CorMedix Inc.
Q1 2016 Earnings Call Transcript

Published: 11 May 2016

[Operator:]

Greetings and welcome to the CorMedix First Quarter 2016 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Randy Milby, CEO. Thank you. Mr. Milby, you may begin.

[Randy Milby:]

Good morning and welcome to the CorMedix first quarter 2016 investor conference call. With me today are Jim Altland, our Interim CFO; Dr. Tony Pfaffle, our CSO; and Jack Armstrong, our Executive Vice President of Technical Operations. They will be available to answer your questions during the Q&A portion of our conference call. First, I want to remind you that this conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical facts regarding management’s expectations, beliefs, goals, plans, or the Company’s prospects, future financial position, future revenues and projected costs should be considered forward-looking. Forward-looking statements include statements about our clinical development plans and timing, regulatory actions, and cash needs. Our actual results may differ materially from these projections or estimates due to a variety of important factors, including uncertainties related to clinical development, regulatory approvals, and commercialization. These risks are described in greater detail in CorMedix’s 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 CorMedix. CorMedix 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. Thank you for joining us. We are encouraged as to the progress that we have made and hope to continue to drive the company forward, both from the standpoint strategically positioning the Company for long-term success as well as executing tactically in the near-term. As many of you know, CorMedix is the commercial stage company with a truly novel anti-infective solution called Neutrolin, which is proven to prevent dangerous and costly bacterial and fungal bloodstream infections that occur in hospitals in patients with implanted central venous catheters. This includes patients receiving hemodialysis or total parenteral nutrition as well as patients in intensive care units. Critical to Neutrolin’s value proposition is that the active ingredient taurolidine is not an antibiotic. And to date has shown no sign of susceptibility to the various bacterial resistance mechanisms that limit the long-term use of antibiotics and have given rise to a very serious public health concerns about the ability to treat infections effectively. Neutrolin has CE marking and is currently commercialized as a Class 3 medical device in Germany and the Middle East. In the United States, we’re developing Neutrolin as a drug, and our pivotal Phase III clinical study program is currently underway with the expectation that we may submit a new drug application to the FDA in 2017. Looking beyond this initial application to prevent catheter-related bloodstream infections, our clinical plan is to broadly explore the utility of taurolidine as a novel anti-infective. Specifically, we are exploring opportunities to develop in collaborations with third parties anti-microbial medical devices, such as sutures that incorporates taurolidine for use in surgical and dermatological settings. We’re also evaluating additional therapeutic uses of proprietary formulations of taurolidine including our recently announced agreement with NanoProteagen to explore a novel combination therapy for pediatric neuroblastoma that uses nanoparticle delivery. With that overview, I would now like to go in some detail on several important topics

[Operator:]

Thank you. At this time we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Ram Selvaraju with Rodman & Renshaw. Please go ahead.

[Ram Selvaraju:]

Thank you very much for taking my question. Randy, can you hear me?

[Randy Milby:]

Yes, I can Ram.

[Ram Selvaraju:]

Okay, So I wanted to get some clarity regarding the interim analysis in the ongoing Phase III trial. You obviously laid out several scenarios for what the interim analysis could effectively lead to. But I just wanted to be clear on what specific information CorMedix expects it will be able to release when the interim analysis has been done. Will you simply indicate whether or not the DSMB has agreed to let the trial continue to completion as planned, or recommend that the trial be stopped early, whether it’s for safety or because of striking efficacy? Or will you provide more granular information at that juncture as to what the result of the interim analysis has been. And then the secondary part of the question is, given where the company currently stands and based on the content of your press release and your commentary earlier today that you may in fact be starting the second Phase III only after you are in possession of interim analysis data from the first study. Would you consider the possibility of effectively going up to the point of getting the data from the interim analysis of the first study before you seek to look to effectively obtain a sufficient capital to fund the second Phase III study, which obviously would be one logical potential way to go. Could you just provide us with some color on those two points please?

[Randy Milby:]

Sure Ram, I’ll turn the first question over to Dr. Pfaffle.

[Tony Pfaffle:]

Yes. Thank you, Randy. Ram, excellent question. So the DSMB evaluates the data routinely. When we approach the interim analysis point, the DSMB will review it, it will be winded [ph] to us the company. If the DSMB looks at the data as you indicated and shows that the data demonstrates there is a separation in the events between the Neutrolin arm and the comparator arm and the separation is at the level that we’re tracking at based upon our statistical design of 40% separation or better than they would likely advise us to continue with the trial. If the data that the DSMB is evaluating and I’m speaking obviously hypothetically, because I don’t have access to the data were blinded. But if they were, to examine the data and it showed a significantly higher than 40% separation, perhaps approaching that of the European data, which is 96%, which is overwhelmingly favorable separation. If they compared both the study drug and the comparator and found that there was a substantive difference in line with that magnitude, then they could recommend to the company, that the company underlined they reveal that to us and in conjunction we would go to the FDA and ask them for a early approval, which we have statutory rights to requests, if the data is that good based on our Fast Track/QIDP status, we’re eligible for early approval. I hope that answers the first part of your question.

[Ram Selvaraju:]

Just a very quick clarification, what do you think is a cutoff point at which the DSMB would say the study needs to be stopped early like what do you think is the basic curve separation level that the DSMB would need to see in order to make that decision, is it 80%, is it 90%, is it 95%?

[Randy Milby:]

Ram, I think that, we will leave that up to the DSMB. We obviously communicate with the DSMB and basically they will make that final decision. The ranges, the numbers that you gave our certainly if they approach those levels, I would think and I’m not speaking to the DSMB, they are an independent arm, I would think that they would then come to us and huddle.

[Ram Selvaraju:]

Okay, that's very helpful. Thank you. And the second part of the question please.

[Randy Milby:]

And the second part of the question as stated in the call today we have enough cash for one year. And we anticipate having the interim analysis in the fourth quarter and don’t anticipate starting the second Phase III, which is still on discussion with the FDA by the way, that has not been finalized and we’re not starting that until the first quarter of 2017.

[Ram Selvaraju:]

Okay, thank you.

[Randy Milby:]

You're welcome.

[Operator:]

Our next question comes from Doug Schwegel, a Private Investor. Please go ahead.

[Doug Schwegel:]

Yes, hi. Good morning. Thanks for taking my call. I got in on the call late. So my questions are redundant, I apologize. I didn't hear anything with regards to that is CEO search. Randy I don’t if you addressed that. Could you provide a little bit of wide in that regard?

[Randy Milby:]

Thanks, Doug. So the question Doug asked was about the CEO search. The process remains underway and it’s taking us sometime to find the right person. And I have committed to remaining on the job until we do with the full support of our Board of Directors. Fortunately, CorMedix and I have the luxury of being able to continue operating at full capacity, while the best possible candidate is chosen.

[Doug Schwegel:]

Great. I just wanted to know with regards to you don’t expect there's going to be discontinuity after that not looking as a shareholder, not looking at elbowing you out at all [indiscernible]. But I want to make sure that we're not left at midstream and I certainly recognize that you put your money where your mouth is, and to your best interest as a shareholder also, as far as continuity on that. Should we – could we even expect to see as if you remain in your current position stuff that you might be interested actually you’re out of a dark out period in purchase of the shares of the company as you guide in the past. Could that be a possibility?

[Tony Pfaffle:]

That’s really the possibility.

[Doug Schwegel:]

Okay, great. Wanted to – I have several questions here since I came second in the queue, I don’t know how many people are behind me. But could you give us an update a little bit with regards to the gel formulation as far as optimizing the valuation of that particular portion of the asset prior to looking at – doing any partnership deals.

[Tony Pfaffle:]

So the question is, just a status on where we are in hydrogels with taurolidine?

[Doug Schwegel:]

Yes, that’s correct, where you’re kind of there. Last time I think we do – you discussed on call that you’re trying to show up some of the intellectual property and possibly some internal trials and things like that. Could you give us a little bit of additional color on that?

[Tony Pfaffle:]

Well, the most advanced project in the medical device space Doug is the sutures. And that’s why we presented some of that in vitro data. We’re doing additional work in that space. On the hydrogels, that’s a lot more preliminary. We’ve just commissioned some work just find out what our zone of innovation and that’s testing to see putting it in a hydrogel formulation, what’s the anti-microbial effect. So that’s early work, it’s preclinical work.

[Doug Schwegel:]

Okay. And how far you foresee with regards to the sutures that strategy might be in an optimized position to – in future for any type of financing stuff that might be enough to [indiscernible] second Phase 3 trial. When might you project that? We’d be in a position of optimization to discuss any potential terms with another entity?

[Tony Pfaffle:]

From a sutures point of view, which is the most advance, it’s still a little premature to say the timing. I will tell you though that this is a – we believe this is a medical device. There’s a predicate in the marketplace, so it’s 510(k) procedure versus a drug procedure. But it’s little early as far as discussing our potential partners at this point.

[Doug Schwegel:]

Okay. With regards to – anything with regards to, you do still have any types of communications with legacy interest that was presented through Evercore. Do you still have conversations with Evercore – any along those volumes?

[Tony Pfaffle:]

We still – the question is our relationship with Evercore. We still have an engagement with Evercore. So that is an active engagement.

[Doug Schwegel:]

Okay, great. When should we expect to hear an update with the clinical trials data for NUMP? And you may have addressed that already, so I apologize.

[Randy Milby:]

I'm sorry, an update of…

[Doug Schwegel:]

The NUMP data over in Germany?

[Randy Milby:]

Tony, do you want to address that?

[Tony Pfaffle:]

Yes. We’re honored that Dr. Christoph Wanner, who is Professor of Medicine at the University of Wurzburg in Germany, and he’s also a Member of the Board of the European Renal Association, he’s going to give an oral presentation in Vienna at the end of the month. This is a big deal for us. We respect Dr. Wanner, but more importantly, he’s universally respected and he’s an awardee of the U.S. National Kidney Foundation, winner of the gold medal for academic achievement and a keynote speaker for many companies, and we’re honor that he's going to be doing the oral presentation on Neutrolin in Vienna at the end of this month. And that was a press released. We're going to have a follow-up once the abstract is on in barcode. And I believe that it will be an auspicious event, and Randy will be attending that event in Vienna.

[Doug Schwegel:]

Okay. Great, thanks so much guys. Keep up the strong work.

[Randy Milby:]

Thank you, Doug.

[Operator:]

[Operator Instructions] Our next question comes from Mark Freed, a Private Investor. Please go ahead.

[Mark Freed:]

Hi, last year at this time in your report there were – there was anticipation that there were would legal action on a couple of issues in Germany and I didn't hear anything about that. Can you update us on that please?

[Tony Pfaffle:]

Sure. The question has to do with the legal action in Germany. In particular, you're referring to the unfair competition act in that litigation. We don't have a hearing date set for that right now. The next upcoming which we announced in the queue, what would be the PTO that’s on the patent situation and that hearing will be July of 29 of this year.

[Mark Freed:]

Okay. So those are still active, but have been pushed out of it?

[Tony Pfaffle:]

They've been pushed out of it, some of it just from scheduling getting the – it’s more on the legal side of getting their layers’ availability. So, but the PTO is pretty much set and that's the July 29 date. And as I mentioned, the unfair competition, I do not have a hearing date yet.

[Mark Freed:]

All right, thanks very much.

[Tony Pfaffle:]

You’re welcome.

[Operator:]

Mr. Milby, there are no further questions at this time. Would you like to make any closing remarks?

[Randy Milby:]

We’ll give everybody a few more minutes.

[Operator:]

Another question is just presented itself [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Yes, sir. Thank you for taking my question. I know revenues are very small so far at this point and I saw that there was a small increase in revenues. I’m wondering if you could give us any additional color as to what country so far involved? What kind of end-user is actually making these purchases? Is the order base so far coming as a reorder from an existing customer and that’s what the increase was from or the investigators or whatever it is? And has the experience with orders so far helped you target in the future, who your best customers might be in international sales? Thank you.

[Randy Milby:]

Well, the question has to do with the sales and then really the source of our sales and also who is the driver. The majority of the sales increase and as I mentioned in my comments, the focus right now is down the Middle East given the legal action underway in Germany, we’ve not spent a lot of time and effort there at this point, but we do have a full-time personnel on the ground in the Middle East. The increase – the Middle East is a tender business. So within each country, we use distributors, individual distributors and we’ve identified those distributors is very strong within that country that have a presence in the hospital setting. And as our label includes both hemodialysis as well as ICU and oncology. So we’re seeing the initial uptick within the hemodialysis setting, and now we’re seeing a lot more uptick or more interest in the ICU/CCU setting and we’ve got data that supports that from a pharmacoeconomics point of view. So with that Dr. Pfaffle as well as our personnel on the ground in the Middle East has spent a lot of time with different physicians there and sharing – and they appreciate the value of an update as well that comes out in Germany.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

Your next question comes from [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Yes, hello. Just two quick questions. Number one, you mentioned fourth quarter interim analysis in your hemodialysis study is that a worst case scenario or could it possibly according to trending come in the earlier quarter. And second question is there any chance of outside grants in any of your respective areas that you discuss. Thank you.

[Tony Pfaffle:]

Okay, this is Dr. Pfaffle. Good question. We are planning for the fourth quarter for the analysis. Its all have been driven. So, we are laser focused on the sites and recalibrating, recalculating continuously infection rates. You get an initial infection rate when the site starts and when track it to see if there’s an observer effect et cetera. We have been very disciplined in tracking that information and we believe it will be on track for the fourth quarter. Is it possible that could come early? Yes, but we’re not planning on it coming earlier. We’re saying the fourth quarter. And if it comes earlier, we’ll obviously let everyone know.

[Randy Milby:]

And this is Randy for your second question. We’ve particularly focused in the medical device space on we’ve submitted for FBI grants and we submitted into Department of Defense for different applications. So we are looking at grand opportunities in these specific areas.

[Unidentified Analyst:]

Thank you.

[Randy Milby:]

You’re welcome. Are there any other questions?

[Operator:]

Yes. Our next question actually comes again from Ram with Rodman & Renshaw. Please go ahead Ram.

[Ram Selvaraju:]

Yes, just a very quick clarification guys regarding the ongoing discussions between you, the FDA regarding the design of the second Phase III trial. Can you give us some clarity as to what specifically remains to be finalized and what has already been decided in these discussions, to whatever extent that you feel comfortable doing so? Thank you.

[Randy Milby:]

Absolutely, again, in the context of public disclosure. So I will say that we have obviously started our clinical trial pivotal program Phase III and we have FDA full permission to go ahead. We will also have permission to do the trial in the second indication. What we’re doing now is simply – while we’re conducting the first Phase III, we are replying in where we gain information or informed by the first trial. We’re taking that information and informing the second trial. So that we develop an optimum efficiency not only with the design, which they’ve seen and agreed with, but also with the details of the logistics. So that’s being baked into the study. You have the protocol, which is the roadmap of the trial and the general roadmap has been agreed to. Now, we’re working on the GPS, the implementation of the map into the physical driving of the trial – driving of identifying patient screening and enrolling them. So we’re just dotting the eyes and crossing the tees and we’re also getting some feedback from the agency on some modifications, which would be very positive. So, there’s nothing negative, it’s all positive. It’s all optimizing the design for the second trial. I hope that’s helpful.

[Ram Selvaraju:]

Okay, thank you very much. That’s very helpful.

[Operator:]

We have another question from Doug Schwegel, a Private Investor. Go ahead.

[Doug Schwegel:]

My question was already previously addressed. Thanks.

[Operator:]

Mr. Milby, we’re not showing anymore questions at this time. Just I want to give them a few more minutes or should I turn it back to you for closing remarks?

[Randy Milby:]

You can turn it back to me for closing remarks.

[Operator:]

Okay then, ladies and gentlemen, at this time Mr. Milby will be making closing remarks for today’s call.

[Randy Milby:]

I want to thank everyone for joining us today. And in summary, this quarter has been another important period of advancement for the company. Our LOCK-IT 100 clinical study continues to attract favorably compared to our enrollment projections and we are moving closer to finalizing the second pivotal study for Neutrolin. Successful and timely execution in our pivotal program and potential FDA approval of Neutrolin, represents the most significant value drivers for CorMedix and that’s why it remains our number one priority. We are continuing to collaborate with regional marketing partners, particularly in the Middle East. We have submitted two orphan drug applications

[Operator:]

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