Khoso Baluch - Chief Executive Officer Robert Cook - Chief Financial Officer

Ram Selvaraju - H.C. Wainwright Alexis Woods - LifeSci Capital

Greetings and welcome to the CorMedix Fourth Quarter 2016 Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host [indiscernible], Investor Relations Manager for CorMedix.

Thank you, Operator and thank you all for participating in today's fourth quarter and year-end 2017 investor conference call. On the call today Khoso Baluch, Chief Executive Officer of CorMedix will provide an update on the company's clinical programs and review upcoming milestones. We will then turn the call over to Bob Cook, Chief Financial Officer. After the prepared remarks we will have the operator coordinate a Q&A session. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. During the call, management may make what are known as forward-looking statements within the meaning 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 for Neutrolin in the U.S. and other product candidates, future financial position, future revenues and projected costs, and potential market acceptance of Neutrolin and other product candidates. More specifically, forward-looking statements include any statements about our clinical development plans and the timing, costs, results and interpretation 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 or other business development transactions, any commercial plans and expectations, market projections for our product candidates, and expectations as to manufacturing and product component costs. Our 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 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. 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. Good afternoon and thank you for joining us on our call today where we would like to review our fourth quarter and full year 2017 financial performance and provide you with an update of our corporate activities. As in our previous calls we will provide updates of key areas that are most critical to driving value for CorMedix including our ongoing Phase 3 clinical trials for Neutrolin and the planned interim analysis. Our pipeline development specifically the neuroblastoma and the taurolidine based medical devices and update on our financial plans and finally a financial update from Bob Cook, our CFO. So let me begin with the ongoing Phase 3 clinical trial and the interim analysis for Neutrolin. Since I joined CorMedix in October of 2016 the program in trial LOCK IT 100 has been our top priority. We remain focused on completing the interim analysis and the trial as efficiently and as quickly as possible. For those of you who may not be familiar with the LOCK IT 100 trial allow me to highlight the recent history. During the second half of 2016 subject enrolment into the study proceeded very slowly and the CorMedix team began to build capabilities internally to address the enrolment issues. That decision and effort resulted in a notable and rapid increase in enrolment rates. As of Friday, March 16, 2018 we have 757 subjects enrolled in this study. The original plan was to have a total of 632 subjects enrolled in this study, the increase in enrolment was discussed with the FDA to address lower than expected rate of CRBSI [ph]. The CorMedix team simultaneously started to investigate why at that time there were so few reported CRBSI's at the study sites. After a careful review including a thorough investigation at the haemodialysis site the team discovered that most subjects who felt sick and needed care did not return to the haemodialysis site for care but rather ended up in a hospital or emergency care facility that was not part of the study. The information about subjects seeking healthcare at emergency care facilities instead of the haemodialysis sites were compiled and presented to the FDA together with our requested changes to the study that would most appropriately capture these subjects. The FDA agreed to these changes in July of 2017 and we announced them in a press release on August 2nd, 2017. The changes included an interim efficacy analysis which was not originally planned. The CorMedix team successful established new working procedures to capture the information from these nonparticipating locations, one of the specific requests from the FDA was to ensure that for the interim analysis the first 28 sequential CAG confirmed CRBSI's would be analysed. Upon receiving FDA concurrence with our new procedures the CorMedix commenced it collecting the medical records required for the packages for the clinical adjudication committee we call it CAG that was implemented to assess CRBSI's. This was an enormous task and included obtaining and reviewing hospital records for potential CRBSI cases. The team did a great job in getting this information completed. These were the major changes to a large ongoing Phase 3 study carried out by small dedicated CorMedix's team of 16 employees and advisors. I'm pleased with how the team has responded and believe strongly that the study is in a far better shape and moving at a far faster pace than it went when it first started. Efforts continue to ensure that there is no missing data or information for the plus 700 subjects in the study. Such changes impact timeline and we've been working diligently to be as efficient as possible. Now let me share with you the progress we've made since our last call. As I indicated we continue to enroll subjects into the study. To-date we have enrolled 757 subjects from the 68 clinical sites across the U.S. and Puerto Rico. As discussed previously we will continue to enrol additional subjects to facilitate achieving the requisite number of CRBSI events in the study. Based on our ongoing efforts we continue to anticipate completing enrolment in the second quarter of 2018. In addition as we announced in our February 20 press release the clinical adjudication committee or CAG established to critically and independently assess capsulated bloodstream infections, have review potential cases of CRBSI in the study that occurred through early December 2017 and identified 28 such cases. The number required by the FDA for an interim analysis the primary endpoint for the study is a comparison of the reduction of CRBSI by Neutrolin versus a heparin catheter lock solution. We are excited to have achieved this critical milestone. In July 2017 once we had the FDA agreement for CorMedix to perform an interim analysis we had tentatively planned to have a meeting of the data safety monitoring board DSMB sometime during late February to early March 2018 to review the interim analysis and provide their recommendations. However it was only during the data review process that commenced course [ph] achievement of the 28 CAG confirmed CRBSI's that we found certain inconsistency in the database. This required attention before the interim analysis could occur. This is a complex and challenging study from the standpoint of having to collect so much data per patients much of it is generated at hospitals and other locations outside of the enrolling sites. While we are disappointed that the database is not ready for the interim analysis we are working with our CRO to address these issues as quickly as possible. Based on our assessment of the database we concluded that a review of the source data and the clinical sites by the clinical research associate under our direct supervision one of the fastest, surest and least expensive way forward. Over the last six months concern about the apparent low incidence of reported CRBSIs we assemble and experience internal senior CRA team that has spearheaded the effort to collect medical records required to complete the CAG packages. This resulted in CAG identification of 28 CRBSI cases. Based on this experience we have augmented the team and assumed direct responsibility for the onsite monitoring. Our internal CRA group is now responsible for the task of ensuring the accuracy and completeness of the data needed for completing the interim analysis. This review includes medical data for all subjects in this study housed at our site. We must assess and ensure the completeness and accuracy of the blinded data for the two secondary endpoints related to catheter removal and catheter blockage [ph] as well as the primary end-point CRBSI and safety information. This is essential to ensure that the quality of data used for the interim analysis is top notch and complies with our protocol. Before the full dataset can be locked and the interim analysis can proceed time will be required to complete the quality assurance procedures appropriate for the amount of data generated in the trial. Most importantly and I cannot stress this enough the data collected with respect to the 20 catheter related bloodstream infection cases confirmed by the clinical adjudication committee was already assembled and screened by the company's internal team prior to the commencement of the data review process and the integrity of such data is not impacted by this additional work. While we are disappointed with the delay CorMedix strongly believes that quality data is essential to increase the probability of a successful outcome and our meticulous approach is in the best interest of the interim analysis, the final study and ultimately the company. We believe that undertaking quality monitoring now and going forward will allow us to avoid any unnecessary delay at the end of the trial whether it is at the interim analysis or upon reaching the 56 events. Once this QA procedures are completed the interim analysis will be performed by an independent third party. CorMedix will continue to remain blinded to the results. The results of the interim analysis will be provided to the DSMB for its review and recommendation. The company still anticipates that the DSMB review will occur in the second quarter of 2018. We anticipate one of three potential outcomes. The first potential outcome is that the interim results show a statistically significant difference between the Neutrolin and heparin arms which would allow us to conclude the study earlier than expected. The second potential outcome is that we complete the study as amended and continue treating subjects until 56 CRBSIs events are confirmed. Finally the third potential outcome is that the interim data suggest a positive outcome is unlikely at which point we would halt the trial for futility. We believe this outcome is unlikely based on prior CorMedix trial results. While we would be thrilled with the first outcome, we are operating on the premise that the study will continue posting interim analysis. As mentioned already we're continuing to accrue patients into the trial and monitoring for additional CRBSI subsequent to the first 28. We recognize there's a great medical need for a product such as Neutrolin particularly for haemodialysis patients with central venous catheters, infection rates are highest among these patients with central venous catheters when compared to other vascular access types and we believe the availability of Neutrolin would offer clinical benefit in these settings. Another update that I'm pleased to announce during this call I have mentioned that CorMedix has assembled a team of experienced senior clinical research associates over these last few months. This team is led by Liz Mason [ph] who very recently joined CorMedix after serving as a consultant to us. We are very pleased to have Liz as part of the corporate leadership team. Liz brings considerable expertise and running clinical study and has a strong background specifically related to haemodialysis related study. Liz's primary responsibility and focus at present is to lead our effort efficiently and rapidly complete the LOCK IT 100 study. Again we will update you further on the interim analysis as soon as we have reportable means. Now let me move to the second topic for which I would like to provide an update and that is the CorMedix pipeline. I will cover during this update for the CorMedix neuroblastoma program and the three medical devices program. Let me first start with the CorMedix program in neuroblastoma. Taurolidine is currently in pre-clinical development as a treatment for neuroblastoma. Taurolidine is a key component in the company's lead product, the preclinical work for taurolidine in neuroblastoma is progressing well with the poetic consortium and the initial results look promising. The preliminary laboratory and animal data shows encouraging activity for taurolidine against neuroblastoma both as a single agent and in combination with other cancer drugs. As CorMedix announced on February 26, the FDA granted CorMedix orphan drug designation to taurolidine for the treatment of neuroblastoma. The data I just referred to was used to supplement our pending application with the FDA and we are pleased with FDA's rapid response in granting our request for orphan drug designation for taurolidine. Orphan Drug designation is granted by the FDA to novel drugs or biologics that treat rare disease or conditions affecting fewer than 200,000 patients in the U.S. The designation provides CorMedix with a potential seven year period of U.S. market exclusivity upon approval of the drug for commercial distribution and eligibility for grant funding clinical trial design system as well as tax credits for research costs and the waiver of the Prescription Drug User Fee Acorn TV, PDUFA filing fees. In addition based on FDA guidance the award of orphan drug designation from neuroblastoma that is not restricted to paediatric neuroblastoma would not preclude us from seeking a rare paediatric disease [indiscernible]. Provided the accrued marketing application includes paediatric use. Under this program a sponsor who receives an approval for a drug or biologic for a rare paediatric disease may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product. To be eligible for the voucher the application must have clinical data derived from studies examining a pretty active population and must be labeled for the paediatric population in terms of safety, effectiveness and dosage information. Neuroblastoma is a severe form of cancer that originate in certain types of nerve tissues and most often begins in the adrenaline glands which are the small glands on top of the kidneys. It can develop in the chest, stomach, neck, pelvis or bones, children age five or younger are most commonly affected and symptoms include fatigue, loss of appetite and fever. The tumor can cause a large bump in the neck region and bulging of the eyes and dark circles around the eyes. In infant it can cause difficulty in breathing. A genetic pattern of inheritance for neuroblastoma can be passed from parent to child and resistant forms of the disease are prevalent and can recur. We believe taurolidine could have potential benefits in this rare paediatric disease area based on ongoing laboratory studies. Current treatment of a poorer outcomes and based on its potential synergies with other drugs approved in this area we believe taurolidine could become an important therapy for neuroblastoma. Once we receive the final report from the ongoing study we plan to issue a separate press release covering the topline results. Our goal is to partner with an appropriate cancer focused company to advance taurolidine into clinical development and ultimately obtain marketing approval. Now moving on to our medical devices. With respect to our medical devices program we have now completed the animal studies to support proof of concept for all three medical devices, sutures, mesh and hydrogels. We have received the preliminary results from all three animal studies. We are now waiting for the final report and the statistical analysis. We will issue a separate press release covering the results once we receive the analysis and the final report which we expect to get in the next few weeks. As I mentioned in the previous updates CorMedix had identified predicates for each of the medical devices and plan to talk to the FDA more specifically the Center for Device and Radiology Health, CDRH to obtain the guidance on the appropriate regulatory pathway. We can report to you today that we recently received FDA communication on this matter. The FDA indicated that these CorMedix medical devices are novel products because taurolidine is not present in any current approved medical device in the U.S. and therefore there are no appropriate predicate devices currently marketed in the U.S. The FDA would therefore regulate CorMedix medical devices as a Class III medical device which requires a pre-market approval, PMA application for the drug device combination. CorMedix intends to continue to discuss the regulatory pathway with the FDA if and when the new drug application for Neutrolin is approved. Although they will presumably still be no appropriate predicate [indiscernible] Class II can be proposed at that time based on the risk assessment and a reasonable assurance of safety and effectiveness. While the PMA pathway is longer and more expensive than the 510(k) application it does provide the opportunity to make claims that can be used to differentiate our products from the others. Having said that once we have the final reports we plan to announce the top-line results from the preclinical animal study and the next steps we will take with respect to these programs including discussions with potential partners. Before I turn the call over to Bob to cover the financial sections I want to highlight a new investment facility that we have put in place. Our financial strategy at CorMedix has not changed since my last update and that is given the current market capitalization of the company to raise the minimum amount of capital on the best terms available to ensure that the company has sufficient cash on hand to complete the interim analysis while minimizing the dilution to our shareholders. After the interim data is reviewed by the DSMB and we know our path forward we will reevaluate our situation and determine both our ongoing cash needs and our financial options. At all times we will continue in our effort to minimize dilution until the market recognize the real value of the company. Since January 1, 2018 we have raised 3.2 million net using the ATM. In addition we've executed the binding term sheet for a second 3 million backstop facility with an existing CorMedix investor. Assuming we close on this facility it should ensure the company will be funded into the third quarter of 2018 which we anticipate gets us past the reporting of the interim efficacy data. As in the past the company will continue to evaluate opportunities that are in the best interests of shareholders. I would now like to hand the call to our CFO, Bob Cook for an update on our financial results for the quarter and more details on our financing. Bob?

Thank you very much, Khoso. The company will file its annual report on Form-10k for the year ended December 31, 2017 t momentarily. I urge you to read the information contained in the report for a more complete explanation of our financial results and analysis of results compared with comparable periods in 2016. With respect to our fourth quarter 2017 financial results are net loss was approximately $10.3 million or $0.15 per share compared with a net loss of a 6.4 million or $0.16 per share in the fourth quarter of 2016. In the third quarter of 2017 we recorded a net loss of $10 million or $0.17 per share. Our fourth quarter 2017 net loss was negatively impacted primarily by the costs related to the ongoing LOCK IT 100 clinical study and by increases in CMC in clinical supply expenses. Operating expenses in the fourth quarter 2017 were $10.4 million compared with 8 million in the third quarter of 2017, an increase of approximately 30%. This increase was due primarily to a $2.4 million or 40.6% increase in R&D expense while SG&A expense remained flat .Within R&D the cost of the LOCK IT 100 hundred clinical trial increased by 1.7 million and CMC clinical supply expenses increased 0.7 million, other R&D remained unchanged. As we discussed in our last conference call the expense of the LOCK IT 100 clinical trial increased during the fourth quarter of 2017 as we continue to enroll more patients and ramped up our efforts to prepare and submit potential CRBSI cases to the clinical adjudication committee. Expense also increased as a result of patients staying in the study longer than we had originally planned. Cash used in operations in the fourth quarter of 2017 was approximately $7.3 million compared with 6.8 million in the third quarter 2017. Cash used in operations during the quarter rebounded as expected from third quarter levels but was still somewhat below guidance due to some timing changes in the payment of certain clinical trial expenses. With respect to our financial results for the year end of December 31, 2017 our net loss was approximately $33 million or $0.60 per share compared with a net loss of 24.6 million or $0.44 per share for the year ended December 31, 2016. Operating expenses during 2017 amounted 33.1 million compared with 24.6 million in 2016, an increase of $8.5 million or 34.6%. The increase in operating expenses compared with 2016 was substantially due to a tripling of clinical trial expense to 16.7 million partially offset by decreases in other R&D, manufacturing and SG&A expense. Our cash used in operations during 2017 was approximately 28.6 million compared with 22.3 million during 2016. The increase in cash used in operations resulted primarily from our higher net loss caused primarily by the ongoing Phase 3 study at Neutrolin. As we have previously discussed we expected that our spending on the LOCK IT 100 would increase in the fourth quarter of 2017. We anticipate study related expenses will remain at a high level during the first quarter of 2018. Cash at December 31, 2017 amounted to $12 million. During the fourth quarter of 2017 we made use of our ATM program raising $5.2 million in net proceeds at an average sales price of $0.61 and we continue to utilize it as circumstances may allow Additionally, we signed today a binding term sheet with our largest shareholder to replace our expired backstop facility with a proposed new $3 million backstop facility to purchase shares of Series F2 convertible preferred stock at our sole discretion beginning April 16 of this year through July 31. This facility encourages us to seek the most cost efficient capital available because we are under no obligation to draw any of the facility and the amounts available to us under the backstop reduced by $1 for each $2 of third party financing that we raise. We're pleased with the confidence and support we have received from our largest investor during this period and we will make the appropriate announcements once this transaction has closed. This proposed backstop is subject to negotiating and executing a definite agreement. We anticipate that our cash and short term investments at December 31, 2017 of 12 million plus the proceeds of our ATM program and the new 3 million backstop facility will fund our requirements into the third quarter of 2018. Based on our current schedule we believe we have sufficient cash to operate through the date of the interim efficacy analysis. I will now hand the call back to Khoso for his closing remarks. Khoso?

Thank you, Bob. In conclusion the LOCK IT 100 study remains our top priority and we remain focused on completing the interim analysis and the trial as efficiently and as quickly as possible. As Neutrolin gets closer to potential FDA approval let me remind you that we will benefit from both the FDA's fast tracked providing the potential for priority review and our current marketing application and the QIGP [ph] designation which secure owns up to 10 years of marketing exclusivities post approval. We are also pleased with the progress of our pipeline and the reason FDA grants of orphan drug designation to taurolidine for the treatment of neuroblastoma. We will provide a top line update on the proof of concept results in the next few weeks and with that we conclude our formal remarks and now we'll open up the line for questions. Monik [ph]

[Operator Instructions]. Our first question is from Ram Selvaraju, H.C. Wainwright. Please proceed with your question.

Just point of clarity with respect to the LOCK IT 100 study interim analysis, can you give us a sense of what specific information you would be able to disclose once the interim analysis is complete and secondly if there would potentially be a scenario under which you would not necessarily need additional information in order to be able to say definitively whether Neutrolin is working in the study, in other words if there is a results coming from the interim analysis that would definitively show Neutrolin is an effective treatment in the context of CRBSI. Thank you.

As I outlined in the call we just had that we required 28 CRBSIs and we achieved that in December and so that last cases were reviewed and confirmed by CAG in early part of January 2018. We then started to review the final data which is normal that you do with when you have had the last patient inclusion included into the 28 CAG cases. So for us as I indicated there are there different scenarios that could occur and they are obviously the scenario occurs where we are statistically different in the Neutrolin arm versus the heparin arm then clearly that would lead us down a path which we would need to submit to the FDA, that would be the only time in my understanding is where we would have the information and the statistics behind it that we would be able to provide it to the FDA in any of the other scenarios. We will then end up having to continue in the second scenario to enrol upto 56 events for if in the unlikely event it's futile then obviously then we would have to stop the study. I think is that your question that you were asking?

So that answers the second part of my question but the first part relates to what specific information you will be able to disclose once the interim analysis is completed? Would it be just a key value or would it be a key value plus some numeric details or would it be more contextual information than that?

Okay. So to the first part of your question the only time we will be able to provide any more details would be if we hate the first scenario potential scenario which is we show a statistical significance at the interim analysis and we submit it to the FDA and only once we hear back from the FDA would we be able to provide more clarity in terms of the top-line results that we have seen in the interim analysis. If we end up in the other two scenarios we will not be able to provide any more details at present to the marketplace till either we get to the 56 events or if the study obviously comes to a stop then that would be the end of it.

And then just a follow up if I may on the medical device related application of these mesh's and so on that you are working on. Given the work you are expecting to release in the course of the near future, could you perhaps lay out for us what you would attempted to do on that front. You know I believe we had previously talked about the possibility of conducting some strategic partnering, or some other initiatives that would enable you to move those programs forward without necessarily having to deploy additional capital into them at this juncture, but could you perhaps give us a bit more color on that please.

Yes, so soon as we've got the results from our three animal study proof of concept we will obviously be looking at that very carefully we are also assessing you know the feedback from the FDA, the PMA pathway versus the 510(k) it's very interesting that in discussions that we have had with several prospective partners they actually express a preference for the PMA pathway over the 510(k) pathway just for the reason that they would be able to articulate the benefits and make claims on the product versus what is today standard of care in the marketplace. So we will be taking all of that information and obviously sharing the results of our study with the potential partners and then be able to lay out a pathway going forward.

Our next question comes from Alexis Woods with LifeSci Capital. Please proceed with your question.

Just for the LOCK IT 100 trial assuming that you wind up in a scenario where you have to continue until 56 events occur, what kind of timeline are you anticipating for the remaining 28 events that occur and then for that final data read out?

Yes. We have not changed our guidance to what we have shared before and that is we expect enrolment to be completed in quarter two and then our top line readout at the tail end of 2018 so that guidance has not changed. We have not seen anything yet in the marketplace that would require us making any change in our assessment of timelines.

And then also with the Neutrolin for obviously you would have to do a second registration trial, are you -- have you made any decisions regarding which indication you'd be pursuing for that. I know there was a discussion of oncology and then also TPN have you come to any conclusions about what you'd be pursuing?

At present no we have not come to any conclusion which of those two indications we would be pursuing for the second study. Our focus has been on the interim analysis and getting to that point before we begin to assess the next study in more detail than what we had originally done.

Okay. And then finally just one more question related to the paediatric neuroblastoma, I know you're planning to providing some results to us soon for the pre-clinical data. Do you have any timeline tentative timelines for moving it into the clinic based on -- assuming that there's positive results from that preclinical stuff?

Yes. So on neuroblastoma all along I have been articulating that our goal very much is to find a partnership with a company that is focusing in the oncology space for us to move this forward into clinic and our goal very much is as this information has come in. We will begin to initiate discussions with potential interested parties and that will dictate timelines from which we will be able to then give further updates on future calls.

Ladies and gentlemen we have reached the end of the question and answer session and I would like to turn the call back to Khoso Baluch for closing remarks.

Thank you very much. I guess at the end of this call just want to thank everyone for following us very closely and having an interest in CorMedix. I think we continue to move forward with speed and clearly we are bringing a change to the marketplace and should Neutrolin get approved by the FDA it will be a change to the standard of care in the U.S. market and so I'm excited to continue this journey and get us across the finish line. So thank you very much following us. Take care. Bye, Bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.