CorMedix Inc.: Form 10-Q for the period ended Mar 31, 2024

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and our audited 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 12, 2024.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. All statements, other than statements of historical facts, regarding management’s expectations, beliefs, goals, plans or CorMedix’s prospects should be considered forward-looking statements. Readers are cautioned that actual results may differ materially from projections or estimates due to a variety of important factors, and readers are directed to the Risk Factors identified in CorMedix’s filings with the SEC, including its most recent Annual Report on Form 10-K, copies of which are available free of charge at the SEC’s website at www.sec.gov (http://www.sec.gov) or upon request from CorMedix. CorMedix may not actually achieve the goals or plans described in its forward-looking statements, and such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Investors should not place undue reliance on these statements. CorMedix assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

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
• We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements, which may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights

Risks Related to the Commercialization of DefenCath

• We are highly dependent on the successful commercialization of our only approved product, DefenCath
• The successful commercialization of DefenCath will depend on obtaining coverage and reimbursement for use of DefenCath from third-party payors
• The expected outpatient demand for DefenCath is highly concentrated, with two large customers accounting for more than 70% of total expected market volume. The failure of one or both of these large dialysis providers to utilize DefenCath is likely to adversely impact the commercial launch of DefenCath
• If we are unable to effectively recruit, train, retain and equip our sales force, our ability to successfully commercialize DefenCath will be harmed

Risks Related to the Development and Commercialization of our Other Products

• Successful development and commercialization of our product candidates is uncertain
• Final approval by regulatory authorities of our product candidates for commercial use may be delayed, limited or prevented, any of which would adversely affect our ability to generate operating revenues

Risks Related to Healthcare Regulatory and Legal Compliance Matters

• DefenCath, and our product candidates (if approved), will be subject to extensive post-approval regulation
• Current healthcare laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. healthcare system may affect our ability to commercialize DefenCath and future marketed products profitably
• We are subject to laws and regulations relating to privacy, data protection and the collection and processing of personal data. Failure to maintain compliance with these regulations could create additional liabilities for us
• Clinical trials required for our new product candidates or for expanded uses of DefenCath will be expensive and time-consuming, and their outcome is uncertain

Risks Related to Our Business and Industry

• Healthcare institutions, physicians and patients may not accept or use our products
• Competition and technological change may make our products and technologies less attractive or obsolete
• 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
• 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
• Changes in funding for the FDA and other government agencies or future government shutdowns or disruptions could cause delays in the submission and regulatory review of marketing applications, including supplements, which could negatively impact our business or prospects
• If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed
• We may not successfully manage our growth
• 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
• We may be exposed to liability claims associated with the use of hazardous materials and chemicals
• If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business
• Negative U.S. and global economic conditions may pose challenges to our business strategy, which relies on funding from the financial markets or collaborators

Risks Related to Our Intellectual Property

• If we materially breach or default under the ND License Agreement with NDP, NDP would have the right to terminate the ND License Agreement, which would materially harm our business
• If we do not obtain protection for and successfully defend our respective intellectual property rights, competitors may be able to take advantage of our research and development efforts to develop competing products
• Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights
• If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages and defend against litigation

Risks Related to Dependence on Third Parties

• If we or our collaborators are unable to manufacture our products in sufficient quantities or experience quality or manufacturing problems, we may be unable to meet demand for our products and we may lose potential revenues
• We depend on third party suppliers and contract manufacturers for the manufacturing of DefenCath and all key active pharmaceutical ingredients (“APIs”), which subjects us to potential cost increases and manufacturing delays that are not within our control
• We currently have one FDA approved supplier for each of our key APIs, taurolidine and heparin, respectively, as well as one currently FDA approved manufacturing site for DefenCath finished dosage. We are actively working to qualify an alternative manufacturing site for finished dosage as well as making preparations to qualify alternative sources of both APIs. There is no guarantee we will be successful in these endeavors.
• Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of new development products or expanded uses of DefenCath
• 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 may rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our product candidates may not advance in a timely manner or at all

Risks Related to Our Common Stock

• Our executive officers and directors may sell shares of their stock, and these sales could adversely affect our stock price
• Our common stock price has fluctuated considerably and is likely to remain volatile, and you could lose all or a part 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
• 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
• If we fail to comply with the continued listing standards of the Nasdaq Global Market, it may result in a delisting of our common stock from the exchange
• Laws, rules and regulations relating to public companies may be costly and impact our ability to attract and retain directors and executive officers
• Our internal control over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur
• Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer
• We do not currently pay dividends on our common stock so any returns on our common stock may be limited to the value of our common stock
• We are a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to such companies could make our common stock less attractive to investors.

Overview

CorMedix Inc. (collectively, with our wholly owned subsidiaries, referred to herein as “we,” “us,” “our” or the “Company”) is a biopharmaceutical company focused on developing and commercializing therapeutic products of life-threatening diseases and conditions.

Our primary focus is on the commercialization of our lead product, DefenCath, in the U.S. The name DefenCath is the U.S. proprietary name that was approved by the FDA.

DefenCath is an antimicrobial catheter lock solution (“CLS”) (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) indicated to reduce the incidence of catheter-related bloodstream infections (“CRBSI”) in adult patients with kidney failure receiving chronic hemodialysis through a central venous catheter (“CVC”). It is indicated for use in a limited and specific population of patients. CRBSIs 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 CVC, related treatment costs, as well as increased mortality. We believe DefenCath can address a significant unmet medical need.

On November 15, 2023, we announced that the FDA approved the NDA for DefenCath to reduce the incidence of CRBSI in adult patients with kidney failure receiving chronic hemodialysis through a CVC. DefenCath is indicated for use in a limited and specific population of patients. DefenCath is the first and only FDA-approved antimicrobial CLS in the U.S. and was shown to reduce the risk of CRBSI by up to 71% in a Phase 3 clinical study. As a result of the November 2023 FDA approval, CorMedix is in the process of launching the product commercially.

DefenCath is listed in the Orange Book as having NCE exclusivity (5 years) expiring on November 15, 2028, and the Generating Antibiotic Incentives Now or GAIN exclusivity extension of the NCE exclusivity (an additional 5 years) expiring on November 15, 2033. The GAIN exclusivity extension of 5 years is the result of the January 2015 designation of DefenCath as a Qualified Infectious Disease Product (“QIDP”).

We announced on April 26, 2023 that following the submission of a duplicate New Technology Add-On Payment (“NTAP”) application in the fourth quarter of 2022 to Centers for Medicare and Medicaid Services (“CMS”), CMS has subsequently issued the Inpatient Prospective Payment System (“IPPS”) 2024 proposed rule that includes a NTAP of up to $17,111 per hospital stay for DefenCath. This NTAP represents reimbursement to inpatient facilities of 75% of the anticipated wholesaler acquisition cost price of $1,170 per 3 mL vial, and an average utilization of 19.5 vials per hospital stay. The final IPPS rule was published in early August 2023 and confirmed this payment amount in that final rule. This NTAP was conditioned upon the DefenCath NDA obtaining final FDA approval prior to July 1, 2024. As the NTAP was calculated by CMS based upon an anticipated wholesale acquisition price (“WAC”) of $1,170, and following FDA approval of the DefenCath NDA, an actual WAC of $249.99 per 3ml vial was established, we anticipate that CMS will revise the amount of the NTAP payment to reflect the actual WAC price in the next IPPS rulemaking, effective October 1, 2024. Upon the listing in the compendia of the actual WAC price of $249.99 per 3ml vial, the Company notified CMS of the new lower WAC pricing and recommended that CMS make an off-cycle adjustment to the NTAP to reflect the current lower WAC pricing amount. CMS subsequently communicated to the Company that they do not intend to update the NTAP reimbursement amount until the next review cycle in October 2024.

On January 25, 2024, CMS determined that DefenCath should be classified as a renal dialysis service that is subject to the Medicare end-stage renal disease prospective payment system (“ESRD PPS”). The ESRD PPS provides bundled payment for renal dialysis services, but also affords a transitional drug add-on payment adjustment, or TDAPA, which provides temporary, additional payments for certain new drugs and biologicals. We submitted an application for TDAPA on January 26, 2024, and received confirmation that our application was approved on April 18, 2024. We also submitted a HCPCS application for a J-code to CMS on December 8, 2023, for DefenCath, which is relevant to billing and the TDAPA application. The HCPCS J-code for DefenCath was published by CMS on April 2, 2024. TDAPA reimbursement is calculated based on 100 percent ASP (or 100 percent of wholesale acquisition price or else manufacturers’ list price, respectively, if such data is unavailable). TDAPA and post-TDAPA add-on payment adjustments for DefenCath apply for five years (with such add-on payments applying to all ESRD PPS payments for years three through five). CMS confirmed a July 1, 2024 implementation date for HCPCS and TDAPA as described below.

We may pursue additional indications for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially significant market opportunities. While we are continuing to assess these areas, potential future indications may include use as a CLS to reduce CRBSIs in total parenteral nutrition patients using a central venous catheter and in certain oncology patients using a central venous catheter. In 2024, the Company anticipates discussing with the FDA potential pathways for expanded indications.

We currently have one FDA approved source for each of our two key APIs for DefenCath, taurolidine and heparin sodium, respectively. With regards to taurolidine, we have a DMF filed with the FDA. There is a master commercial supply agreement between a third-party manufacturer and us in place from August 2018. We are currently in the process of identifying and qualifying an alternate third-party manufacturer for taurolidine under our existing DMF. With respect to heparin sodium API, we have identified an alternate third-party supplier and intend to qualify such supplier under the DefenCath NDA over the next twelve months.

We received FDA approval of DefenCath with finished dosage production from our European based CMO Rovi Pharma Industrial Services. We believe this CMO has adequate capacity to produce the volumes needed to meet near-term projected demand for the commercial launch of DefenCath.

We previously announced a commercial arrangement with Siegfried Hameln to qualify their site as an additional finished dosage manufacturing site for DefenCath. The Company submitted the NDA supplement to FDA on May 7, 2024 as described below.

We announced on May 1, 2023 that the USPTO allowed our patent application directed to a locking solution composition for treating and reducing infection and flow reduction in central venous catheters. This application was granted on August 29, 2023 as U.S. Patent No. 11,738,120. Our newly granted U.S. Patent reflects the unique and proprietary formulation of our product, DefenCath, for which we received FDA approval on November 15, 2023. This patent supplements the coverage of our existing licensed U.S. Patent No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath through 2042.

As part of the DefenCath approval letter, the FDA communicated the existence of a required pediatric assessment under the Pediatric Research Equity Act, or PREA. PREA requires sponsors to conduct pediatric studies for, among other things, NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. FDA deferred submission of the pediatric study for DefenCath because the product is ready for approval for use in adults and the pediatric study has not been completed. We are currently obligated to conduct the study communicated in the approval letter: an open-label, two-arm (DefenCath vs. standard of care) study to assess safety and time to CRBSI in subjects from birth to less than 18 years of age with kidney failure receiving hemodialysis via a central venous catheter. CorMedix intends to address the design and requirements for the pediatric study during our Type C meeting with the FDA during 2024. Because this is a required post-marketing study, we would be required to make annual reports to the FDA. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which, if granted, provides an additional six months of exclusivity that attaches to the end of existing marketing exclusivity and patent periods for DefenCath. Depending on the timing of final report submission, DefenCath could potentially receive a total marketing exclusivity period of 10.5 years. However, there are factors that could affect whether this exclusivity is received or the duration of exclusivity, and DefenCath may or may not ultimately be eligible for the additional 0.5 years of exclusivity associated with this pediatric study.

The Company previously marketed and sold Neutrolin, a CLS product where we received CE-Mark approval for commercial distribution in the EU and other territories. The Company previously elected to discontinue sales of Neutrolin for lack of commercial viability. The winding down of our operations in the EU is nearly complete and Neutrolin sales in both the EU and the Middle East have been discontinued since 2022.

In addition, the following events have occurred subsequent to March 31, 2024:

• CMS HCPCS Determination. CMS published its HCPCS coding decision for DefenCath on April 2, 2024, establishing a new HCPCS Level II code for DefenCath.
• DefenCath Development Plan. The FDA granted the Company’s Type C meeting request to discuss an updated development plan for DefenCath and pediatric study requirements. The Company expects to receive feedback from the FDA by the end of the second quarter of 2024.
• First Customer Announcement. On April 8, 2024, the Company announced it had entered into a 5-year commercial supply contract with ARC Dialysis, LLC, a Florida-based dialysis provider, for the supply of DefenCath.
• Inpatient Commercial Launch. On April 15, 2024, the Company announced that DefenCath is commercially available for U.S. inpatient use.
• Outpatient Reimbursement. On April 18, 2024, CMS notified the Company of its determination that DefenCath meets the criteria for a Transitional Drug Add-On Payment (referred to herein as “TDAPA”) and will be effective July 1, 2024. The TDAPA program currently provides for five years of additional payment reimbursement beyond the ESRD bundled rate to outpatient providers.
• PAS Submission for Alternate Manufacturing. On May 7, 2024 the Company submitted to FDA a supplement to the CorMedix NDA adding Siegfried Hameln as an alternate finished dosage manufacturing site for DefenCath. Pending FDA review and approval, the Company anticipates approval of the supplement by the end of 2024.

Financial Operations Overview

Revenues

We have not generated substantial revenue since our inception. Our ability to generate future revenue and become profitable depends on our ability to successfully commercialize DefenCath beginning in the second quarter of 2024 and any product candidates that we may advance in the future. If we fail to successfully commercialize DefenCath, or any other product candidates we advance in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, could be adversely affected. Through March 31, 2024, we have funded our operations primarily through debt and equity financings.

Cost of Revenues

Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance.

Research and Development Expense

Research and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock–based compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and pre-clinical studies and clinical trials; (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies; and (viii) manufacturing-related costs, including previously expensed pre-NDA approval inventory amounting to approximately $6,400,000. All R&D is expensed as incurred.

The process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our future product candidates.

Development timelines, probability of success and development costs vary widely. We are currently focused on the commercialization of DefenCath in the U.S.

Selling, General and Administrative Expense

Selling, general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.

Foreign Currency Exchange Transaction Gain (Loss)

Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional currency and is reported in the consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our New Jersey-based subsidiary and our Germany-based subsidiary will not be repaid and the nature of the funding advanced was of a long-term investment nature. As such, unrealized foreign exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss).

Interest Income

Interest income consists of interest earned on our cash and cash equivalents and short-term investments.

Interest Expense

Interest expense consists of interest incurred on financing of expenditures.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following is a tabular presentation of our consolidated operating results for the three months ended March 31, 2024 and 2023 (in thousands):

Cost of Revenues. Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath, including product cost, packaging services, freight, and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance. We expect these relatively fixed costs to become less significant as a percentage of net sales with anticipated sales volume increases. There were no direct costs of product sales during the three months ended March 31, 2024 as commercial launch of DefenCath occurred in the second quarter of 2024. Indirect costs of $819,000 for the three months ended March 31, 2024 represent the proportion of salaries, benefits and insurance expenses representing excess capacity pertaining to pre-launch related activities. Certain pre-approval validation batch product previously expensed as R&D will improve margins throughout 2024 or until such inventory is depleted.

Research and Development Expense. R&D expense was $838,000 for the three months ended March 31, 2024, a decrease of $2,569,000, or 75%, from $3,407,000 for the same period in 2023. The decrease was driven by the approval of DefenCath. As a result of the post FDA approval commercial operations, costs related to medical affairs and certain personnel expenses that supported R&D efforts prior to the FDA approval of DefenCath have been recognized in selling, general and administrative expense during the three months ended March 31, 2024, as compared to the same period last year that were recognized in R&D. In addition, a portion of the costs related to the manufacturing of DefenCath, previously recognized in R&D, are now capitalized as a result of the FDA approval. There was also a decrease in non-cash charges for stock-based compensation of $339,000.

Selling, General and Administrative Expense. SG&A expense was $15,048,000 for the three months ended March 31, 2024, an increase of $7,438,000 or 97%, from $7,610,000 for the same period in 2023. The increase was primarily attributable to increases in personnel expenses of $3,756,000, due to the hiring of sales force, medical affairs and marketing personnel. The increase in costs related to medical affairs, market research studies and launch activities in preparation for the commercial marketing of DefenCath of $2,679,000 was a result of the post FDA approval operations that supported R&D efforts prior to the FDA approval, which are now recognized in selling, general and administrative expense during the three months ended March 31, 2024. There were also increases in non-cash charges for stock-based compensation of $449,000, consulting fees of $281,000 and business development activities of $218,000.

Interest Income. Interest income was $857,000 for the three months ended March 31, 2024 compared to $446,000 for the same period last year, an increase of $411,000, or 92%. The increase was attributable to higher interest rates and higher average balance in short-term investments during this period as compared to the same period last year.

Foreign Exchange Transaction Gain (Loss). Foreign exchange transaction gain (loss) were due to the re-measuring of transactions denominated in a currency other than our functional currency. For the quarter ended March 31, 2024, there was a loss of $4,000 and a gain of $12,000 for the same period in 2023.

Interest Expense. Interest expense was $10,000 for the three months ended March 31, 2024 as compared to $9,000 for the same period in 2023, an increase of $1,000, primarily due to higher interest rates on expenses that were financed this year as compared to the same period last year.

Other Comprehensive (Loss) Income. Unrealized foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to U.S. dollars and unrealized movements related to short-term investment are recorded in other comprehensive (loss) income which resulted in the loss of $10,000 for the three months ended March 31, 2024 and a gain of $19,000 for the three months ended March 31, 2023.

Liquidity and Capital Resources

Sources of Liquidity

As a result of our R&D and SG&A expenditures and the lack of substantial product sales revenue, our ongoing operations have not been profitable since our inception. During the three months ended March 31, 2024, we did not have any sales of common stock as compared to $7,200,000 net proceeds for the same period in 2023 from the issuance of 1,684,592 shares of common stock. We will continue to be reliant on external sources of cash for the foreseeable future until we are able to generate profits.

In March 2024, we received $1,395,000, net of expenses, from the sale of our unused New Jersey net operating losses (“NOL”), that was eligible for sale under the State of New Jersey’s Economic Development Authority’s New Jersey Technology Business Tax Certificate Transfer program (“NJEDA Program”). The NJEDA Program allowed us to sell our available NOL tax benefits for the state fiscal year 2023 in the amount of approximately $1,529,000.

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2024 was $17,310,000 as compared to $10,394,000 for the same period in 2023, an increase of $6,916,000. The increase is primarily driven by an increase in net loss of $3,899,000, attributable to a net increase in operating expenses of $4,869,000. As a result of the approval of DefenCath, cost of revenues of $819,000, which are indirect fixed costs related to the manufacturing and distribution of DefenCath were recognized, as compared to the same period last year, these costs were recognized as R&D. There was also an increase in prepaid expenses and other current assets of $1,226,000 and decreases in accrued expenses of $2,416,000 and accounts payable of $1,453,000, among others of lesser significance.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities for the year ended March 31, 2024 was $8,945,000 as compared to $14,687,000 of net cash used in investing activities for the same period in 2023. The net cash provided during the three months ended March 31, 2024, was mainly driven by an increase in maturity of the amount invested in short-term investments, partially offset by lower purchase of short-term investments in 2024 as compared to the same period in 2023.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the three months ended March 31, 2024 was $97,000 due to the payment of employee withholding taxes as a result of the issuance of shares for vested restricted stock units. Net cash provided by financing activities for the three months ended March 31, 2023 was $7,200,000, attributable to the net proceeds generated from the sale of our common stock in our at-the-market program, or ATM program.

Funding Requirements and Liquidity

Our total cash, cash equivalents and short-term investments as of March 31, 2024 was $58,552,000, excluding restricted cash of $179,000, compared with $76,031,000 for the year ended December 31, 2023, excluding restricted cash of $181,000. As of March 31, 2024, we have $104,400,000 available under our 2021 Shelf Registration Statement for the issuance of equity, debt or equity-linked securities.

Because our business has not generated positive operating cash flow, we may need to raise additional capital in order to continue to fund our research and development activities, as well as to fund operations generally. Our continued operations are focused on the commercial launch of DefenCath and we can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, if additional funds are needed.

We expect to continue to fund operations from cash, cash equivalents and short-term investments and through capital raising sources as previously described, which may be dilutive to existing stockholders, through revenues from the sale of our products or through strategic alliances. We expect to implement an ATM program, which may be utilized to support our ongoing funding requirements. Additionally, we may seek to sell additional equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness would result in increased fixed obligations and could contain covenants that would restrict our operations. Raising additional funds through strategic alliance arrangements with third parties may require significant time to complete and could force 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. Our actual cash requirements may vary materially from those now planned due to a number of factors, including any change in the timing of the commercial launch of DefenCath or the focus and direction of our research and development programs, any acquisition or pursuit of development of new product candidates, competitive and technical advances, the costs of commercializing any of our product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights.

We expect to generate product sales for DefenCath in the U.S. In the absence of significant revenue, we are likely to continue generating operating cash flow deficits. We will continue to use cash as we increase other activities leading to the commercialization of DefenCath and pursue business development activities.

We currently estimate that as of March 31, 2024, we have sufficient cash, cash equivalents and short-term investments to fund operations for at least twelve months from the issuance of this Quarterly Report on Form 10-Q. These estimates are based upon the commercial launch in the second quarter of 2024, and other base case assumptions for market penetration, average selling price, research and development expense and commercial infrastructure cost. Additional financing may be needed to build out our commercial infrastructure and to continue our operations. If we are unable to raise additional funds when needed, we may be forced to slow or discontinue the commercial launch of DefenCath. We may also be required to delay, scale back or eliminate some or all of our research and development programs. Each of these alternatives would likely have a material adverse effect on our business.

Contractual Obligations

We entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000, commenced on September 16, 2020.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about revenue and the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

For the three-month period ended March 31, 2024, there were no significant changes to our critical accounting estimates as identified in our Annual Report on Form 10-K for the year ended December 31, 2023, except for the intangible asset probability assessment (see Note 2, “Summary of Significant Accounting Policies,” of the Notes to our Unaudited Condensed Consolidated Interim Financial statement contained in Item 1 of Part 1 of this Quarterly Report on Form 10-Q) and the assessment of going concern uncertainty. The intangible asset probability assessment is based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing of DefenCath launch in the outpatient setting, uptake of our product in the inpatient and outpatient settings and commercial contract terms that align with our internal assumptions. Based on this assessment, as necessary or applicable, we make certain assumptions around revenue. The assessment of going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least one year from the date our condensed consolidated financial statements are issued (the “look-forward period”). As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing of DefenCath launch in the outpatient setting, uptake of our product in the inpatient and outpatient settings and commercial contract terms that align with our internal assumptions. Based on this assessment, as necessary or applicable, we make certain assumptions around revenue, gross profit, operating expenses, inventory build and working capital needs to the extent we deem probable those implementations can be achieved within the look-forward period. For additional information, refer to Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.

Disclosure controls and procedures are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of March 31, 2024. Based on the foregoing evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

There were no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.