CorMedix Inc.

Good afternoon and welcome to the Corps Medics third 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 the conference call over to Daniel Ferry from LifeSci Advisors. Please go ahead.

Good afternoon and welcome to the Corps Medics third quarter 2021 earnings conference call. Leading the call today is Dr. Matt David, Interim Chief Executive Officer and Executive Vice President and Chief Financial Officer of CoreMedix. He is joined by Dr. Phoebe Mounts, Executive Vice President and General Counsel. 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, manufacturing activities, and marketing approval of the CENTCAS in the U.S. and other product candidates, future financial position, future revenues and projected costs, and potential market acceptance of Defendcat, Neutralin, and other product candidates. More specifically, forward-looking statements include any statements about our clinical development plans and the submission and timing, cost, progress, results, estimates, 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 Dr. Matt David, Interim Chief Executive Officer of CoreMedix. Matt, please go ahead.

Good afternoon, everyone, and thank you for joining us on this call. Today marks the first earnings call since Phoebe and I have taken on additional roles within the company, as we announced on October 4th. While it has been an incredibly busy month, we are pleased to be here this afternoon to discuss CoreMedix updates, as well as reflect on our priorities as a company over the coming months. On today's earnings call, we will discuss the third quarter 2021 financial information and the overall progress CoreMedix is making in bringing DefendCath 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. Let's begin with the topics for discussion today. In September, we announced that Chormetics had encountered delays at its third-party contract manufacturer, or CMO, and we were informed by the CMO that there were issues that are unrelated to the DfenCaf manufacturing activities. We also indicated that the timeline for Chormetics and the CMO to address deficiencies at the facility that are required for resubmission of the DfenCaf NDA became uncertain. The DefendCast team, including a group of specialized consultants, has continued to work closely with our CMO, and we are pleased to share with you that we are making progress on this front. Phoebe will provide information on our progress here since the last update. Also, we are balancing our preparations for launching DefendCast while limiting our cash burn so that financially we have the resources required to efficiently bring DefendCast to patients in the U.S. market when FDA approval is received. I will provide an update on our third quarter 2021 financials and provide color regarding the strength of Cormedex's balance sheet. A couple weeks ago in October, we shared some abstracts that the Cormedex team has now presented at two recent conferences, Association of Managed Care Pharmacy and American Society of Nephrology. The analyses described in these abstracts and the epidemiologic data that stem from this work are incredibly important, as they underscore the purpose of the work we are doing here at CoreMedix. I will provide some additional color on these items and how we plan to use these data as we prepare to bring DefendCast to patients in the hemodialysis community who are at risk for life-threatening catheter-related bloodstream infections. Now let's move to the first topic. Phoebe will provide the regulatory and manufacturing update. Phoebe?

Thank you, Matt, and good afternoon, everyone. I am pleased to report that Chormetics and the third-party contract manufacturer have been able to resume work on validation of the DefendCast manufacturing process. As noted by Matt and as we disclosed in early September, there was a delay as a result of issues at the CMO that were unrelated to the manufacturer of DefendCast. We have been able to resume manufacturing activities and are continuing to complete the work that is required to address the deficiencies identified by the FDA. Specifically, we have discussed previously that FDA had identified deficiencies involving activities associated with the vial filling line for DefendCast at the CMO. In particular, the target filling off volume. After analyzing available data, parameters of the filling operation were adjusted and we determined that qualification of the filling operation was required. It will require some time to complete testing and preparation of documentation to resubmit the manufacturing module of the new drug application or NDA for DefendCAS. Until we have completed all of the testing, we will not be able to give specific guidance regarding the timing of resubmission. As a reminder, CoreMedix has not been asked to resubmit any information relating to the clinical data from the Lockett 100 studies. I can assure you that we will continue working diligently to resubmit the DefendCath NDA. As we have stated previously, we are committed to providing updates over the coming months, and we will provide an update on resubmissions when we have clarity on the timelines. We have been extremely fortunate to have well-qualified and experienced consultants who also have been working with us to ensure the CMC module to be resubmitted by Cormetics will meet FDA's regulatory requirements. Approval of the NDA requires sufficient data and documentation to demonstrate to FDA that the manufacturing facility is ready to support commercial operation for DefendCast. As we have explained, FDA informed core medics and the CMO that resolution of all six of the deficiencies at the manufacturing facility identified by FDA in the post-application action letter sent to the CMO will be required for resubmission of the NDA. Corrective actions to address the deficiencies at the manufacturing facility will be submitted to FDA by the CMO. FDA also informed us that corrective actions may be verified during an on-site evaluation of the manufacturing facility subsequent to resubmission of the NDA. While our goal is to resubmit sufficient data and documentation to convince FDA that the manufacturing facility is ready to support commercial operation for DefendCAP without the need for an inspection, we intend for the CMO to be prepared for an in-person or remote interactive evaluation by FDA. We are hopeful that FDA will work quickly to review and approve the NDA, consistent with the recognition by FDA of the potential for DefendCath to address an unmet medical need in reducing life-threatening catheter-related bloodstream infections. Thank you, and I will now turn the call back to Matt to cover financial results cash guidance in our recent industry conference activity. Matt?

Thanks, Phoebe. Next, I will provide an overview of our third quarter 2021 financial results, as well as an update on Cormetics' cash position. The company has filed its report on Form 10-Q for the third quarter ended September 30, 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 third quarter of 2021 financial results, the company has cash in equivalence of 72 million as of September 30th, 2021. Our net loss was approximately 8.6 million or 22 cents per share compared with the net loss of 6.6 million or 22 cents per share in the third quarter of 2020. The higher net loss recognized in 2021 compared with 2020 included increased R&D costs, associated with our manufacturing efforts, as well as increased personnel expenses and increased non-cash charges for stock-based compensation. We recorded an increase in SG&A and an increase in R&D expenses. Operating expenses in the third quarter of 2021 increased approximately 30% to $8.6 million, compared with $6.6 million in the third quarter of 2020. Randy expense increased by approximately 62% to 4.7 million driven primarily by an increase in costs related to the manufacturing of defend cats prior to its potential marketing approval. And to a lesser extent by an increase in personnel expenses and an increase in non cash charges for stock based compensation. SG&A expense increased approximately 4% to $3.8 million, compared with $3.7 million in the third quarter of 2020. This increase was driven by an increase in non-cash charges for stock-based compensation and an increase in personnel expenses as a result of additional hires, partially offset by a decrease in costs related to market research studies in preparation for the potential marketing approval of the FEMCAS and a decrease in consulting fees. With respect to our year-to-date 2021 financial results, total operating expenses during the nine months of 2021 amounted to $21.7 million compared with $21.2 million in the first nine months of 2020, an increase of 2%. R&D expense declined 11% to $9.9 million, driven primarily by a net decrease in costs related to the manufacturing of the FENCAS prior to its potential marketing approval. SG&A expense increased approximately 17% compared with the first nine months of 2020 as a result of higher non-cash charges for stock-based compensation and higher personnel expenses. We recorded net cash used in operations during the first nine months of 2021 of $15.3 million compared with net cash used in operations of $16 million in the nine months of 2020. The difference was primarily driven by an increase in accrued expenses compared to a larger decrease for the same period in 2020, partially offset by an increase in net loss, mainly attributable to lower cash received from the NOL sale in the nine months of 2021 versus the same period in 2020. CoreMedix remains in a strong position from a balance sheet perspective. We believe our cash and equivalence of $72 million gives the company flexibility to fund its operations at least through 2022 after taking into consideration the costs for resubmission of the DefendCath NDA and initial preparations for the commercial launch for DefendCath. We remain optimistic about our continued progress toward the goal of resubmission of the NDA to the FDA. As highlighted previously, we believe that our current cash and equivalence as well as the potential mechanisms available to us for capital raising, allow us to be prepared for the future, given we are approaching what we hope and believe will be a pivotal year ahead for Chormetics, as we seek to bring the FENCAF to patients in the hemodialysis setting. As a third topic today, I would like to highlight our efforts to expand our understanding of catheter-related bloodstream infections, or CRBSIs, in the hemodialysis setting. We announced in October that CoreMedix had three abstracts accepted for presentation at two industry conferences. These include one abstract presented in October at the Association of Managed Care Pharmacy Nexus Conference and two abstracts presented last week at the American Society of Nephrology Conference. The presentations highlight retrospective analyses that were conducted integrating multiple clinical and claims databases that CMS, and dialysis organizations use to track patient care and quality metrics in end-stage renal disease or ESRD patients. The conclusions from these retrospective studies underscore the significant incidence of and mortality related to CRBSIs and economic costs related to these infections. These findings are especially important since approximately 80% of patients undergoing hemodialysis start with a central venous catheter, or CBC, as their first vascular access. Key findings include approximately 29% of the 56,000 hemodialysis patients in the cohort had an occurrence of CRBSI post-CBC insertion. Over 54% of the first CRBSIs occurred within three months following CBC insertion. Approximately 17% of these patients died within 30 days, and 30% died within three months of the CRBSI event. Not only are these infections common, but they are also associated with significant mortality. CRBSIs lead to more hospital admissions, longer stays, and a more complicated clinical course. There is significantly higher incremental risk in CRBSI patients of dysrhythmias, endocarditis, heart failure, myocardial infarction, and stroke. Analysis estimates 2.3 billion in direct costs from CVC CRBSIs annually. The feedback from clinicians caring for hemodialysis patients has been incredibly supportive as they see firsthand the challenges and complications stemming from CRBSIs in this patient population. As there had been minimal comprehensive data available regarding the incidence and associated mortality of CRBSIs among CVC hemodialysis patients in the U.S., we are incredibly proud of the work that our team has been doing to elucidate the magnitude of CRBSI as a significant burden to patients, providers, and payers alike. As we continue to prepare to bring DefendCast to patients in the U.S. following its approval, we will seek to leverage these data and similar work to inform our messaging as we speak with hemodialysis providers and payers, including CMS, across the continuum of care. Although we have encountered unexpected delays in our pathway to bring the PhenCAT to market, the Chromedics team remains steadfast in our commitment to these patients who are in need of alternatives that can reduce CRBSIs that contribute to such a significant level of morbidity and mortality. To summarize what Phoebe and I have discussed today, we continue to focus our efforts on the following. First, we intend to expeditiously resolve the third-party manufacturing deficiencies so that the DefendCath NDA can be resubmitted as soon as possible. In addition, we are carefully balancing our cash burn while preparing for the commercial introduction of DefendCath once we have approval of the NDA by FDA. Also, we are continuing to plan to broaden the opportunity for DefendCath following its approval and continuing to expand our understanding of opportunities such as hemodialysis across a variety of settings, TPN, and oncology. Finally, we continue to aim to maximize the value of our torolidine technology in areas where it may benefit patients. In conclusion, we remain confident that we have a strong team and appropriate resources in place to resolve the third-party manufacturing deficiencies that have been identified by the FDA and bring the PhenCas to hemodialysis patients in the U.S. We will continue to provide updates throughout this process. Thank you for your continued support and interest in Chormetics. Operator, please open the call for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from line of Jason Butler with JMP Securities. Please proceed with your question.

Hi, thanks for taking the questions, and congrats on the progress and appreciate the updates. I guess first question, as you mentioned, you first announced the CMO's delay back in September. Should we read into that as essentially a two-month delay in the work that you had to complete, or are there other factors that we should think about? And then I know I've asked you guys this question before, but I think it's important to keep addressing. Are you still in full alignment with the CMO on the work that needs to be completed and how that work needs to be done to address the CRL items?

This is Phoebe. Yep, thanks for the question, Jason. The delay over the past couple of months didn't affect us in terms of our product, but it did affect the facility. And so it was not possible for us to continue our defend cap manufacturing activities. However, there was obviously other work that was ongoing to address some of the other aspects of the deficiencies. So we were continuing to work, but Unfortunately, it was the specific manufacturing activities that were delayed. And so the good news now is that the manufacturing has resumed. And so we're in the process of doing the testing from those batches to make sure that they meet specifications and that we have, in fact, validated the manufacturing process. And yes, we remain in full alignment with the CMO. Both entities are working very hard The CMO team is very dedicated and conscientious on working with us and addressing the issues. So we're cautiously optimistic that we will soon have all of the information that we need to resubmit the NDO and respond to FDA.

Great. And then just one more from me. The data you presented recently in terms of the, you know, the economic and health burden of infections in patients with catheters. You mentioned, Matt, that you got positive feedback from physicians. Have you already shared this data with payers or had any feedback on this data with payers or dialysis providers?

Yeah, I think we're not prepared to give specifics on that front, but as we have mentioned before, Jason, the company is in continuous dialogue with folks across the spectrum of the industry. right, KOLs, providers, payers, and the like. So as part of the work we're doing to make sure that we're prepared, you know, for a launch of the FENCAS once it's approved.

Okay, great. Thanks again, and congrats again on the progress.

Thank you, Jason. Thanks, Jason.

Our next question comes from June Lee with Truist Securities. Please proceed with your question.

Good evening. This is Les for Kuhn. Thank you for taking my questions. Just regarding the resumptions of manufacturing and it seems like you've resolved the vial filling deficiency. What is the qualification process on that consists of and how long, in your opinion, has that typically taken? Has FDA set any guidelines in this regard? And also, do you plan for the new batches that are manufactured to be re-inspected prior to distribution?

What I should clarify for you is that, thank you Les for the question, the vial filling activities that we're currently undertaking involve manufacturing of defend caps. And it's during that process that we are doing the testing that FDA requires to demonstrate that the process is in fact qualified. So it's a validation process that's ongoing that actually requires the manufacturing activities, which is why when there was a delay, we had a problem in doing the manufacturing. So now that the manufacturing has resumed, we can continue generating the data and the documentation that we need to submit to FDA. And the new batches are part of that process. So obviously we're manufacturing batches as we go and analyzing those batches to collect the data and generate the documentation.

Got it. That is helpful. And then lastly, have the delays in respect to the NDA resubmission, has that impacted your progress with pay and reimbursement strategy? And can you kind of provide more details there? Matt, thank you.

Yeah, no, I appreciate the question. I think the short answer is no. Look, we've had delays that have been unexpected, as you all know, but we've continued forward. Part of that is elucidated, and we wanted to highlight today for everyone with the abstracts and what the commercial team is doing and how they're using that to really help gear the market for once we get on the other side of the approval.

Great. That's helpful. Maybe I can squeeze one more in regards to the abstract presentations you just presented. Has the newly presented pharma economic data steered your pricing strategy forward? Just kind of your outlook on that. Thank you.

It's a great question, and I appreciate that, Reed. Look, it definitely feeds into it, as you can imagine. Part of what was presented talks about the real cost of these on a big picture basis, you know, and just how common and how significant the mortality and morbidity is related to this infection. So it absolutely feeds into it. We've always said in the past that our price discussions that will stem from the pharma economics, the costs that are going to be saved to the system from use of the fan caps. But beyond that, we're not prepared to talk about pricing until we're closer to the approval.

Thank you.

Our next question comes from line of Rohit Basin with Needham and Company. Please proceed with your question.

Hi, this is Rohit on for surge. Thanks for taking my question. Just in regards to across the board heparin pricing increases, have there been any, you know, talks of any shortages or any issues in terms of supply chain issues where you see that possibly being an issue down the line?

None that I'm aware of. Phoebe, do you have anything to add to that?

Yes. Actually, we have experienced in the past, as you're probably aware in the genesis for your question, there have been shortages of heparin for various reasons. And so we have been very conscientious of making sure that we have adequate inventory to go forward with our activities. So that has been an area of concern in the past. We've learned our lessons, and we're making sure that we're covered.

Great. Thank you.

Ladies and gentlemen, at this time, there are no further audio questions. I'd like to turn the call over to Dan Ferry for pre-submitted written questions.

Thanks, Operator. Okay, our first question is, CoreMedix referred to specialized consultants in a recent press release. Can you elaborate on this and discuss how they are assisting the company with the resubmission process?

Thank you for that question. I think it's a good question. Obviously, we have CoreMedix specialists, but because of the importance of these activities and the need to have everything done as quickly as possible, we have engaged a team of external consultants to provide additional expertise on FDA's expectations for addressing the specific deficiencies at the manufacturing facility and to assist in preparations for a pre-approval inspection. So we wanted to make sure that we had adequate resources and sufficient knowledge of what FDA would be looking for to make sure that we were being comprehensive and complete in all of our activities.

Okay, thank you, Phoebe. Has the company focused on securing an additional CMO?

Yes, as we have discussed in the past, CoreMedix continues to pursue the identification of additional manufacturing capacity in the United States. We are continuing that process, and we intend to announce details when we have finalized contracts in hand.

Okay, thank you. Next question is, what is CoreMedic's plan regarding other potential indications for DefendCAS? You know, for example, pediatrics, TPN, maybe oncology?

No problem. Thanks, Dan. The company remains interested, as I think I alluded to, in pursuing additional indications for DefendCast and potential uses for our Trollidine technology. We have said in the past that we would aim to pursue a clinical trial program on a post-approval basis with an emphasis on safety.

Okay, great. Thanks, Matt. Next question is, are commercial launch activities contemplated in your current cash guidance?

Yes, I'll take that one as well. As we've described, cash guidance includes spending for the initial stages of launch.

Okay, great. Have there been any changes to headcount at CoreMedix?

Thanks for that one too, Dan. Among the areas where we have been focused, making sure that we have stability among our highly experienced team at CoreMedix and also making sure we have the relevant talent to keep things moving forward with defend cap. In addition to seeing no significant changes in headcount, we are also seeing interest from highly experienced professionals who seek to join the core medic team.

Okay, great. And last question here, can you comment on the pending litigation?

While we cannot comment on pending litigation, I can assure you that CoreMedix intends to vigorously contest the claims. Thank you.

Okay, great. Matt, I'd like to pass the call back to you for closing remarks.

Thanks, Dan. And thanks, Phoebe. CoreMedix has an experienced team of professionals who have taken pharmaceuticals through the various phases of clinical studies. registered, and successfully launched products in the U.S. market. CoreMedix remains committed to bringing the FENCAP to the U.S. market to help patients in need of protection from life-threatening infections. The importance of reducing the incidence of infections and keeping patients out of the hospital is even more apparent during the ongoing COVID-19 pandemic. I thank you for your time and attention, and have a good evening.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.