SUPPLEMENT TO THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON JUNE 12, 2017 AND ACCOMPANYING PROXY
STATEMENT
Explanatory Note
On
April 24, 2017, a proxy statement (the “Proxy
Statement”) of CorMedix Inc., a Delaware corporation, was
made available to our stockholders in connection with the
solicitation of proxies on behalf of our Board of Directors for use
at the 2017 annual meeting of stockholders to be held at 1545 U.S.
Highway 206, First Floor Conference Room, Bedminster, New Jersey,
on June 12, 2017 at 11:00 a.m. Eastern time, or at such other
time and place to which the annual meeting may be adjourned. A
supplement to the Proxy Statement was made available to our
stockholders on May 8, 2017.
This
supplement dated May 25, 2017 (the “Supplement”)
supplements and amends the Proxy Statement, as supplemented, and is
first being made available to stockholders on or about May 25,
2017. Except as specifically supplemented or amended by the
information contained in this Supplement, all information set forth
in the Proxy Statement, as supplemented, continues to apply and
should be considered in voting your shares.
Response to Stockholder Concerns
We
are aware of stockholders expressing concerns publicly on message
boards regarding our Board and management and related topics. On
May 25, 2017, we are meeting with several of those stockholders to
address their concerns. We want to provide our response to those
concerns to all of our stockholders.
Ex-U.S. Commercialization of Neutrolin
®
Stockholders
have criticized us for the poor results to date of the launch of
Neutrolin in the European Union, mainly Germany, which began
December 2013. We received the CE Mark for Neutrolin in the E.U. in
July 2013. We knew that the European market was a competitive one
due to a variety of available lock solutions and pricing pressure,
among other factors. We also had limited resources with which to
prepare the market and support the sales efforts in the E.U., as
well as maintain our U.S. operations.
None
of the current directors were on the board at the time of the
launch.
Management of LOCK-IT 100 Clinical Trial
Stockholders
have criticized us for issues related to the LOCK-IT 100 trial,
specifically the timing of our reporting on that trial. The LOCK-IT
100 hemodialysis trial started in December 2015. As expected, we
had very little data available during the first two quarters of
2016. In early August 2016, based on data we had received, we
announced that we had revised the anticipated completion of the
enrollment date to the fourth quarter 2016/first quarter 2017. We
also undertook a thorough examination of all aspects of the trial,
which started before our current CEO arrived. This examination was
completed in October 2016. During this time, our head of clinical
operations resigned. In September 2016, we announced that we had
revised the anticipated enrollment completion date to the second
quarter of 2017.
In
the fourth quarter of 2016, we made the first of several changes in
trial enrollment and event capture for LOCK-IT 100. We also began
discussions with the FDA on certain proposed changes to the
trial’s protocol. In November 2016, during our third quarter
2016 earnings call, we announced the changes that were being made
to the trial and announced that we had revised anticipated
enrollment completion in the fourth quarter 2017 for 632
patients.
In
the first quarter of 2017, we continued communications with the FDA
for the proposed LOCK-IT 100 protocol changes. In February 2107, we
hired our Chief Medical Officer. At this time, enrollment seemed to
have traction and we shifted our focus toward better understanding
event capture. As part of this, in the second quarter of 2017, we
discovered an issue with the apparent overall rate of CRBSI events,
which we announced on April 20, 2017.
Ownership of Stock and Sales of Shares by Insiders
Stockholders
have criticized us for a lack of equity ownership by our board and
management, as well as sales of stock by our Chief Scientific
Officer, Antony Pfaffle. Of our current board and executive
management, only Dr. Pfaffle has sold stock. The last sale he
effected before establishing a 10b5-1 sales plan, took place on
June 20, 2016, which was only six months after the LOCK-IT 100
trial had begun. All sales by any director or officer that are made
outside of a 10b5-1 plan, as well as the establishment of any
10b5-1 plan, must be and were made in compliance with our Insider
Trading Policy and federal securities law. For the record, three
former directors sold equity after the Evercore process was
announced. There were weekly meetings with the board and legal
counsel to review disclosure requirements potentially applicable to
the Evercore process.
The
board of directors fees are predominately paid in equity and
therefore their incentive is aligned with the shareholders. Our
management team has an equity compensation program that is directly
aligned to the stock price. This program also has a bonus component
that is aligned with the delivery of certain milestones to the
company which in turn is aligned to creating shareholder
value.
In
July 2014, we put in place a directors deferred compensation plan,
which allows directors to defer their cash compensation and instead
receive shares of stock upon their departure from the board.
Directors Cora Tellez, Mike George and Janet Dillione participate
in this plan.
In
October 2014, the CorMedix board has set in place a policy whereby
all board members are to own at least $100,000 of our stock within
five years.
Board Composition and Qualification
Stockholders
have criticized the experience and effectiveness of our board, and
have cited three directors in particular as lacking sufficient
expertise. The board is engaged and meets at least quarterly and
has met often in between those regularly scheduled meetings. Those
three directors are:
●
Cora Tellez:
Ms. Tellez brings corporate governance
expertise. Including CorMedix, she has served on the boards of
seven publicly traded companies, one venture-backed company, and
one private equity-backed company (four banks, one commercial
development company, one high tech medical records company, one
specialty pharma company, one healthcare management company that
reviews medical claims for errors, and
CorMedix).
●
Dr. Taunia Markvicka:
Dr. Markvicka brings 23 years of
experience in the pharmaceutical industry and has a strong U.S.
commercial and clinical background (four years experience in
clinical, regulatory, project management). She also has extensive
experience in managing a product strategy from development to
commercialization, including market analysis, pre-launch planning,
forecasts, budgets and launches with large companies such as
Sandoz, Watson, The Medicines Company, Biovail, Reliant, and
Pacira.
●
Mike George
:
Mr. George brings more than 25 years of sales and
marketing experience, including senior management positions, with
three large pharmaceutical companies, DuPont Merck Pharmaceutical
Company, Bristol Myers Pharmaceutical Company and Sandoz
Pharmaceuticals, Inc. Mike has assisted in bringing to us the
resources required to oversee the areas of manufacturing, CMC and
cost of goods sold (COGS). Mike has served previously on two public
boards and chaired a number of committees. He has also been on the
board of a company (private equity owned) and CEO of a diagnostic
company and a CRO company
.
While
each member of our board brings different perspectives and
experiences, the board is aware that adding a director with big
pharma clinical experience is important and began a search to fill
those gaps in February 2017.
Search for CEO
Stockholders
have criticized the search for the CEO to replace Randy Milby,
which search ended with the appointment of Khoso Baluch in October
2016. The search process began in July 2015. We were unable to
reach agreement on terms of employment with one candidate due to a
variety of factors, including a demand for protection against
dilution.
We
note that we have less than 10 employees.
Capital Market Activity and Recent Financing that Closed on May 3,
2017
Stockholders
have criticized the recent financing that was completed on May 3,
2017. There were challenges to any financing we might have
identified, namely:
●
The
board wanted to have a new CEO and CFO in place before doing any
financing.
●
We
are in the middle of our first Phase III clinical trial (LOCK-IT
100) that is expected to cost up to $30 million (a good portion
that has already been spent), are planning a second Phase III trial
(LOCK-IT 200) of similar cost, and must complete our product
development (CMC) program for NDA submission, all in as short a
timeframe as possible.
●
Our
cash burn was $6.5 million in the fourth quarter of 2016 and $6.8
million in the first quarter of 2017. Our cash burn is increasing
each quarter.
●
Based
on first quarter 2017 spending and expectations for increasing burn
for the balance of the year, cash at March 31, 2017 would not last
six months.
●
We
announced fourth quarter and full year 2016 results on March 16,
2017. We reported cash at $20.2 million and reiterated our comment
made in November 2016 that cash was insufficient to fund the
remainder of the LOCK-IT 100 Phase III trial, nor would it take us
through yearend 2017. CorMedix stock declined from $2.06 to $1.70
(-17.5%). We concluded that reporting our first quarter cash amount
would invite a similar or worse response if we did not complete a
significant raise before the May 10, 2017 reporting
date.
●
We
concluded that an update regarding LOCK-IT 100 was warranted due to
an apparent overall lower rate of CRBSI events. As a result, we put
the transaction on hold.
During
the period leading up to the announcement of the financing
transaction on April 27, 2017, we had meetings and/or discussions
with a broad range of approximately 30 institutions that agreed to
restrict themselves from trading. Most potential investors we
approached leading up to the financing transaction declined to
indicate terms. Concerns expressed by investors included our high
burn rate due to the expensive LOCK-IT 100 trial, the fact that we
had no Phase II data to support potential positive LOCK-IT 100
results, and we likely would need additional financing around the
time that interim data is expected to be released. These posed
significant challenges to our search for financing.
We
believe we were justified in completing the financing transaction
because large cash expenditures are planned through the balance of
2017 to pay for the ramp up of the LOCK-IT 100 trial and sufficient
resources are needed to reach the interim efficacy analysis, which
could occur as early as the fourth quarter of 2017. In addition, no
other cash source was identified in sufficient size to meet our
funding requirements. Further, an alternative strategy of financing
via a succession of small transactions often results in continued
downward pressure on the stock.
Voting; Revocability of Proxies
This
Supplement does not change the proposals to be acted upon at the
annual meeting, which are described in the Proxy Statement, as
supplemented. As a stockholder, your vote is very important and the
Board encourages you to exercise your right to vote whether or not
you plan to attend the annual meeting and regardless of the number
of shares of the Company’s common stock that you
own.
If
you have already submitted your proxy, you do not need to take any
action unless you wish to change your vote. If you have already
submitted your proxy card and wish to change your vote based on any
of the information contained in this Supplement, you may change
your vote or revoke your proxy at any time before it is voted at
the annual meeting.
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be Held on June 12,
2017
The proxy statement, the supplement dated May 15,
2017, this supplement and our Annual Report on Form 10-K are
available at the following secure website address:
https://www.IPROXYDIRECT.com/CRMD
.