I want this post to enable discussion for ideas that failed to enter your portfolio, what garnered your initial interest, what dissuaded you from investing, did you create full model prior to concluding that it wasn’t good enough?

My Most recent Addition:

I most recently conducted initial DD for CorMedix $CRMD a bio-tech company that had gained FDA approval for DefenCath a Taurolidine/Heparin central venous catheter (CVC) lock used in end stage renal disease (ESRD) patients that receive hemodialysis. Patients that receive hemodialysis via CVC are prone to catheter related blood stream infections (CRBSIs) which is a leading cause of death. Taurolidine (antimicrobial)/ Heparin (anticoagulant) locks have been tremendously effective in reducing CRBSIs by as much as 70% when compared against heparin or saline alone.

With DefenCath receiving market exclusivity for the next 10 years it seems that it would be adopted as a standard of care, the reality seems to reflect that current healthcare frameworks for ESRD disincentivize developers and financially incentivize outpatient dialysis centers to forego adoption of these new drugs.

Profits > People

Current ESRD billing under the Centers for Medicare & Medicaid Services (CMS) has allocated a budget of $281.71 per dialysis treatment. Outpatient dialysis centers make a profit by capturing the spread between what CMS has allocated per treatment vs what it actually costs them. To encourage adoption of new drugs, Transitional Add-on Payment Adjustments (TDAPA) were introduced. TDAPA allows for 100% reimbursement of per use treatment for a period of 2 years. In this specific case an outpatient center can forego the use of their traditional catheter lock, receive $281 and be reimbursed for the use of DefenCath, effectively increasing their margin by whatever their traditional catheter lock costs them.

After TDAPA expires TDAPA drugs are placed under a Post TDAPA add on adjustment (3 years). This post adjustment is calculated based on 65% of the estimated expenditures for the drug, adjusted for utilization and other case factors. Post TDAPA spreads the cost of TDAPA drugs across ALL OF THEIR TREATMENTS and is no longer on a per use basis. In this specific case, the DefenCath post TDAPA adjustment is $2.37, meaning outpatient centers will receive an additional $2.37 per dialysis treatment regardless of whether DefenCath is used or not.  

Yall Wanna See A Dead TDAPA Drug?

Calcimimetics which include Intravenous etelcalcetide and oral cinacalcet were formerly on TDAPA and were prescribed to ESRD patients to prevent complications of elevated parathyroid hormone levels. Once TDAPA expired they were bundled into the ESRD PPS resulting in an increase of base rate dialysis treatment of $10.09 (increasing dialysis budget, regardless of whether Calcimimetics were used or not). Once bundled into the base rate utilization of Calcimimetics dropped with some providers shifting towards active vitamin D.

As you can see, post TDAPA add on adjustments incentivize treatment centers to just collect the free payments vs use DefenCath and compress margins, regardless of what is more beneficial for patients.

 

After seeing DefenCath’s prospects, I totally abandoned the idea, never breaking into the rest of CRMD’s product pipeline. Didn’t create full model, and never calculated an intrinsic value. What step do you get to before throwing the towel?