CorMedix Inc. (CRMD) Earnings Call Transcript & Summary

Good day, and welcome to the CorMedix Inc. Fourth Quarter and Full Year 2024 Financial Results Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Dan Ferry with LifeSci Advisors. Please go ahead.

Good morning, and welcome to the CorMedix Fourth Quarter and Full Year 2024 Earnings Conference Call. Leading the call today is Joe Todisco, Chief Executive Officer of CorMedix and he is joined by Dr. Matt David, Executive Vice President and CFO; Beth Zelnick Kaufman, EVP and Chief Legal and Compliance Officer; Liz Hurlburt, EVP and Chief Clinical Strategy and Operations Officer; and Erin Mistry, EVP and Chief Commercial Officer. Before we begin, I would like to remind everyone that during the call, management may make what are known as forward-looking statements within the meaning set forth in the Private Securities Litigation Reform Act of 1995. These statements are statements other than statements of historical fact regarding management's expectations, beliefs, goals and plans about the company's prospects and future financial position. Actual results may differ materially from the estimates and projections on which these statements are based due to a variety of important factors, including the risks and uncertainties described in greater detail in CorMedix's filings with the SEC, which are available free of charge at the SEC's website or upon request from CorMedix. CorMedix may not actually achieve the goals or plans described in these forward-looking statements. Investors should not place undue reliance on these statements. CorMedix does not intend to update these forward-looking statements, except as required by law. During this call, the company will discuss certain non-GAAP measures of its performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in CorMedix earnings release and the current report on Form 8-K filed with the SEC. This information is available on the Investor Relations section of the CorMedix website. At this time, it is now my pleasure to turn the call over to Joe Todisco, Chief Executive Officer of CorMedix. Joe, please go ahead.

Thank you, Dan. Good morning, everyone, and thank you for joining us on this call. Having completed our initial partial year of commercial launch of DefenCath, I'm incredibly proud of the team's efforts and pleased with the commercial results thus far. The fourth quarter saw continued growth with both existing as well as new customers in the outpatient segment, which was the primary driver of our strong revenue and profit results for both Q4 and full year 2024. Net revenue for the fourth quarter and full year were $31.2 million and $43.5 million, respectively, both of which exceeded Wall Street consensus prior to our preannouncement on January 7. The fourth quarter was also the first profitable commercial quarter in the company's history with net income of $13.5 million and adjusted EBITDA of $15.3 million. Fourth quarter results were driven by strong uptake amongst patients at U.S. Renal Care, ramping implementation at our midsized customers, IRC and DCI as well as utilization by other small outpatient dialysis customers. As we announced back in early January, we began the first quarter of 2025 with more than $25 million of purchase orders in hand from existing customers for first quarter delivery. While we are not going to provide full year revenue guidance at this time, we currently estimate that net revenue from existing purchasing customers for the first 6 months of 2025 should be in the range of $50 million to $60 million, with more than $33 million expected in the first quarter. DefenCath's net selling price has been fairly stable throughout the first 3 quarters of outpatient commercialization. However, we do expect to begin to see some net price erosion beginning in the second quarter of 2025. With respect to patient growth opportunities, there is still some potential for new patients with existing outpatient customers. However, to a large extent, our ability to grow patient volume significantly in the back part of 2025 will be contingent upon the timing of purchasing and scale of implementation by our contracted large dialysis organization customer. Prior to year-end, we met with our contracted LDO customer who communicated to CorMedix that DefenCath implementation was pushed into 2025 due to operational resource constraints. Over the course of February and early March, we have had multiple meetings with this customer, provided significant requested information around resources available at CorMedix to assist with training and the implementation of DefenCath, and we remain hopeful the customer will begin ordering and commence utilization prior to midyear. Turning to the inpatient segment. We have started to see utilization increase at a handful of larger hospitals, and we are hopeful to increase penetration as we move throughout 2025. Back in January, we announced a change to our inpatient commercialization strategy, whereby we reorganized our field team covering outpatient and inpatient customers. This process is now complete as we are partnering with Syneos Health to build a dedicated inpatient field team that is highly experienced in the hospital formulary process and the launch of first-in-class products in the setting of care. We also recently announced a partnership with WSI to provide marketing and promotional resources for DefenCath, specifically to facilities operated by the Veterans Administration. I am happy to announce that the new inpatient team is nearly fully staffed and is expected to be active in the field in the next 4 to 5 weeks. The team contracted through WSI has already commenced promotional activities to VA facilities. While we do not currently report inpatient sales as a separate segment, we do expect to see meaningful growth in this setting of care by the end of 2025 with an increased contribution to overall revenue and earnings in 2026 and beyond. Focusing now on our clinical developments. We are in the process of beginning our Phase 3 clinical study for the reduction of Central Line Associated Bloodstream Infections or CLAPSIs, in patients receiving Total Parenteral Nutrition or TPN, through a central venous catheter. We began site selection in February and expect to begin patient enrollment for the study in the second quarter of this year. As we communicated previously, this is a 12-month study in less than 150 patients, and we are targeting completion of the study and submission of a new drug application to FDA by the end of 2026. We recently submitted to FDA an application for orphan drug status for this indication and are awaiting FDA's determination of eligibility. The company's goal for TPN is to obtain FDA approval for an expanded use of our taurolidine and heparin catheter lock solution in the late 2027 to early 2028 time frame, and we estimate annual peak sales potential in this indication to be in the range of $150 million to $200 million. We'll provide investors with updates on progress in this important area of unmet need as we move forward. During our previous earnings call, we also discussed 3 additional clinical initiatives, all having either commenced in 2024 or expected to begin in 2025. The most meaningful of the 3 from a data value standpoint is our real-world evidence study, which we are running in cooperation with our study partner, U.S. Renal Care. Our hope with this study in which we expect to evaluate outcomes of more than 2,000 patients over 24 months would be to generate real-world evidence around the impact of DefenCath utilization on cost of patient care, infection rates, hospitalizations, mortality, and multiple other metrics such as lost chair time and CRBSI-related antibiotic use. Data collection for this study has already commenced. In addition to our adult TPN and real-world evidence studies, we will also be commencing a study in pediatric hemodialysis in 2025. This will be a relatively small study spread over several years as we expect patient enrollment to be a challenge given an extremely small patient population and the need for very personalized protocols for these ultra-vulnerable patients. This pediatric study is a post-marketing requirement under the Pediatric Research Equity Act by the FDA, and we have FDA's concurrence on the final study protocol. We currently expect patient enrollment to begin in the third quarter of 2025, and we expect this study to span 3 to 5 years. Lastly, in addition to our other clinical initiatives, we have commenced an expanded access program for high-risk populations, including but not limited to pediatric TPN, peritoneal dialysis patients with refractory peritonitis, and neutropenic oncology patients utilizing a CVC. These high-risk patients are those that have exhausted other infection prevention methods and unfortunately, remain at significant risk for comorbidities and mortality. We are fielding a high number of requests for participation in this expanded access program and currently expect patients to be dosed under this program in the second quarter of this year. I would now like to turn the call over to Matt to discuss the company's fourth quarter and full year financial results and financial position. Matt?

Thanks, Joe, and good morning, everyone. I am pleased to be here today to provide an overview of our fourth quarter and full year 2024 financial results as well as an update on CorMedix's cash position. The company has filed its annual report on Form 10-K for the year-ended December 31, 2024. I urge you to read the information contained in the report for a more complete discussion of our financial results. With respect to our fourth quarter of 2024 financial results, our net revenue for the fourth quarter of 2024 amounted to $31.2 million. CorMedix achieved profitability in the fourth quarter as our net income was $13.5 million or $0.22 per share compared with a net loss of $14.8 million or $0.26 per share in the fourth quarter of 2023. The net income recognized in 2024 was driven by the profits associated with net sales of DefenCath following the product's launch in 2024. Operating expenses in the fourth quarter of 2024 increased 9% to $17.1 million compared with $15.7 million in the fourth quarter of 2023. The increase was driven by higher selling and marketing and G&A expenses, offset by a decrease in R&D. R&D expense decreased by 26% to $1.7 million, driven by the approval of DefenCath. CorMedix is now reporting selling and marketing expense and general and administrative expense as separate line items. On an apples-to-apples basis, S&M expense increased 1% to $8.3 million in the fourth quarter of 2024 compared with $8.2 million in the fourth quarter of '23. G&A expense increased 36% to $7.1 million in the fourth quarter of 2024 versus $5.2 million in the fourth quarter of 2023. The increase in S&M expense was attributable primarily to increased marketing efforts and new personnel, inclusive of our field sales organization and support for the commercial launch of DefenCath. The increase in G&A expense was primarily due to increases in personnel costs in preparation for support activities related to our commercial launch. With respect to our full-year 2024 financial results, total net revenue during 2024 amounted to $43.5 million. This marks the first full year CorMedix's reporting net revenue since launching DefenCath in spring/summer of 2024. Total operating expenses during the full year 2024 amounted to $62.6 million compared with $49 million in 2023, an increase of 28%. R&D expense decreased 70% to $3.9 million, driven primarily by the approval of DefenCath. Selling and marketing expense increased 59% to $28.7 million compared with full-year 2023, and G&A expense increased 69% to $30 million compared with 2023. The increases in S&M and G&A were driven primarily by new personnel and cost to support the commercial launch of DefenCath. We recorded net cash used in operations during 2024 of $50.6 million compared with net cash used in operations of $38.4 million in 2023. The increase is primarily driven by an increase in trade receivables and inventories, offset by a net increase in the change of accrued expenses and accounts payable and a decreased net loss. The company has cash and cash equivalents of $51.7 million as of December 31, 2024. Based on accounts receivable collection throughout first quarter of 2025 and to a lesser extent, proceeds from ATM issuance, we anticipate completing first quarter of 2025 with at least $75 million in cash and cash equivalents. As described in our January 7 release, we are guiding to 2025 cash operating expenses of approximately $72 million to $78 million. The increase over 2024 spending levels is expected to be primarily driven by an increase in R&D spending on clinical initiatives. I will now turn the call back over to Joe for closing remarks. Joe?

Thanks, Matt. CorMedix is working diligently on all fronts to increase our existing customer base as well as expand the use of DefenCath to new therapeutic indications. I appreciate everyone's continued support in CorMedix, and I'm happy to take questions.

[Operator Instructions] And today's first question comes from Roanna Ruiz with Leerink Partners.

So I did have a question about the Syneos Health partnership and your build-out of the inpatient sales team. What are your first steps for this team once they're fully launched? And do you have any color on what the ramp might look like in the inpatient setting for DefenCath over time?

Well, look, let me -- I'll comment on the inpatient kind of ramp, and then I'll let Erin and Liz comment a little bit on the team and its deployment. So obviously, we were a little bit slow out the gate on the inpatient side last year. That's not unusual for this setting of care for these types of launches. It takes quite a while to work through P&T processes. I am pleased with what we've seen in the first quarter. I know we -- as I said, we don't report anything from a separate segment standpoint on the inpatient side. But right now, for the first quarter, inpatient is looking to be about 3% of unit volume and 4% to 5% of dollars. So I feel pretty good about that trend. Inpatient as a total is 10% of the unit volume of the overall market opportunity. So if we can move toward there, right, as we get into 2026, I think that's certainly a target that we'd like to try to achieve. We're in the process of just finally completing the staffing of the last 2 to 3 roles, right, to fill out the team completely. Training is near complete, and we hope to have them out in the field in the next 4 to 5 weeks. But Erin, do you want to comment anything beyond that?

Sure. I think that just what we plan for them to do right out of the gate is to focus on the large academic medical centers, similar as before. They're not starting from scratch. These hospitals either have -- are going through the P&T process now or they have already ordered DefenCath. And so we're just making sure that they've got the support they need and the ramp to order more. We're also aligning them closely with VA medical centers that are typically in the same territory or region.

Got it. Thanks. And second one for me. I noticed on the call, you talked about net price erosion starting in 2Q. Can you just elaborate a bit on the degree of the erosion? Could it flow into some of the subsequent quarters as well?

Yes. Thanks, Roanna. I think it would be good to comment on the guidance we gave first and kind of what it means, right? So I know it's unusual to guide for a partial part of the year. But the way we're kind of look at it or the way I think investors should look at it is the $50 million to $60 million range is really, I guess, what you would think of as our base business, right, in terms of the customers that were really buying by year-end and then into the early part of the first quarter. Certainly, to the extent we bring in either new customers -- obviously, new customers, there's upside, right, from those numbers if -- certainly, if our LDO customer starts buying in the second quarter, right, that there's upside in those numbers. Now when we talk about price erosion, it's -- I'm not going to -- I don't know if I can give you an exact percentage, but the way in which we're thinking about it is our agreements with customers and the way that we're currently priced, there are, let's say, discounts and rebates off of government ASP. And government ASP has remained kind of stable, right? It starts out at WAC during TDAPA and then it adjusts for the first quarter. I think it was down only 1% from what it was the prior quarter. Next quarter it's still second quarter going to be fairly stable. The third quarter, it should come down a little bit. But we're going to have to -- we're expecting to take a shelf stock adjustment at the end of the second quarter, right, as we move into third. And what we don't really have a handle on right now is exactly how much inventory will be in the channel by the end of the second quarter. So that's something that we're still working through, and that kind of factors into the range that we gave for revenue from existing -- what we'll call the existing base business over the first part of the year.

And our next question today comes from Jason Butler with Citizens JMP.

Congrats on the progress in the quarter. Joe, can you maybe just give us some more color about the process that the contracted LDO is going through and your interactions that kind of just reinforce your confidence that they will begin ordering in the next couple of months, next few months?

Thanks, Jason. Look, I think what I can say at this point in time is we're being as supportive as we can possibly be. We've had a lot of information requests come from them, right, specifically around support services we could provide for training, for reimbursement. And we're making our staff available to them, right, kind of across the board. So as I said, we're hopeful that we'll stick with the original kind of plan or communicated time line of implementation by midyear. But that's really all I have to go on at this point in time.

Okay. Helpful. And then just from -- in terms of the magnitude of use within the LDO, has that number remained consistent throughout your dialogue with them?

Yes. Look, they haven't given us any indication right now that number or they're going to deviate from that number, but we do know they're looking at implementation. I think there's a possibility that number could be higher. There's a possibility that number could be lower, right? I think what we're trying to do right now, as I said, is make all of the resources of CorMedix available to them and hopefully accelerate the rollout, both in terms of speed and scale.

Great. And then just a second one for me. In terms of potential new customers, obviously, there's the other LDO. Could you give us an update there? But beyond that, are there other smaller providers that potentially could come online in the second half of the year?

Yes, thanks. Look, with respect to the other LDO, obviously, we remain in communication with them. We've provided them additional information. I think candidly, we haven't moved the needle there as much as we would have liked to over the past couple of months. We are still working there, call it, top down, right, through the senior level of management. We've also started to work there bottom up, right? These -- a lot of these large dialysis operators, they have joint venture-owned entities where the JV partner has some decision-making authority. So we've started to work through some of those joint venture organizations that have expressed an interest in DefenCath, and we're hopeful to kind of make inroads there over the next 2 to 3 months. On the small side, yes, right? There's -- there are a lot of -- I guess, first, I'd say we are shipping to a number of small customers where we don't talk about them specifically. Some may have 10 dialysis centers, some might have 20. But in addition to some health systems that have, right, 10 to 25 hospitals. But yes, that's absolutely part of our focus over the next part of 2025 to build inroads with those smaller customers and to increase ordering size and frequency.

And our next question today comes from Gregory Renza with RBC Capital Markets.

It's Anish on for Greg. Congrats on all the progress. Just a couple from us. First, just on TDAPA, how should we be thinking about patient applicability, and what are your thoughts and trends in coverage such as Medicare Advantage over the next 2 to 3 years? And second, what are the key levers you look to pull to maximize uptake of DefenCath to ensure the best possible post-TDAPA add-on adjustment?

Thanks, Anish. Look, I think with respect to TDAPA, I'm not sure what you meant by applicability, but in terms of what we're seeing -- I'll start with what we're seeing from Medicare Advantage now, right? So when we look at our payer claims, we launched the product in mid-2024 in the outpatient setting and initially 100% of claims were fee-for-service, right? Because the Medicare Advantage, there was a little bit of a lag in picking up to TDAPA. And as we moved toward the back part of last year, we started to see the trend going toward Medicare Advantage. I think we closed out last year with about 25% or 30% of our claims being Medicare Advantage. Through this first part of the first quarter, 40% of our claims are Medicare Advantage and other payers and 60% are fee-for-service. That's certainly the trend we want to see. When you look at the broader ESRD market, 80%, 85% of it is Medicare. And within Medicare, half of it is fee-for-service and half is Medicare Advantage. We do see the Medicare Advantage market share of Medicare growing over time. We do think it ultimately will become 70% of ESRD patients. And we do see that as a good opportunity for CorMedix. So what we're doing to better prepare ourselves, call it, for the out years of TDAPA and beyond is the real-world evidence study that we're running in collaboration with U.S. Renal Care, right? A lot of that data and specifically around the pharmacoeconomic benefits of DefenCath is what we'd like to utilize as part of a direct contract negotiation with EMA plans, right, for separate and more sustainable reimbursement. Did I address the second question as well, Anish?

Yes, that's very helpful.

And our next question comes from Les Sulewski with Truist Securities.

This is Jeevan on for Les. We recently saw the news on FDA's acknowledgment of blood line shortages that might impact hemodialysis procedures. Can you provide any commentary if this has any impact on utilization or uptake of DefenCath?

Thanks, Jeevan. No, it's not likely to have any impact, but I'll let Liz explain why.

Yes. So thanks for the question. The good news is that there are 2 equivalent alternative manufacturers for this. So hemodialysis isn't going to stop. I think that the dialysis providers feel pretty good about that. But I don't anticipate any impact to DefenCath utilization with this. It's simply a manufacturing challenge that can be addressed with alternatives.

Okay. Great. Then just a quick second one for me. Can you provide any updates on the status of DefenCath manufacturing capacity? Have there been any readjustments needed or challenges to filling the open purchase orders to Q1?

I'm sorry, Jeevan, was that question around inventory availability?

Yes, yes. Just your clarity there and any challenges in filling the $25 million in open purchase orders.

No, we have more than a year's worth of finished dosage on hand at our current run rate. We're well situated.

And our next question comes from Serge Belanger with Needham & Company.

This is John on for Serge today. First, if you could just quickly give us the current business mix between the various MDOs that you have on board. Obviously, U.S. Renal Care has been your anchor thus far. And secondly, in terms of the expectations for the TPN program. Are these patients going to be similar to those that were enrolled in the LOCK-IT trial in terms of CRBSI susceptibility?

All right. Thanks, John. In a minute, I'll let Liz comment on the study design for TPN. From a business mix standpoint, I think we have exact percentages in the 10-K for where we closed out last year. Obviously, U.S. Renal Care still remains more than 80% orders through that period, it is coming down. Beyond that, I don't think we're going to be providing specific customer-specific guidance, but we'll reevaluate as we go forward. Do you want to comment on the study design on TPN?

Sure. So our NeutraGuard study, which is our Phase 3 randomized, double-blind 2-arm study, which is looking at the efficacy and safety of DefenCath for adult patients receiving TPN is really focused on those that have had a CLABSI in the last 12 months. We know that patients that have had a CLABSI are at higher risk to have another one. They have an average infection rate of 20% to 25%. So similar to dialysis patients in the sense that they are very vulnerable to infection and they may be immunocompromised for a multitude of reasons, right? That's why they're probably on TPN. But unlike dialysis, these are folks that access their catheter on a daily basis, not 3 times a week like you would see in hemodialysis. Does that answer your question?

And this concludes the audio question-and-answer session. I'd like to turn the conference back over to Dan Ferry from LifeSci Advisors for written questions.

Thank you, operator. Joe, we do have some written questions from the audience. The first will be, did the change in CMMI, which is the Center for Medicare and Medicaid Innovation, did that policy impact patient uptake in the first quarter?

Okay. Thanks, Dan. I think what you're referring to is the policy change that took place back in November that removed or the patients that participate in a kidney care entity, the benchmarks, they excluded TDAPA from the benchmark. So they were now allowed to accept TDAPA payments and not be penalized. I think at the time we guided -- we did expect a patient lift of somewhere around 15% to 20%. We did see that throughout the first quarter, certainly with U.S. Renal Care that we saw a lift in patient numbers as a result of that. And I think overall, I think it's important for innovative products in general, right? It was somewhat of a headwind that thankfully, CMS eliminated.

Okay. Great. I have another one here. Proposed changes from the new administration have certainly caused volatility in the sector. Have you seen anything in these announcements that you see as a risk or possibly an opportunity?

Yes. Look, I know there's a lot of trepidation from investors right now, certainly in the biotech segment, right, because of the new administration and potential tariffs on pharmaceuticals. I think the way we're looking at it specific to DefenCath is definitely more of an opportunity. And I think I would divide it probably in a couple of buckets. I think if you're looking at the situation through the lens of, let's say, dose, right, and kind of taking cost out of government spend, I think DefenCath is something that fits very well with that agenda, right? So the government spends over $3 billion a year between inpatient and outpatient-derived CRBSIs in the hemodialysis space. If we can replicate our clinical result in a real-world setting, we have the opportunity to offset a large amount of that spend. If -- second, I think if you're looking at it through the lens of, let's say, make America healthy again, right, type thing, I think we also fit pretty well, right, with that type of mindset where if we are able to have the -- again, replicate our clinical results in a real-world setting and have that type of impact on infections, a byproduct of that is you're reducing hospitalizations from those infections. You'd ultimately be reducing antibiotic use that would result from those infections. I think both of which fit pretty well within that initiative. I think more broadly for this administration, though, I think we do get and just because it's a change of administration, not because of who the administration is, I think there is the ability to look at either past decisions through a new lens or new legislative initiatives. And certainly there's a lot of, I think, momentum right now on a bipartisan basis for hopefully TDAPA reform. I think TDAPA was a really good start. I think it's -- we've done okay, but I think everybody recognizes from a long-term standpoint that it certainly could be better in terms of incentivizing innovation, reimbursing providers for utilizing that innovation. And we do know that there's a bill that's hopefully making its way through Congress and hopefully will be proposed before the end of this year. And if not, hopefully, CMS through rulemaking can make some more positive adjustments. But I think for us and our situation specifically, I think we see a lot of opportunity.

Great. I have another one here that's a bit more on the commercial side of things. What resources does CorMedix have available to help providers with processing reimbursement?

That's a good question. Yes. So we've set up a third-party hub specifically to help the providers themselves navigate claims. And Erin, do you want -- it's through a third party. Erin, do you want to comment on how that's set up?

Sure. So third-party prospectus, and they work directly with both us and our customers across inpatient and outpatient settings. They have a couple of main focus areas. One of those is benefits verification for patients. And then they have very specific billing and coding expertise to make sure that claims are submitted correctly for TDAPA, for example, on the outpatient side and NTAP on the inpatient side as well as the J-codes. And then they also can navigate any payer policies or complex state Medicaid challenges that we may run into.

Okay. Great. Thanks, Erin. Looks like we have one final one here. I think you touched on this earlier, Joe. But if signing an agreement or a currently contracted LDO requires greater capacity, what is your ramp time? And how does CorMedix -- how is CorMedix situated from a raw material standpoint?

Okay. Thanks. I guess that goes back to inventory. So I think we divide into a couple of buckets. I said before, from a finished dosage standpoint, I think we're in pretty good shape based on the current run rate and the anticipated ramp that we kind of built into our LE, right, for the -- what we expected the LDO customer to do. Now, if they wanted to ramp significantly beyond that, our ability to pivot is pretty good, right? I don't think our ramp time is more than a handful of months. We have more than enough raw material on hand between, I'd say, heparin and taurolidine API to cover that ramp over a year. Turnaround time on heparin API is not significant. Turnaround time on taurolidine API is a bit longer, but we have several lots on order that would be delivered in the back part of the year. So really, we've got 2 finished dosage contract manufacturers. One of them is definitely underutilized. So we have finished dosage capacity we can pivot to. And I think it's a matter of a handful of months to be able to ramp.

That's great. Thank you so much, Joe. Operator, this concludes the written question portion of the call. You may now close.

Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.