UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31,
2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________
to ______________________
Commission file number: 001-34673
CORMEDIX INC.
(Exact name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including
area code: (908)517-9500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 Par Value CRMD Nasdaq Global Market
Securities registered pursuant to Section 12(g)
of the Act: None.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those corrections
are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the registrant’s
voting common equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on
the last business day of the registrant’s most recently completed second fiscal quarter was approximately $236.8 million.
The number of outstanding shares of the registrant’s
common stock was 65,181,771 as of March 23, 2025.
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s
definitive Proxy Statement to be issued in conjunction with the registrant’s 2025 Annual Meeting of Stockholders, which is expected
to be filed not later than 120 days after the registrant’s fiscal year ended December 31, 2024, are incorporated by reference
into Part III of this Annual Report. Except as expressly incorporated by reference, the registrant’s Proxy Statement shall not
be deemed to be a part of this Annual Report on Form 10-K.
CORMEDIX INC.
2024 Form 10-K Annual Report
Table of Contents
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 29
Item 1C. Cybersecurity 29
Item 2. Properties 30
Item 3. Legal Proceedings 30
Item 4. Mine Safety Disclosures 30
Item 6. [RESERVED] 31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38
Item 8. Financial Statements and Supplementary Data 38
Item 9A. Controls and Procedures 38
Item 9B. Other Information 40
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 40
PART III 41
Item 10. Directors, Executive Officers, and Corporate Governance 41
Item 11. Executive Compensation 41
Item 14. Principal Accounting Fees and Services 41
Item 15. Exhibits, Financial Statement Schedules 42
SIGNATURES 45
i
Forward-Looking Statements
This Annual Report on Form
10-K 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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), 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 the Risk Factor Summary and section titled “Item 1A. Risk Factors”
of this Annual Report on Form 10-K and in CorMedix’s other filings with the Securities and Exchange Commission (the “SEC”)
copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request
from CorMedix. CorMedix may not actually achieve the goals or plans described in its forward-looking statements, and such forward-looking
statements speak only as of the date of this Annual Report on Form 10-K. 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.
ii
PART I
Item 1. Business
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 for life-threatening diseases and conditions.
Our primary focus is commercializing
our lead product, DefenCath® (taurolidine and heparin), in the U.S. The name DefenCath is the U.S. proprietary name approved by the
U.S. Food and Drug Administration (“FDA”). CorMedix launched the product commercially in April 2024 in the inpatient setting
and July 2024 in the outpatient hemodialysis setting.
DefenCath is an FDA approved 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, a
clinically confirmed subset of the epidemiological surveillance term, central line associated bloodstream infection (“CLABSI”),
can lead to treatment delays and increased costs to the healthcare system when they occur due to extended and often repeat 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.
Following the submission of a duplicate New Technology Add-On Payment
(“NTAP”) application to Centers for Medicare and Medicaid Services (“CMS”), CMS issued the Inpatient Prospective
Payment System (“IPPS”) 2024 proposed rule that includes a NTAP per hospital stay for DefenCath. This NTAP represents reimbursement
to inpatient facilities of 75% of the wholesaler acquisition cost (“WAC”) price per 3 mL vial, and an average utilization
of 19.5 vials per hospital stay. The final IPPS rule amended as of October 1, 2024 to reflect the current WAC of $249.99 per 3ml vial
resulting in a potential maximum NTAP of $3,656.10.
On November 15, 2023, we
announced that the FDA approved the new drug application (“NDA”) for DefenCath to reduce the incidence of CRBSI in adult
patients with kidney failure receiving chronic hemodialysis through a CVC. 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 launched the product commercially in April 2024 in the inpatient setting and July 2024 in the outpatient hemodialysis
setting.
1
DefenCath is listed in the
Orange Book as having new chemical entity (“NCE”) exclusivity (5 years) expiring on November 15, 2028, and the Generating
Antibiotic Incentives Now (“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”).
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 for a July 1, 2024 implementation. We also submitted
a Healthcare Common Procedure Coding System (“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 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.
We announced on June 6, 2024
that CMS determined that DefenCath qualified for pass-through status under the hospital Out-Patient Prospective Payment System (“OPPS”).
Pass-through status provides for separate payment under Medicare Part B for the utilization of DefenCath in the outpatient ambulatory
setting for a period of at least two years, and up to a maximum of three years. While vascular access for hemodialysis can be initiated
in an inpatient setting, ambulatory surgical centers or vascular access centers offer a less-invasive, outpatient-based alternative for
patients. We estimate that up to 100,000 hemodialysis-central venous catheter (“HD-CVC”) placements occur each year, and pass-through
status offers providers a separate reimbursement mechanism in this setting of care administration of DefenCath.
Subsequent to the launch of DefenCath in April 2024, we announced U.S.-based
multi-year commercial supply agreements consisting of a large and several mid-sized dialysis organizations. Each provider has customized
an implementation plan to provide access to patients based on a variety of clinical and other factors. We believe the currently contracted
customer base represents roughly 60% of the outpatient dialysis centers in the U.S., in terms of the total addressable patient market.
Market Opportunity
Central Venous Catheters (“CVC”) or ‘central lines’
are an important and frequently used method for accessing the vasculature for hemodialysis (a form of dialysis where the patient’s
blood is circulated through a dialysis filter), administering chemotherapy and basic fluids in cancer patients and for cancer chemotherapy,
administering long term antibiotic therapy, and administering total parenteral nutrition (complete or partial dietary support via intravenous
nutrients).
Bloodstream infections
resulting from the use of central venous catheters known as CLABSIs can result in significant morbidity and increased rates of
hospital admissions, readmissions and mortality. One of the major and common risk factors for all patients requiring CVCs is the
risk of acquiring a CLBSI and the clinical complications associated with them. The total annual cost for treating outpatient derived
CRBSI episodes and their related complications in the U.S. is up to $2.3 billion, with approximately 250,000 CRBSI episodes per year
(Becker’s Hospital Review).
According to the 2024 United States Renal Disease System, reporting
data from 2022, there were nearly 816,000 End-Stage-Renal-Disease, or ESRD, patients on permanent hemodialysis in the U.S. and nearly
25% of these utilized a CVC for vascular access. Of the total population, approximately 131,000 hemodialysis patients were new patients
diagnosed with ESRD during the year and nearly 85% of those were receiving dialysis through a CVC. Patients are typically treated in various
care settings including inpatient hospitals and outpatient dialysis clinics. Kidney failure patients can include both those affected by
Acute Kidney Injury, or AKI and Chronic Kidney Disease, or CKD, populations that progress into dialysis. Kidney failure patients that
present in the hospital have an average length of stay of 13.3 days and additionally high 30-day readmission rates both for same diagnosis
and all-cause with the all-cause readmissions being higher.
2
The two primary causes of CLABSI are the external introduction of pathogens
to the catheter site and the internal proliferation of pathogens within the catheter lumens. Intralumen infections are often caused by
the formation of biofilm. Biofilm build up is the pathogenesis of both infections and thrombotic complications in central venous catheters.
Prevention of CRBSI and inflammatory complications requires both removal of pathogens from the internal surface of the catheter to prevent
the systemic dissemination of organisms contained within the biofilm as well as an anticoagulant to retain blood flow during dialysis.
Biofilm forms when bacteria adhere to surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor
them to various types of materials, including intravenous catheters. The presence of biofilm has many adverse effects, including the ability
to release bacteria into the blood stream. The current standard of catheter care is to instill a heparin lock solution at a concentration
of 1000 u/mL into each catheter lumen immediately following treatment, in order to prevent clotting between dialysis treatments. However,
a heparin lock solution provides no protection from the risk of infection.
Other than DefenCath, there are no pharmacologic drug products approved
in the U.S. for the prevention or reduction of CRBSIs in CVCs. We believe there is a significant need for reduction or prevention of CRBSIs
in the hemodialysis patient population as well as for other patient populations utilizing central venous catheters such as total parenteral
nutrition and oncology/chemotherapy.
DefenCath, our FDA-approved product, is a non-antibiotic, broad-spectrum
antimicrobial and anticoagulant combination that is active against common microbes including antibiotic-resistant strains of certain pathogens
whose mechanism of action inhibits the first steps in biofilm formation. We believe that using DefenCath as an antimicrobial catheter-lock
solution will significantly reduce the incidence of life-threatening catheter-related blood stream infections, thus reducing the need
for systemic antibiotics while prolonging catheter function. We are unaware of any drug products other than DefenCath approved by the
FDA with an indication for use as a catheter lock solution.
Patents
We announced on May 1, 2023
that the United States Patent and Trademark Office (“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.
We currently believe the
patent that is most material to our business is U.S. Patent No. 11,738,120 (expiring April 15, 2042).
License Agreement with ND Partners, LLP
In 2008, we entered into
a License and Assignment Agreement (the “ND License Agreement”) with ND Partners, LLP (“NDP”). Pursuant to the
ND License Agreement, NDP granted us exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating
and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign
patents and applications (the “NDP Technology”). As consideration in part for the rights to the NDP Technology, upon execution
of the ND License Agreement, we paid NDP an initial licensing fee of $325,000 and granted NDP a 5% equity interest, consisting of 7,996
shares of our common stock.
Under the ND License Agreement, we are required to make cash and equity
payments to NDP upon the achievement of certain milestones. Under the ND License Agreement, the maximum aggregate amount of cash payments
due upon achievement of applicable milestones was $2,500,000, with the balance being $2,000,000 as of December 31, 2024. The outstanding
sales milestones were met in the third quarter of 2024 and, accordingly, we anticipate payment will be due in accordance with the agreement
terms at the end of the twelve month period post attainment.
Beginning in the second quarter of 2024, the license intangible asset
is amortized as cost of goods sold over its estimated economic life of approximately 10 years. The amortization start period correlates
with the product launch of DefenCath and the first period in which revenue will be recognized. Amortization expense of approximately $52,000
and $156,000 was recorded during the three and twelve month periods ending December 31, 2024, respectively.
3
The ND License Agreement
will expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim under the ND License Agreement
in a given country, or (ii) the payment of all milestone payments. Upon the expiration of the ND License Agreement in each country, we
will have an irrevocable, perpetual, fully paid-up, royalty-free exclusive license to the NDP Technology in such country. The ND License
Agreement also may be terminated by NDP if we materially breaches or defaults under the ND License Agreement and that breach is not cured
within 60 days following the delivery of written notice to us, or by us on a country-by-country basis upon 60 days prior written notice
in the event our Board determines not to proceed with the development of the NDP Technology. If the ND License Agreement is terminated
by either party, our rights to the NDP Technology will revert back to NDP.
Competitive Landscape
The drug and medical device
industries are highly competitive and subject to rapid and significant technological change. DefenCath’s potential competitors
could include large as well as specialty pharmaceutical and biotechnology companies and large and specialty medical device companies.
Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly more
experience in the development and commercialization of drugs and medical devices. Further, the development of new treatment methods could
render DefenCath non-competitive or obsolete.
We believe that the key competitive
factors that will affect the commercial success of DefenCath are established efficacy and safety, as well as pricing and reimbursement
mechanisms across the continuum of care. Given that DefenCath is the only approved antimicrobial catheter lock solution in the U.S., we
believe that with adequate reimbursement there is an opportunity for DefenCath to become the new standard of care as a CLS in the U.S.
market. We are not aware of any potentially competitive CLS which are approved or under development by other companies in the U.S. As
a means to reduce infections, some dialysis providers are using anti-infective infused catheter caps and/or compounded unapproved antibiotic
catheter lock solutions.
Customers
We expect sales of DefenCath
to generate substantially all of our product revenues for the foreseeable future. Sales to one customer accounted for 86% of our total
revenue for the year ended December 31, 2024, and we had two customers that accounted for 87% and 12% of our accounts receivable, respectively,
for the year ended December 31, 2024.
Pricing and Reimbursement
Sales of DefenCath and any
future product lines will depend, in part, on the extent to which such products will be covered by third-party payors, such as Medicare,
Medicaid, and other federal and state government programs, managed care entities, commercial insurers, and other organizations, as well
as the level of reimbursement such third-party payors provide for DefenCath and any future product lines. It is essential to obtain third-party
payor coverage policies and adequate payment in order to continue to successfully commercialize DefenCath. We expect to sell DefenCath
primarily to outpatient dialysis clinics and inpatient hospitals.
Inpatient Reimbursement
For Medicare, inpatient acute-care
hospitals are paid under the inpatient prospective payment system (referred to herein as the “IPPS”). The IPPS pays
a flat rate based on the average charges across all hospitals for a specific diagnosis, regardless of whether that particular patient
costs more or less. Under the IPPS, each case is categorized into a diagnosis-related group, or DRG, which is weighted and multiplied
by a standardized amount (updated each year for inflation and other factors), to yield a fixed payment for that DRG and adjusted for
hospital-specific factors (e.g., wages, teaching hospitals) to cover care furnished during the inpatient stay. Additional, temporary
payment is available for new medical services and technologies called New Technology Add-on Payment, or NTAP, if certain criteria are
met. There are three criteria required for new technologies to be eligible to receive NTAP:
1. Product must meet “newness” criteria;
3. Product must meet certain cost thresholds.
4
CMS created several
alternative NTAP approval pathways for certain devices that obtain breakthrough designation and drugs that obtain Qualified Infectious
Disease Product, or QIDP, designation from the FDA. Under these alternative pathways, the new technology need only meet the cost criterion
because CMS assumes that those products meet the newness and substantial clinical improvement criteria.
CMS has issued the IPPS 2024
proposed rule that includes a NTAP per hospital stay for DefenCath. This NTAP represents reimbursement to inpatient facilities of 75%
of the WAC price 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 subsequently amended as of October 1, 2024 to reflect the current WAC of $249.99 per 3ml vial.
NTAP is granted for a period
of 2-3 years after the date of FDA approval. Although NTAP is intended to identify and ensure adequate payment for qualifying new technologies,
it may have a limited effect depending on the DRG assignment after the NTAP period ends. With established reimbursement in the inpatient
setting, we launched DefenCath in hospitals first while outpatient reimbursement became effective July 1, 2024.
Outpatient Reimbursement
As discussed above, in 2024
DefenCath was found to be subject to Medicare ESRD PPS, which provides bundled payment for renal dialysis services and affords a TDAPA,
which provides temporary, additional payments for certain new drugs and biologicals. TDAPA reimbursement is calculated based on 100 percent
ASP (or 100 percent of wholesale acquisition price or 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). The HCPCS J-code for DefenCath was published by CMS on April 2, 2024. CMS confirmed a July 1, 2024 implementation
date for HCPCS and TDAPA.
CMS also determined that
DefenCath qualified for pass-through status under the hospital Out-Patient Prospective Payment System (“OPPS”) in June 2024.
Pass-through status provides for separate payment under Medicare Part B for the utilization of DefenCath in the outpatient ambulatory
setting for a period of at least two years, and up to a maximum of three years. While vascular access for hemodialysis can be initiated
in an inpatient setting, ambulatory surgical centers or vascular access centers offer a less-invasive, outpatient-based alternative for
patients. We estimate that up to 100,000 HD-CVC placements occur each year, and pass-through status offers providers a separate reimbursement
mechanism in this setting of care administration of DefenCath.
Manufacturing/Supply Chain
We do not own or operate
any manufacturing facilities related to the production of our products. All our manufacturing processes currently are, and we expect
them to continue to be, outsourced to third parties. We rely on third-party manufacturers to produce sufficient quantities of drug product
for use both commercially and in clinical trials. We intend to continue this practice in the future.
We currently have one FDA approved source for each of our two key active
pharmaceutical ingredients (“APIs”) for DefenCath, taurolidine and heparin sodium, respectively. With regards to taurolidine,
we have a drug master file (“DMF”) filed with the FDA. There is a master commercial supply agreement between a third-party
manufacturer and the Company which has been in place since August 2018. In addition, we are working with our existing manufacture to source
sufficient quantities of taurolidine API to cover at least 24 months of potential future demand. With respect to heparin sodium API, we
have identified an alternate third-party supplier and may 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 contract manufacturing organization (“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 have also qualified Siegfried Hameln as an alternate finished dosage manufacturing site.
We note that CMOs and our
API suppliers are subject to FDA oversight and inspection regarding compliance with Current Good Manufacturing Practices (“cGMP”),
and if deemed non-compliant with cGMP by FDA, we could face shortages or risk with respect to producing sufficient quantities of drug
product or drug substance.
5
Indications
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 June 2024, we announced that the FDA provided feedback to our request
to discuss development plans for additional indications for DefenCath. In response to these comments, we created and submitted three clinical
protocols specifically, the post-marketing requirement of a pediatric hemodialysis (“HD”) study as an obligation under the
Pediatric Research Equity Act (“PREA”), a Phase 3 study protocol to reduce the risk of central-line associated bloodstream
infections (“CLABSI”) for adult patients receiving total parenteral nutrition (“TPN”) through a CVC and Expanded
Access Program (“EAP”) to FDA that allows for pediatric and adult patients, utilizing a CVC for the treatment or maintenance
of many serious illness, to access DefenCath to protect their central line from serious infection. We launched the EAP at the end of 2024
and expect to begin enrollment for the adult TPN and pediatric HD studies in the first half of 2025.
As part of the DefenCath approval letter, the FDA communicated the
existence of a required pediatric assessment under the 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 as communicated in the NDA 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. 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 the additional 0.5 years
of exclusivity associated with this pediatric study (a total marketing exclusivity period of 10.5 years). 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.
We may seek CMS reimbursement for DefenCath in other catheter indications
beyond ESRD, such as oncology patients and total parenteral nutrition patients, including through (i) relevant hospital inpatient diagnosis-related
groups (“DRGs”), (ii) additional NTAP payments, or (iii) outpatient ambulatory payment classifications, or APCs, and payment
under these Medicare benefit categories is not guaranteed for these additional potential indications.
United States Government Regulation
The research, development,
testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things, of our products are extensively
regulated by governmental authorities in the U.S. and other countries.
In the U.S., the FDA regulates
drugs and medical devices under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the FDA’s implementing regulations.
If we fail to comply with the applicable U.S. requirements at any time during the product development process, clinical testing, and
during the approval process or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include
the FDA’s refusal to approve pending applications, withdrawal of an approval, warning letters, adverse publicity, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution,
among other actions. Any agency enforcement action and/or any related impact could have a material adverse effect on us.
6
Drug Approval Process
The research, development,
and approval process in the U.S. and elsewhere is intensive and rigorous and generally takes many years to complete. The typical process
required by the FDA before a therapeutic drug may be marketed in the U.S. includes:
Clinical trial programs in
humans generally follow a three-phase process. Typically, Phase 1 studies are conducted in small numbers of healthy volunteers or, on
occasion, in patients afflicted with the target disease. Phase 1 studies are conducted to determine the metabolic and pharmacological
action of the product line in humans and the side effects associated with increasing doses, and, if possible, to gain early evidence
of effectiveness. In Phase 2, studies are generally conducted in larger groups of patients having the target disease or condition in
order to validate clinical endpoints, and to obtain preliminary data on the effectiveness of the product line and optimal dosing. This
phase also helps determine further the safety profile of the product line. In Phase 3, large-scale clinical trials are generally conducted
in patients having the target disease or condition to provide sufficient data for the statistical proof of effectiveness and safety of
the product line as required by United States and foreign regulatory agencies. Typically, two Phase 3 trials are required for marketing
approval, though one such trial, plus confirmatory evidence, may be acceptable.
Post-approval trials, sometimes
referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience
from the treatment of patients in the intended therapeutic indication and are commonly intended to generate additional safety data regarding
use of the product in a clinical setting. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition
of approval of an NDA or post-approval.
The clinical trial process
for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning or may place clinical trials
on hold at any point in this process if, among other reasons, it concludes that study subjects are being exposed to an unacceptable health
risk. Trials may also be prevented from beginning or may be terminated by institutional review boards, or IRBs, who must review and approve
all research involving human subjects and amendments thereto. The IRB must continue to oversee the clinical trial while it is being conducted.
This includes the IRB receiving information concerning unanticipated problems involving risk to subjects. Side effects or adverse events
that are reported during clinical trials can delay, impede, or prevent marketing authorization. Similarly, adverse events that are reported
after marketing authorization can result in additional limitations being placed on a product’s use and, potentially, withdrawal
of the product from the market.
Following the completion
of a clinical trial, the data are analyzed by the sponsoring company to determine whether the trial successfully demonstrated safety
and effectiveness and whether a product approval application may be submitted. In the United States, if the product is regulated as a
new drug, an NDA must be submitted and approved by the FDA before commercial marketing may begin. The NDA must include a substantial
amount of data and other information concerning the safety and effectiveness of the compound from laboratory, animal, and human clinical
testing, as well as data and information on manufacturing, product quality and stability, and proposed product labeling.
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Once accepted for filing,
the FDA’s review of an application may involve review and recommendations by an independent FDA advisory committee. The FDA must
refer applications for drugs that contain active ingredients, including any ester or salt of the active ingredients that have not previously
been approved by the FDA to an advisory committee or provide in an action letter a summary for not referring it to an advisory committee.
The FDA may also refer drugs to advisory committees when it is determined that an advisory committee’s expertise would be beneficial
to the regulatory decision-making process, including the evaluation of novel products and the use of new technology. An advisory committee
is typically a panel that includes clinicians and other experts, which review, evaluate, and make a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it
considers such recommendations carefully when making decisions.
After evaluating the NDA
and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing
facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete Response Letter, or CRL. If
a CRL is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified in the letter; withdraw the application;
or request an opportunity for a hearing. A CRL indicates that the review cycle of the application is complete, and the application is
not ready for approval and describes all the specific deficiencies that the FDA identified in the NDA. A CRL generally contains a statement
of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or pre-clinical
testing in order for the FDA to reconsider the application. The deficiencies identified may be minor, for example, requiring labeling
changes; or major, for example, requiring additional clinical trials. Even with submission of this additional information, the FDA ultimately
may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to
the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with
specific prescribing information for specific indications.
Even if the FDA approves
a product, it may limit the approved therapeutic uses for the product as described in the product labeling, require that warning statements
be included in the product labeling, require that additional studies be conducted following approval as a condition of the approval,
impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a Risk Evaluation and Mitigation
Strategy, or a REMS, or otherwise limit the scope of any approval.
In addition, under the Pediatric
Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient, indication, dosage form, dosage regimen, or
route of administration must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications
in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product
is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some
or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.
Such deferred studies become required post-marketing studies upon approval of the product.
Special FDA Expedited Review and Approval
Programs
The FDA has various programs,
including Fast Track designation, priority review and breakthrough designation, that are intended to expedite or simplify the process
for the development and FDA review of certain drug products that are intended for the treatment of serious or life-threatening diseases
or conditions, and demonstrate the potential to address unmet medical needs or present a significant improvement over existing therapy.
The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.
To be eligible for a Fast
Track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening
disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill
an unmet medical need if the product will provide a therapy where none exists or provide a therapy that may be potentially superior to
existing therapy based on efficacy, safety, or public health factors. If Fast Track designation is obtained, drug sponsors may be eligible
for more frequent development meetings and correspondence with the FDA. In addition, the FDA may initiate review of sections of an NDA
before the application is complete. This “rolling review” is available if the applicant provides and the FDA approves a schedule
for the remaining information. A Fast Track product is also eligible to apply for accelerated approval and priority review.
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Exclusivity
For approved drug products,
market exclusivity provisions under the FDCA provide periods of exclusivity, which gives the holder of an approved NDA limited protection
from new competition in the marketplace for the innovation represented by its approved drug.
Section 505 of the FDCA
describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A
Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2)
NDA is an application in which the applicant, in part, relies on investigations that were not conducted by or for the applicant and for
which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. Section 505(j)
establishes an abbreviated approval process for a generic version of approved drug products through the submission of an Abbreviated
New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage
form, strength, route of administration, labeling, performance characteristics, and intended use, among other things, to a previously
approved product. Limited changes must be pre-approved by the FDA via a suitability petition.
Five years of exclusivity
are available to New Chemical Entities, or NCEs. A NCE is a drug that contains no active moiety that has been approved by the FDA in
any other NDA submitted under Section 505 of the FDCA. An active moiety is the molecule or ion, excluding those appended portions of
the molecule, that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent derivatives,
such as a complex, chelate, or clathrate, of the molecule, responsible for the physiological or pharmacological action of the drug substance.
During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA application submitted by another company
that contains the previously approved active moiety, except that an ANDA or 505(b)(2) that contains a certification that the patents
listed by the NCE sponsor in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book, are
invalid or will not be infringed by the manufacture, use, or sale of the drug product for which approval is sought, may be submitted
one year before NCE exclusivity expires. Five-year exclusivity will also not delay the submission or approval of a 505(b)(1) NDA; however,
an applicant submitting a 505(b)(1) NDA would be required to conduct or obtain a right of reference to all the pre-clinical studies and
adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.
The FDCA also provides three
years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than
bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the
application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions
of use associated with the new clinical investigations and does not prohibit the FDA from approving NDAs or ANDAs for drugs containing
the original active agent.
Pediatric exclusivity is
another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional
six months of exclusivity to the term of any existing exclusivity for the product, such as NCE exclusivity. This six-month exclusivity
may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data
do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly
respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to
and accepted by the FDA within the required time frames, whatever statutory or regulatory periods of exclusivity that cover the drug
are extended by six months. For patent protection, pediatric exclusivity does not extend the term of the patent or the term a patent
extension, but rather the period during which FDA cannot approve an ANDA or 505(b)(2) NDA that certifies to a patent listed in the Orange
Book. Moreover, pediatric exclusivity attaches to all formulations, dosage forms, and indications for products with existing marketing
exclusivity or patent life that contain the same active moiety as that which was studied.
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The Orphan Drug Act also
provides incentives for the development of drugs intended to treat rare diseases or conditions, which generally are diseases or conditions
affecting fewer than 200,000 individuals annually in the United States, or affecting more than 200,000 in the United States and for which
there is no reasonable expectation that the cost of developing and making the drug available in the United States will be recovered from
sales in the United States. Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain orphan designation
if there is a drug already approved by the FDA that is intended for the same indication and that is considered by the FDA to be the same
drug as the already approved drug. This hypothesis must be demonstrated to obtain orphan drug exclusivity. If granted, prior to product
approval, Orphan Drug Designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study
costs, tax advantages, and user-fee waivers. In addition, if a product receives FDA approval for the indication for which it has orphan
designation, the product is generally entitled to orphan drug exclusivity, which means the FDA may not approve any other application
to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical
superiority over the product with orphan exclusivity.
For
certain infectious disease products, the above discussed exclusivity periods may be further extended if the product is designated as
a QIDP and receives GAIN Act exclusivity. A qualified infectious disease product, or QIDP, is an antibacterial or antifungal drug for
human use intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant
pathogen, including novel or emerging infectious pathogens; or qualifying pathogens designated by the FDA that have the potential to
pose a serious threat to public health. Subject to the specified statutory limitations, a drug that is designated as a QIDP and is approved
for the use for which the QIDP designation was granted will receive a 5-year extension to any exclusivity for which the application qualifies
upon approval. For example, if the FDA approves an NDA for a drug designated as a QIDP, the NCE exclusivity period is extended to ten
years and the FDA may not accept applications for nine years. Moreover, if a product is designated as a QIDP and an orphan product, the
orphan product exclusivity period is extended to twelve years. These extensions are in addition to any extension that an application
may be entitled to under the pediatric exclusivity provisions. To receive a QIDP designation, the sponsor must request that the FDA designate
the product as such prior to the submission of an NDA. This designation may not be withdrawn except if the FDA finds that the request
for designation contained an untrue statement of material fact. QIDPs are also eligible for Fast Track status and priority review.
Post Approval Requirements
Significant legal and regulatory
requirements also apply after FDA approval to market under an NDA. These include, among other things, requirements related to adverse
event and other reporting, product tracking and tracing, suspect and illegitimate product investigations and notifications, product advertising
and promotion and ongoing adherence to cGMPs, as well as the need to submit appropriate new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. FDA can also require the completion
of studies post-approval, such as required studies under PREA. The FDA also enforces the requirements of the Prescription Drug Marketing
Act which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. The
FDA enforces these requirements through, among other ways, review of promotional material submissions, review of adverse events, review
of annual reports, periodic announced and unannounced facility inspections.
The FDA also strictly regulates
marketing, labeling, advertising, and promotion of products that are placed on the market. Physicians, in their independent professional
medical judgment, may prescribe legally available products for unapproved indications that are not described in the product’s labeling
and that differ from those tested and approved by the FDA. Pharmaceutical companies, however, are allowed to promote their drug products
only for the approved indications and in accordance with the provisions of the approved label; off-label promotion is prohibited, as
is false and misleading promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of
off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including,
but not limited to, criminal and civil penalties under the FDCA and the civil False Claims Act, or FCA, exclusion from participation
in federal healthcare programs, mandatory compliance programs under corporate integrity agreements, debarment, and refusal of government
contracts.
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FDA regulations require that
products be manufactured in specific approved facilities and in accordance with cGMP regulations. We rely, and expect to continue to
rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations.
These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance
of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities
involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA
and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance
with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production
and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP regulations,
could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product,
manufacturer or holder of an approved NDA or Biologics License Application (“BLA”), including recall.
After approval of a drug
is granted, FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur
after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions
to the approved labeling to add new safety information, or imposition of additional post-market surveillance or clinical trials to assess
new safety risks. Other potential consequences include, among other things: restrictions on the marketing or manufacturing of the product,
complete withdrawal of the product from the market or product recalls; fines, warning letters or other enforcement-related letters
or clinical holds on investigational or post-approval clinical trials; refusal by FDA to approve pending NDAs or supplements to
approved NDAs, or suspension or revocation of product approvals; product seizure or detention, or refusal to permit the import or
export of products; injunctions or the imposition of civil or criminal penalties; and consent decrees, corporate integrity
agreements, debarment, or exclusion from federal health care programs; or mandated modification of promotional materials and labeling
and the issuance of corrective information.
Moreover, individual states
may have laws and regulations that we must comply with, such as laws and regulations concerning licensing, promotion, sampling, distribution,
and reporting.
Healthcare Regulation
Federal and state healthcare
laws, including fraud and abuse and health information privacy and security laws, also govern our business. If we fail to comply with
those laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely
affected. Such laws include, but are not limited to: the federal Anti-Kickback Statute (“AKS”); federal pricing transparency
and reporting laws and regulations; federal Physician Payments Sunshine Act and Open Payments requirements to track and report certain
payments and other transfers of value; federal and state civil and criminal false claims laws, including the civil False Claims Act.
Additionally, we are subject to state and local law equivalents of the above federal laws, which may be broader in scope and apply regardless
of whether the payer is a governmental healthcare program. We may also be subject to certain state healthcare laws that may not have
a federal parallel, such as pharmaceutical detailing and disclosure laws and requirements.
We are subject to federal
government price reporting, such as those applicable to the Medicare Part B program, those under the Medicaid Drug Rebate Program (“MDRP”),
the 340 Drug Pricing Program and individual state laws relating to pricing and sales and marketing practices. Manufacturers report Average
Sales Price (ASP) data for Part B-covered drugs and biologicals and related items, services, supplies, and products that are paid as
drugs or biologicals. We also participate in the MDRP and report ASP, Best Price and other metrics related to our participation in such
program. We pay rebates to state Medicaid agencies based on those metrics on Medicaid beneficiary utilization of products. In addition,
we are required to sell our covered outpatient drugs at or below the 340B Ceiling Price to 340B Covered Entities. We are also required
to discount our products to authorized users of the Federal Supply Schedule, under which additional laws and requirements apply. Each
of these programs require submission of pricing data and calculation of discounts and/or rebates pursuant to complex statutory formulas
and regulatory guidance, as well as the entry into government procurement contracts governed by the Federal Acquisition Regulations,
and the guidance governing such calculations is not always clear. Compliance with such requirements can require significant investment
in personnel, systems and resources. Failure to properly calculate prices, or to offer required discounts or rebates could subject us
to substantial penalties including, but not limited to, potential False Claims Act liability. CMS continues to issue guidance and rulemaking
governing our participation in the MDRP, and we cannot predict how future guidance or rules would affect our profitability (including
the potential for increases in our overall Medicaid rebate liability and the obligation to charge greatly reduced prices to 340B Covered