CorMedix Inc.

Good afternoon and welcome to the Corps Medics first quarter earnings conference call. Today's conference call is being recorded. There will be a question and answer session at the end of today's presentation and instructions on how to ask a question will be given at that time. At this time, I would like to turn this conference call over to Mr. Daniel Ferry from LifeSci Advisors. Please go ahead. You may begin.

Good afternoon and welcome to the Corps Medics first quarter 2021 earnings conference call. Leading the call today is Kosa Baloche, Chief Executive Officer of CoreMedix. He is joined by Dr. Phoebe Mounts, Executive Vice President and General Counsel, Dr. Matt David, Executive Vice President and Chief Financial Officer, Ms. Liz Massen Herbert, Executive Vice President for Clinical Operations, and Mr. Tom Nuspickel, Executive Vice President 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 meetings 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 facts 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, costs, results, and interpretations thereof, 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. 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. 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 Mr. Koso Baloche, Chief Executive Officer of CoreMedix. 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 the first quarter of 2021 financial information and the overall progress CoreMedix is making in bringing defend cap to the U.S. market, for its first indication for use as a catheter lock solution for hemodialysis patients to reduce catheter-related bloodstream infections. Joining me on this call are Phoebe, Matt, Liz, and Tom Nuspickel, who joined CoreMedix this morning. So let's begin on the people side first. As announced this morning, I'm pleased to have Tom Nuspickel join CoreMedix as Executive Vice President and Chief Commercial Officer. Tom brings with him a depth of experience on the commercial side from his time at Amgen, Pfizer, and Opco. Of particular note for CoreMedix was Tom's time at Amgen, where he gained several years of experience operating in the hemodialysis space, both in the U.S. and internationally. Tom brings marketing, market access, and government affairs experience that will augment the commercial expertise of the team that CoreMedix has already built. We're pleased to have Tom join us at this important stage for CoreMedix as we continue to refine our launch plans. Although today is Tom's first day, we have already started the process of bringing Tom up to speed on the ongoing activities and strategic priorities for the company. Later during this call, Tom will share some of his thoughts So welcome, Tom. On April 14th, CoreMedx issued a press release that provided an update of our meeting with the FDA. What we stated in that press release included that there was an agreed upon protocol for manual extraction study identified in the CRL, that FDA is requiring us confirmation of an in-process control to demonstrate that the label volume can be consistently withdrawn from the vial. In addition, addressing FDA's concern regarding the qualification of the filling operation at the third-party manufacturing facility may necessitate adjustments in the process and generation of additional data on operating parameters for the manufacturing of defend caps. During this call, Phoebe will provide you an update of the progress CoreMedix has made to date on addressing the deficiencies identified by FDA at the third-party manufacturing facility. In addition to the continued effort to bring DefendCath across the finish line for hemodialysis patients, CoreMedix has been making progress by initiating the work required for label expansion of different cath for use in TPN and oncology patients using a central venous catheter once the FDA has approved the NDA for the initial indication for use. What Liz will provide is an update of the work her team, in conjunction with the medical group and the regulatory group, are doing to prepare the groundwork required to enter into clinical study for label expansion when defend cap is approved. We are proceeding with these plans while limiting our cash burn so that financially we have the resources required to successfully bring defend caps to patients in the US. Matt will provide you an update of our quarter one 2021 financials and provide color regarding the strength of core medics balance sheet. So now let's move to the first topic, the introduction of Tom Naspickel. Tom?

Thank you, Kozo, for the warm welcome and kind introduction. I am excited to be joining CoreMedix at this pivotal time for the company. The PhenCath is a novel catheter lock solution with the potential to prevent catheter-related bloodstream infections in several large markets, addressing significant clinical and economic needs. As Defend-Cath approaches a potential approval by FDA for reducing CRBSIs in patients with kidney failure receiving hemodialysis through a central venous catheter, the company will be accelerating its activities to be able to bring Defend-Cath to hemodialysis patients who can benefit from it as quickly as possible after FDA approval. As Kozo mentioned in his introduction, I have spent my career in the pharma industry where I've gained significant leadership experience in launching products and developing commercial strategies, including highly relevant experience in the chronic kidney disease space. This experience and my relationships within the nephrology community will enable me to help CoreMedix build a high-impact commercial organization as we move closer to the company's first approval and subsequent launch in the hemodialysis market. As I have learned more about Cormedix, I am extremely impressed with the firm clinical foundation the team has built with DefendCath. My objective will be to lead the commercial team as it works to realize the promise for DefendCath to become the new standard of care for hemodialysis, oncology, and TPN patients using central venous catheters. I am energized by this opportunity and I'm excited to join Cormedix today. as we prepare to bring Dupencap to patients. Let me hand it back to Kozo.

Thank you, Tom. Now I'd like Phoebe to provide the regulatory update, starting from the press release of April 14, after the FDA meeting. Phoebe?

Thank you, Kozo. Good afternoon, everyone. I am pleased to report that the CoreMedic CMC and regulatory teams are continuing to work collaboratively with our third-party manufacturing facility to resolve the deficiencies identified by FDA during its review of the DefendCath NDA. As we previously discussed, the complete response letter, or CRL, sent to CoreMedix by the FDA required a manual extraction study to demonstrate that the labeled volume of DefendCath can be consistently withdrawn from the vials to confirm the manufacturing in process controls. I am pleased to report that the study has been completed successfully. As noted by COSO, we announced after the meeting with FDA that we had an agreed upon protocol that has now been executed. The data clearly demonstrate consistent withdrawal of the labeled volume from the vials. The CoreMedix CMC and regulatory teams continue to focus our efforts on resolving the deficiencies sent to the contract manufacturer, or CMO, in the post-application action letter. As we have explained previously, the major focus of FDA's concerns was on the qualification of the filling operation, and CoreMedix and the CMO have been evaluating available data to assess the need for adjustments in the manufacturing process and generation of additional data on operating parameters for manufacture of DefendCas. Based on our analyses, we have concluded that additional process qualification will be needed with subsequent validation to address the deficiencies identified by FDA. As a result, Our current plan is to be able to resubmit the DFENCAP NDA in the fourth quarter of 2021. At the meeting with FDA in mid-April, FDA stated that the review timeline would be determined when the NDA resubmission is received. FDA also expects all corrections to facility deficiencies to be complete at the time of resubmission so that all corrective actions may be verified during an on-site evaluation in the next review cycle if the FDA determines it will do an on-site evaluation. Our goal is to ensure that FDA can conclude that the manufacturing facility is ready to support commercial operation for DefendCAS without the need for an on-site inspection. As I have explained on a previous call, FDA identified the deficiencies based on a review of records that it requested from the CMO. There was no onsite inspection due to travel restrictions in place because of the ongoing COVID-19 pandemic. We are hopeful that FDA will continue to recognize the potential for DefendCas to address an unmet medical need of reducing life-threatening catheter-related bloodstream infections and complete the review of the manufacturing facility using the record review approach to approve the NDA as quickly as possible. However, we are gratified that if FDA decides that an inspection of the CMO is required before the NDA can be approved, it now has the option to use a remote interactive evaluation. In a guidance document recently released by FDA, the agency will decide when it is appropriate to conduct a remote interactive evaluation for a pre-approval inspection to assess a marketing application. Virtual interactions hosted by FDA's IT platforms and equipment will be scheduled when the manufacturing facility is operational. The pre-approval inspection will assess whether the facility can perform the manufacturing operations in conformance with current good manufacturing practice requirements. FDA expects that the use of remote interactive evaluations should help the agency operate within normal timeframes in spite of the COVID-19 pandemic. As we have consistently stated, we are committed to providing updates as we move through resolution of the deficiencies. Thank you, and I will now turn the call to Liz for an update on clinical activities at Core Medics.

Liz? Thank you, Phoebe. Good afternoon, everyone. I'm excited that you're here. the recent efforts and activities of the clinical team as it relates to DefendCast. Given the versatility of DefendCast, we are able to explore potential opportunities for label expansions, as well as potentially expanding the hemodialysis market. To start, we have been researching the standard of care and patient profiles of pediatric patients receiving hemodialysis via a CVC. These young patients come to hemodialysis very differently than the adult population we studied in Lockett 100. In children, the most common causes for dialysis are congenital defects, small or non-functioning kidneys, or scarring in the glomeruli, the filters in the kidney. Similar to adults, pediatric patients using a catheter experience complications like bloodstream infections and clotting, and given the inherent vascular challenges, maintaining catheter patency and health of the patient are critical. Furthermore, while pediatric patients often move to a fistula for primary access, there is a subgroup of patients that remain on long-term catheter care, and these patients specifically have an unmet need. We have had numerous in-depth conversations with key thought leaders in pediatric hemodialysis, and gained support to develop a pediatric program for DefendCast. The outpatient hemodialysis centers serving pediatric patients are often hospital-based, with significant involvement from the treating physicians. These centers are often affiliated with esteemed academic medical institutions that house experts in the pediatric renal space. Based on our many interviews and feasibility questionnaires, we have developed a robust clinical protocol that expands the use of DefendCast into pediatric patients. This study is designed to include pediatric patients younger than 18 years old with varying catheter sizes. Chormetics submitted this protocol to FDA and is awaiting review contingent upon the NDA approval. As we previously discussed, DefendCast's antimicrobial protective properties are potentially beneficial to a number of patient populations, including vulnerable patients undergoing chemotherapy and those receiving total parenteral nutrition, or TPN. These patients greatly depend on their vascular access to deliver life-saving medicines and nutrients. The need to protect those catheters is a priority for the patient's treatment team. Over the past month, the CoreMedix clinical team has conducted a number of in-depth interviews with frontline healthcare providers and assessed published literature to understand not only the occurrence of CRBSI in these groups, but also the management and medical needs of these patients across the continuum of care. It is clear, based on the ongoing threat of infection, that the need to reduce CRBSI to maintain catheter access remains high. For TPN patients, we have heard from clinicians that there remains a significant unmet medical need in this area. Cancer diagnoses in the United States continue to grow at an alarming rate, and by 2040, it is expected the number of new cancer cases per year will be approximately 30 million, compared to just over 18 million in 2018. Because chemotherapy and other treatment regimens leave oncology patients more vulnerable to infection due to immunosuppression, protecting their catheters is a significant priority. Regardless of the type or stage of disease a patient has, we are confident that the FENCAS can provide a reduction in CRBS size. We look forward to expanding our knowledge in these patient populations and the evolving treatment paradigm so that we can appropriately design protocols that align with the healthcare system in place to support the medical needs specific to these patients. Thank you, and I will now turn the call to Matt to cover financial results and cash guidance. Matt?

Thank you, Liz. I'm pleased to be here today to provide an overview of our first quarter 2021 financial results, as well as an update on recent financing activity and cash position. The company has filed its report on Form 10-Q for the first quarter ended March 31st, 2021. I urge you to read the information contained in the report for a more complete discussion of our financial results. With respect to our first quarter 2021 financial results, our net loss was approximately 7.2 million or 20 cents per share compared with the loss of 5.6 million or 21 cents per share in the first quarter of 2020. The higher net loss recognized in 2021 compared with 2020 included 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 first quarter of 2021 increased approximately 29% to 7.2 million compared with 5.6 million in the first quarter of 2020. R&D expense increased by approximately 7% to $2.6 million, driven primarily by increases in personnel expenses and non-cash charges for stock compensation, offset by a decrease in manufacturing costs and clinical trial expenses due to the closing of the Lockett 100 trial. SG&A expense increased approximately 45% to $4.6 million, compared with $3.2 million in the first quarter of 2020. This increase was driven primarily by increases In non-cash charges for stock compensation, increased costs related to market research in preparation for the potential approval of DefendCash and higher staffing costs due to additional hires. We recorded net cash used in operations during the first quarter of 2021 of $6.7 million, compared with net cash used in operations of $8 million in the first quarter of 2020. The decrease was primarily driven by higher non-cash compensation, offset by an increase in net loss, a larger decrease in accrued expenses, and a smaller increase in prepaid expenses versus the same period in 2020. As we have discussed on our year-end earnings call, Cormetics is in a strong position from a balance sheet perspective. The company has cash in equivalence of $81.2 million as of March 31, 2021. We believe this gives the company flexibility to resolve the manufacturing deficiencies that have been identified, resubmit the DEFENCAP NDA, continue to prepare for bringing DEFENCAP to market, and take core medics at least into the second half of 2022. While we are continuing to work through the identified manufacturing issues, we appreciate the support of our investors. We remain active participants in investor conferences as we look to strengthen the shareholder base and raise awareness among the institutional investor community regarding CoreMedix and DefendCast's potential value proposition. With that, I would like to pass the floor back to Kostas.

Thank you, Matt. CoreMedix is continuing to drive forward on our goal of bringing DefendCast to the U.S. market for the hemodialysis segment, which represents a significant market with a very large unmet medical need. Today, where patients urgently need an antimicrobial catheter lock solution for prevention of CRBSI in central venous catheter, there is no pharmacological agent approved. In the U.S., DefendCath would be the first antimicrobial catheter lock solution approved by FDA in the U.S., where deaths occur in as many as 35% of hemodialysis patients experiencing a CRBSI. To summarize, we continue to focus our effort on three fronts. Expeditiously resolving the third-party manufacturing deficiency, continue to expand our connections with the hemodialysis community, and prepare core medics to successfully launch DEFEN-CATH when approved by the FDA, and preparing the clinical study protocols for DEFEN-CATH label expansion beyond hemodialysis so that in a post-approval setting, we will be able to start those studies in a timely manner. We remain confident that we have the right team and appropriate resources in place to resolve the third-party manufacturing deficiencies that have been identified and bring different caps to the hemodialysis patients in the U.S. We expect to continue to provide updates throughout this process. Thank you for your continued support of CoreMedix. And now let me hand the call back to Laura, the moderator, operator.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation symbol indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Jason Butler with J&P Securities. You may proceed with your question.

Thanks for taking the questions, and congrats on the progress in the quarter. First one, just on the manual extraction study, could you just confirm that with the protocol you agreed with FDA, did you agree a statistical analysis plan, and did the results from the study fall within what you agreed on that SAP? and within the typical guidelines the FDA has for vial fill consistency?

Thank you, Jason, for your question. Phoebe?

Yes, we can assure you that we were successful in completing the study as FDA required.

Okay, great. That's great to hear. And then in terms of the additional in-process qualification work, do you Have you already agreed with your CMO what the plan is there and what needs to be done? And is there any granularity you can give us in terms of timelines to complete that work?

Yes, we have agreed with the CMO on the plan to go forward to resolve the deficiencies and generate the additional data. required by FDA. As we've said, the FDA has focused on the in-process controls and has requested some additional data on the process qualification. And as a result of that, we will be required to manufacture the validation batches to fulfill the request from the agency.

Okay, great. And then just last one from me, Tom, congrats on your appointment. Could you maybe highlight some of the key activities you're going to be focusing on now ahead of the launch and what you think the key attributes of the FENCATH are that will drive your marketing message for the launch?

So Jason, as you know, today's Tom's first day. We are beginning to dig on the work that we have done so far. And so Tom is beginning to go through what we have got in place and what is still missing. So I would give a little bit more time before we get into the details of what the game plan is from Tom's side. But I think he can share with you his experience, particularly in the hemodialysis space, of what he's been involved in over the years. And maybe that would be a good introduction of Tom to what he's doing. Tom?

Sure. Thank you, Kosa. As Kosa mentioned, at Amgen, I led the global launch and access for Sensapar, growing Sensapar to over $1.5 billion in peak sales. A key element of Sensapar's success is was its strong global value communication strategy, which focused first on the high disease burden and unmet need in secondary hyperparathyroidism, and then the superior outcomes that were achieved with Sensipar versus the standard of care. Then when CMS and Medicare proposed adding Sensipar to the dialysis bundle in 2011, I worked closely with the dialysis community to develop strategies to protect ESRD patient access, and to provide for physician choice for the best SHPT therapies. Ultimately, the community was successful in changing CMS's proposed policy, and oral SHPT drugs were not added to the ESRD bundle in 2011. In addition to my work with Sensipar, I've also worked closely with other renal therapeutics, including Epigen, Aranesp, parsitive, rhetoric, and most recently, reality.

Great. Okay. That's helpful. Appreciate it. Thanks for taking the questions. And again, congrats on the progress.

Thank you.

Our next question comes from the line of June Lee with Truist Securities. You may proceed with your question.

Yes. Good afternoon. This is Les on for June. Thanks for taking my questions. First question, off is on the assuming NDA resubmission in the fourth quarter, when would you expect a response from the FDA and when would you expect the next review cycle to take place?

That was clearly an issue that we discussed with FDA in mid-April when we had the meeting with them. FDA was very clear is that the classification would be determined at the time of resubmission of the NDA and that the timeline for review would also be determined at that time. So we have no information at this time on the review timeline.

Okay, I understand. And then on the new guidance that FDA provided regarding the virtual inspections, Have you had discussions with the FDA regarding this and do you perhaps handicap that towards a virtual visit if necessary at this stage?

No, that guidance document came out after we met with FDA and FDA did not bring it up when we met with them. I think if you read the guidance document, it's clear FDA will decide when it's appropriate to have the remote interactive evaluation. And the guidance states that a manufacturing facility cannot request the remote interaction. So as part of the review process, FDA will obviously decide, one, if it needs to do an onsite evaluation to assess and verify the completion of the work that's been done to address the deficiencies. and whether or not it can be addressed using the program for the remote interactive evaluation.

That is helpful. Thank you. And then the last one, in regards to the study for pediatric patients and then later on in hemodialysis patients, would there have to be a re-approval of the CMO?

Good question. Phoebe?

I think you're asking to do the post-approval pediatric hemodialysis study. Would the CMO need to be re-approved?

Yes, assuming that moves forward and is approved in the future.

The label expansion would be filed as a supplement to the NDA. So at that point, the manufacturing facility would be on a routine inspection program by FDA.

Got it. Okay. Thank you.

Our next question comes from the line of Chad Mazur with Needham & Company. May I proceed with your question?

Great. Thanks for taking my question, and I do appreciate all the details from the company and especially Phoebe on this. I and probably most other people on this call and investors are not necessarily regulatory experts for which I apologize for any deficiency in my own knowledge in trying to interpret things, but I can't imagine I'm alone in not being able to follow some of the details you guys have given. I'm just hoping a baby with a little bit of extra breath and maybe walk me through it as if I'm ignorant on these things, although I got to tell you, I've sat through a bunch of these. When you say you have additional qualification processes that need to address the SBA and you think you can submit in the fourth quarter an NDA, And then later on you were talking about some manufacturing validation that you need beforehand. As much as you can. And I get it. These are not easy questions and there's a lot of uncertainties. Can you maybe timeline me through or just, you know, slowly treat me like I'm not all that smart, which isn't maybe too far from the truth. What the steps are that you think you need to achieve by this 4Q NDA submission?

Okay. No need to apologize. No one individual is an expert in all of these areas. That's why we have a very experienced team working on this, both CMC side as well as the regulatory side. And it is a complicated process. and that it's not simple. And like all technical work, it needs to be conducted with precision and is subject to issues when something can go wrong. It's highly sophisticated equipment, and so there are times when there may be unexpected results obtained. FDA's concern is as they expressed to us during our meeting with them, focused on the filling operation, which is the process by which to fen-cast, is during a sterile procedure loaded into the vials, and then the vials are capped. They expect us to generate sufficient data to demonstrate that that process works, is a controlled process and is consistent with the agency's requirements for good manufacturing practice. So clearly, sterility is a very important part of that process, but also the accuracy in making sure the right volume of DefendCast is loaded into the vials. And we're talking about thousands of vials during a manufacturing run. So, as I said, it's a complicated process and technically very involved. It involves a generation of a lot of data to make sure that the process itself is, using the jargon, qualified, which means all the equipment has been qualified for the intended use and every step in the manufacturing process has been qualified and that everything works as it is intended to produce the product that has to meet its specifications. So there are very detailed requirements on a chemical basis as well as a performance basis that's required for the product. And so that process needs to be very robust, needs to be reproducible, and the burden is on the manufacturer to demonstrate that the facility can do that process reproducibly and generate the required product for commercial distribution.

All right. Well, I appreciate you taking back to that. That was clearer than it has been to me in the past, so thank you.

Certainly.

There are no further questions over the phone. I would like to turn this call back over to Mr. Dan Ferry for written questions.

Thank you, operator. Costa, we have some written questions here. First one's for you. Why have you decided to bring on a CCO at this point in time?

Thanks, Dan. Our plan all along was to have a chief commercial officer in place prior to the launch of DefendCat. We are now at a point where we are confident in our path forward to a potential NDA approval. And therefore, when the right candidate comes across, we continued with our plans and hired Tom to join us and continue the preparation for the launch of DefendCat in the U.S. markets.

Okay, excellent. The next question here is for Matt David. Matt, as the resubmission activity continues with your CMO, how do we think about this affecting your cash burn and for how long? The longer we wait for regulatory progress, the burn must come down, no? How is this theme contemplated in your current cash guidance?

Thanks for the question, Dan. We have factored in the current manufacturing work and resubmission process into our cash guidance. As we've described, we are confident that we have the resources needed to take us at least into the second half of 2022. Okay, excellent.

And the final question here is for Liz. Liz, what is the timing on beginning these additional studies that you have described in the prepared remarks?

Sure. We are looking forward to starting them as soon as we can after we receive NDA approval.

Okay, very good. So that's all I have. I would like to turn the floor back over to you for closing remarks.

Thank you, Dan. CoreMedix has an experienced team of executives who have taken pharmaceuticals through various phases of clinical study, registration, and successfully launched products onto the U.S. market. Corps Medics remain committed to bringing defend cats 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 infections. The importance of reducing the incidence of infections and keeping patients out of hospital is even more apparent during this ongoing coronavirus pandemic. Despite the delay in the NDA approval, please keep in mind that the potential for more than 10 years of marketing exclusivity remains because it will not commence until the NDA for DefendCath is approved. Thank you for your time and attention, and have a good evening.

This concludes today's conference. You may disconnect your lines at this time.