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Maxim March 2011 Report on Cormedix ($CRMD)

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CorMedix Inc. (AMEX:CRMD) is a pharmaceutical company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and kidney (cardiorenal) disease.

Cardiorenal disease includes a broad range of inter-related cardiovascular, kidney and metabolic problems which share the common trait of underlying oxidative stress and blood vessel malfunction (endothelial dysfunction).

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Maxim March 2011 Report on Cormedix ($CRMD)

  1. 1. Maxim Group LLC - 405 Lexington Avenue - New York, NY 10174 - www.maximgrp.com SEE PAGES 6 - 8 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS EQUITY RESEARCH COMPANY REPORT Biotechnology Closing Price (3/17/10): $1.84 12-Month Target Price: $5.00 52-Week Range: $0.40-$4.00 Market Cap (MM): $21 Shares O/S (MM): 11.4 Float (MM): 10.9 Shares Short (000): 6.1 Avg. Vol. (000) 18.2 Book Value/Share: $0.77 Dividend/Yield: $0.00/0.00% Risk Profile: Speculative Maxim Group FYE: December 2010A 2011E 1Q $0.0 $0.0 2Q $0.0 $0.0 3Q $0.0 $0.0 4Q $0.0 $0.0 FY $0.0 $0.0 Maxim Group Current Prior Current FYE: December EPS EPS P/E 2009A: GAAP ($9.48) NM 2010A: GAAP ($1.15) NM 2011E: GAAP ($0.58) ($0.70) NM 2012E: GAAP ($0.43) NM LT Earnings Growth NA Maxim Group Current Prior Current FYE: December 2010A 2010E 2011E 1Q ($6.40) ($0.13) 2Q ($0.10) ($0.15) 3Q ($0.12) ($0.17) 4Q ($0.16) ($0.09) ($0.14) FY ($1.15) ($6.72) ($0.58) Consensus-First Call FYE: December 2010A 2011E 1Q ($6.40) -- 2Q ($0.10) -- 3Q ($0.12) -- 4Q ($0.16) -- FY ($1.15) ($0.70) Yale Jen, Ph.D. (212) 895-3516 yjen@maximgrp.com Quarterly Revenue ($M) Quarterly EPS March 18, 2011 Quarterly GAAP EPS CorMedix Inc. Buy (CRMD – AMEX – $1.84) 4Q10 results; Waiting for Deferiprone’s interim results from the Phase II trial in in CIN and Neutrolin CE mark CRB approval; Increasing financial estimates; Reiterate Buy rating and $5 price target 4Q10 financial results. CRMD reported a 4Q10 net loss of $1.5MM or ($0.16) per share, compared to both our estimate and the Street consensus estimate of a $1.1MM loss or ($0.09) per share. CRMD ended 4Q10 with cash and cash equivalents of approximately $9.3MM, which we believe is sufficient for its operations into 1Q12. Interim results from the Deferiprone (CRMD001) Phase II trial in CIN prevention are expected in 1Q11. Management indicated that the release of Deferiprone’s interim results in the contrast- induced nephropathy (CIN) prevention Phase II study are slated for 1Q11, with complete results potentially available in 2H11. In our opinion, a positive outcome from the study would be a major catalyst for CRMD shareholder value. Neutrolin (CRMD001) development update. The company has started the process of filing for CE mark in Europe for Neutrolin as a prevention of catheter-related bloodstream infection (CRBI), with potential approval in 2H11. CRMD is also in active discussions with prospective partners for the commercialization of Neutrolin in Europe. If approved, the company could generate revenue from Europe starting in late 2011 or early 2012. The company has also submitted an investigational device exemption (IDE) application to the FDA for the commencement of a pivotal trial for Neutrolin in CRBI, possibly in 1H11. As a reminder, several earlier clinical studies demonstrated that Neutrolin without heparin exhibited antimicrobial activities vs. the current standard of care, and the addition of heparin boosted the anticoagulation activities of Neutrolin – the scenario should bode well for the success of the upcoming Neutrolin Phase III study for CRBI prevention, in our opinion. Reiterate Buy rating and 12-month target price of $5. With the company’s: 1 lead product Neutrolin expected to start a Phase III study in 1H11 in the U.S. and to potentially generate revenue from Europe in late 2011; 2) Deferiprone undergoing a Phase II study, with interim data expected in 1Q11; and 3) low visibility to the investment community, CRMD shares remain undervalued, in our opinion. As such, we reiterate our Buy recommendation for CRMD to risk-tolerant, long-term investors, with a 12-month target price of $5.00 based on a comparable analysis.
  2. 2. CorMedix Inc. (CRMD) Maxim Group LLC 2 DETAILS Interim results from the Deferiprone (CRMD0010) Phase II trial in CIN prevention are expected in 1Q11. Our discussion with management suggests that interim results from the Deferiprone Phase II study in contrast-induced nephropathy (CIN) prevention (mainly biomarker analysis with n=30) are expected in 1Q11 and complete results (n=60) will potentially be reported in 2H11. Given Deferiprone’s established iron-chelating capability and the logical rationale that excess labile iron is a major pathological cause of CIN, we believe the outcome from the upcoming Phase II biomarker study, if positive, could provide a substantial clinical proof-of-concept and increase this asset’s value. Should outcomes be positive, the company could start a pivotal study with a SPA designation in 2012. The company could also potentially consider commencing a proof-of-concept trial that evaluates Deferiprone in high-risk chronic kidney disease (CKD) patients if the Phase II outcome is positive. Neutrolin developments in the U.S. and European updates. The company recently filed for an investigational device exemption (IDE) application to FDA and a CE market application to EMEA for Neutrolin as a prevention of catheter-related bacteremia (CRB). According to this timeline, we believe the company might commence a pivotal Phase III trial in the U.S. in 1H11, with potential interim results expected in late 2011 or early 2012 and potential approval in 2013. Given that several earlier clinical studies exhibited antimicrobial activities vs. the current standard of care (heparin), and the addition of heparin boosted the anticoagulation activities of Neutrolin, we believe this could bode well for the success of the upcoming Neutrolin in CRB prevention Phase III study. Given that there is limited news regarding a potential FDA decision on Zuragen PMA, we believe the competitive landscape might not be as steep as anticipated in the U.S. In addition, the company could potentially receive CE mark approval in Europe in 2H11 and potentially launch the product in Europe soon afterward, in our opinion. Management is contemplating several commercialization models for the potential sale of Neutrolin in Europe and is in active discussions with prospective partners. As such, we believe the company could generate revenue from Neutrolin in Europe starting in late 2011 or 2012. Financials During 4Q10, CRMD’s net loss was $1.5MM, or ($0.16) per share, below our estimate of a $1.1MM loss or ($0.09) per share and the consensus of a $1.1MM loss or ($0.09) per share. By the end of December 2010, the company had cash and cash equivalents of $9.3MM. ($ MM) Maxim Estimate Actual Consensus Total revenue $0 $0 $0 Total op. profit ($1.1) ($2.2) ($1.1) R&D $0.9 $1.1 - SG&A $0.7 $1.1 - EPS (GAAP & dil) ($0.09) ($0.16) ($0.09) Net income ($1.1) ($1.5) ($1.1) Table 1: 4Q10 Estimates and Reported Results Revenues Although we do not model any revenue in 2011, it is possibly that the company could generate revenue from a successful partnership and launch of Neutrolin in Europe.
  3. 3. CorMedix Inc. (CRMD) Maxim Group LLC 3 Operating Expenses Research and development costs for 4Q10 were $1.1MM, higher than our $0.9MM estimate. Based on our discussions with management, we have adjusted our R&D expense estimate for 2011 to $5.2MM, from $6.6MM, and are providing a 2012 R&D estimate of $5.9MM, reflecting the adjusted clinical developments. SG&A expenses for 4Q10 were $1.1MM, higher than our estimate of $0.7MM. As a result, we have adjusted our SG&A expense estimates in 2011 to $3.2MM, from $2.8MM, and are providing a 2012 SG&A expense estimate of $3.4MM, respectively. Net Income and EPS Net loss for 4Q10 was $1.5MM, more than our $1.1MM net loss estimate and consensus’ $1.1MM estimate. Loss per diluted share for 4Q10 was ($0.16), worse than our net loss estimate of ($0.09) and consensus’ ($0.09) estimate. As a result, we have revised our 2011 net loss estimate to $7.6MM, from $9.4 MM, and are providing our 2012 net loss estimate of $7.5MM. Our revised 2011 loss per share estimates adjusts to ($0.58), versus our prior estimate of ($0.70), and we are providing our 2012 loss per share estimate of ($0.43).
  4. 4. CorMedix Inc. (CRMD) Maxim Group LLC 4 Expected milestones for 2011 and beyond Program Indication Event Timing Potentially receive CE mark approval in EU 2H11 Commence pivotal trial 1H11 Potential EU partnership 2011 Potential product launch in EU 2H11 Potential FDA decision on Zuragen PMA 2011 Potential release interim results of pivotal trial Late '11 / '12 Interim results from biomarker Phase II proof-of-concept study 1Q11 Complete results from biomarker Phase II proof-of-concept study 2H11 Potential initiate Phase III study with SPA designation 2012 Chronic Kidney Disease (CKD) Potentially commence of proof of concept trial in high risk CKD patients 2012 Neutrolin (CRMD003) Prevention of catheter related bactermia (CRB) Contrast Induced Nephropathy (CIN) Deferiprone (CRMD001) Source: Company reports and Maxim Group estimates
  5. 5. CorMedix Inc. (CRMD) Maxim Group LLC 5 CorMedix, Inc. Annual Income Statement (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) ($ 000s) 1Q10 2Q10 3Q10 4Q10 1Q11E 2Q11E 3Q11E 4Q11E Revenue Revenue - - - - - - - - - - - 1,000 23,231 Others (upfront, milestone, etc.) - - - - - - - - - - - - - Total revenue - - - - - - - - - - - 1,000 23,231 COGS 4,646 Research and development 4,889 3,097 561 761 1,076 5,494 969 1,163 1,372 1,701 5,204 5,933 7,001 General and administrative 1,167 647 618 642 1,106 3,013 752 797 829 854 3,232 3,393 17,883 Total Operating Expenses 6,055 3,744 1,178 1,403 2,182 8,507 1,721 1,960 2,201 2,555 8,436 9,326 29,530 Operating income (losses) (6,055) (3,744) (1,178) (1,403) (2,182) (8,507) (1,721) (1,960) (2,201) (2,555) (8,436) (8,326) (6,299) Interest income 2 0 6 10 399 415 200 200 200 200 800 800 800 Interest expense, including amortization of deferred financing (2,068) (3,094) - (3,094) - - - - - - - Total other income (expense) (2,066) (3,094) 6 10 399 (2,679) 200 200 200 200 800 800 800 Net income (loss) before tax (8,121) (6,837) (1,173) (1,392) (1,784) (11,186) (1,521) (1,760) (2,001) (2,355) (7,636) (7,526) (5,499) Tax 281 281 - Net income (loss) (8,121) (6,837) (1,173) (1,392) (1,503) (10,905) (1,521) (1,760) (2,001) (2,355) (7,636) (7,526) (5,499) Basic and diluted net income (loss) per share (9.48) (6.40) (0.10) (0.12) (0.16) (1.15) (0.13) (0.15) (0.17) (0.14) (0.58) (0.43) (0.28) Shares outstanding—basic & diluted 857 1,068 11,408 11,408 11,410 9,473 11,610 11,810 12,010 17,410 13,210 17,610 19,677 Margin Analysis (% of Total operating expenses) COGS 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 20% R&D 81% 83% 48% 54% 49% 65% 56% 59% 62% 67% 62% 64% 24% G&A 19% 17% 52% 46% 51% 35% 44% 41% 38% 33% 38% 36% 61% Operating Income (loss) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Financial Indicator Growth Analysis (YoY%) Revenue NA NA NA NA NA NA NA NA NA NA NA NA 2223% Total revenue NA NA NA NA NA NA NA NA NA NA NA NA 2223% COGS NA NA NA NA NA NA NA NA NA NA NA NA NA Research and development 59% 963% -44% 62% -72% 12% -69% 107% 80% 58% -5% 14% 18% General and administrative -33% 89% -43% 87% 1346% 158% 16% 29% 29% -23% 7% 5% 427% Total Operating Expenses 26% 492% -43% 72% -45% 40% -54% 66% 57% 17% -1% 11% 217% Interest income -92% -95% 170% 49305% 1532685% 19365% 714186% 3419% 1828% -50% 93% 0% 0% Interest expense, including amortization of deferred financing co -51% 450% -100% -100% -100% 50% -100% NA NA NA -100% -5% 7% Net income (loss) -10% 472% -67% 13% -67% 34% -78% 50% 44% 57% -30% -1% -27% Basic and diluted net income (loss) per share -13% 369% -93% -92% -97% -88% -98% 45% 36% -13% -50% -26% -35% 2013E '09-'13E CAGR 2009 2010 2011E 2012E SOURCE: MAXIM GROUP LLC RESEARCH AND SEC FILING
  6. 6. CorMedix Inc. (CRMD) Maxim Group LLC 6 DISCLOSURES Source: Investars As of: 3/18/2011 % of Coverage % of Ratings Universe that Firm received Expected Performance* with Rating Banking fees Buy Expected total return of 15% or more over next 12 months 65.1% 23.2% Hold Expected total return of plus or minus 14% over next 12 months 30.2% 0.0% Sell Expected total negative return of at least 15% over next 12 months 4.7% 0.0% * Relative to Nasdaq Composite. An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change. Maxim Group LLC Stock Rating System Maxim makes a market in CorMedix, Inc. Maxim Group has received compensation for investment banking services from CorMedix, Inc. in the past 12 months. Maxim Group expects to receive or intends to seek compensation for investment banking services from CorMedix, Inc. in the next 3 months. Maxim Group has managed or co-managed a public offering of CorMedix, Inc. in the past 12 months. I, Yale Jen, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities. Valuation Methods: One or more of the following valuation methods are used by Maxim Group analysts in making a ratings or price projection: Analysis of companies’ P/E ratio, price/book ratio, earnings expectations or sales growth as they relate within an industry group or to the broader market, enterprise value/sales, individual sector analysis, sum of the parts analysis and discounted cash flow. Price Target Risks: Investment risks associated with the achievement of the price target include, but are not limited to, the company’s failure to achieve our earnings and revenue estimates, unforeseen
  7. 7. CorMedix Inc. (CRMD) Maxim Group LLC 7 macroeconomic and/or industry events that adversely impact demand for the company’s products and services, product obsolescence, the company’s ability to recruit and retain competent personnel, changes in investor sentiment regarding the specific company or industry, changing competitive pressures and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of the company’s shares, refer to the most recent form 10-Q or 10-K that the company has filed with the SEC. Investment Risks: Aside from general market and other economic risks, risks particular to our CorMedix Inc. rating include: 1) the success of pivotal clinical trials for both Neutrolin and Deferiprone would have major impact for CRMD shareholders; 2) sales potential for the two products could be different significantly from expected; 3) lack of cash could impede corporate development; and 4) thinly traded stock limits shareholder options. RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. Speculative – Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High – Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium – Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low – Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry. DISCLAIMERS
  8. 8. CorMedix Inc. (CRMD) Maxim Group LLC 8 Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Maxim Group, LLC (“Maxim”). Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and (2) are subject to investment risks, including the possible loss of principal invested. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances; you may be required to pay more money to support these losses. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

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