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CORMEDIX INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/12/2022 | 04:32pm

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our 2021 Annual Report on Form
10-K, filed with the Securities and Exchange Commission, or the SEC, on March
29, 2022

Forward Looking Statements

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, referred to herein as 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 and those
discussed in the section titled "Risk Factors" included in our most recent
annual report on Form 10-K, as well as any amendments thereto, as filed with the
SEC and which are incorporated herein by reference. 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.
Set forth below is a summary of the principal risks we face:

? We have a history of operating losses, expect to incur additional operating

losses in the future, and may never be profitable;

? Our cost of operations could increase significantly more than what we expect

depending on the costs to complete our development program for DefenCath and


? We will need to finance our future cash needs through public or private equity

offerings, debt financings or corporate collaboration and licensing

arrangements. Any additional funds that we obtain may not be on terms favorable

to us or our stockholders and may require us to relinquish valuable rights;

? The FDA considers the resubmission of the NDA for DefenCath, our lead product

candidate, complete, but the onsite inspection by the FDA and subsequent

approval may be delayed and cannot be guaranteed;

? Our only product Neutrolin is only approved in Europe and is still in

development in the United States, we do not have, and may never obtain, the

regulatory approvals we need to market our product candidates outside of the

European Union;

? Final approval by regulatory authorities of our product candidates for

commercial use may be delayed, limited or prevented, any of which would

adversely affect our ability to generate operating revenues;

? Successful development and commercialization of our other products is


? If we fail to comply with environmental, health and safety laws and

regulations, we could become subject to fines or penalties or incur costs that

could harm our business;

? The successful commercialization of Neutrolin will depend on obtaining coverage

and reimbursement for use of Neutrolin from third-party payors;

? Changes in funding for the FDA and other government agencies or future

government shutdowns or disruptions could cause delays in the submission and

regulatory review of marketing applications, which could negatively impact our

business or prospects;

? The ongoing COVID-19 pandemic, or other pandemic, epidemic or outbreak of an

infectious disease may materially and adversely impact our business, including

our preclinical studies and clinical trials;

? Clinical trials required for our product candidates may be expensive and

time-consuming, and their outcome is uncertain;

? Even if approved, our products will be subject to ongoing government regulation

and regulatory approvals;

? Competition and technological change may make our product candidates and

technologies less attractive or obsolete;

? Healthcare policy changes, including reimbursement policies for drugs and

medical devices, may have an adverse effect on our business, financial

condition and results of operations;


? If we lose key management or scientific personnel, cannot recruit qualified

employees, directors, officers, or other personnel or experience increases in

compensation costs, our business may materially suffer;

? If we are unable to hire additional qualified personnel, our ability to grow

our business may be harmed;

? We face the risk of product liability claims and the amount of insurance

coverage we hold now or in the future may not be adequate to cover all

liabilities we might incur;

? We may be exposed to liability claims associated with the use of hazardous

materials and chemicals;

? Negative U.S. and global economic conditions may pose challenges to our

business strategy, which relies on funding from the financial markets or


? If we materially breach or default under any of our license agreements, the

licensor party to such agreement will have the right to terminate the license

agreement, which termination may materially harm our business;

? If we and our licensors do not obtain protection for and successfully defend

our respective intellectual property rights, competitors may be able to take

advantage of our research and development efforts to develop competing


? Ongoing and future intellectual property disputes could require us to spend

time and money to address such disputes and could limit our intellectual

property rights;

? The decisions by the European and German patent offices may affect patent

rights in other jurisdictions;

? If we infringe the rights of third parties we could be prevented from selling

products and forced to pay damages and defend against litigation;

? We currently have no internal marketing and sales organization and currently

rely and intend to continue to rely on third parties to market, sell, and

distribute Neutrolin outside of the U.S. We may seek a sales partner in the

U.S. if DefenCath receives FDA approval or we may undertake marketing and sales

of DefenCath in the U.S. on our own. If we are unable to enter into or maintain

agreements with third parties to market and sell DefenCath or any other product

after approval or are unable to find a sales partner or establish our own

marketing and sales capabilities, we may not be able to generate significant or

any product revenues;

? If we or our collaborators are unable to manufacture our products in sufficient

quantities or are unable to obtain regulatory approvals for a manufacturing

facility, we may be unable to meet demand for our products and we may lose

potential revenues;

? Corporate and academic collaborators may take actions that delay, prevent, or

undermine the success of our products;

? Data provided by collaborators and others upon which we rely that has not been

independently verified could turn out to be false, misleading, or incomplete;

? We rely on third parties to conduct our clinical trials and pre-clinical

studies. If those parties do not successfully carry out their contractual

duties or meet expected deadlines, our product candidates may not advance in a

timely manner or at all;

? We will depend on third party suppliers and contract manufacturers for the

manufacturing of our product candidates and have no direct control over the

cost of manufacturing our product candidates. Increases in the cost of

manufacturing our product candidates would increase our costs of conducting

clinical trials and could adversely affect our future profitability;


? We will need additional financing to fund our activities in the future, which

likely will dilute our stockholders;

? Our executive officers and directors may sell shares of their stock, and these

sales could adversely affect our stock price;

? Our common stock price has fluctuated considerably and is likely to remain

volatile, in part due to the limited market for our common stock and you could

lose all or a part of your investment;

? A significant number of additional shares of our common stock may be issued at

a later date, and their sale could depress the market price of our common


? Provisions in our corporate charter documents and under Delaware law could make

an acquisition of us, which may be beneficial to our stockholders, more


? Security breaches and other disruptions could compromise our information and

expose us to liability, which would cause our business and reputation to

suffer; and

? Because do not intend to pay cash dividends on our common stock, our

stockholders will not be able to receive a return on their shares unless the

value of our common stock appreciates and they sell their shares.


CorMedix Inc. and our wholly owned German subsidiaries, CorMedix Europe GmbH and
CorMedix Spain, S.L.U., (collectively referred to herein as "we," "us," "our"
and the "Company"), is 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,
DefenCath™, for potential commercialization in the United States, or U.S., and
other key markets as a catheter lock solution, or CLS. 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, while the name Neutrolin® is currently used in
the European Union, or EU, and other territories where we received CE-Mark
approval for the commercial distribution of Neutrolin as a 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 and prevention of catheter-related infections and thrombosis
in patients requiring central venous catheters in clinical settings such as
hemodialysis, total parenteral nutrition, and oncology. Infection and thrombosis
represent key complications among hemodialysis, total parenteral nutrition and
oncology patients with central venous catheters. These complications can lead to
treatment delays and increased costs to the healthcare system when they occur
due to hospitalizations, need for intravenous, or IV antibiotic treatment,
long-term anticoagulation therapy, removal/replacement of the central venous
catheter, related treatment costs and increased mortality. We believe DefenCath
addresses a significant unmet medical need and a potential large market


In January 2015, the FDA designated DefenCath as a Qualified Infectious Disease
Product, or QIDP, for prevention of catheter-related blood stream infections in
patients with end stage renal disease receiving hemodialysis through a central
venous catheter. Catheter-related blood stream infections and clotting 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 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 us 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.

In December 2015, we launched our Phase 3 Prospective, Multicenter,
Double-blind, Randomized, Active Control Study to Demonstrate Safety &
Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream
Infection in Subjects on Hemodialysis for End Stage Renal Disease, or
LOCK-IT-100, in patients with hemodialysis catheters in the U.S. The clinical
trial was designed to demonstrate the safety and effectiveness of DefenCath
compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary
endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for
each study subject. Secondary endpoints were catheter patency, which was defined
as required use of tPA, or removal of catheter due to dysfunction, and removal
of catheter for any reason.

As previously agreed with the FDA, an interim efficacy analysis was performed
when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study
that occurred through early December 2017. Based on these first 28 cases, there
was a highly statistically significant 72% reduction in CRBSI by DefenCath
relative to the active control of heparin (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 LOCK-IT-100 study
was terminated early. The study continued enrolling and treating subjects until
study termination, and the final analysis was based on a total of 795 subjects.
In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative
to heparin, which was highly statistically significant (p=0.0006), with a good
safety profile.

The FDA granted our request for a rolling submission and review of the NDA,
which 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 an 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 study sites that has demonstrated a clinically meaningful and
statistically very persuasive effect on a disease with potentially serious

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, or CRL, that it could not 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 required 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 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 was needed with subsequent validation to address these issues. 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.


On February 28, 2022, 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. On March 28, 2022, we announced that the
resubmission of the NDA for DefenCath has been accepted for filing by the FDA.
The FDA considers the resubmission as a complete, Class 2 response with a
six-month review cycle. The CMO has been notified that an onsite inspection by
FDA will be scheduled during the review. There may be delays if travel
restrictions are again imposed due to the ongoing COVID-19 pandemic.

We intend to pursue additional indications for DefenCath use as a CLS in
populations with an unmet medical need that 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 oncology
patients using a central venous catheter.

The FDA regards taurolidine as a new chemical entity and therefore an unapproved
new drug. Consequently, there is no appropriate predicate medical device
currently marketed in the U.S. on which a 510(k) approval process could be
based. As a result, we will be required to submit a premarket approval
application, or PMA, for marketing authorization for any medical device
indications that we may pursue. 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.

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
, 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

In September 2014, the TUV-SUD and The Medicines Evaluation Board of the
, or MEB, granted a label expansion for Neutrolin to include use in
oncology patients receiving chemotherapy, intravenous, or IV, hydration and IV
medications via CVC for the EU. In December 2014, we received approval from the
Hessian District President in Germany to expand the label for these same
expanded indications. The expansion also adds patients receiving medication and
IV fluids via CVC 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.

In September 2019, our registration with the Saudi Arabia Food and Drug
, or the SFDA, expired. As a result, we cannot sell Neutrolin in
Saudi Arabia and we do not intend to pursue renewal of our registration with the

In May 2022, we announced that we expect to begin winding down our operations in
the EU and discontinue Neutrolin sales in both the EU and the Middle East.

The COVID-19 pandemic and government measures taken in response have had a
significant impact, both direct and indirect, on businesses and commerce. In
response to the COVID-19 pandemic, public health measures to reduce the spread
of the virus have been implemented across much of the United States, Europe and
Asia, including in the locations of our offices, clinical trial sites, key
vendors and partners. Such public health measures, including "shelter-in-place"
orders, were previously lifted, at least partially, in many locations. However,
an increase in the spread of COVID-19 and variants has led, and may continue to
lead, to the re-imposition by many nations and U.S. of quarantine requirements
for travelers from other regions and may lead to the re-imposition of
"shelter-in-place" or other similar orders. Our program timelines may be
negatively affected by COVID-19, which could materially and adversely affect its
business, financial conditions and results of operations.


Since our inception, our operations have been primarily limited to conducting
clinical trials and establishing manufacturing for our product candidates,
licensing product candidates, business and financial planning, research and
development, seeking regulatory approval for our products, initial
commercialization activities for DefenCath in the U.S. and Neutrolin in the EU
and other foreign markets, and maintaining and improving our patent
portfolio. We have funded our operations primarily through debt and equity
financings. We have generated significant losses to date, and we expect to use
substantial amounts of cash for our operations as we prepare our pre-launch
commercial activities for DefenCath for the U.S. market and commercialize
Neutrolin in the EU and other foreign markets, pursue business development
activities, and incur additional legal costs to defend our intellectual
property. As of March 31, 2022, we had an accumulated deficit of approximately
$252.7 million. We are unable to predict the extent of any future losses or when
we will become profitable, if ever.

Financial Operations Overview


We have not generated substantial revenue since our inception. Through March 31,
, we have funded our operations primarily through debt and equity

Research and Development Expense

Research and development, or R&D, expense consists of: (i) internal costs
associated with our development activities; (ii) payments we make to third party
contract research organizations, or CRO, contract manufacturers, investigative
sites, and consultants; (iii) technology and intellectual property license
costs; (iv) manufacturing development costs; (v) personnel related expenses,
including salaries, stock-based compensation expense, benefits, travel and
related costs for the personnel involved in drug development; (vi) activities
relating to regulatory filings and the advancement of our product candidates
through preclinical studies and clinical trials; (vii) facilities and other
allocated expenses, which include direct and allocated expenses for rent,
facility maintenance, as well as laboratory and other supplies; and (viii) costs
related to the manufacturing of the product that could potentially be available
to support the commercial launch prior to marketing approval. All R&D is
expensed as incurred.

Conducting a significant amount of development is central to our business model.
Product candidates in later-stage clinical development generally have higher
development costs than those in earlier stages of development, primarily due to
the significantly increased size and duration of the clinical trials.

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


Development timelines, probability of success and development costs vary widely.
We are currently focused on securing the marketing approval for DefenCath in the
U.S. as well as on continuing sales in foreign markets where Neutrolin is
approved. In December 2015, we signed an agreement with a clinical research
organization, or CRO, to help us conduct our LOCK-IT-100 Phase 3 clinical trial
in hemodialysis patients with central venous catheters to demonstrate the
efficacy and safety of DefenCath in preventing catheter-related bloodstream
infections and blood clotting in subjects receiving hemodialysis therapy as
treatment for end stage renal disease. Our LOCK-IT-100 study was completed and
all costs related to the agreement with the CRO has been paid.

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.

In addition to DefenCath, we are involved in a pre-clinical research
collaboration for the use of taurolidine as a possible treatment for rare orphan
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 and commercial partnerships
if these programs advance.

We are pursuing additional opportunities to generate value from taurolidine, an
active component of DefenCath. Based on initial feasibility work, we have
completed an initial round of pre-clinical studies for taurolidine-infused
surgical meshes, suture materials, and hydrogels, which require a PMA regulatory
pathway for approval.

Selling, General and Administrative Expense

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

Foreign Currency Exchange Transaction Gain (Loss)

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


Interest Income

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

Interest Expense

Interest expense consists of interest incurred on our convertible debt,
amortization of debt discount and on financing of expenditures.

Results of Operations

Three months ended March 31, 2022 compared to three months ended March 31, 2021

The following is a tabular presentation of our condensed consolidated operating
results (in thousands):

For the Three Months % of Change
Ended March 31, Increase
2022 2021 (Decrease)
Revenue $ 8 $ 88 (91 )%
Cost of sales (2 ) (61 ) (98 )%
Gross profit 6 27 (77 )%
Operating Expenses:
Research and development (2,288 ) (2,636 ) (13 )%
Selling, general and administrative (4,751 ) (4,601 ) 3 %
Total operating expenses (7,039 ) (7,237 ) (3 )%
Loss from operations (7,033 ) (7,210 ) (2 )%
Interest income 14 3 274 %
Foreign exchange transaction loss (10 ) (5 ) 108 %
Interest expense (5 ) (5 ) 4 %
Net loss (7,034 ) (7,217 ) (3 )%
Other comprehensive loss (37 ) (3 ) 1,070 %
Comprehensive loss $ (7,071 ) $ (7,220 ) (2 )%

Revenue. Revenue for the three months ended March 31, 2022 was $8,000 as
compared to $88,000 in the same period last year, a decrease of $80,000. The
decrease was attributable to lower sales in the Middle East and European Union
countries in 2022 as compared to the same period in 2021.

Cost of Sales. Cost of sales was $2,000 for the three months ended March 31,
compared to $61,000 in the same period last year, a decrease of $59,000.
The decrease was primarily attributable to the net decrease in cost of materials
as a result of lower sales in 2022 as compared to the same period in 2021.

Research and Development Expense. R&D expense was $2,288,000 for the three
months ended March 31, 2022, a decrease of $348,000, or 13%, from $2,636,000 for
the same period in 2021. The decrease was driven by net decreases in personnel
expenses and non-cash charges for stock-based compensation of $304,000 and
$178,000, respectively, offset by an increase in costs related to the
manufacturing of DefenCath prior to its potential marketing approval of


Selling, General and Administrative Expense. SG&A expense was $4,751,000 for the
three months ended March 31, 2022, an increase of $150,000, or 3%, from
$4,601,000 for the same period in 2021. The increase was primarily attributable
to an increase in legal fees of $479,000, mainly due to the securities
litigation, an increase in personnel expenses of $270,000, an increase in
recruitment fees of $153,000 related to the search for chief executive officer
and increases in general office expenses of $128,000. These increases were
partially offset, among others of lesser significance, by a decrease in non-cash
charges for stock-based compensation of $415,000, reduced costs related to
marketing research studies in preparation for the potential marketing approval
of DefenCath of $250,000, and a decrease in consulting fees of $225,000.

Interest Income. Interest income was $14,000 for the three months ended March
31, 2022
compared to $3,000 for the same period last year, an increase of
$11,000. The increase was attributable to higher average of interest-bearing
cash equivalents and short-term investments during the first quarter of 2022 as
compared to the same period in 2021.

Foreign Exchange Transaction Gain (Loss). A foreign exchange transaction loss of
$10,000 was recorded for the three months ended March 31, 2022 compared to a
loss of $5,000 for the same period last year. These losses occur due to the
re-measuring of transactions denominated in a currency other than our functional

Interest Expense. Interest expense was $5,000 for the three months ended March
31, 2022
and 2021.

Other Comprehensive Loss. Unrealized foreign exchange movements related to
long-term intercompany loans, the translation of the foreign affiliate financial
statements to U.S. dollars and unrealized movements related to short-term
investment resulted in losses of $37,000 and $3,000 for the three months ended
March 31, 2022 and 2021, respectively.

Liquidity and Capital Resources

Sources of Liquidity

As a result of our cost of sales, R&D and SG&A expenditures and the lack of
substantial product sales revenue, our ongoing operations have not been
profitable since our inception. During the three months ended March 31, 2022, we
received net proceeds of $3,004,000 from the issuance of 641,542 shares of
common stock under our at-the-market-issuance sales agreement, or ATM program,
as compared to $41,456,000 net proceeds for the same period in 2021 from the
issuance of 3,737,862 shares of common stock. For the same period in 2021, we
also received $125,000 from the exercise of warrants. We will continue to be
reliant on external sources of cash for the foreseeable future until we are able
to generate revenue.

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022
was $6,744,000 as compared to $6,691,000 for the same period in 2021, an
increase of $53,000, primarily driven by a decrease in non-cash stock-based
compensation, partially offset by, among others of lesser significance, changes
in accrued expenses, accounts payable, and prepaid expenses and other current

Net Cash Provided by (Used in) Investing Activities

Cash used in investing activities for the three months ended March 31, 2022 was
$4,188,000 as compared to $526,000 provided by in the same period in 2021. The
net cash used in investing activities during the three months ended March 31,
was mainly driven by increased amounts invested in short-term investments
as compared to the same period in 2021.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the three months ended March 31,
was $3,004,000 as compared to $41,581,000 for the same period in 2021, a
decrease of $38,577,000. During the three months ended March 31, 2022, we
generated net proceeds of $3,004,000 from the sale of our common stock in our
ATM program as compared to $41,456,000 net proceeds during the same period in
2021. Additionally, during the same period in 2021, we generated net proceeds of
$125,000 from the exercise of warrants.


Funding Requirements and Liquidity

Our total cash on hand and short-term investments as of March 31, 2022 was
$61,687,000, excluding restricted cash of $231,000, compared with $65,466,000 at
December 31, 2021, excluding $234,000 restricted cash. As of March 31, 2022, we
have approximately $46,880,000 available under our ATM program and $150,000,000
under the 2021 Shelf Registration statement for the issuance of equity, debt or
equity-linked securities.

Because our business has not generated positive operating cash flow, we will
need to raise additional capital in order to continue to fund our research and
development activities, as well as to fund operations generally. Our continued
operations are focused primarily in activities leading to the pre-launch and
commercialization for DefenCath and will depend on our ability to raise
sufficient funds through various potential sources, such as equity, debt
financings, and/or strategic relationships and potential strategic transactions.
We can provide no assurances that financing or strategic relationships will be
available on acceptable terms, or at all.

We expect to continue to fund operations from cash on hand and through capital
raising sources as previously described, which may be dilutive to existing
stockholders, through revenues from the licensing of our products, or through
strategic alliances. We expect to continue to utilize our ATM program, if
conditions allow, to support our ongoing funding requirements. Additionally, we
may seek to sell additional equity or debt securities through one or more
discrete transactions, or enter into a strategic alliance arrangement, but can
provide no assurances that any such financing or strategic alliance arrangement
will be available on acceptable terms, or at all. Moreover, the incurrence of
indebtedness would result in increased fixed obligations and could contain
covenants that would restrict our operations. Raising additional funds through
strategic alliance arrangements with third parties may require significant time
to complete and could force us to relinquish valuable rights to our
technologies, future revenue streams, research programs or product candidates,
or to grant licenses on terms that may not be favorable to us or our
stockholders. Our actual cash requirements may vary materially from those now
planned due to a number of factors, any change in the focus and direction of our
research and development programs, any acquisition or pursuit of development of
new product candidates, competitive and technical advances, the costs of
commercializing any of our product candidates, and costs of filing, prosecuting,
defending and enforcing any patent claims and any other intellectual property

Sales of Neutrolin outside the U.S. are not expected to generate significant
product revenues for the foreseeable future, and we expect to grow product sales
for DefenCath in the U.S., should we receive FDA approval. In the absence of
significant revenue, we are likely to continue generating operating cash flow
deficits. We will continue to use cash as we increase other activities leading
to the commercialization of DefenCath upon approval, pursue business development
activities, and incur additional legal costs to defend our intellectual

We currently estimate that we have sufficient cash on hand to fund operations at
least through the first half of 2023. Additional financing may be required to
build out our commercial infrastructure should we receive FDA approval and to
continue our operations should we decide to market and sell DefenCath in the
U.S. on our own. If we are unable to raise additional funds when needed, we may
be forced to slow or discontinue our preparations for the commercial launch of
DefenCath. We may also be required to delay, scale back or eliminate some or all
of our research and development programs. Each of these alternatives would
likely have a material adverse effect on our business.


Contractual Obligations

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

Critical Accounting Policies and Estimates

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

For the three-month period ended March 31, 2022, there were no significant
changes to our critical accounting policies and estimates as identified in our
Annual Report on Form 10-K for the year ended December 31, 2021.

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