CorMedix Inc.

Good morning, ladies and gentlemen, and welcome to the CoreMedics, Inc. 4th Quarter and 4-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 0 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 CoreMedics Full Year 2023 Earnings Conference Call. Leading the call today is Joe Tedisco, Chief Executive Officer of CoreMedics. He is joined by Dr. Matt David, Executive Vice President and CFO, Beth Zelnick-Kaufman, EVP and Chief Legal Officer, Liz Hurlburt, EVP of Chief Clinical Strategy and Operations Officer, and Erin 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 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 commercial launch prospects for DefendCast, its clinical development programs for expanded uses of DefendCast, manufacturing activities, and marketing approvals for other product candidates, future financial position, future revenues and projected costs, and reimbursement and potential market acceptance of DefendCast or other product candidates. Action 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, 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 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's now my pleasure to turn the call over to Joe Tedisco, Chief Executive Officer of CoreMedix. Joe, please go ahead.

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 DefendCAS by the U.S. FDA, as well as confirmation from CMS that DefendCAS will be eligible to receive a transition drug add-on payment or to DAPA for outpatient reimbursement as CMS has classified DefendCAS as a 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 Tdap 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 JCODE and Tdap applications and are working toward a July 1, 2024, effective implementation for a DefendCAS Tdap payment. 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 Tdapa. Both a J-code and an approved and effective Tdapa application are gating items for the outpatient commercial launch of DefendCAS, which is currently slated for July 1st. 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's site in Hamel, Germany as an alternative manufacturing site for DefendCath. 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 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 mid-sized 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 mid-sized 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 DefendCath 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 DefendCath 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. CoreMedix 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 have accomplished over these recent months and excited to bring DefendCast 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 Comedics' 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 26 cents per share compared with the loss of 8.2 million or 20 cents 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 DefendCath 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 defend cap. 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 the FENCAT 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 DefendCath, 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 2022. CoreMedix remains in a good position from a balance sheet perspective as we prepare the company for a commercial launch of DefendCath in April. The company has cash and cash equivalents of $76 million as of December 31, 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 DefendCath. Chromedics anticipates 2024 quarterly operating expenses to range from around $15 to $18 million to support commercial infrastructure and the launch of DefendCath. 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 DefendCath 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 DefendCath demand, uptake, net pricing, and reimbursement. I will now turn the call back over to Joe for closing remarks. Joe?

Thanks, Matt. Well, Medix 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 DefendCast, 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 mid-year 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 CoreMedix, and I'm happy to take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift your hands up before pressing any keys. 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 when do you think you can get the first decisions 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? Thanks.

Thanks, Jason. So 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, you know, how quickly that will move and whether they will be adopted on formulary. But the way I would think about the inpatient, and then I'll even touch on outpatient for a second. Yeah, we mentioned it'd be a slower ramp, right, due to the P&T process. So when we think about it in the short term and long term, you know, 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 the ability of a midsize customer to move volume, we would expect that ramp to be a little more lumpy, right? And on the outpatient side, you know, we see maybe new patient starts within those facilities focusing initially on fee-for-service patients, right, as then we, you know, begin to onboard MA plans over time, it'd be a little bit kind of in-stepped, right, more of a lumpy upward ramp.

Got it. And then just one more for me in terms of the label expansion activities, other catheter-to-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, that's going 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 you know, certain expanded indications, we can launch those fairly quickly. It's not immediate, right? You're not just flipping on a light switch. But, you know, if they, you know, 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 ads 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 DefendCAS? Thanks again.

All right, thanks, Anish. So 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've 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 as 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. So 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. You know, from a political standpoint, it's really hard to tell, right, what may happen. Certainly, you know, we have four years of experience with the Biden White House and have just gone through, right, 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, you know, it certainly could always change.

Great. Thank you.

Thank you.

Our next question comes from the line of Les Soluski from Turbo Securities. Please go ahead.

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

Thanks, Les. Good questions. So from a distribution channel standpoint, you know, essentially the inventory is going to flow through specialty distribution. On the inpatient side, or for inpatient facilities, it'll flow through a specialty distributor. On the outpatient side, it'll be a mix of going through a 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 initial development work. If you 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 a 3ml. You know, the last question that you asked about when we cut over is a difficult one, right, because it depends on uptake and demand. I think the faster demand goes, you can certainly see cut over earlier this year. If demand is a little bit slower, it may take some more time. So we've built a decent amount of inventory that was expensed prior to approval.

Got it. Thanks. I think it 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 and approval that you expect on this and the potential impact to your WAC price?

Yeah, I'm not sure I follow that question, Les. So 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 inpatient side, we do have our NTAP. So the JCODE application is required for to DAPA, right? So JCODE, if that's what you might be thinking, is separate from a Part B determination. Does that clarify the question at all?

Correct. And is there potential for any adjustments to the WAC price?

So, look, we've launched the product with a WAC of $249. I don't at this time envision any adjustments to the WAC price during the DAPA period, but we'll always reevaluate as we move forward.

Got it. Thank you.

Thank you.

Our next question comes from the line of Sergio Bellinger from Needham & Company. Please go ahead.

Hi, good morning. Thanks for taking our 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 an adoption process or evaluation process before there is uptake? And maybe lastly, just 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 allow Aaron to comment on the P&T process for the facilities. And, you know, certainly outpatient, I think that's what you were asking your second question, outpatient, you know, they follow a similar evaluation process when making a determination to put a product on formulary and into utilization, right? 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 the economic terms that we're able to provide that institution. So from, you know, I think what you're asking at number three is, can you clarify, are you asking me to confirm that we get to runway one? What is 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. So, I mean, look, we have certain assumptions that we've made for demand and uptake on both the inpatient and outpatient side, right? That produces a revenue forecast internally and a cash flow forecast that we're comfortable with, gets us to run rate, break even profitability, as I mentioned. So, I don't think we're going to provide more granularity than that at this time, where, as I said, we're not going to give revenue guidance to 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.

And so, 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, right? 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 systems. 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 inpatient 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. Sir, does that answer your question? Yep, thank you.

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

Thank you, operator. Joe, we have a few written in questions from the audience here. The first one is your NTAP was approved based on an estimated WAC price of $11.70 per vial. However, you have launched the product with an actual WAC of about $2.50 per vial. Can you explain what this 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 inpatient 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 points. When we filed the NTAP application two years ago, the market landscape looked very different, specifically on the outpatient side. 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 inpatient side alone for the size of the inpatient market. And ultimately, we settled on the $11.70 price. You know, since that time, obviously, the landscape has shifted to DAPA 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. So the WAC price that we established of $249.99 really was driven by the dynamics of Tdapa for the outpatient segment and but is a reasonable price point for inpatient. So one of the other key pieces of feedback we took over the last two years from inpatient institutions as we messaged around the NTAP and the value of the NTAP was from many institutions that they perceive lower acquisition cost of product to be preferred to a higher NTAP reimbursement. So to that extent, the feedback we've gotten on the inpatient side is that the lower WAC price is more favorable. So I think to the question you asked about, you know, do 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 drive higher utilization on the inpatient side. So certainly we're happy with that.

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 CoreMedx may have a presence?

Yeah, thanks. I'm going to turn that over to Liz in a moment. But, you know, 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?

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. So, you know, those include SHEA, MAD-ID, the NKF Spring Conference, Renal Physicians Association. So I think we have a really good presence out there.

Okay, great. Thanks, Liz. Thanks, Joe. Yeah, okay. Yep.

Joe, final question here is, can you give a sense of what investors may be missing? What is key to understanding core medics over the near term?

Okay, thanks, Dan. So, 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, right? We're in a very nichey therapeutic segment with an atypical reimbursement. And a lot of acronyms we talk about, NTAP to DAPA, 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 that there's a lot of launch value to Vencath 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 and a half years of exclusivity. We're expecting to meet with FDA, you know, mid-year around a label expansion for DefendCath. But I think more importantly, over the next couple of years, you know, our expectation is to be developing real-world evidence demonstrating the impact that DefendCath can have on infection rates and on patients, and certainly would look to utilize that real-world data as one. We obviously established 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.

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. Have a lovely day.