.3 million, primarily driven by increases in operating expenses due to R&D expenses related to the cost of manufacturing DefendCast.

15:41 prior to its potential approval and SG&A expenses related to market research in preparation for the potential approval. This compares with net cash used in operations of $4 million we recorded in the third quarter of 2019. We reported $37 million in cash and short-term investments at September 30th. In addition, we have generated net proceeds of approximately $4.6 million through selling shares via our ATM program following the quarter close. Proforma Cash, including cash from the balance sheet at September 30, 2020, and net proceeds from the recent ATM issuance is approximately $41.8 million, and roughly $2.1 million less than the Proforma Cash described during our 2Q earnings call. We believe we have the funds necessary to continue our operations beyond the coming 12 months.

16:36 On our second quarter earnings call, we highlighted that a key goal of the company was to continue to broaden our recognition and awareness among the financial community. We are pleased to be able to share that two banks, Truist, previously called SunTrust, and J&P Securities, initiated research coverage of CoreMedix during this quarter. Given their fundamental analysis of the company and their dialogue with the institutional investor community, we note that these activities should continue to help attract investors to follow the defendcast story. Cormedix has also filed a refreshed universal shelf which, once declared effective, will give the company significant flexibility in the types of capital raising that we can explore over the coming years.

17:22 As you may be aware, Cormedix used most of the remaining 2018 shelf in completing our July 2020 equity offering. So we believe, as with many of our peers, that having a shelf on file is good corporate housekeeping. While we have described that the company has sufficient resources to extend into the fourth quarter of 2021, we also must ensure that the company is appropriately capitalized to allow us to ensure a robust commercial launch of the FENCAP upon regulatory approval. With that, I would like to pass the floor back to Koso. Thank you, Matt. As I've stated, our goal is to maximize shareholders' value. Because hemodialysis is a very concentrated payer-provider market, we continue our preparation to commercialize defense gas in the U.S., whether on our own or with a commercial partner or other party if a favorable transaction is available.

18:22 All options are on the table and will be evaluated with maximizing shareholders' value in mind. We are now focusing a great deal of our energy on engaging specifically with the various stakeholders within the dialysis market and continuing our discussions with the dialysis providers and with payers, including CMS. This will provide CoreMedix with a 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.

19:09 I believe that should DefendCath be approved by the FDA, it can rapidly become the standard of care in the U.S. So let me summarize the key takeaways from this call. What Phoebe and Matt covered with you hopefully provides you with insight into the effort on which we are focused and that have been accomplished over the last couple of months. I'm pleased about the progress we're making despite challenges imposed by the coronavirus pandemic. I'd like to re-emphasize, I'm delighted that the NDA has been accepted for filing an ongoing priority review. We eagerly look forward to the FDA's Advisory Committee meeting on January 14th.

19:55 We're also pleased with the addition to the Core Medix Board The new members bring experience and insight as CoreMedix evolves into a commercial stage company in the U.S. And finally, our outreach efforts continue and our focus on the payer contracting side for CoreMedix. And these efforts clearly prepare us to launch the FinCAS into the hemodialysis market in the U.S. upon FDA approval. A reminder that while we are initially focused on hemodialysis market, We are determined to seek additional indications for defendCAT use in catheters for oncology and TPN patients. We've had previous discussions with the FDA on clinical trial designs for use as a catheter lock solution in oncology and TPN patients and are working to develop the protocols with the goal of finalizing the regulatory pathway for reducing catheter-related bloodstream infections in these additional patient groups and executing all these plans on a post-approval basis.

21:02 In conclusion, updates going forward will be around the following key events, the FDA Advisory Committee, the anticipated ND approval by the FDA, DEFEN-CAP launch, and successful T-DAPA approval. I look forward to providing you with material development updates via Core Medix website, press release, and conference call. I'd also like to note that as of November 16th, the physical address for CoreMedix will be CoreMedix Inc., 300 Colony Drive, Suite 4200, Berkeley Heights, New Jersey, zip code 07922. Thank you for your continued support of CoreMedix.

21:53 With this, let me pass the floor over to the operator, Grant. Thank you. And if you would like to register a question, press the 1 followed by the 4 on your telephone keypad right now. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. And one moment, please, for the first question. First question comes from the line of Jason Butler with JMP Securities. Please proceed with your questions. Hi. Thanks for taking the questions. The first one, just on the regulatory review, you said – so obviously, the FinCAP would be the first CLS product to be approved with anti-infectious efficacy.

22:47 Can you maybe just comment in that context what you might expect an adcom, the upcoming adcom, to focus on? And then secondly, Closa, you mentioned willingness to explore potential commercial partnerships or strategic alliances. Can you maybe give us some more color on what you would be looking for in that kind of relationship? Thanks. Thank you, Jason. For the first question, I'll ask Phoebe if you can respond. Certainly. Thank you for the question, Jason. As I said in my comments, we don't have any insight at this time on the specific questions that FDA will be posing. That comes much later in the process. As the review team works through the NDA, the process is very much ongoing at this time.

23:36 Most of the questions, as you know from looking at previous advisory committee meetings, focus on the clinical data. and determining whether or not that provides substantial evidence of safety and effectiveness for product approval. I would note that this is a first-in-class product. This is the first time torolidine will have been approved by FDA as a new drug. So it's not uncommon for first-in-class products to go before an advisory committee. Thanks, Phoebe. And to your second part of your question, Jason, We've articulated in the past that we look to prioritize the creation of long-term value for our shareholders.

24:21 To this effect, we will continue to explore all options in order to maximize the commercial value of the 10-cap once approved. Remember that, you know, hemodialysis is a pretty concentrated market and therefore can certainly be covered by modest-sized commercial footprint for a successful launch. And hence, we have stated that all options are on the table and we will consider it or whatever ideas partners bring over to us, they will carefully be considered and shared with the board. Okay, great. Congrats on all the progress and thanks again for taking the question. Thank you, Jason. And the next question is from the line of June Lee with Truist Securities.

25:06 Please proceed with your question. Yes, hi all. This is actually Les for June. Congrats on the quarter and the acceptance of the NDA. So first, you had two additions to the board. Can you comment on expectations for additional hires ahead of the launch? And also, can you provide some more details on the steps you have taken thus far in preparing for commercial launch, assuming approval? And I have a follow-up. Okay, so I don't need to go over the addition to board members that we've added. Clearly, that brings both commercial and strategic leadership experience and capabilities to the board in the pharmaceutical space.

25:51 In terms of hires, we have added a couple of individuals over the last quarter, specifically in medical affairs and supply chain that were critically needed. The preparations we have focused on So far today has been in the payer space and medical affairs. And we have the leaderships in place for both those parts of the organization. And we have done quite a bit of work in the payer space, specifically to ensure that we are able to take the necessary steps that are required when we get approval Thank you. That's helpful. And then lastly, how are you thinking about pricing of Defemcas and when can we expect to learn more about the pharmacokinetic data?

26:51 Thank you. Okay. So let me cover the pricing. Our team has been pretty much focused in doing the work required on the payer side of the market. So we have spent time understanding, doing work and research, understanding the clinical and economic value of DependCast, most of the patients and the healthcare system, health economics publication data, and evaluating the optimal reimbursement scenarios across the portfolio. We have not finalized yet on a price and we will do that closer to approval and launch. The second part of your question was about the pharmacodynamics data.

27:47 Yes. Phoebe, could you take that question? Pharmacoeconomic data. Pharmaco-economic data. Like I said, we are working on putting that together right now, the pharmacoeconomic data. Okay, that's very helpful. Thank you. Thank you. And the next question comes from the line of Andrew DeSilva with B. Riley. Please proceed with your question. Hi, good afternoon. This is Maureen Cabrion for Andy. Thanks for taking the question. So as it relates to obtaining TdapA designation, it looks like only very limited success has taken place to date, primarily with Amgen.

28:36 Can you run us through the gives and takes on obtaining the designation? Does DefenCap being a catheter-lock solution matter as we think about TdapA's tech that notes new injectable or intravenous drugs? What will be considered for the designation? Yeah, so number one, and thanks for your question, number one is that the Tdapa program is relatively new. Amgen applied and got two of their products onto the Tdapa reimbursement program. We've had meetings with CMS. We've introduced the company. We've introduced DefendCast and our perspectives regarding Tdapa eligibility. CMS has been very clear. The TDAPA eligibility criteria are well posted on their website. And we are working very diligently to make the listed criteria.

29:31 The determination from CMS will help drive utilization within the Dallas's organization and capture, you know, the data both from a clinical and economic perspective. And our view is that we are eligible for, TDAFA coverage and clearly we bring and fill a huge unmet medical need and the pharmacoeconomics data we have will clearly show that to CMS. Got it. That's helpful. And I realize that, you know, you don't want to talk about pricing until everything's finalized, but is it possible to comment on how you might think about, you know, in terms of the high and low for a potential price in terms of bundling with TDAPA or low without the designation?

30:23 Yeah, so we are not giving any guidance on that at the moment. Suffice to say that we are focused on a value-based pricing strategy, so clearly looking at the benefits to the patient and to the healthcare system. Clearly, TDAPA Designation will help us significantly and it's going to be very important for us. So the focus on getting the health economics model and being able to share that with CMS is going to be a key part of our strategy as we go forward. And clearly the pricing then will come pretty close to approval and launch.

31:09 Great. That's helpful. Thank you. That's all for me. And the next question comes from the line of Rajahuram Selvaraju with H.C. Wainwright. Please proceed with your question. This is Mazan for ROM. I have a few questions about your other assets. I have three questions. I was wondering how the preclinical testing for CM-DX-001 is going for your rare T2V optics cancer indications. Hello, Ram? I did not hear the question. This is Mazan for Ram. I was wondering how the preclinical testing for CMDX001 is going in terms of rare patriotic cancers.

32:07 Okay. Thanks for your question. Phoebe, would you like to cover that? Certainly. We continue our laboratory studies. We are working on various animal models where human tumor cells are propagated in generally immunodeficient mice, and then the activity of the compound can be tested. So we are making progress on the animal models, but it's all preclinical activity at this time. Okay, thanks for the update. And perhaps, Phoebe, you could answer this one, too. Have you had initial dialogue with the FDA regarding the accelerated 510K device pathway for your medical device opportunities?

33:02 We have had conversations with the Center for Device and Neuroenterological Health on applications of tyrolidine in medical devices. But our focus for the past several years has been on facilitating approval for hemodialysis as a catheter-lock solution. Okay. And one final one about your nanoparticle formulations for the torolidine hydrogel. How is this asset progressing? And I was wondering if you perhaps have other funding sources, such as from the Department of Defense?

33:50 As you probably know, based on your questions, we have patent applications around those potential product development areas. But as I said a few minutes ago, our effort has been on really securing approval as a new drug to address the unmet medical need for hemodialysis patients. Okay. Thanks very much for the call. That's all from me. And I would now like to turn the conference over to Dan Ferry for some written questions. Thank you, Operator. I have one for Phoebe here. Phoebe, why don't you refer to Defencas as an antibiotic?

34:42 Thank you, Dan. That's a good question, and I think not an uncommon question for us. Turalidine, which is the novel antimicrobial component of Defencas, has been shown in laboratory studies to kill both bacteria and fungi. As you probably know, the term antibiotic has come to mean a drug that treats bacterial infections. DefendCath is not a treatment, but rather as a catheter lock solution that's being developed to prevent catheter-related bloodstream infections by killing bacteria as well as fungi that could grow in the catheter and cause the bloodstream infection.

35:28 It is properly considered an antimicrobial, or you could refer to it as an antibacterial and antifungal. But given the commonly used meaning of antibiotic, antibiotic would not be appropriate. Okay, thank you, Phoebe. I have an additional question for Matt David. Matt, I see that you have initiation of coverage from both SunTrust Truist and JMP. What is the value of this coverage? Sure. Thanks, Dan, for the question from the audience. Yeah, we were pleased to see the initiation, as I mentioned, of coverage by both Truist and JMP securities in September. And, of course, thank them for joining us on this call as well. These analysts have done fundamental analysis on the DefendCath opportunity and Mark Potential and have also conveyed their thoughts on the commercial realm.

36:28 In addition, these firms plus our other covering analysts have extensive dialogue with healthcare focused institutional investors and we expect that their support will help to continue to broaden interest and awareness of core medics across the investor community. Thank you, Matt. I have no further questions, and I'd like to pass the call back over to Koso Baloche for closing remarks. Koso? Thank you, Dan. So just I wanted to close by saying, you know, CoreMedix has an experienced team of executives who have taken the pharmaceuticals through the various stages of clinical study, registration, and successfully launched products in the U.S.

37:15 market. CoreMedix remain committed to bringing DefendCat to the U.S. market, whether on our own or with a strategic or commercial partner, to help patients in need of protection from life-threatening infection. The importance of preventing infections and keeping patients out of hospital is even more apparent during the ongoing coronavirus pandemic. With that, I'd like to thank you all for your attention and have a good evening. And that does conclude today's conference. We thank you for your participation and ask that you please disconnect your line.