CorMedix Inc. (CRMD) Earnings Call Transcript & Summary

Greetings. Welcome to the CorMedix Conference Call. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the conference over to Dan Ferry from LifeSci Advisors. Dan, you may begin.

Good morning, and welcome to the CorMedix Management Update Call. Leading the call today is Khoso Baluch, Chief Executive Officer of CorMedix. He is joined by Dr. Phoebe Mounts, Executive Vice President and General Counsel; and Dr. Matt David, Executive Vice President and Chief Financial Officer; and Mr. Jack Armstrong, Executive Vice President for Technical Operations. 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 meanings 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 and marketing approval for DEFENCATH and -- in the U.S. and other product candidates; future financial position, future revenues and projected costs and potential market acceptance of DEFENCATH, Neutrolin and other product candidates. More specifically, forward-looking statements include any statements about our clinical development plans and the timing, cost, results 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 on CorMedix 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 on intend to update these forward-looking statements, except as required by law. It is now time and -- excuse me, at this time, it is now my pleasure to turn the call over to Mr. Khoso Baluch, Chief Executive Officer of CorMedix. Khoso, please go ahead.

Thank you, Dan. Good morning, everyone, and thank you for joining us on this call. On today's management update call, we will focus our discussion on the recent complete response letter, CRL, CorMedix received for DEFENCATH NDA from the FDA. Joining me on this call are Phoebe, Jack and Matt. We will cover this one topic that will be split into 4 sections. We will start with what we have said so far and ensure clarity and consistency. We will then dive deeper into what the FDA communicated directly to our contract manufacturer, CMO, and how we propose to resolve the areas of concern identified by the FDA. We will then cover the process and work that was done with the contract manufacturer in order to prepare the facility to manufacture DEFENCATH for commercial distribution. And finally, we will highlight CorMedix's ability and resources to manage through this process going forward. First, as we announced on March 1, 2021, via press release, we received a complete response letter or CRL from the FDA for DEFENCATH NDA. We communicated the following in that press release. We said that the FDA cannot approve the new drug application, or NDA for DEFENCATH in its present form. The FDA noted concerns as a third-party manufacturing facility after a review of records requested by the FDA and provided by the CMO. We also said that the FDA did not specify the issues to CorMedix and that we intend to work with the CMO to develop a plan for resolution when the FDA informs the facility of the specific concerns. We also stated that the FDA is requiring a manual extraction study to demonstrate that the label volume can be consistently withdrawn from the vial, despite an existing in-process control to demonstrate full volumes within specifications. CorMedix expects to be able to complete this requirement expeditiously. We also stated FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DEFENCATH from LOCK-IT-100. In the draft label discussions with the FDA, the agency added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to the limited population pathway for antibacterial and antifungal drug, LPAD which provides for a streamlined clinical development program involving fewer clinical trials. The LPAD Pathway is intended to encourage the development of safe and effective products, which address unmet medical needs for patients with serious bacterial and fungal infections. The FDA said that satisfactory resolution of this issue is required for approval of the DEFENCATH NDA by a pre-approval inspection and/or adequate manufacturing facility responses addressing these concerns. If an inspection is required, the FDA is currently facing a backlog due to the pandemic and is actively working to define and approach for scheduling outstanding inspections once safe travel may resume. We also added that CorMedix will request a meeting with the FDA, which we estimate will occur by mid-April to obtain agreement with the agency on our proposed plan for resolution of the issues at our third-party manufacturing facility. When we received the CRL from the FDA, we were not told of its specific concerns regarding the third-party manufacturing facility. Immediately after we received the CRL, we reached out to our CMO to see if they had received any FDA communication on the deficiencies. They confirmed that they had not received the deficiencies from the FDA. We also asked our CMO if they had any questions or outstanding items to provide the FDA, and they confirmed they did not. They were surprised that they had not received any follow-up questions from the FDA and have not received information related to the CRL. In the March 1 press release, we included the facts as we knew them at that time. In the press release, we also said that when we are informed of the issues from our third-party manufacturing facility, we would schedule an investor call to provide you an update on the issues raised by the FDA and our expected time line for resolution. So this brings us to today. I can now confirm that we have received the FDA communication regarding our third-party manufacturing facility and we have been in extensive discussions with the CMO, with the goal of better understanding all of the information submitted to the FDA and the deficiencies identified by the FDA. We've also been jointly working on draft responses and planned activities to resolve each of the items identified. The time line we outlined from our March 1, 2021, press release for a planned meeting with the FDA of mid-April is still valid based on our current understanding and the progress that we have made to date. Phoebe will discuss the details of the deficiency and our plans for resolution. With that, let me hand the floor to Phoebe. Phoebe?

Thank you, Khoso, and good morning, everyone. Let me begin by saying that I feel deeply disappointed that FDA did not approve the new drug application for DEFENCATH and instead issued a complete response letter because it concluded that the manufacturing facility is not ready to support commercial operations for DEFENCATH. This conclusion was based on a review of records requested by FDA from the CMO. As you know, FDA has appropriate travel restrictions in place because of the COVID-19 pandemic and consequently, there is an ever-increasing backlog of inspections at the agency. So we were gratified when FDA began requesting documents from the CMO for a records assessment without doing an on-site inspection and followed up with additional requests to the CMO in the subsequent months. We were also responding to FDA with questions from the review of manufacturing records that CorMedix had submitted in the NDA. In parallel, we engaged in dialogue with the clinical review team at FDA who asks for clarification, analyses and draft labeling, and the CorMedix team responded to FDA consistently within the time line specified by FDA. We are obviously pleased and gratified that the CRL did not identify any deficiencies related to the data submitted on efficacy or safety of DEFENCATH from LOCK-IT-100 and FDA did not request any additional clinical studies. In draft-labeling discussed with FDA, the agency added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to limited population pathway for antibacterial and antifungal drugs, or LPAD, which provides for a streamlined clinical development program involving fewer clinical trials and with our Phase III clinical trial population. The LPAD Pathway is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. The FDA recognized the potential of DEFENCATH to address an unmet medical need of reducing life-threatening catheter-related bloodstream infections, as evidenced by the fast track and qualified infectious disease product designations forwarded by FDA as well as potential approval pursuant to LPAD. However, FDA did not communicate 6 manufacturing facility deficiencies until after the PDUFA date and the priority review period was completed. As noted by Khoso, when the deficiencies of the manufacturing facility were communicated to the CMO by FDA, the CMO then shared the deficiencies with CorMedix. As I said, there were 6 facility deficiencies remaining at the conclusion of the assessment of the records request. Based on our discussions with the CMO, we believe these deficiencies can be resolved in the coming weeks. For example, one deficiency results from the proposed future installation of new equipment, but it was apparently not clear to FDA that the equipment is unrelated to the manufacturer of DEFENCATH because FDA has requested details to assess the impact to production readiness for DEFENCATH. Three of the deficiencies involve activities associated with the vial filling line, in particular, the target filling volume. Additionally, a related approvability issue with the FDA's request communicated directly to CorMedix for a required manual extraction study to demonstrate that the labeled volume of the drug product can be consistently withdrawn from vials. As we noted in the March 1 press release, there is an existing in-process control to demonstrate fill volume within specifications. We have submitted data to FDA to demonstrate performance with the specifications but we intend to conduct the requested manual extraction study and expect it to be completed in the next several weeks. Another deficiency identifies concerns an airflow visualization study, and will likely necessitate repeating the study to demonstrate adequate dynamic conditions in the study, which we believe can be accomplished in the next several weeks. The sixth deficiency requests documentation to support appropriate closing of deviations or nonconformances. We are working with the CMO to provide existing documentation to demonstrate that corrective actions are adequate to assure production controls are in place and to ensure standard operating procedures are consistent with actual practices and documentation is completed in a timely manner. Our goal is to ensure that FDA can conclude that the manufacturing facility is ready to support commercial operation for DEFENCATH without the need for an on-site inspection. Accordingly, as we announced in our March 1 press release, we intend to request a meeting with FDA to obtain agreement with the agency on the adequacy of our proposed plans for resolution of deficiencies identified at the manufacturing facility. We will invite our CMO to participate in the meeting. We estimate that the meeting will occur by mid-April, and we will provide an update on our progress and time line for resolution of the deficiencies at that time. With that update, let me pass the floor to Jack to cover the path that CorMedix followed to select and qualify the CMO and prepare it for manufacturing DEFENCATH for commercial distribution. Jack?

Thank you, Phoebe, and good morning, everyone. Let me provide you with some background and the process CorMedix followed in selecting our drug product CMO. We began the evaluation and selection process in late 2016 because of the long lead time. We had several criteria in the selection process: quality system, capacity and cost. We contacted and had initial discussions with 13 potential CMOs in the U.S. and internationally. After the initial assessments, we narrowed the list of several, including U.S. and international sites for more detailed assessment. We then conducted site visits, did an initial quality system review, reviewed proposals and ultimately selected our CMO in 2017. We followed the industry standard practice of executing a manufacturing agreement, quality agreement and development of a project plan for technical, analytical transfer and validation with the associated documentation. Thereafter, we proceeded to execute on the project plan, which included an engineering batch and 3 commercial scale drug product validation batches. Consistent with industry practice, we continued to work closely with the CMO via site visits and regular conference calls to prepare for an FDA inspection after submission of the NDA. We manufactured and validated 3 commercial scale drug product batches. All drug product made at the CMO for validation batches and subsequent batches met specifications. The drug product was put on accelerated and normal stability testing and continues to meet specifications. Now let me hand the floor over to Matt to cover the current financial position of CorMedix. Matt?

Thanks, Jack, and good morning, all. As described by Khoso, Phoebe and Jack on this call, CorMedix is working diligently to determine next steps and likely time line to bring resolution to the outstanding items that must be resolved in order to secure FDA approval of the DEFENCATH NDA. We believe that we are in a strong position financially given our prior efforts raising capital via the equity capital markets. As described in our recent press release, CorMedix has approximately $87.8 million in pro forma cash, cash equivalents and short-term investments as of December 31, and inclusive of proceeds from ATM issuance following the end of the year. CorMedix has always been judicious when it comes to cash burn, and the current situation is not different. We intend to focus our efforts on resolving the deficiencies identified by FDA, which we do not consider to be a significant expense with the goal of securing approval for commercialization of DEFENCATH as quickly as possible. Based on our assessment or resources needed, we believe our cash and equivalents is sufficient to complete the FDA review process and continue operations, at least, into the second half of 2022. During this time, we intend to continue the development of the protocols for pursuing the label expansion into oncology and TPN patient populations. We look forward to sharing additional information on CorMedix's financial position during the earnings call later in the month. I will now pass the floor to Khoso to conclude.

Thank you, Matt. While we spent time covering the details related to the FDA CRL and plan for resolving the manufacturing deficiency, I want to emphasize some important information. First, the FDA did not request any additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DEFENCATH from LOCK-IT-100 required for approval of DEFENCATH. The agency also included in the draft-labeling that the initial approval will be pursuant to LPAD for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. We are working as fast as we can, in concert with the CMO, which is fully cooperating to develop and execute the plan. We believe we have within CorMedix and the CMO, the resources and capabilities to achieve successful resolution of the manufacturing deficiencies to the satisfaction of the FDA. We will work hard to get DEFENCATH across the finish line to reduce life-threatening catheter-related bloodstream infections in hemodialysis patients using CVCs. The importance of preventing infections and keeping patients out of the hospital is even more apparent during the ongoing coronavirus pandemic. Published literature suggest that as many as 35% of patients experiencing CRBSI may die. This is clearly an urgent unmet medical need and CorMedix believes that DEFENCATH can significantly reduce CRBSI and thereby reduce morbidity and mortality for patients with kidney failure who receive hemodialysis via central venous capital. Once we've met with the FDA, we will set up another investor call to update you on our progress and projected time lines. Thank you for your time and attention. And now, I hand the floor back to the operator to open it up for questions.

[Operator Instructions] And our first question comes from the line of Jason Butler, JMP Securities.

Is there any more color you can give on FDA's issues with the vial finishing lines? Anything you can tell us about whether these lines are used solely for DEFENCATH or other products? Or anything that's unique or different about these lines versus other fill/finish facilities? And then, just in terms of your overfill margins, is there anything you're doing different here? Or anything different to industry standard in terms of your overfill margins?

Jason, thank you for your question. I'll start with Phoebe to answer the question, and then maybe Jack can add any more color. Phoebe?

Thanks. Great question, Jason. I can confirm that the fill lines are solely for DEFENCATH. So they're not used for any other product manufacture. As you can imagine, a lot of the information involved in filling lines is proprietary to the facility. And as you will likely expect, there is a confidentiality agreement in place to protect that information. So I cannot disclose any more specific information about the vial filling line. I'll turn it over to Jack to discuss the overfill margins.

Can you clarify the question on overfill for me, please?

Yes. I guess, just can you give us a sense of whether you're doing anything that's different to industry standards here? I mean, the amount of volume that you're overfilling with, is that more or less than is typical or not?

We are following the guidelines that are given, and we are following the guidelines on the overfill. And it's not different than we were doing before. We are within the guidelines.

Okay. Great. And then just one quick follow-up on the air flow visualization study. I guess, what exactly is FDA asking you to do here? Are they asking you to repeat a study that's already been done? Or do they not -- do they disagree with data from your already completed study?

Phoebe?

The air flow visualization study has been conducted at the facility, and FDA received video of the airflow visualization and had some questions related to the video and specifically about dynamic conditions during the study. So this is my personal opinion. Clearly, Jack and the CMC team may have different perspectives. I think we should be prepared to redo the study.

Our next question is from the line of Joon Lee with Truist.

This is actually Les on for Joon. First, how comfortable are you that the FDA will accept the document exchange and not require an inspection? And then, second, how long do you expect, after April's meeting with the FDA, will you expect a response?

Thank you for that question. Phoebe?

Yes. Thank you, Les. When I read the deficiencies and our plans for resolutions, I think some of the information, as I indicated, is simply clarifications and providing documentation that exists. I am hopeful and confident that it should be sufficient. However, as we all know, the norm is for FDA to do a pre-approval inspection. And so I think if the FDA has any remaining concerns, it will not get the comfort level that it needs until it does do an inspection. And I think that should be clear to everyone. With regard to April response from FDA, I think you're asking after we meet with FDA, how long it's going to take us to put all the information together and submit an NDA supplement, is that the question?

Yes, that is.

Okay. Yes, clearly, we're going to be working as we get ready to meet with FDA, we have to put the information together in the background package and then, we will be prepared to complete all of those activities, add anything that FDA additionally request or revise our plans as appropriate after we have the feedback from FDA at the meeting. And at this point, we're cautiously optimistic that we can get an NDA supplement submitted at the end of June -- at the end of May, sorry.

Our next question is from the line of Chad Messer with Needham & Company.

Thanks for your update on this important topic. It seems like most of the FDA's concerns are around this filling vials, which we've discussed at some length today and earlier. But you also mentioned that they had 1 of their 6 questions on documentation about deviations for performance. It's basically SOPs and how they line up with reality. Is there anything specific to that that they're looking for? And how does one address a concern like that outside of an inspection?

Phoebe?

Thanks, Chad. If you look at inspectional observations from FDA, it's very prominent. This gets to what is very important in the quality system and is a way of FDA noting that it's looking very carefully at your documentation and your activities when you have launch informants and information that needs to be investigated and potentially corrected. So it's a big bucket of information. And there are obviously specific issues, as I noted earlier, that we're not going into because that involves proprietary information for the CMO. But as I said, we have been looking at those specific issues and believe that we have, in many cases, the existing documentation that's required and can respond appropriately without the need for an on-site inspection.

Our next question comes from the line of Ram Selvaraju with H.C. Wainwright.

Hello, can you hear me?

Yes, we can.

Okay. So this is pretty straightforward and simple. I just wanted to clarify, let's say, for the sake of argument that the FDA, after your meeting with them in April, decides that a pre-approval inspection is not necessary. Can you just clarify what the time line would be to resubmission of the NDA? And whether or not it would be possible to classify the resubmission as a Class I resubmission and therefore, 2-month review turnaround or not?

Thanks, Ram. Phoebe?

Thanks, Ram. I think in response to an earlier question, I indicated that, if FDA provides us the appropriate feedback that we need at the meeting in mid-April, and we're able to turn those studies and documentation around as we expect, that we plan to file the amendment to the NDA to respond to the deficiencies at the end of May. Now that, obviously, we submit information to our NDA and the CMO needs to submit information to -- directly to FDA with regard to the inspectional observations based on a record review. Once we are in a discussion with FDA, we clearly will attempt to understand what the FDA's time line is for a review of that information. As you know, and as I said, we are not alone. This is an industry-wide problem where there's a backlog because FDA can't travel and do pre-approval inspections. And that is a time line that FDA controls that we cannot control. We will do our best to advocate for a quick and timely review. And I think we'll be able to have an answer that we're confident in after we meet with FDA in mid-April.

Okay. Just as a clarificatory comment on what you just said, 2 things. Firstly, I'm inferring from what you just said, and correct me if I'm wrong, that if a pre-approval inspection is definitively not required, you still can't definitively say whether it will be a 2-month or a 6-month review period. Is that correct?

Not at this time. Not until we discuss with FDA.

Okay. And then given your understanding of the issues that the FDA has specifically cited, by the time the April meeting comes around, aside from the question of whether or not the FDA ultimately decides to conduct a pre-approval inspection, just looking at the issues themselves in isolation, there's nothing right now that would lead you to believe that all of the issues cannot effectively be comprehensively addressed prior to that meeting in April. Is that correct?

Obviously, we are in the process of putting the information together that we believe will resolve the deficiencies for the agency. And as we work through this process, we will do the best that we can and the intention of having meeting with FDA is to make sure that FDA agrees with the approaches we are taking to resolve the issue. So again, after the meeting in mid-April, we will have a better sense of where we are in that process.

But as of right now, there's nothing that would definitively preclude you're being able to look at the issues that the FDA has cited and say, "Oh, they're not going to be addressable by April." As of right now, it doesn't look like there's any specific reason to believe that it would take you longer than until the meeting gets scheduled with the FDA to address the issues. Is that correct, as of right now?

We have proposals that we will discuss with FDA and when we understand that time line, we'll come back.

Our next question is from the line of Andrew D'Silva with B. Riley.

Yes. So the manual extraction study that's going to need to be completed, do you think that the need to have to do that would classify the resubmission as a Class II resubmission? I'm just remembering the differences between Class I and Class II. I'm not sure if this would qualify, in your opinion, as a minor reanalysis or if it fall outside of the protocols for Class I or not?

As I just said in response to an earlier question, Andy, we will have a better sense of where FDA is viewing the information we're proposing to submit in the NDA supplement and we'll respond at that time.

Okay. And how about from the CMO standpoint. This is not the same CMO that you've been using in the EV for Neutrolin commercial sales, correct?

So I'll ask Jack, if you can respond to that.

No, it is not the same CMO that we have been using for Neutrolin.

Okay. And do you have a contingency CMO in place to say that there is a requirement for an inspection? Do you have anybody that you still have queued up from your original 13 chemo analysis that included domestic CMOs that you could utilize or leverage expeditiously? Or basically -- I'm trying to understand, say, they do require an inspection, but they have the backlog and still have restrictions in place, what could you do to resolve the deficiencies, if they're not able to actually do an inspection due to restrictions?

Jack?

Well, for the purpose of capacity backup, CorMedix has been going through an assessment process of North American CMO options, and we have narrowed that process to 2 companies. We've done virtual audits on both. Once the selection is made, the process of getting a CMO to the point of commercializing product from that site is very long and it would be up to 3 years to do that.

So in other words, it is critically important, and the steps we're taking, working with our current CMO to make sure we can address, as Phoebe said, the concerns raised by the FDA, that would be the fastest and most efficient path to bring DEFENCATH across the finish line.

Right. So I'm just trying to see -- figure out what else could happen from a time line standpoint? Obviously, next few months will be crucial in understanding that. But obviously, our job is to speculate on what the different time lines could be, particularly as we think about commercial rollout. Well, I think that's -- go ahead.

Yes, I agree.

Okay. I think that's everything for me. Best of luck. We look forward to getting an update.

I will now turn the call to Dan Ferry for written questions.

Thanks operator. And Khoso, we have a few written questions here. The first one is for you, Khoso. How can you say that CorMedix was not informed by the FDA of manufacturing facility deficiencies?

Thanks, Dan. I can assure you that despite whatever assertions there is in the public domain, CorMedix was not informed by the FDA of the deficiencies. Inspection observations are commonly shared with the facility directly, and FDA referred us to contact the manufacturing facility for the information to maintain appropriate confidentiality of the facilities information, and that's pretty standard.

Okay. Thank you, Khoso. I have another question here for Phoebe. Phoebe, you touched upon this in the prepared remarks, but here's a more direct question. Have you scheduled a meeting with the FDA? Has it happened already? If not, when is it?

Thank you, Dan, for the questions. We will be requesting a meeting. The meeting has not yet happened. We are, as we've discussed on this call, working very closely and actively with the CMO to develop the plans and the information needed to resolve the deficiencies. All of that information will need to go into a background package to support the meeting request with FDA. FDA will then, based on its own clock, will have 10 days from the date of the request to schedule the meeting. And then that meeting will occur according to the FDA's time line within 30 days after the request. So we're thinking we should have a meeting with the FDA in mid-April. And as I said, we intend to provide an update to investors after the meeting with FDA.

Thank you, Phoebe. Operator, this concludes the question-and-answer portion of our call. You may now close.

This concludes today's conference. Thank you for your participation, and have a wonderful day.