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Prospectus
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Filed pursuant to Rule
424(b)(3)
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Registration No.
333-223562
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$14,700,000
Common
Stock
We have entered
into an At Market Issuance Sales Agreement, dated March 9, 2018,
with B. Riley FBR, Inc., or B. Riley FBR, as sales agent. The sales
agreement relates to the sale of shares of our common stock offered
by this prospectus supplement. In accordance with the terms of the
sales agreement, under this prospectus supplement we may offer and
sell shares of our common stock, $0.001 par value per share, having
an aggregate offering price of up to $14,700,000 from time to time
through B. Riley FBR, acting as agent, which is an amount equal to
one-third of our public float as of April 6, 2018.
Our common stock is
traded on the NYSE American under the symbol “CRMD.”
The last reported sale price of our common stock on April 13, 2018
was $0.24 per share.
Sales of our common
stock, if any, under this prospectus will be made by any method
permitted that is deemed an “at the market offering” as
defined in Rule 415 under the Securities Act of 1933, as amended,
or the Securities Act. B. Riley FBR is not required to sell any
specific amount, but will act as our sales agent using commercially
reasonable efforts consistent with its normal trading and sales
practices. There is no arrangement for funds to be received in any
escrow, trust or similar arrangement.
B. Riley FBR will
be entitled to compensation at a commission rate equal to 3% of the
gross sales price per share sold. In connection with the sale of
the common stock on our behalf, B. Riley FBR will be deemed to be
an “underwriter” within the meaning of the Securities
Act and the compensation of B. Riley FBR will be deemed to be
underwriting commissions or discounts. We have also agreed to
provide indemnification and contribution to B. Riley FBR with
respect to certain liabilities, including liabilities under the
Securities Act.
As of April 6,
2018, the aggregate market value of our outstanding common stock
held by non-affiliates, or the public float, was approximately
$44,400,000, which was calculated based on 81,903,027 shares of our
outstanding common stock held by non-affiliates and on a price of
$0.57 per share, the last reported sale price for our common stock
on February 16, 2018. Pursuant to General Instruction I.B.6 of Form
S-3, in no event will we sell our common stock in a public primary
offering with a value exceeding one-third of our public float in
any 12-month period unless our public float subsequently rises to
$75.0 million or more. We have not offered any securities pursuant
to General Instruction I.B.6 of Form S-3 during the 12 calendar
months prior to and including the date of this
prospectus.
Investing
in our common stock involves a high degree of risk. Please read the
information contained in and incorporated by reference under the
heading “Risk Factors” beginning on page 6 of this
prospectus, the section captioned “Item 1A—Risk
Factors” in our most recently filed annual report on Form
10-K, which is incorporated by reference into this prospectus, and
under similar headings in the other documents that are filed after
the date hereof and incorporated by reference into this
prospectus.
Neither the
Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
B.
Riley FBR
The date of this
prospectus is April 16, 2018.
TABLE
OF CONTENTS
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Page
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About
this Prospectus
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1
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Prospectus
Summary
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2
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Risk
Factors
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6
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Special
Note Regarding Forward-Looking Statements
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26
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Use
of Proceeds
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28
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Dilution
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29
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Market
for Common Stock
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31
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Plan
of Distribution
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32
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Description
of our Common Stock
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33
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Certain
Provisions of Delaware Law and of Our Amended and Restated
Certificate of Incorporation and Amended and Restated
Bylaws
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33
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Legal
Matters
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34
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Experts
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34
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Where
You Can Find More Information
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35
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Incorporation
of Documents by Reference
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35
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i
ABOUT
THIS PROSPECTUS
This prospectus is
part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, on Form S-3 utilizing a shelf
registration process relating to the securities described in this
prospectus. Under this shelf registration process, we may, from
time to time, sell up to $70.0 million in the aggregate of common
stock, preferred stock, warrants, various series of debt securities
and/or warrants to purchase any of such securities, either
individually or in units, of which up to an aggregate of $14.7
million may be sold in this offering in the form of shares of
common stock, which is an amount equal to one-third of our public
float as of April 6, 2018, as limited by General Instruction I.B.6
of Form S-3.
This prospectus
relates to the offering of our common stock. Before buying any of
the common stock that we are offering, we urge you to carefully
read this prospectus, together with the information incorporated by
reference as described under the headings “Where You Can Find
More Information” and “Incorporation of Certain
Information by Reference” in this prospectus. These documents
contain important information that you should consider when making
your investment decision.
This prospectus
describes the specific terms of the common stock we are offering
and also adds to, and updates information in any document
incorporated by reference into this prospectus. To the extent there
is a conflict between the information contained in this prospectus,
on the one hand, and the information contained any document
incorporated by reference into this prospectus that was filed with
the Securities and Exchange Commission, or SEC, before the date of
this prospectus, on the other hand, you should rely on the
information in this prospectus. If any statement in one of these
documents is inconsistent with a statement in another document
having a later date — for example, a document incorporated by
reference into this prospectus— the statement in the document
having the later date modifies or supersedes the earlier
statement.
You should rely
only on the information contained in, or incorporated by reference
into, this prospectus and in any free writing prospectus that we
may authorize for use in connection with this offering. We have
not, and B. Riley FBR has not, authorized any other person to
provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it.
We are not, and B. Riley FBR is not, making an offer to sell or
soliciting an offer to buy our securities in any jurisdiction in
which an offer or solicitation is not authorized or in which the
person making that offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make an offer or
solicitation. You should assume that the information appearing into
this prospectus, the documents incorporated by reference into this
prospectus, and in any free writing prospectus that we may
authorize for use in connection with this offering, is accurate
only as of the date of those respective documents. Our business,
financial condition, results of operations and prospects may have
changed since those dates. You should read this prospectus, the
documents incorporated by reference into this prospectus,and any
free writing prospectus that we may authorize for use in connection
with this offering, in their entirety before making an investment
decision. You should also read and consider the information in the
documents to which we have referred you in the sections of this
prospectus entitled “Where You Can Find More
Information” and “Incorporation of Certain Information
by Reference.”
We are offering to
sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The
distribution of this prospectus and the offering of the common
stock in certain jurisdictions may be restricted by law. Persons
outside the United States who come into possession of this
prospectus must inform themselves about, and observeany
restrictions relating to, the offering of the common stock and the
distribution of this prospectus outside the United States. This
prospectus does not constitute, and may not be used in connection
with, an offer to sell, or a solicitation of an offer to buy, any
securities offered by this prospectus by any person in any
jurisdiction in which it is unlawful for such person to make such
an offer or solicitation.
Our primary executive offices are located at 400
Connell Drive, Suite 5000, Berkeley Heights, NJ 07922, and our
telephone number is (908) 517-9500. Our website address
is www.cormedix.com. The
information contained on our website is not a part of, and should
not be construed as being incorporated by reference into, this
prospectus.
Unless
the context otherwise requires, “CorMedix,” the
“company,” “we,” “us,”
“our” and similar names refer to CorMedix
Inc.
Neutrolin®
is our registered trademark and the
CorMedix logo is our trademark. All other trade names, trademarks
and service marks appearing in this prospectus are the property of
their respective owners. We have assumed that the reader
understands that all such terms are source-indicating. Accordingly,
such terms, when first mentioned in this prospectus, appear with
the trade name, trademark or service mark notice and then
throughout the remainder of this prospectus without trade name,
trademark or service mark notices for convenience only and should
not be construed as being used in a descriptive or generic
sense.
1
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PROSPECTUS
SUMMARY
This summary highlights certain information about us, this offering
and selected information contained elsewhere in or incorporated by
reference into this prospectus. This summary is not complete and
does not contain all of the information that you should consider
before deciding whether to invest in our common stock. For a more
complete understanding of our company and this offering, we
encourage you to read and consider carefully the more detailed
information in this prospectus, including the information
incorporated by reference into this prospectus, and the information
referred to under the heading “Risk Factors” in this
prospectus beginning on page 6, and in the documents incorporated
by reference into this prospectus.
OUR
COMPANY
Overview
We are a biopharmaceutical company focused on
developing and commercializing therapeutic products for the
prevention and treatment of infectious and inflammatory
diseases.
Our primary focus
is to develop our lead product candidate, Neutrolin® (also known as
CRMD003), for potential commercialization in the U.S. and other key
markets. We have in-licensed the worldwide rights to develop and
commercialize Neutrolin, which is a novel anti-infective solution
(a formulation of taurolidine, citrate and heparin 1000 u/ml) under
development in the U.S. for the reduction and prevention of
catheter-related infections and thrombosis in patients requiring
central venous catheters in clinical settings such as dialysis,
critical/intensive care, and oncology. Infection and thrombosis
represent key complications among critical care/intensive care and
cancer patients with central venous catheters. These complications
can lead to treatment delays and increased costs to the healthcare
system when they occur due to hospitalizations, need for IV
antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related
treatment costs and increased mortality. We believe Neutrolin has
the potential to address a significant unmet medical need and
represents a potential large market opportunity.
In July 2013, we
received CE Mark approval for Neutrolin. As a result, in
December 2013, we commercially launched Neutrolin in Germany
for the prevention of catheter-related bloodstream infections and
maintenance of catheter patency in hemodialysis patients using a
tunneled, cuffed central venous catheter for vascular
access. To date, Neutrolin is registered and may be sold
in certain European Union and Middle Eastern countries for such
treatment. In April 2017, we
entered into a commercial collaboration with Hemotech SAS covering
France and French overseas territories.
We initiated one
Phase 3 clinical trial in hemodialysis patients with a central
venous catheter (“LOCK-IT-100”) in December 2015. The
FDA has indicated that two pivotal trials to demonstrate safety and
effectiveness of Neutrolin will be required by the U.S. Food and
Drug Administration (“FDA”) to secure marketing
approval in the United States.
In April 2017, a
safety review by an independent Data and Safety Monitoring Board,
or DSMB was completed. The DSMB unanimously concluded that it is
safe to continue the LOCK-IT-100 clinical trial as designed based
on its evaluation of data from the first 279 patients randomized on
trial.
On August 2, 2017,
we announced that the FDA had agreed to key changes to the
LOCK-IT-100 clinical trial. We sought guidance from the FDA to
address, in part, the apparent overall lower rate of
catheter-related blood stream infection (CRBSI) events as announced
in April 2017. Changes made to the protocol were 1) the utilization
of a Clinical Adjudication Committee (CAC) to assess suspected
CRBSIs; 2) the use of the CAC to critically and independently
assess suspected CRBSIs in a blinded fashion based on a single
positive blood culture and supporting documentation, rather than
two positive blood cultures as previously required; 3) the ability
to capture cases occurring outside of dialysis centers to
facilitate more complete capture of CRBSI events in the study,
particularly when patients present with CRBSI events outside of the
dialysis center setting (emergency rooms or urgent care centers);
and 4) a revision of the design of the study to detect a treatment
effect of 55% or greater when comparing the Neutrolin and heparin
control arms. The FDA agreed that cases adjudicated by the CAC to
be CRBSI events and the per protocol definition of CRBSI events
will be included in the primary analysis of the primary efficacy
endpoint of the LOCK-IT-100 study. The amended study assumptions
including a reduction in statistical power have resulted in a
reduction in the total number of CRBSI events required from 161
events to 56 events to complete the study. We believe that these
changes have allowed the identification of more infections,
enabling a single interim analysis.
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2
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On February 20,
2018, we announced that the CAC had reviewed potential cases of
CRBSI in the LOCK-IT-100 study that occurred through early December
2017, and identified 28 such cases. As previously agreed with FDA,
an interim analysis will be performed when the first 28 CRBSIs case
have been identified. The primary endpoint for the study is the
reduction of CRBSI by Neutrolin in comparison to a heparin catheter
lock solution. We are currently directing standard procedures to
ensure the accuracy and completeness of the data required for
conducting the interim analysis. This review includes data for all
subjects in the study needed to assess the two secondary endpoints
related to a reduction in catheter removal and catheter blockage,
as well as the primary endpoint and safety information. Before the
full dataset can be locked and the interim analysis can proceed, a
number of weeks will be required to complete the quality assurance
procedures appropriate for the amount of data generated inthe
trial. The interim analysis will be provided to the Data Safety
Monitoring Board for its review and recommendation upon completion.
We project to complete patient enrollment in mid-year 2018, and
anticipate that we will accumulate the requisite number of CRBSI
events around the end of 2018.
We are evaluating
opportunities for the possible
expansion of taurolidine as a platform compound. Patent
applications have been filed in wound closure, surgical meshes,
wound management, and osteoarthritis, including
visco-supplementation. We have had
dialogue with the FDA on the regulatory pathway for these
indications. The FDA has recently informed us that it regards
taurolidine as a new chemical entity and therefore an unapproved
drug. Consequently, there is no appropriate predicate device
currently marketed in the U.S. on which a 510k approval process
could be based. As a result, we will be required to submit a
premarket approval application for marketing authorization for
these indications. In the event that the New Drug Application for
Neutrolin is approved by the FDA, the regulatory pathway can be
revisited with the FDA. Although there will presumably still
be no appropriate predicate, de novo Class II designation can
be proposed, based on a risk assessment and a reasonable assurance
of safety and effectiveness. We
believe taurolidine can also provide benefits not currently
available in marketed antimicrobial medical devices, including
devices for burn victims and use in less sterile
environments.
We are also involved in a pre-clinical research
collaboration for the use of taurolidine as a possible combination
treatment for rare orphan pediatric tumors. In February
2018, the FDA granted orphan drug designation to taurolidine for
the treatment of neuroblastoma.
Corporate
History and Information
We were organized
as a Delaware corporation on July 28, 2006 under the name
“Picton Holding Company, Inc.” and we changed our
corporate name to “CorMedix Inc.” on January 18, 2007.
Our operations to date have been primarily limited to organizing
and staffing, licensing product candidates, developing clinical
trials for our product candidates, seeking regulatory approvals for
Neutrolin, establishing manufacturing for our product candidates
and maintaining and improving our patent portfolio and launching
Neutrolin in the E.U and other foreign countries.
Our executive
offices are located at 400 Connell Drive, Suite 5000, Berkeley
Heights, NJ 07922. Our telephone number is (908) 517-9500. Our
website address is www.cormedix.com. Information contained in, or
accessible through, our website does not constitute part of this
prospectus supplement.
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3
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THE
OFFERING
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Common stock
offered by us
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Shares having an
aggregate offering price of up to $14.7 million.
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Common stock to be
outstanding after this
offering
(1)
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Up to 140,586,902
shares, assuming sales at a price of $0.25 per share, which was the
closing price on the NYSE American on April 5, 2018. Actual number
of shares issued will vary depending on the sales price under this
offering.
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Manner of
offering
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“At the
market offering” that may be made from time to time through
our sales agent, B. Riley FBR. See “Plan of
Distribution” on page 32.
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Use of
proceeds
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We intend to use
the net proceeds from this offering, if any, for general corporate
purposes, including clinical trials, research and development
expenses and general and administrative expenses. See “Use of
Proceeds” on page 28.
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NYSE American
symbol
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“CRMD”
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Risk
factors
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Investing in our
common stock involves a high degree of risk. Please read the
information contained in and incorporated by reference under the
heading “Risk Factors” beginning on page 6, the section
captioned “Item 1A—Risk Factors” in our most
recently filed annual report on Form 10-K, which is incorporated by
reference into this prospectus, and under similar headings in the
other documents that are filed after the date hereof and
incorporated by reference into this prospectus.
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_____________________________
(1) The number of shares of our common stock that will
be outstanding immediately after this offering as shown above is
based on 81,786,902 shares
outstanding as of March 31, 2018. The number of shares outstanding
as of December 31, 2017, as used throughout this prospectus, unless
otherwise indicated, excludes:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
●
options
to purchase an aggregate of 120,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $1.44 per share;
●
options
to purchase an aggregate of 4,842,495 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.05 per share;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
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4
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●
warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of common
stock;
●
Series C-3
Preferred Stock convertible into 1,040,000 shares of common
stock;
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Series D Preferred
Stock convertible into 1,479,240 shares of common
stock;
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Series E Preferred
Stock convertible into 1,959,759 shares of common
stock;
●
Series F Preferred
Stock convertible into 12,345,679 shares of common stock, subject
to adjustment;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020;
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020;
●
Series A warrants
for 4,078,226 shares of common stock with an exercise price of
$0.75 that expire on September 10, 2018;
●
Series B warrants
for 13,964,476 shares of common stock with an exercise price of
$1.05 that expire on August 10, 2022;
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underwriter
warrants for 1,117,158 shares of common stock with an exercise
price of $0.9375 that expire on August 10, 2022;
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warrants for
564,858 shares of common stock with an exercise price of $0.001
that expire on November 16, 2020; and
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restricted stock
units for 97,529 shares of common stock with an average grant date
fair value of $0.57 per share.
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5
RISK
FACTORS
Investing in our common stock involves risk. Prior
to making a decision about investing in our common stock, you
should carefully consider the specific factors discussed below
together with all of the other information contained or
incorporated by reference in this prospectus. You should also
consider the risks, uncertainties and assumptions discussed under
the heading “Risk Factors” included in our most recent
annual report on Form 10-K which is on file with the SEC and
is incorporated herein by reference, and which may be amended,
supplemented or superseded from time to time by other reports we
have subsequently filed or may file with the SEC in the
future.
Risks Related to Our Financial Position and Need for Additional
Capital
We have a history of operating losses, expect to incur additional
operating losses in the future and may never be
profitable.
Our
prospects must be considered in light of the uncertainties, risks,
expenses, and difficulties frequently encountered by companies in
the early stages of operation. We incurred net losses of
approximately $33 million
and $24.6 million for the years ended December
31, 2017 and 2016, respectively. As of December 31,
2017, we had an
accumulated deficit of approximately $152.2 million. We expect to incur
substantial additional operating expenses over the next several
years as our research, development, pre-clinical testing, clinical
trial and commercialization activities increase as we develop and
commercialize Neutrolin. As a result, we expect to experience
negative cash flow as we fund our operating losses and capital
expenditures. The amount of future losses and when, if ever, we
will achieve profitability are uncertain. Neutrolin was launched in
December 2013 and is currently available for distribution in
certain European Union and Middle East countries. We have not
generated any significant commercial revenue and do not expect to
generate substantial revenues from Neutrolin until it is approved
by the FDA and launched in the U.S. market, and might never
generate significant revenues from the sale of Neutrolin or any
other products. Our ability to generate revenue and achieve
profitability will depend on, among other things, the following:
successfully marketing Neutrolin in Germany and other countries in
which it is approved for sale; obtaining necessary regulatory
approvals for Neutrolin from the other applicable European and
Middle East agencies, other foreign agencies and the FDA and
international regulatory agencies for any other products;
establishing manufacturing, sales, and marketing arrangements,
either alone or with third parties; and raising sufficient funds to
finance our activities. We might not succeed at any of these
undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations
may be materially adversely
affected.
We have
received a
going concern opinion from our independent registered public
accounting firm.
Our operations are
subject to a number of factors that can affect our operating
results and financial condition. Such factors include, but are not limited to: the
results of clinical testing and trial activities of our product
candidates; the ability to obtain regulatory approval to market our
products; ability to manufacture successfully; competition from
products manufactured and sold or being developed by other
companies; the price of, and demand for, our products; our ability
to negotiate favorable licensing or other manufacturing and
marketing agreements for our products; and our ability to raise
capital to support our operations.
To date, our
commercial operations have not generated sufficient revenues to
enable profitability. As of December 31, 2017, we had an
accumulated deficit of $152.2 million, and incurred net losses from
operations of $33.0 million for the year then ended. Based on the
current development plans for Neutrolin in both the U.S. and
foreign markets (including the
ongoing hemodialysis Phase 3 clinical trial in the U.S.) and our
other operating requirements, management believes that the existing
cash at December 31, 2017 plus funding raised through March 9, 2018
and a proposed new $3 million backstop facility, for which a
binding term sheet was recently signed by us and Elliott Management
Corporation, will be sufficient to fund operations into the third
quarter of 2018. If a definitive agreement can be negotiated and
executed, we anticipate that the proposed backstop facility would
be available for drawing between April 16, 2018 and July 31, 2018.
These factors raise substantial doubt regarding our ability to
continue as a going concern. We will need additional funding to
complete the ongoing hemodialysis clinical trial in the U.S. which
commenced in December 2015 and to continue the Neutrolin
development program through to NDA filing and marketing
approval.
6
As a result of the
above matters, our independent auditors have indicated in their
report on our December 31, 2017 financial statements that there is
substantial doubt about our ability to continue as a going concern.
A “going concern” opinion indicates that the financial
statements have been prepared assuming we will continue as a going
concern and do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets, or the amounts
and classification of liabilities that may result if we do not
continue as a going concern. Therefore, you should not rely on our
consolidated balance sheet as an indication of the amount of
proceeds that would be available to satisfy claims of our
creditors, and potentially be available for distribution to our
stockholders, in the event of liquidation.
Our continued
operations will ultimately depend on our ability to raise
additional capital through various potential sources, such as
equity and/or debt financings, strategic relationships, or
out-licensing of our products in order to complete our ongoing and planned Phase 3 clinical trials
and until we achieve profitability, if ever. We can provide no
assurances that such financing or strategic relationships will be
available on acceptable terms, or at all. Without this funding, we
could be required to delay, scale back or eliminate some or all of
our research and development programs which would likely have a
material adverse effect on our business.
We will
need to finance our future cash needs through public or private
equity offerings, debt financings or corporate collaboration and
licensing arrangements. Any additional funds that we obtain may not
be on terms favorable to us or our stockholders and may require us
to relinquish valuable rights.
We have launched Neutrolin in certain European
Union and Middle East countries, but to date have no other approved
product on the market and have not generated significant product
revenue from Neutrolin to date. Unless and until we receive
applicable regulatory approval for Neutrolin in the U.S., we cannot
sell Neutrolin in the U.S. Therefore, for the foreseeable future,
we will have to fund all of our operations and capital expenditures
from Neutrolin sales in Europe and other foreign markets, if
approved, cash on hand, additional financings, licensing fees and
grants.
We believe that our cash resources as of December
31, 2017, plus funding raised through March 9, 2018 and a proposed
new $3 million backstop facility, for which a binding term sheet
was recently signed by us and Elliott Management Corporation, will
be sufficient to fund operations into the third quarter of 2018. If
a definitive agreement can be negotiated and executed, we
anticipate that the proposed backstop facility would be available
for drawing between April 16, 2018 and July 31, 2018. We will need
additional funding thereafter to complete our ongoing and
anticipated Phase 3 clinical trials in the U.S., and to
continue the Neutrolin development program through to NDA filing
and approval. If we are unable to raise additional funds when
needed, we may not be able to complete our ongoing Phase 3 clinical
trial, to complete the Neutrolin development program through to NDA
filing and marketing approval or commercialize Neutrolin and we
could be required to delay, scale back or eliminate some or all of
our research and development programs. We can provide no assurances
that any financing or strategic relationships will be available to
us on acceptable terms, or at all. We expect to incur increases in
our cash used in operations as we continue to conduct our ongoing
Phase 3 clinical trial and prepare for additional Phase 3 clinical
trials, seek FDA approval of Neutrolin in the U.S., commercialize
Neutrolin in Europe and other markets, pursue development of our
medical devices and other business development activities, and
incur additional legal costs to defend our intellectual
property.
To raise needed capital, we may sell additional
equity or debt securities, obtain a bank credit facility, or enter
into a corporate collaboration or licensing arrangement.
The sale of additional equity or debt
securities, if convertible, could result in dilution to our
stockholders. The incurrence of indebtedness would result in fixed
obligations and could also result in covenants that would restrict
our operations. Raising additional funds through collaboration or
licensing arrangements with third parties may require us to
relinquish valuable rights to our technologies, future revenue
streams, research programs or product candidates, or to grant
licenses on terms that may not be favorable to us or our
stockholders.
At the time that we
may need additional financing, we may not have sufficient
authorized shares of common stock available, depending on the
amount of the financing, the price of our common stock and our
obligations to reserve shares for our outstanding convertible
preferred stock, warrants and options. We currently have
160,000,000 shares of common stock authorized and at March 31,
2018, we had 81,786,902 shares outstanding and 37,753,594 shares
reserved for issuance upon the exercise and conversion of our
outstanding convertible preferred stock, warrants and options. To
increase our authorized common stock, we would need stockholder
approval to amend our certificate of incorporation, which approval
may not be obtained.
Until the date that
none of the shares of common stock or warrants that we issued to
Elliott Associates, L.P. and Elliott International, L.P in November
2017 as part of the backstop financing are outstanding, we are
prohibited from issuing or selling any securities convertible into
common stock on terms more favorable than the backstop financing
terms and with a conversion, exchange or exercise price that is
based upon and/or varies with the trading prices of or quotations
for the shares of our common stock or that is subject to being
reset at some future date or upon the occurrence of specified or
contingent events directly or indirectly related to our business
(other than pursuant to a customary “weighted average”
anti-dilution provision) or the market for our common stock or
enter into any agreement to sell securities at a future determined
price (other than standard and customary “preemptive”
or “participation” rights and other than pursuant to an
at-the-market offering through a registered broker-dealer). This
restriction could make raising capital through the sale of equity
securities very difficult and could have a material adverse impact
on our business, financial condition and prospects.
7
Risks Related to the Development and Commercialization of Our
Product Candidates
If we are
unable to successfully complete our Phase 3 LOCK-IT-100 clinical
trial, or if such clinical trial takes longer to complete than we
project, our ability to execute our current business strategy will
be adversely affected.
Whether or not and how quickly we complete the
Phase 3 LOCK-IT-100 clinical trial is dependent in part upon the
rate of enrollment of patients, the rate we collect, clean, lock
and analyze the clinical trial database, and the frequency with
which CRBSI events occur. Patient enrollment is a function of many
factors, including the size of the patient population, the
proximity of patients to clinical sites, the eligibility criteria
for the study, the existence of competitive clinical trials, and
whether existing or new products are approved for the indication we
are studying. In addition, the LOCK-IT-100 clinical trial is
designed to continue until a pre-determined number of events have
occurred in the patients enrolled. Event-driven trials such as
LOCK-IT-100 are subject to delays and other risks stemming from
patient withdrawal and from lower than expected event rates.
A lower event rate will require that
we enroll more patients than initially anticipated, which would
require us to incur additional costs and extend the anticipated time for
completion of the trial
in order to achieve the desired number
of events. If we experience delays in patient enrollment in our
clinical trial, or if we experience other issues related to the
number of events or other trial results, we may incur additional
costs and delays in the trial, and may not be able to complete the
clinical trial in a cost-effective or timely manner, which would
have an adverse effect on our development program for Neutrolin as
a treatment for catheter related bloodstream
infections.
Our only
product Neutrolin is only approved in Europe and is still in
development in the U. S.
Neutrolin currently and for at least the near
future is our only current product as well as product candidate.
Neutrolin has received CE Mark approval in Europe, and we launched
it in Germany in December 2013. We also are pursuing development of
Neutrolin in the U.S. Our product commercialization and development
efforts may not lead to commercially viable products for any of
several reasons. For example, our product candidates may fail to be
proven safe and effective in clinical trials, or we mayhave
inadequate financial or other resources to pursue development
efforts for our product candidates. Even if approved, our products
may not be accepted in the marketplace. Neutrolin will require
significant additional development, clinical trials, regulatory
clearances and/or investment by us or our collaborators as we
continue its commercialization, as will any of our other products.
Specifically, we plan to expand marketing of Neutrolin in other
foreign countries and to develop Neutrolin for sale in the U.S.,
which will take time and capital.
In April 2017, we
entered into a commercial collaboration with Hemotech SAS covering
France and certain overseas territories. We have entered into
agreements with a Saudi Arabian company to market and sell
Neutrolin in Saudi Arabia, and with a South Korean company to
market, sell and distribute Neutrolin in South Korea upon receipt
of regulatory approval in that country. We also have a commercial
presence in Germany and the United Arab Emirates. Consequently, we
will be dependent on these companies and individuals for the
success of sales in those countries and any other countries in
which we receive regulatory
approval and in which we contract with third parties for the
marketing, sale and/or distribution of Neutrolin. If these
companies or individuals do not perform for whatever reason, our
business, prospects and results of operations will be materially
adversely affected. Finding a suitable replacement organization or
individual for these or any other companies or individuals with
whom we might contract could be difficult, which would further harm
our business, prospects and results of
operations.
Successful
development and commercialization of our products is
uncertain.
Our development and commercialization of current and future
product candidates is subject to the risks of failure and delay
inherent in the development of new pharmaceutical products,
including but not limited to the
following:
●
inability
to produce positive data in pre-clinical and clinical
trials;
●
delays in product development, pre-clinical and clinical testing, or
manufacturing;
●
unplanned expenditures in product
development, clinical testing, or
manufacturing;
●
failure
to receive regulatory approvals;
●
emergence of superior or equivalent
products;
8
●
inability to manufacture our product
candidates on a commercial scale on
our own, or in collaboration with third parties;
and
●
failure to achieve market
acceptance.
Because of these risks, our development efforts
may not result in any commercially viable products. If a
significant portion of these development efforts are not
successfully completed, required regulatory approvals are not
obtained or any approved products are not commercialized
successfully, our business, financial condition, and results of
operations will be materially harmed.
Clinical
trials required for our product candidates are expensive and
time-consuming, and their outcome is
uncertain.
In order to obtain FDA or foreign approval to
market a new drug or device product, we must demonstrate proof of
safety and effectiveness in humans. Foreign regulations and
requirements are similar to those of the FDA. To meet FDA
requirements, we must conduct “adequate and
well-controlled” clinical trials. Conducting clinical trials
is a lengthy, time-consuming, and expensive process. The length of
time may vary substantially according to the type, complexity,
novelty, and intended use of the product candidate, and often can
be several years or more per trial. Delays associated with products
for which we are directly conducting clinical trials may cause us
to incur additional operating expenses. The commencement and rate
of completion of clinical trials may be delayed by many factors,
including, for example:
●
inability
to manufacture sufficient quantities of qualified materials under
the FDA’s cGMP requirements for use in clinical
trials;
●
slower than expected rates of patient
recruitment;
●
failure to recruit a sufficient number
of patients;
●
modification of clinical trial
protocols;
●
changes in regulatory requirements
for clinical
trials;
●
lack of effectiveness during clinical
trials;
●
emergence of unforeseen safety issues;
●
delays, suspension, or termination
of clinical trials due to the
institutional review board responsible for overseeing the study at
a particular study site; and
●
government or regulatory delays
or “clinical holds”
requiring suspension or termination of the
trials.
The results from early pre-clinical and clinical
trials are not necessarily predictive of results to be obtained in
later clinical trials. Accordingly, even if we obtain positive
results from early pre-clinical or clinical trials, we may not
achieve the same success in later clinical
trials.
Our clinical trials may be conducted in patients
with serious or life-threatening diseases for whom conventional
treatments have been unsuccessful or for whom no conventional
treatment exists, and in some cases, our product is expected to be
used in combination with approved therapies that themselves have
significant adverse event profiles. During the course of treatment,
these patients could suffer adverse medical events or die for
reasons that may or may not be related to our products. We cannot
ensure that safety issues will not arise with respect to our
products in clinical development.
Clinical trials may not demonstrate statistically
significant safety and effectiveness to obtain the requisite
regulatory approvals for product candidates. The failure of
clinical trials to demonstrate safety and effectiveness for the
desired indications could harm the development of our product
candidates. Such a failure could cause us to abandon a product
candidate and could delay development of other product candidates.
Any delay in, or termination of, our clinical trials would delay
the filing of any NDA or any Premarket Approval Application, or
PMA, with the FDA and, ultimately, our ability to commercialize our
product candidates and generate product revenues. Any change in, or
termination of, our clinical trials could materially harm our
business, financial condition, and results of
operations.
9
If
we fail to comply with international regulatory
requirements we could be subject to regulatory delays,
fines or other penalties.
Regulatory requirements in foreign countries for
international sales of medical devices often vary from country to
country. The occurrence and related impact of the following factors
would harm our business:
●
delays in receipt of, or failure to
receive, foreign regulatory
approvals or clearances;
●
the loss of previously obtained approvals
or clearances; or
●
the failure to comply with existing or
future regulatory
requirements.
The CE Mark is a mandatory conformity mark for
products to be sold in the European Economic Area. Currently, 28
countries in Europe require products to bear CE Marking. To market
in Europe, a product must first obtain the certifications
necessary to affix the CE Mark. The CE Mark is an international
symbol of adherence to the Medical Device Directives and the
manufacturer’s declaration that the product complies with
essential requirements. Compliance with these requirements is
ascertained within a certified Quality Management System (QMS)
pursuant to ISO 13485. In order to obtain and to maintain a CE
Mark, a product must be in compliance with the applicable
quality assurance provisions of the aforementioned ISO and obtain
certification of its quality assurance systems by a recognized
European Union notified body. We received CE Mark approval for
Neutrolin on July 5, 2013. However, certain individual countries
within the European Union require further approval by their
national regulatory agencies. Failure to receive or
maintain these other requisite approvals could prohibit us
from marketing and selling Neutrolin in the entire
European Economic Area or elsewhere.
We do not
have, and may never obtain, the regulatory approvals we need to
market our product candidates outside of the European
Union.
While
we have received the CE Mark approval for Neutrolin in Europe,
certain individual countries within the European Union require
further approval by their national regulatory
agencies. Failure to receive or maintain these other
requisite approvals could prohibit us from marketing and
selling Neutrolin in the entire European Economic Area. In
addition, we will need regulatory approval to market and sell
Neutrolin in foreign countries outside of Europe. We have received
regulatory approval in Saudi Arabia, Kuwait and
Bahrain.
In
the United States, we have no current application for, and have not
received the regulatory approvals required for, the commercial sale
of any of our products. We have not submitted an NDA, PMA or 510(K)
to the FDA for any product. We have received approval from the FDA
to proceed with our ongoing Phase 3 clinical trial for Neutrolin in
hemodialysis catheters as the first of our required two Phase 3
studies. The design of our required second Phase 3 clinical trial
has not been determined. Financing will be required to complete our
current Phase 3 trial and to begin and execute our anticipated
second Phase 3 trial. However, we might not obtain any financing
and may never start the second Phase 3 trial.
The FDA recently informed us that it regards
taurolidine as a new chemical entity and therefore an unapproved
drug. Consequently, there is no appropriate predicate device
currently marketed in the U.S. on which a 510k approval process
could be based. As a result, we will be required to submit a
premarket approval application for marketing authorization for
these indications. In the event that the New Drug Application for
Neutrolin is approved by the FDA, the regulatory pathway can be
revisited with the FDA. Although there will presumably still be no
appropriate predicate, de novo Class II designation can be proposed, based on a
risk assessment and a reasonable assurance of safety and
effectiveness.
It is possible that Neutrolin will not receive any
further approval or that any of our other product candidates will
be approved for marketing. Failure to obtain regulatory approvals,
or delays in obtaining regulatory approvals, would adversely affect
the successful commercialization of Neutrolin or any other drugs or
products that we or our partners develop, impose additional costs
on us or our collaborators, diminish any competitive advantages
that we or our partners may attain, and/or adversely affect our
cash flow.
10
Even if
approved, our products will be subject to extensive post-approval
regulation.
Once a product is approved, numerous post-approval
requirements apply in the United States and abroad. Depending on
the circumstances, failure to meet these post-approval requirements
can result in criminal prosecution, fines, injunctions, recall or
seizure of products, total or partial suspension of production,
denial or withdrawal of pre-marketing product approvals, or refusal
to allow us to enter into supply contracts, including government
contracts. In addition, even if we comply with FDA, foreign and
other requirements, new information regarding the safety or
effectiveness of a product could lead the FDA or a foreign
regulatory body to modify or withdraw product
approval.
The
successful commercialization of Neutrolin will depend on obtaining
coverage and reimbursement for use of Neutrolin from third-party
payors.
Sales of pharmaceutical products largely depend on
the reimbursement of patients’ medical expenses by government
health care programs and/or private health insurers, both in the
U.S. and abroad. Further, significant uncertainty exists as to the
reimbursement status of newly approved health care products.
We initially expect to sell Neutrolin directly to hospitals and key
dialysis center operators, but also plan to expand its usage into
intensive care, oncology and total parenteral nutrition
patients needing catheters,
including Medicare patients. All of these potential customers are
healthcare providers who depend upon reimbursement by government
and commercial insurance payors for dialysis and other treatments.
Reimbursement is strictly governed by these insurance payors. We
believe that Neutrolin would be eligible for coverage under various
reimbursement programs, including hospital inpatient
diagnosis-related groups (DRGs), outpatient ambulatory payment
classification (APCs) and the End-Stage Renal Disease Prospective
Payment System (ESRD PPS) or under the Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule,
depending on the treatment setting. However, coverage by any of
these reimbursement programs is not assured, and even if coverage
is granted it could later be revoked or modified under future
regulations. Further, the U.S. Centers for Medicare & Medicaid
Services (CMS), which administers Medicare and works with states to
administer Medicaid, has adopted and will continue to adopt and/or
amend rules governing reimbursement for specific treatments,
including those we intend to address such as dialysis and ESRD PPS.
We anticipate that CMS and private insurers will increasingly
demand that manufacturers demonstrate the cost effectiveness of
their products as part of the reimbursement review and approval
process. Rising healthcare costs have also lead many European and
other foreign countries to adopt healthcare reform proposals and
medical cost containment measures. Any measures affecting the
reimbursement programs of these governmental and private insurance
payors, including any uncertainty in the medical community
regarding their nature and effect on reimbursement programs, could
have an adverse effect on purchasing decisions regarding Neutrolin,
as well as limit the prices we may charge for Neutrolin.
The failure to obtain or maintain
reimbursement coverage for Neutrolin or any other products could
materially harm our operations.
In anticipation
that the CMS and private payers will demand that we demonstrate the
cost effectiveness of Neutrolin as part of the reimbursement
review and approval process, we
have incorporated health economic evaluations into our ongoing
clinical studies to support this review in the context of the
prospective use of Neutrolin in dialysis, the ICU and oncology
settings. However, our studies might not be sufficient to
support coverage or reimbursement at levels that allow providers to
use Neutrolin.
Physicians
and patients may not accept and use our
products.
Even with the CE Mark approval of Neutrolin, and even if we
receive FDA or other foreign regulatory approval for Neutrolin or
other product candidates, physicians and patients may not accept
and use our products. Acceptance and use of our products will
depend upon a number of factors including the
following:
●
perceptions
by members of the health care community, including physicians,
about the safety and effectiveness of our drug or device
product;
●
cost-effectiveness
of our product relative to competing products;
●
availability of reimbursement for our
product from government or other
healthcare payors; and
●
effectiveness of marketing and distribution
efforts by us and our licensees and
distributors, if any.
11
Because
we expect sales of Neutrolin to generate substantially all of our
product revenues for the foreseeable future, the failure of
Neutrolin to find market acceptance would harm our business and
would require us to seek additional financing.
Risks Related to Our Business and Industry
Competition and technological change may make our product
candidates and technologies less attractive or
obsolete.
We compete with established pharmaceutical and
medical device companies that are pursuing other forms of
prevention or treatment for the same indications we are pursuing
and that have greater financial and other resources. Other
companies may succeed in developing products earlier than we do,
obtaining FDA or any other regulatory agency approval for products
more rapidly, or developing products that are more effective than
our product candidates. Research and development by others may
render our technology or product candidates obsolete or
noncompetitive, or result in processes, treatments or cures
superior to any therapy we develop. We face competition from
companies that internally develop competing technology or acquire
competing technology from universities and other research
institutions. As these companies develop their technologies, they
may develop competitive positions that may prevent, make futile, or
limit our product commercialization efforts, which would result in
a decrease in the revenue we would be able to derive from the sale
of any products.
There can be no assurance that Neutrolin or any
other product candidate will be accepted by the marketplace as
readily as these or other competing treatments. Furthermore, if our
competitors’ products are approved before ours, it could be
more difficult for us to obtain approval from the FDA or any other
regulatory agency. Even if our products are successfully developed
and approved for use by all governing regulatory bodies, there can
be no assurance that physicians and patients will accept any of our
products as a treatment of choice.
Furthermore, the pharmaceutical and medical device
industry is diverse, complex, and rapidly changing. By its nature,
the business risks associated with the industry are numerous and
significant. The effects of competition, intellectual property
disputes, market acceptance, and FDA or other regulatory agency
regulations preclude us from forecasting revenues or income with
certainty or even confidence.
We face the
risk of product liability claims and the amount of insurance
coverage we hold now or in the future may not be adequate to cover
all liabilities we might incur.
Our business exposes us to the risk of product
liability claims that are inherent in the development of drugs. If
the use of one or more of our or our collaborators’ drugs or
devices harms people, we may be subject to costly and damaging
product liability claims brought against us by clinical trial
participants, consumers, health care providers, pharmaceutical
companies or others selling our products.
We currently carry product liability insurance
that covers our clinical trials. We cannot predict all of the
possible harms or side effects that may result and, therefore, the
amount of insurance coverage we hold may not be adequate to cover
all liabilities we might incur. Our insurance covers bodily injury
and property damage arising from our clinical trials, subject to
industry-standard terms, conditions and exclusions. This coverage
includes the sale of commercial products. We have expanded our
insurance coverage to include the sale of commercial products due
to the receipt of the CE Mark approval, but we may be unable to
maintain such coverage or obtain commercially reasonable product
liability insurance for any other products approved for
marketing.
If
we are unable to obtain insurance at an acceptable cost or
otherwise protect against potential product liability claims, we
may be exposed to significant liabilities, which may materially and
adversely affect our business and financial position. If we are
sued for any injury allegedly caused by our or our
collaborators’ products and do not have sufficient insurance
coverage, our liability could exceed our total assets and our
ability to pay the liability. A successful product liability claim
or series of claims brought against us would decrease our cash and
could cause the value of our capital stock to
decrease.
12
We may be exposed to liability claims associated with the use of
hazardous materials and chemicals.
Our
research, development and manufacturing activities and/or those of
our third-party contractors may involve the controlled use of
hazardous materials and chemicals. Although we believe that our
safety procedures for using, storing, handling and disposing of
these materials comply with federal, state and local, as well as
foreign, laws and regulations, we cannot completely eliminate the
risk of accidental injury or contamination from these materials. In
the event of such an accident, we could be held liable for any
resulting damages and any liability could materially adversely
affect our business, financial condition and results of operations.
In addition, the federal, state and local, as well as foreign, laws
and regulations governing the use, manufacture, storage, handling
and disposal of hazardous or radioactive materials and waste
products may require us to incur substantial compliance costs that
could materially adversely affect our business, financial condition
and results of operations.
Healthcare policy changes, including reimbursement policies for
drugs and medical devices, may have an adverse effect on our
business, financial condition and results of
operations.
Market acceptance and sales of Neutrolin or any
other product candidates that we develop will depend on
reimbursement policies and may be affected by health care reform
measures in the United States and abroad. Government authorities
and other third-party payors, such as private health insurers and
health maintenance organizations, decide which drugs they will pay
for and establish reimbursement levels. We cannot be sure that
reimbursement will be available for Neutrolin or any other product
candidates that we develop. Also, we cannot be sure that the amount
of reimbursement available, if any, will not reduce the demand for,
or the price of, our products. If reimbursement is not available or
is available only at limited levels, we may not be able to
successfully commercialize Neutrolin or any other product
candidates that we develop.
In
the United States, there have been a number of legislative and
regulatory proposals to change the health care system in ways that
could affect our ability to sell our products profitably. The
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, or
collectively, the Healthcare Reform Act, substantially changes the
way healthcare is financed by both governmental and private
insurers, and significantly impacts the pharmaceutical industry.
The Healthcare Reform Act contains a number of provisions,
including those governing enrollment in federal healthcare
programs, reimbursement changes and fraud and abuse, which will
impact existing government healthcare programs and will result in
the development of new programs, including Medicare payment for
performance initiatives and improvements to the physician quality
reporting system and feedback program. We anticipate that if we
obtain approval for our products, some of our revenue may be
derived from U.S. government healthcare programs, including
Medicare.
Some of the
provisions of the Healthcare Reform Act have yet to be implemented,
and there have been judicial and Congressional challenges to
certain aspects of the Healthcare Reform Act. Since January 2017,
President Trump has signed two Executive Orders and other
directives designed to delay, circumvent or loosen the
implementation of certain provisions requirements mandated by the
Healthcare Reform Act or otherwise circumvent some of the
requirements for health insurance mandated by the Healthcare Reform
Act. Concurrently, Congress has considered legislation that would
repeal or repeal and replace all or part of the Healthcare Reform
Act. While Congress has not passed repeal legislation, the Tax Cuts
and Jobs Act of 2017 includes a provision repealing, effective
January 1, 2019, the tax-based shared responsibility payment
imposed by the Healthcare Reform Act on certain individuals who
fail to maintain qualifying health coverage for all or part of a
year that is commonly referred to as the “individual
mandate.” Additionally, on January 23, 2018, President
Trump signed a continuing resolution on appropriations for fiscal
year 2018 that delayed the implementation of certain Healthcare
Reform Act-mandated fees, including the so-called
“Cadillac” tax on certain high cost employer-sponsored
insurance plans. Congress may consider other legislation to repeal
or replace elements of the Healthcare Reform Act.
In addition to the Healthcare Reform Act, we
expect that there will continue to be proposals by legislators at
both the federal and state levels, regulators and third-party
payors to keep healthcare costs down while expanding individual
healthcare benefits. Certain of these changes could impose
limitations on the prices we will be able to charge for any
products that are approved or the amounts of reimbursement
available for these products from governmental agencies or other
third-party payors or may increase the tax requirements for life
sciences companies such as ours. While it is too early to predict
what effect the Healthcare Reform Act or any future legislation or
regulation will have on us, such laws could have an adverse effect
on our business, financial condition and results of
operations.
13
Health administration authorities in countries
other than the United States may not provide reimbursement for
Neutrolin or any of our other product candidates at rates
sufficient for us to achieve profitability, or at all. Like the
United States, these countries could adopt health care reform
proposals and could materially alter their government-sponsored
health care programs by reducing reimbursement
rates.
Any reduction in reimbursement rates under
Medicare or private insurers or foreign health care programs could
negatively affect the pricing of our products. If we are not able
to charge a sufficient amount for our products, then our margins
and our profitability will be adversely
affected.
If we lose
key management or scientific personnel, cannot recruit qualified
employees, directors, officers, or other personnel or experience
increases in compensation costs, our business may materially
suffer.
We are highly dependent on the principal members
of our management and scientific staff, specifically, Khoso Baluch,
a director and our Chief Executive Officer, Robert Cook, our Chief
Financial Officer, and John Armstrong, our Executive Vice President
for Technical Operations. Our future success will depend in part on
our ability to identify, hire, and retain current and additional
personnel. We experience intense competition for qualified
personnel and may be unable to attract and retain the personnel
necessary for the development of our business. Moreover, our work
force is located in the New York metropolitan area, where
competition for personnel with the scientific and technical skills
that we seek is extremely high and is likely to remain high.
Because of this competition, our compensation costs may increase
significantly. In addition, we have only limited ability to prevent
former employees from competing with
us.
If we are
unable to hire additional qualified personnel, our ability to grow
our business may be harmed.
Over
time, we expect to hire additional qualified personnel with
expertise in clinical testing, clinical research and testing,
government regulation, formulation and manufacturing, and sales and
marketing. We compete for qualified individuals with numerous
pharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we
cannot be certain that our search for such personnel will be
successful. Attracting and retaining such qualified personnel will
be critical to our success.
We may not successfully manage our growth.
Our
success will depend upon the expansion of our operations to
commercialize Neutrolin and the effective management of any growth,
which could place a significant strain on our management and our
administrative, operational and financial resources. To manage this
growth, we may need to expand our facilities, augment our
operational, financial and management systems and hire and train
additional qualified personnel. If we are unable to manage our
growth effectively, our business may be materially
harmed.
Risks Related to Our Intellectual Property
If we materially breach or default under any of our license
agreements, the licensor party to such agreement will have the
right to terminate the license agreement, which termination may
materially harm our business.
Our
commercial success will depend in part on the maintenance of our
license agreements. Each of our license agreements provides the
licensor with a right to terminate the license agreement for our
material breach or default under the agreement, including the
failure to make any required milestone or other payments. Should
the licensor under any of our license agreements exercise such a
termination right, we would lose our right to the intellectual
property under the respective license agreement, which loss may
materially harm our business.
If we and
our licensors do not obtain protection for and successfully defend
our respective intellectual property rights, our competitors may be
able to take advantage of our research and development efforts to
develop competing products.
Our commercial success will depend in part on
obtaining further patent protection for our products and other
technologies and successfully defending any patents that we
currently have or will obtain against third-party challenges. The
patents which we currently believe are most material to our
business are as follows:
14
●
U.S. Patent No. 8,541,393 (expiring
in November 2024) (the “Prosl
Patent”) - use of Neutrolin for preventing infection and
maintenance of catheter patency in hemodialysis
catheters;
●
U.S.
Patent No. 6,166,007 (expiring May 2019) (the “Sodemann
Patent”) - a method of inhibiting or preventing infection and
blood coagulation at a medical prosthetic device; and
●
European Patent EP 1 814 562 B1 (expiring
October 12, 2025) (the “Prosl
European Patent”) - a low heparin catheter lock solution for
maintaining and preventing infection in a hemodialysis
catheter.
We are currently seeking further patent protection
for our compounds and methods of treating diseases. However, the
patent process is subject to numerous risks and uncertainties, and
there can be no assurance that we will be successful in protecting
our products by obtaining and defending patents. These risks and
uncertainties include the
following:
●
patents
that may be issued or licensed may be challenged, invalidated, or
circumvented, or otherwise may not provide any competitive
advantage;
●
our competitors, many of which have
substantially greater resources than
we have and many of which have made significant investments in
competing technologies, may seek, or may already have obtained,
patents that will limit, interfere with, or eliminate our ability
to make, use, and sell our potential products either in the United
States or in international markets;
●
there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
treatments that prove successful as a matter of public policy
regarding worldwide health concerns; and
●
countries other than the United States may
have less restrictive patent laws than
those upheld by United States courts, allowing foreign competitors
the ability to exploit these laws to create, develop, and market
competing products.
In addition, the United States Patent and
Trademark Office, or PTO, and patent offices in other jurisdictions
have often required that patent applications concerning
pharmaceutical and/or biotechnology-related inventions be limited
or narrowed substantially to cover only the specific innovations
exemplified in the patent application, thereby limiting the scope
of protection against competitive challenges. Thus, even if we or
our licensors are able to obtain patents, the patents may be
substantially narrower than
anticipated.
The above mentioned patents and patent
applications are exclusively licensed to us. To support our patent
strategy, we have engaged in a review of patentability and certain
freedom to operate issues, including performing certain searches.
However, patentability and certain freedom to operate issues are
inherently complex, and we cannot provide assurances that a
relevant patent office and/or relevant court will agree with our
conclusions regarding patentability issues or with our conclusions
regarding freedom to operate issues, which can involve subtle
issues of claim interpretation and/or claim liability. Furthermore,
we may not be aware of all patents, published applications or
published literature that may affect our business either by
blocking our ability to commercialize our product candidates,
preventing the patentability of our product candidates to us or our
licensors, or covering the same or similar technologies that may
invalidate our patents, limit the scope of our future patent claims
or adversely affect our ability to market our product
candidates. Additionally, it is also possible that prior art
of which we are aware, but which we do not believe affects the
validity or enforceability of a claim, may, nonetheless, ultimately
be found by a court of law or an administration panel to affect the
validity or enforceability of a claim. If a third party were to
prevail on a legal assertion of invalidity and/or unenforceability,
we would lose at least part, and perhaps all, of the patent
protection on our product candidates. Such loss of patent
protection could have a material adverse impact on our
business.
In addition to patents, we also rely on trade
secrets and proprietary know-how. Although we take measures to
protect this information by entering into confidentiality and
inventions agreements with our employees and some, but not all, of
our scientific advisors, consultants, and collaborators, we cannot
provide any assurances that these agreements will not be breached,
that we will be able to protect ourselves from the harmful effects
of disclosure or dispute ownership if they are breached, or that
our trade secrets will not otherwise become known or be
independently discovered by competitors. If any of these events
occurs, or we otherwise lose protection for our trade secrets or
proprietary know-how, the value of our intellectual property may be
greatly reduced.
15
Ongoing and
future intellectual property disputes could require us to spend
time and money to address such disputes and could limit our
intellectual property rights.
The biotechnology and pharmaceutical industries
have been characterized by extensive litigation regarding patents
and other intellectual property rights, and companies have employed
intellectual property litigation to gain a competitive advantage.
We may initiate or become subject to infringement claims or
litigation arising out of patents and pending applications of our
competitors, or we may become subject to proceedings initiated by
our competitors or other third parties or the PTO or applicable
foreign bodies to reexamine the patentability of our licensed or
owned patents. In addition, litigation may be necessary to enforce
our issued patents, to protect our trade secrets and know-how, or
to determine the enforceability, scope, and validity of the
proprietary rights of others.
We initiated court proceedings in Germany for
patent infringement and unfair use of our proprietary information
related to Neutrolin (as described below). We also have had
opposition proceedings brought against the European Patent and the
German utility model patent which are the basis of our infringement
proceedings (as described below). The defense and prosecution of
these ongoing and any future intellectual property suits, PTO or
foreign proceedings, and related legal and administrative
proceedings are costly and time-consuming to pursue, and their
outcome is uncertain. An adverse determination in litigation or PTO
or foreign proceedings to which we maybecome a party could subject
us to significant liabilities, including damages, require us to
obtain licenses from third parties, restrict or prevent us from
selling our products in certain markets, or invalidate or render
unenforceable our licensed or owned patents. Although patent and
intellectual property disputes might be settled through licensing
or similar arrangements, the costs associated with such
arrangements may be substantial and could include our paying large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at
all.
On September 9,
2014, we filed in the District Court of Mannheim, Germany a patent
infringement action against TauroPharm GmbH and Tauro-Implant GmbH
as well as their respective CEOs (the “Defendants”)
claiming infringement of our European Patent EP 1 814 562 B1, which
was granted by the EPO on January 8, 2014 (the “Prosl
European Patent”). The Prosl European Patent covers a low
dose heparin catheter lock solution for maintaining patency and
preventing infection in a hemodialysis catheter. In this
action, we claim that the Defendants infringe on the Prosl European
Patent by manufacturing and distributing catheter locking solutions
to the extent they are covered by the claims of the Prosl European
Patent. We believe that our patent is sound, and are
seeking injunctive relief and raising claims for information,
rendering of accounts, calling back, destruction and damages.
Separately, TauroPharm has filed an opposition with the EPO against
the Prosl European Patent alleging that it lacks novelty and
inventive step. We cannot predict what other defenses
the Defendants may raise, or the ultimate outcome of either of
these related matters.
In the same
complaint against the same Defendants, we also alleged an
infringement (requesting the same remedies) of NDP’s utility
model DE 20 2005 022 124 U1 (the “Utility Model”),
which we believe is fundamentally identical to the Prosl European
Patent in its main aspects and
claims. The Court separated the two proceedings and the Prosl
European Patent and the Utility Model claims are now being tried
separately. TauroPharm has filed a cancellation action
against the Utility Model before the German Patent and Trademark
Office (the “German PTO”) based on the similar
arguments as those in the opposition against the Prosl European
Patent.
On March 27, 2015,
the District Court held a hearing to evaluate whether the Utility
Model has been infringed by TauroPharm in connection with the
manufacture, sale and distribution of its TauroLock-HEP100TM and
TauroLock-HEP500TM products. A hearing before the same court was held on
January 30, 2015 on the separate, but related, question of
infringement of the Prosl European Patent by
TauroPharm.
The Court issued
its decisions on May 8, 2015, staying both
proceedings. In its decisions, the Court found that the
commercialization by TauroPharm in Germany of its TauroLock
catheter lock solutions Hep100 and Hep500 infringes both the
Prosl European Patent and the Utility Model and further that there
is no prior use right that would allow TauroPharm to continue to make, use or sell its product
in Germany. However, the Court declined to issue an injunction in
favor of us that would preclude the continued commercialization by
TauroPharm based upon its finding that there is a sufficient
likelihood that the EPO, in the case of the Prosl European Patent,
or the German PTO, in the case of the Utility Model, may find that
such patent or utility model is invalid. Specifically, the Court
noted the possible publication of certain instructions for
product use that may be deemed to constitute prior art. As such,
the District Court determined that it will defer any consideration
of the request by us for injunctive and other relief until such
time as the EPO or the German PTO has ruled on the underlying
validity of the Prosl European Patent and the Utility
Model.
16
The opposition
proceeding against the Prosl European Patent before the EPO is
ongoing. In its preliminary consideration of the matter, the EPO
(and the German PTO) regarded the patent as not inventive or novel
due to publication of prior art. Oral proceedings before the
Opposition Division at the EPO were held on November 25, 2015, at
which the three judge patent examiner panel considered arguments
related to the validity of the Prosl European Patent. The hearing
was adjourned due to the fact that the panel was of the view that
Claus Herdeis, one of the managing directors of TauroPharm, has to
be heard as a witness in a further hearing in order to close some
gaps in the documentation presented by TauroPharm as regards the
publication of prior art.
The German PTO held
a hearing in the validity proceedings relating to the Utility Model
on June 29, 2016, at which the panel affirmed its preliminary
finding that the Utility Model was invalid based upon prior
publication of a reference to the benefits that may be associated
with adding heparin to a taurolidine based solution. The decision
is subject to appeal and has only a declaratory effect, as the Utility Model
had expired in November 2015. Furthermore, it has no bearing on the
ongoing consideration of the validity and possible infringement of
the Prosl Patent by the EPO. We filed an appeal against the ruling
on September 7, 2016.
In October 2016,
TauroPharm submitted a further writ to the EPO requesting a date
for the hearing and bringing forward further arguments, in
particular in view of the June 2016 decision of the German PTO on
the invalidity of the utility model, which we have appealed. On
November 22, 2017, the EPO in Munich, Germany held a further oral
hearing in this matter. At the hearing, the panel held that the
Prosl European Patent would be invalidated because it did not meet
the requirements of novelty based on a technical aspect of the
European intellectual property law. We disagree with this decision
and plan to appeal. Our appeal will be based, in part, on the
written opinion to be issued by the Opposition Division, which is
expected during the second quarter of 2018. We continue to believe
that the Prosl European Patent is indeed novel and that its
validity should be maintained. There can be no assurance that we
will prevail in this matter with either the German PTO or the EPO.
In addition, the ongoing Unfair
Competition litigation against TauroPharm is not affected and will
continue.
On January 16,
2015, we filed a complaint against TauroPharm GmbH and its managing
directors in the District Court of Cologne,
Germany. In the complaint, we allege violation of the
German Unfair Competition Act by TauroPharm for the unauthorized
use of its proprietary information obtained in confidence by
TauroPharm. We allege that TauroPharm is improperly and
unfairly using its proprietary
information relating to the composition and manufacture of
Neutrolin, in the manufacture and sale of TauroPharm’s
products TauroLockTM, TauroLock-HEP100 and
TauroLock-HEP500. We seek a cease and desist order
against TauroPharm from continuing to manufacture and sell any
product containing taurolidine (the active pharmaceutical
ingredient (“API”) of Neutrolin) and citric acid in
addition to possible other components, damages for any sales in the
past and the removal of all such products from the market. An
initial hearing in the District Court of Cologne, Germany was held
on November 19, 2015 to consider our claims. The judge made no
decision on the merits of our complaint. On January 14, 2016,
the court issued an interim decision in the form of a court order
outlining several issues of concern that relate primarily to
court's interest in clarifying the facts and reviewing any and all
available documentation, in particular with regard to the question
which specific know-how was provided to TauroPharm by whom and
when. We have prepared the requested reply and produced the
respective documentation. TauroPharm has also filed another writ
within the same deadline and both parties have filed further writs
at the end of April setting out their respective argumentation in
more detail. A further oral hearing in this matter was held on
November 15, 2016. In this hearing, the court heard arguments from
us and TauroPharm concerning the allegations of unfair competition.
The court made no rulings from the bench, and indicated that it is
prepared to further examine the underlying facts of our
allegations. On March 7, 2017, the court issued another interim
decision in the form of a court order outlining again several
issues relating to the argumentation of both sides in the
proceedings. In particular the court requested us to further
specify our requests and to further substantiate in even more
detail which know know-how was provided by Biolink to TauroPharm by
whom and when. The court also raised the question whether the
know-how provided at the time to TauroPharm could still be
considered to be secret know-how or may have become public in the
meantime. The court granted both sides the opportunity to reply to
this court order and provide additional facts and evidence until
May 15, 2017. Both parties have submitted further writs in this
matter and the court had scheduled a further hearing for May 8,
2018. After having been rescheduled
several times, the hearing is now scheduled to take place on
November 20, 2018. We intend to continue to pursue this
matter, and to provide additional supplemental documentary and
other evidence as may be necessary to support its
claims.
17
If we
infringe the rights of third parties we could be prevented from
selling products and forced to pay damages and defend against
litigation.
If our products, methods, processes and other
technologies infringe the proprietary rights of other parties, we
could incur substantial costs
and we may have to do one or more of the
following:
●
obtain licenses, which may not be available
on commercially reasonable terms, if
at all;
●
abandon an infringing product
candidate;
●
redesign
our products or processes to avoid infringement;
●
stop using the subject matter claimed in
the patents held by
others;
●
pay damages; or
●
defend litigation or administrative proceedings, which may be costly
whether we win or lose, and which could result in a substantial
diversion of our financial and management
resources.
Risks Related to Dependence on Third Parties
If we are
not able to develop and maintain collaborative marketing
relationships with licensees or partners, or create an effective
sales, marketing, and distribution capability, we may be unable to
market our products or market them
successfully.
Our business strategy for Neutrolin relies on
collaborating with larger firms with experience in marketing and
selling medical devices and pharmaceutical products; for other
products we may also rely on such marketing collaborations or
out-licensing of our product candidates. Specifically, for
Neutrolin, we have a distributor agreement with each of a Saudi
Arabian, an Emirati, and a South Korean company for sales and
marketing (upon receipt of approval to market in South Korea). In
April 2017, we announced a commercial collaboration with Hemotech
SAS covering France and certain overseas territories. Assuming we
receive applicable regulatory approval for other markets, we plan
to enter into distribution agreements with one or more third
parties for the sale of Neutrolin in various European, Middle East
and other markets. However, there can be no assurance that we will
be able to successfully maintain those relationships or establish
and maintain additional marketing, sales, or distribution
relationships, nor can there be assurance that such relationships
will be successful, or that we will be successful in gaining market
acceptance for our products. To the extent that we enter into any
marketing, sales, or distribution arrangements with third parties,
our product revenues will be lower than if we marketed and sold our
products directly, and any revenues we receive will depend upon the
efforts of such third-parties.
If
we are unable to establish and maintain such third-party sales and
marketing relationships, or choose not to do so, we will have to
establish our own in-house capabilities. We currently have no
sales, marketing, or distribution infrastructure. To market any of
our products directly, we would need to develop a marketing, sales,
and distribution force that has both technical expertise and the
ability to support a distribution capability. The establishment of
a marketing, sales, and distribution capability would take time and
significantly increase our costs, possibly requiring substantial
additional capital. In addition, there is intense competition for
proficient sales and marketing personnel, and we may not be able to
attract individuals who have the qualifications necessary to
market, sell, and distribute our products. There can be no
assurance that we will be able to establish internal marketing,
sales, or distribution capabilities. If we are unable to, or choose
not to establish these capabilities, or if the capabilities we
establish are not sufficient to meet our needs, we will be required
to establish collaborative marketing, sales, or distribution
relationships with third parties, which we might not be able to do
on acceptable terms or at all.
18
We currently have no
internal marketing and sales organization and currently rely and
intend to continue to rely on third parties to market
and
sell Neutrolin.
If we are unable to enter into or maintain agreements with third
parties to market and sell Neutrolin or any other product after
approval or are unable to establish our own marketing and sales
capabilities, we may not be able to generate significant or any
product revenues.
We do not have an
internal sales organization. To date we have relied, and intend to
continue to rely, on third parties for the marketing, sales and
distribution of Neutrolin and any other product we might develop.
However, we may not be able to maintain current and future
arrangements or enter into new arrangements with third parties to
sell Neutrolin or any other product on favorable terms or at all.
In that event, we would have to develop our own marketing and sales
force. The establishment and development of our own sales force
would be expensive and time consuming and could delay any
product launch, and we cannot
be certain that we would be able to successfully develop this
capability. In addition, the use of third parties to commercialize
our approved products reduces the revenues that we would receive if
we commercialized these products ourselves.
We have entered
into agreements with independent companies to market Neutrolin in
Saudi Arabia, the United Arab Emirates and France, and, upon
regulatory approval, South Korea. We may seek a sales partner in
the U.S. if Neutrolin receives FDA approval. Consequently, we will
be dependent on these firms and individuals for the success of
sales in these and any other countries in which approval is
granted. If these firms or individuals do not perform for whatever
reason, our business, prospects
and results of operations may be materially adversely affected.
Finding a new or replacement organization for sales and marketing
could be difficult, which would further harm our business,
prospects and results of operations.
If we or
our collaborators are unable to manufacture our products in
sufficient quantities or are unable to obtain regulatory approvals
for a manufacturing facility, we may be unable to meet demand for
our products and we may lose potential
revenues.
Completion of our clinical trials and
commercialization of Neutrolin and any other product candidate
require access to, or development of, facilities to manufacture a
sufficient supply of our product candidates. All of our
manufacturing processes currently are, and we expect them to
continue to be, outsourced to third parties. Specifically, we will
rely on one or more manufacturers to supply us and/or our
distribution partners with commercial quantities of Neutrolin. If,
for any reason, we become unable to rely on our current sources for
the manufacture of Neutrolin or any other product candidates or for
active pharmaceutical ingredient, or API, either for clinical
trials or for commercial quantities, then we would need to identify
and contract with additional or replacement third-party
manufacturers to manufacture compounds for pre-clinical, clinical,
and commercial purposes. We may not be successful in identifying
such additional or replacement third-party manufacturers, or in
negotiating acceptable terms with any that we do identify. Such
third-party manufacturers must receive FDA or applicable foreign
approval before they can produce clinical material or commercial
product, and any that are identified may not receive such approval
or may fail to maintain such approval. In addition, we may be in
competition with other companies for access to these
manufacturers’ facilities and may be subject to delays in
manufacturing if the manufacturers give other clients higher
priority than they give to us. If we are unable to secure and
maintain third-party manufacturing capacity, the development and
sales of our products and our financial performance may be
materially affected.
Before we could begin to commercially manufacture
Neutrolin or any other product candidate on our own, we must obtain
regulatory approval of the manufacturing facility and process. The
manufacture of drugs for clinical and commercial purposes must
comply with cGMP and applicable non-U.S. regulatory requirements.
The cGMP requirements govern quality control and documentation
policies and procedures. Complying with cGMP and non-U.S.
regulatory requirements would require that we expend time, money,
and effort in production, recordkeeping,and quality control to
assure that the product meets applicable specifications and other
requirements. We would also have to pass a pre-approval inspection
prior to FDA or non-U.S. regulatory agency approval. Failure to
pass a pre-approval inspection may significantly delay regulatory
approval of our products. If we fail to comply with these
requirements, we would be subject to possible regulatory action and
may be limited in the jurisdictions in which we are permitted to
sell our products. As a result, our business, financial condition,
and results of operations could be materially adversely
affected.
19
Corporate
and academic collaborators may take actions that delay, prevent, or
undermine the success of our products.
Our operating and financial strategy for the
development, clinical testing, manufacture, and commercialization
of our product candidates is heavily dependent on our entering into
collaborations with corporations, academic institutions, licensors,
licensees, and other parties. Our current strategy assumes that we
will successfully establish and maintain these collaborations or
similar relationships. However, there can be no assurance that we
will be successful establishing or maintaining such collaborations.
Some of our existing collaborations, such as our licensing
agreements, are, and future collaborations may be, terminable at
the sole discretion of the collaborator in certain circumstances.
Replacement collaborators might not be available on attractive
terms, or at all.
In addition, the activities of any collaborator
will not be within our control and may not be within our power to
influence. There can be no assurance that any collaborator will
perform its obligations to our satisfaction or at all, that we will
derive any revenue or profits from such collaborations, or that any
collaborator will not compete with us. If any collaboration is not
pursued, we may require substantially greater capital to undertake
on our own the development and marketing of our product candidates
and may not be able to develop and market such products
successfully, if at all. In addition, a lack of development and
marketing collaborations may lead to significant delays in
introducing product candidates into certain markets and/or reduced
sales of products in such markets.
Data
provided by collaborators and others upon which we rely that has
not been independently verified could turn out to be false,
misleading, or incomplete.
We rely on third-party vendors, scientists, and
collaborators to provide us with significant data and other
information related to our projects, clinical trials, and business.
If such third parties provide inaccurate, misleading, or incomplete
data, our business, prospects, and results of operations could be
materially adversely affected.
Risks Related to our Common Stock
Prior to fiscal 2015, we
had identified a material weakness in our internal control over
financial reporting, and our current internal control
over
financial
reporting and our disclosure controls and procedures may not
prevent all possible errors that could
occur.
In the several
years prior to fiscal 2015, we had identified a material weakness
in our internal control over financial reporting that was related
to our limited finance staff and the resulting ineffective
management review over financial reporting, coupled with
increasingly complex accounting
treatments associated with our financing activities and European
expansion. While we remediated this material weakness in 2015, we
cannot be certain that material weaknesses will not arise
again.
A control system,
no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s
objectives will be satisfied. Internal control over financial
reporting and disclosure controls and procedures are designed to
give a reasonable assurance that they are effective to achieve
their objectives. We cannot provide absolute assurance that all of
our possible future control issues will be detected. These inherent
limitations include the possibility that judgments in our decision
making can be faulty, and that isolated breakdowns can occur
because of simple human error
or mistake. The design of our system of controls is based in part
upon assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed absolutely in
achieving our stated goals under all potential future or
unforeseeable conditions. Because of the inherent limitations in a
cost-effective control system, misstatements due to error could
occur and not be detected. This and any future failures could cause
investors to lose confidence in our reported financial information,
which could have a negative impact on our financial condition and
stock price.
20
Our common
stock price has fluctuated considerably and is likely to remain
volatile, in part due to the limited market for our common stock
and you could lose all or a part of your
investment.
During the period from the completion of our
initial public offering, or IPO, on March 30, 2010 through April 9,
2018, the high and low sales prices for our common stock were
$10.40 and $0.15,
respectively. There is a limited public market for our common stock
and we cannot provide assurances that an active trading market will
develop or continue. As a result of low trading volume in our
common stock, the purchase or sale of a relatively small number of
shares could result in significant share price
fluctuations.
Additionally, the market price of our common
stock may continue to fluctuate significantly in response to a
number of factors, some of which are beyond our control, including
the following:
●
market acceptance of Neutrolin in those markets
in which it is approved for
sale;
●
our need for additional capital;
●
the
receipt of or failure to obtain additional regulatory approvals for
Neutrolin, including FDA approval in the U.S.;
●
results of clinical trials of our product candidates, including our ongoing
and planned Phase 3 trials for Neutrolin in the U.S., or those of
our competitors;
●
our entry into or the loss of a significant
collaboration;
●
regulatory
or legal developments in the United States and other countries,
including changes in the healthcare payment systems;
●
changes in financial estimates or investment recommendations by
securities analysts relating to our common
stock;
●
announcements
by our competitors of significant developments, strategic
partnerships, joint ventures or capital commitments;
●
changes in key personnel;
●
variations in our financial results or those of companies that are perceived
to be similar to us;
●
market conditions in the pharmaceutical
and medical device sectors and
issuance of new or changed securities analysts’ reports or
recommendations;
●
general economic, industry and market conditions;
●
developments
or disputes concerning patents or other proprietary
rights;
●
future sales or anticipated sales of our securities by us or our stockholders;
and
●
any other factors described in this “Risk Factors”
section.
In addition, the stock markets in general, and the
stock of pharmaceutical and medical device companies in particular,
have experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry factors
may negatively affect the market price of our common stock,
regardless of our actual operating
performance.
For these reasons and others, an investment in our
securities is risky and invest only if you can withstand a
significant loss and wide fluctuations in the value of your
investment.
A
significant number of additional shares of our common stock may be
issued at a later date, and their sale could depress the market
price of our common stock.
As of March 31, 2018, we had outstanding the
following securities that are convertible into or exercisable for
shares of our common stock:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
21
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants for 125,000 shares issued
to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
●
options to purchase an aggregate of 120,000 shares
of our common stock issued to our officers, directors, employees
and non-employee consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $1.44 per share;
●
options
to purchase an aggregate of 5,381,613 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $1.88 per share;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
●
warrants for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of common
stock;
●
Series C-3
Preferred Stock convertible into 1,040,000 shares of common
stock;
●
Series D Preferred
Stock convertible into 1,479,240 shares of common
stock;
●
Series E Preferred
Stock convertible into 1,959,759 shares of common
stock;
●
Series F Preferred
Stock convertible into 12,345,679 shares of common stock, subject
to adjustment;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020;
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020;
●
Series A warrants
for 4,078,226 shares of common stock with an exercise price of
$0.75 that expire on September 10, 2018;
●
Series B warrants
for 13,964,476 shares of common stock with an exercise price of
$1.05 that expire on August 10, 2022;
●
underwriter
warrants for 1,117,158 shares of common stock with an exercise
price of $0.9375 that expire on August 10, 2022;
●
warrants for
564,858 shares of common stock with an exercise price of $0.001
that expire on November 16, 2020; and
●
restricted stock
units for 97,529 shares of common stock with an average grant date
fair value of $0.57 per share.
The possibility of the issuance of these shares,
as well as the actual sale of such shares, could substantially
reduce the market price for our common stock and impede our ability
to obtain future financing.
22
We will
need additional financing to fund our activities in the future,
which likely will dilute our
stockholders.
To date, our
commercial operations have not generated sufficient revenues to
enable profitability. As of December 31, 2017, we had an
accumulated deficit of $152.2 million, and incurred net losses from
operations of $33.0 million for the year then ended. Based on the current development
plans for Neutrolin in both the U.S. and foreign markets (including
the ongoing hemodialysis Phase 3 clinical trial in the U.S.) and
our other operating requirements, management believes that the
existing cash at December 31, 2017 plus funding raised through
March 9, 2018 and a proposed new $3 million backstop facility, for
which a binding term sheet was recently signed by us and Elliott
Management Corporation, will be sufficient to fund operations into
the third quarter of 2018. If a definitive agreement can be
negotiated and executed, we anticipate that the proposed backstop
facility would be available for drawing between April 16, 2018 and
July 31, 2018. Further, we will need additional funding to complete
the hemodialysis clinical trial in the U.S. which commenced in
December 2015 and to continue the Neutrolin development program
through the NDA filing and marketing approval. We anticipate that we will incur operating losses for
the foreseeable future. Additionally, we will require substantial
funds in the future to support our operations. We expect to seek
equity or debt financings in the future to fund our operations. The
issuance of additional equity securities, or convertible debt or
other derivative securities, likely will dilute some if not all of
our then existing stockholders, depending on the financing
terms.
Future
sales and issuances of our equity securities or rights to purchase
our equity securities, including pursuant to equity incentive
plans, would result in additional dilution of the percentage
ownership of our stockholders and could cause our stock price to
fall.
To the extent we raise additional capital by
issuing equity securities, our stockholders may experience
substantial dilution. We may, as we have in the past, sell common
stock, convertible securities or other equity securities in
one or more transactions at
prices and in a manner we determine from time to time. If we sell
common stock, convertible securities or other equity securities in
more than one transaction, investors may be further diluted by
subsequent sales. Such sales may also result in material dilution
to our existing stockholders, and new investors could gain rights
superior to existing stockholders.
Pursuant to our 2013 Stock Plan, our Board of
Directors is authorized to award up to a total of 11,000,000 shares
of common stock or options to purchase shares of common stock to
our officers, directors, employees and non-employee consultants. As
of December 31, 2017, options to purchase 120,000 shares of common
stock issued under our 2006 Stock Plan at a weighted average
exercise price of $1.44 per share, and options to purchase
4,842,495 shares of common stock issued under our 2013 Stock Plan
at a weighted average exercise price of $2.05 per share were
outstanding. In addition, at December 31, 2017, there were
outstanding warrants to purchase an aggregate of 23,417,891 shares
of our common stock at prices ranging from $0.001 to $7.00, and
shares of our outstanding Series C-2, C-3, D, E and F preferred
stock convertible into an aggregate of 9,136,560 shares of our
common stock. Stockholders will experience dilution in the event
that additional shares of common stock are issued under our 2006
Stock Plan or 2013 Stock Plan, or options issued under our 2006
Stock Plan or 2013 Stock Plan are exercised, or any warrants are
exercised for, or preferred stock shares are converted to, common
stock.
Provisions
in our corporate charter documents and under Delaware law could
make an acquisition of us, which may be beneficial to our
stockholders, more difficult.
Provisions in our Amended and Restated Certificate
of Incorporation, as amended, and our Amended and Restated Bylaws,
as well as provisions of the General Corporation Law of the State
of Delaware, or DGCL, may discourage, delay or prevent a merger,
acquisition or other change in control of our company, even if such
a change in control would be beneficial to our stockholders. These
provisions include the following:
●
authorizing
the issuance of “blank check” preferred stock, the
terms of which may be established and shares of which may be issued
without stockholder approval;
●
prohibiting our stockholders from
fixing the number of our directors;
and
●
establishing advance notice requirements
for stockholder proposals that can be
acted on at stockholder meetings and nominations to our Board of
Directors.
23
These provisions may frustrate or prevent any
attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace
members of our board of directors, which is responsible for
appointing the members of our management. In addition, we are
subject to Section 203 of the DGCL, which generally prohibits a
Delaware corporation from engaging in any of a broad range of
business combinations with an interested stockholder for a period
of three years following the date on which the stockholder became
an interested stockholder, unless such transactions are approved by
the board of directors. This provision could have the effect of
discouraging, delaying or preventing someone from acquiring us or
merging with us, whether or not it is desired by, or beneficial to,
our stockholders. Any provision of our Amended and Restated
Certificate of Incorporation, as amended, or Amended and Restated
Bylaws or Delaware law that has the effect of delaying or deterring
a change in control could limit the opportunity for our
stockholders to receive a premium for their shares of our common
stock and could also affect the price that some investors are
willing to pay for our common
stock.
If we fail
to comply with the continued listing standards of the NYSE
American, it may result in a delisting of our common stock from the
exchange.
Our common stock is
currently listed for trading on the NYSE American, and the
continued listing of our common stock on the NYSE American is
subject to our compliance with a number of listing standards. These
listing standards include the requirement for avoiding sustained losses and maintaining a minimum
level of stockholders’ equity. In 2012 and 2014,
we received notices from the NYSE American that we did not meet
continued listing standards of the NYSE American as set forth in
Part 10 of the Company Guide. Specifically, we were not
in compliance with Section 1003(a)(i) and Section 1003(a)(ii) of
the Company Guide because we reported stockholders’ equity of
less than the required amounts. As a result, we became
subject to the procedures and requirements of Section 1009 of the
Company Guide and were subject to possible delisting. In March
2015, we regained compliance with the NYSE American listing
requirements due to our market capitalization, pursuant to Section
1003(a) of the Company Guide. However, there can be no assurance
that we will continue to meet the continued listing standards of
the NYSE American.
If our common stock were no longer listed on the
NYSE American, investors might only be able to trade on one of the
over-the-counter markets, including the OTC Bulletin Board
® or in the Pink Sheets ® (a
quotation medium operated by Pink Sheets LLC). This would impair
the liquidity of our common stock not only in the number of shares
that could be bought and sold at a given price, which might be
depressed by the relative illiquidity, but also through delays in
the timing of transactions and reduction in media
coverage.
Because the
average daily trading volume of our common stock has been low
historically, the ability to sell our shares in the secondary
trading market may be limited.
Because the average daily trading volume of our
common stock on the NYSE American has been low historically, the
liquidity of our common stock may be impaired. As a result, prices
for shares of our common stock may be lower than might otherwise
prevail if the average daily trading volume of our common stock was
higher. The average daily trading volume of our common stock may be
low relative to the stocks of other exchange-listed companies,
which could limit investors’ ability to sell shares in the
secondary trading market.
24
Penny stock
regulations may impose certain restrictions on marketability of our
securities.
The SEC has adopted regulations which generally
define a “penny stock” to be any equity security that
has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions.
A security listed on a national securities exchange is exempt from
the definition of a penny stock. Our common stock is listed on the
NYSE American and so is not considered a penny stock. However, if
we fail to maintain our common stock’s listing on the NYSE
American, our common stock would be considered a penny stock. In
that event, our common stock would be subject to rules that impose
additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000
together with their spouse). For transactions covered by such
rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have received
the purchaser’s written consent to the transaction prior to
the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the
transaction, of a risk disclosure document mandated by the SEC
relating to the penny stock market. The broker-dealer must also
disclose the commission payable to both the broker-dealer and the
registered representative, current quotations for the securities
and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market. Finally, monthly statements must
be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks. Broker-dealers must wait two business days after providing
buyers with disclosure materials regarding a security before
effecting a transaction in such security. Consequently, the
“penny stock” rules restrict the ability of
broker-dealers to sell our securities and affect the ability of
investors to sell our securities in the secondary market and the
price at which such purchasers can sell any such securities,
thereby affecting the liquidity of the market for our common
stock.
Stockholders should be aware that, according to
the SEC, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns
include:
●
control of the market for the security by
one or more broker-dealers that are
often related to the promoter or issuer;
●
manipulation of prices through prearranged
matching of purchases and sales and
false and misleading press releases;
●
“boiler room” practices
involving high pressure sales
tactics and unrealistic price projections by inexperienced sales
persons;
●
excessive and undisclosed bid-ask
differentials and markups by selling
broker-dealers; and
●
the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the inevitable collapse of those prices with
consequent investor losses.
We do not
intend to pay dividends on our common stock so any returns on our
common stock will be limited to the value of our common
stock.
We
have never declared dividends on our common stock, and currently do
not plan to declare dividends on shares of our common stock in the
foreseeable future. Pursuant to the terms of our Series D, E and F
Non-Voting Convertible Preferred Stock, we may not declare or pay
any dividends or make any distributions on any of our shares or
other equity securities as long as any of those preferred shares
remain outstanding. We currently expect to retain future earnings,
if any, for use in the operation and expansion of our business. The
payment of cash dividends in the future, if any, will be at the
discretion of our board of directors and will depend upon such
factors as earnings levels, capital requirements, our overall
financial condition and any other factors deemed relevant by our
board of directors. Any return to holders of our common stock will
be limited to the value of their common stock.
25
Additional Risks Related to This Offering
Management
will have broad discretion as to the use of the proceeds from this
offering, and may not use the proceeds effectively.
Because we have not
designated the amount of net proceeds from this offering to be used
for any particular purpose, our management will have broad
discretion as to the application of the net proceeds from this
offering and could use them for purposes other than those
contemplated at the time of the offering. Our management may use
the net proceeds for corporate purposes that may not improve our
financial condition or market value. The failure by management to
apply these funds effectively could result in financial losses that
could have a material adverse effect on our business, cause the
price of our common stock to decline and delay the development and
commercialization of our product candidates.
You
may experience immediate and substantial dilution.
The offering price
per share in this offering may exceed the net tangible book value
per share of our common stock outstanding prior to this offering.
Assuming that an aggregate of 58,800,000 shares of our common
stock are sold during the term of the sales agreement with B. Riley
FBR at a price of $0.25 per share, the last reported sale price of
our common stock on the NYSE American on April 5, 2018, for
aggregate gross proceeds of $14.7 million, after deducting
commissions and estimated aggregate offering expenses payable by
us, you will experience immediate dilution of $0.09 per share, representing the
difference between our as-adjusted net tangible book value per
share as of December 31, 2017, after giving effect to this offering
and the assumed offering price. The exercise of outstanding stock
options and warrants may result in further dilution of your
investment. See the section entitled “Dilution” below
for a more detailed illustration of the dilution you would incur if
you participate in this offering.
You
may experience future dilution as a result of future equity
offerings.
We will need
significant additional funds to complete the U.S development of
Neutrolin. In order to raise additional capital, we plan to offer
in the future additional shares of our common stock or other
securities convertible into or exchangeable for our common stock at
prices that may not be the same as the price per share in this
offering. We may sell shares or other securities in any other
offering at a price per share that is less than the price per share
paid by investors in this offering, and investors purchasing shares
or other securities in the future could have rights superior to
existing stockholders. The price per share at which we sell
additional shares of our common stock, or securities convertible or
exchangeable into common stock, in future transactions may be
higher or lower than the price per share paid by investors in this
offering.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
SEC encourages companies to disclose forward-looking information so
that investors can better understand a company’s future
prospects and make informed investment decisions. This prospectus,
any applicable prospectus supplement and the documents we have
filed with the SEC that are incorporated herein and therein by
reference contain such “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995.
26
Words such as “may,”
“might,” “should,”
“anticipate,” “estimate,”
“expect,” “projects,”
“intends,” “plans,” “believes”
and words and terms of similar substance used in connection with
any discussion of future operating or financial performance,
identify forward-looking statements. Forward-looking statements
represent management’s current judgment regarding future
events and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those
described in the forward-looking statements. These risks include,
but are not limited to: CorMedix’s ability to obtain
financing to support its research and development and clinical
activities and operations, including its LOCK-IT-100 clinical trial
for Neutrolin; the cost, timing and results of the planned and
ongoing Phase 3 trials for Neutrolin® in the U.S., including
variances in the expected rate of catheter-related bloodstream
infection events and the resources needed to commence and complete
those trials; the risks and uncertainties associated with
CorMedix’s ability to manage its limited cash resources;
CorMedix’s ability to continue as a going concern; later
developments with the FDA that may be inconsistent with the
FDA’s acceptance of any interim analyses of the LOCK-IT-100
trial; obtaining regulatory approvals to conduct clinical trials
and to commercialize CorMedix’s product candidates, including
the anticipated second Phase 3 trial of Neutrolin and the marketing
of Neutrolin in countries other than Europe; the outcome of
clinical trials of CorMedix’s product candidates and whether
they demonstrate these candidates’ safety and effectiveness;
the risks associated with the launch of Neutrolin in new markets;
CorMedix’s ability to enter into, execute upon and maintain
collaborations with third parties for its development and marketing
programs; CorMedix’s dependence on its collaborations and its
license relationships; CorMedix’s ability to maintain its
listing on the NYSE American; achieving milestones under
CorMedix’s collaborations; CorMedix’s dependence on
preclinical and clinical investigators, preclinical and clinical
research organizations, manufacturers, sales and marketing
organizations, and consultants; and protecting the intellectual
property developed by or licensed to CorMedix. Please also see the discussion of risks and
uncertainties under “Risk Factors” above and otherwise
incorporated by reference herein, and in our most recent annual
report on Form 10-K, as revised or supplemented by any of our
subsequently filed quarterly reports on Form 10-Q, as well as
any amendments thereto, as filed with the SEC and which are
incorporated herein by reference.
In
light of these assumptions, risks and uncertainties, the results
and events discussed in the forward-looking statements contained in
this prospectus, any applicable prospectus supplement or in any
document incorporated herein or therein by reference might not
occur. Investors are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the respective
dates of this prospectus or any applicable prospectus supplement or
the date of the document incorporated by reference in this
prospectus or any applicable prospectus supplement. We are not
under any obligation, and we expressly disclaim any obligation, to
update or alter any forward-looking statements, whether as a result
of new information, future events or otherwise. All subsequent
forward-looking statements attributable to us or to any person
acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
section.
27
USE
OF PROCEEDS
We currently intend
to use the net proceeds from this offering, if any, for general
corporate purposes, including clinical trials, research and
development expenses, and general and administrative
expenses.
The amounts and
timing of our use of the net proceeds from this offering will
depend on a number of factors, such as the timing and progress of
our research and development efforts, the timing and progress of
any collaborative or strategic partnering efforts, and the
competitive environment for our planned products. As of the date of
this prospectus, we cannot specify with certainty all of the
particular uses for the net proceeds to us from this offering.
Accordingly, our management will have broad discretion in the
timing and application of these proceeds. Pending application of
the net proceeds as described above, we intend to temporarily
invest the proceeds in short-term, interest-bearing
instruments.
28
DILUTION
Our net tangible book value as of December 31,
2017 was approximately $7,193,351, or $0.10 per share of common stock. Net tangible book value
per share is calculated by subtracting our total liabilities from
our total tangible assets, which is total assets less intangible
assets, and dividing this amount by the number of shares of common
stock outstanding. After giving effect to the sale by us of the
full $14.7 million of common stock that may be offered in this
offering at an assumed offering price of $0.25 per share, which was the closing price of our
common stock on the NYSE American on April 5, 2018, and after
deducting estimated offering commissions and expenses payable by
us, our as-adjusted net tangible book value as of December 31, 2017
would have been approximately $21,340,351, or $0.16 per share of common stock. This represents an
immediate increase in the net tangible book value of $0.06 per
share to our existing stockholders and an immediate and substantial
dilution in net tangible book value of $0.09 per share to new investors. The following table
illustrates this hypothetical per share
dilution:
|
Assumed public
offering price per share
|
|
$ 0.25
|
|
Net tangible book
value per share as of December 31, 2017
|
$0.10
|
|
|
Increase in net
tangible book value per share attributable to this
offering
|
0.06
|
|
|
As adjusted net
tangible book value per share as of December 31, 2017, after giving
effect to this offering
|
|
0.16
|
|
Dilution per share
to new investors purchasing shares in this offering
|
|
$ 0.09
|
The table above assumes for illustrative purposes
that an aggregate of 58,800,000 shares of our common stock are sold
at a price of $0.25 per share, the last reported sale price of our
common stock on the NYSE American on April 5, 2018, for aggregate
gross proceeds of $14.7 million. The shares sold in this offering,
if any, will be sold from time to time at various prices. An
increase of $0.06 per share in the price at which the shares are
sold from the assumed offering price of $0.25 per share shown in
the table above, assuming all of our common stock in the aggregate
amount of $14.7 million is sold at that price, would increase our adjusted
net tangible book value per share after the offering to $0.18 per
share and would increase the dilution in net tangible book value
per share to new investors in this offering to
$0.13 per share, after deducting commissions and
estimated aggregate offering expenses payable by us. A decrease of
$0.06 per share in the price at which the shares are sold from the
assumed offering price of $0.25 per share shown in the table above,
assuming all of our common stock in the aggregate amount of $14.7
million is sold at that price, would decrease our adjusted net
tangible book value per share after the offering to
$0.15 per share and would decrease the dilution in net
tangible book value per share to new investors in this offering to
$0.04 per share, after deducting commissions and estimated
aggregate offering expenses payable by us. This information is
supplied for illustrative purposes only.
To
the extent that any outstanding options or warrants are exercised,
new options are issued under our 2006 Stock Incentive Plan or our
2013 Stock Incentive Plan or we otherwise issue additional shares
of common stock in the future, there will be further dilution to
new investors.
The above
discussion and table are based on 71,413,790 shares of our common
stock outstanding as of December 31, 2017 and excludes the
following securities outstanding on December 31, 2017:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
29
●
options
to purchase an aggregate of 120,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $1.44 per share;
●
options
to purchase an aggregate of 4,842,495 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.05 per share;
●
a
warrant to purchase 400,000 shares of our common stock issued on
February 19, 2013 with an exercise price of $1.50 that expire on
February 19, 2018;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
●
warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of common
stock;
●
Series C-3
Preferred Stock convertible into 1,040,000 shares of common
stock;
●
Series D Preferred
Stock convertible into 1,479,240 shares of common
stock;
●
Series E Preferred
Stock convertible into 1,959,759 shares of common
stock;
●
Series F Preferred
Stock convertible into 12,345,679 shares of common stock, subject
to adjustment;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020;
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020;
●
Series A warrants
for 4,078,226 shares of common stock with an exercise price of
$0.75 that expire on September10, 2018;
●
Series B warrants
for 13,964,476 shares of common stock with an exercise price of
$1.05 that expire on August 10, 2022;
●
underwriter
warrants for 1,117,158 shares of common stock with an exercise
price of $0.9375 that expire on August 10, 2022;
●
warrants
for 564,858 shares of common stock issued on November 16, 2017 with
an exercise price of $0.001 that expire on November 16, 2020;
and
●
restricted stock
units for 66,414 shares of common stock with an average grant date
fair value of $2.08 per share.
30
MARKET
FOR COMMON STOCK
Our common stock
trades on the NYSE American under the symbol “CRMD.”
The following table sets forth the high and low sales prices for
our common stock for the periods indicated as reported by NYSE
American:
|
Fiscal
Year ending 2018
|
High
|
Low
|
|
First
Quarter
|
$ 0.59
|
$ 0.17
|
|
Second Quarter
(through April 13, 2018)
|
$0.30
|
$0.18
|
|
|
|
|
|
Fiscal
Year 2017
|
High
|
Low
|
|
First
Quarter
|
$2.48
|
$1.44
|
|
Second
Quarter
|
$1.64
|
$0.36
|
|
Third
Quarter
|
$0.54
|
$0.32
|
|
Fourth
Quarter
|
$0.77
|
$0.45
|
|
|
|
|
|
Fiscal
Year 2016
|
High
|
Low
|
|
First
Quarter
|
$2.88
|
$1.15
|
|
Second
Quarter
|
$4.54
|
$1.83
|
|
Third
Quarter
|
$3.12
|
$1.35
|
|
Fourth
Quarter
|
$3.26
|
$1.46
|
Based upon
information furnished by our transfer agent, at April 5, 2018, we
had 61 holders of record of our common stock.
We have never
declared dividends on our equity securities, and currently do not
plan to declare dividends on shares of our common stock in the
foreseeable future. We expect to retain our future earnings, if
any, for use in the operation and expansion of our business.
Further, pursuant to the terms of our
Series D, Series E and Series F Non-Voting Convertible Preferred
Stock, we may not declare or pay any dividends or make any
distributions on any of our shares of common stock or other equity
securities as long as any of those preferred shares remain
outstanding. Subject to the foregoing, the payment of cash
dividends in the future, if any, will be at the discretion of our
Board of Directors and will depend upon such factors as earnings
levels, capital requirements, our overall financial condition and
any other factors deemed relevant by our Board of
Directors.
31
PLAN
OF DISTRIBUTION
We have entered
into an At-Market Issuance Sales Agreement, referred to as the
sales agreement, with B. Riley FBR, Inc., or. B. Riley FBR.
Pursuant to the sales agreement, we may issue and sell up to
$14,700,000 of our common stock from time to time through B. Riley
FBR acting as agent, subject to certain limitations, including the
number or dollar amount of
shares registered under the registration statement to which the
offering relates, The form of the sales agreement was filed as an
exhibit to the registration statement
of which this prospectus is a part and is incorporated by
reference in this prospectus. The sales, if any, of shares made
under the sales agreement will be made by any method that is deemed
an “at the market offering” as defined in Rule 415
promulgated under the Securities Act. We may instruct B. Riley FBR
not to sell common stock if the sales cannot be effected at or
above the price designated by us from time to time. We or B. Riley
FBR may suspend the offering of common stock upon notice and
subject to other conditions.
Each time we wish
to issue and sell common stock under the sales agreement, we will
notify B. Riley FBR of the number or dollar value of shares to be
issued, the dates on which such sales are anticipated to be made,
any minimum price below which sales may not be made and other sales
parameters as we deem appropriate. Once we have so instructed B.
Riley FBR, unless B. Riley FBR declines to accept the terms of the
notice, B. Riley FBR has agreed to use its commercially reasonable
efforts consistent with its normal trading and sales practices to
sell such shares up to the amount specified on such terms. The
obligations of B. Riley FBR under the sales agreement to sell our
common stock is subject to a number of conditions that we must
meet.
We will pay B.
Riley FBR commissions for its services in acting as agent in the
sale of common stock. B. Riley FBR will be entitled to a commission
equal to 3% of the gross proceeds from the sale of common stock
offered hereby. In addition, we have agreed to reimburse certain
expenses of B. Riley FBR in an amount not to exceed $25,000. We
estimate that the total expenses for the offering, excluding
compensation payable to B. Riley FBR under the terms of the sales
agreement, will be approximately $100,000.
Settlement for
sales of common stock will generally occur on the second business
day following the date on which any sales are made, or on some
other date that is agreed upon by us and B. Riley FBR in connection
with a particular transaction, in return for payment of the net
proceeds to us. There is no arrangement for funds to be received in
an escrow, trust or similar arrangement.
In connection with
the sale of the common stock on our behalf, B. Riley FBR will be
deemed to be an “underwriter” within the meaning of the
Securities Act and the compensation of B. Riley FBR will be deemed
to be underwriting commissions or discounts. We have agreed to
provide indemnification and contribution to B. Riley FBR against
certain civil liabilities, including liabilities under the
Securities Act. We have also agreed to reimburse B. Riley FBR for
certain other specified expenses.
The offering of our
common stock pursuant to the sales agreement will terminate upon
the earlier of (i) the sale of all of our common stock provided for
in this prospectus or (ii) termination of the sales agreement as
provided therein.
B. Riley FBR and
its affiliates may in the future provide various investment banking
and other financial services for us and our affiliates, for which
services they may in the future receive customary fees. To the
extent required by Regulation M, B. Riley FBR will not engage in
any market making activities involving our common stock while the
offering is ongoing under this prospectus.
The $14,700,000
equals one-third of our public float as of April 6, 2018 (which was
approximately $44,400,000), as limited by General Instruction I.B.6
of Form S-3.
32
DESCRIPTION
OF OUR COMMON STOCK
Pursuant
to our Amended and Restated Certificate of Incorporation, as
amended, we are authorized to issue 160,000,000 shares of common
stock, $0.001 par value per share. As of March 31, 2018, we had
81,786,902 shares of common stock outstanding.
The
following summary of certain provisions of our common stock does
not purport to be complete. You should refer to our Amended and
Restated Certificate of Incorporation, as amended, and our Amended
and Restated Bylaws. We filed our Amended and Restated Certificate
of Incorporation as an exhibit to our registration statement on
Form S-1/A filed with the SEC on March 1, 2010, and filed
amendments to the Amended and Restated Certificate of Incorporation
as exhibits to our registration statement on Form S-1/A filed with
the SEC on March 19, 2010, our annual report on Form 10-K filed
with the SEC on March 27, 2013, and our current report on Form 8-K
filed with the SEC on August 10, 2017. We filed an Amended and
Restated Certificate of Designation for each of our Series C-2,
C-3, D and E non-voting preferred stock as exhibits to our current
report on Form 8-K on September 16, 2014, and the Amended and
Restated Certificate of Designation for our Series F non-voting
preferred stock on December 11, 2017. We filed our Amended and
Restated Bylaws as an exhibit to our quarterly report on Form 10-Q
filed with the SEC on May 10, 2016. The summary below is also
qualified by provisions of applicable law.
The
holders of our common stock are entitled to one vote per share on
all matters to be voted on by the stockholders, and there are no
cumulative voting rights. Generally, all matters to be voted on by
stockholders must be approved by a majority (or, in the case of
election of directors, by a plurality) of the votes entitled to be
cast by all shares of common stock present in person or represented
by proxy, subject to any voting rights granted to holders of any
preferred stock.
The
holders of common stock are entitled to receive ratable dividends,
if any, payable in cash, in stock or otherwise if, as and when
declared from time to time by our board of directors out of funds
legally available for the payment of dividends, subject to any
preferential rights that may be applicable to any outstanding
preferred stock. In the event of a liquidation, dissolution, or
winding up of our company, after payment in full of all outstanding
debts and other liabilities, the holders of common stock are
entitled to share ratably in all remaining assets, subject to prior
distribution rights of preferred stock, if any, then outstanding.
No shares of common stock have preemptive rights or other
subscription rights to purchase additional shares of common stock.
There are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock included in
this registration statement will be fully paid and nonassessable.
The rights, preferences and privileges of holders of our common
stock will be subject to, and might be adversely affected by, the
rights of holders of any preferred stock that we may issue in the
future. All shares of common stock that are acquired by us shall be
available for reissuance by us at any time.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is VStock
Transfer, LLC. The transfer agent’s address is 18 Lafayette
Place, Woodmere, New York 11598 and its telephone number is (212)
828-8436.
CERTAIN PROVISIONS OF DELAWARE LAW AND OF OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED
BYLAWS
Certain
provisions of DGCL and our Amended and Restated Certificate of
Incorporation, as amended, and our Amended and Restated Bylaws
discussed below may have the effect of making more difficult or
discouraging a tender offer, proxy contest or other takeover
attempt. These provisions are expected to encourage persons seeking
to acquire control of our company to first negotiate with our board
of directors. We believe that the benefits of increasing our
ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure our company outweigh
the disadvantages of discouraging these proposals because
negotiation of these proposals could result in an improvement of
their terms.
33
Delaware Anti-takeover Law
We are subject to
Section 203 of the DGCL, an anti-takeover law. In general, Section
203 prohibits a publicly held Delaware corporation from engaging in
a “business combination” with an “interested
stockholder” for a period of three years following the date
the person became an interested stockholder, unless:
●
the board of
directors approves the transaction in which the stockholder became
an interested stockholder prior to the date the interested
stockholder attained that status;
●
when the
stockholder became an interested stockholder, he or she owned at
least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by persons
who are directors and also officers and certain shares owned by
employee benefits plans; or
●
on or subsequent to
the date the business combination is approved by the board of
directors, the business combination is authorized by the
affirmative vote of at least 66 2/3% of the voting stock of the
corporation at an annual or special meeting of
stockholders.
Generally,
a “business combination” includes a merger, asset or
stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. Generally, an “interested
stockholder” is a person who, together with affiliates and
associates, owns, or is an affiliate or associate of the
corporation and within three years prior to the determination of
interested stockholder status did own, 15% or more of a
corporation’s voting stock.
The
existence of Section 203 of the DGCL would be expected to have an
anti-takeover effect with respect to transactions not approved in
advance by our board of directors, including discouraging attempts
that might result in a premium over the market price for the shares
of our common stock.
Charter Documents
Our Amended and
Restated Certificate of Incorporation, as amended, and Amended and
Restated Bylaws include a number of provisions that may have the
effect of deterring hostile takeovers or delaying or preventing
changes in control or management of our company. First, our Amended
and Restated Bylaws limit who may call special meetings of the
stockholders, such meetings may only be called by the chairman of
the board, the chief executive officer, the board of directors or
holders of an aggregate of at least 15% of our outstanding entitled
to vote. Second, our Amended and Restated Certificate of
Incorporation does not include a provision for cumulative voting
for directors. Under cumulative voting, a minority stockholder
holding a sufficient percentage of a class of shares may be able to
ensure the election of one or more directors. Third, our Amended
and Restated Bylaws provide that the number of directors on our
board, which may range from five to nine directors, shall be
exclusively fixed by our board, which has set the number of
directors at seven. Fourth, newly created directorships resulting
from any increase in our authorized number of directors and any
vacancies in our board resulting from death, resignation,
retirement, disqualification or other cause (including removal from
office by a vote of the shareholders) will be filled by a majority
of our board then in office. Finally, our Amended and Restated
Bylaws establish procedures, including 90-day advance notice
requirement, with regard to the nomination of candidates for
election as directors and stockholder proposals. These and other
provisions of our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws and Delaware law could discourage
potential acquisition proposals and could delay or prevent a change
in control or management of our company.
LEGAL
MATTERS
Wyrick Robbins
Yates & Ponton LLP, Raleigh, North Carolina, will pass upon the
validity of the common stock offered by this prospectus. B. Riley
FBR is being represented in connection with this offering by Duane
Morris LLP, Newark, New Jersey.
EXPERTS
The
financial statements of CorMedix Inc. as of December 31, 2017 and
2016 and for the years then ended have been incorporated herein by
reference in reliance on the report (which report expresses an
unqualified opinion on the financial statements and includes an
emphasis of matter paragraph referring to the substantial doubt
regarding the Company’s ability to continue as a going
concern) of Friedman LLP, independent registered public accounting
firm, given upon their authority as experts in accounting and
auditing.
34
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
This prospectus is
part of the registration statement on Form S-3 we filed with the
SEC under the Securities Act and does not contain all the
information set forth in the registration statement. Whenever a
reference is made in this prospectus to any of our contracts,
agreements or other documents, the reference may not be complete
and you should refer to the exhibits that are a part of the
registration statement or the exhibits to the reports or other
documents incorporated by reference into this prospectus for a copy
of such contract, agreement or other document. Because we are
subject to the information and reporting requirements of the
Exchange Act, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SEC’s
website at http://www.sec.gov. You may also read and copy any
document we file at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the
Public Reference Room.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by reference” information from other
documents that we file with it, which means that we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be part
of this prospectus. Information in this prospectus supersedes
information incorporated by reference that we filed with the SEC
prior to the date of this prospectus, while information that we
file later with the SEC will automatically update and supersede the
information in this prospectus. The documents we are
incorporating by reference are:
●
our
Annual Report on Form 10-K for the fiscal year ended December
31, 2017, filed with the SEC pursuant to Section 13 of the Exchange
Act on March 19, 2018;
●
our
Amendment to the Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2017, filed with the SEC pursuant to Section 13
of the Exchange Act on April 11, 2018;
●
our
Current Reports on Form 8-K, filed with the SEC pursuant to
Section 13 of the Exchange Act on February 10, March 3, April 20,
April 28, May 3, June 13, June 27, July 12, August 1, August 2,
August 7, August 9 (Form 8-K/A), August 10, August 28, August 30,
September 1, September 5, November 13, November 20, December 4,
December 5, December 8 and December 11, 2017, and February 20,
February 26, February 27, and March 22, 2018;
●
the
description of our common stock contained on Form 8-A (File No.
333-163380) filed with the SEC on March 19, 2010, including any
amendment or report filed for the purpose of updating such
description; and
●
all
of the filings pursuant to the Exchange Act after the date of the
filing of the registration statement and prior to the effectiveness
of the registration statement.
We also incorporate
by reference any future filings (other than current reports
furnished under Item 2.02 or Item 7.01 of Form 8-K and
exhibits filed on such form that are related to such items unless
such Form 8-K expressly provides to the contrary) made with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, including those made after the date of the initial filing of
the registration statement of which this prospectus is a part and
prior to effectiveness of such registration statement, until we
file a post-effective amendment that indicates the termination of
the offering of the common stock made by this prospectus and will
become a part of this prospectus from the date that such documents
are filed with the SEC. Information in such future filings updates
and the information provided in this prospectus.
Any statements in
any such future filings will automatically be deemed to modify and
supersede any information in any document we previously filed with
the SEC that is incorporated or deemed to be incorporated herein by
reference to the extent that statements in the later filed document
modify or replace such earlier statements.
35
The
information relating to us contained in this prospectus should be
read together with the documents incorporated herein by
reference.
Upon oral or
written request and at no cost to the requester, we will provide to
any person, including a beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the information that has been
incorporated by reference in this prospectus but not delivered with
this prospectus. All requests should be made
to: CorMedix Inc., Attention: Secretary, 400 Connell
Drive, Suite 5000, Berkeley Heights, NJ 07922, (908)
517-9500.
You should rely
only on the information incorporated by reference or provided in
this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information
in this prospectus or the documents incorporated herein by
reference is accurate as of any date other than the date on the
front of this prospectus or those documents.
36
$14,700,000
Common
Stock
PROSPECTUS
B.
Riley FBR
April
16, 2018