TABLE OF CONTENTS
About this Prospectus
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1
|
Prospectus Summary
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2
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Risk Factors
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6
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Special Note Regarding Forward-Looking Statements
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25
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Use of Proceeds
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26
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Plan of Distribution
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27
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Description of Our Capital Stock
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29
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Common Stock
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29
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Issued and Outstanding Preferred Stock
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29
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Series C-2 and C-3 Non-Voting Convertible Preferred
Stock
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30
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Series D Non-Voting Convertible Preferred Stock
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31
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Series E Non-Voting Convertible Preferred Stock
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32
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Transfer Agent and Registrar
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33
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Description of Preferred Stock That May be Offered
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33
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Description of Debt Securities
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34
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Description of Warrants
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36
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Description of Units
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37
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Certain Provisions of Delaware Law and of Our Amended and Restated
Certificate of Incorporation and Amended and Restated
Bylaws
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38
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Legal Matters
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39
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Experts
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39
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Where You Can Find Additional Information
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39
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Incorporation of Documents by Reference
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39
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This prospectus is part of a registration
statement that we filed with the Securities and Exchange
Commission, or SEC, utilizing a “shelf” registration
process.
Under this shelf registration process, we may offer
shares of our common stock and preferred stock, various series of
debt securities and/or warrants to purchase any of such securities,
either individually or in units, in one or more offerings, of an
indeterminate amount.
This prospectus
provides you with a general description of the securities we may
offer. Each time we offer a type or series of securities under this
prospectus, we will provide a prospectus supplement that will
contain specific information about the terms of that
offering.
This
prospectus does not contain all of the information included in the
registration statement. For a more complete understanding of the
offering of the securities, you should refer to the registration
statement, including its exhibits. Prospectus supplements may also
add, update or change information contained or incorporated by
reference in this prospectus. However, no prospectus supplement
will fundamentally change the terms that are set forth in this
prospectus or offer a security that is not registered and described
in this prospectus at the time of its effectiveness. This
prospectus, together with the applicable prospectus supplements and
the documents incorporated by reference into this prospectus,
includes all material information relating to this offering. You
should carefully read this prospectus, the applicable prospectus
supplement, the information and documents incorporated herein by
reference and the additional information under the heading
“Where You Can Find More Information” before making an
investment decision.
You
should rely only on the information we
have provided or incorporated by reference in this prospectus or
any prospectus supplement. We have not authorized anyone to provide
you with information different from that contained or incorporated
by reference in this prospectus. No dealer, salesperson or other
person is authorized to give any information or to represent
anything not contained or incorporated by reference in this
prospectus. You must not rely on any unauthorized information or
representation. This prospectus is an offer to sell only the
securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. You should assume that
the information in this prospectus or any prospectus supplement is
accurate only as of the date on the front of the document and that
any information we have incorporated herein by reference is
accurate only as of the date of the document incorporated by
reference, regardless of the time of delivery of this prospectus or
any sale of a security.
To
the extent there are inconsistencies between any prospectus
supplement, this prospectus and any documents incorporated by
reference, the document with the most recent date will
control.
This prospectus may not be used to consummate sales of our
securities, unless it is accompanied by a prospectus
supplement.
Unless
the context otherwise requires, “CorMedix,” the
“company,” “we,” “us,”
“our” and similar names refer to CorMedix
Inc.
Neutrolin
®
is our registered trademark and the
CorMedix logo is our trademark. All other trade names, trademarks
and service marks appearing in this prospectus are the property of
their respective owners. We have assumed that the reader
understands that all such terms are source-indicating. Accordingly,
such terms, when first mentioned in this prospectus, appear with
the trade name, trademark or service mark notice and then
throughout the remainder of this prospectus without trade name,
trademark or service mark notices for convenience only and should
not be construed as being used in a descriptive or generic
sense.
This summary highlights certain information about us, this offering
and selected information contained elsewhere in or incorporated by
reference into this prospectus. This summary is not complete and
does not contain all of the information that you should consider
before deciding whether to invest in our common stock. For a more
complete understanding of our company and this offering, we
encourage you to read and consider carefully the more detailed
information in this prospectus, including the information
incorporated by reference into this prospectus, and the information
referred to under the heading “Risk Factors” in this
prospectus beginning on page 6, and in the documents incorporated
by reference into this prospectus.
OUR COMPANY
Overview
We are
a biopharmaceutical company focused on developing and
commercializing therapeutic products for the prevention and
treatment of infectious and inflammatory diseases.
Our
primary focus is on the development of our lead product candidate,
Neutrolin® (also known as CRMD003), for potential
commercialization in the United States (“U.S.”) and
other key markets. We have in-licensed the worldwide rights to
develop and commercialize Neutrolin®. Neutrolin is a novel
anti-infective solution (a formulation of taurolidine, citrate and
heparin 1000 u/ml) for the reduction and prevention of
catheter-related infections and thrombosis in patients requiring
central venous catheters in clinical settings such as dialysis,
critical/intensive care, and oncology. Infection and thrombosis
represent key complications among critical care / intensive care
and cancer patients with central venous catheters. These
complications can lead to treatment delays and increased costs to
the healthcare system when they occur due to hospitalizations, need
for IV antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related
treatment costs and increased mortality when they occur. We believe
Neutrolin addresses a significant unmet medical need and potential
large market opportunities.
Neutrolin is an
anti-infective solution for the prevention of catheter-related
infections and thrombosis in the central venous catheter markets
such as dialysis, critical care, and oncology. There are seven
million central venous catheters and 160 million peripheral
catheters placed per year in patients in the United States.
There are 250,000 catheter related bloodstream infections (CRBSIs)
in the United States per year. The mortality rate ranges from
20 to 25%. Neutrolin is a novel formulation of taurolidine,
citrate and heparin 1000 u/ml that provides a combination
preventative solution to decrease the development of biofilm, which
reduces infection and thrombosis thereby keeping catheters
operating optimally in the clinical settings in hemodialysis,
critical care/intensive care and oncology. There are approximately
468,000 hemodialysis patients in the United States. Hemodialysis
using a tunneled central vein catheter was our initial target
market with Germany being the first market in which we launched
Neutrolin as a medical device in December 2013. These hemodialysis
patients represent over 127 million catheter/dialysis treatment
days per year in the U.S., which we believe represents a
conservative market potential of $300 to $400 million. The
market in the critical care/intensive care units is 28.5 million
catheter days per year in the United States alone. There were over
14.5 million patients living with cancer in the United States as of
2014 with an estimated 7.7 million having a long-term central
venous catheter. However, when stages of disease, chemotherapy
regimens and catheter types are factored, the oncology market
represents 90 million catheter days. Infection and thrombosis
represent key complications among critical care/intensive care and
cancer patients with central venous catheters. These complications
can lead to treatment delays and increased costs to the healthcare
system when they occur due to hospitalizations, need for IV
antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related
treatment costs and increased mortality when they
occur.
The
U.S. Food and Drug Administration, or FDA, has designated Neutrolin
as a Qualified Infectious Disease Product (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 an additional
five years of market exclusivity in addition to the five years
granted for a New Chemical Entity. In addition, in January 2015,
the FDA granted Fast Track designation to Neutrolin Catheter Lock
Solution, pursuant to the Food and Drug Administration Safety
Innovation Act (FDASIA) highlighting the large unmet need to
prevent infections in the U.S. healthcare system. The Fast Track
designation of Neutrolin 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
late 2013, we met with the FDA to determine the pathway for U.S.
marketing approval of Neutrolin. Based on those discussions, we
plan to conduct two pivotal trials, both of which are required to
demonstrate safety and effectiveness of Neutrolin to secure
marketing approval. We initiated the first Phase 3 clinical trial
in hemodialysis patients with a central venous catheter in December
2015 and plan to initiate the second Phase 3 trial in oncology
patients with catheters receiving total parenteral nutrition,
subject to sufficient resources.
We
launched the Phase 3 clinical trial in hemodialysis catheters in
the U.S. in December 2015. The clinical trial, named Catheter Lock
Solution Investigational Trial, or LOCK-IT-100, is a prospective,
multicenter, randomized, double-blind, placebo-controlled, active
control trial which aims to demonstrate the efficacy and safety of
Neutrolin in preventing catheter-related bloodstream infections, or
CRBSI, in subjects receiving hemodialysis therapy as treatment for
end stage renal disease.
The primary
endpoint for the trial is time to CRBSI. The trial will evaluate
whether Neutrolin is superior to the active control heparin by
documenting the incidence of CRBSI and the time until the
occurrence of CRBSI. Key secondary endpoints are catheter patency
which is defined as required use of tissue plasminogen activating
factor (tPA) or removal of catheter due to dysfunction and catheter
removal for any reason. We project that the Data and Safety
Monitoring Board will conduct a safety analysis in the fourth
quarter of 2016 when half of the patients are enrolled or when
there have been 81 events, whichever occurs first. In addition, we
project to complete enrollment in the first quarter of 2017 with
top line data release in the third quarter of
2017.
Our
plans also include conducting a Phase 3
clinical trial in oncology patients with catheters receiving total
parenteral nutrition, or LOCK-IT-200. We are in discussions with
the FDA to develop the design of the trial. These plans are subject
to funding requirements (see
Funding and Capital
Requirements
).
In July
2013, we received CE Mark approval for Neutrolin. As a result, in
December 2013, we began the commercial launch of Neutrolin in
Germany for the prevention of catheter-related bloodstream
infections (“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 and Middle
Eastern countries for such treatment.
In
September 2014, the TUV-SUD and The Medicines Evaluation Board of
the Netherlands granted a label expansion for Neutrolin for these
same expanded indications for the European Union
(“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.
We are
evaluating
opportunities for the
possible expansion of indications for taurolidine. Provisional
patents have been submitted in four areas, antimicrobial sutures,
nanofiber webs, wound management, and osteoarthritis and
visco-supplementation. There exists a need to
control and protect against surgical site infections upon closure
with sutures. We believe taurolidine could offer
benefits not currently available in marketed antimicrobial
sutures. We also believe that the nanofiber webs used
for absorbable meshes could benefit from taurolidine’s
minimal inflammatory response and infection
control. Taurolidine incorporated into webs or hydrogels
could also be used for wound management especially wounds in less
sterile environments and burn patients. Lastly,
incorporating taurolidine into formulations for osteoarthritis and
visco-supplementation may benefit from taurolidine’s
anti-inflammatory and anti-infection properties. We have entered
into a research collaboration regarding incorporating taurolidine
into electrospun nanofibers.
Recent Developments
As a result of our formal search for an individual
to serve as our Chief Executive Officer, on September 27, 2016, we
entered into an employment agreement, effective October 3, 2016,
with
Khoso Baluch
. Unless
renewed pursuant to the terms thereof, the agreement will expire on
October 3, 2019. Mr. Baluch was also be appointed to our Board of
Directors on October 3, 2016, and we will use our best efforts to
cause Mr. Baluch to be elected to the Board of Directors throughout
the term of his employment agreement, unless there is a change of
control.
Mr.
Baluch previously served as Senior Vice President and President
Europe, Middle East & Africa EMEA of UCB, SA, or UCB, from
January 2015 to early 2016, Senior Vice President and President of
the European Region of UCB from February 2013 to December 2014, and
Senior Vice President and Chief Marketing Officer of UCB from
January 2010 to February 2013. Prior to joining UCB, Mr. Baluch
worked for Eli Lilly & Co for 24 years, holding international
positions spanning Europe, the Middle East and the United States in
general management, business development, market access and product
leadership. He has served as an independent director of Poxel SA, a
French publicly traded biotech company, since 2013. Mr. Baluch
holds a BSc in Aeronautical Engineering from City University London
and a Masters of Business Administration from Cranfield School of
Management.
In
exchange for his service as our Chief Executive Officer, Mr. Baluch
will receive an annual base salary of $375,000, which cannot be
decreased unless all officers and/or members of our executive
management team experience an equal or greater percentage reduction
in base salary and/or total compensation, provided that any
reduction in Mr. Baluch’s salary may be no greater than 25%.
Mr. Baluch will be eligible for an annual bonus, which may equal up
to 80% of his base salary then in effect, as determined by our
Board or compensation committee. In determining such bonus, our
Board or compensation committee will take into consideration the
achievement of specified company objectives, predetermined by the
Board, and specified personal objectives, predetermined by the
Board in consultation with Mr. Baluch. For fiscal year 2016, Mr.
Baluch’s bonus will be prorated, contingent upon Mr. Baluch
meeting performance objectives established by the Board in
consultation with Mr. Baluch. Mr. Baluch must be employed through
December 31 of a given year to earn that year’s annual
bonus.
In
connection with his employment, we granted Mr. Baluch stock options
to purchase 1,850,000 shares of our common stock, with 1,250,000 of
the options vesting in four equal annual installments on the first
four anniversaries of the grant date. Of the remaining options,
300,000, split into three equal tranches, become exercisable upon
the achievement of specified performance milestones, provided that
these options will be forfeited if the milestones are not achieved
within four years of grant date and provided further that these
options will not vest before December 18, 2018. The remaining
300,000 options become exercisable upon the achievement of a
specified average closing stock price, provided that these options
will not vest before December 31, 2018 and if the specified average
closing stock price is not met on December 31, 2018, the options
will be forfeited. In each case, Mr. Baluch must be an employee of
ours or a consultant to us on the applicable vesting
date.
Mr.
Baluch will receive up to $75,000 to cover expenses associated with
his relocation. Mr. Baluch is eligible to participate in all
employee benefits available to our senior executives from
time-to-time. Pursuant to the agreement, Mr. Baluch is eligible for
up to four weeks of paid vacation per year and may be reimbursed
for specified business-related expenses.
After
the initial three-year term of Mr. Baluch’s employment
agreement, the agreement will automatically renew for additional
successive one-year periods, unless either party notifies the other
in writing at least 90 days before the expiration of the then
current term that the agreement will not be
renewed.
If we terminate Mr. Baluch’s employment for
Cause (as defined in the agreement), Mr. Baluch will be entitled to
receive only the accrued compensation due to him as of the date of
such termination,
rights to
indemnification and directors’ and officers’ liability
insurance, and any benefit required by law. All unvested shares of
restricted stock then held by him will be forfeited to us as of
such date, and all unexercised options to purchase shares of our
capital stock, whether or not vested, will immediately
terminate.
If we terminate Mr. Baluch’s employment
other than for Cause, death or disability, other than by notice of
nonrenewal, or if Mr. Baluch resigns for Good Reason (as defined in
the agreement), Mr. Baluch will receive the following: (i) payment
of any accrued compensation and any unpaid bonus for the prior
year, as well as rights
to indemnification and
directors’ and officers’ liability insurance and any
rights or privilege otherwise required by law;
(ii) his base salary and benefits for a period of
12 months following the effective date of the termination of his
employment; (iii) payment on a prorated basis of any partial bonus
earned by Mr. Baluch based on the actual achievement of the
specified bonus objectives; (iv) if Mr. Baluch timely elects
continued health insurance coverage under COBRA, then we will pay
the premium to continue such coverage for Mr. Baluch and his
eligible dependents in an amount equal to the portion paid for by
us during Mr. Baluch’s employment until the conclusion of the
time when he is receiving continuation of base salary payments or
until he becomes eligible for group health insurance coverage under
another employer’s plan, whichever occurs first, provided
however that we have the right to terminate such payment of COBRA
premiums on behalf of Mr. Baluch and instead pay him a lump sum
amount equal to the COBRA premium times the number of months
remaining in the specified period if we determine in our discretion
that continued payment of the COBRA premiums is or may be
discriminatory under Section 105(h) of the Internal Revenue Code of
1986, as amended; and (v) all restricted shares and unvested stock
options held by Mr. Baluch
that
are scheduled to vest on or before the next succeeding anniversary
of the date of termination shall be accelerated and deemed to have
vested as of the termination date. The separation benefits set
forth above are conditioned upon Mr. Baluch executing a release of
claims against us, our parents, subsidiaries and affiliates and
each such entities’ officers, directors, employees, agents,
successors and assigns in a form acceptable to us, within a time
specified therein, which release is not revoked within any time
period allowed for revocation under applicable
law.
If we terminate Mr. Baluch without Cause or if Mr.
Baluch resigns for Good Reason within 24 months after a change in
control, Mr. Baluch will receive the following: (i) payment of any
accrued compensation and any unpaid bonus for the prior year, as
well as rights
to indemnification and directors’ and
officers’ liability insurance and any rights or privilege
otherwise required by law;
(ii) his
base salary and full bonus for a period of 12 months following the
effective date of the termination of his employment; (iii) payment
on a prorated basis for any partial bonus earned by Mr. Baluch
based on the actual achievement of the specified bonus objectives;
(iv) if Mr. Baluch timelyelects continued health insurance coverage
under COBRA, then we will pay the entire premium necessary to
continue such coverage for Mr. Baluch and his eligible dependents
until the conclusion of the time when he is receiving continuation
of base salary payments or until he becomes eligible for group
health insurance coverage under another employer’s plan,
whichever occurs first, provided however that we have the right to
terminate such payment of COBRA premiums on behalf of Mr. Baluch
and instead pay him a lump sum amount equal to the COBRA premium
times the number of months remaining in the specified period if we
determine in our discretion that continued payment of the COBRA
premiums is or may be discriminatory under Section 105(h) of the
Internal Revenue Code of 1986, as amended; and (v) all restricted
shares and unvested stock options held by Mr. Baluch
shall be accelerated and deemed to
have vested as of the termination date. The separation benefits set
forth above are conditioned upon Mr. Baluch executing a release of
claims against us, our parents, subsidiaries and affiliates and
each such entities’ officers, directors, employees, agents,
successors and assigns in a form acceptable to us, within a time
specified therein, which release is not revoked within any time
period allowed for revocation under applicable
law.
If Mr. Baluch terminates his employment by written
notice of termination or if Mr. Baluch or we terminate his
employment by providing a notice of nonrenewal at least 90 days
before the agreement is set to expire, Mr. Baluch will not be
entitled to receive any payments or benefits other than any accrued
compensation,
any unpaid prior year’s bonus, rights to
indemnification and directors’ and officers’ liability
insurance and as otherwise required by law.
During the term of
the agreement and the 12-month period immediately following Mr.
Baluch’s separation from employment for any reason, Mr.
Baluch is prohibited from engaging in any business involving the
development or commercialization of a preventive anti-infective
product that would be a direct competitor of Neutrolin or a product
containing taurolidine or any other product being actively
developed or produced by us within the United States and the
European Union on the date of termination of his
employment.
As
previously disclosed, our former Chief Executive Officer, Randy
Milby, had been serving as our Interim Chief Executive Officer. Mr.
Milby resigned from this role, and also resigned from our Board of
Directors, on October 2, 2016.
Corporate History and Information
We
were organized as a Delaware corporation on July 28, 2006 under the
name “Picton Holding Company, Inc.” and we changed our
corporate name to “CorMedix Inc.” on January 18, 2007.
Our operations to date have been primarily limited to organizing
and staffing, licensing product candidates, developing clinical
trials for our product candidates, establishing manufacturing for
our product candidates and maintaining and improving our patent
portfolio.
Our
executive offices are located at 1430 US Highway 206, Suite 200,
Bedminster, NJ 07921. Our telephone number is (908) 517-9500. Our
website address is www.cormedix.com. Information contained in, or
accessible through, our website does not constitute part of this
prospectus.
Offerings
Under This Prospectus
We may
offer shares of our common stock and preferred stock, various
series of debt securities and/or warrants to purchase any of such
securities, either individually or in units, up to an indeterminate
amount from time to time under this prospectus at prices and on
terms to be determined by market conditions at the time of any
offering. This prospectus provides you with a general description
of the securities we may offer. Each time we offer a type or series
of securities under this prospectus, we will provide a prospectus
supplement that will describe the specific amounts, prices and
other important terms of the securities.
The
prospectus supplement also may add, update or change information
contained in this prospectus or in documents we have incorporated
by reference into this prospectus. However, no prospectus
supplement will fundamentally change the terms that are set forth
in this prospectus or offer a security that is not registered and
described in this prospectus at the time of its
effectiveness.
This prospectus may not be used to consummate a sale of any
securities unless it is accompanied by a prospectus
supplement.
We may
sell the securities directly to investors or to or through agents,
underwriters or dealers. We, and our agents or underwriters,
reserve the right to accept or reject all or part of any proposed
purchase of securities. If we offer securities through agents or
underwriters, we will include in the applicable prospectus
supplement:
●
the
names of those agents or underwriters;
●
applicable
fees, discounts and commissions to be paid to them;
●
details
regarding over-allotment options, if any; and
●
the
net proceeds to us.
Common Stock
We may
issue shares of our common stock from time to time. The holders of
common stock are entitled to one vote per share on all matters to
be voted upon by stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of
common stock are entitled to receive ratably any dividends that may
be declared from time to time by our board of directors out of
funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, the holders of common stock
are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of any
preferred stock then outstanding.
Preferred Stock
We may
issue shares of our preferred stock from time to time, in one or
more series. Our board of directors will determine the rights,
preferences, privileges and restrictions of the preferred stock,
including dividend rights, conversion rights, voting rights, terms
of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such
series, without any further vote or action by stockholders.
Convertible preferred stock will be convertible into our common
stock or exchangeable for our other securities. Conversion may be
mandatory or at your option or both and would be at prescribed
conversion rates.
If
we sell any series of preferred stock under this prospectus and
applicable prospectus supplements, we will fix the rights,
preferences, privileges and restrictions of the preferred stock of
such series in the certificate of designation relating to that
series. We will file as an exhibit to the registration statement of
which this prospectus is a part, or will incorporate by reference
from reports that we file with the SEC, the form of any certificate
of designation that describes the terms of the series of preferred
stock we are offering before the issuance of the related series of
preferred stock. We urge you to read the applicable prospectus
supplement related to the series of preferred stock being offered,
as well as the complete certificate of designation that contains
the terms of the applicable series of preferred stock.
Warrants
We
may issue warrants for the purchase of common stock, preferred
stock and/or debt securities in one or more series. We may issue
warrants independently or together with common stock, preferred
stock and/or debt securities, and the warrants may be attached to
or separate from these securities. We will evidence each series of
warrants by warrant certificates that we will issue under a
separate agreement. We may enter into warrant agreements with a
bank or trust company that we select to be our warrant agent. We
will indicate the name and address of the warrant agent in the
applicable prospectus supplement relating to a particular series of
warrants.
In
this prospectus, we have summarized certain general features of the
warrants. We urge you, however, to read the applicable prospectus
supplement related to the particular series of warrants being
offered, as well as the warrant agreements and warrant certificates
that contain the terms of the warrants. We will file as exhibits to
the registration statement of which this prospectus is a part, or
will incorporate by reference from reports that we file with the
SEC, the form of warrant agreement or warrant certificate
containing the terms of the warrants we are offering before the
issuance of the warrants.
Debt Securities
We
may offer debt securities from time to time, in one or more series,
as either senior or subordinated debt or as senior or subordinated
convertible debt. The senior debt securities will rank equally with
any other unsecured and unsubordinated debt. The subordinated debt
securities will be subordinate and junior in right of payment, to
the extent and in the manner described in the instrument governing
the debt, to all of our senior indebtedness. Convertible debt
securities will be convertible into or exchangeable for our common
stock or our other securities. Conversion may be mandatory or at
your option or both and would be at prescribed conversion
rates.
With
respect to any debt securities that we issue, we will issue such
debt securities under an indenture, which we would enter into with
the trustee named in the indenture. The form of indenture was filed
as an exhibit to the registration statement of which this
prospectus is a part and is incorporated herein by reference. Any
indenture would be qualified under the Trust Indenture Act of
1939.
Units
We
may issue units consisting of common stock, preferred stock, debt
securities and/or warrants for the purchase of common stock,
preferred stock and/or debt securities in one or more series. In
this prospectus, we have summarized certain general features of the
units. We urge you, however, to read the applicable prospectus
supplement related to the series of units being offered, as well as
the unit agreements that contain the terms of the units. We will
file as exhibits to the registration statement of which this
prospectus is a part, or will incorporate by reference reports that
we file with the SEC, the form of unit agreement and any
supplemental agreements that describe the terms of the series of
units we are offering before the issuance of the related series of
units.
Investing in our securities involves risk. The prospectus
supplement applicable to each offering of our securities will
contain a discussion of the risks applicable to an investment in
our company. Prior to making a decision about investing in our
securities, you should carefully consider the specific factors
discussed below and under the heading “Risk Factors” in
the applicable prospectus supplement, together with all of the
other information contained or incorporated by reference in the
prospectus supplement or appearing or incorporated by reference in
this prospectus. You should also consider the risks, uncertainties
and assumptions discussed under the heading “Risk
Factors” included in our most recent annual report on
Form 10-K which is on file with the SEC and is incorporated
herein by reference, and which may be amended, supplemented or
superseded from time to time by other reports we file with the SEC
in the future.
Risks Related to Our Financial Position and Need for Additional
Capital
We have a limited operating history and a history of operating
losses, and expect to incur additional operating losses in
2016.
We
were established in July 2006 and have only a limited operating
history. Our prospects must be considered in light of the
uncertainties, risks, expenses, and difficulties frequently
encountered by companies in the early stages of operation. We
incurred a net loss of approximately $18.2 million for the year
ended December 31, 2015 and $9.1 million for the six months ended
June 30, 2016. As of June 30, 2016, we had an accumulated deficit
of approximately $103.5 million. We expect to incur substantial
additional operating expenses over the next several years as our
research, development, pre-clinical testing, clinical trial and
commercialization activities increase as we develop and
commercialize Neutrolin. The amount of future losses and when, if
ever, we will achieve profitability are uncertain. Neutrolin was
launched in December 2013 and is currently available for
distribution in certain European Union and Middle East countries.
We have not generated any significant commercial revenue and do not
expect to generate substantial revenues from Neutrolin until it is
approved by the FDA and launched in the U.S. market, and might
never generate significant revenues from the sale of Neutrolin or
any other products. Our ability to generate revenue and achieve
profitability will depend on, among other things, the following:
successfully marketing Neutrolin in Germany and other countries in
which it is approved for sale; obtaining necessary regulatory
approvals for Neutrolin from the other applicable European and
Middle East agencies, other foreign agencies and the FDA and
international regulatory agencies for any other products;
establishing manufacturing, sales, and marketing arrangements,
either alone or with third parties; and raising sufficient funds to
finance our activities. We might not succeed at any of these
undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations
may be materially adversely affected.
We are not
currently profitable and may never become
profitable.
We
have a history of losses, and we may never achieve or maintain
profitability. Until we successfully commercialize Neutrolin and
generate substantial earnings from it, we expect to incur losses
and may never become profitable. We also expect to continue to
incur significant operating and capital expenditures as we pursue
the U.S. development of Neutrolin and anticipate that our expenses
will increase substantially in the foreseeable future as we
continue to undertake development and commercialization of
Neutrolin including the ongoing and planned clinical trials, seek
regulatory approvals for Neutrolin, implement additional internal
systems and infrastructure, and hire additional
personnel.
We
also expect to experience negative cash flow as we fund our
operating losses and capital expenditures. As a result, we will
need to generate significant revenues in order to achieve and
maintain profitability. We may not be able to generate these
revenues or achieve profitability in the future. Our failure to
achieve or maintain profitability would negatively impact the value
of our securities.
We will need to finance our future cash needs through public or
private equity offerings, debt financings or corporate
collaboration and licensing arrangements. Any additional funds that
we obtain may not be on terms favorable to us or our stockholders
and may require us to relinquish valuable
rights.
We
have launched Neutrolin in certain European Union and Middle East
countries, but to date have no other approved product on the market
and have not generated significant product revenue from Neutrolin
to date. Unless and until we receive applicable regulatory approval
for Neutrolin in the U.S., we cannot sell Neutrolin in the U.S.
Therefore, for the foreseeable future, we will have to fund all of
our operations and capital expenditures from Neutrolin sales in
Europe and other foreign markets, if approved, cash on hand,
additional financings, licensing fees and
grants.
We believe that our cash resources as of June 30,
2016, will be sufficient to enable us to fund our projected
operating requirements for at least the next twelve months
following the balance sheet date. However, we will need additional
funding thereafter to complete our ongoing Phase 3
hemodialysis clinical trial in the U.S., as well initiate as our
planned Phase 3 clinical trial in the U.S. in oncology patients
with catheters receiving total parenteral nutrition. If we are
unable to raise additional funds when needed, we may not be able to
complete our ongoing Phase 3 clinical trial, commence and complete
our planned Phase 3 clinical trial or commercialize Neutrolin and
we could be required to delay, scale back or eliminate some or all
of our research and development programs. We can provide no
assurances that any financing or strategic relationships will be
available to us on acceptable terms, or at all. We expect to incur
increases in our cash used in operations as we continue to
commercialize Neutrolin in Europe and other markets, conduct our
ongoing and Phase 3 clinical trial and prepare for our planned
Phase 3 clinical trial in oncology patients, seek FDA approval of
Neutrolin in the U.S., commercialize Neutrolin in Europe and other
markets, pursue business development activities, and incur
additional legal costs to defend our intellectual
property.
To
raise needed capital, we may sell additional equity or debt
securities, obtain a bank credit facility, or enter into a
corporate collaboration or licensing arrangement. The sale of
additional equity or debt securities, if convertible, could result
in dilution to our stockholders. The incurrence of indebtedness
would result in fixed obligations and could also result in
covenants that would restrict our operations. Raising additional
funds through collaboration or licensing arrangements with third
parties may require us to relinquish valuable rights to our
technologies, future revenue streams, research programs or product
candidates, or to grant licenses on terms that may not be favorable
to us or our stockholders.
Our efforts to explore strategic alternatives aimed at accelerating
Neutrolin’s development and commercialization and maximizing
shareholder value may not result in any definitive transaction or
deliver the expected benefits, and may create a distraction for our
management and uncertainty that may adversely affect our operating
results and business.
Strategic alternatives we may pursue could
include, but are not limited to, joint ventures or partnering or
other collaboration agreements, licensing arrangements, or another
transaction intended to maximize shareholder value, such as a
merger, a sale of the Company or some or all of its assets, or
another strategic transaction. In March 2015, the Board
commenced a process to evaluate our strategic alternatives in order
to accelerate the global development of Neutrolin and maximize
shareholder value. The Board previously engaged the
investment bank Evercore Group L.L.C. to provide financial advice
and assist the Board with its evaluation process.
After
the process with Evercore, we announced in July 2015 that we expect
to continue to pursue product development and commercialization
opportunities as we move forward with the planned Phase 3 clinical
trials, rather than pursuing a possible sale of our company as this
time.
No transaction materialized
pursuant to the Evercore engagement.
We
terminated the arrangement with Evercore in July 2016, although we
will remain open to and consider strategic partnerships although
there can be no assurance that any
transaction will present itself
.
There
are various uncertainties and risks relating to our evaluation and
negotiation of possible strategic alternatives and our ability to
consummate a definitive transaction, including:
●
expected benefits
may not be successfully achieved;
●
evaluation and
negotiation of a proposed transaction may distract management from
focusing our time and resources on execution of our operating plan,
which could have a material adverse effect on our operating results
and business;
●
the process of
evaluating proposed transactions may be time consuming and
expensive and may result in the loss of business
opportunities;
●
perceived
uncertainties as to our future direction may result in increased
difficulties in retaining key employees and recruiting new
employees, particularly senior management;
●
even if our Board
of Directors negotiates a definitive agreement, successful
integration or execution of the strategic alternative will be
subject to additional risks;
●
the current market
price of our common stock may reflect a market assumption that a
transaction will occur, and during the period in which we are
considering a transaction, the market price of our common stock
could be highly volatile; and
●
a failure to
complete a transaction could result in a negative perception by
investors in the Company generally and could cause a decline in the
market price of our common stock, as well as lead to greater
volatility in the market price of our common stock, all of which
could adversely affect our ability to access the equity and
financial markets, as well as our ability to explore and enter into
different strategic alternatives.
Risks Related to the Development and Commercialization of Our
Product Candidates
Our only product is only recently approved in Europe and is still
in development in the U. S.
Neutrolin
currently and for at least the near future is our only current
product as well as product candidate. Neturolin has received CE
Mark approval in Europe, and we launched it in Germany in December
2013, and are pursuing commercialization in Europe and other
markets abroad. We also are pursuing development of Neutrolin in
the U.S. Our product commercialization and development efforts may
not lead to commercially viable products for any of several
reasons. For example, our product candidates may fail to be proven
safe and effective in clinical trials, or we may have inadequate
financial or other resources to pursue development efforts for our
product candidates. Even if approved, our products may not be
accepted in the marketplace. Neutrolin will require significant
additional development, clinical trials, regulatory clearances
and/or investment by us or our collaborators as we continue its
commercialization, as will any of our other products. Specifically,
we plan to expand marketing of Neutrolin in other foreign countries
and to develop Neutrolin for sale in the U.S., which will take time
and capital.
We have
entered into an agreement with a German company to market and sell
Neutrolin in Germany, which launched in Germany in the fourth
quarter of 2013. We also have entered into agreements with a Saudi
Arabian company to market and sell Neutrolin in Saudi Arabia, and
with a South Korean company to market, sell and distribute
Neutrolin in South Korea upon receipt of regulatory approval in
that country. We also have independent sales representatives in the
United Arab Emirates and The Netherlands. Consequently, we will be
dependent on these companies and individuals for the success of
sales in those countries and any other countries in which we
receive regulatory approval and in which we contract with third
parties for the marketing, sale and/or distribution of Neutrolin.
If these companies or individuals do not perform for whatever
reason, our business, prospects and results of operations will me
materially adversely affected. Finding a suitable replacement
organization or individual for these or any other companies or
individuals with whom we might contract could be difficult, which
would further harm our business, prospects and results of
operations.
Successful development and commercialization of our products is
uncertain.
Our
development and commercialization of current and future product
candidates is subject to the risks of failure and delay inherent in
the development of new pharmaceutical products, including but not
limited to the following:
●
inability
to produce positive data in pre-clinical and clinical
trials;
●
delays
in product development, pre-clinical and clinical testing, or
manufacturing;
●
unplanned
expenditures in product development, clinical testing, or
manufacturing;
●
failure
to receive regulatory approvals;
●
emergence
of superior or equivalent products;
●
inability
to manufacture our product candidates on a commercial scale on our
own, or in collaboration with third parties; and
●
failure
to achieve market acceptance.
Because
of these risks, our development efforts may not result in any
commercially viable products. If a significant portion of these
development efforts are not successfully completed, required
regulatory approvals are not obtained or any approved products are
not commercialized successfully, our business, financial condition,
and results of operations will be materially harmed.
Clinical trials required for our product candidates are expensive
and time-consuming, and their outcome is uncertain.
In
order to obtain FDA or foreign approval to market a new drug or
device product, we must demonstrate proof of safety and
effectiveness in humans. Foreign regulations and requirements are
similar to those of the FDA. To meet FDA requirements, we must
conduct “adequate and well-controlled” clinical trials.
Conducting clinical trials is a lengthy, time-consuming, and
expensive process. The length of time may vary substantially
according to the type, complexity, novelty, and intended use of the
product candidate, and often can be several years or more per
trial. Delays associated with products for which we are directly
conducting clinical trials may cause us to incur additional
operating expenses. The commencement and rate of completion of
clinical trials may be delayed by many factors, including, for
example:
●
inability
to manufacture sufficient quantities of qualified materials under
the FDA’s cGMP requirements for use in clinical
trials;
●
slower
than expected rates of patient recruitment;
●
failure
to recruit a sufficient number of patients;
●
modification
of clinical trial protocols;
●
changes
in regulatory requirements for clinical trials;
●
lack
of effectiveness during clinical trials;
●
emergence
of unforeseen safety issues;
●
delays,
suspension, or termination of clinical trials due to the
institutional review board responsible for overseeing the study at
a particular study site; and
●
government
or regulatory delays or “clinical holds” requiring
suspension or termination of the trials.
The
results from early pre-clinical and clinical trials are not
necessarily predictive of results to be obtained in later clinical
trials. Accordingly, even if we obtain positive results from early
pre-clinical or clinical trials, we may not achieve the same
success in later clinical trials.
Our
clinical trials may be conducted in patients with serious or
life-threatening diseases for whom conventional treatments have
been unsuccessful or for whom no conventional treatment exists, and
in some cases, our product is expected to be used in combination
with approved therapies that themselves have significant adverse
event profiles. During the course of treatment, these patients
could suffer adverse medical events or die for reasons that may or
may not be related to our products. We cannot ensure that safety
issues will not arise with respect to our products in clinical
development.
Clinical
trials may not demonstrate statistically significant safety and
effectiveness to obtain the requisite regulatory approvals for
product candidates. The failure of clinical trials to demonstrate
safety and effectiveness for the desired indications could harm the
development of our product candidates. Such a failure could cause
us to abandon a product candidate and could delay development of
other product candidates. Any delay in, or termination of, our
clinical trials would delay the filing of any NDA or any Premarket
Approval Application, or PMA, with the FDA and, ultimately, our
ability to commercialize our product candidates and generate
product revenues. Any change in, or termination of, our clinical
trials could materially harm our business, financial condition, and
results of operations.
If we fail to comply with international regulatory
requirements we could be subject to regulatory delays,
fines or other penalties.
Regulatory
requirements in foreign countries for international sales of
medical devices often vary from country to country. The occurrence
and related impact of the following factors would harm our
business:
●
delays
in receipt of, or failure to receive, foreign regulatory approvals
or clearances;
●
the
loss of previously obtained approvals or clearances;
or
●
the
failure to comply with existing or future regulatory
requirements.
The
CE Mark is a mandatory conformity mark for products to be sold in
the European Economic Area. Currently, 28 countries in Europe
require products to bear CE Marking. To market in Europe,
a product must first obtain the certifications necessary to
affix the CE Mark. The CE Mark is an international symbol of
adherence to the Medical Device Directives and the
manufacturer’s declaration that the product complies with
essential requirements. Compliance with these requirements is
ascertained within a certified Quality Management System (QMS)
pursuant to ISO 13485. In order to obtain and to maintain a CE
Mark, a product must be in compliance with the applicable
quality assurance provisions of the aforementioned ISO and obtain
certification of its quality assurance systems by a recognized
European Union notified body. We received CE Mark approval for
Neutrolin on July 5, 2013. However, certain individual countries
within the European Union require further approval by their
national regulatory agencies. Failure to receive or
maintain these other requisite approvals could prohibit us
from marketing and selling Neutrolin in the entire
European Economic Area or elsewhere.
We do not have, and may never obtain, the regulatory approvals we
need to market our product candidates outside of the European
Union.
While
we have received the CE Mark approval for Neutrolin in Europe,
certain individual countries within the European Union require
further approval by their national regulatory
agencies. Failure to receive or maintain these other
requisite approvals could prohibit us from marketing and
selling Neutrolin in the entire European Economic Area. In
addition, we will need regulatory approval to market and sell
Neutrolin in foreign countries outside of Europe. We have received
regulatory approval in Saudi Arabia and Kuwait.
In
the United States, we have no current application for, and have not
received the regulatory approvals required for, the commercial sale
of any of our products. None of our product candidates has been
determined to be safe and effective in the United States, and we
have not submitted an NDA or PMA to the FDA for any product. We
have received approval from the FDA to proceed with our ongoing
Phase 3 clinical trial for Neutrolin in hemodialysis catheters and
our planned Phase 3 trial in oncology patients with catheters
receiving total parenteral nutrition, which is subject to
finalization of the protocol with the FDA. In December 2015, we
initiated the Phase 3 trial in hemodialysis catheters; however, we
will not initiate the Phase 3 trial in oncology patients with
catheters receiving total parenteral nutrition until we receive
sufficient funding. We are seeking one or more strategic partners
or other sources of capital to complete the Phase 3 trial in
hemodialysis and to start the Phase 3 trial for oncology patients
with catheters receiving total parenteral nutrition. However, we
might not obtain any commercial partner or financing and may never
start the Phase 3 clinical trial for oncology patients with
catheters receiving total parenteral nutrition.
It
is possible that Neutrolin will not receive any further approval or
that any of our other product candidates will be approved for
marketing. Failure to obtain regulatory approvals, or delays in
obtaining regulatory approvals, would adversely affect the
successful commercialization of Neutrolin or any other drugs or
products that we or our partners develop, impose additional costs
on us or our collaborators, diminish any competitive advantages
that we or our partners may attain, and/or adversely affect our
cash flow.
Even if approved, our products will be subject to extensive
post-approval regulation.
Once
a product is approved, numerous post-approval requirements apply in
the United States and abroad. Depending on the circumstances,
failure to meet these post-approval requirements can result in
criminal prosecution, fines, injunctions, recall or seizure of
products, total or partial suspension of production, denial or
withdrawal of pre-marketing product approvals, or refusal to allow
us to enter into supply contracts, including government contracts.
In addition, even if we comply with FDA, foreign and other
requirements, new information regarding the safety or effectiveness
of a product could lead the FDA or a foreign regulatory body to
modify or withdraw product approval.
The successful commercialization of Neutrolin will depend on
obtaining coverage and reimbursement for use of Neutrolin from
third-party payors.
Sales
of pharmaceutical products largely depend on the reimbursement of
patients’ medical expenses by government health care programs
and/or private health insurers, both in the U.S. and abroad.
Further, significant uncertainty exists as to the reimbursement
status of newly approved health care products.
We initially
expect to sell Neutrolin directly to hospitals and key dialysis
center operators, but also plan to expand its usage into intensive
care, oncology and total parenteral nutrition patients needing
catheters, including Medicare patients. All of these potential
customers are healthcare providers who depend upon reimbursement by
government and commercial insurance payors for dialysis and other
treatments. Reimbursement is strictly governed by these insurance
payors. We believe that Neutrolin would be eligible for coverage
under various reimbursement programs, including hospital inpatient
diagnosis-related groups (DRGs), outpatient ambulatory payment
classification (APCs) and the End-Stage Renal Disease Prospective
Payment System (ESRD PPS) or under the Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule,
depending on the treatment setting. However, coverage by any of
these reimbursement programs is not assured, and even if coverage
is granted it could later be revoked or modified under future
regulations. Further, the U.S. Centers for Medicare & Medicaid
Services (CMS), which administers Medicare and works with states to
administer Medicaid, has adopted and will continue to adopt and/or
amend rules governing reimbursement for specific treatments,
including those we intend to address such as dialysis and ESRD PPS.
We anticipate that CMS and private insurers will increasingly
demand that manufacturers demonstrate the cost effectiveness of
their products as part of the reimbursement review and approval
process. Rising healthcare costs have also lead many European and
other foreign countries to adopt healthcare reform proposals and
medical cost conainment measures. Any measures affecting the
reimbursement programs of these governmental and private insurance
payors, including any uncertainty in the medical community
regarding their nature and effect on reimbursement programs, could
have an adverse effect on purchasing decisions regarding Neutrolin,
as well as limit the prices we may charge for Neutrolin.
The failure to obtain or maintain
reimbursement coverage for Neutrolin or any other products could
materially harm our operations.
Physicians and patients may not accept and use our
products.
Even
with the CE Mark approval of Neutrolin, and even if we receive FDA
or other foreign regulatory approval for Neutrolin or other product
candidates, physicians and patients may not accept and use our
products. Acceptance and use of our products will depend upon a
number of factors including the
following:
●
perceptions
by members of the health care community, including physicians,
about the safety and effectiveness of our drug or device
product;
●
cost-effectiveness
of our product relative to competing products;
●
availability
of reimbursement for our product from government or other
healthcare payors; and
●
effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
Because
we expect sales of Neutrolin to generate substantially all of our
product revenues for the foreseeable future, the failure of
Neutrolin to find market acceptance would harm our business and
would require us to seek additional
financing.
Risks Related to Our Business and Industry
We are subject to a putative securities class action, which may
require significant management time and attention and significant
legal expenses and may result in an unfavorable outcome, which
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
On July 7, 2015, a putative class action lawsuit
was commenced against us and certain of our current and former
officers in the United States District Court for the District of
New Jersey, captioned
Li v. Cormedix Inc., et
al.
, Case 3:15-cv-05264. On
September 4, 2015, two individuals, Shahm Martini and Paul Chretien
(the “Martini Group”), filed a Motion to Appoint Lead
Plaintiff. On that same date, another individual, Elaine Wood,
filed a competing Motion to Appoint Lead Plaintiff. On September
18, 2015, the Martini Group withdrew its motion. Thereafter, on
September 22, 2015, the Court appointed Elaine Wood as Lead
Plaintiff and, on October 2, 2015, appointed the Rosen Law Firm as
Lead Counsel.
On
December 1, 2015, Lead Plaintiff filed an Amended Complaint
asserting claims that we and Steven Lefkowitz, Randy Milby and
Harry O’Grady (the “Cormedix Defendants”)
violated Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder and Section 20(a) of the Exchange Act. The
Amended Complaint also names as defendants several unrelated
entities that allegedly were paid stock promoters. Lead Plaintiff
alleges generally that the Cormedix Defendants made materially
false or misleading statements and omissions concerning, among
other things, the competitive landscape for our Neutrolin product
and the alleged use of stock promoters. The Amended Complaint
seeks unspecified damages, interest, attorneys’ fees, and
other costs.
On
February 1, 2016, the Cormedix Defendants filed a motion to dismiss
all claims asserted against them in the Amended Complaint on the
grounds, among others, that the Amended Complaint fails to
adequately allege: (1) material misstatements or omissions; (2)
scienter by any of the Cormedix Defendants; or (3) loss causation.
The Court heard oral argument on this motion on July 18, 2016 and
took the matter under advisement.
On May 13, 2016, a putative shareholder derivative
action was filed in the Superior Court of New Jersey against the
Company and certain present and former directors and officers
captioned
Raval v. Milby, et.
al.
, Docket No. C-12034-6 (the
“Derivative Action”). The factual allegations of the
Derivative Action substantially overlap the factual allegations
contained in the Amended Complaint in the Securities Class Action.
The plaintiff purports to assert claims against the individual
defendants on behalf of the Company for breach of fiduciary duty,
unjust enrichment, abuse of control, gross mismanagement and waste
of corporate assets. The complaint in the Derivative Action seeks
unspecified damages, interest, attorneys’ fees and other
costs, and certain amendments to the Company’s
“corporate governance and internal procedures”. On June
30, 2016, the Court entered a stipulated order, among other things,
staying the Derivative Action until 30 days after either: (a) the
entry of any order denying any motion to dismiss the Derivative
Action in the Securities Class Action, or (b) the entry of a final
order dismissing the Securities Class Action with
prejudice.
While
we believe that we have substantial legal and factual defenses to
the claims in the class action and intend to continue vigorously
defending the case there can be no assurance as to the outcome of
this class action litigation.
In addition, there is the potential for additional shareholder
litigation, and we could be similarly materially and adversely
affected by such matters.
Competition and technological change may make our product
candidates and technologies less attractive or
obsolete.
We
compete with established pharmaceutical and medical device
companies that are pursuing other forms of prevention or treatment
for the same indications we are pursuing and that have greater
financial and other resources. Other companies may succeed in
developing products earlier than we do, obtaining FDA or any other
regulatory agency approval for products more rapidly, or developing
products that are more effective than our product candidates.
Research and development by others may render our technology or
product candidates obsolete or noncompetitive, or result in
processes, treatments or cures superior to any therapy we develop.
We face competition from companies that internally develop
competing technology or acquire competing technology from
universities and other research institutions. As these companies
develop their technologies, they may develop competitive positions
that may prevent, make futile, or limit our product
commercialization efforts, which would result in a decrease in the
revenue we would be able to derive from the sale of any
products.
There
can be no assurance that Neutrolin or any other product candidate
will be accepted by the marketplace as readily as these or other
competing treatments. Furthermore, if our competitors’
products are approved before ours, it could be more difficult for
us to obtain approval from the FDA or any other regulatory agency.
Even if our products are successfully developed and approved for
use by all governing regulatory bodies, there can be no assurance
that physicians and patients will accept any of our products as a
treatment of choice.
Furthermore,
the pharmaceutical and medical device industry is diverse, complex,
and rapidly changing. By its nature, the business risks associated
with the industry are numerous and significant. The effects of
competition, intellectual property disputes, market acceptance, and
FDA or other regulatory agency regulations preclude us from
forecasting revenues or income with certainty or even
confidence.
We face the risk of product liability claims and the amount of
insurance coverage we hold now or in the future may not be adequate
to cover all liabilities we might incur.
Our
business exposes us to the risk of product liability claims that
are inherent in the development of drugs. If the use of one or more
of our or our collaborators’ drugs or devices harms people,
we may be subject to costly and damaging product liability claims
brought against us by clinical trial participants, consumers,
health care providers, pharmaceutical companies or others selling
our products.
We
currently carry product liability insurance that covers our
clinical trials. We cannot predict all of the possible harms or
side effects that may result and, therefore, the amount of
insurance coverage we hold may not be adequate to cover all
liabilities we might incur. Our insurance covers bodily injury and
property damage arising from our clinical trials, subject to
industry-standard terms, conditions and exclusions. This coverage
includes the sale of commercial products. We have expanded our
insurance coverage to include the sale of commercial products due
to the receipt of the CE Mark approval, but we may be unable to
maintain such coverage or obtain commercially reasonable product
liability insurance for any other products approved for
marketing.
If
we are unable to obtain insurance at an acceptable cost or
otherwise protect against potential product liability claims, we
may be exposed to significant liabilities, which may materially and
adversely affect our business and financial position. If we are
sued for any injury allegedly caused by our or our
collaborators’ products and do not have sufficient insurance
coverage, our liability could exceed our total assets and our
ability to pay the liability. A successful product liability claim
or series of claims brought against us would decrease our cash and
could cause the value of our capital stock to
decrease.
We may be exposed to liability claims associated with the use of
hazardous materials and chemicals.
Our
research, development and manufacturing activities and/or those of
our third-party contractors may involve the controlled use of
hazardous materials and chemicals. Although we believe that our
safety procedures for using, storing, handling and disposing of
these materials comply with federal, state and local, as well as
foreign, laws and regulations, we cannot completely eliminate the
risk of accidental injury or contamination from these materials. In
the event of such an accident, we could be held liable for any
resulting damages and any liability could materially adversely
affect our business, financial condition and results of operations.
In addition, the federal, state and local, as well as foreign, laws
and regulations governing the use, manufacture, storage, handling
and disposal of hazardous or radioactive materials and waste
products may require us to incur substantial compliance costs that
could materially adversely affect our business, financial condition
and results of operations.
Healthcare policy changes, including reimbursement policies for
drugs and medical devices, may have an adverse effect on our
business, financial condition and results of
operations.
Market
acceptance and sales of Neutrolin or any other product candidates
that we develop will depend on reimbursement policies and may be
affected by health care reform measures in the United States and
abroad. Government authorities and other third-party payors, such
as private health insurers and health maintenance organizations,
decide which drugs they will pay for and establish reimbursement
levels. We cannot be sure that reimbursement will be available for
Neutrolin or any other product candidates that we develop. Also, we
cannot be sure that the amount of reimbursement available, if any,
will not reduce the demand for, or the price of, our products. If
reimbursement is not available or is available only at limited
levels, we may not be able to successfully commercialize Neutrolin
or any other product candidates that we develop.
In
the United States, there have been a number of legislative and
regulatory proposals to change the health care system in ways that
could affect our ability to sell our products profitably. The
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, or
collectively, the Healthcare Reform Act, substantially changes the
way healthcare is financed by both governmental and private
insurers, and significantly impacts the pharmaceutical industry.
The Healthcare Reform Act contains a number of provisions,
including those governing enrollment in federal healthcare
programs, reimbursement changes and fraud and abuse, which will
impact existing government healthcare programs and will result in
the development of new programs, including Medicare payment for
performance initiatives and improvements to the physician quality
reporting system and feedback program. We anticipate that if we
obtain approval for our products, some of our revenue may be
derived from U.S. government healthcare programs, including
Medicare. Furthermore, beginning in 2011, the Healthcare Reform Act
imposed a non-deductible excise tax on pharmaceutical manufacturers
or importers who sell “branded prescription drugs,”
which includes innovator drugs and biologics (excluding orphan
drugs or generics) to U.S. government programs. We expect that the
Healthcare Reform Act and other healthcare reform measures that may
be adopted in the future could have an adverse effect on our
industry generally and our products specifically.
In
addition to the Healthcare Reform Act, we expect that there will
continue to be proposals by legislators at both the federal and
state levels, regulators and third-party payors to keep healthcare
costs down while expanding individual healthcare benefits. Certain
of these changes could impose limitations on the prices we will be
able to charge for any products that are approved or the amounts of
reimbursement available for these products from governmental
agencies or other third-party payors or may increase the tax
requirements for life sciences companies such as ours. While it is
too early to predict what effect the Healthcare Reform Act or any
future legislation or regulation will have on us, such laws could
have an adverse effect on our business, financial condition and
results of operations.
Health
administration authorities in countries other than the United
States may not provide reimbursement for Neutrolin or any of our
other product candidates at rates sufficient for us to achieve
profitability, or at all. Like the United States, these countries
could adopt health care reform proposals and could materially alter
their government-sponsored health care programs by reducing
reimbursement rates.
Any
reduction in reimbursement rates under Medicare or private insurers
or foreign health care programs could negatively affect the pricing
of our products. If we are not able to charge a sufficient amount
for our products, then our margins and our profitability will be
adversely affected.
If we lose key management or scientific personnel, cannot recruit
qualified employees, directors, officers, or other personnel or
experience increases in compensation costs, our business may
materially suffer.
We
are highly dependent on the principal members of our management and
scientific staff, specifically, Khoso Baluch, a
director and our Chief Executive Officer, and Dr. Antony Pfaffle,
our Chief Scientific Officer. Our future success will depend in
part on our ability to identify, hire, and retain current
and additional personnel. We experience intense competition
for qualified personnel and may be unable to attract and retain the
personnel necessary for the development of our business. Moreover,
our work force is located in the New Jersey metropolitan area,
where competition for personnel with the scientific and technical
skills that we seek is extremely high and is likely to remain high.
Because of this competition, our compensation costs may increase
significantly. In addition, we have only limited ability to prevent
former employees from competing with us.
If we are unable to hire additional qualified personnel, our
ability to grow our business may be harmed.
Over
time, we expect to hire additional qualified personnel with
expertise in clinical testing, clinical research and testing,
government regulation, formulation and manufacturing, and sales and
marketing. We compete for qualified individuals with numerous
pharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we
cannot be certain that our search for such personnel will be
successful. Attracting and retaining such qualified personnel will
be critical to our success.
We may not successfully manage our growth.
Our
success will depend upon the expansion of our operations to
commercialize Neutrolin and the effective management of any growth,
which could place a significant strain on our management and our
administrative, operational and financial resources. To manage this
growth, we may need to expand our facilities, augment our
operational, financial and management systems and hire and train
additional qualified personnel. If we are unable to manage our
growth effectively, our business may be materially
harmed.
Risks Related to Our Intellectual Property
If we materially breach or default under any of our license
agreements, the licensor party to such agreement will have the
right to terminate the license agreement, which termination may
materially harm our business.
Our
commercial success will depend in part on the maintenance of our
license agreements. Each of our license agreements provides the
licensor with a right to terminate the license agreement for our
material breach or default under the agreement, including the
failure to make any required milestone or other payments. Should
the licensor under any of our license agreements exercise such a
termination right, we would lose our right to the intellectual
property under the respective license agreement, which loss may
materially harm our business.
If we and our licensors do not obtain protection for and
successfully defend our respective intellectual property rights,
our competitors may be able to take advantage of our research and
development efforts to develop competing
products.
Our
commercial success will depend in part on obtaining further patent
protection for our products and other technologies and successfully
defending any patents that we currently have or will obtain against
third-party challenges. The patents which we currently believe are
most material to our business are as follows:
●
U.S.
Patent No. 8,541,393 (expiring in November 2024) (the “Prosl
Patent”) - use of Neutrolin for preventing infection and
maintenance of catheter patency in hemodialysis catheters (for
CRMD003);
●
U.S.
Patent No. 6,166,007 (expiring May 2019) (the “Sodemann
Patent”) - a method of inhibiting or preventing infection and
blood coagulation at a medical prosthetic device (for CRMD003);
and
●
European
Patent EP 1 814 562 B1 (expiring October 12, 2025) (the
“Prosl European Patent”) - a low heparin catheter lock
solution for maintaining and preventing infection in a hemodialysis
catheter.
We
are currently seeking further patent protection for our compounds
and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no
assurance that we will be successful in protecting our products by
obtaining and defending patents. These risks and uncertainties
include the following:
●
patents
that may be issued or licensed may be challenged, invalidated, or
circumvented, or otherwise may not provide any competitive
advantage;
●
our
competitors, many of which have substantially greater resources
than we have and many of which have made significant investments in
competing technologies, may seek, or may already have obtained,
patents that will limit, interfere with, or eliminate our ability
to make, use, and sell our potential products either in the United
States or in international markets;
●
there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
treatments that prove successful as a matter of public policy
regarding worldwide health concerns; and
●
countries
other than the United States may have less restrictive patent laws
than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop,
and market competing products.
In
addition, the United States Patent and Trademark Office, or PTO,
and patent offices in other jurisdictions have often required that
patent applications concerning pharmaceutical and/or
biotechnology-related inventions be limited or narrowed
substantially to cover only the specific innovations exemplified in
the patent application, thereby limiting the scope of protection
against competitive challenges. Thus, even if we or our licensors
are able to obtain patents, the patents may be substantially
narrower than anticipated.
The
above mentioned patents and patent applications are exclusively
licensed to us. To support our patent strategy, we have engaged in
a review of patentability and certain freedom to operate issues,
including performing certain searches. However, patentability and
certain freedom to operate issues are inherently complex, and we
cannot provide assurances that a relevant patent office and/or
relevant court will agree with our conclusions regarding
patentability issues or with our conclusions regarding freedom to
operate issues, which can involve subtle issues of claim
interpretation and/or claim liability. Furthermore, we may not be
aware of all patents, published applications or published
literature that may affect our business either by blocking our
ability to commercialize our product candidates, preventing the
patentability of our product candidates to us or our licensors, or
covering the same or similar technologies that may invalidate our
patents, limit the scope of our future patent claims or adversely
affect our ability to market our product
candidates.
In
addition to patents, we also rely on trade secrets and proprietary
know-how. Although we take measures to protect this information by
entering into confidentiality and inventions agreements with our
employees, scientific advisors, consultants, and collaborators, we
cannot provide any assurances that these agreements will not be
breached, that we will be able to protect ourselves from the
harmful effects of disclosure if they are breached, or that our
trade secrets will not otherwise become known or be independently
discovered by competitors. If any of these events occurs, or we
otherwise lose protection for our trade secrets or proprietary
know-how, the value of our intellectual property may be greatly
reduced.
Ongoing and future intellectual property disputes could require us
to spend time and money to address such disputes and could limit
our intellectual property rights.
The
biotechnology and pharmaceutical industries have been characterized
by extensive litigation regarding patents and other intellectual
property rights, and companies have employed intellectual property
litigation to gain a competitive advantage. We may initiate or
become subject to infringement claims or litigation arising out of
patents and pending applications of our competitors, or we may
become subject to proceedings initiated by our competitors or other
third parties or the PTO or applicable foreign bodies to reexamine
the patentability of our licensed or owned patents. In addition,
litigation may be necessary to enforce our issued patents, to
protect our trade secrets and know-how, or to determine the
enforceability, scope, and validity of the proprietary rights of
others.
We
initiated court proceedings in Germany for patent infringement and
unfair use of our proprietary information related to Neutrolin (as
described below). We also have had opposition proceedings brought
against the European Patent and the German utility model patent
which are the basis of our infringement proceedings (as described
below). The defense and prosecution of these ongoing and any future
intellectual property suits, PTO or foreign proceedings, and
related legal and administrative proceedings are costly and
time-consuming to pursue, and their outcome is uncertain. An
adverse determination in litigation or PTO or foreign proceedings
to which we may become a party could subject us to significant
liabilities, including damages, require us to obtain licenses from
third parties, restrict or prevent us from selling our products in
certain markets, or invalidate or render unenforceable our licensed
or owned patents. Although patent and intellectual property
disputes might be settled through licensing or similar
arrangements, the costs associated with such arrangements may be
substantial and could include our paying large fixed payments and
ongoing royalties. Furthermore, the necessary licenses may not be
available on satisfactory terms or at all.
In
February 2007, Geistlich Söhne AG für Chemische
Industrie, Switzerland (“Geistlich”) brought an action
against the European Sodemann Patent covering our Neutrolin product
candidate, which is owned by ND Partners, LLC (“NDP”)
and licensed to us pursuant to the License and Assignment Agreement
between us and NDP. This action was brought at the Board of the
European Patent Office (“EPO”) opposition division (the
“Opposition Board”) based upon alleged lack of
inventiveness in the use of citric acid and a pH value in the range
of 4.5 to 6.5 with having the aim to provide an alternative lock
solution through having improved anticoagulant characteristics
compared to the lock solutions of the prior art. The Opposition
Board rejected the opposition by Geistlich. On August 27, 2008,
Geistlich appealed the court’s ruling, alleging the
same arguments as presented during the opposition proceedings. We
filed a response to the appeal of Geistlich on March 25, 2009
requesting a dismissal of the appeal and maintenance of the patent
as granted. On November 28, 2012, the Board of Appeals of the EPO
(the “Appeals Board”) held oral proceedings and
verbally upheld the counterpart of the Sodemann Patent covering
Neutrolin, but remanded the proceeding to the lower court to
consider restricting certain claims of the counterpart of the
Sodemann Patent. We received the Appeals Board’s final
written decision on March 28, 2013, which was consistent with the
oral proceedings. In a letter dated September 30, 2013, we were
notified that the opposition division of the EPO reopened the
proceedings before the first instance and gave their preliminary
non-binding opinion that the patent as amended during the appeal
proceedings fulfills the requirements of clarity, novelty, and
inventive step, and invited the parties to provide their comments
and/or requests by February 10, 2014. We filed its
response on February 3, 2014 to request that the patent be
maintained as amended during the appeal
proceedings. Geistlich did not provide any filing by
February 10, 2014; however, the Opposition Board granted Geistlich
an extension to respond by the end of July 2014 because its
representative did not receive the September 30, 2013 letter due to
a change of address. Geistlich did not file a further
statement within the required timeline. On November 5,
2014, the Opposition Division at the EPO issued the interlocutory
decision to maintain the patent on the basis of the claims as
amended during the appeal proceedings. This decision became final
as no further appeal was lodged by Geistlich.
On
September 9, 2014, we filed in the District Court of Mannheim,
Germany a patent infringement action against TauroPharm GmbH and
Tauro-Implant GmbH as well as their respective CEOs (the
“Defendants”) claiming infringement of our European
Patent EP 1 814 562 B1, which was granted by the EPO on January 8,
2014 (the “Prosl European Patent”). The Prosl European
Patent covers a low dose heparin catheter lock solution for
maintaining patency and preventing infection in a hemodialysis
catheter. In this action, we claim that the Defendants
infringe on the Prosl European Patent by manufacturing and
distributing catheter locking solutions to the extent they are
covered by the claims of the Prosl European Patent. We
believe that our patent is sound, and are seeking injunctive relief
and raising claims for information, rendering of accounts, calling
back, destruction and damages. Separately, TauroPharm has filed an
opposition with the EPO against the Prosl European Patent alleging
that it lacks novelty and inventive step. We cannot
predict what other defenses the Defendants may raise, or the
ultimate outcome of either of these related matters.
In the
same complaint against the same Defendants, we also alleged an
infringement (requesting the same remedies) of NDP’s utility
model DE 20 2005 022 124 U1 (the “Utility Model”),
which we believe is fundamentally identical to the Prosl European
Patent in its main aspects and claims. The Court separated the two
proceedings and the Prosl European Patent and the Utility Model
claims are now being tried separately. TauroPharm has
filed a cancellation action against the Utility Model before the
German Patent and Trademark Office (the “German PTO”)
based on the similar arguments as those in the opposition against
the Prosl European Patent.
On
March 27, 2015, the District Court held a hearing to evaluate
whether the Utility Model has been infringed by TauroPharm in
connection with the manufacture, sale and distribution of its
TauroLock-HEP100TM and TauroLock-HEP500TM products. A hearing
before the same court was held on January 30, 2015 on the separate,
but related, question of infringement of the Prosl European Patent
by TauroPharm.
The
Court issued its decisions on May 8, 2015 staying both
proceedings. In its decisions, the Court found that the
commercialization by TauroPharm in Germany of its TauroLock
catheter lock solutions Hep100 and Hep500 infringes both the
Prosl European Patent and the Utility Model and further that there
is no prior use right that would allow TauroPharm to continue to
make, use or sell its product in Germany. However, the Court
declined to issue an injunction in favor of us that would preclude
the continued commercialization by TauroPharm based upon its
finding that there is a sufficient likelihood that the EPO, in the
case of the Prosl European Patent, or the German PTO, in the case
of the Utility Model, may find that such patent or utility model is
invalid. Specifically, the Court noted the
possible publication of certain instructions for product use
that may be deemed to constitute prior art. As such, the District
Court determined that it will defer any consideration of the
request by us for injunctive and other relief until such time as
the EPO or the German PTO has ruled on the underlying validity of
the Prosl European Patent and the Utility Model.
The
opposition proceeding against the Prosl European Patent before the
EPO is ongoing. In its preliminary consideration of the matter, the
EPO (and the German PTO) regarded the patent as not inventive or
novel due to publication of prior art. Oral proceedings
before the Opposition Division at the EPO were held on November 25,
2015, at which the three judge patent examiner panel considered
arguments related to the validity of the Prosl European Patent. The
hearing was adjourned due to the fact that the panel was of the
view that Claus Herdeis, one of the managing directors of
TauroPharm, has to be heard as a witness in a further hearing in
order to close some gaps in the documentation presented by
TauroPharm as regards the publication of prior art. No date has yet
been established for such further hearing as of the filing of this
10-Q. While we continue to believe that the referenced
publication and instructions for use do not, in fact, constitute
prior art and that the Prosl European Patent will be found to be
valid by the EPO, there can be no assurance that we will prevail in
this matter. The German PTO held a hearing in the validity
proceedings relating to the Utility Model on June 29, 2016, at
which the panel affirmed its preliminary finding that the Utility
Model was invalid based upon prior publication of a reference to
the benefits that may be associated with adding heparin to a
taurolidine based solution. The decision is subject to appeal and
has only a declaratory effect, as the Utility Model had expired in
November 2015. Furthermore, it has no bearing on the ongoing
consideration of the validity and possible infringement of the
Prosl Patent by the EPO.
On
January 16, 2015, we filed a complaint against TauroPharm GmbH and
its managing directors in the District Court of Cologne,
Germany. In the complaint, we allege violation of the
German Unfair Competition Act by TauroPharm for the unauthorized
use of its proprietary information obtained in confidence by
TauroPharm. We allege that TauroPharm is improperly and
unfairly using its proprietary information relating to the
composition and manufacture of Neutrolin, in the manufacture and
sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100
and TauroLock-HEP500. We seek a cease and desist order
against TauroPharm from continuing to manufacture and sell any
product containing taurolidine (the active pharmaceutical
ingredient (“API”) of Neutrolin) and citric acid in
addition to possible other components, damages for any sales in the
past and the removal of all such products from the market. An
initial hearing in the District Court of Cologne, Germany was held
on November 19, 2015 to consider our claims. The judge made no
decision on the merits of our complaint. On January 14, 2016,
the court issued an interim decision in the form of a court order
outlining several issues of concern that relate primarily to
court's interest in clarifying the facts and reviewing any and all
available documentation, in particular with regard to the question
which specific know-how was provided to TauroPharm by whom and
when. We have prepared the requested reply and produced the
respective documentation. TauroPharm has also filed another writ
within the same deadline and both parties have filed further writs
at the end of April setting out their respective argumentation in
more detail. A further oral hearing has been scheduled for November
15, 2016.
If we infringe the rights of third parties we could be prevented
from selling products and forced to pay damages and defend against
litigation.
If
our products, methods, processes and other technologies infringe
the proprietary rights of other parties, we could incur substantial
costs and we may have to do one or more of the
following:
●
obtain
licenses, which may not be available on commercially reasonable
terms, if at all;
●
abandon
an infringing product candidate;
●
redesign
our products or processes to avoid infringement;
●
stop
using the subject matter claimed in the patents held by
others;
●
defend
litigation or administrative proceedings, which may be costly
whether we win or lose, and which could result in a substantial
diversion of our financial and management resources.
Risks Related to Dependence on Third Parties
If we are not able to develop and maintain collaborative marketing
relationships with licensees or partners, or create an effective
sales, marketing, and distribution capability, we may be unable to
market our products or market them successfully.
Our
business strategy for Neutrolin relies on collaborating with larger
firms with experience in marketing and selling medical devices and
pharmaceutical products; for other products we may also rely on
such marketing collaborations or out-licensing of our product
candidates. Specifically, for Neutrolin, we have entered into an
agreement with a German company to market and sell Neutrolin in
Germany and a distributor agreement with each of a Saudi Arabian
and a South Korean company for sales and marketing in those two
countries (upon receipt of approval to market in South Korea). In
addition, we have independent sales representatives marketing and
selling in the Middle East and The Netherlands. Assuming we receive
applicable regulatory approval for other markets, we plan to enter
into distribution agreements with one or more third parties for the
sale of Neutrolin in various European, Middle East and other
markets. However, there can be no assurance that we will be able to
successfully maintain those relationships or establish and maintain
additional marketing, sales, or distribution relationships. Nor can
there be assurance that such relationships will be successful, or
that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or
distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly,
and any revenues we receive will depend upon the efforts of such
third-parties.
If
we are unable to establish and maintain such third-party sales and
marketing relationships, or choose not to do so, we will have to
establish our own in-house capabilities. We currently have no
sales, marketing, or distribution infrastructure. To market any of
our products directly, we would need to develop a marketing, sales,
and distribution force that has both technical expertise and the
ability to support a distribution capability. The establishment of
a marketing, sales, and distribution capability would take time and
significantly increase our costs, possibly requiring substantial
additional capital. In addition, there is intense competition for
proficient sales and marketing personnel, and we may not be able to
attract individuals who have the qualifications necessary to
market, sell, and distribute our products. There can be no
assurance that we will be able to establish internal marketing,
sales, or distribution capabilities. If we are unable to, or choose
not to establish these capabilities, or if the capabilities we
establish are not sufficient to meet our needs, we will be required
to establish collaborative marketing, sales, or distribution
relationships with third parties, which we might not be able to do
on acceptable terms or at all.
We currently have no internal marketing and sales organization and
currently rely and intend to continue to rely on third parties to
market and sell Neutrolin. If we are unable to enter into or
maintain agreements with third parties to market and sell Neutrolin
or any other product after approval or are unable to establish our
own marketing and sales capabilities, we may not be able to
generate significant or any product revenues.
We do
not have an internal sales organization. To date we have relied,
and intend to continue to rely, on third parties for the marketing,
sales and distribution of Neutrolin and any other product we might
develop. However, we may not be able to maintain current and future
arrangements or enter into new arrangements with third parties to
sell Neutrolin or any other product on favorable terms or at all.
In that event, we would have to develop our own marketing and sales
force. The establishment and development of our own sales force
would be expensive and time consuming and could delay any product
launch, and we cannot be certain that we would be able to
successfully develop this capability. In addition, the use of third
parties to commercialize our approved products reduces the revenues
that we would receive if we commercialized these products
ourselves.
We have
entered into agreements with independent companies to market
Neutrolin in Germany and in Saudi Arabia and, upon regulatory
approval, South Korea. We also have independent sales
representatives in the Middle East and The Netherlands. We intend
to seek a sales partner in the U.S. if Neutrolin receives FDA
approval. Consequently, we will be dependent on these firms and
individuals for the success of sales in these and any other
countries in which approval is granted. If these firms or
individuals do not perform for whatever reason, our business,
prospects and results of operations will be materially adversely
affected. Finding a new or replacement organization for sales and
marketing could be difficult, which would further harm our
business, prospects and results of operations.
If we or our collaborators are unable to manufacture our products
in sufficient quantities or are unable to obtain regulatory
approvals for a manufacturing facility, we may be unable to meet
demand for our products and we may lose potential
revenues.
Completion
of our clinical trials and commercialization of Neutrolin and any
other product candidate require access to, or development of,
facilities to manufacture a sufficient supply of our product
candidates. All of our manufacturing processes currently are, and
we expect them to continue to be, outsourced to third parties.
Specifically, we will rely on one or more manufacturers to supply
us and/or our distribution partners with commercial quantities of
Neutrolin. If, for any reason, we become unable to rely on our
current sources for the manufacture of Neutrolin or any other
product candidates or for active pharmaceutical ingredient, or API,
either for clinical trials or for commercial quantities, then we
would need to identify and contract with additional or replacement
third-party manufacturers to manufacture compounds for
pre-clinical, clinical, and commercial purposes. We may not be
successful in identifying such additional or replacement
third-party manufacturers, or in negotiating acceptable terms with
any that we do identify. Such third-party manufacturers must
receive FDA or applicable foreign approval before they can produce
clinical material or commercial product, and any that are
identified may not receive such approval or may fail to maintain
such approval. In addition, we may be in competition with other
companies for access to these manufacturers’ facilities and
may be subject to delays in manufacturing if the manufacturers give
other clients higher priority than they give to us. If we are
unable to secure and maintain third-party manufacturing capacity,
the development and sales of our products and our financial
performance may be materially affected.
Before
we could begin to commercially manufacture Neutrolin or any other
product candidate on our own, we must obtain regulatory approval of
the manufacturing facility and process. The manufacture of drugs
for clinical and commercial purposes must comply with cGMP and
applicable non-U.S. regulatory requirements. The cGMP requirements
govern quality control and documentation policies and procedures.
Complying with cGMP and non-U.S. regulatory requirements would
require that we expend time, money, and effort in production,
recordkeeping, and quality control to assure that the product meets
applicable specifications and other requirements. We would also
have to pass a pre-approval inspection prior to FDA or non-U.S.
regulatory agency approval. Failure to pass a pre-approval
inspection may significantly delay regulatory approval of our
products. If we fail to comply with these requirements, we would be
subject to possible regulatory action and may be limited in the
jurisdictions in which we are permitted to sell our products. As a
result, our business, financial condition, and results of
operations could be materially adversely
affected.
Corporate and academic collaborators may take actions that delay,
prevent, or undermine the success of our products.
Our
operating and financial strategy for the development, clinical
testing, manufacture, and commercialization of our product
candidates is heavily dependent on our entering into collaborations
with corporations, academic institutions, licensors, licensees, and
other parties. Our current strategy assumes that we will
successfully establish and maintain these collaborations or similar
relationships. However, there can be no assurance that we will be
successful establishing or maintaining such collaborations. Some of
our existing collaborations, such as our licensing agreements, are,
and future collaborations may be, terminable at the sole discretion
of the collaborator in certain circumstances. Replacement
collaborators might not be available on attractive terms, or at
all.
In
addition, the activities of any collaborator will not be within our
control and may not be within our power to influence. There can be
no assurance that any collaborator will perform its obligations to
our satisfaction or at all, that we will derive any revenue or
profits from such collaborations, or that any collaborator will not
compete with us. If any collaboration is not pursued, we may
require substantially greater capital to undertake on our own the
development and marketing of our product candidates and may not be
able to develop and market such products successfully, if at all.
In addition, a lack of development and marketing collaborations may
lead to significant delays in introducing product candidates into
certain markets and/or reduced sales of products in such
markets.
Data provided by collaborators and others upon which we rely that
has not been independently verified could turn out to be false,
misleading, or incomplete.
We
rely on third-party vendors, scientists, and collaborators to
provide us with significant data and other information related to
our projects, clinical trials, and business. If such third parties
provide inaccurate, misleading, or incomplete data, our business,
prospects, and results of operations could be materially adversely
affected.
Risks Related to our Common Stock
Prior to fiscal 2015, we had identified a material weakness in our
internal control over financial reporting, and our current internal
control over financial reporting and our disclosure controls and
procedures may not prevent all possible errors that could
occur.
In the
several years prior to fiscal 2015, we had identified a material
weakness in our internal control over financial reporting that was
related to our limited finance staff and the resulting ineffective
management review over financial reporting, coupled with
increasingly complex accounting treatments associated with our
financing activities and European expansion. While we remediated
this material weakness in 2015, we cannot be assured that material
weaknesses will not arise again.
A
control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control
system’s objectives will be satisfied. Internal control over
financial reporting and disclosure controls and procedures are
designed to give a reasonable assurance that they are effective to
achieve their objectives. We cannot provide absolute assurance that
all of our possible future control issues will be detected. These
inherent limitations include the possibility that judgments in our
decision making can be faulty, and that isolated breakdowns can
occur because of simple human error or mistake. The design of our
system of controls is based in part upon assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed absolutely in achieving our stated goals under
all potential future or unforeseeable conditions. Because of the
inherent limitations in a cost effective control system,
misstatements due to error could occur and not be detected. This
and any future failures could cause investors to lose confidence in
our reported financial information, which could have a negative
impact on our financial condition and stock price.
Our common stock price has fluctuated considerably and is likely to
remain volatile, in part due to the limited market for our common
stock and you could lose all or a part of your
investment.
During
the period from the completion of our initial public offering, or
IPO, on March 30, 2010 through October 10, 2016, the
high and low sales prices for our common stock were $10.40 and
$0.15, respectively. There is a limited public market for our
common stock and we cannot provide assurances that an active
trading market will develop. As a result of low trading volume in
our common stock, the purchase or sale of a relatively small number
of shares could result in significant share price
fluctuations.
Additionally,
the market price of our common stock may continue to fluctuate
significantly in response to a number of factors, some of which are
beyond our control, including the
following:
●
market
acceptance of Neutrolin in those markets in which it is approved
for sale;
●
our
need for additional capital;
●
the
receipt of or failure to obtain additional regulatory approvals for
Neutrolin, including FDA approval in the U.S.;
●
results
of clinical trials of our product candidates, including our planned
Phase 3 trial for Neutrolin in the U.S., or those of our
competitors;
●
our
entry into or the loss of a significant collaboration;
●
regulatory
or legal developments in the United States and other countries,
including changes in the healthcare payment systems;
●
changes
in financial estimates or investment recommendations by securities
analysts relating to our common stock;
●
announcements
by our competitors of significant developments, strategic
partnerships, joint ventures or capital commitments;
●
changes
in key personnel;
●
variations
in our financial results or those of companies that are perceived
to be similar to us;
●
market
conditions in the pharmaceutical and medical device sectors and
issuance of new or changed securities analysts’ reports or
recommendations;
●
general
economic, industry and market conditions;
●
developments
or disputes concerning patents or other proprietary
rights;
●
future
sales or anticipated sales of our securities by us or our
stockholders; and
●
any
other factors described in this “Risk Factors”
section.
In
addition, the stock markets in general, and the stock of
pharmaceutical and medical device companies in particular, have
experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of
these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our
actual operating performance.
For
these reasons and others, an investment in our securities is risky
and invest only if you can withstand a significant loss and wide
fluctuations in the value of your investment.
A significant number of additional shares of our common stock may
be issued at a later date, and their sale could depress the market
price of our common stock.
As
of June 30, 2016, we had outstanding the following securities that
are convertible into or exercisable for shares of our common
stock:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
●
options
to purchase an aggregate of 475,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $0.84 per share;
●
options
to purchase an aggregate of 3,509,545 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.18 per share;
●
warrants
issued to investors in our 2012 private placement to purchase an
aggregate of 312,500 shares of our common stock with an exercise
price of $0.40 per share, which expire on September 20,
2017;
●
a
warrant for 795 shares of our common stock issued to the placement
agent for our 2012 private placement with an exercise price of
$0.40 per share, which expires on September 20, 2017;
●
a
warrant to purchase 400,000 shares of our common stock issued on
February 19, 2013 with an exercise price of $1.50 that expire on
February 19, 2018;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
●
warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of
common;
●
Series C-3
Preferred Stock convertible into 1,365,000 shares of common
stock;
●
Series D Preferred
Stock convertible 1,479,240 shares of common stock;
●
Series E Preferred
Stock convertible 1,959,759 shares of common stock;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020; and
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020.
The
possibility of the issuance of these shares, as well as the actual
sale of such shares, could substantially reduce the market price
for our common stock and impede our ability to obtain future
financing.
We will need additional financing to fund our activities in the
future, which likely will dilute our stockholders.
We
anticipate that we will incur operating losses for the foreseeable
future. Additionally, we will require substantial funds in the
future to support our operations. We expect to seek equity or debt
financings in the future to fund our operations. The issuance of
additional equity securities, or convertible debt or other
derivative securities, likely will dilute some if not all of our
then existing stockholders, depending on the financing
terms.
Future sales and issuances of our equity securities or rights to
purchase our equity securities, including pursuant to equity
incentive plans, would result in additional dilution of the
percentage ownership of our stockholders and could cause our stock
price to fall.
To
the extent we raise additional capital by issuing equity
securities, our stockholders may experience substantial dilution.
We may, as we have in the past, sell common stock, convertible
securities or other equity securities in one or more transactions
at prices and in a manner we determine from time to time. If we
sell common stock, convertible securities or other equity
securities in more than one transaction, investors may be further
diluted by subsequent sales. Such sales may also result in material
dilution to our existing stockholders, and new investors could gain
rights superior to existing stockholders.
Pursuant
to our 2013 Stock Plan, our Board of Directors is authorized to
award up to a total of 11,000,000 shares of common stock or options
to purchase shares of common stock to our officers, directors,
employees and non-employee consultants. As of June 30, 2016,
options to purchase 475,000 shares of common stock issued under our
2006 Stock Plan at a weighted average exercise price of $0.84 per
share, and options to purchase 3,509,545 shares of common stock
issued under our 2013 Stock Plan at a weighted average exercise
price of $2.18 per share were outstanding. In addition, at June 30,
2016, there were outstanding warrants to purchase an aggregate of
4,006,468 shares of our common stock at prices ranging from $0.40
to $7.00, and shares of our outstanding Series C-2, C-3, D and E
preferred stock convertible into an aggregate of 6,303,999 shares
of our common stock. Stockholders will experience dilution in the
event that additional shares of common stock are issued under our
2006 Stock Plan or 2013 Stock Plan, or options issued under our
2006 Stock Plan or 2013 Stock Plan are exercised, or any warrants
are exercised for, or preferred stock shares are converted to,
common stock.
Provisions in our corporate charter documents and under Delaware
law could make an acquisition of us, which may be beneficial to our
stockholders, more difficult.
Provisions
in our Amended and Restated Certificate of Incorporation, as
amended, and our Amended and Restated Bylaws, as well as provisions
of the General Corporation Law of the State of Delaware, or DGCL,
may discourage, delay or prevent a merger, acquisition or other
change in control of our company, even if such a change in control
would be beneficial to our stockholders. These provisions include
the following:
●
authorizing
the issuance of “blank check” preferred stock, the
terms of which may be established and shares of which may be issued
without stockholder approval;
●
prohibiting
our stockholders from fixing the number of our directors;
and
●
establishing
advance notice requirements for stockholder proposals that can be
acted on at stockholder meetings and nominations to our Board of
Directors.
These
provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making
it more difficult for stockholders to replace members of our board
of directors, which is responsible for appointing the members of
our management. In addition, we are subject to Section 203 of the
DGCL, which generally prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with an
interested stockholder for a period of three years following the
date on which the stockholder became an interested stockholder,
unless such transactions are approved by the board of directors.
This provision could have the effect of discouraging, delaying or
preventing someone from acquiring us or merging with us, whether or
not it is desired by, or beneficial to, our stockholders. Any
provision of our Amended and Restated Certificate of Incorporation,
as amended, or Amended and Restated Bylaws or Delaware law that has
the effect of delaying or deterring a change in control could limit
the opportunity for our stockholders to receive a premium for their
shares of our common stock and could also affect the price that
some investors are willing to pay for our common
stock.
If we fail to comply with the continued listing standards of the
NYSE MKT, it may result in a delisting of our common stock from the
exchange.
Our
common stock is currently listed for trading on the NYSE MKT, and
the continued listing of our common stock on the NYSE MKT is
subject to our compliance with a number of listing standards. These
listing standards include the requirement for avoiding sustained
losses and maintaining a minimum level of stockholders’
equity. In 2012 and 2014, we received notices from the
NYSE MKT that we did not meet continued listing standards of the
NYSE MKT as set forth in Part 10 of the Company
Guide. Specifically, we were not in compliance with
Section 1003(a)(i) and Section 1003(a)(ii) of the Company Guide
because we reported stockholders’ equity of less than the
required amounts. As a result, we became subject to the
procedures and requirements of Section 1009 of the Company Guide
and were subject to possible delisting. In March 2015, we regained
compliance with the NYSE MKT listing requirements due to our market
capitalization, pursuant to Section 1003(a) of the Company Guide.
However, there can be no assurance that we will continue to meet
the continued listing standards of the NYSE MKT.
If our common stock were no longer listed on the
NYSE MKT, investors might only be able to trade on the OTC Bulletin
Board
®
or in the Pink Sheets
®
(a quotation medium operated by Pink
Sheets LLC). This would impair the liquidity of our common stock
not only in the number of shares that could be bought and sold at a
given price, which might be depressed by the relative illiquidity,
but also through delays in the timing of transactions and reduction
in media coverage.
Because the average daily trading volume of our common stock has
been low historically, the ability to sell our shares in the
secondary trading market may be limited.
Because
the average daily trading volume of our common stock on the NYSE
MKT has been low historically, the liquidity of our common stock
may be impaired. As a result, prices for shares of our common stock
may be lower than might otherwise prevail if the average daily
trading volume of our common stock was higher. The average daily
trading volume of our common stock may be low relative to the
stocks of other exchange-listed companies, which could limit
investors’ ability to sell shares in the secondary trading
market.
Penny stock regulations may impose certain restrictions on
marketability of our securities.
The
SEC has adopted regulations which generally define a “penny
stock” to be any equity security that has a market price of
less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. A security listed on a
national securities exchange is exempt from the definition of a
penny stock. Our common stock is listed on the NYSE MKT and so is
not considered a penny stock. However, if we fail to maintain our
common stock’s listing on the NYSE MKT, our common stock
would be considered a penny stock. In that event, our common stock
would be subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse).
For transactions covered by such rules, the broker-dealer must make
a special suitability determination for the purchase of such
securities and have received the purchaser’s written consent
to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock
market. The broker-dealer must also disclose the commission payable
to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is
the sole market maker, the broker-dealer must disclose this fact
and the broker-dealer’s presumed control over the market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information
on the limited market in penny stocks. Broker-dealers must wait two
business days after providing buyers with disclosure materials
regarding a security before effecting a transaction in such
security. Consequently, the “penny stock” rules
restrict the ability of broker-dealers to sell our securities and
affect the ability of investors to sell our securities in the
secondary market and the price at which such purchasers can sell
any such securities, thereby affecting the liquidity of the market
for our common stock.
Stockholders
should be aware that, according to the SEC, the market for penny
stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include:
●
control
of the market for the security by one or more broker-dealers that
are often related to the promoter or issuer;
●
manipulation
of prices through prearranged matching of purchases and sales and
false and misleading press releases;
●
“boiler
room” practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales
persons;
●
excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
●
the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the inevitable collapse of those prices with
consequent investor losses.
We do not intend to pay dividends on our common stock so any
returns on our common stock will be limited to the value of our
common stock.
We
have never declared dividends on our common stock, and currently do
not plan to declare dividends on shares of our common stock in the
foreseeable future. Pursuant to the terms of our Series D and E
Non-Voting Convertible Preferred Stock, we may not declare or pay
any dividends or make any distributions on any of our shares or
other equity securities as long as any of those preferred shares
remain outstanding. We currently expect to retain future earnings,
if any, for use in the operation and expansion of our business. The
payment of cash dividends in the future, if any, will be at the
discretion of our board of directors and will depend upon such
factors as earnings levels, capital requirements, our overall
financial condition and any other factors deemed relevant by our
board of directors. Any return to holders of our common stock will
be limited to the value of their common stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
SEC encourages companies to disclose forward-looking information so
that investors can better understand a company’s future
prospects and make informed investment decisions. This prospectus,
any applicable prospectus supplement and the documents we have
filed with the SEC that are incorporated herein and therein by
reference contain such “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995.
Words such as “may,”
“might,” “should,”
“anticipate,” “estimate,”
“expect,” “projects,”
“intends,” “plans,” “believes”
and words and terms of similar substance used in connection with
any discussion of future operating or financial performance,
identify forward-looking statements. Forward-looking statements
represent management’s current judgment regarding future
events and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those
described in the forward-looking statements. These risks include,
but are not limited to:
the cost, timing and results of
CorMedix’s ongoing and planned Phase 3 trials for
Neutrolin® in the U.S. and the resources needed to commence
and complete those trials; obtaining additional financing to
support CorMedix’s research and development and clinical
activities and operations; obtaining regulatory approvals to
conduct clinical trials and to commercialize CorMedix’s
approved products and product candidates, including approval of
Neutrolin in the U.S. by the FDA and marketing of Neutrolin in
countries other than Europe; the risks associated with the launch
of Neutrolin in new markets; CorMedix’s ability to
enter into, execute upon and maintain collaborations with third
parties for its development and marketing programs; the risks and
uncertainties associated with CorMedix’s ability to manage
its limited cash resources; the outcome of clinical trials of
CorMedix’s product candidates and whether they demonstrate
these candidates’ safety and effectiveness; CorMedix’s
dependence on its collaborations and its license relationships;
CorMedix’s ability to maintain its listing on the NYSE MKT;
achieving milestones under CorMedix’s collaborations:
CorMedix’s dependence on preclinical and clinical
investigators, preclinical and clinical research organizations,
manufacturers, sales and marketing organizations, and consultants;
and protecting the intellectual property developed by or licensed
to CorMedix.
Please also see the
discussion of risks and uncertainties under “Risk
Factors” above and otherwise incorporated by reference
herein, and in our most recent annual report on Form 10-K, as
revised or supplemented by any of our subsequently filed quarterly
reports on Form 10-Q, as well as any amendments thereto, as
filed with the SEC and which are incorporated herein by
reference.
In
light of these assumptions, risks and uncertainties, the results
and events discussed in the forward-looking statements contained in
this prospectus, any applicable prospectus supplement or in any
document incorporated herein or therein by reference might not
occur. Investors are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the respective
dates of this prospectus or any applicable prospectus supplement or
the date of the document incorporated by reference in this
prospectus or any applicable prospectus supplement. We are not
under any obligation, and we expressly disclaim any obligation, to
update or alter any forward-looking statements, whether as a result
of new information, future events or otherwise. All subsequent
forward-looking statements attributable to us or to any person
acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
section.
We
cannot assure you that we will receive any proceeds in connection
with securities offered by us pursuant to this prospectus. Unless
otherwise provided in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our securities by
us under this prospectus for general corporate purposes, including
clinical trials, research and development expenses, and general and
administrative expenses. We will set forth in the applicable
prospectus supplement our intended use for the net proceeds
received from the sale of any securities by us. Pending the
application of the net proceeds, we intend to invest the net
proceeds generally in short-term, investment grade,
interest-bearing securities.
We may
sell the securities from time to time pursuant to underwritten
public offerings, negotiated transactions, block trades or a
combination of these methods. We may sell the securities to or
through underwriters or dealers, through agents, or directly to one
or more purchasers. We may distribute securities from time to time
in one or more transactions:
●
at a fixed price or
prices, which may be changed;
●
at market prices
prevailing at the time of sale;
●
at prices related
to such prevailing market prices; or
A
prospectus supplement or supplements (and any related free writing
prospectus that we may authorize to be provided to you) will
describe the terms of the offering of the securities, including, to
the extent applicable:
●
the name or names
of the underwriters, if any;
●
the purchase price
of the securities or other consideration therefor, and the
proceeds, if any, we will receive from the sale;
●
any over-allotment
options under which underwriters may purchase additional securities
from us;
●
any agency fees or
underwriting discounts and other items constituting agents’
or underwriters’ compensation;
●
any public offering
price;
●
any discounts or
concessions allowed or reallowed or paid to dealers;
and
●
any securities
exchange or market on which the securities may be
listed.
Only
underwriters named in the prospectus supplement will be
underwriters of the securities offered by the prospectus
supplement.
If
underwriters are used in the sale, they will acquire the securities
for their own account and may resell the securities from time to
time in one or more transactions at a fixed public offering price
or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the securities will be
subject to the conditions set forth in the applicable underwriting
agreement. We may offer the securities to the public through
underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Subject to certain conditions,
the underwriters will be obligated to purchase all of the
securities offered by the prospectus supplement, other than
securities covered by any over-allotment option. Any public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers may change from time to time. We may
use underwriters with whom we have a material relationship. We will
describe in the prospectus supplement, naming the underwriter, the
nature of any such relationship.
We may
sell securities directly or through agents we designate from time
to time. We will name any agent involved in the offering and sale
of securities and we will describe any commissions we will pay the
agent in the prospectus supplement. Unless the prospectus
supplement states otherwise, our agent will act on a best-efforts
basis for the period of its appointment.
We may
authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase securities from us at the
public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. We will describe the
conditions to these contracts and the commissions we must pay for
solicitation of these contracts in the prospectus
supplement.
We may
provide agents and underwriters with indemnification against civil
liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or
underwriters may make with respect to these liabilities. Agents and
underwriters may engage in transactions with, or perform services
for, us in the ordinary course of business.
All
securities we may offer, other than common stock, will be new
issues of securities with no established trading market. Any
underwriters may make a market in these securities, but will not be
obligated to do so and may discontinue any market making at any
time without notice. We cannot guarantee the liquidity of the
trading markets for any securities.
Any
underwriter may engage in over-allotment, stabilizing transactions,
short-covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves
sales in excess of the offering size, which create a short
position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a
specified maximum price. Syndicate-covering or other short-covering
transactions involve purchases of the securities, either through
exercise of the over-allotment option or in the open market after
the distribution is completed, to cover short positions. Penalty
bids permit the underwriters to reclaim a selling concession from a
dealer when the securities originally sold by the dealer are
purchased in a stabilizing or covering transaction to cover short
positions. Those activities may cause the price of the securities
to be higher than it would otherwise be. If commenced, the
underwriters may discontinue any of the activities at any
time.
Any
underwriters that are qualified market makers on the NYSE MKT may
engage in passive market making transactions in the common stock on
the NYSE MKT in accordance with Regulation M under the
Exchange Act, during the business day prior to the pricing of the
offering, before the commencement of offers or sales of the common
stock. Passive market makers must comply with applicable volume and
price limitations and must be identified as passive market makers.
In general, a passive market maker must display its bid at a price
not in excess of the highest independent bid for such security; if
all independent bids are lowered below the passive market
maker’s bid, however, the passive market maker’s bid
must then be lowered when certain purchase limits are exceeded.
Passive market making may stabilize the market price of the
securities at a level above that which might otherwise prevail in
the open market and, if commenced, may be discontinued at any
time.
DESCRIPTION OF OUR CAPITAL STOCK
Pursuant to our Amended and Restated Certificate
of Incorporation, as amended, we are authorized to issue 80,000,000
shares of common stock, $0.001 par value per share. As of June 30,
2016, we had
37,296,523
shares
of common stock outstanding.
On
August 26, 2016, we entered into an At Market Issuance Sales
Agreement with FBR Capital Markets & Co., or FBR, whereby we
may offer through FBR up to $40,000,000 of shares of our common
stock. If we were to sell all $40.0 million available
under the sales agreement, we could issue up to
13,840,830 shares, assuming sales at a price of
$2.89 per share, which was the closing price on the
NYSE MKT on October 10, 2016. Issuing that number of
shares would cause us to exceed our authorized common shares. Until
we amend our Amended and Restated Certificate of Incorporation to
increase the authorized shares of common stock, which we intend to
do during 2016, we would only be able to issue under the sales
agreement with FBR that number of shares, which, when added
together with all outstanding shares and all shares reserved for
issuance pursuant to outstanding preferred shares, options and
warrants and all shares reserved for issuance under our 2013 Stock
Plan, would not exceed 80,000,000 shares. The amendment of our
Amended and Restated Certificate of Incorporation to increase the
authorized shares of common stock will require the approval of a
majority of the shares of common stock outstanding entitled to vote
at the meeting that we intend to hold for such
vote.
The
following summary of certain provisions of our common stock does
not purport to be complete. You should refer to our Amended and
Restated Certificate of Incorporation, as amended, and our Amended
and Restated Bylaws. We filed our Amended and Restated Certificate
of Incorporation, as amended, as an exhibit to our definitive proxy
statement on Schedule 14A with the SEC on October 17, 2012 and
filed our Amended and Restated Bylaws as an exhibit to the
registration statement on Form S-1 filed with the SEC on March 1,
2010. We filed a Certificate of Designation for each of our Series
C-2, C-3, D and E non-voting preferred stock as exhibits to our
current reports on Form 8-K on October 23, 2013 and January 9,
2014, and amendments to the Certificate of Designation for each of
our Series C-2, C-3, D and E non-voting preferred stock on
September 16, 2014. The summary below is also qualified by
provisions of applicable law.
The
holders of our common stock are entitled to one vote per share on
all matters to be voted on by the stockholders, and there are no
cumulative voting rights. Generally, all matters to be voted on by
stockholders must be approved by a majority (or, in the case of
election of directors, by a plurality) of the votes entitled to be
cast by all shares of common stock present in person or represented
by proxy, subject to any voting rights granted to holders of any
preferred stock.
The
holders of common stock are entitled to receive ratable dividends,
if any, payable in cash, in stock or otherwise if, as and when
declared from time to time by our board of directors out of funds
legally available for the payment of dividends, subject to any
preferential rights that may be applicable to any outstanding
preferred stock. In the event of a liquidation, dissolution, or
winding up of our company, after payment in full of all outstanding
debts and other liabilities, the holders of common stock are
entitled to share ratably in all remaining assets, subject to prior
distribution rights of preferred stock, if any, then outstanding.
No shares of common stock have preemptive rights or other
subscription rights to purchase additional shares of common stock.
There are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock included in
this registration statement will be fully paid and nonassessable.
The rights, preferences and privileges of holders of our common
stock will be subject to, and might be adversely affected by, the
rights of holders of any preferred stock that we may issue in the
future. All shares of common stock that are acquired by us shall be
available for reissuance by us at any time.
Issued and Outstanding Preferred Stock
Under
the terms of our Amended and Restated Certificate of Incorporation,
as amended, our board of directors is authorized to issue up to
2,000,000 shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion to
determine the rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, of each series
of preferred stock. As of June 30, 2016, of the 2,000,000 shares of
preferred stock authorized, our board of directors has designated
(all with par value of $0.001 per share): 150,000 shares as Series
C-2 Non-Voting Convertible Preferred Stock; 200,000 shares as
Series C-3 Non-Voting Convertible Preferred Stock; 73,962 shares as
Series D Non-Voting Convertible Preferred Stock; and 92,440 shares
as Series E Non-Voting Convertible Preferred Stock. At June 30,
2016, we had outstanding: 150,000 shares as Series C-2 Non-Voting
Convertible Preferred Stock; 136,500 shares as Series C-3
Non-Voting Convertible Preferred Stock; 73,962 shares as Series D
Non-Voting Convertible Preferred Stock; and 89,623 shares as Series
E Non-Voting Convertible Preferred Stock. The Series A Non-Voting
Convertible Preferred Stock, Series B Non-Voting Convertible
Preferred Stock and Series C-1 Non-Voting Convertible Preferred
Stock that were previously designated have all been converted to
shares of common stock.
Series C-2 and C-3 Non-Voting Convertible Preferred Stock
The
Series C-2 and C-3 Preferred Stock, referred to collectively as the
Series C Preferred Stock, have identical rights, privileges and
terms, as described below.
Rank
.
The Series C Preferred Stock will
rank:
●
senior to our common
stock;
●
senior to any class or series of
capital stock created after the issuance of the Series C Preferred
Stock; and
●
junior t
o the Series D Non-Voting
Convertible Preferred Stock and Series E Non-Voting Convertible
Preferred Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series C Preferred Stock
is convertible into 10 shares of our common stock (subject to
adjustment in the event of s
tock dividends and
distributions, stock splits, stock combinations, or
reclassifications affecting our common stock
) at a per share price of $1.00 at any time at the
option of the holder, except that a holder will be prohibited from
converting shares of Series C Preferred Stock into shares of common
stock if, as a result of such conversion, such holder, together
with its affiliates, would beneficially own more than 9.99% of the
total number of shares of our common stock then issued and
outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series C Preferred Stock will receive a
payment equal to $10.00 per share of Series C Preferred Stock
before any proceeds are distributed to the holders of our common
stock. After the payment of this preferential amount, and subject
to the rights of holders of any class or series of our capital
stock hereafter created specifically ranking by its terms senior to
the Series C Preferred Stock, holders of Series C Preferred Stock
will participate ratably in the distribution of any remaining
assets with the common stock and any other class or series of our
capital stock hereafter created that participates with the common
stock in such distributions.
Voting
Rights
.
Shares of Series C Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of two thirds of the outstanding Series C-2
and Series C-3 Preferred Stock, respectively, will be required to
amend the terms of the Series C-2 and C-3 Preferred Stock or the
certificate of designation for the Series C-2 and C-3 Preferred
Stock, respectively.
Dividends
.
Holders of Series C Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series C Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series C Preferred Stock. Shares of Series
C Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series C Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series C Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series C Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series C Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series C-2 Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Series D Non-Voting Convertible Preferred Stock
Rank
.
The Series D Preferred Stock will
rank:
●
senior
to our common stock;
●
senior
to any class or series of capital stock created after the issuance
of the Series D Preferred Stock;
●
senior
to the Series C-2 Non-Voting Convertible Preferred Stock and the
Series C-3 Non-Voting Convertible Preferred Stock; and
●
on
parity with the Series E Non-Voting Convertible Preferred
Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series D Preferred Stock
is convertible into 20 shares of our common stock (subject to
adjustment in the event of s
tock dividends and
distributions, stock splits, stock combinations, or
reclassifications affecting our common stock
) at a per share price of $0.35 at any time at the
option of the holder, except that a holder will be prohibited from
converting shares of Series D Preferred Stock into shares of common
stock if, as a result of such conversion, such holder, together
with its affiliates, would beneficially own more than 9.99% of the
total number of shares of our common stock then issued and
outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series D Preferred Stock will receive a
payment equal to $21.00 per share of Series D Preferred Stock on
parity with the payment of the liquidation preference due the
Series E Preferred Stock, but before any proceeds are distributed
to the holders of common stock, the Series C-2 Non-Voting
Convertible Preferred Stock and the Series C-3 Non-Voting
Convertible Preferred Stock. After the payment of this preferential
amount, holders of Series D Preferred Stock will participate
ratably in the distribution of any remaining assets with the common
stock and any other class or series of our capital stock that
participates with the common stock in such
distributions.
Voting
Rights
.
Shares of Series D Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of a majority of the outstanding Series D
Preferred Stock will be required to amend the terms of the Series D
Preferred Stock or the certificate of designation for the Series D
Preferred Stock.
Dividends
.
Holders of Series D Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series D Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series D Preferred Stock. Shares of Series
D Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series D Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series D Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series D Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series D Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series D Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Series E Non-Voting Convertible Preferred Stock
Rank
.
The Series E Preferred Stock will
rank:
●
senior
to our common stock;
●
senior
to any class or series of capital stock created after the issuance
of the Series E Preferred Stock;
●
senior
to the Series C-2 Non-Voting Convertible Preferred Stock and the
Series C-3 Non-Voting Convertible Preferred Stock; and
●
on
parity with the Series D Non-Voting Convertible Preferred
Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series E Preferred Stock
is convertible into 21.8667 shares of our common stock (subject to
adjustment as provided in the certificates of designation for the
Series E Preferred Stock) at a per share price of $0.75 at any time
at the option of the holder, except that a holder will be
prohibited from converting shares of Series E Preferred Stock into
shares of common stock if, as a result of such conversion, such
holder, together with its affiliates, would beneficially own more
than 9.99% of the total number of shares of our common stock then
issued and outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series E Preferred Stock will receive a
payment equal to $49.20 per share of Series E Preferred Stock on
parity with the payment of the liquidation preference due the
Series D Preferred Stock, but before any proceeds are distributed
to the holders of common stock, the Series C-2 Non-Voting
Convertible Preferred Stock and the Series C-3 Non-Voting
Convertible Preferred Stock. After the payment of this preferential
amount, holders of Series E Preferred Stock will participate
ratably in the distribution of any remaining assets with the common
stock and any other class or series of our capital stock that
participates with the common stock in such
distributions.
Voting
Rights
.
Shares of Series E Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of a majority of the outstanding Series E
Preferred Stock will be required to amend the terms of the Series E
Preferred Stock or the certificate of designation for the Series E
Preferred Stock.
Dividends
.
Holders of Series E Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series E Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series E Preferred Stock. Shares of Series
E Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series E Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series E Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series E Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series E Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series E Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Other
Covenants
.
In addition to the debt restrictions above, as
long as any the Series E Preferred Stock is outstanding
, we
cannot, among others things: create, incur, assume or suffer to
exist any encumbrances on any of our assets or property; redeem,
repurchase or pay any cash dividend or distribution on any of our
capital stock (other than as permitted, which includes the
dividends on the Series D Preferred Stock and the Series E
Preferred Stock); redeem, repurchase or prepay any indebtedness; or
engage in any material line of business substantially different
from our current lines of business.
Purchase
Rights
.
In the event
we issue any options, convertible securities or rights to purchase
stock or other securities pro rata to the holders of common stock,
then the a holder of Series E Preferred Stock will be entitled to
acquire, upon the same terms a pro rata amount of such stock or
securities as if the Series E Preferred Stock had been converted to
common stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock is
VStock Transfer, LLC.
The transfer agent’s address is 18 Lafayette Place, Woodmere,
New York 11598 and its telephone number is (212)
828-8436.
We
act as our own transfer agent and registrar for the Series C-2,
C-3, D and E Preferred Stock.
Description of Preferred Stock That May Be Offered
Our
board of
directors has the authority,
without further action by the stockholders, to issue up to
2,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms
of redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of such
series, without any further vote or action by our stockholders. As
of the date of this prospectus, no shares of preferred stock were
outstanding. The issuance of preferred stock could adversely affect
the voting power of holders of common stock and the likelihood that
such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deferring or
preventing a change in control of our
company.
We will fix the rights, preferences, privileges
and restrictions of the preferred stock of each series in the
certificate of designation relating to that series. We will file as
an exhibit to the registration statement of which this prospectus
is a part, or will incorporate by reference from reports that we
file with the SEC, the form of any certificate of designation that
describes the terms of the series of preferred stock we are
offering before the issuance of the related series of preferred
stock. This description will include any
or all of the
following, as required:
●
the title and
stated value;
●
the number of
shares we are offering;
●
the liquidation
preference per share;
●
the dividend rate,
period and payment date and method of calculation for
dividends;
●
whether dividends
will be cumulative or non-cumulative and, if cumulative, the date
from which dividends will accumulate;
●
the procedures for
any auction and remarketing, if any;
●
the provisions for
a sinking fund, if any;
●
the provisions for
redemption or repurchase, if applicable, and any restrictions on
our ability to exercise those redemption and repurchase
rights;
●
any listing of the
preferred stock on any securities exchange or market;
●
whether the
preferred stock will be convertible into our common stock, and, if
applicable, the conversion price, or how it will be calculated, and
the conversion period;
●
whether the
preferred stock will be exchangeable into debt securities, and, if
applicable, the exchange price, or how it will be calculated, and
the exchange period;
●
voting rights, if
any, of the preferred stock;
●
preemptive rights,
if any;
●
restrictions on
transfer, sale or other assignment, if any;
●
whether interests
in the preferred stock will be represented by depositary
shares;
●
a discussion of any
material or special United States federal income tax considerations
applicable to the preferred stock;
●
the relative
ranking and preferences of the preferred stock as to dividend
rights and rights if we liquidate, dissolve or wind up our
affairs;
●
any limitations on
issuance of any class or series of preferred stock ranking senior
to or on a parity with the series of preferred stock as to dividend
rights and rights if we liquidate, dissolve or wind up our affairs;
and
●
any other specific
terms, preferences, rights or limitations of, or restrictions on,
the preferred stock.
If we
issue shares of preferred stock under this prospectus, the shares
will be fully paid and non-assessable.
The
General Corporation Law of the State of Delaware, the state of our
incorporation, provides that the holders of preferred stock will
have the right to vote separately as a class on any proposal
involving fundamental changes in the rights of holders of that
preferred stock. This right is in addition to any voting rights
that may be provided for in the applicable certificate of
designation.
Our
board of directors may authorize the issuance of preferred stock
with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of our common stock.
Preferred stock could be issued quickly with terms designed to
delay or prevent a change in control of our company or make removal
of management more difficult. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price
of our common stock.
DESCRIPTION OF DEBT SECURITIES
The
following description, together with the additional information we
include in any applicable prospectus supplement, summarizes the
material terms and provisions of any debt securities that we may
offer under this prospectus. While the terms we have summarized
below will apply generally to any future debt securities we may
offer, we will describe the particular terms of any debt securities
that we may offer in more detail in the applicable prospectus
supplement. The terms of any debt securities we may offer under a
prospectus supplement may differ from the terms described below.
For any debt securities that we may offer, an indenture (and any
relevant supplemental indenture) will contain additional important
terms and provisions, the form of which we filed as an exhibit to
the registration statement of which this prospectus is a part and
is incorporated therein by reference. We will file any definitive
indenture as an exhibit to reports that we file with the SEC and
incorporate by reference in this prospectus and the applicable
prospectus supplement. Any indenture would be qualified under the
Trust Indenture Act of 1939.
With
respect to any debt securities that we issue, we will describe in
each prospectus supplement the following terms relating to a series
of debt securities:
●
the
principal amount being offered, and if a series, the total amount
authorized and the total amount outstanding;
●
any
limit on the amount that may be issued;
●
whether
or not we will issue the series of debt securities in global form,
and if so, the terms and who the depository will be;
●
the
principal amount due at maturity;
●
whether
and under what circumstances, if any, we will pay additional
amounts on any debt securities held by a person who is not a United
States person for tax purposes, and whether we can redeem the debt
securities if we have to pay such additional amounts;
●
the
annual interest rate, which may be fixed or variable, or the method
for determining the rate and the date interest will begin to
accrue, the dates interest will be payable and the regular record
dates for interest payment dates or the method for determining such
dates;
●
whether
or not the debt securities will be convertible into shares of our
common stock or our preferred stock and, if so, the terms of such
conversion;
●
whether
or not the debt securities will be secured or unsecured by some or
all of our assets, and the terms of any secured debt;
●
the
terms of the subordination of any series of subordinated
debt;
●
the
place where payments will be payable;
●
r
estrictions on transfer, sale or other assignment,
if any;
●
our
right, if any, to defer payment or interest and the maximum length
of any such deferral period;
●
the
date, if any, after which and the conditions upon which, and the
price at which, we may, at our option, redeem the series of debt
securities pursuant to any optional or provisional redemption
provisions and the terms of those redemptions
provisions;
●
the
date, if any, on which, and the price at which we are obligated,
pursuant to any mandatory sinking fund or analogous fund provisions
or otherwise, to redeem, or at the holder’s option to
purchase, the series of debt securities and the currency or
currency unit in which the debt securities are
payable;
●
whether
the indenture will restrict our ability to pay dividends, or will
require us to maintain any asset ratios or reserves;
●
whether
we will be restricted from incurring any additional indebtedness,
issuing additional securities, or entering into a merger,
consolidation or sale of our business;
●
a
discussion of any material or special United States federal income
tax considerations applicable to the debt securities;
●
information
describing any book-entry features;
●
any
provisions for payment of additional amounts for
taxes;
●
whether
the debt securities are to be offered at a price such that they
will be deemed to be offered at an “original issue
discount” as defined in paragraph (a) of
Section 1273 of the Internal Revenue Code of 1986,
as amended;
●
the
denominations in which we will issue the series of debt securities,
if other than denominations of $1,000 and any integral multiple
thereof;
●
whether
we and/or the indenture trustee may change an indenture without the
consent of any holders;
●
the
form of debt security and how it may be exchanged and
transferred;
●
description
of the indenture trustee and paying agent, and the method of
payments; and
●
any
other specified terms, preferences, rights or limitations of, or
restrictions on, the debt securities and any terms that may be
required by us or advisable under applicable laws or
regulations.
We
summarize below the material terms of the form of indenture or
indicate which material terms will be described in the applicable
prospectus supplement. The indenture:
●
does not limit the
amount of debt securities that we may issue;
●
allows us to issue
debt securities in one or more series;
●
does not require us
to issue all of the debt securities of a series at the same
time;
●
allows us to reopen
a series to issue additional debt securities without the consent of
the holders of the debt securities of such series; and
●
provides that the
debt securities will be unsecured, except as may be set forth in
the applicable prospectus supplement.
DESCRIPTION OF WARRANTS
The
following description, together with the additional information we
may include in any applicable prospectus supplement, summarizes the
material terms and provisions of any warrants that we may offer
under this prospectus and the related warrant agreements and
warrant certificates. While the terms summarized below will apply
generally to any warrants that we may offer, we will describe the
particular terms of any series of warrants in more detail in the
applicable prospectus supplement. The terms of any warrants offered
under a prospectus supplement may differ from the terms described
below. With respect to any warrants that we offer, specific warrant
agreements will contain additional important terms and provisions
and will be incorporated by reference as an exhibit to the
registration statement that includes this prospectus or as an
exhibit to reports that we file with the SEC and incorporated by
reference in this prospectus:
●
the
specific designation and aggregate number of, and the price at
which we will issue, the warrants;
●
the
currency or currency units in which the offering price, if any, and
the exercise price are payable;
●
if
applicable, the exercise price for shares of our common stock or
preferred stock and the number of shares of common stock or
preferred stock to be received upon exercise of the
warrants;
●
in the case of
warrants to purchase debt securities, the principal amount of debt
securities purchasable upon exercise of one warrant and the price
at, and currency in which, this principal amount of debt securities
may be purchased upon such exercise;
●
the
date on which the right to exercise the warrants will begin and the
date on which that right will expire or, if you may not
continuously exercise the warrants throughout that period, the
specific date or dates on which you may exercise the
warrants;
●
w
hether the warrants will be issued in fully
registered form or bearer form, in definitive or global form or in
any combination of these forms, although, in any case, the form of
a warrant included in a unit will correspond to the form of the
unit and of any security included in that unit;
●
any
applicable material U.S. federal income tax
consequences;
●
the
identity of the warrant agent for the warrants and of any other
depositaries, execution or paying agents, transfer agents,
registrars or other agents;
●
the
proposed listing, if any, of the warrants or the common stock
issuable upon exercise of the warrants on any securities
exchange;
●
if
applicable, the date from and after which the warrants and the
common stock will be separately transferable;
●
if
applicable, the minimum or maximum amount of the warrants that may
be exercised at any one time;
●
information
with respect to book-entry procedures, if any;
●
the
anti-dilution provisions of the warrants, if any;
●
any
redemption or call provisions;
●
whether
the warrants are to be sold separately or with other securities as
parts of units; and
●
any
additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the
warrants.
Before
exercising their warrants, holders of warrants will not have any of
the rights of holders of the securities purchasable upon such
exercise, including:
●
in
the case of warrants to purchase debt securities, the right to
receive payments of principal of, or premium, if any, or interest
on, the debt securities purchasable upon exercise or to enforce
covenants in the applicable indenture; or
●
in the case of warrants to purchase common stock
or preferred stock, the right to receive dividends, if any, or,
payments
upon our liquidation, dissolution or winding up or
to exercise voting rights, if any.
Transfer Agent and Registrar
The
transfer agent and registrar for any warrants will be set forth in
the applicable prospectus supplement.
DESCRIPTION OF UNITS
We
might issue units composed of one or more debt securities, shares
of common stock, shares of preferred stock and warrants in any
combination. Each unit will be issued so that the holder of the
unit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of
a holder of each included security. The unit agreement under which
a unit is issued may provide that the securities included in the
unit may not be held or transferred separately, at any time or at
any time before a specified date. We will file as exhibits to the
registration statement of which this prospectus is a part, or will
incorporate by reference from reports that we file with the SEC,
the form of unit agreement, warrant and any supplemental agreements
that describe the terms of the series of units we are offering
before the issuance of the related series of units.
We
may choose to evidence each series of units by unit certificates
that we would issue under a separate agreement. If we choose to
evidence the units by unit certificates, we will enter into the
unit agreements with a unit agent and will indicate the name and
address of the unit agent in the applicable prospectus supplement
relating to the particular series of units.
CERTAIN PROVISIONS OF DELAWARE LAW AND OF OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED
BYLAWS
Certain
provisions of DGCL and our Amended and Restated Certificate of
Incorporation, as amended, and our Amended and Restated Bylaws
discussed below may have the effect of making more difficult or
discouraging a tender offer, proxy contest or other takeover
attempt. These provisions are expected to encourage persons seeking
to acquire control of our company to first negotiate with our board
of directors. We believe that the benefits of increasing our
ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure our company outweigh
the disadvantages of discouraging these proposals because
negotiation of these proposals could result in an improvement of
their terms.
Delaware Anti-takeover Law
We are
subject to Section 203 of the DGCL, an anti-takeover law. In
general, Section 203 prohibits a publicly held Delaware corporation
from engaging in a “business combination” with an
“interested stockholder” for a period of three years
following the date the person became an interested stockholder,
unless:
●
the board of
directors approves the transaction in which the stockholder became
an interested stockholder prior to the date the interested
stockholder attained that status;
●
when the
stockholder became an interested stockholder, he or she owned at
least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by persons
who are directors and also officers and certain shares owned by
employee benefits plans; or
●
on or subsequent to
the date the business combination is approved by the board of
directors, the business combination is authorized by the
affirmative vote of at least 66 2/3% of the voting stock of the
corporation at an annual or special meeting of
stockholders.
Generally,
a “business combination” includes a merger, asset or
stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. Generally, an “interested
stockholder” is a person who, together with affiliates and
associates, owns, or is an affiliate or associate of the
corporation and within three years prior to the determination of
interested stockholder status did own, 15% or more of a
corporation’s voting stock.
The
existence of Section 203 of the DGCL would be expected to have an
anti-takeover effect with respect to transactions not approved in
advance by our board of directors, including discouraging attempts
that might result in a premium over the market price for the shares
of our common stock.
Charter Documents
Our
Amended and Restated Certificate of Incorporation, as amended, and
Amended and Restated Bylaws include a number of provisions that may
have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of our company. First,
our Amended and Restated Bylaws limit who may call special meetings
of the stockholders, such meetings may only be called by the
chairman of the board, the chief executive officer, the board of
directors or holders of an aggregate of at least 15% of our
outstanding entitled to vote. Second, our Amended and Restated
Certificate of Incorporation does not include a provision for
cumulative voting for directors. Under cumulative voting, a
minority stockholder holding a sufficient percentage of a class of
shares may be able to ensure the election of one or more directors.
Third, our Amended and Restated Bylaws provide that the number of
directors on our board, which may range from five to nine
directors, shall be exclusively fixed by our board, which has set
the number of directors at seven. Fourth, newly created
directorships resulting from any increase in our authorized number
of directors and any vacancies in our board resulting from death,
resignation, retirement, disqualification or other cause (including
removal from office by a vote of the shareholders) will be filled
by a majority of our board then in office. Finally, our Amended and
Restated Bylaws establish procedures, including 90-day advance
notice requirement, with regard to the nomination of candidates for
election as directors and stockholder proposals. These and other
provisions of our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws and Delaware law could discourage
potential acquisition proposals and could delay or prevent a change
in control or management of our company.
The
validity of the securities being offered hereby will be passed upon
by Wyrick Robbins Yates & Ponton LLP, Raleigh, North
Carolina.
The balance sheets of CorMedix Inc. as of December
31, 2015 and 2014 and the related consolidated statements of
operations and comprehensive income (loss), stockholders’
equity, and cash flows for each of the years in the two-year period
ended December 31, 2015,
and the effectiveness of internal
control over financial reporting as of December 31, 2015 (which is
included in the Annual Report on Form 10-K for the year ended
December 31, 2015),
have been
incorporated herein by reference in reliance on the report of
Friedman LLP, independent registered public accounting firm, given
upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the reporting
requirements of the Exchange Act and file annual, quarterly and
current reports, proxy statements and other information with the
SEC. You may read and copy these reports, proxy statements and
other information at the SEC’s public reference facilities at
100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying
a fee for the copying cost. Please call the SEC at 1-800-SEC-0330
for more information about the operation of the public reference
facilities. SEC filings are also available at the SEC’s web
site at http://www.sec.gov. Our common stock is listed on the NYSE
MKT, and you can read and inspect our filings at the offices of the
NYSE MKT at 20 Broad Street, New York, NY
10005.
This
prospectus is only part of a registration statement on Form S-3
that we have filed with the SEC under the Securities Act and
therefore omits certain information contained in the registration
statement. We have also filed exhibits and schedules with the
registration statement that are excluded from this prospectus, and
you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or
other document. You may inspect a copy of the registration
statement, including the exhibits and schedules, without charge, at
the public reference room or obtain a copy from the SEC upon
payment of the fees prescribed by the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The
SEC allows us to “incorporate by reference” information
that we file with them. Incorporation by reference allows us to
disclose important information to you by referring you to those
other documents. The information incorporated by reference is an
important part of this prospectus and any applicable accompanying
prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We filed a
registration statement on Form S-3 under the Securities Act of
1933, as amended, with the SEC with respect to the securities being
offered pursuant to this prospectus and any applicable accompanying
prospectus. This prospectus omits certain information contained in
the registration statement, as permitted by the SEC. You should
refer to the registration statement, including the exhibits, for
further information about us and the securities being offered
pursuant to this prospectus and any applicable accompanying
prospectus. Statements in this prospectus and any applicable
accompanying prospectus regarding the provisions of certain
documents filed with, or incorporated by reference in, the
registration statement are not necessarily complete and each
statement is qualified in all respects by that reference. Copies of
all or any part of the registration statement, including the
documents incorporated by reference or the exhibits, may be
obtained upon payment of the prescribed rates at the offices of the
SEC listed above in “Where You Can Find More
Information.” The documents we are incorporating by reference
into this prospectus are:
●
our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2015, filed with the SEC pursuant to Section 13
of the Exchange Act on March 15, 2016;
●
our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2016,
filed with the SEC pursuant to Section 13 of the Exchange Act on
May 10, 2016;
●
our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2016,
filed with the SEC pursuant to Section 13 of the Exchange Act on
August 4, 2016;
●
our
Current Reports on Form 8-K, filed with the SEC pursuant to
Section 13 of the Exchange Act on January 19, 2016, March 15, 2016,
April 13, 2016, April 21, 2016, April 25, 2016, May 2, 2016,
June 13, 2016, July 5, 2016, September 16, 2016, and
October 3, 2016;
●
our
definitive proxy statement on Schedule 14A for the 2016 annual
meeting of stockholders, filed with the SEC pursuant to Section 14
of the Exchange Act on May 4, 2016; and
●
all
of the filings pursuant to the Exchange Act after the date of the
filing of the registration statement and prior to the effectiveness
of the registration statement.
In
addition, all documents subsequently filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act before
the date our offering is terminated or completed are deemed to be
incorporated by reference into, and to be a part of, this
prospectus.
Any
statement contained in this prospectus and any applicable
prospectus supplement or in a document incorporated or deemed to be
incorporated by reference into this prospectus and any applicable
prospectus supplement will be deemed to be modified or superseded
for purposes of this prospectus and any prospectus supplement to
the extent that a statement contained in this prospectus and any
applicable prospectus supplement or any other subsequently filed
document that is deemed to be incorporated by reference into this
prospectus and any applicable prospectus supplement modifies or
supersedes the statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus and any applicable prospectus
supplement.
We
will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference,
including exhibits to these documents. You should direct any
requests for documents to CorMedix, Inc., Attention: Secretary,
1430 US Highway 206, Suite 200, Bedminster, New Jersey 07921, (908)
517-9500.
You should rely only on information contained in,
or incorporated by reference into, this prospectus and any
applicable prospectus supplement. We have not authorized anyone to
provide you with information different from that contained in this
prospectus and any applicable prospectus supplement or incorporated
by reference in this prospectus and any applicable prospectus
supplement. We are not making offers to sell the securities in any
jurisdiction in which such an offer or solicitation is not
authorized or in which the person making such offer or solicitation
is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation
.
The information in this prospectus is not complete and may be
changed. We may not sell these securities or accept an offer to buy
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities, and we are not soliciting an
offer to buy these securities in any state where the offer or sale
is not permitted.
Prospectus
Subject to completion, dated October 13,
2016
$40,000,000
Common Stock
We have
entered into an At Market Issuance Sales Agreement, which we refer
to as the sales agreement, with FBR Capital Markets & Co., or
FBR, relating to the sale of shares of our common stock offered by
this prospectus. In accordance with the terms of the sales
agreement, under this prospectus we may offer and sell shares of
our common stock, $0.001 par value per share, having an aggregate
offering price of up to $40,000,000 from time to time through FBR,
acting as agent.
Our
common stock is traded on the NYSE MKT under the symbol
“CRMD.” The last reported sale price of our common
stock on October 10, 2016 was
$2.89 per share.
Sales
of our common stock, if any, under this prospectus will be made by
any method permitted that is deemed an “at the market
offering” as defined in Rule 415 under the Securities Act of
1933, as amended, or the Securities Act. FBR is not required to
sell any specific amount, but will act as our sales agent using
commercially reasonable efforts consistent with its normal trading
and sales practices. There is no arrangement for funds to be
received in any escrow, trust or similar arrangement.
FBR
will be entitled to compensation at a commission rate equal to 3%
of the gross sales price per share sold. In connection with the
sale of the common stock on our behalf, FBR may be deemed to be an
“underwriter” within the meaning of the Securities Act
and the compensation of FBR may be deemed to be underwriting
commissions or discounts. We have also agreed to provide
indemnification and contribution to FBR with respect to certain
liabilities, including liabilities under the Securities
Act.
Investing
in our common stock involves a high degree of risk. Please read the
information contained in and incorporated by reference under the
heading “Risk Factors” beginning on page 6 of this
prospectus, the section captioned “Item 1A—Risk
Factors” in our most recently filed annual report on Form
10-K, which is incorporated by reference into this prospectus, and
under similar headings in the other documents that are filed after
the date hereof and incorporated by reference into this
prospectus.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
FBR
The
date of this prospectus is ______, 2016.
TABLE OF CONTENTS
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Page
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About this Prospectus
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1
|
Prospectus Summary
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2
|
Risk Factors
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6
|
Special Note Regarding Forward-Looking Statements
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26
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Use of Proceeds
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27
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Dilution
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27
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Market for Common Stock
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29
|
Plan of Distribution
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30
|
Description of our Capital Stock
|
30
|
Certain Provisions of Delaware Law and of Our Amended and Restated
Certificate of Incorporation and Amended and Restated
Bylaws
|
35
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Legal Matters
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36
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Experts
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36
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Where You Can Find More Information
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37
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Incorporation of Documents by Reference
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37
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ABOUT
THIS PROSPECTUS
This
prospectus relates to the offering of our common stock. Before
buying any of the common stock that we are offering, we urge you to
carefully read this prospectus, together with the information
incorporated by reference as described under the headings
“Where You Can Find More Information” and
“Incorporation of Certain Information by Reference” in
this prospectus. These documents contain important information that
you should consider when making your investment
decision.
This
prospectus describes the specific terms of the common stock we are
offering and also adds to, and updates information in any document
incorporated by reference into this prospectus. To the extent there
is a conflict between the information contained in this prospectus,
on the one hand, and the information contained any document
incorporated by reference into this prospectus that was filed with
the Securities and Exchange Commission, or SEC, before the date of
this prospectus, on the other hand, you should rely on the
information in this prospectus. If any statement in one of these
documents is inconsistent with a statement in another document
having a later date — for example, a document incorporated by
reference into this prospectus— the statement in the document
having the later date modifies or supersedes the earlier
statement.
You
should rely only on the information contained in, or incorporated
by reference into, this prospectus and in any free writing
prospectus that we may authorize for use in connection with this
offering. We have not, and FBR has not, authorized any other person
to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on
it. We are not, and FBR is not, making an offer to sell or
soliciting an offer to buy our securities in any jurisdiction in
which an offer or solicitation is not authorized or in which the
person making that offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make an offer or
solicitation. You should assume that the information appearing into
this prospectus, the documents incorporated by reference into this
prospectus, and in any free writing prospectus that we may
authorize for use in connection with this offering, is accurate
only as of the date of those respective documents. Our business,
financial condition, results of operations and prospects may have
changed since those dates. You should read this prospectus, the
documents incorporated by reference into this prospectus, and any
free writing prospectus that we may authorize for use in connection
with this offering, in their entirety before making an investment
decision. You should also read and consider the information in the
documents to which we have referred you in the sections of this
prospectus entitled “Where You Can Find More
Information” and “Incorporation of Certain Information
by Reference.”
We are
offering to sell, and seeking offers to buy, shares of common stock
only in jurisdictions where offers and sales are permitted. The
distribution of this prospectus and the offering of the common
stock in certain jurisdictions may be restricted by law. Persons
outside the United States who come into possession of this
prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the common stock and the
distribution of this prospectus outside the United States. This
prospectus does not constitute, and may not be used in connection
with, an offer to sell, or a solicitation of an offer to buy, any
securities offered by this prospectus by any person in any
jurisdiction in which it is unlawful for such person to make such
an offer or solicitation.
Our primary executive offices are located at 1430
U.S. Highway 206, Suite 200, Bedminster, NJ 07921, and our
telephone number is (908) 517-9500. Our website address
is
www.cormedix.com
.
The
information contained on our website is not a part of, and should
not be construed as being incorporated by reference into, this
prospectus.
Unless
the context otherwise requires, “CorMedix,” the
“company,” “we,” “us,”
“our” and similar names refer to CorMedix
Inc.
Neutrolin
®
is our registered trademark and the
CorMedix logo is our trademark. All other trade names, trademarks
and service marks appearing in this prospectus are the property of
their respective owners. We have assumed that the reader
understands that all such terms are source-indicating. Accordingly,
such terms, when first mentioned in this prospectus, appear with
the trade name, trademark or service mark notice and then
throughout the remainder of this prospectus without trade name,
trademark or service mark notices for convenience only and should
not be construed as being used in a descriptive or generic
sense.
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PROSPECTUS SUMMARY
This summary highlights certain information about us, this offering
and selected information contained elsewhere in or incorporated by
reference into this prospectus. This summary is not complete and
does not contain all of the information that you should consider
before deciding whether to invest in our common stock. For a more
complete understanding of our company and this offering, we
encourage you to read and consider carefully the more detailed
information in this prospectus, including the information
incorporated by reference into this prospectus, and the information
referred to under the heading “Risk Factors” in this
prospectus beginning on page 6, and in the documents incorporated
by reference into this prospectus.
OUR COMPANY
Overview
We are
a biopharmaceutical company focused on developing and
commercializing therapeutic products for the prevention and
treatment of infectious and inflammatory diseases.
Our
primary focus is on the development of our lead product candidate,
Neutrolin® (also known as CRMD003), for potential
commercialization in the United States (“U.S.”) and
other key markets. We have in-licensed the worldwide rights to
develop and commercialize Neutrolin®. Neutrolin is a novel
anti-infective solution (a formulation of taurolidine, citrate and
heparin 1000 u/ml) for the reduction and prevention of
catheter-related infections and thrombosis in patients requiring
central venous catheters in clinical settings such as dialysis,
critical/intensive care, and oncology. Infection and thrombosis
represent key complications among critical care / intensive care
and cancer patients with central venous catheters. These
complications can lead to treatment delays and increased costs to
the healthcare system when they occur due to hospitalizations, need
for IV antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related
treatment costs and increased mortality when they occur. We believe
Neutrolin addresses a significant unmet medical need and potential
large market opportunities.
Neutrolin is an
anti-infective solution for the prevention of catheter-related
infections and thrombosis in the central venous catheter markets
such as dialysis, critical care, and oncology. There are seven
million central venous catheters and 160 million peripheral
catheters placed per year in patients in the United States.
There are 250,000 catheter related bloodstream infections (CRBSIs)
in the United States per year. The mortality rate ranges from
20 to 25%. Neutrolin is a novel formulation of taurolidine,
citrate and heparin 1000 u/ml that provides a combination
preventative solution to decrease the development of biofilm, which
reduces infection and thrombosis thereby keeping catheters
operating optimally in the clinical settings in hemodialysis,
critical care/intensive care and oncology. There are approximately
468,000 hemodialysis patients in the United States. Hemodialysis
using a tunneled central vein catheter was our initial target
market with Germany being the first market in which we launched
Neutrolin as a medical device in December 2013. These hemodialysis
patients represent over 127 million catheter/dialysis treatment
days per year in the U.S., which we believe represents a
conservative market potential of $300 to $400 million. The
market in the critical care/intensive care units is 28.5 million
catheter days per year in the United States alone. There were over
14.5 million patients living with cancer in the United States as of
2014 with an estimated 7.7 million having a long-term central
venous catheter. However, when stages of disease, chemotherapy
regimens and catheter types are factored, the oncology market
represents 90 million catheter days. Infection and thrombosis
represent key complications among critical care/intensive care and
cancer patients with central venous catheters. These complications
can lead to treatment delays and increased costs to the healthcare
system when they occur due to hospitalizations, need for IV
antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related
treatment costs and increased mortality when they
occur.
The
U.S. Food and Drug Administration, or FDA, has designated Neutrolin
as a Qualified Infectious Disease Product (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 an additional
five years of market exclusivity in addition to the five years
granted for a New Chemical Entity. In addition, in January 2015,
the FDA granted Fast Track designation to Neutrolin Catheter Lock
Solution, pursuant to the Food and Drug Administration Safety
Innovation Act (FDASIA) highlighting the large unmet need to
prevent infections in the U.S. healthcare system. The Fast Track
designation of Neutrolin 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.
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In late
2013, we met with the FDA to determine the pathway for U.S.
marketing approval of Neutrolin. Based on those discussions, we
plan to conduct two pivotal trials, both of which are required to
demonstrate safety and effectiveness of Neutrolin to secure
marketing approval. We initiated the first Phase 3 clinical trial
in hemodialysis patients with a central venous catheter in December
2015 and plan to initiate the second Phase 3 trial in oncology
patients with catheters receiving total parenteral nutrition,
subject to sufficient resources.
We
launched the Phase 3 clinical trial in hemodialysis catheters in
the U.S. in December 2015. The clinical trial, named Catheter Lock
Solution Investigational Trial, or LOCK-IT-100, is a prospective,
multicenter, randomized, double-blind, placebo-controlled, active
control trial which aims to demonstrate the efficacy and safety of
Neutrolin in preventing catheter-related bloodstream infections, or
CRBSI, in subjects receiving hemodialysis therapy as treatment for
end stage renal disease.
The primary
endpoint for the trial is time to CRBSI. The trial will evaluate
whether Neutrolin is superior to the active control heparin by
documenting the incidence of CRBSI and the time until the
occurrence of CRBSI. Key secondary endpoints are catheter patency
which is defined as required use of tissue plasminogen activating
factor (tPA) or removal of catheter due to dysfunction and catheter
removal for any reason. We project that the Data and Safety
Monitoring Board will conduct a safety analysis in the fourth
quarter of 2016 when half of the patients are enrolled or when
there have been 81 events, whichever occurs first. In addition, we
project to complete enrollment in the first quarter of 2017 with
top line data release in the third quarter of
2017.
Our
plans also include conducting a Phase 3
clinical trial in oncology patients with catheters receiving total
parenteral nutrition, or LOCK-IT-200. We are in discussions with
the FDA to develop the design of the trial. These plans are subject
to funding requirements (see
Funding and Capital
Requirements
).
In July
2013, we received CE Mark approval for Neutrolin. As a result, in
December 2013, we began the commercial launch of Neutrolin in
Germany for the prevention of catheter-related bloodstream
infections (“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 and Middle
Eastern countries for such treatment.
In
September 2014, the TUV-SUD and The Medicines Evaluation Board of
the Netherlands granted a label expansion for Neutrolin for these
same expanded indications for the European Union
(“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.
We are
evaluating
opportunities for the
possible expansion of indications for taurolidine. Provisional
patents have been submitted in four areas, antimicrobial sutures,
nanofiber webs, wound management, and osteoarthritis and
visco-supplementation. There exists a need to
control and protect against surgical site infections upon closure
with sutures. We believe taurolidine could offer
benefits not currently available in marketed antimicrobial
sutures. We also believe that the nanofiber webs used
for absorbable meshes could benefit from taurolidine’s
minimal inflammatory response and infection
control. Taurolidine incorporated into webs or hydrogels
could also be used for wound management especially wounds in less
sterile environments and burn patients. Lastly,
incorporating taurolidine into formulations for osteoarthritis and
visco-supplementation may benefit from taurolidine’s
anti-inflammatory and anti-infection properties. We have entered
into a research collaboration regarding incorporating taurolidine
into electrospun nanofibers.
Re
cent
Developments
As a result of our formal search for an individual
to serve as our Chief Executive Officer, on September 27, 2016, we
entered into an employment agreement, effective October 3, 2016,
with
Khoso Baluch
. Unless
renewed pursuant to the terms thereof, the agreement will expire on
October 3, 2019. Mr. Baluch was also be appointed to our Board of
Directors on October 3, 2016, and we will use our best efforts to
cause Mr. Baluch to be elected to the Board of Directors throughout
the term of his employment agreement, unless there is a change of
control.
Mr.
Baluch previously served as Senior Vice President and President
Europe, Middle East & Africa EMEA of UCB, SA, or UCB, from
January 2015 to early 2016, Senior Vice President and President of
the European Region of UCB from February 2013 to December 2014, and
Senior Vice President and Chief Marketing Officer of UCB from
January 2010 to February 2013. Prior to joining UCB, Mr. Baluch
worked for Eli Lilly & Co for 24 years, holding international
positions spanning Europe, the Middle East and the United States in
general management, business development, market access and product
leadership. He has served as an independent director of Poxel SA, a
French publicly traded biotech company, since 2013. Mr. Baluch
holds a BSc in Aeronautical Engineering from City University London
and a Masters of Business Administration from Cranfield School of
Management.
In
exchange for his service as our Chief Executive Officer, Mr. Baluch
will receive an annual base salary of $375,000, which cannot be
decreased unless all officers and/or members of our executive
management team experience an equal or greater percentage reduction
in base salary and/or total compensation, provided that any
reduction in Mr. Baluch’s salary may be no greater than 25%.
Mr. Baluch will be eligible for an annual bonus, which may equal up
to 80% of his base salary then in effect, as determined by our
Board or compensation committee. In determining such bonus, our
Board or compensation committee will take into consideration the
achievement of specified company objectives, predetermined by the
Board, and specified personal objectives, predetermined by the
Board in consultation with Mr. Baluch. For fiscal year 2016, Mr.
Baluch’s bonus will be prorated, contingent upon Mr. Baluch
meeting performance objectives established by the Board in
consultation with Mr. Baluch. Mr. Baluch must be employed through
December 31 of a given year to earn that year’s annual
bonus.
In
connection with his employment, we granted Mr. Baluch stock options
to purchase 1,850,000 shares of our common stock, with 1,250,000 of
the options vesting in four equal annual installments on the first
four anniversaries of the grant date. Of the remaining options,
300,000, split into three equal tranches, become exercisable upon
the achievement of specified performance milestones, provided that
these options will be forfeited if the milestones are not achieved
within four years of grant date and provided further that these
options will not vest before December 18, 2018. The remaining
300,000 options become exercisable upon the achievement of a
specified average closing stock price, provided that these options
will not vest before December 31, 2018 and if the specified average
closing stock price is not met on December 31, 2018, the options
will be forfeited. In each case, Mr. Baluch must be an employee of
ours or a consultant to us on the applicable vesting
date.
Mr.
Baluch will receive up to $75,000 to cover expenses associated with
his relocation. Mr. Baluch is eligible to participate in all
employee benefits available to our senior executives from
time-to-time. Pursuant to the agreement, Mr. Baluch is eligible for
up to four weeks of paid vacation per year and may be reimbursed
for specified business-related expenses.
After
the initial three-year term of Mr. Baluch’s employment
agreement, the agreement will automatically renew for additional
successive one-year periods, unless either party notifies the other
in writing at least 90 days before the expiration of the then
current term that the agreement will not be
renewed.
If we terminate Mr. Baluch’s employment for
Cause (as defined in the agreement), Mr. Baluch will be entitled to
receive only the accrued compensation due to him as of the date of
such termination,
rights to
indemnification and directors’ and officers’ liability
insurance, and any benefit required by law. All unvested shares of
restricted stock then held by him will be forfeited to us as of
such date, and all unexercised options to purchase shares of our
capital stock, whether or not vested, will immediately
terminate.
If we terminate Mr. Baluch’s employment
other than for Cause, death or disability, other than by notice of
nonrenewal, or if Mr. Baluch resigns for Good Reason (as defined in
the agreement), Mr. Baluch will receive the following: (i) payment
of any accrued compensation and any unpaid bonus for the prior
year, as well as rights
to indemnification and
directors’ and officers’ liability insurance and any
rights or privilege otherwise required by law;
(ii) his base salary and benefits for a period of
12 months following the effective date of the termination of his
employment; (iii) payment on a prorated basis of any partial bonus
earned by Mr. Baluch based on the actual achievement of the
specified bonus objectives; (iv) if Mr. Baluch timely elects
continued health insurance coverage under COBRA, then we will pay
the premium to continue such coverage for Mr. Baluch and his
eligible dependents in an amount equal to the portion paid for by
us during Mr. Baluch’s employment until the conclusion of the
time when he is receiving continuation of base salary payments or
until he becomes eligible for group health insurance coverage under
another employer’s plan, whichever occurs first, provided
however that we have the right to terminate such payment of COBRA
premiums on behalf of Mr. Baluch and instead pay him a lump sum
amount equal to the COBRA premium times the number of months
remaining in the specified period if we determine in our discretion
that continued payment of the COBRA premiums is or may be
discriminatory under Section 105(h) of the Internal Revenue Code of
1986, as amended; and (v) all restricted shares and unvested stock
options held by Mr. Baluch
that
are scheduled to vest on or before the next succeeding anniversary
of the date of termination shall be accelerated and deemed to have
vested as of the termination date. The separation benefits set
forth above are conditioned upon Mr. Baluch executing a release of
claims against us, our parents, subsidiaries and affiliates and
each such entities’ officers, directors, employees, agents,
successors and assigns in a form acceptable to us, within a time
specified therein, which release is not revoked within any time
period allowed for revocation under applicable
law.
If we terminate Mr. Baluch without Cause or if Mr.
Baluch resigns for Good Reason within 24 months after a change in
control, Mr. Baluch will receive the following: (i) payment of any
accrued compensation and any unpaid bonus for the prior year, as
well as rights
to indemnification and directors’ and
officers’ liability insurance and any rights or privilege
otherwise required by law;
(ii) his
base salary and full bonus for a period of 12 months following the
effective date of the termination of his employment; (iii) payment
on a prorated basis for any partial bonus earned by Mr. Baluch
based on the actual achievement of the specified bonus objectives;
(iv) if Mr. Baluch timelyelects continued health insurance coverage
under COBRA, then we will pay the entire premium necessary to
continue such coverage for Mr. Baluch and his eligible dependents
until the conclusion of the time when he is receiving continuation
of base salary payments or until he becomes eligible for group
health insurance coverage under another employer’s plan,
whichever occurs first, provided however that we have the right to
terminate such payment of COBRA premiums on behalf of Mr. Baluch
and instead pay him a lump sum amount equal to the COBRA premium
times the number of months remaining in the specified period if we
determine in our discretion that continued payment of the COBRA
premiums is or may be discriminatory under Section 105(h) of the
Internal Revenue Code of 1986, as amended; and (v) all restricted
shares and unvested stock options held by Mr. Baluch
shall be accelerated and deemed to
have vested as of the termination date. The separation benefits set
forth above are conditioned upon Mr. Baluch executing a release of
claims against us, our parents, subsidiaries and affiliates and
each such entities’ officers, directors, employees, agents,
successors and assigns in a form acceptable to us, within a time
specified therein, which release is not revoked within any time
period allowed for revocation under applicable
law.
If Mr. Baluch terminates his employment by written
notice of termination or if Mr. Baluch or we terminate his
employment by providing a notice of nonrenewal at least 90 days
before the agreement is set to expire, Mr. Baluch will not be
entitled to receive any payments or benefits other than any accrued
compensation,
any unpaid prior year’s bonus, rights to
indemnification and directors’ and officers’ liability
insurance and as otherwise required by law.
During the term of
the agreement and the 12-month period immediately following Mr.
Baluch’s separation from employment for any reason, Mr.
Baluch is prohibited from engaging in any business involving the
development or commercialization of a preventive anti-infective
product that would be a direct competitor of Neutrolin or a product
containing taurolidine or any other product being actively
developed or produced by us within the United States and the
European Union on the date of termination of his
employment.
As
previously disclosed, our former Chief Executive Officer, Randy
Milby, had been serving as our Interim Chief Executive Officer. Mr.
Milby resigned from this role, and also resigned from our Board of
Directors, on October 2, 2016.
Corporate History and Information
We
were organized as a Delaware corporation on July 28, 2006 under the
name “Picton Holding Company, Inc.” and we changed our
corporate name to “CorMedix Inc.” on January 18, 2007.
Our operations to date have been primarily limited to organizing
and staffing, licensing product candidates, developing clinical
trials for our product candidates, establishing manufacturing for
our product candidates and maintaining and improving our patent
portfolio.
Our
executive offices are located at 1430 US Highway 206, Suite 200,
Bedminster, NJ 07921. Our telephone number is (908) 517-9500. Our
website address is www.cormedix.com. Information contained in, or
accessible through, our website does not constitute part of this
prospectus.
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THE OFFERING
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Common
stock offered by us
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Shares having an
aggregate offering price of up to $40.0 million
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Common
stock to be outstanding after this offering
(1)
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Up to
13,840,830 shares, assuming sales at a price of
$2.89 per share, which was the closing price on the
NYSE MKT on October 10, 2016. Actual number of shares
issued will vary depending on the sales price under this
offering.
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Manner
of offering
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“At the
market offering” that may be made from time to time through
our sales agent, FBR Capital Markets & Co. See “Plan of
Distribution” on page 30.
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Use of
proceeds
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We intend to use
the net proceeds from this offering, if any, for general corporate
purposes, including clinical trials, research and development
expenses and general and administrative expenses. See “Use of
Proceeds” on page 27.
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NYSE
MKT symbol
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“CRMD”
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Risk
factors
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Investing in our
common stock involves a high degree of risk. Please read the
information contained in and incorporated by reference under the
heading “Risk Factors” beginning on page 6, the section
captioned “Item 1A—Risk Factors” in our most
recently filed annual report on Form 10-K, which is incorporated by
reference into this prospectus, and under similar headings in the
other documents that are filed after the date hereof and
incorporated by reference into this prospectus.
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(1)
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The number of shares of our common stock that will
be outstanding immediately after this offering as shown above is
based on
37,296,523
shares
outstanding as of June 30, 2016. The number of shares outstanding
as of June 30, 2016, as used throughout this prospectus, unless
otherwise indicated, excludes:
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warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
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warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
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warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
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options
to purchase an aggregate of 475,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $0.84 per share;
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options
to purchase an aggregate of 3,509,545 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.18 per share;
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warrants
issued to investors in our 2012 private placement to purchase an
aggregate of 312,500 shares of our common stock with an exercise
price of $0.40 per share, which expire on September 20,
2017;
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a
warrant for 795 shares of our common stock issued to the placement
agent for our 2012 private placement with an exercise price of
$0.40 per share, which expires on September 20, 2017;
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a
warrant to purchase 400,000 shares of our common stock issued on
February 19, 2013 with an exercise price of $1.50 that expire on
February 19, 2018;
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warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
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warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
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Series C-2
Preferred Stock convertible into 1,500,000 shares of
common;
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Series C-3
Preferred Stock convertible into 1,365,000 shares of common
stock;
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Series D Preferred
Stock convertible 1,479,240 shares of common stock;
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Series E Preferred
Stock convertible 1,959,759 shares of common stock;
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warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
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warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020; and;
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warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020.
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RISK FACTORS
Investing in our common stock involves risk. Prior
to making a decision about investing in our common stock, you
should carefully consider the specific factors discussed below
together with all of the other information contained or
incorporated by reference in this prospectus. You should also
consider the risks, uncertainties and assumptions discussed under
the heading “Risk Factors” included in our most recent
annual report on Form 10-K which is on file with the SEC and
is incorporated herein by reference, and which may be amended,
supplemented or superseded from time to time by other reports we
have subsequently filed or may file with the SEC in the
future.
Risks Related to Our Financial Position and Need for Additional
Capital
We have a limited operating history and a history of operating
losses, and expect to incur additional operating losses in
2016.
We
were established in July 2006 and have only a limited operating
history. Our prospects must be considered in light of the
uncertainties, risks, expenses, and difficulties frequently
encountered by companies in the early stages of operation. We
incurred a net loss of approximately $18.2 million for the year
ended December 31, 2015 and $9.1 million for the six months ended
June 30, 2016. As of June 30, 2016, we had an accumulated deficit
of approximately $103.5 million. We expect to incur substantial
additional operating expenses over the next several years as our
research, development, pre-clinical testing, clinical trial and
commercialization activities increase as we develop and
commercialize Neutrolin. The amount of future losses and when, if
ever, we will achieve profitability are uncertain. Neutrolin was
launched in December 2013 and is currently available for
distribution in certain European Union and Middle East countries.
We have not generated any significant commercial revenue and do not
expect to generate substantial revenues from Neutrolin until it is
approved by the FDA and launched in the U.S. market, and might
never generate significant revenues from the sale of Neutrolin or
any other products. Our ability to generate revenue and achieve
profitability will depend on, among other things, the following:
successfully marketing Neutrolin in Germany and other countries in
which it is approved for sale; obtaining necessary regulatory
approvals for Neutrolin from the other applicable European and
Middle East agencies, other foreign agencies and the FDA and
international regulatory agencies for any other products;
establishing manufacturing, sales, and marketing arrangements,
either alone or with third parties; and raising sufficient funds to
finance our activities. We might not succeed at any of these
undertakings. If we are unsuccessful at some or all of these
undertakings, our business, prospects, and results of operations
may be materially adversely affected.
We are not
currently profitable and may never become
profitable.
We
have a history of losses, and we may never achieve or maintain
profitability. Until we successfully commercialize Neutrolin and
generate substantial earnings from it, we expect to incur losses
and may never become profitable. We also expect to continue to
incur significant operating and capital expenditures as we pursue
the U.S. development of Neutrolin and anticipate that our expenses
will increase substantially in the foreseeable future as we
continue to undertake development and commercialization of
Neutrolin including the ongoing and planned clinical trials, seek
regulatory approvals for Neutrolin, implement additional internal
systems and infrastructure, and hire additional
personnel.
We
also expect to experience negative cash flow as we fund our
operating losses and capital expenditures. As a result, we will
need to generate significant revenues in order to achieve and
maintain profitability. We may not be able to generate these
revenues or achieve profitability in the future. Our failure to
achieve or maintain profitability would negatively impact the value
of our securities.
We will need to finance our future cash needs through public or
private equity offerings, debt financings or corporate
collaboration and licensing arrangements. Any additional funds that
we obtain may not be on terms favorable to us or our stockholders
and may require us to relinquish valuable
rights.
We
have launched Neutrolin in certain European Union and Middle East
countries, but to date have no other approved product on the market
and have not generated significant product revenue from Neutrolin
to date. Unless and until we receive applicable regulatory approval
for Neutrolin in the U.S., we cannot sell Neutrolin in the U.S.
Therefore, for the foreseeable future, we will have to fund all of
our operations and capital expenditures from Neutrolin sales in
Europe and other foreign markets, if approved, cash on hand,
additional financings, licensing fees and
grants.
We believe that our cash resources as of June 30,
2016, will be sufficient to enable us to fund our projected
operating requirements for at least the next twelve months
following the balance sheet date. However, we will need additional
funding thereafter to complete our ongoing Phase 3
hemodialysis clinical trial in the U.S., as well initiate as our
planned Phase 3 clinical trial in the U.S. in oncology patients
with catheters receiving total parenteral nutrition. If we are
unable to raise additional funds when needed, we may not be able to
complete our ongoing Phase 3 clinical trial, commence and complete
our planned Phase 3 clinical trial or commercialize Neutrolin and
we could be required to delay, scale back or eliminate some or all
of our research and development programs. We can provide no
assurances that any financing or strategic relationships will be
available to us on acceptable terms, or at all. We expect to incur
increases in our cash used in operations as we continue to
commercialize Neutrolin in Europe and other markets, conduct our
ongoing and Phase 3 clinical trial and prepare for our planned
Phase 3 clinical trial in oncology patients, seek FDA approval of
Neutrolin in the U.S., commercialize Neutrolin in Europe and other
markets, pursue business development activities, and incur
additional legal costs to defend our intellectual
property.
To
raise needed capital, we may sell additional equity or debt
securities, obtain a bank credit facility, or enter into a
corporate collaboration or licensing arrangement. The sale of
additional equity or debt securities, if convertible, could result
in dilution to our stockholders. The incurrence of indebtedness
would result in fixed obligations and could also result in
covenants that would restrict our operations. Raising additional
funds through collaboration or licensing arrangements with third
parties may require us to relinquish valuable rights to our
technologies, future revenue streams, research programs or product
candidates, or to grant licenses on terms that may not be favorable
to us or our stockholders.
Our efforts to explore strategic alternatives aimed at accelerating
Neutrolin’s development and commercialization and maximizing
shareholder value may not result in any definitive transaction or
deliver the expected benefits, and may create a distraction for our
management and uncertainty that may adversely affect our operating
results and business.
Strategic alternatives we may pursue could
include, but are not limited to, joint ventures or partnering or
other collaboration agreements, licensing arrangements, or another
transaction intended to maximize shareholder value, such as a
merger, a sale of the Company or some or all of its assets, or
another strategic transaction. In March 2015, the Board
commenced a process to evaluate our strategic alternatives in order
to accelerate the global development of Neutrolin and maximize
shareholder value. The Board previously engaged the
investment bank Evercore Group L.L.C. to provide financial advice
and assist the Board with its evaluation process.
After
the process with Evercore, we announced in July 2015 that we expect
to continue to pursue product development and commercialization
opportunities as we move forward with the planned Phase 3 clinical
trials, rather than pursuing a possible sale of our company as this
time.
No transaction materialized
pursuant to the Evercore engagement.
We
terminated the arrangement with Evercore in July 2016, although we
will remain open to and consider strategic partnerships although
there can be no assurance that any
transaction will present itself
.
There
are various uncertainties and risks relating to our evaluation and
negotiation of possible strategic alternatives and our ability to
consummate a definitive transaction, including:
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expected benefits
may not be successfully achieved;
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evaluation and
negotiation of a proposed transaction may distract management from
focusing our time and resources on execution of our operating plan,
which could have a material adverse effect on our operating results
and business;
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the process of
evaluating proposed transactions may be time consuming and
expensive and may result in the loss of business
opportunities;
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perceived
uncertainties as to our future direction may result in increased
difficulties in retaining key employees and recruiting new
employees, particularly senior management;
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even if our Board
of Directors negotiates a definitive agreement, successful
integration or execution of the strategic alternative will be
subject to additional risks;
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the current market
price of our common stock may reflect a market assumption that a
transaction will occur, and during the period in which we are
considering a transaction, the market price of our common stock
could be highly volatile; and
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a failure to
complete a transaction could result in a negative perception by
investors in the Company generally and could cause a decline in the
market price of our common stock, as well as lead to greater
volatility in the market price of our common stock, all of which
could adversely affect our ability to access the equity and
financial markets, as well as our ability to explore and enter into
different strategic alternatives.
Risks Related to the Development and Commercialization of Our
Product Candidates
Our only product is only recently approved in Europe and is still
in development in the U. S.
Neutrolin
currently and for at least the near future is our only current
product as well as product candidate. Neturolin has received CE
Mark approval in Europe, and we launched it in Germany in December
2013, and are pursuing commercialization in Europe and other
markets abroad. We also are pursuing development of Neutrolin in
the U.S. Our product commercialization and development efforts may
not lead to commercially viable products for any of several
reasons. For example, our product candidates may fail to be proven
safe and effective in clinical trials, or we may have inadequate
financial or other resources to pursue development efforts for our
product candidates. Even if approved, our products may not be
accepted in the marketplace. Neutrolin will require significant
additional development, clinical trials, regulatory clearances
and/or investment by us or our collaborators as we continue its
commercialization, as will any of our other products. Specifically,
we plan to expand marketing of Neutrolin in other foreign countries
and to develop Neutrolin for sale in the U.S., which will take time
and capital.
We have
entered into an agreement with a German company to market and sell
Neutrolin in Germany, which launched in Germany in the fourth
quarter of 2013. We also have entered into agreements with a Saudi
Arabian company to market and sell Neutrolin in Saudi Arabia, and
with a South Korean company to market, sell and distribute
Neutrolin in South Korea upon receipt of regulatory approval in
that country. We also have independent sales representatives in the
United Arab Emirates and The Netherlands. Consequently, we will be
dependent on these companies and individuals for the success of
sales in those countries and any other countries in which we
receive regulatory approval and in which we contract with third
parties for the marketing, sale and/or distribution of Neutrolin.
If these companies or individuals do not perform for whatever
reason, our business, prospects and results of operations will me
materially adversely affected. Finding a suitable replacement
organization or individual for these or any other companies or
individuals with whom we might contract could be difficult, which
would further harm our business, prospects and results of
operations.
Successful development and commercialization of our products is
uncertain.
Our
development and commercialization of current and future product
candidates is subject to the risks of failure and delay inherent in
the development of new pharmaceutical products, including but not
limited to the following:
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inability
to produce positive data in pre-clinical and clinical
trials;
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delays
in product development, pre-clinical and clinical testing, or
manufacturing;
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unplanned
expenditures in product development, clinical testing, or
manufacturing;
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failure
to receive regulatory approvals;
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emergence
of superior or equivalent products;
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inability
to manufacture our product candidates on a commercial scale on our
own, or in collaboration with third parties; and
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failure
to achieve market acceptance.
Because
of these risks, our development efforts may not result in any
commercially viable products. If a significant portion of these
development efforts are not successfully completed, required
regulatory approvals are not obtained or any approved products are
not commercialized successfully, our business, financial condition,
and results of operations will be materially harmed.
Clinical trials required for our product candidates are expensive
and time-consuming, and their outcome is uncertain.
In
order to obtain FDA or foreign approval to market a new drug or
device product, we must demonstrate proof of safety and
effectiveness in humans. Foreign regulations and requirements are
similar to those of the FDA. To meet FDA requirements, we must
conduct “adequate and well-controlled” clinical trials.
Conducting clinical trials is a lengthy, time-consuming, and
expensive process. The length of time may vary substantially
according to the type, complexity, novelty, and intended use of the
product candidate, and often can be several years or more per
trial. Delays associated with products for which we are directly
conducting clinical trials may cause us to incur additional
operating expenses. The commencement and rate of completion of
clinical trials may be delayed by many factors, including, for
example:
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inability
to manufacture sufficient quantities of qualified materials under
the FDA’s cGMP requirements for use in clinical
trials;
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slower
than expected rates of patient recruitment;
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failure
to recruit a sufficient number of patients;
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modification
of clinical trial protocols;
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changes
in regulatory requirements for clinical trials;
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lack
of effectiveness during clinical trials;
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emergence
of unforeseen safety issues;
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delays,
suspension, or termination of clinical trials due to the
institutional review board responsible for overseeing the study at
a particular study site; and
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government
or regulatory delays or “clinical holds” requiring
suspension or termination of the trials.
The
results from early pre-clinical and clinical trials are not
necessarily predictive of results to be obtained in later clinical
trials. Accordingly, even if we obtain positive results from early
pre-clinical or clinical trials, we may not achieve the same
success in later clinical trials.
Our
clinical trials may be conducted in patients with serious or
life-threatening diseases for whom conventional treatments have
been unsuccessful or for whom no conventional treatment exists, and
in some cases, our product is expected to be used in combination
with approved therapies that themselves have significant adverse
event profiles. During the course of treatment, these patients
could suffer adverse medical events or die for reasons that may or
may not be related to our products. We cannot ensure that safety
issues will not arise with respect to our products in clinical
development.
Clinical
trials may not demonstrate statistically significant safety and
effectiveness to obtain the requisite regulatory approvals for
product candidates. The failure of clinical trials to demonstrate
safety and effectiveness for the desired indications could harm the
development of our product candidates. Such a failure could cause
us to abandon a product candidate and could delay development of
other product candidates. Any delay in, or termination of, our
clinical trials would delay the filing of any NDA or any Premarket
Approval Application, or PMA, with the FDA and, ultimately, our
ability to commercialize our product candidates and generate
product revenues. Any change in, or termination of, our clinical
trials could materially harm our business, financial condition, and
results of operations.
If we fail to comply with international regulatory
requirements we could be subject to regulatory delays,
fines or other penalties.
Regulatory
requirements in foreign countries for international sales of
medical devices often vary from country to country. The occurrence
and related impact of the following factors would harm our
business:
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delays
in receipt of, or failure to receive, foreign regulatory approvals
or clearances;
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the
loss of previously obtained approvals or clearances;
or
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the
failure to comply with existing or future regulatory
requirements.
The
CE Mark is a mandatory conformity mark for products to be sold in
the European Economic Area. Currently, 28 countries in Europe
require products to bear CE Marking. To market in Europe,
a product must first obtain the certifications necessary to
affix the CE Mark. The CE Mark is an international symbol of
adherence to the Medical Device Directives and the
manufacturer’s declaration that the product complies with
essential requirements. Compliance with these requirements is
ascertained within a certified Quality Management System (QMS)
pursuant to ISO 13485. In order to obtain and to maintain a CE
Mark, a product must be in compliance with the applicable
quality assurance provisions of the aforementioned ISO and obtain
certification of its quality assurance systems by a recognized
European Union notified body. We received CE Mark approval for
Neutrolin on July 5, 2013. However, certain individual countries
within the European Union require further approval by their
national regulatory agencies. Failure to receive or
maintain these other requisite approvals could prohibit us
from marketing and selling Neutrolin in the entire
European Economic Area or elsewhere.
We do not have, and may never obtain, the regulatory approvals we
need to market our product candidates outside of the European
Union.
While
we have received the CE Mark approval for Neutrolin in Europe,
certain individual countries within the European Union require
further approval by their national regulatory
agencies. Failure to receive or maintain these other
requisite approvals could prohibit us from marketing and
selling Neutrolin in the entire European Economic Area. In
addition, we will need regulatory approval to market and sell
Neutrolin in foreign countries outside of Europe. We have received
regulatory approval in Saudi Arabia and Kuwait.
In
the United States, we have no current application for, and have not
received the regulatory approvals required for, the commercial sale
of any of our products. None of our product candidates has been
determined to be safe and effective in the United States, and we
have not submitted an NDA or PMA to the FDA for any product. We
have received approval from the FDA to proceed with our ongoing
Phase 3 clinical trial for Neutrolin in hemodialysis catheters and
our planned Phase 3 trial in oncology patients with catheters
receiving total parenteral nutrition, which is subject to
finalization of the protocol with the FDA. In December 2015, we
initiated the Phase 3 trial in hemodialysis catheters; however, we
will not initiate the Phase 3 trial in oncology patients with
catheters receiving total parenteral nutrition until we receive
sufficient funding. We are seeking one or more strategic partners
or other sources of capital to complete the Phase 3 trial in
hemodialysis and to start the Phase 3 trial for oncology patients
with catheters receiving total parenteral nutrition. However, we
might not obtain any commercial partner or financing and may never
start the Phase 3 clinical trial for oncology patients with
catheters receiving total parenteral nutrition.
It
is possible that Neutrolin will not receive any further approval or
that any of our other product candidates will be approved for
marketing. Failure to obtain regulatory approvals, or delays in
obtaining regulatory approvals, would adversely affect the
successful commercialization of Neutrolin or any other drugs or
products that we or our partners develop, impose additional costs
on us or our collaborators, diminish any competitive advantages
that we or our partners may attain, and/or adversely affect our
cash flow.
Even if approved, our products will be subject to extensive
post-approval regulation.
Once
a product is approved, numerous post-approval requirements apply in
the United States and abroad. Depending on the circumstances,
failure to meet these post-approval requirements can result in
criminal prosecution, fines, injunctions, recall or seizure of
products, total or partial suspension of production, denial or
withdrawal of pre-marketing product approvals, or refusal to allow
us to enter into supply contracts, including government contracts.
In addition, even if we comply with FDA, foreign and other
requirements, new information regarding the safety or effectiveness
of a product could lead the FDA or a foreign regulatory body to
modify or withdraw product approval.
The successful commercialization of Neutrolin will depend on
obtaining coverage and reimbursement for use of Neutrolin from
third-party payors.
Sales
of pharmaceutical products largely depend on the reimbursement of
patients’ medical expenses by government health care programs
and/or private health insurers, both in the U.S. and abroad.
Further, significant uncertainty exists as to the reimbursement
status of newly approved health care products.
We initially
expect to sell Neutrolin directly to hospitals and key dialysis
center operators, but also plan to expand its usage into intensive
care, oncology and total parenteral nutrition patients needing
catheters, including Medicare patients. All of these potential
customers are healthcare providers who depend upon reimbursement by
government and commercial insurance payors for dialysis and other
treatments. Reimbursement is strictly governed by these insurance
payors. We believe that Neutrolin would be eligible for coverage
under various reimbursement programs, including hospital inpatient
diagnosis-related groups (DRGs), outpatient ambulatory payment
classification (APCs) and the End-Stage Renal Disease Prospective
Payment System (ESRD PPS) or under the Durable Medical Equipment,
Prosthetics, Orthotics and Supplies (DMEPOS) Fee Schedule,
depending on the treatment setting. However, coverage by any of
these reimbursement programs is not assured, and even if coverage
is granted it could later be revoked or modified under future
regulations. Further, the U.S. Centers for Medicare & Medicaid
Services (CMS), which administers Medicare and works with states to
administer Medicaid, has adopted and will continue to adopt and/or
amend rules governing reimbursement for specific treatments,
including those we intend to address such as dialysis and ESRD PPS.
We anticipate that CMS and private insurers will increasingly
demand that manufacturers demonstrate the cost effectiveness of
their products as part of the reimbursement review and approval
process. Rising healthcare costs have also lead many European and
other foreign countries to adopt healthcare reform proposals and
medical cost conainment measures. Any measures affecting the
reimbursement programs of these governmental and private insurance
payors, including any uncertainty in the medical community
regarding their nature and effect on reimbursement programs, could
have an adverse effect on purchasing decisions regarding Neutrolin,
as well as limit the prices we may charge for Neutrolin.
The failure to obtain or maintain
reimbursement coverage for Neutrolin or any other products could
materially harm our operations.
Physicians and patients may not accept and use our
products.
Even
with the CE Mark approval of Neutrolin, and even if we receive FDA
or other foreign regulatory approval for Neutrolin or other product
candidates, physicians and patients may not accept and use our
products. Acceptance and use of our products will depend upon a
number of factors including the
following:
●
perceptions
by members of the health care community, including physicians,
about the safety and effectiveness of our drug or device
product;
●
cost-effectiveness
of our product relative to competing products;
●
availability
of reimbursement for our product from government or other
healthcare payors; and
●
effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
Because
we expect sales of Neutrolin to generate substantially all of our
product revenues for the foreseeable future, the failure of
Neutrolin to find market acceptance would harm our business and
would require us to seek additional
financing.
Risks Related to Our Business and Industry
We are subject to a putative securities class action, which may
require significant management time and attention and significant
legal expenses and may result in an unfavorable outcome, which
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
On July 7, 2015, a putative class action lawsuit
was commenced against us and certain of our current and former
officers in the United States District Court for the District of
New Jersey, captioned
Li v. Cormedix Inc., et
al.
, Case 3:15-cv-05264. On
September 4, 2015, two individuals, Shahm Martini and Paul Chretien
(the “Martini Group”), filed a Motion to Appoint Lead
Plaintiff. On that same date, another individual, Elaine Wood,
filed a competing Motion to Appoint Lead Plaintiff. On September
18, 2015, the Martini Group withdrew its motion. Thereafter, on
September 22, 2015, the Court appointed Elaine Wood as Lead
Plaintiff and, on October 2, 2015, appointed the Rosen Law Firm as
Lead Counsel.
On
December 1, 2015, Lead Plaintiff filed an Amended Complaint
asserting claims that we and Steven Lefkowitz, Randy Milby and
Harry O’Grady (the “Cormedix Defendants”)
violated Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder and Section 20(a) of the Exchange Act. The
Amended Complaint also names as defendants several unrelated
entities that allegedly were paid stock promoters. Lead Plaintiff
alleges generally that the Cormedix Defendants made materially
false or misleading statements and omissions concerning, among
other things, the competitive landscape for our Neutrolin product
and the alleged use of stock promoters. The Amended Complaint
seeks unspecified damages, interest, attorneys’ fees, and
other costs.
On
February 1, 2016, the Cormedix Defendants filed a motion to dismiss
all claims asserted against them in the Amended Complaint on the
grounds, among others, that the Amended Complaint fails to
adequately allege: (1) material misstatements or omissions; (2)
scienter by any of the Cormedix Defendants; or (3) loss causation.
The Court heard oral argument on this motion on July 18, 2016 and
took the matter under advisement.
On May 13, 2016, a putative shareholder derivative
action was filed in the Superior Court of New Jersey against the
Company and certain present and former directors and officers
captioned
Raval v. Milby, et.
al.
, Docket No. C-12034-6 (the
“Derivative Action”). The factual allegations of the
Derivative Action substantially overlap the factual allegations
contained in the Amended Complaint in the Securities Class Action.
The plaintiff purports to assert claims against the individual
defendants on behalf of the Company for breach of fiduciary duty,
unjust enrichment, abuse of control, gross mismanagement and waste
of corporate assets. The complaint in the Derivative Action seeks
unspecified damages, interest, attorneys’ fees and other
costs, and certain amendments to the Company’s
“corporate governance and internal procedures”. On June
30, 2016, the Court entered a stipulated order, among other things,
staying the Derivative Action until 30 days after either: (a) the
entry of any order denying any motion to dismiss the Derivative
Action in the Securities Class Action, or (b) the entry of a final
order dismissing the Securities Class Action with
prejudice.
While
we believe that we have substantial legal and factual defenses to
the claims in the class action and intend to continue vigorously
defending the case there can be no assurance as to the outcome of
this class action litigation.
In addition, there is the potential for additional shareholder
litigation, and we could be similarly materially and adversely
affected by such matters.
Competition and technological change may make our product
candidates and technologies less attractive or
obsolete.
We
compete with established pharmaceutical and medical device
companies that are pursuing other forms of prevention or treatment
for the same indications we are pursuing and that have greater
financial and other resources. Other companies may succeed in
developing products earlier than we do, obtaining FDA or any other
regulatory agency approval for products more rapidly, or developing
products that are more effective than our product candidates.
Research and development by others may render our technology or
product candidates obsolete or noncompetitive, or result in
processes, treatments or cures superior to any therapy we develop.
We face competition from companies that internally develop
competing technology or acquire competing technology from
universities and other research institutions. As these companies
develop their technologies, they may develop competitive positions
that may prevent, make futile, or limit our product
commercialization efforts, which would result in a decrease in the
revenue we would be able to derive from the sale of any
products.
There
can be no assurance that Neutrolin or any other product candidate
will be accepted by the marketplace as readily as these or other
competing treatments. Furthermore, if our competitors’
products are approved before ours, it could be more difficult for
us to obtain approval from the FDA or any other regulatory agency.
Even if our products are successfully developed and approved for
use by all governing regulatory bodies, there can be no assurance
that physicians and patients will accept any of our products as a
treatment of choice.
Furthermore,
the pharmaceutical and medical device industry is diverse, complex,
and rapidly changing. By its nature, the business risks associated
with the industry are numerous and significant. The effects of
competition, intellectual property disputes, market acceptance, and
FDA or other regulatory agency regulations preclude us from
forecasting revenues or income with certainty or even
confidence.
We face the risk of product liability claims and the amount of
insurance coverage we hold now or in the future may not be adequate
to cover all liabilities we might incur.
Our
business exposes us to the risk of product liability claims that
are inherent in the development of drugs. If the use of one or more
of our or our collaborators’ drugs or devices harms people,
we may be subject to costly and damaging product liability claims
brought against us by clinical trial participants, consumers,
health care providers, pharmaceutical companies or others selling
our products.
We
currently carry product liability insurance that covers our
clinical trials. We cannot predict all of the possible harms or
side effects that may result and, therefore, the amount of
insurance coverage we hold may not be adequate to cover all
liabilities we might incur. Our insurance covers bodily injury and
property damage arising from our clinical trials, subject to
industry-standard terms, conditions and exclusions. This coverage
includes the sale of commercial products. We have expanded our
insurance coverage to include the sale of commercial products due
to the receipt of the CE Mark approval, but we may be unable to
maintain such coverage or obtain commercially reasonable product
liability insurance for any other products approved for
marketing.
If
we are unable to obtain insurance at an acceptable cost or
otherwise protect against potential product liability claims, we
may be exposed to significant liabilities, which may materially and
adversely affect our business and financial position. If we are
sued for any injury allegedly caused by our or our
collaborators’ products and do not have sufficient insurance
coverage, our liability could exceed our total assets and our
ability to pay the liability. A successful product liability claim
or series of claims brought against us would decrease our cash and
could cause the value of our capital stock to
decrease.
We may be exposed to liability claims associated with the use of
hazardous materials and chemicals.
Our
research, development and manufacturing activities and/or those of
our third-party contractors may involve the controlled use of
hazardous materials and chemicals. Although we believe that our
safety procedures for using, storing, handling and disposing of
these materials comply with federal, state and local, as well as
foreign, laws and regulations, we cannot completely eliminate the
risk of accidental injury or contamination from these materials. In
the event of such an accident, we could be held liable for any
resulting damages and any liability could materially adversely
affect our business, financial condition and results of operations.
In addition, the federal, state and local, as well as foreign, laws
and regulations governing the use, manufacture, storage, handling
and disposal of hazardous or radioactive materials and waste
products may require us to incur substantial compliance costs that
could materially adversely affect our business, financial condition
and results of operations.
Healthcare policy changes, including reimbursement policies for
drugs and medical devices, may have an adverse effect on our
business, financial condition and results of
operations.
Market
acceptance and sales of Neutrolin or any other product candidates
that we develop will depend on reimbursement policies and may be
affected by health care reform measures in the United States and
abroad. Government authorities and other third-party payors, such
as private health insurers and health maintenance organizations,
decide which drugs they will pay for and establish reimbursement
levels. We cannot be sure that reimbursement will be available for
Neutrolin or any other product candidates that we develop. Also, we
cannot be sure that the amount of reimbursement available, if any,
will not reduce the demand for, or the price of, our products. If
reimbursement is not available or is available only at limited
levels, we may not be able to successfully commercialize Neutrolin
or any other product candidates that we develop.
In
the United States, there have been a number of legislative and
regulatory proposals to change the health care system in ways that
could affect our ability to sell our products profitably. The
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, or
collectively, the Healthcare Reform Act, substantially changes the
way healthcare is financed by both governmental and private
insurers, and significantly impacts the pharmaceutical industry.
The Healthcare Reform Act contains a number of provisions,
including those governing enrollment in federal healthcare
programs, reimbursement changes and fraud and abuse, which will
impact existing government healthcare programs and will result in
the development of new programs, including Medicare payment for
performance initiatives and improvements to the physician quality
reporting system and feedback program. We anticipate that if we
obtain approval for our products, some of our revenue may be
derived from U.S. government healthcare programs, including
Medicare. Furthermore, beginning in 2011, the Healthcare Reform Act
imposed a non-deductible excise tax on pharmaceutical manufacturers
or importers who sell “branded prescription drugs,”
which includes innovator drugs and biologics (excluding orphan
drugs or generics) to U.S. government programs. We expect that the
Healthcare Reform Act and other healthcare reform measures that may
be adopted in the future could have an adverse effect on our
industry generally and our products specifically.
In
addition to the Healthcare Reform Act, we expect that there will
continue to be proposals by legislators at both the federal and
state levels, regulators and third-party payors to keep healthcare
costs down while expanding individual healthcare benefits. Certain
of these changes could impose limitations on the prices we will be
able to charge for any products that are approved or the amounts of
reimbursement available for these products from governmental
agencies or other third-party payors or may increase the tax
requirements for life sciences companies such as ours. While it is
too early to predict what effect the Healthcare Reform Act or any
future legislation or regulation will have on us, such laws could
have an adverse effect on our business, financial condition and
results of operations.
Health
administration authorities in countries other than the United
States may not provide reimbursement for Neutrolin or any of our
other product candidates at rates sufficient for us to achieve
profitability, or at all. Like the United States, these countries
could adopt health care reform proposals and could materially alter
their government-sponsored health care programs by reducing
reimbursement rates.
Any
reduction in reimbursement rates under Medicare or private insurers
or foreign health care programs could negatively affect the pricing
of our products. If we are not able to charge a sufficient amount
for our products, then our margins and our profitability will be
adversely affected.
If we lose key management or scientific personnel, cannot recruit
qualified employees, directors, officers, or other personnel or
experience increases in compensation costs, our business may
materially suffer.
We
are highly dependent on the principal members of our management and
scientific staff, specifically, Khoso Baluch, a
director and our Chief Executive Officer, and Dr. Antony Pfaffle,
our Chief Scientific Officer. Our future success will depend in
part on our ability to identify, hire, and retain current
and additional personnel. We experience intense competition
for qualified personnel and may be unable to attract and retain the
personnel necessary for the development of our business. Moreover,
our work force is located in the New Jersey metropolitan area,
where competition for personnel with the scientific and technical
skills that we seek is extremely high and is likely to remain high.
Because of this competition, our compensation costs may increase
significantly. In addition, we have only limited ability to prevent
former employees from competing with us.
If we are unable to hire additional qualified personnel, our
ability to grow our business may be harmed.
Over
time, we expect to hire additional qualified personnel with
expertise in clinical testing, clinical research and testing,
government regulation, formulation and manufacturing, and sales and
marketing. We compete for qualified individuals with numerous
pharmaceutical companies, universities and other research
institutions. Competition for such individuals is intense, and we
cannot be certain that our search for such personnel will be
successful. Attracting and retaining such qualified personnel will
be critical to our success.
We may not successfully manage our growth.
Our
success will depend upon the expansion of our operations to
commercialize Neutrolin and the effective management of any growth,
which could place a significant strain on our management and our
administrative, operational and financial resources. To manage this
growth, we may need to expand our facilities, augment our
operational, financial and management systems and hire and train
additional qualified personnel. If we are unable to manage our
growth effectively, our business may be materially
harmed.
Risks Related to Our Intellectual Property
If we materially breach or default under any of our license
agreements, the licensor party to such agreement will have the
right to terminate the license agreement, which termination may
materially harm our business.
Our
commercial success will depend in part on the maintenance of our
license agreements. Each of our license agreements provides the
licensor with a right to terminate the license agreement for our
material breach or default under the agreement, including the
failure to make any required milestone or other payments. Should
the licensor under any of our license agreements exercise such a
termination right, we would lose our right to the intellectual
property under the respective license agreement, which loss may
materially harm our business.
If we and our licensors do not obtain protection for and
successfully defend our respective intellectual property rights,
our competitors may be able to take advantage of our research and
development efforts to develop competing
products.
Our
commercial success will depend in part on obtaining further patent
protection for our products and other technologies and successfully
defending any patents that we currently have or will obtain against
third-party challenges. The patents which we currently believe are
most material to our business are as follows:
●
U.S.
Patent No. 8,541,393 (expiring in November 2024) (the “Prosl
Patent”) - use of Neutrolin for preventing infection and
maintenance of catheter patency in hemodialysis catheters (for
CRMD003);
●
U.S.
Patent No. 6,166,007 (expiring May 2019) (the “Sodemann
Patent”) - a method of inhibiting or preventing infection and
blood coagulation at a medical prosthetic device (for CRMD003);
and
●
European
Patent EP 1 814 562 B1 (expiring October 12, 2025) (the
“Prosl European Patent”) - a low heparin catheter lock
solution for maintaining and preventing infection in a hemodialysis
catheter.
We
are currently seeking further patent protection for our compounds
and methods of treating diseases. However, the patent process is
subject to numerous risks and uncertainties, and there can be no
assurance that we will be successful in protecting our products by
obtaining and defending patents. These risks and uncertainties
include the following:
●
patents
that may be issued or licensed may be challenged, invalidated, or
circumvented, or otherwise may not provide any competitive
advantage;
●
our
competitors, many of which have substantially greater resources
than we have and many of which have made significant investments in
competing technologies, may seek, or may already have obtained,
patents that will limit, interfere with, or eliminate our ability
to make, use, and sell our potential products either in the United
States or in international markets;
●
there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
treatments that prove successful as a matter of public policy
regarding worldwide health concerns; and
●
countries
other than the United States may have less restrictive patent laws
than those upheld by United States courts, allowing foreign
competitors the ability to exploit these laws to create, develop,
and market competing products.
In
addition, the United States Patent and Trademark Office, or PTO,
and patent offices in other jurisdictions have often required that
patent applications concerning pharmaceutical and/or
biotechnology-related inventions be limited or narrowed
substantially to cover only the specific innovations exemplified in
the patent application, thereby limiting the scope of protection
against competitive challenges. Thus, even if we or our licensors
are able to obtain patents, the patents may be substantially
narrower than anticipated.
The
above mentioned patents and patent applications are exclusively
licensed to us. To support our patent strategy, we have engaged in
a review of patentability and certain freedom to operate issues,
including performing certain searches. However, patentability and
certain freedom to operate issues are inherently complex, and we
cannot provide assurances that a relevant patent office and/or
relevant court will agree with our conclusions regarding
patentability issues or with our conclusions regarding freedom to
operate issues, which can involve subtle issues of claim
interpretation and/or claim liability. Furthermore, we may not be
aware of all patents, published applications or published
literature that may affect our business either by blocking our
ability to commercialize our product candidates, preventing the
patentability of our product candidates to us or our licensors, or
covering the same or similar technologies that may invalidate our
patents, limit the scope of our future patent claims or adversely
affect our ability to market our product
candidates.
In
addition to patents, we also rely on trade secrets and proprietary
know-how. Although we take measures to protect this information by
entering into confidentiality and inventions agreements with our
employees, scientific advisors, consultants, and collaborators, we
cannot provide any assurances that these agreements will not be
breached, that we will be able to protect ourselves from the
harmful effects of disclosure if they are breached, or that our
trade secrets will not otherwise become known or be independently
discovered by competitors. If any of these events occurs, or we
otherwise lose protection for our trade secrets or proprietary
know-how, the value of our intellectual property may be greatly
reduced.
Ongoing and future intellectual property disputes could require us
to spend time and money to address such disputes and could limit
our intellectual property rights.
The
biotechnology and pharmaceutical industries have been characterized
by extensive litigation regarding patents and other intellectual
property rights, and companies have employed intellectual property
litigation to gain a competitive advantage. We may initiate or
become subject to infringement claims or litigation arising out of
patents and pending applications of our competitors, or we may
become subject to proceedings initiated by our competitors or other
third parties or the PTO or applicable foreign bodies to reexamine
the patentability of our licensed or owned patents. In addition,
litigation may be necessary to enforce our issued patents, to
protect our trade secrets and know-how, or to determine the
enforceability, scope, and validity of the proprietary rights of
others.
We
initiated court proceedings in Germany for patent infringement and
unfair use of our proprietary information related to Neutrolin (as
described below). We also have had opposition proceedings brought
against the European Patent and the German utility model patent
which are the basis of our infringement proceedings (as described
below). The defense and prosecution of these ongoing and any future
intellectual property suits, PTO or foreign proceedings, and
related legal and administrative proceedings are costly and
time-consuming to pursue, and their outcome is uncertain. An
adverse determination in litigation or PTO or foreign proceedings
to which we may become a party could subject us to significant
liabilities, including damages, require us to obtain licenses from
third parties, restrict or prevent us from selling our products in
certain markets, or invalidate or render unenforceable our licensed
or owned patents. Although patent and intellectual property
disputes might be settled through licensing or similar
arrangements, the costs associated with such arrangements may be
substantial and could include our paying large fixed payments and
ongoing royalties. Furthermore, the necessary licenses may not be
available on satisfactory terms or at all.
In
February 2007, Geistlich Söhne AG für Chemische
Industrie, Switzerland (“Geistlich”) brought an action
against the European Sodemann Patent covering our Neutrolin product
candidate, which is owned by ND Partners, LLC (“NDP”)
and licensed to us pursuant to the License and Assignment Agreement
between us and NDP. This action was brought at the Board of the
European Patent Office (“EPO”) opposition division (the
“Opposition Board”) based upon alleged lack of
inventiveness in the use of citric acid and a pH value in the range
of 4.5 to 6.5 with having the aim to provide an alternative lock
solution through having improved anticoagulant characteristics
compared to the lock solutions of the prior art. The Opposition
Board rejected the opposition by Geistlich. On August 27, 2008,
Geistlich appealed the court’s ruling, alleging the
same arguments as presented during the opposition proceedings. We
filed a response to the appeal of Geistlich on March 25, 2009
requesting a dismissal of the appeal and maintenance of the patent
as granted. On November 28, 2012, the Board of Appeals of the EPO
(the “Appeals Board”) held oral proceedings and
verbally upheld the counterpart of the Sodemann Patent covering
Neutrolin, but remanded the proceeding to the lower court to
consider restricting certain claims of the counterpart of the
Sodemann Patent. We received the Appeals Board’s final
written decision on March 28, 2013, which was consistent with the
oral proceedings. In a letter dated September 30, 2013, we were
notified that the opposition division of the EPO reopened the
proceedings before the first instance and gave their preliminary
non-binding opinion that the patent as amended during the appeal
proceedings fulfills the requirements of clarity, novelty, and
inventive step, and invited the parties to provide their comments
and/or requests by February 10, 2014. We filed its
response on February 3, 2014 to request that the patent be
maintained as amended during the appeal
proceedings. Geistlich did not provide any filing by
February 10, 2014; however, the Opposition Board granted Geistlich
an extension to respond by the end of July 2014 because its
representative did not receive the September 30, 2013 letter due to
a change of address. Geistlich did not file a further
statement within the required timeline. On November 5,
2014, the Opposition Division at the EPO issued the interlocutory
decision to maintain the patent on the basis of the claims as
amended during the appeal proceedings. This decision became final
as no further appeal was lodged by Geistlich.
On
September 9, 2014, we filed in the District Court of Mannheim,
Germany a patent infringement action against TauroPharm GmbH and
Tauro-Implant GmbH as well as their respective CEOs (the
“Defendants”) claiming infringement of our European
Patent EP 1 814 562 B1, which was granted by the EPO on January 8,
2014 (the “Prosl European Patent”). The Prosl European
Patent covers a low dose heparin catheter lock solution for
maintaining patency and preventing infection in a hemodialysis
catheter. In this action, we claim that the Defendants
infringe on the Prosl European Patent by manufacturing and
distributing catheter locking solutions to the extent they are
covered by the claims of the Prosl European Patent. We
believe that our patent is sound, and are seeking injunctive relief
and raising claims for information, rendering of accounts, calling
back, destruction and damages. Separately, TauroPharm has filed an
opposition with the EPO against the Prosl European Patent alleging
that it lacks novelty and inventive step. We cannot
predict what other defenses the Defendants may raise, or the
ultimate outcome of either of these related matters.
In the
same complaint against the same Defendants, we also alleged an
infringement (requesting the same remedies) of NDP’s utility
model DE 20 2005 022 124 U1 (the “Utility Model”),
which we believe is fundamentally identical to the Prosl European
Patent in its main aspects and claims. The Court separated the two
proceedings and the Prosl European Patent and the Utility Model
claims are now being tried separately. TauroPharm has
filed a cancellation action against the Utility Model before the
German Patent and Trademark Office (the “German PTO”)
based on the similar arguments as those in the opposition against
the Prosl European Patent.
On
March 27, 2015, the District Court held a hearing to evaluate
whether the Utility Model has been infringed by TauroPharm in
connection with the manufacture, sale and distribution of its
TauroLock-HEP100TM and TauroLock-HEP500TM products. A hearing
before the same court was held on January 30, 2015 on the separate,
but related, question of infringement of the Prosl European Patent
by TauroPharm.
The
Court issued its decisions on May 8, 2015 staying both
proceedings. In its decisions, the Court found that the
commercialization by TauroPharm in Germany of its TauroLock
catheter lock solutions Hep100 and Hep500 infringes both the
Prosl European Patent and the Utility Model and further that there
is no prior use right that would allow TauroPharm to continue to
make, use or sell its product in Germany. However, the Court
declined to issue an injunction in favor of us that would preclude
the continued commercialization by TauroPharm based upon its
finding that there is a sufficient likelihood that the EPO, in the
case of the Prosl European Patent, or the German PTO, in the case
of the Utility Model, may find that such patent or utility model is
invalid. Specifically, the Court noted the
possible publication of certain instructions for product use
that may be deemed to constitute prior art. As such, the District
Court determined that it will defer any consideration of the
request by us for injunctive and other relief until such time as
the EPO or the German PTO has ruled on the underlying validity of
the Prosl European Patent and the Utility Model.
The
opposition proceeding against the Prosl European Patent before the
EPO is ongoing. In its preliminary consideration of the matter, the
EPO (and the German PTO) regarded the patent as not inventive or
novel due to publication of prior art. Oral proceedings
before the Opposition Division at the EPO were held on November 25,
2015, at which the three judge patent examiner panel considered
arguments related to the validity of the Prosl European Patent. The
hearing was adjourned due to the fact that the panel was of the
view that Claus Herdeis, one of the managing directors of
TauroPharm, has to be heard as a witness in a further hearing in
order to close some gaps in the documentation presented by
TauroPharm as regards the publication of prior art. No date has yet
been established for such further hearing as of the filing of this
10-Q. While we continue to believe that the referenced
publication and instructions for use do not, in fact, constitute
prior art and that the Prosl European Patent will be found to be
valid by the EPO, there can be no assurance that we will prevail in
this matter. The German PTO held a hearing in the validity
proceedings relating to the Utility Model on June 29, 2016, at
which the panel affirmed its preliminary finding that the Utility
Model was invalid based upon prior publication of a reference to
the benefits that may be associated with adding heparin to a
taurolidine based solution. The decision is subject to appeal and
has only a declaratory effect, as the Utility Model had expired in
November 2015. Furthermore, it has no bearing on the ongoing
consideration of the validity and possible infringement of the
Prosl Patent by the EPO.
On
January 16, 2015, we filed a complaint against TauroPharm GmbH and
its managing directors in the District Court of Cologne,
Germany. In the complaint, we allege violation of the
German Unfair Competition Act by TauroPharm for the unauthorized
use of its proprietary information obtained in confidence by
TauroPharm. We allege that TauroPharm is improperly and
unfairly using its proprietary information relating to the
composition and manufacture of Neutrolin, in the manufacture and
sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100
and TauroLock-HEP500. We seek a cease and desist order
against TauroPharm from continuing to manufacture and sell any
product containing taurolidine (the active pharmaceutical
ingredient (“API”) of Neutrolin) and citric acid in
addition to possible other components, damages for any sales in the
past and the removal of all such products from the market. An
initial hearing in the District Court of Cologne, Germany was held
on November 19, 2015 to consider our claims. The judge made no
decision on the merits of our complaint. On January 14, 2016,
the court issued an interim decision in the form of a court order
outlining several issues of concern that relate primarily to
court's interest in clarifying the facts and reviewing any and all
available documentation, in particular with regard to the question
which specific know-how was provided to TauroPharm by whom and
when. We have prepared the requested reply and produced the
respective documentation. TauroPharm has also filed another writ
within the same deadline and both parties have filed further writs
at the end of April setting out their respective argumentation in
more detail. A further oral hearing has been scheduled for November
15, 2016.
If we infringe the rights of third parties we could be prevented
from selling products and forced to pay damages and defend against
litigation.
If
our products, methods, processes and other technologies infringe
the proprietary rights of other parties, we could incur substantial
costs and we may have to do one or more of the
following:
●
obtain
licenses, which may not be available on commercially reasonable
terms, if at all;
●
abandon
an infringing product candidate;
●
redesign
our products or processes to avoid infringement;
●
stop
using the subject matter claimed in the patents held by
others;
●
defend
litigation or administrative proceedings, which may be costly
whether we win or lose, and which could result in a substantial
diversion of our financial and management resources.
Risks Related to Dependence on Third Parties
If we are not able to develop and maintain collaborative marketing
relationships with licensees or partners, or create an effective
sales, marketing, and distribution capability, we may be unable to
market our products or market them successfully.
Our
business strategy for Neutrolin relies on collaborating with larger
firms with experience in marketing and selling medical devices and
pharmaceutical products; for other products we may also rely on
such marketing collaborations or out-licensing of our product
candidates. Specifically, for Neutrolin, we have entered into an
agreement with a German company to market and sell Neutrolin in
Germany and a distributor agreement with each of a Saudi Arabian
and a South Korean company for sales and marketing in those two
countries (upon receipt of approval to market in South Korea). In
addition, we have independent sales representatives marketing and
selling in the Middle East and The Netherlands. Assuming we receive
applicable regulatory approval for other markets, we plan to enter
into distribution agreements with one or more third parties for the
sale of Neutrolin in various European, Middle East and other
markets. However, there can be no assurance that we will be able to
successfully maintain those relationships or establish and maintain
additional marketing, sales, or distribution relationships. Nor can
there be assurance that such relationships will be successful, or
that we will be successful in gaining market acceptance for our
products. To the extent that we enter into any marketing, sales, or
distribution arrangements with third parties, our product revenues
will be lower than if we marketed and sold our products directly,
and any revenues we receive will depend upon the efforts of such
third-parties.
If
we are unable to establish and maintain such third-party sales and
marketing relationships, or choose not to do so, we will have to
establish our own in-house capabilities. We currently have no
sales, marketing, or distribution infrastructure. To market any of
our products directly, we would need to develop a marketing, sales,
and distribution force that has both technical expertise and the
ability to support a distribution capability. The establishment of
a marketing, sales, and distribution capability would take time and
significantly increase our costs, possibly requiring substantial
additional capital. In addition, there is intense competition for
proficient sales and marketing personnel, and we may not be able to
attract individuals who have the qualifications necessary to
market, sell, and distribute our products. There can be no
assurance that we will be able to establish internal marketing,
sales, or distribution capabilities. If we are unable to, or choose
not to establish these capabilities, or if the capabilities we
establish are not sufficient to meet our needs, we will be required
to establish collaborative marketing, sales, or distribution
relationships with third parties, which we might not be able to do
on acceptable terms or at all.
We currently have no internal marketing and sales organization and
currently rely and intend to continue to rely on third parties to
market and sell Neutrolin. If we are unable to enter into or
maintain agreements with third parties to market and sell Neutrolin
or any other product after approval or are unable to establish our
own marketing and sales capabilities, we may not be able to
generate significant or any product revenues.
We do
not have an internal sales organization. To date we have relied,
and intend to continue to rely, on third parties for the marketing,
sales and distribution of Neutrolin and any other product we might
develop. However, we may not be able to maintain current and future
arrangements or enter into new arrangements with third parties to
sell Neutrolin or any other product on favorable terms or at all.
In that event, we would have to develop our own marketing and sales
force. The establishment and development of our own sales force
would be expensive and time consuming and could delay any product
launch, and we cannot be certain that we would be able to
successfully develop this capability. In addition, the use of third
parties to commercialize our approved products reduces the revenues
that we would receive if we commercialized these products
ourselves.
We have
entered into agreements with independent companies to market
Neutrolin in Germany and in Saudi Arabia and, upon regulatory
approval, South Korea. We also have independent sales
representatives in the Middle East and The Netherlands. We intend
to seek a sales partner in the U.S. if Neutrolin receives FDA
approval. Consequently, we will be dependent on these firms and
individuals for the success of sales in these and any other
countries in which approval is granted. If these firms or
individuals do not perform for whatever reason, our business,
prospects and results of operations will be materially adversely
affected. Finding a new or replacement organization for sales and
marketing could be difficult, which would further harm our
business, prospects and results of operations.
If we or our collaborators are unable to manufacture our products
in sufficient quantities or are unable to obtain regulatory
approvals for a manufacturing facility, we may be unable to meet
demand for our products and we may lose potential
revenues.
Completion
of our clinical trials and commercialization of Neutrolin and any
other product candidate require access to, or development of,
facilities to manufacture a sufficient supply of our product
candidates. All of our manufacturing processes currently are, and
we expect them to continue to be, outsourced to third parties.
Specifically, we will rely on one or more manufacturers to supply
us and/or our distribution partners with commercial quantities of
Neutrolin. If, for any reason, we become unable to rely on our
current sources for the manufacture of Neutrolin or any other
product candidates or for active pharmaceutical ingredient, or API,
either for clinical trials or for commercial quantities, then we
would need to identify and contract with additional or replacement
third-party manufacturers to manufacture compounds for
pre-clinical, clinical, and commercial purposes. We may not be
successful in identifying such additional or replacement
third-party manufacturers, or in negotiating acceptable terms with
any that we do identify. Such third-party manufacturers must
receive FDA or applicable foreign approval before they can produce
clinical material or commercial product, and any that are
identified may not receive such approval or may fail to maintain
such approval. In addition, we may be in competition with other
companies for access to these manufacturers’ facilities and
may be subject to delays in manufacturing if the manufacturers give
other clients higher priority than they give to us. If we are
unable to secure and maintain third-party manufacturing capacity,
the development and sales of our products and our financial
performance may be materially affected.
Before
we could begin to commercially manufacture Neutrolin or any other
product candidate on our own, we must obtain regulatory approval of
the manufacturing facility and process. The manufacture of drugs
for clinical and commercial purposes must comply with cGMP and
applicable non-U.S. regulatory requirements. The cGMP requirements
govern quality control and documentation policies and procedures.
Complying with cGMP and non-U.S. regulatory requirements would
require that we expend time, money, and effort in production,
recordkeeping, and quality control to assure that the product meets
applicable specifications and other requirements. We would also
have to pass a pre-approval inspection prior to FDA or non-U.S.
regulatory agency approval. Failure to pass a pre-approval
inspection may significantly delay regulatory approval of our
products. If we fail to comply with these requirements, we would be
subject to possible regulatory action and may be limited in the
jurisdictions in which we are permitted to sell our products. As a
result, our business, financial condition, and results of
operations could be materially adversely
affected.
Corporate and academic collaborators may take actions that delay,
prevent, or undermine the success of our products.
Our
operating and financial strategy for the development, clinical
testing, manufacture, and commercialization of our product
candidates is heavily dependent on our entering into collaborations
with corporations, academic institutions, licensors, licensees, and
other parties. Our current strategy assumes that we will
successfully establish and maintain these collaborations or similar
relationships. However, there can be no assurance that we will be
successful establishing or maintaining such collaborations. Some of
our existing collaborations, such as our licensing agreements, are,
and future collaborations may be, terminable at the sole discretion
of the collaborator in certain circumstances. Replacement
collaborators might not be available on attractive terms, or at
all.
In
addition, the activities of any collaborator will not be within our
control and may not be within our power to influence. There can be
no assurance that any collaborator will perform its obligations to
our satisfaction or at all, that we will derive any revenue or
profits from such collaborations, or that any collaborator will not
compete with us. If any collaboration is not pursued, we may
require substantially greater capital to undertake on our own the
development and marketing of our product candidates and may not be
able to develop and market such products successfully, if at all.
In addition, a lack of development and marketing collaborations may
lead to significant delays in introducing product candidates into
certain markets and/or reduced sales of products in such
markets.
Data provided by collaborators and others upon which we rely that
has not been independently verified could turn out to be false,
misleading, or incomplete.
We
rely on third-party vendors, scientists, and collaborators to
provide us with significant data and other information related to
our projects, clinical trials, and business. If such third parties
provide inaccurate, misleading, or incomplete data, our business,
prospects, and results of operations could be materially adversely
affected.
Risks Related to our Common Stock
Prior to fiscal 2015, we had identified a material weakness in our
internal control over financial reporting, and our current internal
control over financial reporting and our disclosure controls and
procedures may not prevent all possible errors that could
occur.
In the
several years prior to fiscal 2015, we had identified a material
weakness in our internal control over financial reporting that was
related to our limited finance staff and the resulting ineffective
management review over financial reporting, coupled with
increasingly complex accounting treatments associated with our
financing activities and European expansion. While we remediated
this material weakness in 2015, we cannot be assured that material
weaknesses will not arise again.
A
control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control
system’s objectives will be satisfied. Internal control over
financial reporting and disclosure controls and procedures are
designed to give a reasonable assurance that they are effective to
achieve their objectives. We cannot provide absolute assurance that
all of our possible future control issues will be detected. These
inherent limitations include the possibility that judgments in our
decision making can be faulty, and that isolated breakdowns can
occur because of simple human error or mistake. The design of our
system of controls is based in part upon assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed absolutely in achieving our stated goals under
all potential future or unforeseeable conditions. Because of the
inherent limitations in a cost effective control system,
misstatements due to error could occur and not be detected. This
and any future failures could cause investors to lose confidence in
our reported financial information, which could have a negative
impact on our financial condition and stock price.
Our common stock price has fluctuated considerably and is likely to
remain volatile, in part due to the limited market for our common
stock and you could lose all or a part of your
investment.
During
the period from the completion of our initial public offering, or
IPO, on March 30, 2010 through October 10, 2016, the
high and low sales prices for our common stock were $10.40 and
$0.15, respectively. There is a limited public market for our
common stock and we cannot provide assurances that an active
trading market will develop. As a result of low trading volume in
our common stock, the purchase or sale of a relatively small number
of shares could result in significant share price
fluctuations.
Additionally,
the market price of our common stock may continue to fluctuate
significantly in response to a number of factors, some of which are
beyond our control, including the
following:
●
market
acceptance of Neutrolin in those markets in which it is approved
for sale;
●
our
need for additional capital;
●
the
receipt of or failure to obtain additional regulatory approvals for
Neutrolin, including FDA approval in the U.S.;
●
results
of clinical trials of our product candidates, including our planned
Phase 3 trial for Neutrolin in the U.S., or those of our
competitors;
●
our
entry into or the loss of a significant collaboration;
●
regulatory
or legal developments in the United States and other countries,
including changes in the healthcare payment systems;
●
changes
in financial estimates or investment recommendations by securities
analysts relating to our common stock;
●
announcements
by our competitors of significant developments, strategic
partnerships, joint ventures or capital commitments;
●
changes
in key personnel;
●
variations
in our financial results or those of companies that are perceived
to be similar to us;
●
market
conditions in the pharmaceutical and medical device sectors and
issuance of new or changed securities analysts’ reports or
recommendations;
●
general
economic, industry and market conditions;
●
developments
or disputes concerning patents or other proprietary
rights;
●
future
sales or anticipated sales of our securities by us or our
stockholders; and
●
any
other factors described in this “Risk Factors”
section.
In
addition, the stock markets in general, and the stock of
pharmaceutical and medical device companies in particular, have
experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of
these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our
actual operating performance.
For
these reasons and others, an investment in our securities is risky
and invest only if you can withstand a significant loss and wide
fluctuations in the value of your investment.
A significant number of additional shares of our common stock may
be issued at a later date, and their sale could depress the market
price of our common stock.
As
of June 30, 2016, we had outstanding the following securities that
are convertible into or exercisable for shares of our common
stock:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
●
options
to purchase an aggregate of 475,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $0.84 per share;
●
options
to purchase an aggregate of 3,509,545 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.18 per share;
●
warrants
issued to investors in our 2012 private placement to purchase an
aggregate of 312,500 shares of our common stock with an exercise
price of $0.40 per share, which expire on September 20,
2017;
●
a
warrant for 795 shares of our common stock issued to the placement
agent for our 2012 private placement with an exercise price of
$0.40 per share, which expires on September 20, 2017;
●
a
warrant to purchase 400,000 shares of our common stock issued on
February 19, 2013 with an exercise price of $1.50 that expire on
February 19, 2018;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
●
warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of
common;
●
Series C-3
Preferred Stock convertible into 1,365,000 shares of common
stock;
●
Series D Preferred
Stock convertible 1,479,240 shares of common stock;
●
Series E Preferred
Stock convertible 1,959,759 shares of common stock;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020; and
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020.
The
possibility of the issuance of these shares, as well as the actual
sale of such shares, could substantially reduce the market price
for our common stock and impede our ability to obtain future
financing.
We will need additional financing to fund our activities in the
future, which likely will dilute our stockholders.
We
anticipate that we will incur operating losses for the foreseeable
future. Additionally, we will require substantial funds in the
future to support our operations. We expect to seek equity or debt
financings in the future to fund our operations. The issuance of
additional equity securities, or convertible debt or other
derivative securities, likely will dilute some if not all of our
then existing stockholders, depending on the financing
terms.
Future sales and issuances of our equity securities or rights to
purchase our equity securities, including pursuant to equity
incentive plans, would result in additional dilution of the
percentage ownership of our stockholders and could cause our stock
price to fall.
To
the extent we raise additional capital by issuing equity
securities, our stockholders may experience substantial dilution.
We may, as we have in the past, sell common stock, convertible
securities or other equity securities in one or more transactions
at prices and in a manner we determine from time to time. If we
sell common stock, convertible securities or other equity
securities in more than one transaction, investors may be further
diluted by subsequent sales. Such sales may also result in material
dilution to our existing stockholders, and new investors could gain
rights superior to existing stockholders.
Pursuant
to our 2013 Stock Plan, our Board of Directors is authorized to
award up to a total of 11,000,000 shares of common stock or options
to purchase shares of common stock to our officers, directors,
employees and non-employee consultants. As of June 30, 2016,
options to purchase 475,000 shares of common stock issued under our
2006 Stock Plan at a weighted average exercise price of $0.84 per
share, and options to purchase 3,509,545 shares of common stock
issued under our 2013 Stock Plan at a weighted average exercise
price of $2.18 per share were outstanding. In addition, at June 30,
2016, there were outstanding warrants to purchase an aggregate of
4,006,468 shares of our common stock at prices ranging from $0.40
to $7.00, and shares of our outstanding Series C-2, C-3, D and E
preferred stock convertible into an aggregate of 6,303,999 shares
of our common stock. Stockholders will experience dilution in the
event that additional shares of common stock are issued under our
2006 Stock Plan or 2013 Stock Plan, or options issued under our
2006 Stock Plan or 2013 Stock Plan are exercised, or any warrants
are exercised for, or preferred stock shares are converted to,
common stock.
Provisions in our corporate charter documents and under Delaware
law could make an acquisition of us, which may be beneficial to our
stockholders, more difficult.
Provisions
in our Amended and Restated Certificate of Incorporation, as
amended, and our Amended and Restated Bylaws, as well as provisions
of the General Corporation Law of the State of Delaware, or DGCL,
may discourage, delay or prevent a merger, acquisition or other
change in control of our company, even if such a change in control
would be beneficial to our stockholders. These provisions include
the following:
●
authorizing
the issuance of “blank check” preferred stock, the
terms of which may be established and shares of which may be issued
without stockholder approval;
●
prohibiting
our stockholders from fixing the number of our directors;
and
●
establishing
advance notice requirements for stockholder proposals that can be
acted on at stockholder meetings and nominations to our Board of
Directors.
These
provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making
it more difficult for stockholders to replace members of our board
of directors, which is responsible for appointing the members of
our management. In addition, we are subject to Section 203 of the
DGCL, which generally prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with an
interested stockholder for a period of three years following the
date on which the stockholder became an interested stockholder,
unless such transactions are approved by the board of directors.
This provision could have the effect of discouraging, delaying or
preventing someone from acquiring us or merging with us, whether or
not it is desired by, or beneficial to, our stockholders. Any
provision of our Amended and Restated Certificate of Incorporation,
as amended, or Amended and Restated Bylaws or Delaware law that has
the effect of delaying or deterring a change in control could limit
the opportunity for our stockholders to receive a premium for their
shares of our common stock and could also affect the price that
some investors are willing to pay for our common
stock.
If we fail to comply with the continued listing standards of the
NYSE MKT, it may result in a delisting of our common stock from the
exchange.
Our
common stock is currently listed for trading on the NYSE MKT, and
the continued listing of our common stock on the NYSE MKT is
subject to our compliance with a number of listing standards. These
listing standards include the requirement for avoiding sustained
losses and maintaining a minimum level of stockholders’
equity. In 2012 and 2014, we received notices from the
NYSE MKT that we did not meet continued listing standards of the
NYSE MKT as set forth in Part 10 of the Company
Guide. Specifically, we were not in compliance with
Section 1003(a)(i) and Section 1003(a)(ii) of the Company Guide
because we reported stockholders’ equity of less than the
required amounts. As a result, we became subject to the
procedures and requirements of Section 1009 of the Company Guide
and were subject to possible delisting. In March 2015, we regained
compliance with the NYSE MKT listing requirements due to our market
capitalization, pursuant to Section 1003(a) of the Company Guide.
However, there can be no assurance that we will continue to meet
the continued listing standards of the NYSE MKT.
If our common stock were no longer listed on the
NYSE MKT, investors might only be able to trade on the OTC Bulletin
Board
®
or in the Pink Sheets
®
(a quotation medium operated by Pink
Sheets LLC). This would impair the liquidity of our common stock
not only in the number of shares that could be bought and sold at a
given price, which might be depressed by the relative illiquidity,
but also through delays in the timing of transactions and reduction
in media coverage.
Because the average daily trading volume of our common stock has
been low historically, the ability to sell our shares in the
secondary trading market may be limited.
Because
the average daily trading volume of our common stock on the NYSE
MKT has been low historically, the liquidity of our common stock
may be impaired. As a result, prices for shares of our common stock
may be lower than might otherwise prevail if the average daily
trading volume of our common stock was higher. The average daily
trading volume of our common stock may be low relative to the
stocks of other exchange-listed companies, which could limit
investors’ ability to sell shares in the secondary trading
market.
Penny stock regulations may impose certain restrictions on
marketability of our securities.
The
SEC has adopted regulations which generally define a “penny
stock” to be any equity security that has a market price of
less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. A security listed on a
national securities exchange is exempt from the definition of a
penny stock. Our common stock is listed on the NYSE MKT and so is
not considered a penny stock. However, if we fail to maintain our
common stock’s listing on the NYSE MKT, our common stock
would be considered a penny stock. In that event, our common stock
would be subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse).
For transactions covered by such rules, the broker-dealer must make
a special suitability determination for the purchase of such
securities and have received the purchaser’s written consent
to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock
market. The broker-dealer must also disclose the commission payable
to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is
the sole market maker, the broker-dealer must disclose this fact
and the broker-dealer’s presumed control over the market.
Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information
on the limited market in penny stocks. Broker-dealers must wait two
business days after providing buyers with disclosure materials
regarding a security before effecting a transaction in such
security. Consequently, the “penny stock” rules
restrict the ability of broker-dealers to sell our securities and
affect the ability of investors to sell our securities in the
secondary market and the price at which such purchasers can sell
any such securities, thereby affecting the liquidity of the market
for our common stock.
Stockholders
should be aware that, according to the SEC, the market for penny
stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include:
●
control
of the market for the security by one or more broker-dealers that
are often related to the promoter or issuer;
●
manipulation
of prices through prearranged matching of purchases and sales and
false and misleading press releases;
●
“boiler
room” practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales
persons;
●
excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
●
the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the inevitable collapse of those prices with
consequent investor losses.
We do not intend to pay dividends on our common stock so any
returns on our common stock will be limited to the value of our
common stock.
We
have never declared dividends on our common stock, and currently do
not plan to declare dividends on shares of our common stock in the
foreseeable future. Pursuant to the terms of our Series D and E
Non-Voting Convertible Preferred Stock, we may not declare or pay
any dividends or make any distributions on any of our shares or
other equity securities as long as any of those preferred shares
remain outstanding. We currently expect to retain future earnings,
if any, for use in the operation and expansion of our business. The
payment of cash dividends in the future, if any, will be at the
discretion of our board of directors and will depend upon such
factors as earnings levels, capital requirements, our overall
financial condition and any other factors deemed relevant by our
board of directors. Any return to holders of our common stock will
be limited to the value of their common stock.
Additional Risks Related to This Offering
Management will have broad discretion as to the use of the proceeds
from this offering, and may not use the proceeds
effectively.
Because
we have not designated the amount of net proceeds from this
offering to be used for any particular purpose, our management will
have broad discretion as to the application of the net proceeds
from this offering and could use them for purposes other than those
contemplated at the time of the offering. Our management may use
the net proceeds for corporate purposes that may not improve our
financial condition or market value. The failure by management to
apply these funds effectively could result in financial losses that
could have a material adverse effect on our business, cause the
price of our common stock to decline and delay the development and
commercialization of our product candidates.
You may experience immediate and substantial dilution.
The
offering price per share in this offering may exceed the net
tangible book value per share of our common stock outstanding prior
to this offering. Assuming that an aggregate of
13,840,830 shares of our common stock are sold during
the term of the sales agreement with FBR at a price of
$2.89 per
share, the last reported sale price of our common stock on the NYSE
MKT on October 10, 2016, for aggregate gross proceeds
of $40.0 million, after deducting commissions and estimated
aggregate offering expenses payable by us, you will experience
immediate dilution of $1.59 per share, representing
the difference between our as-adjusted net tangible book value per
share as of June 30, 2016, after giving effect to this offering and
the assumed offering price. The exercise of outstanding stock
options and warrants may result in further dilution of your
investment. See the section entitled “Dilution” below
for a more detailed illustration of the dilution you would incur if
you participate in this offering.
You may experience future dilution as a result of future equity
offerings.
We will
need significant additional funds to complete the U.S development
of Neutrolin. In order to raise additional capital, we plan to
offer in the future additional shares of our common stock or other
securities convertible into or exchangeable for our common stock at
prices that may not be the same as the price per share in this
offering. We may sell shares or other securities in any other
offering at a price per share that is less than the price per share
paid by investors in this offering, and investors purchasing shares
or other securities in the future could have rights superior to
existing stockholders. The price per share at which we sell
additional shares of our common stock, or securities convertible or
exchangeable into common stock, in future transactions may be
higher or lower than the price per share paid by investors in this
offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
SEC encourages companies to disclose forward-looking information so
that investors can better understand a company’s future
prospects and make informed investment decisions. This prospectus,
any applicable prospectus supplement and the documents we have
filed with the SEC that are incorporated herein and therein by
reference contain such “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995.
Words such as “may,”
“might,” “should,”
“anticipate,” “estimate,”
“expect,” “projects,”
“intends,” “plans,” “believes”
and words and terms of similar substance used in connection with
any discussion of future operating or financial performance,
identify forward-looking statements. Forward-looking statements
represent management’s current judgment regarding future
events and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those
described in the forward-looking statements. These risks include,
but are not limited to:
the cost, timing and results of
CorMedix’s ongoing and planned Phase 3 trials for
Neutrolin® in the U.S. and the resources needed to commence
and complete those trials; obtaining additional financing to
support CorMedix’s research and development and clinical
activities and operations; obtaining regulatory approvals to
conduct clinical trials and to commercialize CorMedix’s
approved products and product candidates, including approval of
Neutrolin in the U.S. by the FDA and marketing of Neutrolin in
countries other than Europe; the risks associated with the launch
of Neutrolin in new markets; CorMedix’s ability to
enter into, execute upon and maintain collaborations with third
parties for its development and marketing programs; the risks and
uncertainties associated with CorMedix’s ability to manage
its limited cash resources; the outcome of clinical trials of
CorMedix’s product candidates and whether they demonstrate
these candidates’ safety and effectiveness; CorMedix’s
dependence on its collaborations and its license relationships;
CorMedix’s ability to maintain its listing on the NYSE MKT;
achieving milestones under CorMedix’s collaborations:
CorMedix’s dependence on preclinical and clinical
investigators, preclinical and clinical research organizations,
manufacturers, sales and marketing organizations, and consultants;
and protecting the intellectual property developed by or licensed
to CorMedix.
Please also see the
discussion of risks and uncertainties under “Risk
Factors” above and otherwise incorporated by reference
herein, and in our most recent annual report on Form 10-K, as
revised or supplemented by any of our subsequently filed quarterly
reports on Form 10-Q, as well as any amendments thereto, as
filed with the SEC and which are incorporated herein by
reference.
In
light of these assumptions, risks and uncertainties, the results
and events discussed in the forward-looking statements contained in
this prospectus, any applicable prospectus supplement or in any
document incorporated herein or therein by reference might not
occur. Investors are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the respective
dates of this prospectus or any applicable prospectus supplement or
the date of the document incorporated by reference in this
prospectus or any applicable prospectus supplement. We are not
under any obligation, and we expressly disclaim any obligation, to
update or alter any forward-looking statements, whether as a result
of new information, future events or otherwise. All subsequent
forward-looking statements attributable to us or to any person
acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this
section.
USE OF PROCEEDS
We
currently intend to use the net proceeds from this offering, if
any, for general corporate purposes, including clinical trials,
research and development expenses, and general and administrative
expenses.
The
amounts and timing of our use of the net proceeds from this
offering will depend on a number of factors, such as the timing and
progress of our research and development efforts, the timing and
progress of any collaborative or strategic partnering efforts, and
the competitive environment for our planned products. As of the
date of this prospectus, we cannot specify with certainty all of
the particular uses for the net proceeds to us from this offering.
Accordingly, our management will have broad discretion in the
timing and application of these proceeds. Pending application of
the net proceeds as described above, we intend to temporarily
invest the proceeds in short-term, interest-bearing
instruments.
DILUTION
Our net tangible book value as of June 30, 2016
was approximately $28,070,698, or $0.75 per share of common stock.
Net tangible book value per share is calculated by subtracting our
total liabilities from our total tangible assets, which is total
assets less intangible assets, and dividing this amount by the
number of shares of common stock outstanding. After giving effect
to the sale by us of the full $40.0 million of common stock that
may be offered in this offering at an assumed offering price of
$2.89 per share, which was the closing price of our
common stock on the NYSE MKT on October 10, 2016, and
after deducting estimated offering commissions and expenses payable
by us, our as-adjusted net tangible book value as of June 30, 2016
would have been approximately $66,745,698, or
$1.30 per share of common stock. This represents an
immediate increase in the net tangible book value of
$0.55 per share to our existing stockholders and an
immediate and substantial dilution in net tangible book value of
$1.59 per share to new investors. The following table
illustrates this hypothetical per share
dilution:
Assumed public
offering price per share
|
|
$
2.89
|
Net tangible book
value per share as of June 30, 2016
|
$
0.75
|
|
Increase in net
tangible book value per share attributable to this
offering
|
0.55
|
|
As adjusted net
tangible book value per share as of June 30, 2016, after giving
effect to this offering
|
|
$
1.30
|
Dilution per share
to new investors purchasing shares in this offering
|
|
$
1.59
|
The table above assumes for illustrative purposes
that an aggregate of 13,840,830
shares of our common stock are sold at a price of
$2.89 per share, the last reported sale price of our
common stock on the NYSE MKT on October 10, 2016, for
aggregate gross proceeds of $40.0 million. The shares sold in this
offering, if any, will be sold from time to time at various prices.
An increase of $1.00
per share in the price at which the shares are
sold from the assumed offering price of $2.89 per
share shown in the table above, assuming all of our common stock in
the aggregate amount of $40.0 million
is sold at that price, would increase our adjusted
net tangible book value per share after the offering by
$0.65 per share and would increase the dilution in net
tangible book value per share to new investors in this offering to
$2.49 per share, after deducting commissions and
estimated aggregate offering expenses payable by us. A decrease of
$1.00 per share in the price at which the shares are sold from the
assumed offering price of $2.89 per share shown in the
table above, assuming all of our common stock in the aggregate
amount of $40.0 million is sold at that price, would
decrease our adjusted net
tangible book value per share after the offering by
$0.39 per share and would decrease the
dilution in net tangible book value per share to new investors in
this offering to $0.75 per share, after deducting
commissions and estimated aggregate offering expenses payable by
us. This information is supplied for illustrative purposes
only.
To
the extent that any outstanding options or warrants are exercised,
new options are issued under our 2006 Stock Incentive Plan or our
2013 Stock Incentive Plan or we otherwise issue additional shares
of common stock in the future, there will be further dilution to
new investors.
The
above discussion and table are based on 37,296,523 shares of our
common stock outstanding as of June 30, 2016 and excludes the
following securities outstanding on June 30, 2016:
●
warrants
for 227,273 shares of common stock issued in July 2013 with an
exercise price of $1.50 that expire on July 30, 2018;
●
warrants
for 500,000 shares of common stock issued in May 2013 with an
exercise price of $0.65 per share that expire on May 30,
2019;
●
warrants
for 125,000 shares issued to ND Partners in April 2013 in
connection with the amendment to the license and assignment
agreement with an exercise price of $1.50 per share that expire on
April 11, 2018;
●
options
to purchase an aggregate of 475,000 shares of our common stock
issued to our officers, directors, employees and non-employee
consultants under our Amended and Restated 2006 Stock Incentive
Plan, or the 2006 Stock Plan, with a weighted average exercise
price of $0.84 per share;
●
options
to purchase an aggregate of 3,509,545 shares of our common stock
issued to our officers, directors and non-employee consultants
under our 2013 Stock Plan, with a weighted average exercise price
of $2.18 per share;
●
warrants
issued to investors in our 2012 private placement to purchase an
aggregate of 312,500 shares of our common stock with an exercise
price of $0.40 per share, which expire on September 20,
2017;
●
a
warrant for 795 shares of our common stock issued to the placement
agent for our 2012 private placement with an exercise price of
$0.40 per share, which expires on September 20, 2017;
●
a
warrant to purchase 400,000 shares of our common stock issued on
February 19, 2013 with an exercise price of $1.50 that expire on
February 19, 2018;
●
warrants
for 750,000 shares of common stock with an exercise price of $0.90
that expire on October 22, 2019;
●
warrants
for 725,000 shares of common stock with an exercise price of $0.90
that expire on January 8, 2020;
●
Series C-2
Preferred Stock convertible into 1,500,000 shares of
common;
●
Series C-3
Preferred Stock convertible into 1,365,000 shares of common
stock;
●
Series D Preferred
Stock convertible 1,479,240 shares of common stock;
●
Series E Preferred
Stock convertible 1,959,759 shares of common stock;
●
warrants for
682,500 shares of common stock issued in March 2014 with an
exercise price of $2.50 per shares that expire on September 10,
2019;
●
warrants for
200,000 shares of common stock with an exercise price of $7.00 that
expire on March 3, 2020; and
●
warrants for 83,400
shares of common stock with an exercise price of $7.00 that expire
on March 25, 2020.
MARKET
FOR COMMON STOCK
Our
common stock trades on the NYSE MKT under the symbol
“CRMD.” The following table sets forth the high and low
sales prices for our common stock for the periods indicated as
reported by NYSE MKT:
|
|
|
First
Quarter
|
$
2.88
|
$
1.15
|
Second
Quarter
|
$
4.54
|
$
1.83
|
Third Quarter
(through October 10, 2016)
|
$
3.26
|
$
1.36
|
|
|
|
First
Quarter
|
$
9.90
|
$
1.63
|
Second
Quarter
|
$
10.40
|
$
3.62
|
Third
Quarter
|
$
4.31
|
$
1.72
|
Fourth
Quarter
|
$
2.96
|
$
1.72
|
|
|
|
First
Quarter
|
$
3.20
|
$
1.24
|
Second
Quarter
|
$
2.56
|
$
1.05
|
Third
Quarter
|
$
2.15
|
$
1.69
|
Fourth
Quarter
|
$
1.97
|
$
1.25
|
Based
upon information furnished by our transfer agent, at October
10, 2016, we had 64 holders of record of our
common stock.
We have
never declared dividends on our equity securities, and currently do
not plan to declare dividends on shares of our common stock in the
foreseeable future. We expect to retain our future earnings, if
any, for use in the operation and expansion of our business.
Further, pursuant to the terms of our
Series D and Series E Non-Voting Convertible Preferred Stock, we
may not declare or pay any dividends or make any distributions on
any of our shares or other equity securities as long as any of
those preferred shares remain outstanding.
Subject to the
foregoing, the payment of cash dividends in the future, if any,
will be at the discretion of our Board of Directors and will depend
upon such factors as earnings levels, capital requirements, our
overall financial condition and any other factors deemed relevant
by our Board of Directors.
PLAN
OF DISTRIBUTION
We have
entered into an At Market Issuance Sales Agreement, which we refer
to as the sales agreement, with FBR under which we may issue and
sell our common stock from time to time through FBR acting as
agent, subject to certain limitations, including the number or
dollar amount of shares registered under the registration statement
to which the offering relates. The form of the sales agreement was
filed as an exhibit to the registration statement of which this
prospectus is a part, and is incorporated by reference in this
prospectus. The sales, if any, of shares made under the sales
agreement will be made by any method that is deemed an “at
the market offering” as defined in Rule 415 promulgated under
the Securities Act. We may instruct FBR not to sell common stock if
the sales cannot be effected at or above the price designated by us
from time to time. We or FBR may suspend the offering of common
stock upon notice and subject to other conditions.
Each
time we wish to issue and sell common stock under the sales
agreement, we will notify FBR of the number of shares to be issued,
the dates on which such sales are anticipated to be made, any
minimum price below which sales may not be made and other sales
parameters as we deem appropriate. Once we have so instructed FBR,
unless FBR declines to accept the terms of the notice, FBR has
agreed to use its commercially reasonable efforts consistent with
its normal trading and sales practices to sell such shares up to
the amount specified on such terms. The obligations of FBR under
the sales agreement to sell our common stock is subject to a number
of conditions that we must meet.
We will
pay FBR commissions for its services in acting as agent in the sale
of common stock. FBR will be entitled to a commission equal to 3%
of the gross proceeds from the sale of common stock offered hereby.
In addition, we have agreed to reimburse certain expenses of FBR in
an amount not to exceed $25,000. We estimate that the total
expenses for the offering, excluding compensation payable to FBR
under the terms of the sales agreement, will be approximately
$100,000.
Settlement for
sales of common stock will generally occur on the third business
day following the date on which any sales are made, or on some
other date that is agreed upon by us and FBR in connection with a
particular transaction, in return for payment of the net proceeds
to us. There is no arrangement for funds to be received in an
escrow, trust or similar arrangement.
In
connection with the sale of the common stock on our behalf, FBR
may, and will with respect to sales effected in an “at the
market offering,” be deemed to be an
“underwriter” within the meaning of the Securities Act
and the compensation of FBR may be deemed to be underwriting
commissions or discounts. We have agreed to provide indemnification
and contribution to FBR against certain civil liabilities,
including liabilities under the Securities Act. We have also agreed
to reimburse FBR for certain other specified expenses.
The
offering of our common stock pursuant to the sales agreement will
terminate upon the earlier of (i) the sale of all of our common
stock provided for in this prospectus or (ii) termination of the
sales agreement as provided therein.
FBR and
its affiliates have in the past and may in the future provide
various investment banking and other financial services for us and
our affiliates, for which services they may in the future receive
customary fees. To the extent required by Regulation M, FBR will
not engage in any market making activities involving our common
stock while the offering is ongoing under this
prospectus.
DESCRIPTION OF OUR CAPITAL STOCK
Common Stock
Pursuant to our Amended and Restated Certificate
of Incorporation, as amended, we are authorized to issue 80,000,000
shares of common stock, $0.001 par value per share. As of June 30,
2016, we had
37,296,523
shares
of common stock outstanding.
If we were to sell
all $40.0 million available under this prospectus, we
could issue up to 13,840,830 shares, assuming sales at
a price of $2.89 per share, which was the closing
price on the NYSE MKT on October 10, 2016. Issuing
that number of shares would cause us to exceed our authorized
common shares. Until we amend our Amended and Restated Certificate
of Incorporation to increase the authorized shares of common stock,
which we intend to do during 2016, we would only be able to issue
under the sales agreement with FBR that number of shares, which,
when added together with all outstanding shares and all shares
reserved for issuance pursuant to outstanding preferred shares,
options and warrants and all shares reserved for issuance underour
2013 Stock Plan, would not exceed 80,000,000 shares. The amendment
of our Amended and Restated Certificate of Incorporation to
increase the authorized shares of common stock will require the
approval of a majority of the shares of common stock outstanding
entitled to vote at the meeting that we intend to hold for such
vote.
The
following summary of certain provisions of our common stock does
not purport to be complete. You should refer to our Amended and
Restated Certificate of Incorporation, as amended, and our Amended
and Restated Bylaws. We filed our Amended and Restated Certificate
of Incorporation, as amended, as an exhibit to our definitive proxy
statement on Schedule 14A with the SEC on October 17, 2012 and
filed our Amended and Restated Bylaws as an exhibit to the
registration statement on Form S-1 filed with the SEC on March 1,
2010. We filed a Certificate of Designation for each of our Series
C-2, C-3, D and E non-voting preferred stock as exhibits to our
current reports on Form 8-K on October 23, 2013 and January 9,
2014, and amendments to the Certificate of Designation for each of
our Series C-2, C-3, D and E non-voting preferred stock on
September 16, 2014. The summary below is also qualified by
provisions of applicable law.
The
holders of our common stock are entitled to one vote per share on
all matters to be voted on by the stockholders, and there are no
cumulative voting rights. Generally, all matters to be voted on by
stockholders must be approved by a majority (or, in the case of
election of directors, by a plurality) of the votes entitled to be
cast by all shares of common stock present in person or represented
by proxy, subject to any voting rights granted to holders of any
preferred stock.
The
holders of common stock are entitled to receive ratable dividends,
if any, payable in cash, in stock or otherwise if, as and when
declared from time to time by our board of directors out of funds
legally available for the payment of dividends, subject to any
preferential rights that may be applicable to any outstanding
preferred stock. In the event of a liquidation, dissolution, or
winding up of our company, after payment in full of all outstanding
debts and other liabilities, the holders of common stock are
entitled to share ratably in all remaining assets, subject to prior
distribution rights of preferred stock, if any, then outstanding.
No shares of common stock have preemptive rights or other
subscription rights to purchase additional shares of common stock.
There are no redemption or sinking fund provisions applicable to
the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock included in
this registration statement will be fully paid and nonassessable.
The rights, preferences and privileges of holders of our common
stock will be subject to, and might be adversely affected by, the
rights of holders of any preferred stock that we may issue in the
future. All shares of common stock that are acquired by us shall be
available for reissuance by us at any time.
Issued and Outstanding Preferred Stock
Under
the terms of our Amended and Restated Certificate of Incorporation,
as amended, our board of directors is authorized to issue up to
2,000,000 shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion to
determine the rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, of each series
of preferred stock. As of June 30, 2016, of the 2,000,000 shares of
preferred stock authorized, our board of directors has designated
(all with par value of $0.001 per share): 150,000 shares as Series
C-2 Non-Voting Convertible Preferred Stock; 200,000 shares as
Series C-3 Non-Voting Convertible Preferred Stock; 73,962 shares as
Series D Non-Voting Convertible Preferred Stock; and 92,440 shares
as Series E Non-Voting Convertible Preferred Stock. At June 30,
2016, we had outstanding: 150,000 shares as Series C-2 Non-Voting
Convertible Preferred Stock; 136,500 shares as Series C-3
Non-Voting Convertible Preferred Stock; 73,962 shares as Series D
Non-Voting Convertible Preferred Stock; and 89,623 shares as Series
E Non-Voting Convertible Preferred Stock. The Series A Non-Voting
Convertible Preferred Stock, Series B Non-Voting Convertible
Preferred Stock and Series C-1 Non-Voting Convertible Preferred
Stock that were previously designated have all been converted to
shares of common stock.
Series C-2 and C-3 Non-Voting Convertible Preferred
Stock
The
Series C-2 and C-3 Preferred Stock, referred to collectively as the
Series C Preferred Stock, have identical rights, privileges and
terms, as described below.
Rank
.
The Series C Preferred Stock will
rank:
●
senior
to our common stock;
●
senior to any class or series of capital
stock created after the issuance of the Series C Preferred Stock;
and
●
junior
to the Series D Non-Voting Convertible Preferred Stock and Series E
Non-Voting Convertible Preferred Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series C Preferred Stock
is convertible into 10 shares of our common stock (subject to
adjustment in the event of s
tock dividends and
distributions, stock splits, stock combinations, or
reclassifications affecting our common stock
) at a per share price of $1.00 at any time at the
option of the holder, except that a holder will be prohibited from
converting shares of Series C Preferred Stock into shares of common
stock if, as a result of such conversion, such holder, together
with its affiliates, would beneficially own more than 9.99% of the
total number of shares of our common stock then issued and
outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series C Preferred Stock will receive a
payment equal to $10.00 per share of Series C Preferred Stock
before any proceeds are distributed to the holders of our common
stock. After the payment of this preferential amount, and subject
to the rights of holders of any class or series of our capital
stock hereafter created specifically ranking by its terms senior to
the Series C Preferred Stock, holders of Series C Preferred Stock
will participate ratably in the distribution of any remaining
assets with the common stock and any other class or series of our
capital stock hereafter created that participates with the common
stock in such distributions.
Voting
Rights
.
Shares of Series C Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of two thirds of the outstanding Series C-2
and Series C-3 Preferred Stock, respectively, will be required to
amend the terms of the Series C-2 and C-3 Preferred Stock or the
certificate of designation for the Series C-2 and C-3 Preferred
Stock, respectively.
Dividends
.
Holders of Series C Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series C Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series C Preferred Stock. Shares of Series
C Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series C Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series C Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series C Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series C Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series C-2 Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Series D Non-Voting Convertible Preferred Stock
Rank
.
The Series D Preferred Stock will
rank:
●
senior
to our common stock;
●
senior
to any class or series of capital stock created after the issuance
of the Series D Preferred Stock;
●
senior
to the Series C-2 Non-Voting Convertible Preferred Stock and the
Series C-3 Non-Voting Convertible Preferred Stock; and
●
on
parity with the Series E Non-Voting Convertible Preferred
Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series D Preferred Stock
is convertible into 20 shares of our common stock (subject to
adjustment in the event of s
tock dividends and
distributions, stock splits, stock combinations, or
reclassifications affecting our common stock
) at a per share price of $0.35 at any time at the
option of the holder, except that a holder will be prohibited from
converting shares of Series D Preferred Stock into shares of common
stock if, as a result of such conversion, such holder, together
with its affiliates, would beneficially own more than 9.99% of the
total number of shares of our common stock then issued and
outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series D Preferred Stock will receive a
payment equal to $21.00 per share of Series D Preferred Stock on
parity with the payment of the liquidation preference due the
Series E Preferred Stock, but before any proceeds are distributed
to the holders of common stock, the Series C-2 Non-Voting
Convertible Preferred Stock and the Series C-3 Non-Voting
Convertible Preferred Stock. After the payment of this preferential
amount, holders of Series D Preferred Stock will participate
ratably in the distribution of any remaining assets with the common
stock and any other class or series of our capital stock that
participates with the common stock in such
distributions.
Voting
Rights
.
Shares of Series D Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of a majority of the outstanding Series D
Preferred Stock will be required to amend the terms of the Series D
Preferred Stock or the certificate of designation for the Series D
Preferred Stock.
Dividends
.
Holders of Series D Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series D Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series D Preferred Stock. Shares of Series
D Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series D Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series D Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series D Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series D Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series D Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Series E Non-Voting Convertible Preferred Stock
Rank
.
The Series E Preferred Stock will
rank:
●
senior
to our common stock;
●
senior
to any class or series of capital stock created after the issuance
of the Series E Preferred Stock;
●
senior
to the Series C-2 Non-Voting Convertible Preferred Stock and the
Series C-3 Non-Voting Convertible Preferred Stock; and
●
on
parity with the Series D Non-Voting Convertible Preferred
Stock.
in
each case, as to dividends or distributions of assets upon our
liquidation, dissolution or winding up whether voluntarily or
involuntarily.
Conversion
.
Each share of Series E Preferred Stock
is convertible into 21.8667 shares of our common stock (subject to
adjustment as provided in the certificates of designation for the
Series E Preferred Stock) at a per share price of $0.75 at any time
at the option of the holder, except that a holder will be
prohibited from converting shares of Series E Preferred Stock into
shares of common stock if, as a result of such conversion, such
holder, together with its affiliates, would beneficially own more
than 9.99% of the total number of shares of our common stock then
issued and outstanding.
Liquidation
Preference
.
In the event of our liquidation, dissolution or
winding up, holders of Series E Preferred Stock will receive a
payment equal to $49.20 per share of Series E Preferred Stock on
parity with the payment of the liquidation preference due the
Series D Preferred Stock, but before any proceeds are distributed
to the holders of common stock, the Series C-2 Non-Voting
Convertible Preferred Stock and the Series C-3 Non-Voting
Convertible Preferred Stock. After the payment of this preferential
amount, holders of Series E Preferred Stock will participate
ratably in the distribution of any remaining assets with the common
stock and any other class or series of our capital stock that
participates with the common stock in such
distributions.
Voting
Rights
.
Shares of Series E Preferred Stock will generally
have no voting rights, except as required by law and except that
the consent of holders of a majority of the outstanding Series E
Preferred Stock will be required to amend the terms of the Series E
Preferred Stock or the certificate of designation for the Series E
Preferred Stock.
Dividends
.
Holders of Series E Preferred Stock
are entitled to receive, and we are required to pay, dividends on
shares of the Series E Preferred Stock equal (on an
as-if-converted-to-common-stock basis) to and in the same form as
dividends (other than dividends in the form of common stock)
actually paid on shares of the common stock when, as and if such
dividends (other than dividends in the form of common stock) are
paid on shares of the common stock.
Redemption
.
We are not obligated to redeem or
repurchase any shares of Series E Preferred Stock. Shares of Series
E Preferred Stock are not otherwise entitled to any redemption
rights, or mandatory sinking fund or analogous fund
provisions.
Listing
.
There is no established public trading
market for the Series E Preferred Stock, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing of the Series E Preferred Stock on any national securities
exchange or trading system.
Fundamental
Transactions
.
If, at any time that shares of Series E Preferred
Stock are outstanding, we effect a merger or other change of
control transaction, as described in the certificate of designation
and referred to as a fundamental transaction, then a holder will
have the right to receive, upon any subsequent conversion of a
share of Series E Preferred Stock (in lieu of conversion shares)
for each issuable conversion share, the same kind and amount of
securities, cash or property as such holder would have been
entitled to receive upon the occurrence of such fundamental
transaction if such holder had been, immediately prior to such
fundamental transaction, the holder of a share of common
stock.
Debt
Restriction
.
As long as any the Series E Preferred Stock is
outstanding, we cannot incur any indebtedness other than
indebtedness existing prior to September 15, 2014, trade payables
incurred in the ordinary course of business consistent with past
practice, and letters of credit incurred in an aggregate amount of
$3.0 million at any point in time.
Other
Covenants
.
In addition to the debt restrictions above, as
long as any the Series E Preferred Stock is outstanding
, we
cannot, among others things: create, incur, assume or suffer to
exist any encumbrances on any of our assets or property; redeem,
repurchase or pay any cash dividend or distribution on any of our
capital stock (other than as permitted, which includes the
dividends on the Series D Preferred Stock and the Series E
Preferred Stock); redeem, repurchase or prepay any indebtedness; or
engage in any material line of business substantially different
from our current lines of business.
Purchase
Rights
.
In the event
we issue any options, convertible securities or rights to purchase
stock or other securities pro rata to the holders of common stock,
then the a holder of Series E Preferred Stock will be entitled to
acquire, upon the same terms a pro rata amount of such stock or
securities as if the Series E Preferred Stock had been converted to
common stock.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is VStock
Transfer, LLC. The transfer agent’s address is 18 Lafayette
Place, Woodmere, New York 11598 and its telephone number is (212)
828-8436.
We
act as our own transfer agent and registrar for the Series C-2,
C-3, D and E Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW AND OF OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED
BYLAWS
Certain
provisions of DGCL and our Amended and Restated Certificate of
Incorporation, as amended, and our Amended and Restated Bylaws
discussed below may have the effect of making more difficult or
discouraging a tender offer, proxy contest or other takeover
attempt. These provisions are expected to encourage persons seeking
to acquire control of our company to first negotiate with our board
of directors. We believe that the benefits of increasing our
ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure our company outweigh
the disadvantages of discouraging these proposals because
negotiation of these proposals could result in an improvement of
their terms.
Delaware Anti-takeover Law
We are
subject to Section 203 of the DGCL, an anti-takeover law. In
general, Section 203 prohibits a publicly held Delaware corporation
from engaging in a “business combination” with an
“interested stockholder” for a period of three years
following the date the person became an interested stockholder,
unless:
●
the board of
directors approves the transaction in which the stockholder became
an interested stockholder prior to the date the interested
stockholder attained that status;
●
when the
stockholder became an interested stockholder, he or she owned at
least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by persons
who are directors and also officers and certain shares owned by
employee benefits plans; or
●
on or subsequent to
the date the business combination is approved by the board of
directors, the business combination is authorized by the
affirmative vote of at least 66 2/3% of the voting stock of the
corporation at an annual or special meeting of
stockholders.
Generally,
a “business combination” includes a merger, asset or
stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. Generally, an “interested
stockholder” is a person who, together with affiliates and
associates, owns, or is an affiliate or associate of the
corporation and within three years prior to the determination of
interested stockholder status did own, 15% or more of a
corporation’s voting stock.
The
existence of Section 203 of the DGCL would be expected to have an
anti-takeover effect with respect to transactions not approved in
advance by our board of directors, including discouraging attempts
that might result in a premium over the market price for the shares
of our common stock.
Charter Documents
Our
Amended and Restated Certificate of Incorporation, as amended, and
Amended and Restated Bylaws include a number of provisions that may
have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of our company. First,
our Amended and Restated Bylaws limit who may call special meetings
of the stockholders, such meetings may only be called by the
chairman of the board, the chief executive officer, the board of
directors or holders of an aggregate of at least 15% of our
outstanding entitled to vote. Second, our Amended and Restated
Certificate of Incorporation does not include a provision for
cumulative voting for directors. Under cumulative voting, a
minority stockholder holding a sufficient percentage of a class of
shares may be able to ensure the election of one or more directors.
Third, our Amended and Restated Bylaws provide that the number of
directors on our board, which may range from five to nine
directors, shall be exclusively fixed by our board, which has set
the number of directors at seven. Fourth, newly created
directorships resulting from any increase in our authorized number
of directors and any vacancies in our board resulting from death,
resignation, retirement, disqualification or other cause (including
removal from office by a vote of the shareholders) will be filled
by a majority of our board then in office. Finally, our Amended and
Restated Bylaws establish procedures, including 90-day advance
notice requirement, with regard to the nomination of candidates for
election as directors and stockholder proposals. These and other
provisions of our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws and Delaware law could discourage
potential acquisition proposals and could delay or prevent a change
in control or management of our company.
LEGAL MATTERS
Wyrick
Robbins Yates & Ponton LLP, Raleigh, North Carolina, will pass
upon the validity of the common stock offered by this prospectus.
FBR is being represented in connection with this offering by Duane
Morris LLP, Newark, New Jersey.
EXPERTS
The balance sheets of CorMedix Inc. as of December
31, 2015 and 2014 and the related consolidated statements of
operations and comprehensive income (loss), stockholders’
equity, and cash flows for each of the years in the two-year period
ended December 31, 2015,
and the effectiveness of internal
control over financial reporting as of December 31, 2015 (which is
included in the Annual Report on Form 10-K for the year ended
December 31, 2015),
have been
incorporated herein by reference in reliance on the report of
Friedman LLP, independent registered public accounting firm, given
upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
This
prospectus is part of the registration statement on Form S-3 we
filed with the SEC under the Securities Act and does not contain
all the information set forth in the registration statement.
Whenever a reference is made in this prospectus to any of our
contracts, agreements or other documents, the reference may not be
complete and you should refer to the exhibits that are a part of
the registration statement or the exhibits to the reports or other
documents incorporated by reference into this prospectus for a copy
of such contract, agreement or other document. Because we are
subject to the information and reporting requirements of the
Exchange Act, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SEC’s
website at http://www.sec.gov. You may also read and copy any
document we file at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the
Public Reference Room.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” information
from other documents that we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is considered
to be part of this prospectus. Information in this prospectus
supersedes information incorporated by reference that we filed with
the SEC prior to the date of this prospectus, while information
that we file later with the SEC will automatically update and
supersede the information in this prospectus. The
documents we are incorporating by reference are:
●
our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2015, filed with the SEC pursuant to Section 13
of the Exchange Act on March 15, 2016;
●
our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2016,
filed with the SEC pursuant to Section 13 of the Exchange Act on
May 10, 2016;
●
our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2016,
filed with the SEC pursuant to Section 13 of the Exchange Act on
August 4, 2016;
●
our
Current Reports on Form 8-K, filed with the SEC pursuant to
Section 13 of the Exchange Act on January 19, 2016, March 15, 2016,
April 13, 2016, April 21, 2016, April 25, 2016, May 2, 2016,
June 13, 2016, July 5, 2016, September 16, 2016, and
October 3, 2016; and
●
all
of the filings pursuant to the Securities Exchange Act of 1934, as
amended, after the date of the filing of the registration statement
and prior to the effectiveness of the registration
statement.
We also
incorporate by reference any future filings (other than current
reports furnished under Item 2.02 or Item 7.01 of Form
8-K and exhibits filed on such form that are related to such items
unless such Form 8-K expressly provides to the contrary) made with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, including those made after the date of the initial
filing of the registration statement of which this prospectus is a
part and prior to effectiveness of such registration statement,
until we file a post-effective amendment that indicates the
termination of the offering of the common stock made by this
prospectus and will become a part of this prospectus from the date
that such documents are filed with the SEC. Information in such
future filings updates and the information provided in this
prospectus.
Any
statements in any such future filings will automatically be deemed
to modify and supersede any information in any document we
previously filed with the SEC that is incorporated or deemed to be
incorporated herein by reference to the extent that statements in
the later filed document modify or replace such earlier
statements.
The information relating to us contained in this prospectus should
be read together with the documents incorporated herein by
reference.
Upon
oral or written request and at no cost to the requester, we will
provide to any person, including a beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the information
that has been incorporated by reference in this prospectus but not
delivered with this prospectus. All requests should be made
to: CorMedix Inc., Attention: Secretary, 1430 U.S.
Highway 206, Suite 200, Bedminster, NJ 07921, (908)
517-9500.
You
should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to
provide you with different information. You should not assume that
the information in this prospectus or the documents incorporated
herein by reference is accurate as of any date other than the date
on the front of this prospectus or those documents.
$40,000,000
Common
Stock
PROSPECTUS
FBR
__________, 2016
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 14.
Other Expenses of Issuance and
Distribution.
We
estimate that expenses payable by us in connection with the
offering described in this registration statement will be as
follows:
SEC registration
fee
|
$
16,050
|
Legal fees and
expenses
|
$
75,000
*
|
Accounting fees and
expenses
|
$
20,000
|
Printing
expenses
|
$
10,000
*
|
Miscellaneous
|
$
3,950
|
Total
|
$
125,000
|
*
Estimated as
permitted under Rule 511 of Regulation S-K.
Item 15.
Indemnification of Directors and
Officers.
Section
145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or
agents against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or
proceeding brought by third parties by reason of the fact that they
were or are directors, officers, employees or agents of the
corporation, if such directors, officers, employees or agents acted
in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to
believe their conduct was unlawful. In a derivative action, that is
one by or in the right of the corporation, indemnification may be
made only for expenses actually and reasonably incurred by
directors, officers, employees or agents in connection with the
defense or settlement of an action or suit, and only with respect
to a matter as to which they will have acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification will
be made if such person will have been adjudged liable to the
corporation, unless and only to the extent that the court in which
the action or suit was brought will determine upon application that
the defendant directors, officers, employees or agents are fairly
and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Pursuant to the
DGCL, our Amended and Restated Certificate of Incorporation, as
amended provides that no director will be personally liable to our
company or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the director’s duty of loyalty to our company or
our stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) for any transaction
from which the director derived any improper personal benefit. Our
Amended and Restated Bylaws provide that we will generally
indemnify our directors, officers, employees or agents to the
fullest extent permitted by the law against all losses, claims,
damages or similar events. We have obtained liability insurance for
each director and officer for certain losses arising from claims or
charges made against them while acting in their capacities as
directors or officers of our Company.
Item
16. Exhibits.
(a)
The following
exhibits are filed as part of this Registration
Statement:
Exhibit
Number
|
|
Description of Document
|
|
Registrant’s
Form
|
|
Dated
|
|
Exhibit Number
|
|
Filed Herewith
|
1.1
|
|
At
Market Issuance Sales Agreement, dated August 26, 2016, between
CorMedix Inc. and FBR Capital Markets & Co.
|
|
S-3
|
|
8/26/2016
|
|
1.1
|
|
|
3.1
|
|
Form of
Amended and Restated Certificate of Incorporation.
|
|
S-1/A
|
|
3/01/2010
|
|
3.3
|
|
|
3.2
|
|
Form of
Amended and Restated Bylaws as amended April 19, 2016.
|
|
10-Q
|
|
5/10/2016
|
|
3.1
|
|
|
3.3
|
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation,
dated December 3, 2012.
|
|
10-K
|
|
3/27/2013
|
|
3.3
|
|
|
3.4
|
|
Certificate
of Designation of Series A Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
February 18, 2013, as corrected on February 19, 2013.
|
|
8-K
|
|
2/19/2013
|
|
3.3
|
|
|
3.5
|
|
Certificate
of Designation of Series B Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
July 26, 2013.
|
|
8-K
|
|
7/26/2013
|
|
3.4
|
|
|
3.6
|
|
Certificate
of Designation of Series C-1 Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
October 21, 2013.
|
|
8-K
|
|
10/23/2013
|
|
3.5
|
|
|
3.7
|
|
Certificate
of Amendment to Certificate of Designation of Series C-1 Non-Voting
Convertible Preferred Stock of CorMedix Inc., filed with the
Delaware Secretary of State on January 8, 2014.
|
|
8-K
|
|
1/09/2014
|
|
3.10
|
|
|
3.8
|
|
Certificate
of Designation of Series C-2 Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
October 21, 2013.
|
|
8-K
|
|
10/23/2013
|
|
3.6
|
|
|
3.9
|
|
Certificate
of Amendment to Certificate of Designation of Series C-2 Non-Voting
Convertible Preferred Stock of CorMedix Inc., filed with the
Delaware Secretary of State on January 8, 2014.
|
|
8-K
|
|
1/09/2014
|
|
3.11
|
|
|
3.10
|
|
Certificate
of Designation of Series C-3 Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
January 8, 2014.
|
|
8-K
|
|
1/09/2014
|
|
3.9
|
|
|
3.11
|
|
Certificate
of Designation of Series D Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
October 4, 2013.
|
|
8-K
|
|
10/23/2013
|
|
3.7
|
|
|
3.12
|
|
Certificate
of Amendment to Certificate of Designation of Series D Non-Voting
Convertible Preferred Stock of CorMedix Inc., filed with the
Delaware Secretary of State on January 21, 2014.
|
|
8-K
|
|
1/09/2014
|
|
3.12
|
|
|
|
|
|
|
|
|
Dated
|
|
Exhibit
Number
|
|
Filed
Herewith
|
3.13
|
|
Certificate
of Designation of Series E Non-Voting Convertible Preferred Stock
of CorMedix Inc., filed with the Delaware Secretary of State on
October 21, 2013.
|
|
8-K
|
|
10/23/2013
|
|
3.8
|
|
|
3.14
|
|
Certificate
of Amendment to Certificate of Designation of Series E Non-Voting
Convertible Preferred Stock of CorMedix Inc., filed with the
Delaware Secretary of State on January 8, 2014.
|
|
8-K
|
|
1/09/2014
|
|
3.13
|
|
|
4.1
|
|
Specimen
of Common Stock Certificate.
|
|
S-1/A
|
|
3/19/2010
|
|
4.1
|
|
|
4.2
|
|
Stockholder
Agreement, dated as of January 30, 2008, between CorMedix Inc. and
ND Partners LLC.
|
|
S-1
|
|
11/25/2009
|
|
4.7
|
|
|
4.3
|
|
Form of
Registration Rights Agreement.
|
|
10-Q
|
|
11/13/2012
|
|
4.5
|
|
|
4.4
|
|
Form of
Warrant issued on February 19, 2013.
|
|
8-K
|
|
2/19/2013
|
|
4.13
|
|
|
4.5
|
|
Form of
Warrant issued on May 30, 2013.
|
|
8-K
|
|
5/24/2013
|
|
4.20
|
|
|
4.6
|
|
Form of
Warrant issued on July 30, 2013.
|
|
8-K
|
|
7/26/2013
|
|
4.21
|
|
|
4.7
|
|
Form of
Warrant issued on October 22, 2013.
|
|
8-K
|
|
1/09/2014
|
|
4.23
|
|
|
4.8
|
|
Form of
Warrant issued on January 8, 2014.
|
|
|
|
|
|
|
|
|
4.9
|
|
Form of
Warrant issued on March 10, 2014
|
|
8-K
|
|
03/05/2014
|
|
4.24
|
|
|
4.10
|
|
Warrant
issued March 3, 2015.
|
|
8-K
|
|
03/04/2015
|
|
4.1
|
|
|
4.11
|
|
Amended
and Restated Warrant originally issued May 30, 2013.
|
|
8-K
|
|
03/04/2015
|
|
4.2
|
|
|
4.12
|
|
Amended
and Restated Warrant originally issued March 24, 2010.
|
|
8-K
|
|
03/04/2015
|
|
4.3
|
|
|
4.13
|
|
Form of
Convertible Note.
|
|
8-K
|
|
03/04/2015
|
|
4.4
|
|
|
4.14
|
|
Registration
Rights Agreement, dated March 3, 2015, by and between CorMedix Inc.
and Manchester Securities Corp.
|
|
8-K
|
|
03/04/2015
|
|
4.5
|
|
|
4.15
|
|
Form of
Indenture.
|
|
S-3
|
|
08/26/2016
|
|
4.15
|
|
|
4.16*
|
|
Form of
Note.
|
|
|
|
|
|
|
|
|
4.17*
|
|
Form of
Common Stock Warrant Agreement and Warrant
Certificate.
|
|
|
|
|
|
|
|
|
4.18*
|
|
Form of
Preferred Stock Warrant Agreement and Warrant
Certificate.
|
|
|
|
|
|
|
|
|
4.19*
|
|
Form of
Debt Securities Warrant Agreement and Warrant
Certificate.
|
|
|
|
|
|
|
|
|
4.20*
|
|
Form of
Unit Agreement.
|
|
|
|
|
|
|
|
|
5.1
|
|
Opinion
of Wyrick Robbins Yates & Ponton LLP.
|
|
S-3
|
|
08/26/2016
|
|
5.1
|
|
|
21.1
|
|
List of
Subsidiaries.
|
|
10-K
|
|
3/27/2013
|
|
21.1
|
|
|
23.1
|
|
Consent
of Friedman LLP, Independent Registered Accounting
Firm
|
|
|
|
|
|
|
|
x
|
23.3
|
|
Consent
of Wyrick Robbins Yates & Ponton LLP (included as part of
Exhibit 5.1).
|
|
S-3
|
|
08/26/2016
|
|
23.3
|
|
|
24.1
|
|
Power
of Attorney (included in the signature page hereto).
|
|
|
|
|
|
|
|
x
|
25.1*
|
|
Statement
of Eligibility of Trustee
|
|
|
|
|
|
|
|
|
* To be filed
by amendment or as an exhibit to a Current Report on Form 8-K and
incorporated herein by reference, if applicable.
(b) Financial
statement schedule.
None.
Item
17. Undertakings
(a) The
undersigned Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement:
(i) To
include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the
effective registration statement;
(iii) To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however,
that paragraphs
(1)(i), (1)(ii) and (1)(iii) above do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by Registrant pursuant to Section 13 and Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form
of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
(2) That,
for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To
remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That,
for the purpose of determining liability under the Securities Act
of 1933 to any purchaser:
(i) Each
prospectus filed by the Registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the
registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5) or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii) or (x) for the purpose of providing
the information required by Section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall
be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date.
(5) That,
for the purpose of determining liability of the Registrant under
the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The
undersigned Registrant undertakes that in a primary offering of
securities of the undersigned Registrant pursuant to this
Registration Statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to
Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on
behalf of the undersigned Registrant or used or referred to by the
undersigned Registrant;
(iii) The
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
Registrant or its securities provided by or on behalf of the
undersigned Registrant; and
(iv) Any
other communication that is an offer in the offering made by the
undersigned Registrant to the purchaser.
(b) The
undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant’s annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) The
undersigned Registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective;
and
(2) For
the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(e) To
file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of section 310
of the Trust Indenture Act (“Act”) in accordance
with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Bedminster, State of New Jersey, on October 13,
2016.
CORMEDIX
INC.
By:
/s/ Khoso
Baluch
Khoso
Baluch
Chief
Executive Officer
We, the undersigned
officers and directors of CorMedix Inc., do hereby constitute and
appoint Khoso Baluch and Antony Pfaffle, or either of them, our
true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith,
with the SEC, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite are necessary to be done in and about
the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all
that each of said attorney-in-fact and agents, or his or her
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the
requirements of the Securities Act, this Registration Statement on
Form S-3 has been signed by the following persons in the capacities
and on the dates indicated.
Signature
|
|
Capacity
|
|
Date
|
|
|
|
|
|
/s
Khoso Baluch
|
|
Director
and Chief Executive Officer (Principal Executive Officer and
Principal Financial Officer)
|
|
October 13,
2016
|
Khoso Baluch
|
|
|
|
|
|
|
|
|
|
/s/ Janet
Dillione
|
|
Director
|
|
|
Janet
Dillione
|
|
|
|
|
|
|
|
|
|
/s/ Michael
W. George
|
|
Director
|
|
|
Michael
W. George
|
|
|
|
|
|
|
|
|
|
/s/ Myron
Kaplan
|
|
Director
|
|
|
Myron
Kaplan
|
|
|
|
|
|
|
|
|
|
/s/ Taunia
Markvcka
|
|
Director
|
|
|
Taunia
Markvicka
|
|
|
|
|
|
|
|
|
|
/s/ Cora M.
Tellez
|
|
Director
|
|
|
Cora M.
Tellez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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