CorMedix Is A Drug And Medical Device Company Focusing On The Anti-Infective Space
CorMedix's (NYSEMKT:CRMD) first commercial product, Neutrolin?, available in Europe, addresses catheter-related blood stream infections. It recently successfully concluded a phase 3 trial for hemodialysis catheter usage and has plans to pursue oncological applications.
The company has a market cap under $100mn, no debt, and per the last quarterly update, insufficient cash on hand to reach 2019. However, an At Market Issuance Sales Agreement (ATM) is in place for ~$15mn, which if fully utilized, would result in total common stock of around 140mn shares. CorMedix had received a going concern opinion from their auditors previously and so, funding is a near-term issue for the company. Per their most recent 10-K, we should expect something this quarter that more definitively lays out their capital strategy.
The company is under-capitalized to fund a phase 3 trial for oncology, which is a larger market than the dialysis opportunity. Nonetheless, positive signs exist, such as open-market purchases and PIPE participation by board members including Gary Gelbfish, Mehmood Kahn, and Myron Kaplan. In addition, the product is already manufactured for use in the European market; presumably with FDA approval, CorMedix' management would have the knowledge to scale production to meet US need. In addition, significant NOLs for this New Jersey-based company may offer additional financing if they can be sold separately as others in the state have done.
While CorMedix Has Several Early-Stage Products, Including Mesh And Sutures, We Will Focus On The Recently Completed Hemodialysis Opportunity Given Its Successful Phase 3 Completion
For patients with chronic conditions in which clinicians frequently need to administer drugs intravenously, central lines are a mainstay of medicine. Central Venous Catheters (CVCs) and Peripherally Inserted Central Catheters (PICCs) are frequently used in dialysis patients, chemotherapy patients, and patients receiving parenteral nutrition.
Domestically, CorMedix identifies the US market for CVC in Hemodialysis, Oncology, and ICU patients as 468,000, 7,740,000, and 5,700,000 respectively (Investor presentation). Quantified a different way, there are approximately 245 million days annually that patients in these three categories carry CVCs. That creates 245 million opportunities for infections in these lines. Blood clots (thrombosis) are also a concern in this population.
Catheter-Related Blood Stream Infections (CRBSIs) and Thrombosis occur at a rate of 3.5 CRBSIs and approximately 2 episodes of Thrombosis per 1000 catheter days. This implies nearly 900,000 infections annually in CVCs, so for all of their convenience, there are hazards to CVCs as well that are not currently well controlled with current practice.
Neutrolin is a blend of Taurolidine (1.35%), Citrate (3.5%), and Heparin (1000 units/ml) being tested as an anti-infective in the lumen of the CVCs of hemodialysis patients. When my investing companion Matt Rosenberg first brought CorMedix to me as a potential investment candidate, I was a little hesitant because Neutrolin isn't really a drug in a classical sense being administered to the patient. I only invest in therapeutics, not devices or diagnostics, and Neutrolin is only injected into the lumen (the plastic tube) of the catheter, so under normal conditions, Neutrolin would fall outside my investment thesis.
However, I decided Neutrolin was worth a look. The primary reason is that if Neutrolin is approved and adopted, and it should be, it would fill an unmet medical need of profound importance. Health care costs escalate substantially in patients with CRBSIs. More importantly, in a patient who is already health-compromised, it is not helpful when the very device that is supposed to help improve health and quality of life becomes the source of a potentially deadly infection. And since frequently CRBSIs are introduced in a medical setting, there is a high probability of picking up a multi-drug resistant bug. The mortality rate in the US for CRBSIs is between 12% and 25%1.
Anti-infective agents, in general, have been a tough investment space over the last year. But that sentiment ignores the reality that more anti-microbial agents are sorely needed in the medical space. Anti-microbials include both antibiotics and antifungals where the latter category is a growing public health hazard. Neutrolin offers an even better value proposition in that it helps with the prevention of both varieties of infection.
The Active Anti-Microbial Portion Of Neutrolin Is An Interesting Molecule Called Taurolidine
As its name might suggest, Taurolidine is a chemical derivative of the amino acid Taurine. As eluded, Taurolidine is not an antibiotic per say, but rather appears to inhibit the binding and adhesion of bacteria and fungi to the surfaces of the catheter lumen where they would normally set up shop, reproduce, and produce bio-film and essentially build up a critical mass capable of then producing an infection2.
In terms of mechanism, in a biological environment, Taurolidine converts to methylol-taurultam. This entity appears to bind "fimbriae" on the surfaces of bacteria3 and fungi4 which are required for adhesion and biofilm formation.
Neutrolin is already approved in the EU and in a post-marketing study that followed 202 patients at 20 dialysis centers in Germany, Neutrolin was effective in reducing CRBSI and Thrombosis. The study looked at 15,464 dialysis sessions over a 26-month period (representing 36,083 catheter days) and reduced CRBSI by 96% and Thrombosis by 96.7%. In the US, CorMedix recently completed their Phase 3 trial studying Neutrolin entitled LOCK-IT-100. The trial had been the subject of a ton of criticism due to some of the trial management. Fortunately, however, LOCK-IT-100 had a happy ending and the trial was stopped for efficacy by the Data Safety Monitoring Board in July of 2018. CorMedix will now package up the findings and likely pursue an NDA.
In Europe, there are other Taurolidine containing catheter lock products. TauroLock is marketed in the EU and is a very similar product. Incidentally, TauroLock is the subject of a patent infringement lawsuit filed by CorMedix several years ago and currently has a hearing date of November 20, 2018 (page 19 of their most recent 10-K). TauroLock carries 4% citrate as opposed to 3.5% in Neutrolin and comes in two different "flavors" with either heparin (100 units/ml) or alternatively urokinase (25k IU) as an anti-thrombolytic for high flow rate requirements. The data in Europe builds on the solid case for efficacy in hemodialysis5, but also in parenteral nutrition.
Will Neutrolin Be Successful?
Unlike many of the products in development that I study, Neutrolin really isn't in question in terms of its efficacy. In my view, the medical community should really like Neutrolin because unlike antibiotics, the use of Taurolidine will not contribute to multi-drug resistant pathogens. It also fills an unmet medical need in preventing infections in a sensitive patient population. This doesn't end with hemodialysis patients but will extend to oncology, TPN, etc. Lots to like. The question will really be one of adoption in the U.S. After all, Neutrolin is already available in Europe and it isn't yet catching fire there.
I would argue that CorMedix's best future for Neutrolin would lie in the hands of a larger company that could apply the appropriate resources to its market penetration. In other words, CorMedix should hang out the "For Sale" sign. I've offered this opinion about other companies like Verastem (VSTM), but they don't necessarily follow my advice. In the case of Verastem, it appears that they have decided to raise capital in order to build out their own sales platform. In determining who will sell and who will not, it's helpful to look at the ownership and vision of leadership, and I think in the case of CorMedix, they are a more likely candidate for divestiture.
If it were up to me, I would pursue a sale of the company immediately after FDA approval of Neutrolin. For at-risk capital, CorMedix appears to represent a worth-while short-term investment. With no debt, and with a more clear path to approval on Neutrolin, CorMedix may be able to pursue debt opportunities to fund the company instead of additional dilution. With the ATM offering already in place, this path of least resistance seems likely to be exercised, but will not create an oppressive amount of dilution for the company. In the case of Verastem, after the acceptance of their NDA, they utilized an ATM offering in a manner that likely suppressed the share price for a period of time. With the recent appreciation in CorMedix value, it's possible that the same is happening.
Timing an investment between now and when the company's capital uncertainty is solved (or not solved) represents both the risk and the opportunity with this equity. I can't say what the appropriate valuation of the stock is at this time, but if Neutrolin is approved, given the potential market size, CorMedix appears undervalued.
Thanks to Matt Rosenberg for introducing this interesting micro-cap biotech to me and for providing perspective on some of their corporate matters.
1. Gahlot R, Nigam C, Kumar V, Yadav G, Anupurba S. Catheter-related bloodstream infections. International Journal of Critical Illness and Injury Science. 2014;4(2):162-167
2. Gorman SP, McCafferty DF, Woolfson AD, Junes DS. Electronmicroscope observations of bacterial cell surface effects due to taurolidine treatment. Lett Appl Microbiol. 1987;4:103-109.
3. Caruso F, Darnowski J, Opazo C, Goldberg A, Kishore N, Agoston E, Rossi M. Taurolidine Antiadhesive Properties on Interaction with E. coli; Its Transformation in Biological Environment and Interaction with Bacteria Cell Wall. PlosOne 2010;5(1):e8927.
4. Celerin M, Day AW. Sex, Smut, and RNA: The complexity of fungal fimbriae. Int J Plant Sci 1998;159(2):175-184
5. Liu Y, Zhang A, Cao L, Xia H, Ma J. Taurolidine Lock Solutions for the Prevention of Catheter-Related Bloodstream Infections: A Systematic Review and Meta-Analysis of Randomized Controlled Trials PlosOne. 2013;8(11)e794417
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