Health and Healthcare

Why CorMedix Could See 300% Upside From the Defencath Central Venous Catheter

Jon C. Ogg

Published: September 21, 2020 10:31 am

It may be unusual to see nearly a 10% gain from a single analyst call. When analysts call for upside of more than 100% it can attract some attention. Monday’s top analyst upgrades and downgrades included a new Buy rating initiated on CorMedix Inc. (NASDAQ: CRMD) from Truist Securities. The firm assigned a $20 price target. The stock closed at $4.61 a share on Friday.

Joon Lee, the Truist Securities analyst behind the call, noted that CorMedix’s Defencath could change the standard of care when it comes to central venous catheters (CVCs). The view started with hemodialysis and noted that oncology and nutrition are the next low hanging fruits to go after.

Remember that no single analyst report, no matter how positive or negative the calls are, should ever be used as the sole basis for buying or selling a stock.

A CVC is a medical tool that is used to deliver drugs or nutrients to a patient, and it can act as a route for hemodialysis. With high rates of infection associated with this, the current standard of care promoted by Centers for Disease Control and Prevention is “good hygiene,” according to Lee’s report.

While Defencath is offering what would appear to be exponential upside in the report, also investors should know that the drug is currently under U.S.  Food and Drug Administration (FDA) priority review and its Prescription Drug User Fee Act (PDUFA) date is currently listed as February 28, 2021.

This was previously in a Phase 3 study that was stopped at interim analysis. That trial halt was recommended by the Data Safety Monitoring Board because the study showed a 72% reduction in infection versus the comparator arm. The recommendation was listed as “overwhelming efficacy” in that report.

The Truist Securities report suggests that Defencath could change the standard of care, with conservative peak sales of roughly $400 million in hemodialysis alone. Lee’s report also suggests that Defencath also could be approved in oncology use, with a total addressable market that is about 1.7 times larger than the hemodialysis market.

The CorMedix new drug application was accepted by the FDA on August 31, 2020, and it was granted Priority Review status that assured an expedited six-month review for Defencath. As far as how much Defencath can shake up the old regime, Lee’s report said:

Defencath contains, taurolidine which, upon coming in contact with microbe, destabilizes the cell membrane preventing biofilm formation and subsequent destruction of bacteria. Based on taurolidine’s MOA, resistance is unlikely and there are no reports of resistance to-date from both gram-negative and gram-positive species. Also, taurolidine stays in the catheter with minimal to no exposure to the patient. Phase 3 study and other investigator sponsored studies have shown excellent safety profile.

While the pandemic has negatively affected other drug or related studies, the Truist view is that the pandemic is a tailwind for an expedited approval. The report added:

One of investor concerns on the stock has been whether the FDA would even accept an new drug application filing based on a single positive study when drugs typically require duplicate studies for approval. However, we think FDA’s willingness to not only review the drug but with a priority review status is highly reassuring and validates Defencath’s value proposition. Also, we think the current pandemic environment favors drugs such as Defencath that can reduce potential hospitalizations from catheter related blood stream infections.

The current base case is $20 for the official price target. That is up over 300% from Friday’s $4.61 closing price, and up just over 3% after the 8% gain to $4.98 that was seen on Monday morning. Truist also listed a bullish case of $50 a share if the corresponding products and technology value are fully approved and capture 100% of their sales potential. To be fair and balanced, Truist’s bearish case is only a $1.00 stock, based solely on its current net cash position.

CorMedix has traded in a range of $2.16 to $8.48 over the past 52 weeks. Investors should consider that this company effectively has no revenues now, and it came public back in 2010.