Q4 2023 CorMedix Inc Earnings Call

Participants

Joe Todisco; CEO; CorMedix Inc.

Matt David; EV & CFO; CorMedix Inc.

Dan Ferry; IR; LifeSci Advisors

Jason Butler; Analyst; JMP Securities

Gregory Renza; Analyst; RBC Capital Markets

Leszek Sulewski; Analyst; Truist Securities

Serge Belanger; Senior Analyst; Needham & Company LLC

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the CorMedix Inc., fourth-quarter and full-year 2023 earnings call. (Operator Instructions) This call is being recorded on March 12, 2024, and I would now like to turn the conference over to from LifeSci Advisors. Please go ahead.

Dan Ferry

Good morning, and welcome to the CorMedix full year 2023 earnings conference call. Leading the call today is Joe to disco Chief Executive Officer of CorMedix is joined by Dr. Matt David, Executive Vice President and CFO, Beth Zeltiq, Kaufman, EVP and Chief Legal Officer, with Robert EVT. have Chief Clinical Strategy and Operations Officer, and Aron Mistry, EVP and Chief Commercial 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 meaning 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 the following
Any statements other than statements of historical facts regarding management's expectations, beliefs, goals and plans about the Company's prospects, including its commercial launch prospects for DefenCath, its clinical development programs for expanded uses of DefenCath manufacturing activities and marketing approvals for other primary other product candidates, future financial position, future revenues and projected costs and reimbursement and potential market acceptance of DefenCath or other product candidates. 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 CorMedix filings with the SEC, including the latest quarterly report on Form 10 Q and annual report on Form 10 K, copies of which are available free of charge at the SEC's website at www.SEC.gov or upon request from CorMedix clear that it 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 CorMedix does not intend to update these forward-looking statements except as required by law.
At this time.
It's now my pleasure to turn the call over to Joe to disco Chief Executive Officer of CorMedix.
Joe, please go ahead.

Joe Todisco

Thanks, Dan. Good morning, everyone, and thank you for joining us on this call. Since we last presented earnings in November, the Company achieved a number of key milestones, most notably the final NDA approval of DefenCath by the US FDA as well as confirmation from CMS that DefenCath will be eligible to receive a transitional drug add-on payment or to depot 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 HCPS. J code application to CMS in December and our AP. application in January. Following receipt of that reimbursement guidance from CMS. Those applications remain under review with CMS and CMS has confirmed in writing that they are actively reviewing our J code into DEF applications and are working toward a July first, 2020 for effective implementation for DefenCath to depot payments. That said, CMS reserves, the right to request additional information for any application which may impact the review timing and or approvability of a J-code or to depot, both a J code and an approved and effective to death application, our gating items for the outpatient commercial launch of DefenCath, which is currently slated for July first, the Company remains on schedule to commence our commercial launch for the inpatient setting.
On April 15th, 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 inpatient 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 site in Hemel 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 inpatient launch trajectory in April, we do expect the ramp for inpatient utilization to be fairly modest over the first two launch quarters as inpatient inpatient health systems and hospitals are working through their respective P and 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 midsize 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 midsize dialysis operators, and we look forward to providing additional updates over the coming months as these discussions advance based upon our current force at 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 reimburse. 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 until 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'm 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'm 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?

Matt David

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 PolyMedica's cash position. The Company has filed its annual report on Form 10 K for the year ended December 31st, 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 or $0.2 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 prelaunch 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, 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 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 prelaunch activities in preparation for the commercial launch of DefenCath and an increase in personnel expenses as a result of the 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 2020 to CorMedix remains in a good position from a balance sheet perspective as we prepare the company for a commercial launch of DefenCath in April, the company has cash and cash equivalents of $76 million as of December 31st, 2023.
As we've discussed previously, we expect our operating expenses, especially SG&A to increase in 2024 given the growth of the Company and the cost driven by the commercial launch of DefenCath, CorMedix anticipates or 2024 quarterly operating expenses to range from around 15 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 update, net pricing and reimbursement.
I will now turn the call back over to Joe for closing remarks.

Joe Todisco

Thanks, Matt. Biomedics is laser focused on our upcoming launch date in April is actively engaged in customer discussions on both the inpatient and outpatient settings of care and is 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. Appreciate everyone's continued support CorMedix, and I'm happy to take questions.

Question and Answer Session

Operator

(Operator Instructions)
Jason Butler, Citizen's JMP.

Jason Butler

Hi. Thanks for taking the questions and congrats on the progress. I'm 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 decision? What do you think you can get the first decisions out of And out of those meetings and 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. I mean, should we expect any use before you get the first committee approvals?

Joe Todisco

Thanks. Yes, I think thanks, Jason. So from a from a P. and T. meeting process, we do have a some meetings that are currently scheduled? We have it. We have a number that we expect to be scheduled, let's say, in the second quarter. I don't I can't comment on the timing of how quickly that will move and whether they will be adopted on formulary. But the way I would think about it inpatient, and then I'll even touch on outpatient for a second on?
Yes, we mentioned it would be a slower ramp rate due to the P&T process. So when we think about it in the short term and long term, we think about the inpatient 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 even the ability of a midsize customer to move volume, we would expect that that ramp to be a little more lumpy.
Right. And on the outpatient side, we see maybe new patient starts within those facilities focusing initially on fee for service patients, right. And then we begin to onboard MA plans over time, be a little bit kind of in step, right, more of a lumpy upward ramp.

Jason Butler

Got it. And then just one more for me. In terms of the label expansion activities other than other categories 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?

Joe Todisco

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

Jason Butler

Okay, great. Thanks for taking the questions.

Operator

Gregory Renza, RBC Capital Markets.

Gregory Renza

Hi, Joe and team and finish 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 inpatient and outpatient segments to date and then secondly, how are you thinking about current and upcoming shifts in political tides affecting CMS reimbursement policies as it pertains to DefenCath?

Joe Todisco

Thanks again, thanks.
Thanks, Nishu. So from a 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 inpatient and outpatient teams, we somewhat melded them into one with geographic deployment being being more important than some, 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 of reimbursement knowledge from a contracting standpoint, the hurdle on both sides really is getting the product adopted in the system via a large system or a small dialysis operator.
So right now, we're staffed with about 30 in the fields. We think that's sufficient for launch. We may look to grow over time into the into the 45 to 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 right what what may happen. Certainly, we have four years of experience with the Biden White House and 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 could always change.

Gregory Renza

Great. Thank you.

Operator

Leszek Sulewski, Truist Securities.

Leszek Sulewski

Good morning. Thank you for taking my questions of. Can you Joe provide some color on distribution channels around the your commercial inventory levels ahead of launch and how do you expect the inpatient centers to manage their stocking levels on maybe your implied ratio and expected demand for the three mill versus the five?
No vial and And also a follow-up to that one out which quarter would you expect the manufacturing costs, the shift from R&D to COGS?

Matt David

Thanks for the good questions. So from a distribution channel standpoint, from essentially the inventory is going to flow through specialty distribution on the inpatient side or for inpatient facilities will flow through a specialty distributor on the outpatient side, it'll be a mix of going through, especially distributor for some customers and others potentially will go will get shipped direct from.
And the other three MLN. five ml issue, the 5m that was in our label because we had done the initial development work from the practices additionally in applied ML vial, but it's not our intent to commercialize the five ml at this time. So we're launching the intent is to launch the product with the 3M L.

Joe Todisco

The last question that you asked about when we when we cut over as a a difficult one because it depends on uptake and demand. I think the faster demand goes, you could certainly see cutover earlier, right this year, some right. If demand is a little bit slower, may take some more time, right. We so we've built a decent amount of inventory pre, right, that that was expense right prior to prior to approval.

Leszek Sulewski

Got it. Thanks.
I just wanted to call out there was yes, I think you did.
Yes.
I just had 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 study expect on this and the potential impact to your rack price?

Joe Todisco

Yes, I'm not sure I follow that question. Less service. So we have our outpatient reimbursement termination. Cms has made a determination that we're eligible for to depot. Resin is going to fall under the scope of the end-stage of the ESRD prospective payment system on the inpatient side, we do have our N-type. So the J-code application is required for to data, right? So J-code, if that's what you might be thinking is separate from a Part B determination. Does that clarify question at all lever active?
And is there potential for any adjustments to the whack price?
And so look, we've launched the product with a whack of $249. I don't at this time envision any adjustments to the whack price during the period, but we'll always reevaluate as we move forward.

Leszek Sulewski

Got it. Thank you.

Operator

Serge Belanger, Needham & Company.

Serge Belanger

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. And then in the outpatient setting Do you also expect kind of the adoption process or evaluation process before there is uptake?
And maybe lastly, just if you can walk us through your base case for breakeven by the end of the year.

Joe Todisco

Okay. So I'm going to start with number first, and then I'll allow Eric to comment on the P&T process for the facilities and some certainly outpatient as I think that's what you're asking.
Your second question, outpatient? Yes, they follow a similar evaluation process when making a determination to put a product on formulary formulary and into utilization rate, you're looking at the clinical data for the product and looking at the medical need and certainly the reimbursement to the facility as well as whatever the economic terms that we're able to provide that institution on the circle. So from, you know, I think what you're asking and number three is, can you clarify, are you asking me to confirm that we get to runway.
Right, pretty tied to what you said last month, right?
Is it the pushes and pulls to get you to that breakeven status that you talked about as your base case?
Okay.
Yes, sure. So I mean, look, we have we have certain assumptions we've made for demand and uptake on both the inpatient and outpatient side, right? That produces a revenue forecast internally and the cash flow forecast that we're comfortable with gets us to a run rate breakeven profitability, as I mentioned. So I don't think we're going to we're going to provide more granularity than that at this time where, as I said, we're not going to give revenue guidance, but certainly I think you can 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.
So Aaron, you want to provide a sure I can provide a little bit of color around the P&T process. And the process itself is driven by the hospital. Internally. Rates usually 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 systems.
We've seen a lot of them interest in the product, both organically and inorganically, right, where we've done some reach out. And we've also had reach out from hospitals to us I think the benefit here is that we have secured the untapped prior to being approved. We have that opportunity to to leverage off of a payment mechanism on the inpatient side and we also have the opportunity to leverage the health economics, right? The long-term complications of these patients, the hospitals, the one are the ones that see those patients and those expenses so we've had a lot of organic and inorganic interest from hospitals.
Thanks, sir. Does that answer your question?

Serge Belanger

Yes, thank you.

Operator

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

Dan Ferry

Thank you, operator. Joe. We have a few written questions from the audience here. The first one is your end TAP was approved based on an estimated whack price of 1170 per vial. However, you have launched the product with a national whack of about two 50 per vial. Can you explain with this, can you explain what impact this will have on the NTAP reimbursement? You expect this price point to have a positive or negative impact on inpatient utilization? And further, what color can you provide around why the Lower West was decided.

Joe Todisco

Okay, thanks. And just a lot to unpack there on. I'm going to start with taking a step back and the thought process around when we established the 1170 price points or it's when we when we filed the N-type application two years ago, the market landscape looked very different. Certainly on the outpatient side, right to Depot 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 inpatient side alone for the size of the inpatient market, Palm and ultimately we settled on the 1170 price. Since that time. Obviously, the landscape has shifted to death 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 have first of all, secure reimbursement with Depot and second get get sufficient uptake. So the whack price that we established of two, 49 99. It really was driven by the dynamics of data for the outpatient segment, but at a reasonable price point for inpatient.
So one of the other key piece of feedback we took over the last two years from inpatient institutions as we message around the untapped and the value of the untapped was from many institutions that they perceive lower acquisition cost of product and to be preferred to a higher end type reimbursement.
So to that extent, the feedback we've gotten on the inpatient side is that the lower wax prices more favorable so I think to the question you asked about you expect this price point to have a positive or negative impact on utilization. The feedback we're getting is that the lower acquisition cost of product should should drive higher utilization on the inpatient side. So certainly we're happy with that.

Dan Ferry

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

Joe Todisco

Yes, thanks. I'm going to 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 but Liz, why don't you go ahead?

Dan Ferry

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 for shares 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. So you know, those include chef, Matt ID, the NKF Spring Conference, Prenate physicians association. So I think we have a really good presence out there.

Joe Todisco

Okay, great. Thanks for that Adesto.

Dan Ferry

Yes, Joe. 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, um.

Joe Todisco

Okay. Thanks. Then so but I assume you're thinking about it from a from a stock price trading standpoint. I still think we're a story that's that's not completely widely understood, right. We are in a very niche-y therapeutic segment with an atypical reimbursement and a lot of acronyms we talk about and tap to data 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 a new, perhaps a new, a new equity offering but as we've discussed today, we're focused on launch. We think that there's a lot of launch value.
Defencath is certainly not captured in the trading value of the stock, and we also think that there's potentially long term value of 10.5 years of exclusivity. We're expecting to meet with FDA from midyear around a label expansion for DefenCath.
But I think more importantly, over the over the next couple of years, our expectation is to be developing real-world evidence, demonstrating the impact and the impact that DefenCath can have on infection rates and on On and on patients and certainly would look to utilize that on real-world data as one. We obviously establish broader utilization, but also more long term reimbursement across the continuum of care.

Dan Ferry

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

Operator

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines and have a lovely day.