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, 2021
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. ☐
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 $208.4
million. Solely for the purpose of this calculation, shares held by directors and executive officers of the registrant have been excluded.
The number of outstanding shares of the registrant’s common stock
was 38,727,979 as of March 25, 2022.
DOCUMENTS INCORPORATED BY REFERENCE
None
CORMEDIX INC.
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 43
Item 2. Properties 43
Item 3. Legal Proceedings 44
Item 4. Mine Safety Disclosures 45
Item 6. [RESERVED] 46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55
Item 8. Financial Statements and Supplementary Data 55
Item 9A. Controls and Procedures 55
Item 9B. Other Information 56
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 56
PART III 57
Item 10. Directors, Executive Officers, and Corporate Governance 57
Item 11. Executive Compensation 62
Item 14. Principal Accounting Fees and Services 75
Item 15. Exhibits, Financial Statement Schedules 76
Neutrolin® is our registered trademark. DefenCathTM and CorMedix
Inc. are our filed trademarks. All other trade names, trademarks and service marks appearing in this report are the property of their
respective owners. We have assumed that the reader understands that all such terms are source-indicating. Accordingly, such terms, when
first mentioned in this report, appear with the trade name, trademark or service mark notice and then throughout the remainder of this
report without trade name, trademark or service mark notices for convenience only and should not be construed as being used in a descriptive
or generic sense.
i
PART I
Forward-Looking Statements
This report contains “forward-looking
statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could
cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in
this report that are not purely historical are forward-looking statements within the meaning of 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”). 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. These statements are based on the beliefs and assumptions of our management based on information currently available to management.
Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the
timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to, those identified below in the section titled “Item
1A. Risk Factors.” The impact of COVID-19 may also exacerbate these risks, any of which could have a material effect on us. Furthermore,
such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update
any forward-looking statements to reflect events or circumstances after the date of such statements.
Item
1. Business
Overview
We are a biopharmaceutical company focused on
developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases.
Our primary focus is on the development of our lead product candidate,
DefenCathTM, for potential commercialization in the United States, or U.S., and other key markets. We have in-licensed
the worldwide rights to develop and commercialize DefenCath and Neutrolin®. The name DefenCath is the U.S. proprietary
name conditionally approved by the U.S. Food and Drug Administration, or FDA. The name Neutrolin is currently used in the European Union,
or EU, and other territories where the Company has received CE-Mark approval for the commercial distribution of Neutrolin as a catheter
lock solution, or CLS, regulated as a medical device.
DefenCath/Neutrolin is a novel anti-infective solution
(a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) intended for the reduction of catheter-related infections and
thrombosis in patients requiring central venous catheters, or CVCs, in clinical settings such as hemodialysis and total parenteral nutrition.
Infections and thrombosis represent key complications among hemodialysis patients with CVCs. These complications can lead to treatment
delays and increased costs to the healthcare system when they occur due to hospitalizations, need for intravenous, or IV, antibiotic treatment,
removal/replacement of the CVC, related treatment costs and increased mortality. We believe DefenCath addresses a significant unmet medical
need and a potential large market opportunity.
DefenCath – United States
In late 2013, we met with the FDA, to determine the pathway for obtaining
U.S. marketing approval of DefenCath as a new drug. In January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product,
or QIDP, for prevention of catheter-related blood stream infections, or CRBSIs, in patients with end stage renal disease receiving hemodialysis
through a CVC. CRBSIs can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to the five
years granted for a New Chemical Entity, or NCE, upon approval of a New Drug Application, or NDA. In addition, in January 2015 the FDA
granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review
of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track
designation of DefenCath provides the Company with the opportunity to meet with the FDA on a more frequent basis during the development
process, and also ensures eligibility to request priority review of the marketing application.
1
We launched the Phase 3 clinical trial in patients
with hemodialysis catheters in the U.S. in December 2015. The clinical trial, named Phase 3 Prospective, Multicenter, Double-blind, Randomized,
Active Control Study to Demonstrate Safety and Effectiveness of DefenCath in Preventing Catheter-related Bloodstream Infection in Subjects
on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, was a prospective, multicenter, randomized, double-blind, active control
trial which aimed to demonstrate the efficacy and safety of DefenCath in preventing CRBSIs, in subjects receiving hemodialysis therapy
as treatment for end stage renal disease. The primary endpoint for the trial was time to CRBSI. The trial evaluated DefenCath relative
to the active control heparin by documenting the incidence of CRBSI and the time until the occurrence of CRBSI for each study
subject. Secondary endpoints were catheter patency, which was defined as required use of tissue plasminogen activating factor, or tPA,
or removal of catheter due to dysfunction, and removal of catheter for any reason.
During the course of the study, in consultation
with the FDA, we established the Clinical Adjudication Committee, or CAC, to critically and independently assess CRBSI while being blinded
to treatment assignment. As announced in July 2018, the CAC reviewed potential cases of CRBSI in our LOCK-IT-100 study that occurred
through early December 2017 and identified 28 such cases. As previously agreed with the FDA, an interim efficacy analysis was performed
when the first 28 CRBSIs were identified. On July 25, 2018, we announced that the independent Data Safety Monitoring Board, or DSMB,
had completed its review of the interim analysis of the data from the LOCK-IT-100 study. Based on the first 28 cases, there was a highly
statistically significant 72% reduction in CRBSI relative to the control (p=0.0034). Because the pre-specified level of statistical significance
was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the DSMB recommended the study be terminated
early.
Following discussions with the FDA, we proceeded
with an orderly termination of LOCK-IT-100. In late January 2019, we announced the topline results of the full data set of the LOCK-IT-100
study. The study continued enrolling and treating subjects until study termination, and the final efficacy analysis was based on a total
of 795 subjects.
The primary endpoint of the Phase 3 LOCK-IT-100
study was the reduction of the risk of occurrence of CRBSI by DefenCath relative to the active control of heparin. In the analysis of
the full data set, a total of 41 CRBSI events were determined by the CAC. There was a 71% reduction in the risk of occurrence of CRBSIs
compared with the active control of heparin, which was well in excess of the study’s assumed treatment effect size of a 55% reduction.
In the DefenCath arm, the CRBSI event rate was 0.13 per 1000 catheter days, which is significantly lower than the event rate of 0.46
per 1000 catheter days in the control arm. The statistical significance of the primary endpoint in the full data set (p=0.0006) was even
more impressive than that of the interim analysis (p=0.0034).
The FDA granted our request for a rolling submission
and review of the New Drug Application, or NDA, that is designed to expedite the approval process for products being developed to address
an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness
for approval of the NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial
with a broad range of subjects and investigation sites with procedures to include trial quality that has demonstrated a clinically meaningful
and statistically very persuasive effect on prevention of a disease with potentially serious outcome.
In March 2020, we began the modular submission
process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in August 2020, the FDA accepted for filing
the DefenCath NDA. The FDA also granted our request for priority review, which provides for a six-month review period instead of the
standard ten-month review period. As we announced in March 2021, the FDA informed us in its Complete Response Letter (“CRL”)
that it cannot approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after
a review of records requested by the FDA and provided by the contract manufacturing organization, or CMO. Additionally, the FDA is requiring
a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process
control to demonstrate fill volume within specifications.
In April 2021, we and the CMO met with the FDA
to discuss proposed resolutions for the deficiencies identified in the CRL to us and the Post-Application Action Letter, or PAAL, received
by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol for the manual extraction study identified in the
CRL, which now has been successfully completed. Addressing the FDA’s concerns regarding the qualification of the filling operation
necessitated adjustments in the process and generation of additional data on operating parameters for manufacture of DefenCath. We and
the CMO determined that additional process qualification is needed with subsequent validation to address these issues. The FDA stated
that the review timeline would be determined when the NDA resubmission is received. The FDA also stated that it expected all corrections
to facility deficiencies to be complete at the time of resubmission so that all corrective actions may be verified during an onsite evaluation
of the manufacturing facility in the next review cycle, if the FDA determines it will do an onsite evaluation.
2
CorMedix and the CMO worked closely to ensure
that the identified deficiencies were resolved and on February 28, 2022, we announced that we resubmitted the NDA for DefenCath to address
the CRL issued by the FDA. In parallel, our third-party manufacturer submitted responses to the deficiencies identified at the manufacturing
facility in the PAAL issued by the FDA concurrently with the CRL. Satisfactory resolution of these issues is required for approval of
the DefenCath NDA. If an onsite inspection is required, we may encounter delays in obtaining FDA approval because the FDA is currently
facing a backlog due to the COVID-19 pandemic. The FDA issued a guidance document on its plan to use voluntary remote interactive evaluations
at facilities, including for a pre-approval inspection to assess a marketing application. The FDA will request the manufacturing facility
to participate in a voluntary remote interactive evaluation, if the FDA believes it is appropriate. A manufacturing facility cannot request
the remote interaction. The FDA expects the use of remote interactive evaluations should help the FDA operate within normal timeframes
in spite of the COVID-19 pandemic.
The FDA did not request additional clinical data
and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100. In
draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney
failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant
to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed as part of the 21st Century
Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat
serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical
development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective
products that address unmet medical needs of patients with serious bacterial and fungal infections. We believe that LPAD will provide
additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving
hemodialysis through a central venous catheter.
In March 2020, we were granted a deferral by the
FDA under the Pediatric Research Equity Act, or PREA, that requires sponsors to conduct pediatric studies for 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. We have made a commitment to
conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients. Pediatric studies for an approved product
conducted under PREA may qualify for pediatric exclusivity, which if granted would provide an additional six months of marketing exclusivity.
DefenCath would then have the potential to receive a total marketing exclusivity period of 10.5 years, including exclusivity pursuant
to NCE and QIDP.
Neutrolin – International
In the European Union, or EU, Neutrolin is regulated
as a Class 3 medical device. In July 2013, we received CE Mark approval for Neutrolin. In December 2013, we commercially launched
Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients using a tunneled, cuffed
central venous catheter for vascular access. To date, Neutrolin is registered and may be sold in certain European Union countries for
such treatment.
In September 2014, the TUV-SUD and The Medicines
Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin for these same expanded indications for the EU.
In December 2014, we received approval from the Hessian District President in Germany to expand the label to include use in oncology
patients receiving chemotherapy, IV hydration and IV medications via central venous catheters. The expansion also adds patients receiving
medication and IV fluids via central venous catheters in intensive or critical care units (cardiac care unit, surgical care unit, neonatal
critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved.
Additional Development Possibilities
In addition to developing the use of taurolidine
as a catheter lock solution, we are sponsoring a pre-clinical research collaboration for the use of taurolidine as a possible treatment
for rare pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma
in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine
for the treatment of neuroblastoma in children. We are also evaluating opportunities for the possible expansion of taurolidine as a platform
compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical
meshes, and wound management. Based on initial feasibility work, we are advancing pre-clinical studies for taurolidine-infused surgical
meshes, suture materials and hydrogels. We will seek to establish development/commercial partnerships as these programs advance.
3
The FDA regards taurolidine as a new chemical
entity and therefore it is currently regulated as an unapproved new drug. We might in the future pursue product candidates that would
involve devices impregnated with taurolidine, and we believe that at the current time such products would be combination products subject
to both device premarket submission requirements and drug regulations. Consequently, given that there is no appropriate predicate medical
device currently marketed in the U.S. on which a 510(k) clearance process could be based and that taurolidine is not yet approved in
any application, we anticipate that we would be required to submit a premarket approval application, or PMA, for marketing authorization
for any medical device indications that we may pursue for devices containing taurolidine. In the event that an NDA for DefenCath is approved
by the FDA, the regulatory pathway for these medical device product candidates may be revisited with the FDA. Although there may be no
appropriate predicate, de novo Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety
and effectiveness.
DefenCath
Market Opportunity
Central venous catheters and
peripherally inserted central catheters (“Central Catheters”) are an important and frequently used method for accessing the
vasculature in 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, long term antibiotic therapy, and total parenteral nutrition
(complete or partial dietary support via intravenous nutrients).
According to the 2015 United
States Renal Disease System, there were 660,000 patients on hemodialysis in the U.S. Hemodialysis National Kidney Foundation has reported
that patients requiring Central Catheters represent over 63 million catheter/dialysis treatment days per year.
One of the major and common
complications for all patients requiring CVCs is CRBSI and the clinical complications associated with them. The total annual cost for
treating CRBSI episodes and their related complications in the U.S. is up to $2.7 billion, with approximately 250,000 CRBSI episodes
per year (Becker’s Hospital Review).
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.
Currently, there are no pharmacologic
agents approved in the U.S. for the prevention of CRBSI in CVCs. As noted above, we received the CE Mark approval for Neutrolin from
the MEB of the EU in July 2013. We believe there is a significant need for prevention of CRBSI in the hemodialysis patient population
as well as for other patient populations utilizing central venous catheters and peripherally inserted central catheters, such as oncology/chemotherapy,
and total parenteral nutrition.
DefenCath is a broad-spectrum
antibacterial, antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant strains
and in addition may prevent biofilm formation. We believe that using DefenCath as an anti-infective solution will significantly reduce
the incidence of life-threatening catheter-related blood stream infections, thus reducing the need for local and systemic antibiotics
while prolonging catheter function.
4
Initially, we expect to sell DefenCath in the
U.S. primarily to key operators of dialysis centers. We anticipate that Medicare reimbursement could be available for DefenCath in hemodialysis
and other catheter indications, such as oncology patients and total parenteral nutrition patients through relevant hospital inpatient
diagnosis-related groups, or DRGs, or outpatient ambulatory payment classifications, or APCs, the End-Stage Renal Disease Prospective
Payment System, or ESRD PPS, base payment, or under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies, or DMEPOS, Fee
Schedule, depending on the setting of care. We also plan to seek separate reimbursement as a drug, where available under Medicare, through
mechanisms such as pass-through status under the Hospital Outpatient Prospective Payment System, the transitional drug add-on payment
adjustment, or TDAPA, under the ESRD PPS, or reimbursement as a drug used with a DMEPOS infusion pump. We have engaged the U.S. Centers
for Medicare & Medicaid Services, or CMS, in preliminary discussions concerning the reimbursement for DefenCath under TDAPA, however,
qualifications cannot be determined until after FDA approval and CMS evaluates the request for coverage in a quarterly review. If approved
under TDAPA, reimbursement of DefenCath would be calculated based on its average selling price. To be eligible for TDAPA, a new renal
drug or biologic must be:
● Commercially available
● Assigned a Healthcare Common Procedure Coding System code
● Identified as not fitting into an established ESRD PPS functional category
● Designated by CMS as a renal dialysis service.
Although we cannot fully anticipate changes in
reimbursement requirements and mechanisms in the coming years, we expect DefenCath would be eligible for and would obtain TDAPA. DefenCath
meets the criterion of being a new renal dialysis product used to treat or manage a condition associated with ESRD, since infections
are the second leading cause of death in patients with ESRD and CVCs are a significant risk factor for infection-associated mortality.
Furthermore, we anticipate that the CMS, and private
payers will increasingly demand that manufacturers demonstrate the cost effectiveness of their product as part of the reimbursement review
and approval process. With this in mind, we are performing health economic evaluations to support this review in the context of the prospective
use of DefenCath in dialysis, and other settings. Our studies may not be sufficient to support coverage or reimbursement at levels
that allow providers to use DefenCath.
Competitive Landscape
The drug and medical device industries are highly
competitive and subject to rapid and significant technological change. DefenCath’s current and future competitors include large
as well as specialty pharmaceutical and biotechnology companies and large and specialty medical device companies. Many of our 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 development and commercial success of DefenCath are efficacy and safety, as well as pricing and reimbursement. Given
that there are no approved catheter lock solutions with antimicrobial properties in the U.S., and that the current standard of care is
heparin, we believe there is an opportunity for DefenCath to become the new standard of care as a CLS in the U.S. market, if approved
by FDA. We are not aware of any potentially competitive CLS which are approved or under development by other companies in the U.S. A
development stage product from Citius is being studied for salvage of CVCs once a patient becomes diagnosed with a catheter related blood
stream infection.
In the EU, several catheter lock solutions have
received a CE Mark, in addition to Neutrolin. For example, TauoLock contains a combination of citrate 4% with (cyclo)-taurolidine and
heparin or urokinase, but it is not approved for use in the U.S. Some device companies have launched antibiotic or antimicrobial-coated
catheters as short-term prevention of catheter infection. We believe these are not effective for hemodialysis catheters due to the long-term
use and high blood flow associated with hemodialysis.
5
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.
With regards to taurolidine,
an active drug ingredient, or API, of DefenCath, we have a Drug Master File filed with the FDA. There is a master commercial supply agreement
between the third-party manufacturer, and us in place from August 2018. We have two sources for the other key API, Heparin sodium.
We have utilized two drug
product CMOs. One CMO manufactures for the EU and Middle East markets and the other is for U.S. production. In order to assure supply,
we are in the process of identifying an additional CMO.
We are confident that these
CMO’s have adequate capacity to produce the volumes needed, and that there exists a sufficient number of potential alternate sources
for the drug substances required to produce our products, as well as third-party manufacturers, that we will be able to find alternate
suppliers and third-party manufacturers in the event that our relationship with any supplier or third-party manufacturer deteriorates.
The process for selecting and qualifying an alternative contract manufacturer and for completing the technology transfer to such a manufacturer
to the point of enabling commercialization of the product would take several years.
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. Our products may be classified by the FDA as a drug or a medical device
depending upon the indications for use or claims. Because certain of our product candidates are considered as medical devices and others
are considered as drugs for regulatory purposes, we intend to submit applications to regulatory agencies for approval or clearance of
both medical devices and pharmaceutical product candidates.
In the U.S., the FDA regulates
drugs and medical devices under the Federal Food, Drug, and Cosmetic Act (FDCA) and the Agency’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, license suspension or revocation, 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.
Drug Approval Process
The research, development, and
approval process in the United States 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 United States includes:
6
During pre-clinical testing,
studies are performed with respect to the chemical and physical properties of candidate formulations. These studies are subject to GLP
requirements. Biological testing is typically done in animal models to demonstrate the activity of the compound against the targeted
disease or condition and to assess the apparent effects of the new product candidate on various organ systems, as well as its relative
therapeutic effectiveness and safety. An IND application must be submitted to the FDA and become effective before studies in humans may
commence.
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 candidate 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 candidate and optimal dosing. This phase also
helps determine further the safety profile of the product candidate. 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 candidate as required by United States and foreign regulatory agencies. Typically, two Phase 3 trials are required for marketing
approval.
In the case of products for
certain serious or life-threatening diseases, the initial human testing may be done in patients with the disease rather than in healthy
volunteers. Because these patients are already afflicted with the target disease or condition, it is possible that such studies will
also provide results traditionally obtained in Phase 2 studies. These studies are often referred to as “Phase 1/2” studies.
However, even if patients participate in initial human testing and a Phase 1/2 study is carried out, the sponsor is still responsible
for obtaining all the data usually obtained in both Phase 1 and Phase 2 studies.
Before proceeding with a study,
sponsors may seek a written agreement known as a Special Protocol Assessment, or SPA, from the FDA regarding the design, size, and conduct
of a clinical trial. Among other things, SPAs can cover clinical studies for pivotal trials whose data will form the primary basis to
establish a product’s efficacy. SPAs help establish up-front agreement with the FDA about the adequacy of a clinical trial design
to support a regulatory approval, but the agreement is not binding on the FDA if new circumstances arise. An SPA may only be modified
with the agreement of the FDA and the trial sponsor or if the director of the FDA reviewing division determines that a substantial scientific
issue essential to determining the safety or efficacy of the drug was identified after the testing began. There is no guarantee that
a study will ultimately be adequate to support an approval even if the study is subject to an SPA.
Additionally, some clinical trials are overseen
by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.
This group regularly reviews accumulated data and advises the study sponsor regarding the continuing safety of trial subjects, and the
continuing validity and scientific merit of the clinical trial. The data safety monitoring board receives special access to unblinded
data during the clinical trial and may advise the sponsor to halt the clinical trial if it determined there is an unacceptable safety
risk for subjects or on other grounds, such as no demonstration of efficacy. The committee can also stop a clinical trial for an overwhelming
demonstration of efficacy, based on pre-defined, stringent statistical parameters and ethical considerations.
The manufacture of investigational drugs for the
conduct of human clinical trials is subject to current Good Manufacturing Practice, or cGMP, requirements. Investigational drugs and
active pharmaceutical ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling
and distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements
of the receiving country as well as U.S. export requirements under the FDCA.
IND sponsors are required to submit a number of
reports to the FDA during the course of a development program. For instance, sponsors are required to make annual reports to the FDA
concerning the progress of their clinical trial programs as well as more frequent reports for certain serious adverse events. Sponsors
must submit a protocol for each clinical trial, and any subsequent protocol amendments to the FDA. Investigators must also provide certain
information to the clinical trial sponsors to allow the sponsors to make certain financial disclosures to the FDA. Information about
certain clinical trials, including a description of the study and study results, must be submitted within specific timeframes to the
National Institutes of Health, or NIH, for public dissemination on their clinicaltrials.gov website. Moreover, under the 21st Century
Cures Act, manufacturers or distributors of investigational drugs for the diagnosis, monitoring, or treatment of one or more serious
diseases or conditions must have a publicly available policy concerning expanded access to investigational drugs.
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United States law requires that
studies conducted to support approval for product marketing be “adequate and well controlled.” In general, this means that
either a placebo or a product already approved for the treatment of the disease or condition under study must be used as a reference
control. The recently passed 21st Century Cures Act, however, provides for FDA acceptance of new kinds of data such as patient experience
data, real world evidence, and, for appropriate indications sought through supplemental marketing applications, data summaries. Studies
must also be conducted in compliance with good clinical practice requirements, and informed consent must be obtained from all study subjects.
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.
The FDA also may require submission of a risk
evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug outweigh the risks of the drug. The REMS plan could
include medication guides, physician communication plans, and elements to assure safe use, such as restricted distribution methods, patient
registries, or other risk minimization tools. An assessment of the REMS must also be conducted at set intervals. Following product approval,
a REMS may also be required by the FDA if new safety information is discovered and the FDA determines that a REMS is necessary to ensure
that the benefits of the drug outweigh the risks of the drug.
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.
Each domestic and foreign manufacturing
establishment, including any contract manufacturers that we may decide to use, must be listed in the NDA and must be registered with
the FDA. The application generally will not be approved until the FDA conducts a manufacturing inspection, approves the applicable manufacturing
process for the drug product, and determines that the facility is in compliance with current cGMP requirements. Moreover, FDA will also
typically inspect one or more clinical trial sites to confirm that the applicable clinical trials were conducted in accordance with GCPs.
Under the Prescription Drug
User Fee Act (PDUFA), as amended, the FDA assesses and receives application user fees for reviewing an NDA, as well as annual program
fees for commercial manufacturing establishments and for approved products. These fees can be significant. Fee waivers, reductions or
refunds are available in certain circumstances. One basis for a waiver or refund of the application user fee is if the applicant is a
“small business” generally defined as employing fewer than 500 employees, including employees of affiliates, no approved
marketing application for a product that has been introduced or delivered for introduction into interstate commerce, and the applicant,
including its affiliates, is submitting its first marketing application. Product candidates that are designated as orphan drugs, which
are further described below, are also not subject to application user fees unless the application includes an indication other than the
orphan indication. Under certain circumstances, orphan products may also be exempt from product and establishment fees.
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Each NDA submitted for FDA approval
is usually reviewed for administrative completeness and reviewability. Following this review, the FDA may request additional information
rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted
application is also subject to review before the FDA accepts it for filing.
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 REMS or otherwise limit the scope of any approval.
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.
The FDA may give a priority review designation
to drugs that are intended to treat serious conditions and, if approved, would provide significant improvements in the safety or effectiveness
of the treatment, diagnosis, or prevention of serious conditions. A priority review means that the goal for the FDA is to review an application
within six months, rather than the standard review of ten months under current PDUFA guidelines, of the 60-day filing date for new molecular
entities.
9
Moreover, under the provisions of the Food and
Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can request designation of a product candidate as
a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one
or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the
drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are eligible for the Fast Track
designation features as described above, intensive guidance on an efficient drug development program beginning as early as Phase 1
trials, and a commitment from the FDA to involve senior managers and experienced review staff in a proactive collaborative, cross-disciplinary
review.
Even if a product qualifies for one or more of
these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period
for FDA review or approval will not be shortened.
A final new program to expedite the development
of drug products is the LPAD, which was passed as part of the 21st Century Cures Act. LPAD allows for the FDA’s determination
of safety and effectiveness to reflect the risk-benefit profile of the drug in the intended limited population, taking into account the
severity, rarity, or prevalence of the infection and the availability of alternative treatments in the limited population. Under LPAD,
a sponsor may request drug approval for an antibacterial or antifungal drug if the drug is intended to treat a serious life-threatening
infection in a limited population of patients with unmet needs. The drug may be approved for the limited population notwithstanding a
lack of evidence to fully establish a favorable benefit-risk profile in a broader population. The FDA must provide prompt advice to sponsors
seeking approval under LPAD to enable them to plan a development program. If approved under LPAD, certain post-marketing requirements
would apply, such as required labeling and advertising statements and pre-distribution submission of promotional materials to FDA. If
after approval for a limited population, a product receives a broader approval, the FDA may remove such post-marketing restrictions.
While a drug may only be approved for a limited population under this program, the 21st Century Cures Act states that it is
not intended to restrict the prescribing of antimicrobial drugs or other products by healthcare professionals.
Exclusivity
For approved drug products, market exclusivity
provisions under the FDCA provide periods of regulatory 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. 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 therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review and
make an ANDA or a 505(b)(2) NDA approval effective for an application submitted by another company that contains the previously approved
active moiety. An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if the applicant submits
a certification stating 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. Five-year exclusivity will also not delay the submission or approval of a full NDA; however, an applicant submitting a full
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.
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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 marketing
protection to the term of any existing regulatory exclusivity, including the non-patent exclusivity period described above. 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 or Orange Book listed
patent protection cover the drug are extended by six months. 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.
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 under the FDA’s qualified infectious disease
product program. 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