CRMD - NASDAQ

Good morning ladies and gentlemen, and welcome to the CorMedix Inc. fourth quarter and full year 2023 earnings call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star, zero for the Operator. This call is being recorded on March 12, 2024. I would now like to turn the conference over to Dan Ferry from LifeSci Advisors. Please go ahead.

Good morning and welcome to the CorMedix full year 2023 earnings conference call. Leading the call today is Joe Todisco, Chief Executive Officer of CorMedix. He is joined by Dr. Matt David, Executive Vice President and CFO, Beth

Thanks Dan. Good morning everyone and thank you for joining us on this call. Since we last presented earnings in November, the company has achieved a number of key milestones, most notably the final NDA approval of DefenCath by the U.S. FDA, as well as confirmation from CMS that DefenCath will be eligible to receive a transition drug add-on payment, or TDAPA, for outpatient reimbursement as CMS has classified DefenCath for renal dialysis service under the end stage renal disease prospective payment system. As we previously announced, we submitted our HEPS J-code application to CMS in December and our TDAPA application in January following receipt of that reimbursement guidance from CMS. Those applications remain under review at CMS and CMS has confirmed in writing that they are actively reviewing our J-code and TDAPA applications and are working toward a July 1, 2024 effective implementation for a DefenCath TDAPA payment. That said, CMS reserves the right to request additional information for any application, which may impact the review timing and/or probability of a J-code or TDAPA. Both a J-code and an approved and effective TDAPA application are gating items for the outpatient commercial launch of DefenCath, which is currently slated for July 1. The company remains on schedule to commence our commercial launch for the in-patient setting on April 15. We have staffed and trained our field sales and medical affairs organizations and held a successful internal team launch meeting during the last week of February. The team we have built is deeply experienced and specialized with backgrounds in both infectious disease and nephrology spanning both the in-patient and outpatient settings of care. We are also ramping up inventory production in accordance with our internal plan, which is heavily weighted toward the back part of the year. As part of our supply chain strategy, the company is on track to submit a supplement to our NDA in April qualifying Siegfried’s site in Hameln, Germany as an alternative manufacturing site for DefenCath. Assuming a favorable FDA review of the supplement, additional production from that site would come online by the end of 2024. As we think about the in-patient launch trajectory in April, we do expect the ramp for our in-patient utilization to be fairly modest over the first two launch quarters as in-patient health systems and hospitals are working through their respective P&T formulary review processes. On average, the P&T process for a particular system or hospital can range from three to nine months. That said, we have received significant interest over the last few months and are actively working through the P&T process with several large and midsized health systems. We expect this activity to intensify in the coming months as our field-based key account managers have just begun calling on hospitals and health systems to effectuate pre-launch contracting discussions. On the outpatient side, we continue to have productive discussions with large and midsized dialysis operators and we look forward to providing additional updates over the coming months as these discussions advance. Based upon our current base case forecast for 2024, we continue to believe that the company can achieve breakeven profitability on a run rate basis by the end of December 2024, assuming we are able to achieve our internal base case assumptions for DefenCath demand, uptake, net pricing and reimbursement. We believe we have sufficient cash resources on hand to achieve this objective, however should the launch and uptake of DefenCath be slower than our internal projections, requiring more capital, we believe we have several financing alternatives available to the company, including non-dilutive sources of financing. CorMedix has grown in size with the addition of new hires in field sales and medical affairs, as well as other additions across the organization. I am thankful for all of those involved in the latest expansion, our new team members, and all the work that has gone into preparing the company for our anticipated commercial launch. I am proud of what we’ve accomplished over these recent months and excited to bring DefenCath to patients. I would now like to turn over the call to Matt to discuss the company’s fourth quarter and year-end financial results and financial position. Matt?

Thanks Joe, and good morning everyone. I am pleased to be here today to provide an overview of our fourth quarter and full year 2023 financial results, as well as an update on CorMedix’s cash position. The company has filed its annual report on Form 10-K for the year ended December 31, 2023. I urge you to read the information contained in the report for a more complete discussion of our financial results. With respect to our fourth quarter of 2023 financial results, our net loss was approximately $14.8 million or $0.26 per share compared with a loss of $8.2 million of $0.20 per share in the fourth quarter of 2022. The higher net loss recognized in 2023 compared with 2022 was primarily driven by increases in costs related to market research studies and pre-launch activities for DefenCath and increases in personnel expenses due to new hires in 2023 compared to the same period in 2022. Operating expenses in the fourth quarter of 2023 increased approximately 86% to $15.7 million compared with $8.4 million in the fourth quarter of 2022. R&D expense decreased by approximately 19% to $2.3 million driven primarily by decreases in manufacturing costs related to DefenCath. SG&A expense increased approximately 140% to $13.4 million in the fourth quarter of 2023 compared with $5.6 million in the fourth quarter of 2022. This increase was primarily attributable to an increase in costs related to launch activities and higher personnel costs due to the additional hires in Q4. With respect to our full year 2023 financial results, total operating expenses during the full year 2023 amounted to $49 million compared with $30.7 million in 2022, an increase of 60%. R&D expense increased 23% to $13.2 million, driven primarily by an increase in personnel expenses, an increase in costs related to medical affairs activities, and an increase in costs related to the technical and quality operations for the manufacturing of DefenCath prior to its marketing approval. SG&A expense increased approximately 79% to $35.8 million, primarily driven by an increase in costs related to market research studies and pre-launch activities in preparation for the commercial launch of DefenCath, and an increase in personnel expenses as a result of additional hires in 2023. These increases were partially offset, among others of lesser significance, by a decrease in legal fees for the period. We recorded net cash used in operations during 2023 of $38.4 million compared with net cash used in operations of $24.4 million in 2022. The increase is primarily driven by an increase in net loss primarily attributable to an increase in operating expenses as compared with the same period in 2022. CorMedix remains in a good position from a balance sheet perspective as we prepare the company for commercial launch of DefenCath in April. The company had cash and cash equivalents of $76 million as of December 31, 2023. As we have discussed previously, we expect our operating expenses, especially SG&A to increase in 2024 given the growth of the company and the costs driven by the commercial launch of DefenCath. CorMedix anticipates 2024 quarterly operating expenses to range from around $15 million to $18 million to support commercial infrastructure and the launch of DefenCath. We believe our cash, cash equivalents, short term investments and projected future operating cash flow gives the company the ability to fund operations for at least 12 months and to fund the commercial launch of DefenCath through to anticipated profitability, which may occur on a run rate basis by the end of December 2024, assuming we are able to achieve our internal base case assumptions for DefenCath demand, uptake, net pricing and reimbursement. I will now turn the call back over to Joe for closing remarks. Joe?

Thanks Matt. CorMedix is laser focused on our upcoming launch date in April. We’ve actively engaged in customer discussions on both the in-patient and outpatient settings of care and are optimistic about our launch potential for 2024 and beyond. With respect to any future potential indications for DefenCath, we are targeting the submission of a post-approval meeting request to FDA by the end of March and we expect to have a meaningful discussion with FDA around potential clinical pathways in midyear 2024. As I mentioned earlier, we do not intend to provide revenue or earnings guidance at this time; however, we may revisit guidance if and when appropriate. I appreciate everyone’s continued support in CorMedix, and I am happy to take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. [Operator instructions] We have our first question coming from the line of Jason Butler from Citizens JMP. Please go ahead.

Hi, thanks for taking the questions, and congrats on the progress. Just wondering if you could give us a little bit more detail on the progress you’re making with the hospital P&T committees. Do you have meetings scheduled at this point, and do you think you can get any--when do you think you can get the first decisions out of those meetings? Then secondly, just walk us through how we should think about the early launch and utilization within the hospitals as you get these committee meetings and approvals. Should we expect any use before you get the first committee approvals? Thanks.

Yes, thanks Jason. From a P&T meeting process, we do have some meetings that are currently scheduled. We have a number that we expect to be scheduled, let’s say in the second quarter. I can’t really comment on the timing of how quickly that will move and whether they will adopted on formulary, but the way I would think about in-patient, and I’ll even touch on outpatient for a second, we mentioned it would be a slower ramp due to the P&T process, so when we think about it in the short term and long term, we think about the in-patient side as kind of a more steady, gradual ramp, whereas on the outpatient side, given the potential size of certain large customers as well as even the ability of a midsized customer to move volume, we would expect that ramp to be a little more lumpy. On the outpatient side, we see maybe new patient starts within those facilities focusing initially on fee-for-service patients, as then we begin to on-board and make plans over time to be a little bit kind of in step, more of a lumpy upward ramp.

Got it. Then just one more from me in terms of the label expansion activities, other catheter use settings. Obviously you mentioned waiting for the FDA interactions and feedback, but just from an operational perspective, are you guys preparing to be in a position to launch those trials or start those trials quickly after you get FDA alignment?

Obviously they’d have to depend on whether or not they adopt the proposal that we intend to make. I think if they are accepting of the pathway that we’re going to put forward for certain expanded indications, we can launch those fairly quickly - it’s not immediate, right, not just flipping on a light switch, but if they desire for more work to be done, then it could be a longer pathway.

Okay, great. Thanks for taking the questions.

Thank you. Our next question comes from the line of Gregory Renza from RBC Capital Markets. Go ahead, please.

Hi Joe and team, it’s Anish on for Greg. Congrats on the progress this quarter, and thanks for taking my questions. Just first, maybe if you could give us an update on the current composition of your commercial field force and for some granularity on the new adds in the in-patient and outpatient segments to date. Then secondly, how are you thinking about current and upcoming shifts in political tides affecting CMS reimbursement policies as it pertains to DefenCath? Thanks again.

Thanks Anish. From a field team standpoint, we’ve migrated a little bit from, I think, our thinking last year, and rather than have a bifurcation between the in-patient and outpatient teams, we somewhat melded them into one with geographic deployment being more important than, let’s say, a split between those two settings of care. Given the nature of the role is more of a key account manager than a medical rep, it’s essentially the same skill set on both sides of the care from a reimbursement knowledge, from a contracting standpoint, the hurdle on both sides really is getting the product adopted in the system, be it a large system or a small dialysis operator. Right now, we’re staffed with about 30 in the field - we think that’s sufficient for launch. We may look to grow over time into the 45, 50 range, but right now we’re comfortable where we’re at, that we have the right team in place. From a political standpoint, it’s really hard to tell what may happen. Certainly we have four years of experience with the Biden White House and have just gone through our experience with CMS. We also have four years of past experience with the Trump administration, so at this time, we’re not really seeing anything drastically change at CMS, regardless of who ends up in the White House, but certainly it could always change.

Great, thank you.

Thank you. Our next question comes from the line of Les Sulewski from Truist Securities. Please go ahead.

Good morning, thank you for taking my questions. Can you, Joe, provide some color on distribution channels, around your commercial inventory levels ahead of launch, and how do you expect in-patient centers to manage their stocking levels and maybe your implied ratio on expected demand for the 3ml versus the 5ml vial? Also a follow-up to that, which quarter would you expect the manufacturing costs to shift from R&D to patents?

Thanks Les, good questions. From a distribution channel standpoint, essentially the end inventory is going to flow through specialty distribution. On the in-patient facilities, it will flow through a specialty distributor. On the outpatient side, it will be a mix of going through specialty distributor for some customers and others potentially will get shipped direct. On the 3ml and 5ml issue, the 5ml is in our label because we had done additional development work - remember, the product was initially in a 5ml vial, but it’s not our intent to commercialize the 5ml at this time, so we’re launching--the intent is to launch the product with the 3ml. The last question that you asked, about when we cut over, it’s a difficult one because it depends on uptake and demand. I think the faster demand goes, you could certainly see it cut over earlier this year. If demand is a little bit slower, it may take some more time. We’ve built a decent amount of inventory that was expensed prior to approval.

Got it, thanks.

Did I touch on everything?

I think you did, yes. Just one more follow-up, I guess on the strategy around separate payment under Medicare Part B reimbursement. What are some potential timelines for filing an approval that you expect on this, and the potential impact to your WAC price?

Yes, I’m not sure I thought of that question, Les. We have our outpatient reimbursement determination. CMS has made a determination that we’re eligible for TDAPA, right, that it’s going to fall under the scope of the end stage of the ESRD prospective payment system. On the in-patient side, we do have our NTAP, so the J-code application is required for TDAPA, right, so J-code, if that’s what you might be thinking, is separate from a Part B determination. Does that clarify the question at all, Les?

Correct, and is there potential for any adjustments to the WAC price?

Look, we’d launch the product with a WAC of $249. I don’t at this time envision any adjustments to the WAC price during the TDAPA period, but we will always re-evaluate as we move forward.

Got it, thank you.

Thank you. Our next question comes from the line of Serge Belanger from Needham & Company. Please go ahead.

Hi, good morning. Thanks for taking my questions. Joe, I think you mentioned that the P&T review process would take three to nine months. Maybe just talk a little bit about that process and what it entails. Then in the outpatient setting, do you also expect an adoption process or evaluation process before there is uptake, and maybe lastly, if you can walk us through your base case for breakeven by the end of the year. Thanks.

Okay, so I’m going to start with number three first and then I’m going to--I’ll allow Erin to comment on the P&T process for facilities. Certainly outpatient, I think that was what you were asking in your second question, outpatient, they follow a similar evaluation process for making a determination to put a product on formulary and into utilization. They’re looking at the clinical data for the product, they’re looking at the medical need and certainly the reimbursement to the facility, as well as whatever economic terms that we’re able to provide that institution. I think what you’re asking in number three is--can you clarify, are you asking me to confirm that we get to run rate--? What was your question on three?

Really, just the pushes and pulls to get you to that breakeven status that you talked about as your base case.

Okay, yes. Sure. Look - we have certain assumptions we’ve made for demand and uptake on both the in-patient and outpatient side, right - that produces a revenue forecast internally and a cash flow forecast that we are comfortable with, that gets us to run rate breakeven profitability, as I mentioned. I don’t think we’re going to provide more granularity than that at this time - as I said, we’re not going to give revenue guidance, but certainly I think you can do the math. We’ve given guidance on what our run rate operating expenses are going to be, so you can somewhat back into where revenue really needs to be in order to hit that milestone. Erin, you want to provide a--?

Sure, I can provide a little bit of color around the P&T process. The process itself is driven by the hospital internally, so usually you have a physician champion that advocates for the product and then the formulary meeting happens and they adopt the product, and then it goes through the process of implementing it within the health system. We’ve seen a lot of interest in the product, both organically and inorganically, right, where we’ve done some reach outs and we’ve also had reach outs from hospitals to us. I think the benefit here is that we have secured the NTAP prior to being approved. We have that opportunity to leverage a payment mechanism on the in-patient side, and we also have the opportunity to leverage the health economics, right, the long term complications of these patients. The hospitals are the ones that see those patients and those expenses, so we’ve had a lot of organic and inorganic interest from the hospitals.

Thanks Erin. Serge, does that answer your questions?

Yes, thank you.

Thank you. I’ll now turn the call back over to Dan Ferry for written questions from the audience.

Thank you Operator. Joe, we have few written-in questions from the audience here. The first one is your NTAP was approved based on an estimated WAC price of $1170 per vial; however, you have launched the product with an actual WAC of about $250 per vial. Can you explain what impact this will have on the NTAP reimbursement? Do you expect this price point to have a positive or negative impact on in-patient utilization, and further, what color can you provide around why the lower WAC was decided?

Okay, thanks Dan. There’s a lot to unpack there. I’m going to start with taking a step back and the thought process around when we established the $1170 price point. When we filed the NTAP application two years ago, the market landscape looked very different, specifically on the outpatient side, right - TDAPA was two years, we didn’t necessarily have visibility to outpatient utilization, and we did our market analysis and market research around where the product would need to be priced on the in-patient side alone for the size of the in-patient market. Ultimately, we settled on the $1170 price. Since that time, obviously the landscape has shifted - TDAPA is now five years, we’ve had a number of conversations with customers in both settings of care over the last two years, and on the outpatient side specifically have gotten much more comfortable and confident around the ability to, first of all, secure reimbursement with TDAPA, and second get sufficient uptake. The WAC price that we established of $249.99 really was driven by the dynamics of TDAPA for the outpatient segment, but is a reasonable price point for in-patient. One of the other key pieces of feedback we took over the last two years from in-patient institutions, as we messaged around the NTAP and the value of the NTAP, was from many institutions that they perceived lower acquisition cost of product to be preferred to a higher NTAP reimbursement, so to that extent, the feedback we’ve gotten in the in-patient side is that the lower WAC price is more favorable. So I think to the question you asked about do you expect this price point to have a positive or a negative impact on utilization, the feedback we’re getting is that the lower acquisition cost of product should drive higher utilization on the in-patient side, so certainly we’re happy with that.

Okay, great. Thanks Joe. A second question here is are there any expected studies or data to be presented over the coming months, and can you give an investors a sense of which conferences CorMedix may have a presence?

Yes, thanks. I’m going to turn that over to Liz in a moment, but we’ve got a pretty ambitious 2024 planned with both field organizations being out there and active in a number of industry conferences. Liz, why don’t you go ahead?

Sure, thanks Joe. Yes, we’re excited, actually - we’re going to be presenting two abstracts this spring at the upcoming Society for Healthcare Epidemiology of America, or SHEA’s annual meeting, and both field teams, both medical and commercial are going to be present at over a dozen conferences this year and continuing to connect with key stakeholders - those include SHEA, MAD-ID, the NKIF spring conference, Renal Physicians Association, so I think we have a really good presence out there.

Okay great, thanks Liz, thanks Joe. Joe, a final question here is can you give a sense of what investors may be missing? What is key to understanding CorMedix over the near term?

Okay, thanks Dan. Look - I assume you’re thinking about it from a stock price trading standpoint. You know, I still think we’re a story that’s not completely widely understood. We are in a very niche-y therapeutic segment with an atypical reimbursement and a lot of acronyms we talk about - NTAP, TDAPA, that are not necessarily common vernacular for biotech investors. We’re also a young biotech going through its first launch, so I think historically a lot of investors have kind of sat on the sidelines, waiting for perhaps a new equity offering, but as we’ve discussed today, we’re focused on launch. We think there’s a lot of launch value to DefenCath that is certainly not captured in the trading value of the stock, and we also think that there’s potentially long term value. We have 10.5 years of exclusivity, we’re expecting to meet with FDA midyear around a label expansion for DefenCath, but I think more importantly, over the next couple of years, our expectation is to be developing real world evidence demonstrating that the impact that DefenCath can have on infection rates and on patients, and certainly we’d look to utilize that real world data as, one, we obviously establish broader utilization but also more long term reimbursement across the continuum of care.

Okay great, thanks Joe. Operator, that concludes the written portion of the Q&A session. You may now close the call.