CorMedix Inc.
Q4 2015 Earnings Call Transcript

Published: 16 Mar 2016

[Operator:]

Greetings and welcome to the CorMedix Fourth Quarter and Year-end Review Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Randy Milby, CEO of CorMedix. Thank you. Mr. Milby, you may begin.

[Randy Milby:]

Good morning and welcome to the CorMedix fourth quarter and full-year 2015 investor conference call. In the room with me, is Jim Altland, our interim CFO; Dr. Tony Pfaffle, our CSO, and Jack Armstrong, our Executive Vice President of Technical Operations, who will be available during the question-and-answer portion of the 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 the 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 Web site 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 we’ve made and hope to continue to make to drive the company forward, both from the standpoint of strategically positioning the Company for long-term success, as well as executing tactically in the near-term. For those of you who maybe new to the CorMedix story, we’re commercial stage company developing a truly novel anti-infective solution designed to prevent dangerous and costly bacterial and fungal infections that can arise in patients who have implanted central venous catheters. This includes hemodialysis patients as well as patients with advanced cancer who are on total parenteral nutrition or are in the intensive care units. It is important to note that the active ingredient contained in our lead product Neutrolin, a compound known as taurolidine is not an antibiotic, and therefore is not susceptible 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 been cleared by the EMEA and is currently CE marked and commercialized in Germany and the Middle East. We’ve recently initiated a pivotal Phase III clinical study that has been designed to support a new drug application for FDA submission in 2017. Taurolidine itself has broad application as a novel anti-infective and we’re exploring the development of anti-microbial medical devices that incorporates taurolidine for potential use in surgical and dermatological settings. So with that overview, I’d like to give you an update on several important areas, clinical development, scientific affairs, operations and financials. First, in terms of advancing our clinical development program, we initiated our first U.S Phase III clinical study to evaluate Neutrolin and hemodialysis patients in December of last year. The study is called LOCK-IT, for catheter lock solution investigational trial. LOCK-IT continues to enroll patients and they add sites in line with our expectations, and we’re focused on continuing to execute successfully in this study. With the primary objective of demonstrating a reduction in the occurrence of catheter-related blood stream infections compared to the current standard of care heparin, we expect to complete enrollment in this event driven study during this calendar year with the completion expected in 2017. Second, we’ve received further guidance from the FDA on the protocol design of our second planned pivotal Phase III study of Neutrolin in oncology TPN. We are in the process of finalizing the details of this study, which we expect to commence by year-end in 2016. Third, we continue to generate a compelling body of clinical data to support the use of Neutrolin. In December, we completed our Neutrolin Usage Monitoring Program, a post-marketing surveillance survey conducted at sites in Germany, which clearly demonstrates the efficacy of using Neutrolin in patients with central venous catheters. Specifically, the survey showed greater than 96% reduction in infection and thrombosis as measured against the current benchmark. These clinical data used demonstrate the ability of Neutrolin to address an unmet medical need and improved patient care by reducing infections, which also has a major added benefit of reducing hospital costs associated with treating these infections. Finally, we continue to evaluate opportunities to explore the use of taurolidine in new areas of treatment and expand our business. We’ve done some preliminary work to achieve proof-of-concept for using taurolidine to improve outcomes beyond reducing catheter-related infections and have been diligent in protecting our intellectual property for these new endeavors. As such, we’ve filed provisional patents in five areas

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Ram Selvaraju with H.C. Wainwright. Please proceed with your question.

[Ram Selvaraju:]

Hi. Thanks very much for taking my question. Can you hear me?

[Randy Milby:]

Yes, we can.

[Ram Selvaraju:]

Okay, three very quick things. Firstly, I wanted to see whether you could provide us with some more granularity regarding the cost of manufacturing improvements on the taurolidine side, and whether this is related to taurolidine or Neutrolin, the product itself. Where are the manufacturing savings and improvements and efficiency coming from? What exactly have you done to the process to make it more efficient and cost effective? The second question pertains to the interim analysis specifically. You mentioned in your most recent comments that, this would potentially if the interim analysis were positive, allow you to pursue accelerated approvals specifically for dialysis indication hold [ph]. I just wanted to clarify whether, had in fact the speed such guidance from the FDA or do you anticipate seeking and obtaining such guidance from the FDA, is a wake of a positive interim analysis? And then the third question relates to the developments of [technical difficulty] relations of taurolidine. At this juncture, do you anticipate doing any active work in that area or would you first look to bring in additional funding in order to spur those initiatives? Thank you.

[Randy Milby:]

Thanks, Ram. Answering the first question on the COGS …

[Jack Armstrong:]

Okay. It’s Jack Armstrong. Actually it took several levels. It involves the [indiscernible] taurolidine, Heparin, as well as the cost of manufacturing. So it’s a combination thereof. As you know, FDA have used this as a drug, so we are being judicious as we approach implementing these things to make sure we have the highest quality possible to insure that the CMC section works very well the first time through. But it’s a multi-faceted things, it’s all the above.

[Randy Milby:]

Your second question on interim analysis, Dr. Pfaffle will take that.

[Tony Pfaffle:]

Hi, Ram. Yes, under fast track which we’ve been grated by the agency -- by the FDA, we are eligible for accelerated review, which means that, we are able to request the review after the interim analysis results are reviewed by DSMB. So that is already in place, should we be lucky enough to attain those results.

[Randy Milby:]

And then the last question, Ram was on the development alternatives. We are -- we have a couple of things going on there. We are not spending a lot of our money here, but we are working on partnerships with a couple of companies that can do the first couple of phases. And as you know, these are medical devices, so these are 510(k). We also will be initiating discussions for potential partnerships and different applications. Does that answer your three questions, Ram?

[Ram Selvaraju:]

Yes, absolutely. Thank you very much.

[Randy Milby:]

You are welcome.

[Operator:]

Our next question comes from the line of Ed White with FBR & Co. please proceed with your question.

[Edward White:]

Thanks for taking my question. The first one is just following up on Ram’s question. When looking at the five other indications outside the catheter, is the suture product the lead product there or how should we be thinking about the order of importance of those and the timing of those?

[Randy Milby:]

You’re correct. The sutures and that’s why we were able to present the data. The suture product in this case is the lead product as we’ve talked in the past, we’ve done a core extrusion with taurolidine within the suture material, and we’re advancing it to get that provisional patent to PCT patent. The second one would be the nanofibers. Here again it’s using extrusion technology with taurolidine, and incorporating it either as a coating or extruding it within the nanofibers. So both of those are open for partnership discussions, and as I mentioned with Ram, we’re spending a minimum amount of our money in this area, and we’ve submitted FBI grants and some other government -- submitted for other government grants to move these along.

[Edward White:]

Okay, great. Thank you. And now just looking at the revenues, you had said the majority of the revenues were from Germany and Middle East. Did you get any revenue at all from the Netherlands and also, has Neutrolin received product registration in South Korea and should we expect to see sales in South Korea in 2016?

[Randy Milby:]

I can answer the South Korean first. The South Korea follows the US FDA. So on that case they have, as you correctly state, they do have the license for South Korea. But that won't be approved or marketed until after we’ve received US FDA approval. As far as the Netherlands, we don’t have sales. We pretty much deemphasize the Netherlands. We’ve done sampling there, and we’ve deemphasized some of the activity than Germany. The focus right now is on the Middle East. We’re trying to manage our cash flows or focus mainly on the US clinical development.

[Edward White:]

Okay. Thank you. And then, lastly just on G&A, two questions. One, what was your headcount at the end of the year? And also, the consulting fees of $554,000 in 2015, was primarily due to the executive search fee. Can you just give us an update there on the search and should we see a similar amount being expanded in 2016 for the search as well?

[Jack Armstrong:]

I can address the executive search first, and the process as you know is well under way. We are working with Korn Ferry International, a leading search firm. And as you know it takes time to find the right person. And I have committed to remaining in the job until we do with the full support of our Board of Directors. We have seen some interest in candidates to date, and we are very close to a final decision. It is my opinion this candidate will represent the company very well and it is my opinion that this most likely will be my last quarterly call. As far as the headcount, we have nine people at year end and we use a lot of consultants. So your comment about the consulting fees we’ve used consultants for marketing access and other applications as well as even in the clinical area.

[Edward White:]

Okay, great. Thanks for taking my questions.

[Jack Armstrong:]

You’re welcome.

[Operator:]

[Operator Instructions] Our next question comes from the line of Doug Schwegel, who is a private investor. Please proceed with your question.

[Doug Schwegel:]

Yes. Good morning, Randy. Could you address two questions. One, could you shed a little bit of light with regards to potential market size in the two alternative indications, the principle lead indications with regards to sutures and nanofiber webs?

[Randy Milby:]

Absolutely. So, I haven’t provided, as you’ve seen Doug in the PowerPoint that we just recently released. I don’t talk about -- we’ve done, we’ve looked at it globally. So on the sutures the global market in 2015 was $3.5 billion, and in topicals its $900 million -- $700 million -- and this fiscal supplementation around $800 million. So what we’ve done is, we’ve just done a ballpark based upon talking with some experts of what the penetration would be. We’re going to be doing a little more market research in that space. But it’s safe to say that the sales potential was greater than $1 billion in this space if you add all those up.

[Doug Schwegel:]

As a medical device, what's the relative timeframe with initiating any trials and potential FDA approval? Is it shortened relative to what we see with developing it for a drug indication?

[Randy Milby:]

Yes. So these are going to 510(k) as we expect them to be at this point. We haven’t had any discussions with the FDA at this point. It could be that it’s possible they view them as the drug combination, but at this time we view them as a 510(k). The 510(k), as you know it takes between 12 months to 18 months. Now that does require some clinical work. So the earlier question about, how much resources we’re putting into this and that’s why we’re partnering and working with other -- couple of other companies that can do at least the Phase I, Phase II work.

[Doug Schwegel:]

And would we -- could we safely expect if there was to be something that was worked out with regards to partnerships that we might see something in this calendar year?

[Randy Milby:]

That’s one of my objectives, yes.

[Doug Schwegel:]

Okay. And lastly, could you shed a little bit more color with regards to the proceedings that are going on in Germany and where we’re at with legal proceedings?

[Randy Milby:]

So, as you know we have two things going on in Germany, and we hold patent positions on various aspects of Neutrolin, and our underlying technology in U.S, Europe and other territories. As we’ve spoken in the past, we’re confident that we have the freedom to operate and commercial our product in the manner that we are now doing, and we in the midst of bringing a series of legal challenges to our rival in Europe. We expect that there will be a ruling concerning our patent position, and the activities of the unfair competition by mid 2016. Beyond that I can't say much more, but we are determined to press these matters to defend our intellectual property rights and those of our predecessor filing.

[Doug Schwegel:]

Great. Thanks.

[Randy Milby:]

You are welcome.

[Operator:]

There are no further questions at this time. I would like to turn the floor back over to you Mr. Milby for closing comments.

[Randy Milby:]

Well, thank you very much everybody for dialing in. I think you’ll agree that we made tremendous progress in the last quarter and for 2015 and you can expect more of the same in 2016. The team is working diligently to get the patients enrolled and get the sites onboard. As you heard from Jack Armstrong, the initiative to reduce the COGS so that we will be ready for the launch in 2018 is well underway. We’re making solid progress. We’ve got quarter-by-quarter objectives. We’ve got monthly objectives for Tony, for the enrollment of pensions, and you’ll see more positive results in 2016. I appreciate everybody dialing in. And if you have any questions, you can always reach out to me. Thank you very much.

[Operator:]

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.