CorMedix Inc. (CRMD) Earnings Call Transcript & Summary

Okay. So thank you all for joining. Just a quick note on disclosure. For important disclosures, please see the Morgan Stanley research disclosure website or please reach out to your Morgan Stanley sales representatives for any disclosures. So welcome to the Morgan Stanley Healthcare Conference and then the fireside chat with CorMedix. My name is Ross Cohen. I'm an Executive Director in the Morgan Stanley Healthcare Investment Banking team. And I'm thrilled to be joined in person by Joe Todisco, the CEO of CorMedix. Welcome, Joe.

Welcome. Thank you, Ross.

So for the audience who maybe not as familiar with CorMedix, and you guys have obviously had a very busy last few months with the transformational acquisition of Melinta. Can you give a quick background on the company and the deal?

Sure. I think -- I mean, up until 4 weeks ago, we're a much different business, right? For much of the last decade, we were a development stage company focused on bringing DefenCath to market, which is our lead product. For much of the last year, we were a single product commercial, right, biotech company focused on commercializing DefenCath. DefenCath is an interesting product, right? It's a catheter lock solution. It sits in the catheter in between the times catheter is accessed, but it acts as a preventative, right? It's not a therapeutic. It's preventative drug product that reduces the incidence of bloodstream infections, right? So the initial indication for DefenCath is in the hemodialysis space, hemodialysis patients, severe patients with ESRD have very high rates of infection, very severe complications for those infections. About 1/3 of patients get an infection, about 1/4 of those prove fatal and the infections happen very quickly. But DefenCath itself is, right, it's not a renal product, right? It's -- as I said, it's an antimicrobial catheter lock with broader applicability across settings of care, one of which is in the hospital space, both for hemodialysis as well as future planned indications most notably parental nutrition, right? So as part of our growth strategy, we're looking for opportunities that were, one, near-term accretive, but two, fit very well synergistically with either our existing commercial deployment, where we are today in the renal or hospital space or where we want to be in the future, right, predominantly in the hospital space. So hospital and then kind of, I'll call it, outpatient infusion, right, clinic space. Now, what Melinta has done for us is it's really transformational deal for us, right? So first, it's a very good and durable. We see a very good and durable base business there with a portfolio of approved anti-infective drugs, right, that are deployed both in the hospital inpatient setting as well as the outpatient infusion care setting. But most importantly, there's a tremendous growth driver there. We believe a tremendous growth driver in REZZAYO, right, for the prophylaxis indication. So we're excited about what that transaction has done transformationally for CorMedix.

Yes. No, it's super exciting. So maybe just starting off and digging into your first commercial product, DefenCath. Can you maybe walk through a little bit of the update on the market adoption to date since the commercial launch in mid-'24?

Sure. So for all intents and purposes, we launched in July of '24 when our outpatient reimbursement kicked in. In the hemodialysis space, about 90% of hemodialysis sessions occur in an outpatient dialysis center setting, about 10% occur in a hospital inpatient setting and the inpatient setting is split between end-stage renal disease patients and acute kidney injury patients, patients that are in kidney failure. But largely, we launched in July of '24. In the outpatient space, the market is highly concentrated. Five providers represent about just over 90% of the market. There's 2 large players, DaVita and Fresenius. There's 3 midsized players, U.S. Renal Care, IRC and DCI. U.S. Renal Care was the first to adopt DefenCath in July of 2024. We're also running a real-world evidence study with U.S. Renal Care. Later in the year, IRC and DCI began implementation. And then most recently in July, 1 of the 2 LDOs began implementing the product. So we've seen pretty good consistent uptake, I'd say, with all of our customers. We're seeing a good growth trajectory, right, with increased utilization, right, with those customers over time. Most recently, we did just raise our DefenCath guidance, right, for the back part of the year. And I think what was most notable about that guidance raise is, and I said this last week in public comments that the real catalyst for us making a decision to do the raise wasn't even what we're seeing yet with the LDO, which is still kind of growing. It was strength we're seeing with non-LDO customers and gave us kind of a bullish signal and confidence to increase that range. While I think we still have good opportunity, and we're getting now more visibility into the LDO, right, we'll update investors as we go through the year, but I think we've also still left ourselves room, right, for good growth.

Yes. Yes. That's great. And so as the first and only antimicrobial catheter lock solution, what competitive advantage do you see DefenCath having across the market? And how sustainable are they going forward?

Well, look, when you look at what the standard of care was for locking, right, historically, catheters are locked with heparin or saline, right? They don't have any antimicrobial capabilities. What's unique about DefenCath being a combination of heparin, which protects catheter patency and then Taurolidine, which is our proprietary [indiscernible] entity, Taurolidine is not an antibiotic, right? It's an amino acid, but it demonstrates broad spectrum activity against gram-positive and gram-negative bacteria as well as fungus. But it's also got a very good safety profile in terms of toxicity, right, can be safely flushed into the patient if needed. So from a standard of care standpoint for locking, there really is nothing else that hasn't -- nothing else FDA approved that has any antimicrobial characteristics. Now, there are other means for infection reduction, whether it's antimicrobial impregnated catheters or infused catheters, caps. We view those as complementary, right, to DefenCath. So they should be used in combination with DefenCath as opposed to alternatives. And that certainly, that's what's best for patients in terms of determining a future standard of care.

Yes. And will that somewhat depend on also the specific therapeutic areas or indications that you will also address?

Well, look, I think right now, right, we're approved for use in patients undergoing hemodialysis through a catheter, right? We're entering -- or in Phase III clinical study for patients getting IV nutrition therapy right through a catheter. When we talk about where we are kind of in the near to medium term, right, it's utilization that's very much right, consistent with label. Where I'd like to see this 10 years from now is that FDA's focus in terms of determining label is more about how often a catheter is accessed as opposed to what disease right a patient has because ultimately, we're not treating a disease state, right? We recognize that there's variations in how different patient populations may act in between those diseases. But our view, I think it has more to do with how often the catheter is accessed as opposed to whether they're undergoing right chemotherapy or whether they're undergoing IV nutrition therapy.

Yes. So shifting basically from a disease specific to more of a [indiscernible] agnostic.

Right. And I'm not saying today, we sit here with a pathway for that. That's where I'd like to see this go over the next decade. That's right.

Yes, super interesting. And so back on the large dialysis organization customer that you initiated with, so the utilization in patients back in early July, a system-wide rollout, targeting approximately 6,000 patients. How has this rollout effectively progressed? What has the feedback been so far? Is there an opportunity to go beyond the initial?

It's interesting. I'm really happy with what we've seen, and I want to comment for a minute on the 6,000. And it was important to us that we put a directional number out there, right, in combination or in conjunction with the LDO, but it's not a hard and fast ceiling or floor or anything. I think the door is open, right, for the product to get broader utilization. I think the LDO itself has between 40,000 and 50,000 catheterized patients, which would be right, all candidates theoretically for DefenCath therapy. 6,000 was what I think we both thought we were comfortable is achievable, right, in kind of the near term, say it, before the end of the year. But certainly, the opportunity is there for better progress.

Yes. And then in terms of the current contracted customer base representing about 60% of the outpatient dialysis centers in the U.S., how do you -- what's your strategy for going beyond the 60% capturing those?

Well, there's one customer in particular that represents most of that delta that we're short. I think all I'm comfortable saying to is we remain in discussions, right? They've not demonstrated a desire to be a quick mover, but I'd say there are more discussions post the implementation from the other LDO, right? So let's see where we go.

Yes. And then maybe shifting gears to reimbursement. I guess what does the current -- what's the current reimbursement environment look like for DefenCath and how potential changes might impact the business and adoption rates going forward?

Sure. So in the outpatient hemodialysis space, which is about 90% of the market opportunity where most people when they ask about reimbursement is what they're asking about, -- there's something called the TDAPA, Transitional Drug Add-on Payment Adjustment to the bundle. We've just finished our first year of TDAPA. We're now into year 2. Right now, the structure of TDAPA is really -- and it's only really for fee-for-service patients, is a 5-year payment system where the first 2 years are ASP-based pricing model, years 3, 4 and 5 are add-on payment to the bundle overall model, right, where that add-on payment gets split according to the proportion of dialysis treatments that each provider does in the market. There's a couple of things that I think are notable there. One, the ESRD final rule will come out later this year that will give us a kind of sense for how FDA or how CMS is thinking about the time period with which they would calculate our post TDAPA add-on payment. I think for us specifically, our TDAPA does not begin on Gen 1, right? So there's no time sensitivity to do that calculation. I think we submitted comments and encourage CMS to delay that calculation into next year to capture the utilization from the LDO that just came on, right, in July and some later time periods. We do expect that there is some legislation that will be brought forward later this year, codifying TDAPA and law and making certain improvements. I mean legislation is always very speculative and -- but we'll see -- we'll keep an eye on that and see where that goes. But that's only the really fee-for-service piece. Separately from that, we've been running our real-world evidence study with U.S. Renal Care. We expect to do an interim readout of that study probably in the fourth quarter. The goal of that study was always to be able to utilize the data with Medicare Advantage payers, right? So Medicare Advantage payers today represent about just under half of all ESRD patients. It's grown quite significantly. They, as a private payer, are in a position to contract directly, right, for separate payment for a product, especially one where I think we will be able to demonstrate the pharmacoeconomic benefit, right, to the health system of investing in prevention and replicating, hopefully, in a real-world setting what we showed in our clinical study results. Yes.

And then so maybe shifting gears a little bit to guidance and kind of the update recently. And so you laid out updated guidance for '25, DefenCath revenue between $200 million and $250 million. What drove the update to that guidance? And what are maybe some areas that can help you drive to the upper end and beyond?

Well, look, I think as I said before, the shift in guidance predominantly was based on what we saw in the non-LDO business, right? And we saw -- we're bullish about the trend we saw there with existing customers and consistently increased order size, right, as well as some new customers, some new smaller customers that came on. I do think in terms of when you say hit the top end or exceed, I think our view of where the LDO progresses over the next couple of months certainly could drive that upside.

Got it. And then now that the Melinta acquisition has closed, can you maybe walk through some of the strategic rationale? You touched on some of it earlier, but maybe a little bit more deeply and then how it transforms the business model?

Yes. No, absolutely, right? Look, it took us from a single product company largely dependent on DefenCath to a multiproduct company, right? And some of the things we talk about with DefenCath, right, having some uncertainty in the post-adaptive periods, right, for hemodialysis before we are able to get to our TPM indication and kind of that, I think this largely mitigates, right, the back part of next year and early '27 with a -- what we're viewing as a stable-ish base business, right, of these synergistic anti-infective drugs that are used in the hospital setting, right, where we want to take DefenCath as well as this tremendous or what we view as a tremendous growth opportunity with REZZAYO, right? So it really checked all the boxes for us, as I said, near-term accretive high level of operating synergy growth, right? Those are the 3 things that the Melinta transaction brought to CorMedix.

That's great. And then you mentioned REZZAYO already, but maybe among the 6 commercial products that Melinta did bring in, which ones do you see as having the biggest growth potential? And then what are your strategies to achieve that?

Right. So look, obviously, REZZAYO, I'll talk about that separately. But when we say we looked at the base business and said, okay, this is stable-ish, we do see growth there, right? Minocin got some year-over-year growth that we think is favorable. VABOMERE has got a small amount of growth. We're taking a hard look at a smaller drug like Kimyrisa, right, which has been on the market for a few years. I think it could be an ideal candidate for a relaunch. It's something that we're looking at, whether that's maybe change in marketing tactics or change in pricing tactics. It could be something there to kind of drive that a little bit more. But the largest growth opportunity and what we're most excited about is obviously REZZAYO, right? So -- when you look at REZZAYO, it is FDA approved today for treatment of invasive fungal infections, right, caused by Candida. That's a small total addressable market, right? It's about a $250 million TAM. It's almost -- not almost all, but it's majority hospital inpatient utilization. So you have that reimbursement headwind there because there's no separate payment, right, for patients that get administered into an inpatient stay. Now, prophylaxis, however, is a much different dynamic, right? So you've got a larger patient population, much longer duration of therapy and a lot of it is outpatient oncology clinics, which is buy and bill. So that product is actively in Phase III study. It's being run in conjunction with Mundipharma, who is a global partner. Mundipharma has ex U.S. rights. Melinta, now CorMedix has U.S. rights. We expect that study to complete in the beginning of 2026. Presumably, it would read out somewhere around the middle of the year, right? And hopefully, we're in a position to begin commercialization under that label in early '27, right, if all the kind of stars aligned. I think what we're excited about, the things that we saw in diligence had more to do with what is the current standard of care for prophylaxis, right? So the patient population that we're actively in Phase III, which is allogeneic bone marrow transplantation, that and a number of other kind of areas in the, call it, the hem/onc space, whether it's non-Hodgkin's lymphoma, multiple myeloma, even solid organ transplant. These are patients that are immune compromised. They're all on immunosuppressive therapy. Most of them get prophylactic antifungal treatment. right? So the current standard of care, which is the -- in the arm of our -- the comparator arm of our study is posaconazole plus Bactrum, right? And the reason 2 drugs are given, right, is because posaconazole shows activity against Candida as well aspergillus, which are 2 different strains of fungus and then the Bactum is there for pneumocystis. rezafungin, presumably, we believe, shows activity against all 3, right? So hopefully, as part of this Phase III study, we demonstrate, one, that there's no need to give Bactrim. And if we demonstrate noninferiority against posaconazole, we can presumably or hopefully become the new standard of care for the regimen. Now, even in a non-inferiority type endpoint setting, why we're excited is the existing standard of care does have some call it, issues, right, associated known drug interaction issues, right? So posaconazole has a known interaction with tacrolimus, right, and immunosuppressive drugs that are typically given. So they have to dose those a little bit lower to account for the posaconazole. Azoles as a class are known to be hepatoxic, right, which rezafungin is not. And then on the bacterial standpoint, it's known to be myelosuppressive, right, also, which rezafungin is not. So I think we are in a pretty good position, right, should the study meet its endpoint, right, for commercialization.

Yes. That's great. And so you projected roughly, call it, $35 million to $45 million in annual synergies from the acquisition. Can you maybe elaborate on where these things will come from and the time line to achieving them?

Look, I think that's something we're going to update on a little bit later in the year. We're -- I'd say nothing -- there's nothing we've seen to deviate yet from that 35 million to 45 million or the midpoint of that range. We said at the outset, the timing to capture is within 12 months. There will definitively be a decent amount that is captured before the end of the year, right? So we don't know yet what that's going to be. We'll probably, when we report earnings, put out a better estimate. But obviously, like in any deal, there's overlap of operations. There's going to be some personnel costs. There's going to be non-personnel costs. I think non-personnel costs are probably larger than people realize in terms of total contribution to total synergy. But yes, we'll give a little bit more directional guidance when we get toward the back part of the year on timing to capture.

Yes. And maybe to that point, how do you kind of -- how do you see the commercial organizations coming together, particularly in the hospital and acute setting?

Well, look, I think that's an area of both revenue and cost synergy, right? So I think we want to have one unified field team that is calling on inpatient institutions, right, that is in some way, shape and form, promoting both REZZAYO and DefenCath, right, and not necessarily as in combination. But that is an area that over the next, say, 3 to 4 months, we are heavily focused on putting together a strategic plan to kind of reprioritize call it, the product mix within the field team bag.

Yes. Yes, makes sense. And then maybe moving on to the pipeline. Let's start off with the label expansion opportunities for DefenCath. And so maybe let's -- starting off with TPN. Can you discuss the unmet need and market opportunity for DefenCath and TPN?

Sure. So TPN, patients getting IV nutrition therapy, very similar to hemodialysis have very high infection rates, right? So about 1/4 of patients undergoing IV nutrition get an infection. About 20% of those end up being fatal, right? So it's a critical unmet medical need. There is nothing currently FDA-approved drug product there for mitigation of these infections, right there's a fly buzzing around that. And it's a market opportunity, right? We've sized. We believe it's about 10 million vials of DefenCath in terms of kind of total market size. We think the total addressable market is somewhere between $500 million and $750 million, depending on where we shake out with pricing. But we think comparative to hemodialysis, the reimbursement landscape there is much more traditional, right? You're not dealing with like an add-on payment to a bundled system. We think it's about 1/3 of TPN is, we call it hospital. And within there, there's a mix of hospital inpatient and outpatient infusion clinics, right? Inpatient is obviously DRG, but the outpatient infusion clinics would be Medicare B, buy-and-bill. And then about 2/3 of it is home. And this is really interesting because a decent part of home is Medicare D, right, pharmacy benefit, which for me is very attractive because it lends itself to more traditional kind of contracting and the rebate strategy with the payer. So we're very bullish on the opportunity in TPN.

Yes. And so when do you expect to complete the registrational study with the pathway to NDA?

So we just began the Phase III study. I think first patient in was either late April or early May. We have now 7 sites up and running. We should have more coming shortly. Study, I believe, is still on track for completion end of 2026. The goal would be to have hopefully a label indication by the end of '27.

Yes. And then maybe just some additional context around what the patient population looks like in TPN. Is there a potential overlap with the larger patient population as well?

Look, I think once we get -- if we get, sorry, TPN into the label, I think there is the potential for broader spillover into other call it, hospitalized patient populations where they are high risk for infection, right? Maybe they have a PICC line that's being accessed daily or something like that. And I think those opportunities will be there. I don't know that I can quantify them today, right, or give a lot of specificity. But certainly, the more label expansion that we produce, there's going to be opportunities for investigational studies in other areas and spillover, certainly.

And then maybe one of the last label expansion piece of this is it's earlier stage, but what is the development plan for DefenCath in the oncology setting and what's the unmet need?

Yes. So that's something we are still working on. And hopefully, by the end of this year, I can give a little bit more guidance. It's taken us a little bit longer. And one of the reasons and I've talked about why we prioritize TPN over oncology being a lot of us view oncology presumably as the larger market opportunity is it's a much more straightforward clinical trial design, right, because you have a patient population that's much more uniform. Catheters are accessed daily, right? And it's -- it was essentially an easier study to design where we were looking at the endpoint. Now for oncology, oncology is not a disease state, right? It's a sector, and it's really hematology and oncology kind of thing. And you've got different chemo regimens. You've got different types of cancers, right, solid cancers, liquid cancers. And you've got catheters and ports and you've got catheters that are accessed weekly, biweekly, right? So trying to design a study that captures, right, the broadest patient population possible while best setting ourselves up for success has been a challenge. We're getting close, and we will have something to put in front of FDA soon.

Yes. And that was going to be my other question, and it might be too early to say, but the difference between the catheters and the ports in the oncology setting, what kind of problems does that...

It's just -- I'd say the infection rates in ports is lower, so which would lend itself to a higher number of patients, right, to kind of show statistical significance. So those are the types of things that we're working through.

Yes, that makes sense.

But when you're in that setting, as I said before, and you're immunosuppressed, a single infection is so devastating, right? So that's why there really is a critical unmet medical need there.

No. And the other side of it, too, is if you're not in the infusion center at the oncology clinic and go to the ER, for example, you can't get access to the port, right? And so having more solutions there makes a ton of sense. And then maybe just going back to REZZAYO for a minute. I know you covered some of the overview and the data around what you're excited about. But as you think about the call point for prophylaxis, is there a need to kind of expand the footprint to adjust for that as well?

Look, I think that's something we're going to look at. And there's a difference between do we have to expand the footprint in terms of total number of heads? Or do we have to add in a couple of incremental heads with certain specialized skill sets, right? And I think that's something that we'll look at over the next year, certainly, once we see the strength of the clinical data. I think one of the things I did forget to mention about REZZAYO, it's interesting when we look at -- or when we talk about DefenCath and these patients being immune suppressed and being so susceptible to infection, One of the things that's really, I think, interesting about REZZAYO is as a weekly -- a once-weekly dose, it doesn't require the patient to have an inserted PICC line, right? So that in itself, if you aren't wearing a PICC line, by nature, you're less susceptible to catheter-related bloodstream infections, right, which will become an issue, right, for that patient set.

Yes. No, makes a ton of sense. And then maybe beyond DefenCath and REZZAYO, what else are you looking at in terms of the pipeline?

Well, look, we just announced a deal on Monday that I think was pretty interesting for us and probably in my career, one of the more creative deals that we've put together in terms of creating, I think what I'll say is an asymmetry of risk-reward profile, right, where we've taken a moderate risk, right? We've invested $5 million in a pipe in Talphera to acquire just under 20%. In conjunction with that, we've taken a right of first negotiation to acquire the business. We have an exclusive negotiation period after the readout of the Phase III data. I think the product that they're developing is incredibly interesting, right? It's Niyad, which is nafamostat, which will be utilized in the ICU setting as an alternative to heparin as an anticoagulant in the continuous renal replacement therapy process. So I think our diligence from a commercial standpoint was really bullish on what this could be. So we're excited about that data, which we expect in the early part of '26 as well. Look, for us, as I said, this is a moderate risk way to take a shot on goal for a product that could be highly synergistic with our sales deployment in the hospital space. And these are the types of things that we want to find and do.

Yes. And so you've been super active clearly recently on the BD front. Now Melinta is behind you, Talphera. How are you thinking about capital allocation over the next year or 2 years internally versus externally?

So look, I think the internal R&D spend is somewhat known, right? It's TPN and eventually, hopefully, oncology for DefenCath. REZZAYO's clinical studies are being done in conjunction with Mundipharma, right? It's a milestone-based payment system. So it's not sitting on our R&D spend. Now in terms of future BD, I think there are certain things where we are at our stage today that are important. And I'd say criteria would have to meet what we set for ourselves with Melinta, which was near-term accretion, right, commercial synergy growth, right? Those 3 things have to be present, I think, for us to pursue another opportunity over the next 12 months.

Yes. That makes sense. And then maybe shifting back to taking a step back actually rather on the company over the next 12 to 18 months, what are the kind of the key milestones that you're looking at and you're excited about and you're driving towards?

Sure. I think -- I mean the biggest near-term milestone is probably the readout of the REZZAYO clinical data, right, next -- early to mid next year, so to speak. So yes, that's probably what I'd say we're most excited about in the near term. Obviously, we want to see how we progress commercially with our LDO. Can we add the other LDO on in any capacity, I think could be interesting, certainly, not a requirement, but interesting upside. I'd say, over the next 12 months and then TPN, hopefully, by late '26 data.

Yes. And look, I think that's really -- that's all we had. Is there anything else you feel like we should discuss or did.

No, I think you've done a great job of questions. I think we're really excited about the future direction of the business. I think -- with the Melinta acquisition now, and we're firing on all cylinders, we're focused on integration. We're on track with synergy capture. I haven't given directional guidance, but I'd say that we're definitely on track with what we estimated and what we saw, and we're excited.

Great. Well, thank you, Joe. Really appreciate you joining us today, and thank you all for attending the fireside.

All right. Thank you.