CorMedix: CRL Resolution Likely

Summary

• Today we look at CorMedix, whose shares have had a wild ride thanks primarily to the CRL it received from the FDA around its primary drug candidate.
• The CRL is likely to be resolved, but does that mean investors should buy the dip in this stock?
• A full analysis on CorMedix and our view on that question is provided in the paragraphs below.
• I do much more than just articles at The Biotech Forum: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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"After you find out all the things that can go wrong, your life becomes less about living and more about waiting."― Chuck Palahniuk, Choke

Today, we look at a small cap concern which is focused on getting its primary candidate over the finish line and to garner FDA approval. It has been a wild ride for its shareholders so far in 2021, due primarily to a recent roadblock in that effort. We examine what is next for this concern below.

Company Overview:

CorMedix (NASDAQ:CRMD) is a Berkeley Heights, New Jersey-based biopharmaceutical company that started trading on the NASDAQ in 2021. The company's focus is on the prevention and treatment of infectious and inflammatory diseases. The lead product candidate is called Defencath, which is designed to prevent catheter-related bloodstream infections in patients with end-stage renal disease receiving hemodialysis through a central venous catheter. Also, the company is working to leverage its taurolidine technology to develop a pipeline of antimicrobial medical devices. Thus far, their active research programs include surgical sutures, meshes, and topical hydrogels. Additionally, CorMedix is working to develop taurolidine-based therapies for rare pediatric cancers. CorMedix currently has a market capitalization of approximately $360 million and trades for around $9.50 a share.

Pipeline:

Source: Company Presentation

Defencath:

Defencath is an antibacterial and antifungal solution being developed for the prevention of catheter-related bloodstream infections in patients with end-stage renal disease receiving hemodialysis through a central venous catheter. The drug is a proprietary formulation of taurolidine 1.35%, citrate 3.5%, and heparin 1000 units/mL that is used as a catheter lock solution for reducing the risk of infections from indwelling catheters. Taurolidine, the key compound in Defencath, is an amino acid derivative. Defencath is already available in Europe and other territories under the brand name Neutrolin. In January 2015, the FDA granted Fast Track and Qualified Infectious Disease Product designations for Defencath.

Source: Company Presentation

For hemodialysis alone, the target market for Defencath in the United States is approximately 80 million vials. Catheter biofilm develops within 24 hours and can lead to life-threatening infections, costing the United States healthcare system billions. It's estimated that 250,000 CRBSIs occur annually in the United States. With no drugs approved in the U.S. for the prevention of CRBSI in central venous catheters, the need is immense.

Source: Company Presentation

In a Phase 3 trial called LOCK-IT-100, Defencath demonstrated statistically significant and meaningful results such as a 71% reduction in the risk of occurrence of CRBSI in 795 hemodialysis subjects. Additionally, the safety profile proved to be comparable to heparin catheter lock solution, which is the standard of care for preventing clotting. With solid clinical results and a November 18th announcement that the Antimicrobial Drug Advisory Committee meeting for the drug was not needed, approval on the PDUFA date of February 28, 2021, seemed imminent to some.

However, on March 1st, the company received a Complete Response Letter from the FDA stating that the agency could not approve the NDA for Defencath in its present form. The FDA has concerns about the third-party manufacturing facility following a review of records requested by the FDA and provided by the manufacturing facility. More detail was not provided, but the company intends to work with the FDA to resolve the issue. Also, the FDA is requiring a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications.

A meeting with CorMedix and the FDA should occur soon. Of note, Covid-19 could potentially slow down the process. For example, if an inspection is required, the FDA is currently facing a backlog due to the pandemic. On a positive note, the FDA did not request additional clinical data and did not cite any issues with the safety or efficacy data of Defencath. Despite the setback, the firm will also continue to expand its efforts to prepare for the commercial launch of Defencath, which includes such activities as dialoguing with key payors.

Source: Company Presentation

Analyst Commentary and Balance Sheet:

The company ended FY2020 with just over $45 million of cash and marketable securities on the balance sheet after posted a net loss of $6.1 million in the fourth quarter. CorMedix has raised $41.5 million in net proceeds from ATM issuances since the beginning of 2021. The company stated on its recent quarterly earnings press release that it had sufficient resources to fund operations at least into the second half of 2022.

Since early March, five analyst firms have reiterated Buy ratings on CRMD, albeit three come with downward price target revisions. On March 2nd, B Riley FBR reiterated its buy rating, but they lowered their price target substantially from $25 a share to $13.50 a share. The lowered price target is the direct result of the Complete Response Letter issued by the FDA for Defencath. The analyst noted that the CRL appears to be the result of manufacturing issues and not concerning the safety or efficacy of the drug; however, specificity is needed.

Prior to the CRL, analysts were a bit more excited about the company's prospects. On February 17th, Needham & Company initiated coverage with a buy rating and a $31 price target. The analyst at Needham & Company is excited by the lack of competition that Defencath will face in the marketplace, and he is projecting over $500 million in U.S. sales by 2025. Needham reissued the same Buy rating and $31 price target on March 31st. The four other analyst firms have price targets ranging from $10 to $23 a share.

Verdict:

On the bright side, I believe the company will be able to resolve issues within the CRL and push Defencath across the finish line, hopefully sometime this year. This is the conclusion by another Seeking Alpha contributor in a recent article as well. That said, CorMedix does not possess the multiple 'shots on goal' I like to see in the developmental space before I consider a significant investment. In addition, new antifungal/antibiotic products tend to have slower than projected roll outs even if they are much needed. CorMedix probably will have to continue to dilute shareholders for some time before hopefully gaining enough traction with Defencath sales growth and becoming cash flow positive. Given that, I am staying on the sidelines with this name for the time being.

"For somehow this is tyranny's disease, to trust no friends."― Aeschylus, Prometheus Bound

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Bret Jensen]

CorMedix (NASDAQ:CRMD) has met with the FDA to discuss solutions to the deficiencies identified in the Complete Response Letter (“CRL”) to its marketing application for DefenCath™ (taurolidine/heparin catheter lock solution).
The discussions have also involved the third-party manufacturer (“CMO”) who was cited by the FDA in the CRL after a review of the records.
As required by the FDA in the CRL, the company has agreed to a protocol for the manual extraction study for confirmation of in-process controls.
The study is expected to indicate that the labeled volume can be consistently withdrawn from the vials. The company anticipates fulfilling the requirement within several weeks.
In early March, CorMedix dropped sharply after announcing that the FDA has declined to approve its marketing application for DefenCath™ (taurolidine/heparin catheter lock solution).

[JoshE]

@Bret Jensen So yesterday's precipitous drop is due to the need for a manual extraction study? Seems to confirm your thesis regarding the probable need for additional dilution.

[Bret Jensen]

@JoshE Does seem that way

[john boy]

@Bret Jensen
Any idea when the Fda could approve defenccath

[herwilagn]

Great article, thanks.

[Bret Jensen]

@herwilagn YW. Glad you enjoyed it.

[john boy]

I would like to know at what price Bret was placing on a vial, I have worked in health caree and wife was a cost accountant for hospital group we think CRMD should get 10 to 12$ per vial and with ER numbers added this should be a billion dollar per year in sales by 2025 if they get FDA approval by say SEPT.

[Chimpanzee ate my face]

When is a CRL resolution going to be likely for Acadia? Should we double down at these levels? Thanks.

[Bret Jensen]

@Chimpanzee ate my face Don't think ACAD gets CRL resolution without further studies. Still has room to grow Nuplazid sales based on approved indication and off label use. I added using covered calls.

[Rhmassing]

Reason given for the CRL sounds so familiar and so often these days. Just a few days ago, PRVB, a co developing a drug to delay/haul the emergence of T1 diabetics was halted for similar reason for using a different supplier of drug manufacturing before the FDA approval date in June. Sounds like these concerns could have been provided to biotech cos much earlier, particularly for those applicants with breakthrough and priority designations FDA had given. Both are trading at more than half of its high with significantly efficacy proven in trials meeting critical medical needs. Puzzling!

[Rich5444]

everything is right about the drug but seems like just bcz FDA couldn’t make physical inspection, it threw a little tantrum of small couple things in CRL. If the stats are true, this should be approved in an instant. So many people are dieing due to CRBSI & $$ spent in treating CRBSI is huge.