CorMedix Inc. Q4 FY2024 Earnings Call

Good day and welcome to the CorMedix Inc. Fourth Quarter and Full Year 2024 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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 Chief Financial Officer; Beth Zelnick Kaufman, Executive Vice President and Chief Legal and Compliance Officer; Liz Hurlburt, Executive Vice President and Chief Clinical Strategy and Operations Officer; and Erin Mistry, Executive Vice President 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 facts 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 and 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's 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 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 7th. 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 US 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 six 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 three 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 the DefenCath implementation was pushed into 2025 due to operational resource constraints. Over the course of February and early March, we've 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're 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 four to five 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 CLABSIs 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 three additional clinical initiatives, all having either commenced in 2024 or expected to begin in 2025. The most meaningful of the three from a data value standpoint is our real-world evidence study, which we are running in cooperation with our study partner US 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 three to five 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 31st, 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 the 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 is 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 31st, 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 7th 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.

Thank you. We will now begin the question-and-answer session. The first question today comes from Roanna Ruiz with Leerink Partners. Please go ahead.

Hey, good morning, everybody. 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?

Let me comment on the inpatient ramp and then I'll let Erin and Liz add a bit about the team and its deployment. We were a little slow to start on the inpatient side last year, which is not unusual for this setting of care or for these types of launches. It takes quite a while to work through pharmacy and therapeutics processes. I am pleased with what we've seen in the first quarter. As I said, we don't report inpatient separately at this time, but for the first quarter inpatient is looking to be about 3% of unit volume and 4% to 5% of dollars. I feel pretty good about that trend. Inpatient as a total is roughly 10% of the unit volume of the overall market opportunity. If we can move toward that as we get into 2026, that's certainly a target we'd like to achieve. We are in the process of completing the staffing of the last two to three roles to fill out the team completely. Training is near complete and we hope to have them out in the field in the next four to five weeks. Erin, do you want to comment beyond that?

Sure. What we plan for the team to do right out of the gate is focus on large academic medical centers similar to before. They are not starting from scratch: these hospitals either are going through the P&T process now or they have already ordered DefenCath. We will make sure they have the support they need to ramp orders, and we're also aligning them closely with VA medical centers that are typically in the same territories or regions.

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

Thanks, Roanna. I'll comment on the guidance and what we mean by it. I know it's unusual to guide for part of the year, but the $50 million to $60 million range is really what we view as our base business from existing purchasing customers for the first six months of 2025, with upside if we bring in new customers or if our LDO customer starts buying in the second quarter. On price erosion, I won't give an exact percentage, but here's how we're thinking about it. Our agreements with customers include discounts and rebates off of government ASP. Government ASP has remained relatively stable; it started at a WAC level during TDAPA and then it adjusted in the first quarter, which was down only about 1% from the prior quarter. The second quarter should still be fairly stable. By the third quarter, it is expected to come down a bit. We expect a shelf stock adjustment at the end of the second quarter as we move into the third. What we do not yet have a clear handle on is how much inventory will be in the channel at the end of the second quarter, and that uncertainty factors into the revenue range we provided for the existing base over the first part of the year. So some price erosion is expected beginning in the second quarter, and it could affect subsequent quarters depending on channel inventory and ASP adjustments.

Thank you. And our next question today comes from Jason Butler with Citizens JMP. Please go ahead.

Hi. Thanks for taking the question and 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. We're being as supportive as possible. We've had a number of information requests from the LDO, particularly around support services we could provide for training and reimbursement, and we've made our staff available across those areas. We're hopeful they will stick with their original implementation timeline of midyear, but we've been told only that implementation was pushed into 2025 due to operational resource constraints. That's the basis for our hope; we continue to work with them closely.

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. They haven't indicated they will deviate from the previously discussed magnitude. There is a possibility that the number could be higher or lower, but we have not received any indication of a change. Right now, our objective is to make all CorMedix resources available to them to accelerate rollout in both speed and scale.

Great. And then just 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? Thanks.

With respect to the other LDO, we remain in communication and have provided additional information, but progress has been slower than we would have liked over the past couple of months. We're pursuing both top-down engagement with senior management and bottom-up engagement with joint venture entities that have decision-making authority. Some of those joint ventures have expressed interest, and we hope to make inroads over the next two to three months. On the small provider side, we are shipping to a number of smaller customers, some with 10 to 20 dialysis centers, and to some health systems that have 10 to 25 hospitals. Building inroads with these smaller customers and increasing their ordering size and frequency is an important focus for the remainder of 2025.

Okay, great. Thank you for taking the questions.

Thank you. And our next question today comes from Gregory Renza with RBC Capital Markets. Please go ahead.

Hi, guys. It's Anish on for Greg. Congrats on all the progress and thanks for taking our questions. 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 two-to-three 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 so much.

Thanks, Anish. On TDAPA and Medicare Advantage trends: when we launched in mid-2024 in the outpatient setting, essentially 100% of claims were fee-for-service initially because Medicare Advantage can have a lag in picking up TDAPA. By the back part of last year we began to see a shift to Medicare Advantage. We closed out the year with about 25% to 30% of claims being Medicare Advantage. Through the early part of the first quarter of 2025, roughly 40% of our claims are Medicare Advantage and commercial payers, and 60% are fee-for-service. For the broader ESRD market, approximately 80% to 85% of patients are covered by Medicare, and within that cohort approximately half are fee-for-service and half are Medicare Advantage. We expect Medicare Advantage market share of ESRD to grow over time and ultimately believe it could reach about 70% of ESRD patients. That growth represents an opportunity for CorMedix. To prepare for out-years of TDAPA and to support sustainable reimbursement, we are running a real-world evidence study with US Renal Care to generate pharmacoeconomic data regarding DefenCath's impact on cost of care, infection rates, hospitalizations and antibiotic use. We intend to use that evidence in direct contract negotiations with Medicare Advantage plans or other payers to secure separate and more sustainable reimbursement. On the second part of your question about levers to maximize uptake, the real-world evidence and pharmacoeconomic data are key. Additional commercial execution — including field support, reimbursement assistance and targeted hospital engagement — will also be important to position DefenCath for the best possible post-TDAPA adjustment.

Thank you. And our next question comes from Les Sulewski with Truist Securities. Please go ahead.

Hey, this is Jeevan on for Les. Thanks for taking our questions. We recently saw the news on FDA's acknowledgment of bloodline shortages that might impact hemodialysis procedures. Can you provide any commentary if this has any impact on utilization or uptake of DefenCath? Thank you.

Thanks. I don't think this will have any impact on DefenCath utilization, but I'll let Liz explain why.

Thanks for the question. The good news is there are two equivalent alternative manufacturers for bloodline products, so hemodialysis is not expected to stop. Dialysis providers feel comfortable using alternatives. I do not anticipate any impact to DefenCath utilization from these bloodline manufacturing challenges; it's a separate manufacturing issue 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 into Q1? Thank you.

Are you asking about inventory availability and capacity? We have more than a year's worth of finished dosage inventory on hand at our current run rate. We're well situated. We have two finished dosage contract manufacturers, and one is underutilized so we can pivot quickly. From a finished dosage standpoint, we do not expect challenges filling the open purchase orders we have into the first quarter.

Thank you. And our next question comes from Serge Belanger with Needham & Company. Please go ahead.

Hi. Good morning. This is John on for Serge today. Thanks for taking our questions. First, if you can just quickly give us the current business mix between the various MDOs that you have on board, obviously US 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?

Thanks, John. From a business mix standpoint, the exact percentages are provided in our 10-K for how we closed out 2024. US Renal Care still accounts for more than 80% of orders through that period, though that percentage is declining as other customers ramp. Beyond that, we are not providing customer-specific guidance at this time but will reassess as the year progresses. Liz, do you want to comment on the TPN study design?

Sure. Our NutriGuard study, the Phase 3 randomized double-blind two-arm study looking at efficacy and safety of DefenCath for adult patients receiving TPN, is focused on patients who have had a CLABSI in the last 12 months. Patients with a prior CLABSI are at higher risk for another infection and have an average infection rate of approximately 20% to 25%, so they are similar to dialysis patients in terms of vulnerability to infection. These patients may be immunocompromised for various reasons and, unlike dialysis patients who access their catheter three times a week, TPN patients access theirs daily. This distinction informs the study design and the expected infection dynamics.

Yes, that's great. Thank you very much.

Thank you. 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?

I believe you're referring to the policy change in November that removed TDAPA from benchmarks for kidney care entities participating in CMMI programs, which means those patients can accept TDAPA payments without being penalized in their benchmarks. At the time we provided guidance, we expected a patient lift of somewhere around 15% to 20%. We did see that lift in patient numbers in the first quarter, particularly at US Renal Care. Overall, this change removed a headwind and is positive for innovative products in this space.

Okay, great. And 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?

There is a lot of trepidation from investors given the change of administration and discussions about potential pharmaceutical pricing initiatives. From our perspective at CorMedix, we view many of the proposed directions as an opportunity rather than a risk. If the administration focuses on reducing government healthcare spend, DefenCath fits well into that agenda: the government spends over $3 billion annually on CRBSI-related costs in inpatient and outpatient hemodialysis, and if we can replicate our clinical results in the real-world setting we could contribute to reducing that spend. If the administration emphasizes making American healthcare stronger, our ability to reduce infections, hospitalizations and antibiotic use aligns with that goal as well. More broadly, political change can create opportunities to revisit prior decisions or to advance legislative initiatives; there is bipartisan interest in TDAPA reform and potential for improvements to better incentivize innovation and reimbursement for novel therapies. We see potential upside in policy discussions and remain focused on demonstrating value in clinical and economic terms.

Great. Thank you for that, Joe. 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?

We have established a third-party hub to help providers navigate claims and reimbursement. Erin, do you want to describe how that's set up?

Sure. We work with a third-party services partner that interfaces directly with CorMedix and our customers across inpatient and outpatient settings. Their main focus areas include benefits verification for patients and specific billing and coding expertise to ensure claims are submitted correctly—for TDAPA on the outpatient side, NTAP on the inpatient side, and J-codes where applicable. They can also navigate payer policies and manage complex state Medicaid challenges our customers might encounter.

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 is CorMedix situated from a raw material standpoint?

We have more than a year's worth of finished dosage inventory on hand at our current run rate, so we are well positioned for the anticipated ramp based on current expectations. If the LDO or another large customer wanted to ramp significantly beyond our current run rate, we can pivot within a matter of a handful of months. We have sufficient raw materials—heparin and taurolidine API—on hand to cover at least a year's supply at current usage, and several additional lots of taurolidine API are on order for delivery in the back part of the year. As I said, we use two finished dosage contract manufacturers and at least one is underutilized, so we have capacity to scale finished product relatively quickly. Overall, our ramp time would be measured in months rather than quarters, and we are not constrained by raw material availability for the planned 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.