CRMD Q3 2024 Earnings - The Numbers Are Even Better Than Expected

Investment Analysis Clubs Saul’s Investing Discussions
1

The Headlines

CRMD reported today and honestly, these numbers blew past even my bullish expectations:

  • Total Revenue: $104.3M
  • Pro Forma Net Revenue: $130.8M
  • Net Income: $108.6M (yes, higher than revenue - I’ll explain)
  • Adjusted EBITDA: $71.9M
  • GAAP Diluted EPS: $1.26
  • Non-GAAP Diluted EPS: $0.83

Current Valuation:

  • TTM P/E: 12.0
  • GAAP Run Rate P/E: 2.5
  • Non-GAAP Run Rate P/E: 3.7

Wait, Net Income Higher Than Revenue?

CRMD pulled in about $50 million in tax credits from the Melinta acquisition. That’s why net income exceeded total revenue this quarter. For my non-GAAP calculations, I stripped out those tax credits to get a cleaner picture of the actual earning power. Even without that one-time benefit, we’re looking at a run rate P/E of 3.7.

Guidance: Conservative As Usual

Q4 Guidance: $115M - $135M

Here’s the thing - the Pro Forma Net Revenue was already $130.8M. So the high end of guidance is only showing a 3% gain from current run rate. They’ve consistently given conservative guidance.

DefenCath Dialysis - The Big TAM Adjustment

I need to acknowledge something important: My previous $2 billion TAM model for DefenCath is basically dead.

The CEO said they’ve been lowering the price of DefenCath, and my entire analysis was built on a steady-state price assumption. He declined to give specific pricing, so that model is out the window.

BUT - and this is important - CRMD says the TAM is about 40.8 million vials. If the price dropped to $50 per vial (published price is $299), you can still see a $2B TAM. The dialysis sector still has massive room to run, even with pricing pressure.

The U.S. Renal Real-World Study - Major Catalyst Coming

This is something management seemed genuinely excited about on the call. CRMD is conducting a real-world study with U.S. Renal:

  • Study Size: 2,000 patients
  • Status: Year 1 is complete, moving into Year 2
  • Timeline: Results from Year 1 expected in 5-7 weeks

Why This Matters:

Right now, about 40% of dialysis patients don’t fall under TDAPA coverage. For those patients, CRMD has to negotiate directly with insurance providers on pricing and reimbursement. This real-world data with 2,000 patients could be a game-changer for those negotiations.

Management expects this data to strengthen their position with insurers by demonstrating real-world efficacy and outcomes. If the results are strong (and they seem confident they will be), this could help lock in better reimbursement rates for that 40% of the market that’s currently outside TDAPA.

The Timing: 5-7 weeks puts us right around late December/early January for the data release. That could be a significant catalyst heading into year-end.

Pipeline - This Is Where It Gets Interesting

DefenCath for TPN (Total Parenteral Nutrition)

  • Status: Phase 3 trials underway
  • TAM: $500M - $750M
  • New Development: CRMD announced massive international interest and they’re starting studies in Turkey to increase participant enrollment

This is a completely new indication beyond dialysis. If they hit on this, it’s another $500M+ market opportunity.

Rezzayo

  • Current TAM: $250M
  • Phase 3 Studies: Prophylaxis of invasive fungal infections
  • Expanded TAM: Over $2 billion

Rezzayo is flying under the radar right now, but the prophylaxis indication has a TAM exceeding $2B. That’s a massive expansion from the current $250M market. No analyst asked a question about it until the last analyst asked what have investors missed on CRMD and the CEO laser focused in on Rezzayo.

Why CRMD Is Seriously Undervalued

Look at these numbers:

  • TTM P/E: 12.0
  • Run Rate P/E: Under 5 (even on non-GAAP)

For a company that’s:

  • Actually profitable (not burning cash)
  • Generating strong cash flows
  • Has multiple shots on goal with billion-dollar TAMs
  • Consistently beating guidance

This valuation makes no sense to me.

The Market’s Concerns:

  1. TDAPA expiring eventually
  2. DefenCath pricing pressure

My Take: These concerns are way overdone in the stock price. Yes, TDAPA will end at some point. Yes, they’re cutting prices. But the company is still highly profitable, the volume growth is real, and they have multiple other products that can drive growth.

What I’m Watching

  1. U.S. Renal Real-World Study Results (5-7 weeks) -
  2. Q4 Results -
  3. DefenCath TPN Phase 3 -
  4. Rezzayo Prophylaxis Data -
  5. International Expansion -
  6. Pricing Dynamics/TDAPA -

Bottom Line

CRMD is trading at a run rate P/E under 5 despite being profitable with strong growth and multiple pipeline opportunities. The market is pricing in all the concerns (TDAPA, pricing pressure) but ignoring the execution, the cash generation, and the pipeline optionality.

I think this is the most undervalued stock I’m tracking right now. The risk/reward here is extremely compelling, especially with that valuation and the multiple growth vectors ahead.

Drew

45 Likes
2

Yes, I agree with your analysis. I think the numbers were remarkably strong, especially considering how the market reacted to the announcement. I started a position today after reviewing the numbers.

This stock perfectly matches with the strategy of finding companies early before they take off. Companies like this are heavily discounted by the market because they are seen as “too risky” for institutional investors. Institutional investors are heavily regulated and tend to be slow to enter and exit stocks. This is why retail investors have a significant advantage and can obtain much higher returns with stocks that have higher perceived risk.

Yes, the potential for TDAPA to expire and for DefenCath pricing pressure to have a significant negative impact on the financials is a major risk. However, it’s a risk that I would take again and again, given the potential for upside. And if I’m wrong, I can take a loss and move on.

Cormedix is not understood by the market and IMO will eventually be rerated higher.

Long CRMD

15 Likes
3

Nice write up! It is indeed an attractive ticker. But after researching a bit more on TDAPA, I decided to not buy this stock at the moment.

I believe the inevitable ending of TDAPA will doom DefenCath completely rather than just add pricing pressure. And this is not a per company issue, but is a structural problem caused by the way how Medicare reimburses dialysis costs.

The Medicare ESRD PPS pays dialysis centers a fixed per-treatment amount that covers nearly everything (drugs, labs, staff). Innovative but expensive drugs (e.g., DefenCath, Korsuva) get full extra reimbursement only during the temporary 2-year TDAPA period. Once TDAPA ends, they are folded into the bundle with just a tiny add-on (~$1–2 per treatment), while the drugs cost centers $50+ per use.

The dialysis centers therefore lose money on every dose of the superior drug and gain nothing from the downstream savings (fewer infections → fewer hospitalizations), because those savings accrue to Medicare Part A, not the dialysis provider.

As a result, even when a new drug is clinically far better and FDA-approved, most dialysis centers switch back to dirt-cheap old standards the moment the full extra payment disappears. The reimbursement structure financially punishes quality and innovation in dialysis.

Most dialysis centers have a very thin operating margin and are really sensitive to additional costs.

I briefly searched online and it looks like most of the drugs tied to the dialysis reimbursement bundle failed hard after TDAPA expires.

Luffy

19 Likes
4

Luffy,

I agree TDAPA structure is a risk. I think those risks are already priced in to the stock.

Let’s do a worse case scenario the company loses every patient on the fee simple structure. Based on Q1 2025 conference call it said that 40% were Medicare Advantage. So using 60% of patients are on the fee simple structure. Defencath was 88M this quarter. So they would lose 52.8M and they have 93% gross margin. Assuming all other costs remain the same with decreased sales. Which would remove 49.1M from their bottom line. Would give you 22.8M in profit or 26.3 cents eps diluted or a run rate P/E of 10.6.

The worst case scenario also doesn’t include the 26M in revenue that Melinta had last quarter before the purchase. That revenue will be in next quarter and increasing the profit of CRMD.

Defencath is also most likely not going to be bundled right away as well. Because it doesn’t fall into any category of existing bundling.

“If the new renal dialysis drug or biological product is used to treat or manage a condition for which there is not an ESRD PPS functional category, the new renal dialysis drug or biological product is not considered included in the ESRD PPS bundled payment …”

“we acknowledge that for new renal dialysis drugs that represent entirely novel categories, it may take longer to determine an appropriate adjustment to the base rate … During this time, we will utilize transitional add-on payments to facilitate adoption without disrupting facility operations”

The length of the addon period is typically an additional 3 years. Because the government would want to see it’s usage and real world data before deciding how much they will pay for it. CMS also has flexibility to adjust payments based on overall savings to Medicare from the drug. Which puts even more importance on the real world study that’s coming out this year. Not just for CMS but also for patients with Medicare Advantage or other insurances.

The companies I read about struggling post TDAPA was because their drug was replacing another drug and CMS decided to pay them the same as the previous drug. The companies that succeed post TDAPA are ones that create a new category, like DefenCath does.

I strongly agree with this being an issue and its been raised in congress several times. The company is hopeful a bill gets passed to help change this. I’m withholding this from my investment thesis because investing on what Congress will do is story investing and not based on real growth.

So, I agree that TDAPA ending is a big risk, but I see it more as a pricing pressure because its generating a new category because its the first product that prevents catheter-related bloodstream infections (CRBSIs). And in a worse case scenario I still think the company would have an attractive P/E rate especially with all the growth vectors the company has in front of it.

Drew

19 Likes