Special Report

TICKERS: CRMD

CorMedix Transformative Anti-Infective Technology for Catheters Developed to Decrease Serious Drug-Resistant Infections: CEO Randy Milby

Patients on dialysis and cancer patients with indwelling catheters live with the possibility of contracting drug-resistant infections that can become more life threatening than their primary diseases. CorMedix Inc. (CRMD:NYSE.MKT) is developing a platform that has shown impressive results in preventing serious bloodstream infections. In this interview with The Life Sciences Report, CorMedix CEO Randy Milby addresses his company's science, pipeline and market opportunity. Chief Scientific Officer and Cofounder Antony Pfaffle, an internist who practiced nephrology, joins the conversation to relate his experience managing chronically ill patients undergoing catheter-based therapies in the critical care setting.

Management Q&A: View From the Top

The Life Sciences Report: The World Health Organization (WHO) has said, and I'm paraphrasing, that we live in a post-antibiotic world. Antibiotic resistance is a fact of life now, and in a couple of decades most of the antibiotics on pharmacy shelves and in hospital dispensaries will not be effective against new subspecies of bacteria that are sure to emerge. What is being done to address this?

Randy Milby: Rapid mutations are leading to increased antibiotic resistance, and we can foresee a future where the seemingly innocuous infections of today can no longer be treated with the current armamentarium of antibiotics. Few antibiotics have been approved since 1987. Five were approved in the 2014–2015 time frame, but it has become difficult to develop agents with novel mechanisms of action. In fact, most recently approved agents belong to an existing class of antibiotics.

"We believe CorMedix is very well positioned given renewed government focus on antibiotic resistance."

To that end, and to answer your question, Congress passed the Generating Antibiotic Incentives Now (GAIN) Act, which President Obama signed into law in July 2012. The GAIN Act allows the FDA to grant Qualified Infectious Disease Product (QIDP) designations and exclusivity to encourage companies to develop such products. Our lead pipeline product Neutrolin®, which is not an antibiotic, is now in Phase 3 (NCT02651428) and has the QIDP designation. Neutrolin is taurolidine + citrate + heparin, and CorMedix is developing it to prevent catheter-related bloodstream infections in patients undergoing hemodialysis.

TLSR: QIDP is like a fast-track designation, right?

RM: It does include a fast track, but it's even more valuable than that. For example, a new chemical entity has five years of market exclusivity; however, with the QIDP designation, in addition to fast-track status, CorMedix has an additional five years of exclusivity on top of the first five.

TLSR: Why haven't more companies looked into non-antibiotic modalities to deal with both prevention and directly with infections as CorMedix is with Neutrolin?

RM: Historically, traditional medicine has focused on treatment rather than prevention, and it's generally more profitable to treat than to prevent. Drug manufacturers have tended to focus on higher-margin products, such as oncology drugs or orphan disease therapeutics, where special incentives and pricing are favorable. Anti-infectives have taken a backseat to these other, sexier products.

TLSR: Antibiotics are essentially a drug category that developers have not wanted to pursue because they take about the same amount of time to develop as oncology agents, yet an antibiotic is used for a very short period of time before it has either cleared the infection or the clinician decides it doesn't work. That's a lack of incentive, isn't it?

RM: Historically it has been, and that's why the GAIN Act and QIDP double the period of market exclusivity that directly benefits CorMedix. The U.S. government and the FDA are encouraging companies to increase development efforts in antibiotics because of the increased awareness and fear of the post-antibiotic world of resistance. We believe CorMedix is very well positioned given this renewed government focus and current regulatory environment.

TLSR: Looking at CorMedix technology caused me to wonder if the company is focused, in part, on preventing chronic catheter-related infections and thrombosis by inhibiting stasis of bacteria in dialysis catheters. Is that right?

RM: That's just part of it. Biofilms form when bacteria adhere to surfaces in aqueous environments. They begin to secrete a viscous, gluelike substance that can adhere to multiple materials. Once a biofilm forms, bacteria, fungi and other materials become enmeshed in its matrix, and they become significantly more difficult to eradicate.

"Our goal is to prevent biofilm formation, not treat it once it has already formed."

An indwelling catheter provides an attractive host for biofilm development. The taurolidine portion of Neutrolin prevents the biofilm from adhering to the luminal surface in the first place by destroying the fimbriae (protein filaments on the bacterial cell) and flagella (whiplike structures with a complex attachment to the bacterial cell that allows it to move), thus preventing the biofilm formation. Our goal is to prevent biofilm formation, not treat it once it has already formed.

TLSR: Catheters are used in many ways in medicine. Does CorMedix have other indications planned for this platform?

RM: Absolutely. What we've stated is that we will be the taurolidine franchise. The other applications are in the medical device space. The CorMedix team is laser-focused on getting our Phase 3 study completed. But in preclinical studies, we have programs incorporating taurolidine into sutures, as well as a coating for implanted devices.

TLSR: Address the implantable device idea. What might that include?

RM: An implantable device could involve orthopedic prosthetic applications, or it could be cardiovascular applications. Not only does taurolidine prevent formation of biofilms, but it also has an anti-inflammatory effect, inhibiting interleukin-1 (IL-1) and IL-2. That anti-inflammatory effect is critical for implantable devices. We currently are conducting early-stage work in nanofiber webs, or surgical meshes, either coating or embedding taurolidine in those materials.

TLSR: What about the potential use of taurolidine, perhaps in some combination, for use to prevent chronic urinary tract infections (cUTIs) where patients get encrustation in their catheters. Are you thinking that way?

RM: Yes. That is a great question, because approximately 10–20% of hospitalized patients are catheterized, and catheter-associated UTIs account for 40% of all the nosocomial (hospital-acquired) infections. Urinary or Foley catheters do provide a nexus for biofilm formation, so it makes sense that taurolidine could be effective in preventing biofilm formation if used as a lavage in the Foley catheter. We would eventually expand our trials to look at the Foley and other indwelling catheters. But right now we're focused on getting our two Phase 3 trials completed so we can apply for FDA approval. We intend to perform label-expansion trials later.

TLSR: There are fewer hospitals and nephrology/dialysis centers than there are regular physician practice management groups. If you get through your pivotal trials and get approval of Neutrolin, how might you market the product? Would you hire a small sales force, or will you have to partner?

"The CorMedix team is laser-focused on getting our Phase 3 study completed."

RM: The kidney dialysis market is easier to access: 70% of the U.S. market is controlled by the two largest dialysis service providers, DaVita HealthCare Partners Inc. (DVA:NYSE) and Fresenius Medical Care AG (FME:ETR), with which we already have solid relationships. We are actively working to solidify our marketing and distribution strategy later this year. We will explore several opportunities, including an internal sales force, a contract sales organization, or even a partnership with a company already established in the hospital, outpatient and oncology markets.

TLSR: Is CorMedix in the process of lining up key opinion leaders (KOLs) to discuss the technology platform?

RM: Yes. We have very solid relationships with KOLs in the dialysis market. That said, we continue to engage additional thought leaders to help educate the market before Neutrolin's approved. This is true in the dialysis, oncology total parenteral nutrition (TPN) and ICU markets.

TLSR: Are there competing agents in this indication?

RM: No. In the U.S., standard of care is saline or heparin as a lavage to keep the catheters unclogged and flowing. There may be homebrews in some hospitals, where they add an antibiotic solution, but there is no established market. That's why CorMedix is truly first-in-class.

TLSR: With no competing FDA-approved agents, how much could Neutrolin be worth?

RM: Consultants have indicated the total peak market potential for Neutrolin to be in excess of $1 billion annually. This is predicated on 237 million potential catheter days, or 465 million vials. Given regulatory approval and recommendations from KOLs and other thought leaders, it is still unlikely any one product could get full market penetration.

TLSR: CorMedix market cap is currently $64 million. Even half of that $1 billion ($1B) revenue potential for Neutrolin would give CorMedix quite a valuation—billions, I believe. Is that reasonable?

RM: We believe so, but ultimately that's up to the financial world and the markets. We do feel that our stock is quite undervalued currently, given that we have begun a Phase 3. That $1B revenue potential is only for Neutrolin. It does not factor in how much taurolidine might be valued in the medical device space—sutures, orthopedic, cardiovascular implants, etc.

TLSR: Quality and quality assurance are becoming major focuses in hospitals these days. It starts with making sure employees are washing their hands, and it goes to the operating room (OR), where quality assurance managers want personnel to perform checklists before procedures are done. Quality is about preventing unnecessary morbidity and mortality, and making sure the healthcare system is getting value for the reimbursements by payers. Do you see CorMedix, with Neutrolin and its taurolidine-based platform, fitting into that model of prevention and quality assurance?

RM: Absolutely. We believe our platform fits into the concept of infection prevention very nicely, and we believe we can become an overall anti-infective solution. The FDA must also believe we're capable of becoming an important component because it granted Neutrolin QIDP designation. Neutrolin will be a nice fit into that concept, and into the armamentarium that enables it.

TLSR: You just began your Phase 3 trial with Neutrolin in December 2015. I'm noting that it's powered quite well. You will eventually have 632 patients enrolled in this study, and it is double-blind and placebo-controlled. Will there be an interim look at the data?

RM: We hope to complete the enrollment by year-end 2016, and to be prepared to file for approval with the FDA in 2017. There will be an interim look at the trial data by the Data and Safety Monitoring Board (DSMB) once we have reached 81 infections/events.

TLSR: Will CorMedix have to do a confirmatory Phase 3, or will that be determined by the p-value of the current Phase 3 in dialysis patients?

"We believe we can become an overall anti-infective solution."

RM: We've been working very closely with the FDA to forge our approval pathway. In fact, the FDA suggested we do a second Phase 3 trial in oncology TPN, rather than in dialysis. We also plan to do a Phase 4 trial in ICU catheters. If the interim data are exceptional in the current Phase 3 trial in dialysis, then there is a possibility that the DSMB stops the Phase 3 trial early and recommends approval before we enroll the full 632 patients. Early approval would be very quite meaningful to investors.

TLSR: Aside from the interim data looks, are there other catalysts anticipated in 2016?

RM: Yes. This year's anticipated catalysts include completion of enrollment in the Phase 3 dialysis trial, hopefully the interim analysis by the DSMB, and then initiation of a second Phase 3 trial in oncology TPN. There would be a potential decision in our European lawsuit and arbitration cases. We might also sign a partnership deal with a device company for the use of taurolidine in the suture space. In 2017, we expect to complete the Phase 3 dialysis trial.

TLSR: Will you go back to the market, or is your cash runway solid enough to carry you through this 632-patient trial?

RM: At the end of last quarter, we had $37.5M on the balance sheet, which is enough money to complete one Phase 3 study. We do have enough money for a full year. Right now, we are not in the financial marketplace.

TLSR: Tony, you're the chief scientific officer for CorMedix. You are an internist and have practiced nephrology. Could you briefly give me some background on your experience with catheters and patients?

Antony E. Pfaffle: I've had many years' experience with patients and their catheters, and I think CorMedix's platform, with taurolidine and Neutrolin, will be a game changer and become the new standard of care. I practiced dialysis for 10 years, and I've been in the ICU for five years. I've been a consultant at Memorial Sloan Kettering Cancer Center, not for oncology but for patients who had kidney problems. Often those patients were also on dialysis or had TPN.

TLSR: What about how the product affects quality in hospitals. Can you add anything to that?

AP: I would add that just recently, the Centers for Medicare & Medicaid Services (CMS) put out a statement in Nephro News that it would be tracking infections. This tracking initiative, combined with the fact that there are so many resistant organisms developing in the ecosystem now, leads us to understand that preventing infection is going to be key in the future, because physicians and the overall healthcare system only have a limited armamentarium of antibiotics and don't want to have to use them unless they absolutely must. That’s why I believe CorMedix will be the first line of defense in antimicrobial, anti-infective therapy.

TLSR: Randy, as I look at CorMedix share price performance, you are down only 17% from one year ago, and this is in a negative market environment. As I see it, CorMedix actually has some relative strength versus the rest of the market. Investors obviously like something about CorMedix. What do they see when they look at your platform?

RM: The first thing investors see is that we have a Phase 3 study started and in the works.

Second, they look at our Neutrolin Usage Monitoring Program (NUMP), an observational study we conducted in Germany, which showed there were 0.142 infections versus the benchmark of 3.5 infections per 1,000 catheter days. That is a 96% reduction in infections.

Third, the literature would say there are 2.5 thrombotic events per 1,000 catheter days, but our NUMP study came in at 0.085, and that represents a 96.6% reduction in thrombosis. The FDA threshold is a 40% reduction rate.

More investors are seeing CorMedix as a derisked story, and they are beginning to anticipate results now that we have entered our Phase 3 study in catheter-related bloodstream infections in the hemodialysis setting. We will hit our milestones, we'll hit the benchmarks that we've set, and I think you will see more investors getting back into the stock.

TLSR: Thank you, Randy and Tony.

Randy Milby was appointed chief executive officer of CorMedix in January 2013. He joined CorMedix in May 2012 as chief operating officer. Previously, Mr. Milby was cofounder and a managing director of WaterStone Bridge LLC, a healthcare consulting services firm. During his 11-year tenure at DuPont Co., he held several management positions, the most recent as global business director, Applied Biosciences. From 1998–1999, Mr. Milby was a healthcare analyst at Goldman Sachs. Mr. Milby received his pharmacy degree at the University of Kansas, and his master's degree in business administration from Washington University in St. Louis.

Antony E. Pfaffle, M.D., has been a director of CorMedix since February 2007, was appointed interim chief scientific officer on Jan. 1, 2013, and chief scientific officer in July 2014. Dr. Pfaffle has been director of healthcare research at Bearing Circle Capital L.P., an investment fund, since May 2007. He is an advisory medical director for ParagonRx, an Inventiv company specializing in drug and device risk evaluation and mitigation. He was a managing director at Paramount BioCapital Inc. and senior vice-president of business development at Paramount BioSciences LLC from December 2005 to May 2007. Dr. Pfaffle was a principal and founder of Black Diamond Research, an investment research company, from July 2001 to December 2005. Dr. Pfaffle is an internist who practiced nephrology at New York Hospital-Weill Cornell Medical Center, Lenox Hill Hospital and Memorial Sloan-Kettering Cancer Center. Dr. Pfaffle received his M.D. from New York Medical College.

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DISCLOSURE:
1) Dr. George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Resources Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the company mentioned in this interview: None.
2) CorMedix Inc. is a sponsor of Streetwise Reports.
3) Randy Milby and Antony Pfaffle had final approval of the content and are wholly responsible for the validity of the statements. Opinions expressed are the opinions of Mr. Milby and Dr. Pfaffle, and not of Streetwise Reports or its officers.
4) The interview does not constitute investment advice. Each reader is encouraged to read all CorMedix public filings and consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
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