UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
For the fiscal year ended: December 31, 2011
For the transition period from _________________ to ______________________
Commission file number: 001-34673
CORMEDIX
INC.
(Exact name of Registrant as Specified in Its Charter)
Registrant’s telephone number, including area code: (908) 517-9500
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on the last business day of the registrant’s most recently completed second fiscal quarter was $16,024,222. Solely for the purpose of this calculation, shares held by directors and executive officers of the registrant have been excluded. Such exclusion should not be deemed a determination or an admission by the registrant that such individuals are, in fact, affiliates of the registrant.
The number of outstanding shares of the registrant’s common stock was 11,408,274 as of March 19, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10, 11, 12, 13 and 14 of Part III of this report is incorporated by reference from the registrant’s definitive proxy statement on Schedule 14A relating to its 2012 annual meeting of stockholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.
CORMEDIX INC.
PART I
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below in the section titled “Risk Factors.” Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Item 1. Business.
Overview
CorMedix Inc., incorporated in July 2006 under the laws of the State of Delaware (referred to herein as “we,” “us,” “our” and the “Company”), is a development stage pharmaceutical and medical device company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, specifically in the dialysis and non-dialysis areas.
Our primary product candidate in development is CRMD003 (Neutrolin®) for the prevention of catheter related infections in the dialysis and non-dialysis markets, which we believe addresses a large unmet medical need and market opportunity. CRMD003 is a liquid formulation designed to prevent central venous catheter infection and maintenance of catheter patency in central venous catheters (initially in hemodialysis catheters). During the third quarter of 2011, we received a notice from the U.S. Food and Drug Administration, or the FDA that our product candidate, CRMD003, Neutrolin® had been assigned to the Center for Drug Evaluation and Research, or CDER. As a result of this notice and our current capital position, we decided to change our business strategy and focus the majority of our resources on the research and development of CRMD003 and seek regulatory and commercialization approval for Neutrolin® in Europe through a CE Mark application. During the first half of 2011, we submitted our design dossier to TÜV SÜD the European notified body managing our CE Mark application. In the fourth quarter 2011 we successfully completed our stage 1 audit with TÜV. Upon the successful completion of the upcoming stage 2 audit and the implementation and approval of our quality management system and approval of our design dossier, we anticipate being in a position to obtain a CE mark approval in the first half of 2012. If we obtain CE Mark approval in Europe, we intend to be in a position to launch Neutrolin® for the prevention of Catheter Related Bloodstream Infections, or CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2012. We cannot be assured of CE Mark approval of Neutrolin® on that timeline or at all. We are currently exploring the various methods of launching Neutrolin® in Europe, whether through a distributorship or partnership arrangement, or otherwise.
During 2011, we completed a phase II study of CRMD001 (deferiprone) an oral formulation of the drug deferiprone which we in-licensed from Shiva Biomedical in 2006. The phase II study was designed for the prevention of Contrast-Induced Nephropathy, or CIN, which is a common and potentially serious complication arising from the use of iodinated contrast media used in X-ray procedures to identify the status of blood vessels in the heart. In June 2010, we initiated patient dosing in a phase II biomarker “proof of concept” study for the CIN indication. As of June 2011, we completed the recruitment of our phase II biomarker study of a proprietary formulation of deferiprone for the prevention of CIN also known as Contrast-Induced Acute Kidney Injury or CI-AKI in high risk patients with chronic kidney disease undergoing percutaneous cardiac catheterization with the intent of Percutaneous Coronary Intervention or PCI. The study included patients undergoing cardiac catheterization with the intent of PCI and considered at high risk for CIN who received either deferiprone or placebo twice a day beginning 1-3 hours before the procedure for a total of 8 days. The study was randomized, double-blind and placebo-controlled. Deferiprone was given at a dose of 2700 mg twice per day in the form of 900-mg tablets (1 immediate release and 2 extended release). A total of 61 patients (32 deferiprone, 29 placebo) were enrolled in the study. A variety of biomarkers of kidney injury and function were measured. Clinical events and safety parameters, including Serious Adverse Events or SAEs were followed through day 90. Top-line results were reviewed and interpreted internally, by the principal investigator and by three external academic biomarker experts. In the placebo group, most of the kidney injury biomarkers increased after contrast administration, as expected. Deferiprone tended to reduce acute elevations of the injury biomarkers, particularly in the first 8 hours. Measures of glomerular filtration (serum cystatin C, serum creatinine and Estimated Glomerular Filtration Rate, or EGFR) unexpectedly trended in the opposite direction over the first 8 days, as there was little change in the placebo group and small decreases in renal function in the deferiprone group. Analysis of SAEs indicated no safety signal. Based upon these top-line results, along with the extensive review of our CIN intellectual property position, the review of biomarker expert opinions, and among other factors such as our current cash position, we decided against pursuing further development of CRMD001. On December 1, 2011 we issued a notice of termination to the Shiva Biomedical license agreement.
In March 2010, we completed our Initial Public Offering, or the IPO, whereby we sold 1,925,000 units, each unit consisting of two shares of our common stock and a warrant to purchase one share of common stock, at $6.50 per unit resulting in gross proceeds of $12,512,500 and net proceeds to us of $10,457,270 after deducting underwriting discounts and commissions and offering expenses payable by us. All of our convertible notes and accrued interest thereon and all of our outstanding shares of Non-Voting Subordinated Class A Common Stock automatically converted into units or common stock upon the completion of the IPO. We believe that the net proceeds from the IPO and existing cash will be sufficient to fund our projected operating requirements into the fourth quarter of 2012.
We also effected a 1 for 7.836 reverse stock split of our common stock on February 24, 2010 in connection with the IPO. All shares and per share amounts, except as noted, have been retroactively adjusted to give effect to the reverse stock split.
Platforms and Products
Our product candidates’ technology seeks to utilize liquid and gel formulations of Neutrolin® (CRMD003 and CRMD004, respectively) to prevent the infection and maintenance of catheter patency in central venous catheters and peripherally inserted central catheters. These catheters are frequently used for vascular access in hemodialysis (a form of dialysis where the patient’s blood is circulated through a dialysis filter), for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition (complete or partial dietary support via intravenous nutrients) and intensive care patients.
Over the past two years we have made progress toward the development of CRMD003, including the following:
The following table summarizes our current product candidates.
CRMD003 (CorMedix Neutrolin®)
Market Opportunity
Patients undergoing hemodialysis require access to the vascular system in order to perform treatments on a multiple scheduled basis each week. According to the American Journal of Kidney Diseases, February 2008, approximately 81,000 hemodialysis patients in the United States relied on a central venous catheter. One of the major complications in the use of a central venous catheter for hemodialysis treatment is CRBIs and the inflammatory complications associated with them. Assuming an average of 2 episodes of CRBIs per year, there would be 162,000 episodes per year. Further stated in the American Journal of Kidney Diseases, the total annual cost in the United States of treating all CRBI episodes and their complications would amount to approximately $777 million. CRBIs and inflammatory complications are a primary cause of morbidity in the end-stage renal disease hemodialysis patient population, and the second most common cause of mortality.
Prevention of catheter-related blood stream infections and inflammatory complications requires decontamination of the internal surface of the catheter to prevent the systemic dissemination of organisms contained within the biofilm and an anticoagulant to retain patency. Biofilm forms when bacteria adhere to surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor them to various types of materials, including intravenous catheters. The presence of biofilm has many adverse effects, including the ability to release bacteria into the blood stream. The current standard of catheter care is to instill a heparin lock solution at a concentration of 1,000 – 5,000 u/mL into each catheter lumen immediately post treatment, in order to prevent clotting between dialysis treatments. However, a heparin lock solution provides no protection from the risk of infection. Currently, there are no pharmacologic agents approved for the prevention of CRBIs in central venous catheters.
There is a significant unmet need for prevention of CRBIs in the hemodialysis patient population as well as for other patient populations utilizing central venous catheters, such as oncology/chemotherapy, total parenteral nutrition and intensive care unit patients.
CRMD003, or Neutrolin®, is a broad-spectrum antimicrobial/antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant strains and in addition may prevent biofilm formation. We believe that using Neutrolin® as a catheter lock solution will significantly reduce the incidence of catheter-related blood stream infections, thus reducing the need for local and systemic antibiotics while prolonging catheter life.
Development Strategy
Our strategy is to obtain worldwide approval for Neutrolin®. Projected key regulatory submissions/communications for both the United States and European Union in the next 12 months include:
· review by the Notified Body and discussions/agreements with them for Class III CE Marking and Quality System Regulation (QSR) certification;
· completion of stage 2 quality management system audit;
· approval of Class III CE Mark; and
· obtaining Investigational New Drug approval from the FDA to begin clinical studies.
Sales and Marketing Strategy
If we obtain CE Mark approval, we intend to be in a position to launch Neutrolin® for the prevention of CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2012. However, we cannot be assured of CE Mark approval of Neutrolin® on that timeline or at all, or, if CE Mark approval is received, we cannot be assured we can effectively launch Neutrolin® in 2012. We are currently exploring the various methods of launching Neutrolin® in Europe, whether through a distributorship or partnership arrangement or otherwise.
If we obtain FDA approval, we would intend to launch Neutrolin® for the prevention of CRBIs and maintenance of catheter patency in hemodialysis patients in the U.S. within six months afterwards. The sales model will primarily be one of achieving formulary listing and inclusion as policy and procedure with the key customers (Fresenius and Davita, as dialysis providers, cover 70% of dialysis patients). Key account managers will be required as well as medical liaison specialists.
It is anticipated that the costs of Neutrolin® will be added to the dialysis “bundle”, which will transition in from 2011 – 2014. In the interim, for those centers not participating in the bundle, we expect that the product will be billable on the basis of a separate billing “J” code. In any future model of full capitation reimbursement for dialysis services, the value proposition for Neutrolin® would be even stronger. Clear demonstration of cost-effectiveness will be important for the Centers for Medicare & Medicaid Services, or CMS, private payers and users of Neutrolin®.