Randy Milby - CEO Harry O'Grady - CFO Tony Pfaffle - Chief Scientific Officer

Greetings and welcome to the CorMedix Third Quarter 2014 Results 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. I would now like to turn the conference over to the CEO of CorMedix Randy Milby. Thank you sir, please go ahead.

Good morning and welcome to the CorMedix, third quarter 2014 conference call. I will begin by providing you with an update on our commercial strategy and operational progress. Then Harry O'Grady our CFO, who is with me today in New Jersey, will provide a more detailed summary of our financial results. 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 risk 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 cost should be considered forward-looking. 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 filing with the SEC, copies of which are available free-of-charge at the SEC's Web site at www.sec.gov or on 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. As many of you on this call know, CorMedix is a specialty pharmaceutical and biomedical device company focused on developing and commercializing therapeutic products for the treatment of infectious disease in both acute and chronic care settings. Our first commercial product being marketed outside of U.S. is Neutrolin, which is used to prevent central venous catheter or central line-associated bloodstream infections and thrombosis. There are over 15 million central venous catheter patient days in the U.S. alone. Neutrolin contains taurolidine, a potent broad spectrum, anti-infective agent active against Gram-positive and Gram-negative bacteria, including MRSA and fungi including Candida and it also contains heparin, an antithrombotic anticoagulant. These two agents together are critical in preventing both infection and clotting in central venous catheter patients. Today I will update you on the key near and longer term catalysts for ProMedix growth. First the plans for U.S. clinical trial and commercial development; second, commercialization of Neutrolin in the European Union and expanding the product label to include the indications; and third, expansion beyond the EU through marketing and distribution partners in the Middle-East, Asia and Latin America. And so first, the clinical and commercial development of Neutrolin in the United States. As you know Neutrolin is a Class III medical device in the European Union. But the FDA regards it as a drug for purposes of regulatory approval in the United States. We are very pleased that the FDA's division of anti-infective products. Cedar has completed its review of our investigational New Drug Application or IND for Neutrolin which was submitted on September 24, 2014 and they determined that our IND is not subject to a clinical hold and that we can now initiate a pivotal clinical study in the United States. This IND includes a pivotal Phase III protocol for Neutrolin in hemodialysis patients with a central venous catheter. Just to give you an idea of the market potential here, it is estimated that at any given time, there are approximately a 100,000 patients who are using a central venous catheter for hemodialysis in the United States. The Phase III clinical study will be a multi-centered, randomized, controlled study conducted in the U.S. and Europe. Dr. Michael Allon, Professor, Department of Medicine, Division of Nephrology at the University of Alabama, Birmingham will be the Study Chair of the Neutrolin Phase 3 program. Our forthcoming study in Hemodialysis will include 633 patients monitored for catheter related bloodstream infection and the relevant comparison will be Neutrolin versus heparin as a control arm. We also intend to propose a smaller Phase III with 330 patients for a new indication in oncology patients undergoing total peripheral nutrition. As we have stated previously, our goal is to engage with a strategic partner that will provide working capital and clinical development expertise. We are considering our options in this regard. We are also pleased to announce that we have submitted a request to the FDA for fast track designation for Neutrolin to prevent catheter related bloodstream infections in patients receiving Hemodialysis. Fast track designation is intended to facilitate the development and expedite the review of drugs to treat serious conditions and to fill unmet medical needs. If we received fast track designation we can expect to have more frequent interactions with the FDA during the drug development. In addition, products that have been designated as fast track can obtain rolling review of the marketing application to expedite approval. We are also planning to initiate a request for the designation as a qualified infectious disease product or QIDB under the GAIN Act. The GAIN Act provides incentives for the development of new antimicrobials. If granted, this would extend patent exclusivity after drug approval by five years above the standard five years for the NCE. Together with the additional extension for pediatric use, this means that Neutrolin could have an aggregate period of exclusivity in the United States as long as 10.5 years from the date of launch. Back at the commercialization of Neutrolin in the EU. As you know, we launched Neutrolin in the European Union beginning in Germany in the first quarter of this year. Earlier this year, we initiated a Neutrolin usage monitoring program. It's a registry study of selected dialysis centers in hospitals. To date we have 175 patients enrolled and have recorded no infections during 1,900 patient days of therapy, and as a comparison, you would ordinarily expect between 2.5 to 5 infections per 1,000 patient days. Although this study is not designed to show statistical significance, we believe that this provides compelling evidence demonstrating the anti-infective value of Neutrolin and the ability to address an unmet medical need. Dr. Allon and Dr. [indiscernible], the Chairman of our European Union Scientific Advisory Board presented early results of the Neutrolin usage monitoring program at an American Society of Nephrology Symposium last night in Philadelphia. While we are encouraged by these excellent Neutrolin usage monitoring program results, we have been working to better understand German physician perspectives so that we can translate this data into meaningful medical communications with nephrologists and selected oncologists with patients on a central venous catheter. We are not satisfied with our sales revenue and commercial progress in Germany. We need to make clear the value of our product for the patient and to do that we must better develop articulate the medical and scientific data to physicians. To that end we submitted earlier this year a package to expand the product label to address those patients with a central venous catheter who are being treated for cancer or in a hospital intensive [indiscernible] or receiving total frontal nutrition. I hope that you all saw our press releases of September announcing that the European authorities had approved this label expansion. This now includes new indications for use of our product and oncology patients receiving chemotherapy, IV hydration and IV medications via central venous catheters, as well as patients receiving medications in IV fluids via central venous catheter and intensive or critical care units. The European regulatory package is now under active review by the German regulatory authority and we expect that they will grant income free marketing approval covering these same indications for year end. Let me make one of the comments that relates to our commercial position in Europe. You may have notice that we announced in September that we filed a patent infringement action in Germany against our primary competitor TauroPharm claiming infringement of our European patent which was granted by the European patent office on January 8 2014. Our patent covers low heparin catheter loss solution for maintain patency and preventing infection in a hemodialysis catheter. There will be a hearing in this matter in January and TauroPharm has filed an opposition to our patent as we expected they would. Of course we cannot challenge you how this will play out. These kind of cases are complicated and I cannot comment on specific aspects on an ongoing legal matter. But I can show you that we believe we have a good case and we are confident. Remember we have the freedom to operate and commercialize our product in the matter we are now doing. It is important for you to understand that our board is determined to assert our intellectual property and other proprietary rights against third parties where we believe they are being violated I am not going to sit back and watch others sell a product that is based our technology. As I have said to you previously we seek to market Neutrolin on a global basis in those territories where there is an evident medical need and adequate reimbursement. We are very active in identifying pursuing commercial partnerships in the European Union, Asia, Latin America and the Middle East. We have added additional personnel to drive these collaborations. In general we are seeking partners with regulatory and marketing strength that have historically focused on hemodialysis and in the hospital market, including the oncology, ICU and total frontal nutrition. I strongly believe that this commercial strategy for CorMedix in that it will allow us to prudently introduce Neutrolin into a large number of central venous catheter patients throughout the world while minimizing our expenses and fixed capital commitments that would be substantial if we would established in country operations. In summary our IND has been approved by the FDA and we are pursuing our clinical development strategy. We continue to focus on execution. We in an early phase of commercialization of Neutrolin in outside of the U.S and we are making steady progress in our efforts to expand to additional countries. We have made our regulatory filing for the label expansion in Germany and believe that we will have approval before year end. We have accomplished much this quarter and while there is more to do to accelerate our commercial progress in the EU, we are encouraged by the progress evident in this recent successes. I look forward to your questions. With that I would like to turn the call over to Harry O'Grady to provide detail on our financial update. Harry? Harry O'Grady: Thank you Randy and thank you all, for joining us today. I would like to now review the financial information filed yesterday on our Form 10-Q. As mentioned on our last call we expect our cash current to increase as we begin our commercialization of Neutrolin. As a result we ended the third quarter with a cash balance of approximately of $5.9 million. I would like to now review our operating results and financial statements. For the quarter ended September 30 2014 we recorded a loss of $5 million. Of this amount $3.3 million were non-cash items, $200,000 for stock based compensation, $600,000 was a loss related to the revaluation of derivate liabilities and 2.5 million losses on the modification of equity investments related with derivative attributes. As you may have read, on September 15, 2014, we entered into consent and exchange agreements with the investors following certain classes of our securities that had features that required derivative liability accounting treatment. Pursuant to those agreements, the Company and the investors agreed to amend these safety securities to remove anti-dilution, price reset, cash settlement features and certain change of control provisions that caused those instruments to be classified as derivative liabilities. The details of the terms of these transactions are available on our 10-Q and our other public filings. As a result of these modifications, all of the outstanding derivative liabilities were E classified equity. We do not anticipate any further charges through our P&L related to these derivative liabilities going forward. Please keep in mind that while these accounting treatment [indiscernible] income statement this quarter, they are not cash expenses and do not impact our ability to fund operations. As Randy noted, we have just started our commercial operations. Sales in the third quarter were approximately $52,000 and cost of goods were approximately $37,000. As we move forward with our planned clinical trial in the U.S., we have decided to actively pursue improvements in our manufacturing processes to allow for higher efficiency and cost improvements which will provide lower cost structure for both the clinical supply and future commercial product. As a result, we anticipate that our gross margin should improve. Our operating costs were $1.9 million with $393,000 for R&D and approximately $1.6 million for SG&A generating lots of operations of $1.9 million. Including these amounts or as I've stated before 200,000 of non-cash stock-based compensation, which resulted in operating cash flow of $1.7 million. This is approximately $200,000 higher than that of the first quarter and second quarters. The SG&A spend funded our European operations and expenses related to a variety of other items including our FDA filing in the U.S., legal and accounting fee expense related to our intellectual property and intellectual portfolio and manufacturing cost focused on efficiency improvements. Based on operations continuing at current levels, we believe that we have sufficient capital through Q3 of 2015. This also assumes that we will partner the U.S. clinical trials not be successful in funding other partnership agreements and not significantly alter our current operating expense level. Our net loss was $5 million driven by the charges of P&L related to the change of fair value of derivative liabilities and the modification of certain equity investment derivative attributes of 3.1 million. As a result of all these outstanding -- as a result of these modifications, all of the outstanding derivative liabilities were classified to equity. Randy?

Operator, now we can open the conference call to questions.

All right, sir. (Operator Instructions) Our first question comes from the line of Doug [indiscernible] who is a Private Investor. Please proceed with your question.

I had a couple of questions, if you could provide a little bit of color for me. Where are we at on the filing dates with regards to a fast track and a QIDP?

The question that Doug asked is just on the filing date for the QIDP which as I mentioned is under the GAIN act. So that -- we couldn't actually submit that until after the IND has been approved. We took -- it was a step-wise approach. So we filed for fast track first and then we're in the process of preparing to initiate for the QIDP.

You guys may also -- fast track's been filed, is that correct?

Yes, fast track has been filed. We did it sequentially, fast track first and then initiating the QIDP process.

Can you give me some kind of ballpark on the QIDP?

From the timing of submission?

Yes sir.

Randy its Tony. You want me to comment on that. Okay I know that Doug, there's been lots of questions and lots of speculation about QIDP and everyone seems to think that if it's not done like 24 hours, hence it's not going to get done or there is some looming problem or issue that that's completely full .So everything is and I think you've seen on the regulatory basis, we checked the boxes methodically and then once we submit them and we get approvals. We want to continue to do that in a humble and thorough way, Doug. So you might expect that we are feverishly working, we got the fast track application in. We had contributions from the all the members of the regulatory team and our lawyers, very complete. So although the agency will make its own decision, we think it's a very robust application. Same thing with QIDP. All the people have been lined up, the statute has been completely reviewed. We've checked all the boxes. It’s not like the IND and fast track. It's more going through the process of teaming the FDA and speaking to a variety of people at the agency who are responsible for granting the QIDP. That process has already been initiated. There is a pay per SAR application, which is in the process. So drafts are being written. When we are ready to submit it, we will submit it, but we don't want to submit an incomplete application. The review process for fast track and QIDP is around 30 to 60 days. So both of them could theoretically come in before the end of the year. It'd be a nice holiday gift around Christmas Hanukah period. At the end of the day we can't guarantee that absolutely, but we are working towards those ends. And you have to believe us, we've delivered [indiscernible] on the regulatory front. You have to believe us that these things have been -- fast track, has been filed as Randy has announced and we're moving forward in working with the QIDP with our regulatory attorneys who are very experienced and we are going to do it the right way. So we hope for the right result which is a positive one.

Thank you, Tony.

Yes, first of all, I would have directed that to Tony. I didn't know he was on the call. Tony thanks and yes, there is any [indiscernible]. I was just trying to get a little bit of idea, it's good to know that the fast track has been filed and I prefer you to do it right and appropriately than fast and wrong. So no pressure on this and just want to give an update on that. I'll direct my next question if possible and I will just get out of the way and let somebody else on. Either Tony or Randy, when do you think we are going to be -- will be at the completion of the Neutrolin usage monitoring program.

Randy, why don't you take it?

So what we have right now is we have 175 patients in the program. It's actually staged. So they stay and we have 36 -- 36 patients had completed and what we'll do is it will flow out over through the rest of this year and into the first quarter based upon the number of patients were enrolled in a program. But what we're going to do and Tony is already working with this and this is why we had a little highlight of the symposium last night at the -- at the American Society of Nephrology was the top line of results. So when we will be able to have full completion and present all the results, most likely we are anticipating in the third quarter of 2015, possibly fourth quarter. We're still doing a lot of dicing and slicing of the information.

An then one last -- has there been any events or anything with regards to, I believe its CRMD004, the gel formulation?

Tony why don't you address that?. Tony leads the effort on the gel, thixotropic gel.

Yes, there has -- very good question, Doug. And there has been -- we have a -- just like we have a committee for CRMD003 the solution, we have a committee for the gel as well, which includes a variety of experts both in infectious disease and formulation and we are moving forward on that front. So as we make tangible progress, Randy will huddle with me and then we'll press release it but the answer is there is significant activity moving that forward.

Thank you. And we will hold for one more moment to see if there is any further question. [Operator Instructions]. Our next question comes from the line of Ben Reed with Dawson James [ph]. Please proceed with your question.

I was hoping if you could just explain briefly on layman's terms, why you think your property rights are being infringed and explain your case, why you think it's so strong?

As you know I can address. I'll take first crack at this. The prosal [ph] patent which is the patent that we're referring to here was granted in January of last year. And with our council we’ve obviously felt that they have a product on the market it has the same three components that we do, and with council we look this out. So we've taken the [indiscernible] in violation of our intellectual property.

Okay and then in the same portions or how similar is it yours on the sent to the global.

There actually have four formulations. One is a formulation that's a taurolidine citrate which is the Taurolock. They have a formulation with Taurolock with 100 units of heparin, a formulation Taurolock with 500 units of heparin and then have a Taurolock with urokinase. So our patent stake goes from 25 to 2500 international units of heparin. So as you can see that least for those -- and the Sodemann patent as you recall -- the Sodemann patent was the Taurolock with citrate.

Thank you and our next question comes from line of Joe [indiscernible] with Maxim Group. Please proceed with your question.

Hey guys just a quick question and I think you addressed it a little but may be you could just expand on a little. I know that you were disappointed a little bit in your revenue so far in Europe and I wanted to ask what steps you are taking to try to improve on those numbers.

It’s a great question. What we’ve done is we’re making some changes in our personnel on the ground and the other aspect of this -- I just want reiterate for everyone on the call, you recall that right now the label that we have is for hemodialysis only. So this label expansion which allows us to go into the oncology ICU, CCU total parenteral nutrition will give us a lot more rep when we call on positions in Germany. The same is true for my discussions in the business development slide for potential partners. So it's both the changing in the personnel and changing some of the target that they are going to be targeting from a hemodialysis clinic to little more hospital based ICU as well as the skill sets of the team and we’re doing some training right. Even this week we are doing some training and repositioning the product.

Great and one last question and I imagine that there is only so much you can talk about. But you did say the your kind of weighing your options as far as partnerships go. To the extent that you can, can you kind of a expand on that a little bit in terms of where do you think you have some strong viable options at this point and to the extent that you can maybe just talk about that a little bit.

Sure we’ve had -- as you know on previous calls we voice talked about and we mentioned the number of timings that we have ongoing discussions with companies. One thing that just -- the level of interest increased I would say maybe dramatically once you have the INDs. So once we IND was approved by the FDA, now it seems to be more serious. We’re talking to companies that both on the pharma side and the device side. But in doesn’t -- it's not just dialysis and I want to reiterate for everyone on the call, this is a central venous catheter story. So it could be applicability in dialysis, oncology, ICU, CCU. So as you sit back and think of who is in that type of space consider the number of players that we could having discussion with.

Thank you. And its seems that we have no further questions at this time I’d like to turn the floor back to management for any closing remarks.

Thank you everyone for dialing in today. I think the message that you should walk away with is that A, we’ve made significant progress both in the U.S and are making significant progress in the European Union. The label expansion, the IND being accepted the filing of the fast track are all steps in a right direction. Continue to watch us, continue to monitor us and we’ll continue to deliver on our results and our promises. Thank you very much for dialing in.

Ladies and gentleman this concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.