What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-17 compared with 2020-11-09 · 157 added, 223 removed, 53 unchanged (88% of the section changed)

2 unchanged sentences

Condensed Consolidated Financial Statements”.

References in this report to the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc.

References in this report to "Rockwell," the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc.

and its subsidiaries.

17 unchanged sentences

Overview and Recent Developments

Rockwell Medical, Inc.

and subsidiaries (collectively, “we”, “our”, “us”, or the “Company”), is a biopharmaceutical company dedicated to improving outcomes for patients with iron deficiency and iron-deficiency anemia, with an initial focus on patients with end-stage kidney disease (ESKD) and on dialysis.

The Company is focused on developing its proprietary ferric pyrophosphate citrate (“FPC”) therapeutic platform.

The first product developed from this platform is Triferic, the first-FDA approved product for the replacement of iron and maintenance of hemoglobin in adult hemodialysis patients.

We initiated commercial sales of Triferic Dialysate during the second quarter of 2019 and received approval by the U.S.

Food and Drug Administration ("FDA") for the intravenous formulation of Triferic, Triferic AVNU, on March 27, 2020.

We plan to leverage our experience with Triferic to develop our FPC platform for iron deficiency and iron deficiency anemia in other disease states.

Our lead indication is developing FPC for the treatment of iron deficiency anemia in patients undergoing home infusion therapy.

We are also a manufacturer of hemodialysis concentrates for dialysis providers and distributors in the United States and abroad.

We supply the domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim.

Our mission is to transform anemia management in a wide variety of disease states across the globe, while improving patients’ lives.

Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of iron deficiency.

Substantially all of our sales have been concentrate products and ancillary items, though we initiated commercial sales of our proprietary therapeutic, Triferic Dialysate, during the second quarter of 2019.

Triferic is the Company’s first proprietary iron therapy from the FPC therapeutic platform that replaces iron and maintains hemoglobin in dialysis patients without increasing iron stores.

Triferic Dialysate was the first FDA approved product indicated to replace iron and maintain hemoglobin concentration in adult HDD-CKD hemodialysis patients.

On March 27, 2020, the FDA approved Triferic AVNU, a novel intravenous formulation of Triferic that would be used for the same indication.

Descriptions of Triferic Dialysate and Triferic AVNU are set forth below.

Triferic Dialysate

Triferic Dialysate, our dialysate formulation of Triferic, received FDA approval in 2015 and remains the first FDA-approved therapy indicated to replace iron and maintain hemoglobin in adult hemodialysis patients.

Triferic Dialysate received a reimbursement J-code on January 1, 2016 from the Centers for Medicare & Medicaid Services (the "CMS"), providing that Triferic Dialysate would be reimbursed for administration to dialysis patients within the existing fixed-price “bundle” of payments that CMS provides to dialysis providers.

On April 26, 2019, pursuant to a request we submitted earlier in 2019, we were notified of a preliminary recommendation by CMS to grant our powder packet formulation of Triferic Dialysate a separate J-Code, which became effective on July 1, 2019.

As a result, the Company changed its commercialization strategy to plan for the commercial launch of Triferic Dialysate with reimbursement within the bundle of payments to dialysis providers, while continuing to develop Triferic AVNU (discussed below).

We commercially launched Triferic Dialysate in May 2019.

In June 2018, the Company determined, based on feedback provided from CMMI, that Triferic Dialysate was unlikely to obtain add-on reimbursement in the near term.

We commercially launched Triferic Dialysate in May 2019.

Triferic AVNU (formerly I.V.

We have also developed Triferic AVNU, an intravenous injection formulation of Triferic, for use by hemodialysis clinics in the United States as well as international markets.

On March 27, 2020, we received FDA approval for Triferic AVNU, with the same indications as the dialysate formulation (indicated to replace iron and maintain hemoglobin concentration in adult HDD-CKD hemodialysis patients) and we began recruiting clinics for participation in a sample evaluation program for Triferic AVNU during the third quarter of 2020.

Due to a minor scheduling delay in the production of packaging for salable product, commercialization will likely be postponed until the first quarter of 2021.

Like Triferic Dialysate, Triferic AVNU will be reimbursed within the existing fixed-price bundle of payments that CMS provides to dialysis providers.

While we intend to market and sell Triferic Dialysate and Triferic AVNU directly in the United States, our international strategy is to partner with and license these products to established companies in other regions of the world to assist in the further development (primarily clinical trials and regulatory activities), if necessary, and commercialize in those regions.

We continue to pursue international licensing opportunities in a number of countries and specific regions.

Dialysis Concentrates

We manufacture, sell, deliver and distribute hemodialysis concentrates, along with a line of ancillary dialysis products abroad.

We sell directly to DaVita, Inc.

and use Baxter as our exclusive marketer and distributor in the United States and in select foreign markets.

Dialysate concentrates accounted for approximately 96% of our revenues for the nine months September 30, 2020, with ancillary products and Triferic accounting for most of the remainder.

We receive a pre-defined gross profit margin on our concentrate products sold pursuant to the Baxter Agreement, subject to an annual true-up of costs.

Clinical Development

Although Triferic is approved for commercial sale in the United States, it is not approved for sale in other major markets globally.

We have received regulatory guidance from the European Medicines Agency ("EMA") regarding the clinical studies that are needed to file for approval of Triferic AVNU in Europe.

At the present time, we do not intend to commence these clinical studies without a development partner in Europe.

In conjunction with our licensee in China, Wanbang Biopharmaceutical, Co., Ltd.

("Wanbang"), we completed two clinical pharmacology studies in China during 2019.

We expect Wanbang to initiate an additional, pivotal, clinical study that is required to support a submission for regulatory approval in China.

In addition, pursuant to the licensing agreement with Sun Pharmaceutical Industries Ltd.

("Sun Pharma"), our licensee in India, meetings between Sun Pharma and the regulatory authorities in India have been initiated.

Sun Pharma continues to follow

up with the Indian regulatory authorities to determine the requirements for approval of Triferic in India.

Lastly, pursuant to the licensing agreement with Jeil Pharmaceutical Co., Ltd ("Jeil Pharma"), our licensee in South Korea, meetings between Jeil Pharma and the regulatory authorities in South Korea will be initiated.

Jeil Pharma has informed us they do not believe they would need to perform a clinical trial in advance of approval.

We anticipate sales in South Korea to begin in early 2022.

See "Item 1A — Risk Factors" below for a discussion of the potential impact of COVID-19 our overall business and such clinical studies.

As a post-approval requirement under the Pediatric Research Equity Act, we are required to conduct a further clinical study of the effectiveness of Triferic in a pediatric patient population.

We have reached agreement with the FDA and EMA on the design of this study.

We have engaged a contract research organization and are in process of selecting sites in the United States and selected EU countries.

We expect the data from this study could be used as part of the overall clinical data package to support approval by the EMA, if and when we are able to complete the other clinical trials needed to support making such a filing.

See "Item 1A — Risk Factors" below for a discussion of the potential impact of COVID-19 on such clinical studies.

Growth Opportunities

In the third Quarter of 2020 we initiated our plan to leverage our development and regulatory experience with our FPC platform for use in other indications.

We plan to meet with the FDA for a Type C meeting to discuss our plan for developing FPC for the treatment of iron deficiency anemia in patients undergoing home infusion therapy.

Over 3.2 million patients are treated annually using home infusion therapy.

The incidence of iron deficiency is estimated to be as high as 60% in this patient population.

Iron deficiency anemia is largely undertreated in part due to limitations of the currently available iron replacement drugs.

Due to concerns about hypersensitivity reactions, IV iron is infrequently prescribed as a home infusion therapy.

This means that patients need to visit a physician office for an infusion which is costly and inconvenient.

As a result, physicians are often hesitant to proactively treat iron deficiency and the majority of patients are left to deal with the disease on their own.

Those who become severely anemic are reactively given blood transfusions, which comes with significant risk.

We also plan to meet with FDA in 2021 to discuss our development plans for FPC to improve cardiac function in hospitalized acute congestive heart failure patients.

More than a million patients are hospitalized each year with acute decompensated heart failure.

Iron deficiency is a common co-morbidity in 50% to 70% of these patients.

While there is increasing evidence regarding the positive impact of IV iron replacement therapy in the chronic ambulatory heart failure patient, the evidence in the acute population is scarce.

One limitation of currently available parenteral iron products is that the iron must be processed and stored in the liver before it is released and becomes available as a fuel for cardiac muscle energetics.

We believe FPC may be a significant advantage for the acute heart failure patient due to the fact that it provides 100% immediately bioavailable iron, which may mean it is faster acting and could make a meaningful impact within the context of the hospital stay.

Results of Operations for the three months ended September 30, 2020 and 2019

The following table summarizes our operating results for the periods presented below (dollars in thousands):

For the Three Months Ended September 30,

2020 % of Revenue 2019 % of Revenue % Change

Net Sales $ 15,280 $ 15,407 (0.8) %

Cost of Sales 14,934 97.7 % 15,424 100.1 % (3.2)

Gross Profit (Loss) 346 2.3 (17) (0.1) (2,135.3)

Selling and Marketing 1,669 10.9 1,827 11.9 (8.6)

General and Administrative 3,622 23.7 4,623 30.0 (21.7)

Research and Product Development 1,745 11.4 1,475 9.6 18.3

Operating Loss $ (6,690) (43.8) % $ (7,942) (51.5) % (15.8) %

During the three months ended September 30, 2020, our net sales were $15.3 million compared to net sales of $15.4 million during the three months ended September 30, 2019.

The decrease of $0.1 million was primarily due to a decrease in international sales of dialysis concentrates products.

Triferic Dialysate net sales for the three months ended September 30, 2020 included approximately $0.2 million of Triferic Dialysate product sales to United States customers.

Cost of sales during the three months ended September 30, 2020 was $14.9 million, resulting in gross profit of $0.4 million during the three months ended September 30, 2020, compared to cost of sales of a $15.4 million and a gross loss of $17,000 during the three months ended September 30, 2019.

Gross profit increased by $0.4 million in the third quarter of 2020 compared to the third quarter of 2019, due primarily to a large inventory reserved of $1.1 million recorded in the third quarter of 2019 compared to $0.3 million inventory reserve recorded in the third quarter of 2020;

offset by an increase in labor and material costs $0.3 million to address protocols put in place from the ongoing COVID-19 pandemic.

Gross profits are primarily related to our concentrates business at this time.

The Company anticipates that potential future sales of Triferic will impact the mix of future gross profits.

Selling and Marketing Expense

Selling and marketing expenses were $1.7 million during the three months ended September 30, 2020, compared with $1.8 million during the three months ended September 30, 2019.

The decrease of $0.1 million is primarily due to a decrease in marketing costs related to Triferic Dialysate offset by an increase in costs associated with the launch of Triferic AVNU, our new FDA-approved intravenous formula.

General and Administrative Expense

General and administrative expenses were $3.6 million during the three months ended September 30, 2020, compared with $4.6 million during the three months ended September 30, 2019.

The decrease of $1.0 million is due primarily to a decrease in stock compensation of $0.6 million, relating to a decrease in incentive compensation from forfeited equity awards associated with the departure of our former Chief Financial in July 2020;

a decrease in consulting expense of $0.3 million, relating to strategic development;

a decrease in accounting costs of $0.2 million , relating to a decrease in internal audit fees;

and a decrease in legal expense of $0.1 million, relating to previous litigation that has since been resolved;

partially offset by an increase of $0.3 million for increased training cost and severance pay related to our former President and Chief Executive Officer.

Research and Product Development Expense

Research and product development expenses were $1.7 million for the three months ended September 30, 2020, compared with $1.5 million during the three months ended September 30, 2019.

The increase of $0.2 million was due primarily

to increase in costs relating to our scientific programs.

The Company is continuing to invest in its medical and scientific programs to support the global launch of Triferic and the advancement of our FPC technology platform.

Other Income (Expense)

Other income for the three months ended September 30, 2020 was $5,861, consisting of interest income of $1,767 and $4,094 of realized gains on investments.

Other income for the three months ended September 30, 2019 was $103,386, consisting of $97,100 of interest income and $6,268 of realized gains on investments.

Other expense for the three months ended September 30, 2020 was $0.7 million of interest expense related to our debt facility (see Note 15 for more information on our debt facility).

Other expense for the three months ended September 30, 2019 was $16,365 of interest expense.

Results of Operations for the nine months ended September 30, 2020 and 2019

Rockwell is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, Ferric Pyrophosphate Citrate ("FPC"), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives.

We are also one of the two major suppliers of life-saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform.

We are marketing both products to kidney dialysis centers for their patients receiving dialysis.

In 2021, we intend to advance our FPC platform strategy by starting a Phase 2 trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous ("IV") medications in the home infusion setting.

The trend toward providing medical care, including the delivery of medicines, at home make the home infusion market a rapidly growing area of healthcare.

We believe that the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from diseases that are associated with iron deficiency and anemia.

In our R&D pipeline, we are also investigating FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase 2 trial in these patients in 2022.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability.

We believe that this reputation, which is based on over 25 years of service to the kidney dialysis centers, combined with about $60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, gives us a solid foundation on which to grow.

At Rockwell Medical, we are dedicated to replacing the currently inadequate standard of care for treatment of iron deficiency in acute and chronic disease by leveraging our proprietary FPC platform technology.

We believe that our proprietary drug platform, FPC, is a next-generation parenteral iron therapeutic.

We believe our FPC platform has several advantages over other parenteral iron therapies.

Importantly, it provides iron that is immediately available for critical body processes once it is administered.

It has been demonstrated to be safe and well-tolerated, with a safety profile similar to placebo.

Iron deficiency can develop into a serious medical condition that is often overlooked and undertreated in several illnesses because it is hard to treat.

It is a common comorbidity in many disease states, such as end-stage kidney disease, chronic kidney disease, acute heart failure, cancer and multiple chronic gastrointestinal conditions.

Iron deficiency impacts patients’ health in many ways, including anemia, organ dysfunction, slower recovery, diminished energy and reduced quality of life.

Strategy Evolution and Overview

Rockwell Medical has evolved its strategy over the past year to develop into a more medically-, scientifically- and data-driven company.

We believe future clinical, regulatory and commercial success require the right people with the right experience to navigate us to the right data.

There has been an evolution of both our management and board, providing us with greater relevant experience.

In particular, we have added board members and employees with significant medical and commercial experience in iron deficiency anemia and the dialysis sector, drug development and commercialization, small-cap public company finance and management and clinical nurse educator patient support.

We believe these changes support an improved execution of our strategy to generate data that will support future commercial growth, fair reimbursement and regulatory approvals.

Our strategy is to accelerate Rockwell’s growth by creating and developing pharmaceutical products based on our FPC technology for disease states where patients can benefit the most from an effective treatment for iron deficiency, while concurrently refining our dialysis business to drive incremental growth and efficiencies.

We plan to leverage and build on the foundation provided by our current dialysis business serving kidney dialysis centers by developing a pipeline of additional potential drug therapies in multiple disease states.

We have preliminarily identified three disease states where we believe FPC may have the biggest impact.

Dialysis Business:

We are the second largest supplier, and one of the two major suppliers of hemodialysis concentrates in the United States.

We manufacture, sell and deliver hemodialysis concentrates, which are used to maintain human life by removing toxins and balancing electrolytes in the dialysis patient’s bloodstream.

We have core capabilities in manufacturing hemodialysis concentrates in three facilities, totaling 159,000 square feet, located in Michigan, Texas and South Carolina.

We also have core capabilities in the logistics of delivering these products to dialysis clinics throughout most of the United States.

Our first two branded products from our FPC platform, Triferic® (dialysate) and Triferic AVNU® (IV), are used to maintain hemoglobin in patients undergoing hemodialysis.

We are building on our reputation and industry presence by commercializing then to medium and small dialysis organizations.

We began commercializing Triferic and Triferic AVNU in the United States in the second half of 2019 and in early 2021, respectively.

In April 2021, we received marketing approval for Triferic AVNU from Health Canada for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease, which is the first international regulatory approval for our intravenous therapy.

We expect Triferic AVNU to become commercially available in Canada during 2022.

Our strategy for increasing Triferic adoption is to continue to generate data in clinics showing the benefits of Triferic in real world protocols.

In addition, we expect to study Triferic use with the innovations that we believe have the potential to change future medical practices (e.g.

introduction and adoption of HIF-PHIs).

We believe that positive data from these studies would better position Triferic for long-term growth.

We are developing strategic alliance partners for development, regulatory approval and commercialization of Triferic outside of the United States.

Home Infusion Program:

We are initiating a clinical trial program of FPC for the treatment of iron deficiency anemia in the home-infusion setting.

Many patient groups requiring home infusion therapies suffer from chronic diseases that are associated with a high incidence of iron deficiency and anemia.

Home infusion represents a large and rapidly-growing segment of healthcare where we believe FPC may have distinct advantages over currently available iron replacement therapy options.

Pipeline Development:

We are investigating the use of our FPC platform for the treatment of hospitalized patients with acute heart failure.

We believe that FPC may deliver rapidly bioavailable iron to the heart and improve cardiac energetics.

This effect could help patients recover faster, resulting in shorter hospital stays and fewer 30-day re-admissions, which would be a meaningful reduction healthcare costs and human suffering.

Our Growth Strategy

We plan to accelerate our growth by combining the solid foundation, strength and reputation of our dialysis business with the high-growth potential from therapeutics derived (or generated) from our FPC platform in multiple disease states where patients can benefit the most from an effective treatment for iron deficiency.

In parallel with continually seeking to drive incremental growth and efficiencies in our dialysis business unit, our strategy is to accelerate the growth of our business in large, higher-margin markets by creating and developing pharmaceutical products based on our proprietary FPC technology that address iron deficiency in patients who are currently under-treated.

Dialysis Business

We are one of the two major suppliers of hemodialysis concentrates in the United States.

Over the past 25 years we have developed a core expertise in manufacturing and delivering hemodialysis concentrates.

Because these concentrates are used to maintain human life by removing toxins and balancing electrolytes in the dialysis patient’s bloodstream, we manufacture them under cGMP regulations as described below.

Our concentrates are manufactured in three facilities, totaling 159,000 square feet, located in Michigan, Texas and South Carolina, from which we deliver these products to dialysis clinics throughout most of the United States.

We utilize our own delivery fleet as well as third parties.

We employ approximately 300 people in the concentrates unit of our dialysis business.

The “Rockwell Medical” name has earned a reputation for dependability, quality and service within our customer base.

This reputation was further strengthened during the recent challenges presented, not only by the COVID-19 pandemic, but also by the multitude of recent natural disasters where our team has been challenged by hurricanes, flooding and freezing, while still meeting production demands.

Our dialysis business in concentrates and our growth opportunities with FPC technology are synergistic.

We are leveraging our leadership position in the dialysis sector to commercialize our first two FPC-based products, Triferic and Triferic AVNU, which are indicated for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease.

We commercialize the Triferic products ourselves in the United States, and are partnering with established local pharmaceutical companies for the regulatory approval and commercialization outside of the United States.

Although we have an excellent reputation for dependability and service within the dialysis sector, with concentrates and Triferic, our growth opportunities for both in the United States dialysis market are challenged by the consolidated ownership of dialysis clinics, a capitated reimbursement model and the demographics of the patient population.

The two largest dialysis organizations treat approximately 73% of the patients in the United States.

One manufactures its own concentrates and IV iron and we already supply concentrates to the other.

Through our partnership with Baxter International, we currently supply concentrates to a significant percentage of the small and medium sized dialysis organizations.

In a sector, such as kidney dialysis, with capitated reimbursement for the dialysis procedure and all included inputs, new product success depends on compelling data demonstrating improved patient outcomes and/or pharmacoeconomics versus the current standard of care in practice in the clinics.

Once Medicare determined that Triferic and Triferic AVNU would be reimbursed under the fixed bundled rate, market adoption became more dependent on the generation of these data, which were not required for the drug's approval from the FDA.

Notwithstanding the growth limitations mentioned above, we have made progress and continue to be confident that Triferic has the potential to be the treatment of choice for the maintenance of hemoglobin in dialysis patients.

Toward this end, we have increased our efforts in generating real world data in clinics with current protocols, which we believe will help with the adoption of Triferic and Triferic AVNU as these results are developed and disseminated over time.

In addition, we believe the hemodialysis industry may experience a great deal of change over the next several years.

We plan to take the steps necessary to generate the data necessary to potentially allow Triferic and Triferic AVNU to benefit from these new innovations, such as the potential approval of a class of drugs, known as hypoxia-inducible factor prolyl hydroxylase inhibitors ("HIF-PHIs"), as well as the new, solid-state dialysis equipment in development.

We are planning to study Triferic in combination with these potential new innovations as they become available.

A key element of our dialysis business strategy is to also improve the strength of our concentrates business by creating efficiencies and enhancing our manufacturing and transportation operations.

We have launched projects to identify ways to improve the overall profitability of these core operations.

Specifically, we are reviewing our entire supply chain to identify opportunities for improvement, prioritizing initiatives that will have the largest impact on long-term efficiency, profitability and growth.

Home Infusion

Our growth strategy is to go beyond our foundational business in dialysis by leveraging the efficacy and safety data from Triferic.

We are planning to develop an FPC-based therapeutic for iron deficiency to be given in the home infusion setting.

The number of patients served by home infusion therapy has grown from approximately 800,000 in 2010 to over 3,000,000 in 2019.

The home infusion setting is expected to continue to expand, which has been further supported with the COVID-19 environment.

Many patient groups requiring home infusion therapies suffer from diseases that are associated with an incidence of iron deficiency and anemia.

For example, it is estimated that 40% to 55% of all home parenteral nutrition patients are iron deficient.

We believe, based on our data with hemodialysis patients, FPC as a home infusion therapy for iron deficiency anemia may have distinct advantages over currently available iron replacement therapy options.

Based on feedback received in March 2021 from the FDA, we plan on initiating a Phase 2 clinical study in home infusion patients with iron deficient anemia during the second half of 2021 to confirm the dose and duration of FPC treatment.

We expect data from the trial in the second half of 2022.

The company is planning to review this clinical plan in a meeting with the FDA in 2021.

After reviewing with the FDA, apply feedback, initiate the trial and, if necessary, update our clinical plan and related timelines.

Pipeline Development

In our R&D pipeline, we are also exploring FPC’s impact in the treatment of hospitalized heart failure patients.

More than one million people in the United States are hospitalized each year for acute heart failure.

Clinical improvement in heart failure has already been demonstrated with older first-generation forms of IV iron in clinical trials in the outpatient setting.

We believe that FPC may deliver rapidly bioavailable iron to the heart and improve cardiac energetics during hospitalization.

This effect could help patients recover faster resulting in shorter hospital stays and fewer 30-day re-admissions.

If so, these outcomes would translate into a meaningful reduction in healthcare costs and human suffering.

We expect to communicate with the FDA in 2021 regarding a development pathway for this indication.

We continue exploring other potential patient populations for application of our technology.

We are considering disease states where patients can benefit the most from an effective treatment for iron deficiency, and where the development path, cost estimates and reimbursement are the most favorable.

Results of Operations for the Three Months Ended March 31, 2021 and 2020

The following table summarizes our operating results for the periods presented below (dollars in thousands):

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

2021 % of Revenue 2020 % of Revenue % Change

2 unchanged sentences

Gross Profit 401 2.6 1,113 7.0 (64.0)

Research and Product Development 1,809 11.7 1,822 11.5 (0.7)

Selling and Marketing 1,851 12.0 2,073 13.1 (10.7)

General and Administrative 3,923 25.4 5,273 33.3 (25.6)

Settlement Expense, net of Reimbursement — — 430 0.9 (100.0)

Research and Product Development 5,183 11.0 4,930 10.8 5.1

Operating Loss $ (7,182) (46.4) % $ (8,055) (50.8) % (10.8) %

During the nine months ended September 30, 2020, our net sales were $47.0 million compared to net sales of $45.8 million during the nine months ended September 30, 2019.

The increase of $1.2 million was primarily due to higher domestic dialysis concentrate sales of $0.8 million and an increase in Triferic Dialysate sales of approximately $0.4 million compared to the nine months ended September 30, 2019.

Triferic was launched in the third quarter of 2019 via the sample evaluation program and there were nominal revenues for the same period in 2019.

Cost of sales during the nine months ended September 30, 2020 was $44.7 million, resulting in gross profit of $2.3 million during the nine months ended September 30, 2020, compared to cost of sales of $44.1 million and a gross profit of $1.7 million during the nine months ended September 30, 2019.

Gross profit increased by $0.6 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

The increase was due primarily to a gross margin increase of $0.3 million in our Triferic Dialysate product in 2020.

In comparison, the launch and sales of Triferic Dialysate occurred in the third quarter of 2019 and had no to minimal impact during the nine months ended September 30, 2019.

Gross profits are primarily related to our concentrates business at this time.

The Company anticipates that potential future sales of Triferic will impact the mix of future gross profits.

During the three months ended March 31, 2021, our net sales were $15.5 million compared to net sales of $15.9 million during the three months ended March 31, 2020.

The decrease of $0.4 million was primarily due to a decrease in sales of dialysis concentrates products.

Cost of sales during the three months ended March 31, 2021 was $15.1 million, resulting in gross profit of $0.4 million during the three months ended March 31, 2021, compared to cost of sales of a $14.7 million and a gross profit of $1.1 million during the three months ended March 31, 2020.

Gross profit decreased by $0.7 million mainly due to a decrease in concentrate sales and an increase in costs related to protocols implemented because of the ongoing COVID-19 pandemic.

Research and Product Development Expense

Research and product development expenses were $1.8 million for the three months ended March 31, 2021 and 2020.

The Company is continuing to invest in its medical and scientific programs to support the continued data and phase 4 clinical programs for Triferic in dialysis and the advancement of our FPC technology platform.

Selling and Marketing Expense

Selling and marketing expenses were $5.7 million during the nine months ended September 30, 2020, compared with $7.1 million during the nine months ended September 30, 2019.

The decrease of $1.4 million is due primarily to the decrease in marketing costs of $2.2 million, partially offset by an increase in costs associated with hiring, training and educating new employees of $0.8 million.

The fluctuation in these costs are mainly due to the timing of the Triferic Dialysate launch in the third quarter of 2019.

We expect those costs to continue to level off quarter over quarter going forward.

Selling and marketing expenses were $1.9 million during the three months ended March 31, 2021, compared with $2.1 million during the three months ended March 31, 2020.

The decrease of $0.2 million is primarily due to a decrease in marketing costs related to Triferic (dialysate) partially offset by a slight increase in costs associated with the launch of Triferic AVNU.

General and Administrative Expense

General and administrative expenses were $11.8 million during the nine months ended September 30, 2020, compared with $16.3 million during the nine months ended September 30, 2019.

The $4.5 million decrease was driven primarily by decreases to stock compensation, legal, recruiting and consulting fees, partially offset by an increase in labor costs.

The decrease in stock compensation primarily relate to the resignation of our former President and Chief Executive Officer in April 2020 and former Chief Financial Officer effective July 2020.

Research and Product Development Expense

Research and product development expenses was $5.2 million for the nine months ended September 30, 2020, compared with $4.9 million during the nine months ended September 30, 2019, an increase of $0.3 million.

Research and product development expenses for the nine months ended September 30, 2020 included clinical trials and other product development expenses of $1.8 million for Triferic, compared to $1.4 million during the nine months ended September 30, 2019.

The Company is continuing to invest in its medical and scientific programs to support the global launch of Triferic and the advancement of our FPC technology platform.

Settlement Expense, net of Reimbursement

Settlement expense was nil for the nine months ended September 30, 2020, compared to $0.4 million in for the nine months ended September 30, 2019.

Settlement expense for the nine months ended September 30, 2019 reflected the terms of the confidential settlement agreement and mutual release entered into in August 2018 relating to the Company’s former Chief Executive Officer, Robert Chioini, former Chief Financial Officer, Thomas Klema, and a former and then current director.

General and administrative expenses were $3.9 million during the three months ended March 31, 2021, compared with $5.3 million during the three months ended March 31, 2020.

The decrease of $1.4 million is due primarily to a decrease in stock compensation of $1.2 million, relating to a decrease in incentive compensation from forfeited equity awards and the change in probability relating to performance award achievement;

a decrease in legal costs of $0.2 million, relating to previous litigation that has since been resolved;

and a decrease in insurance costs of $0.1 million, relating to reduced premiums;

partially offset by an increase of $0.1 million for increased headcount and severance pay related to our former President and Chief Executive Officer.

Other Income (Expense)

Other income for the nine months ended September 30, 2020 was $247,682, consisting of interest income of $239,594 and $8,088 of realized gains on investments.

Other income for the nine months ended September 30, 2019 was $313,393, consisting of $289,101 of interest income and $24,292 of realized gains on investments.

Other expense for the nine months ended September 30, 2020 was $2.1 million, consisting of warrant modification expense of $0.8 million and interest expense of $1.3 million related to our debt facility (see Note 15 for more information on our debt facility).

Other expense for the nine months ended September 30, 2019 was $16,365 of interest expense.

Other income for the three months ended March 31, 2021 was $11,000, consisting primarily of interest income.

Other income for the three months ended March 31, 2020 was $0.2 million, consisting primarily of interest income.

Other expense for the three months ended March 31, 2021 was $0.6 million of interest expense related to our debt facility (see Note 15 for more

information on our debt facility).

Other expense for the three months ended March 31, 2020 was $0.1 million of interest expense.

Liquidity and Capital Resources

As of September 30, 2020, we had approximately $67.3 million of cash, cash equivalents and investments available-for-sale, and working capital of $65.2 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was approximately $21.1 million.

On March 22, 2019, the Company entered into a sales agreement with Cantor Fitzgerald & Co.

(the “Agent”), pursuant to which the Company may offer and sell from time to time shares of the Company’s common stock through the Agent up to $40.0 million.

As of December 31, 2019, the Company sold 1,840,443 shares of its common stock pursuant to the Sales Agreement for gross proceeds of approximately $5.4 million, at a weighted average selling price of approximately $2.92.

The Company paid approximately $0.3 million in commissions and offering fees related to the sale of the common stock.

During the nine months ended September 30, 2020, the Company sold 1,128,608 of shares of its common stock pursuant to the Sales Agreement with the Agent for proceeds of $2.3 million, net of issuance costs.

As of September 30, 2020, approximately $32.3 million remains available for sale under this facility.

On February 4, 2020, the Company entered into an underwriting agreement with Cantor Fitzgerald & Co., as underwriter, pursuant to which the Company agreed to issue and sell up to 3,670,212 shares of its common stock, which included 478,723 shares optional shares that may be sold pursuant to an over-allotment option granted to the underwriters.

On February 6, 2020, the Company closed the sale of 3,191,489 shares of its common stock at the public offering price of $2.22 per share.

On February 19, 2020, the underwriter exercised its over-allotment option to purchase an additional 478,723 shares at a price of $2.22 per share, which closed on February 21, 2020.

The Company raised a total of $8.0 million, net of issuance costs of $0.1 million, relating to the sale of the common stock in the offering.

The offering was made pursuant to the Company’s effective Registration Statement on Form S-3 (File No.

333-227363), which was previously filed with the SEC.

On March 16, 2020, Rockwell Medical, Inc.

and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $35.0 million (the “Term Loans”).

Funding of the first $22.5 million tranche was completed on March 16, 2020.

The Company is no longer eligible to draw on a second tranche of $5.0 million, which was tied to the achievement of certain milestones by a specified date.

The Company may be eligible to draw on a third tranche of $7.5 million upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds.

Net draw down proceeds were $21.2 million with closing costs of $1.3 million.

The Company is entitled to make interest-only payments for thirty months, or up to thirty-nine months if certain conditions are met.

The Term Loans will mature on March 16, 2025 and will bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75%, plus 4.00%, with an initial interest rate of 8.75% per annum.

The Company has the option, under certain circumstances, to add 1.00% of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash.

For the nine months ended September 30, 2020 and 2019, interest expense amounted to $1.3 million and $16,000, respectively.

The Loan Agreement is secured by all assets of the Company and Rockwell Transportation, Inc.

Proceeds will be used for working capital purposes.

The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months sales of Triferic, with the latter beginning with the period ending December 31, 2020.

We cannot assure you that we can maintain compliance with the covenants under our Loan Agreement, which may result in an event of default.

Our ability to comply with these covenants may be adversely affected by events beyond our control.

For example, the Loan Agreement contains certain financial covenants relating to sales and, as a result of the ongoing COVID-19 pandemic and its effect on our sales activities, among other factors, we may not be able to satisfy such covenants in the future.

Based on our annualized Triferic sales through September 30, 2020, we may not satisfy this covenant as of December 31, 2020.

If we are unable to comply with the covenants under our Loan Agreement, we intend to pursue all available cure options in order to regain compliance.

However, we may not be able to mutually agree with Innovatus on appropriate remedies to cure a breach of a covenant, which could give rise to an event of default.

If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity.

As of September 30, 2020, the Company was in compliance with all the reporting and financial covenants.

If the Company is unable to maintain compliance with the reporting and financial covenants in the future, the Company could experience an event of default under the Loan Agreement, which would negatively impact the Company’s liquidity.

For more information, see the risk factor entitled “Our Loan Agreement with Innovatus contains certain covenants that could adversely affect our operations and, if an event of default were to occur, we could be forced to repay the outstanding indebtedness sooner than planned and possibly at a time when we do not have sufficient capital to meet this obligation.

The occurrence of any of these events could cause a significant adverse impact on our business, prospects and share price.” in “Item 1A — Risk Factors.”

On September 23, 2020, the Company entered into a Securities Purchase Agreement with certain purchasers named therein, pursuant to which the Company agreed to issue and sell to several institutional and accredited investors in a registered direct offering 21,818,544 shares of common stock and warrants to purchase up to 23,178,809 shares of common stock (the “Warrants”) at a combined purchase price equal to $1.51 per share.

Each Warrant is exercisable for one share of common stock at an exercise price of $1.80 per share.

The Warrants are immediately exercisable and will expire on September 25, 2022.

The Company also offered to certain purchasers pre-funded warrants to purchase up to an aggregate of 1,360,265 shares of common stock (the “Pre-Funded Warrants”), in lieu of shares of common stock.

The purchase price of each Pre-Funded Warrant is equal to the price at which a share of common stock is sold to the public in the offering, minus $0.001, and the exercise price of each Pre-Funded Warrant is $0.001 per share.

The Pre-Funded Warrants were exercised in conjunction with the issuance of common stock under the Securities Purchase Agreement.

The Company received gross proceeds of approximately $35.0 million in connection with the offering, before deducting placement agent fees and related offering expenses of approximately $2.3 million.

Based on the equity and debt financing described above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the commercial launch and medical education programs of Triferic Dialysate and Triferic AVNU, and the further development of our FPC pipeline programs.

If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing.

Since inception, Rockwell has incurred significant net losses and has funded its operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships.

At March 31, 2021, Rockwell had an accumulated deficit of approximately $345.2 million and stockholders' equity of $26.2 million.

As of March 31, 2021, Rockwell had approximately $46.1 million of cash, cash equivalents and investments available-for-sale, and working capital of $48.0 million.

Net cash used in operating activities for the three months ended March 31, 2021 was approximately $12.5 million.

Based on the currently available working capital, capital raise and debt financing noted above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan, including the commercialization of Triferic (dialysate) and Triferic AVNU in dialysis, generating additional data for Triferic in dialysis, developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for its FPC platform.

If the Company is unable to generate sufficient revenue from sales of its commercial products and from partnerships, the Company will need to obtain additional equity or debt financing.

If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to, the expenses and revenue associated with the commercial launch of Triferic Dialysate and Triferic AVNU;

In addition, the Company is subject to certain covenants and cure provisions under our Loan Agreement with Innovatus.

As of the date of this report, the Company is in compliance with all covenants.(See Note 15 for further detail).

the timing and magnitude of cash received from drug product sales;

and the timing and expenditures associated with the development of Triferic for international markets;

the timing and expenditures associated with the development of further innovative administration techniques of Triferic for dialysis patients;

the timing and expenditures associated with the development of our FPC technology for patients with iron-deficiency anemia in other disease states;

and the costs associated with ongoing litigation and investigatory matters.

the timing and expenditures associated with the development programs including our FPC technology for home infusion and potentially acute heart failure;

and the costs associated with our manufacturing and transportation operations related to our concentrate business.

We may elect to raise capital in the future through one or more of the following:

(i) equity and debt raises through the equity and capital markets, though there can be no assurance that we will be able to secure additional capital or funding on acceptable terms, of if at all;

and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the U.S., as well as potential combinations (including by merger or acquisition) or other corporate transactions.

We believe that our ability to fund our activities in the long term will be highly dependent upon our ability to successfully launch Triferic Dialysate and Triferic AVNU.

Our commercialization of Triferic Dialysate and Triferic AVNU is subject to significant risks and uncertainties, including risks we will be successful in the commercialization of Triferic in accordance with our plans.

If our commercialization of Triferic Dialysate and/or Triferic AVNU should be delayed for any reason or not proceed in accordance with our plans, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs.

If our launch of Triferic Dialysate and/or Triferic AVNU is unsuccessful or our commercial launch does not proceed as planned, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business.

If we are unable to raise the required capital, we may be required to

curtail all of our activities and, ultimately, cease operations.

(i) equity and debt raises through the equity and capital markets, though there can be no assurance that we will be able to secure additional capital or funding on acceptable terms, or if at all;

and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the United States, as well as potential combinations (including by merger or acquisition) or other corporate transactions.

In particular, our Baxter Agreement prohibits us from entering into a contract that would encumber the assets used in our concentrate business without the prior written consent of Baxter.

Due to the fact that the assets used in our concentrate business currently constitute a substantial portion of the tangible assets we own other than our drug inventory, we may not be able to, or we may find it difficult, to obtain secured debt financing without the consent of Baxter.

We believe that our ability to fund our activities in the long term will be highly dependent upon 1) our ability to execute on the development of the FPC platform for new therapies, and 2) our ability to commercialize and increase adaptation of Triferic (dialysate) and Triferic AVNU.

Both of these strategies is subject to significant risks and uncertainties such that there can be no assurance that we will be successful is achieving approval of FPC in a new therapeutic area or that we will be able to have sustained commercial success with Triferic (dialysate) and Triferic AVNU.

If our planned clinical program is delayed or fails or if our commercialization of Triferic (dialysate) and/or Triferic AVNU should fail to increase sales, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs.

Even though we began commercialization of Triferic (dialysate) and Triferic AVNU as planned, if the results are unsuccessful, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business.

If we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations.

Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline.

Cash Used in Operating Activities

Net cash used in operating activities was $21.1 million for the nine months ended September 30, 2020.

The net loss for this period was higher than net cash used in operating activities by $1.1 million, which was primarily attributable to non-cash expenses of $2.8 million, consisting primarily of $1.1 million of amortization of the right to use assets, $0.8 million of warrant modification expense, $0.6 million of depreciation and amortization, ($0.3) million of stock-based compensation and a ($1.6) million net change in assets and liabilities.

Net cash used in operating activities was $22.0 million for the nine months ended September 30, 2019.

The net loss for this period was higher than net cash used in operating activities by $4.9 million, which was primarily attributable to non-cash expenses of $7.2 million, consisting of $3.9 million of stock-based compensation, $1.4 million of amortization of the right to use assets, $0.6 million of depreciation and amortization, and a ($2.3) million net change in assets and liabilities.

Cash Provided by (Used In) Investing Activities

Net cash provided by investing activities was $2.6 million during the nine months ended September 30, 2020.

The net cash provided was primarily due to the sales of our available-for-sale investments of $27.1 million, offset by $23.5 million used for the purchase of investments available-for-sale and $1.0 million for the purchase of equipment.

Net used in investing activities was $4.9 million during the nine months ended September 30, 2019.

The cash used was primarily due to the purchase of our available-for-sale investments of $30.5 million, offset by $34.2 million provided by the sale of investments available-for-sale, $0.8 million for the purchase of research and development licenses acquired from a related party and $0.4 million for the purchase of equipment.

Net cash used in operating activities was $12.5 million for the three months ended March 31, 2021 compared to net cash used in operating activities of $6.5 million for the three months ended March 31, 2020.

The increase in cash used from operating activities during the current period was primarily due to changes in current balance sheet accounts in the ordinary course of business of approximately $5.3 million, including an increase in net accounts receivable of $2.4 million and a reduction in accounts payable and accrued expense of approximately $1.8 million.

Our cash used in Q1 is normally higher due to one-time annualized payments and further affected by some timing issues related to the receipt of payments for product sales and reimbursements from one of our large customers, which was received in early April.

Overall, our cash burn for the first quarter was in line with our expectations, and we continue to expect, in aggregate, 2021 cash burn to be lower than 2020 cash burn.

Cash (Used In) Provided by Investing Activities

Net cash used in investing activities was $0.5 million during the three months ended March 31, 2021 compared to net cash provided by investing activities of $2.6 million for the three months ended March 31, 2020.

The net cash used in investing activities during the three months ended March 31, 2021 was primarily due to sales and purchase of available-for-sale investments during the quarter.

Cash Provided by Financing Activities

Net cash provided by financing activities was $63.3 million during the nine months ended September 30, 2020.

The net cash provided was primarily due to net proceeds of $21.2 million related to the Loan Agreement and $40.7 million and $2.3 million from the sale of our common stock, related to our public offerings and our at-the market offering, respectively.

Net cash provided by financing activities was $18.6 million during the nine months ended September 30, 2019.

The net cash provided was primarily due to net proceeds of $17.3 million and $2.1 million from the sale of our common stock, related to our public offering and our at-the market offering, respectively.

Net cash provided by financing activities was nil during the three months ended March 31, 2021 compared to the net cash provided by financing activities of $29.6 million for the three months ended March 31, 2020.

The net cash provided during the three months ended March 31, 2020 was primarily due to net proceeds of $22.1 million related to proceeds from the debt facility and $8.0 million from the sale of our common stock, related to our public offering, offset by $0.6 million for payments on short term notes.

COVID-19 Impact

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Quarantines, shelter-in-place, executive and similar government orders may negatively impact our sales and marketing activities, particularly if our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic.

Depending on the severity of the impact on our sales and marketing efforts, the timing of our commercial launch of Triferic AVNU could be adjusted.

The Company's international business development activities may also continue to be negatively impacted by COVID-19, especially with the recent surge in infections internationally, ongoing international travel restrictions and quarantines or shelter-in-place orders.

The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial and credit markets.

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Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Our critical accounting policies and significant estimates have not changed from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, except for those subjects mentioned in the section of the notes to the condensed consolidated financial statements titled Adoption of Recent Accounting Pronouncements.

Our critical accounting policies and significant estimates have not changed from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Recently issued and adopted accounting pronouncements :

We have evaluated all recently issued accounting pronouncements and believe such pronouncements do not have a material effect our financial statements.

See Note 3 of the condensed consolidated financial statements at September 30, 2020.

See Note 3 of the condensed consolidated financial statements at March 31, 2021.

Quantitative and Qualitative Disclosures about Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis