KORU Medical Systems, Inc. (KRMD) Q3 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the KORU Medical Systems Third Quarter Financial Results Conference Call and Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Devin Sullivan, Senior Vice President of The Equity Group. Please, go ahead, Devin.

Thank you, Gerry, and good morning, everyone. Thank you for joining us for KORU Medical Systems Third Quarter 2020 Financial Results Conference Call. Our speakers today are: Don Pettigrew, President and Chief Executive Officer; and Karen Fisher, our Chief Financial Officer. During this call, we will discuss our business outlook and make certain forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to several risks and uncertainties including those mentioned in the associated slide presentation and our most recent filings with the SEC, along with the associated press releases. We assume no obligation to update any forward-looking statements. The associated slide presentation will be posted to the Investor Relations section of our website, www.korumedical.com. I encourage listeners to have our press release in front of you, which includes our financial results, as well as commentary on the quarter. During the call, management will discuss certain non-GAAP financial measures, and our press release and slide presentation accompanying this webcast and our filings with the SEC, each of which are posted to our website. You will find additional disclosure regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our strategic plan goals incorporate the trends that we've seen today and what we believe to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including the introduction of competitive products, availability of insurance reimbursement, the success of our research and development efforts, acceptance of and demand for new and existing products, expanded market acceptance of the Freedom System, the cost duration and ultimate outcomes of litigation, general economic and business conditions in the United States and abroad, the impact of COVID-19 and other factors described in our filings with the SEC. Therefore, our actual results could differ materially from those goals. For the benefit of those of you listening to the replay, this call was held and recorded on Wednesday, November 4, 2020 at approximately 9:00 AM Eastern Time. Since then, the company may have made additional comments related to the topics discussed. And please reference the company's most recent press releases and filings with the SEC. With that said, I'd now like to turn the call over to Don Pettigrew, President and CEO of KORU Medical Systems. Don, please go ahead.

Thank you, Devin. Good morning, everyone, and thank you for joining us today. I want to make sure you're aware of the Safe Harbor statement on Slide 2. But let's move on to Slide 3. So with that background, I want to move on to the overview of the third quarter. The strength and resiliency of our core business and the unwavering commitment of our dedicated employees are allowing us to navigate the challenges of COVID-19, while working tirelessly to execute our long-term growth strategy. For Q3 2020, our total net sales declined from prior-year period, due primarily to lower clinical trial activity. Allowances associated with U.S. sales also contributed to the decline in Q3 2020 total net sales. 9-month year-over-year net sales and volume grew. Karen will discuss the results in greater detail shortly. The effects of the pandemic are complex and evolving. For example, in the first half of 2020, COVID-19 produced a net positive effect on our results. In Q2 2020, we benefited from increased purchasing activity from specialty pharmacies, likely in anticipation of higher demand for at-home infusion therapy and concern about supply chain disruption due to the pandemic. We also generated meaningful net sales related to clinical trial activity, both ongoing and anticipated. During our second quarter call, we commented that it'd be difficult to determine at what level this buying activity would continue for the balance of the year. I want to stress, we remain very confident in our current market position and the long-term outlook for our business and industry. We continue to pursue opportunities created by multiple long-term growth drivers and we remain supported by a strong balance sheet. Let's move on to Slide 4. As you can see, net sales for the 9 months ended September 30, 2020 increased 19%, inclusive of a $1 million early order that Karen will discuss shortly. We understand that there is inherent quarter-to-quarter lumpiness in our business model, owing to the unpredictable impact of clinical trial sales, and OUS expansion above and beyond our core business. The dynamics of the current environment should not mask the long-term net sales growth we have achieved. Moving to Slide 5, at KORU Medical our core business, which excludes clinical trials, provides products to patients who have been diagnosed with PIDD and CIDP, both chronic conditions, and may expand to other indications as we execute our growth strategy. PIDD is a complex condition comprised of 400-plus separate diseases that affect the immune system. Diagnosis can take years and involve multiple physician visits. The patients who utilize our products are managing chronic health conditions and rely on the products and support we provide. We are pleased that these relationships have resulted in a steady and substantial base of recurring revenue, and that our business has experienced minimal patient churn. Beyond that, our growth drivers include clinical trials, geographic expansion and new drug indications. Clinical trial activity delivers 2 advantages to KORU Medical. One is net sales associated with these trials. And two, the potential to expand our core business with product commercialization. In a normalized business environment, the amount and timing of clinical trial contributions and geographic expansion have always been less predictable than those generated by our core business. COVID-19 has magnified these inconsistencies. We are also keeping an eye on new patient starts. State and local lockdowns related to COVID-19 may be impeding the ability of PIDD patients, who present with compromised immune systems to receive a diagnosis and prescription to commence their therapy. Our primary growth thesis, which is based on newly diagnosed patients and the ongoing shift from hospital and clinic-based IVIg treatments, to home-based subcutaneous Ig treatments also remains intact. While this transition will not be immediate, we believe that the pandemic will over time help accelerate this trend, especially for vulnerable populations. This shift should support increasing adoption of our products and we believe we remain very well positioned to capitalize on these opportunities. Slide 6, our Freedom System is currently involved in multiple clinical trials associated with the potential expansion of Ig and development of subcutaneous therapies for other disease states. Some of these trials have been disrupted due to COVID-19. But we are not aware of any that have been discontinued. On our last call, we discussed the use of the Freedom System in a recently completed Phase 3 trial for a subcutaneous hematology drug. We are now in a position to add a bit more color to this conversation. The trial used our FreedomEdge syringe driver, which accommodates smaller volumes than our FREEDOM60 syringe driver. The drug in question is aimed at treating PNH, a rare, chronic blood disorder characterized by destruction of red blood cells, blood clots, and impaired bone marrow function. PNH affects an estimated 15,000 people worldwide and it's primarily a disease of younger adults with a median age at diagnosis of 35 to 40. We understand that this new drug is scheduled to launch in 2021. And the Freedom System will be the delivery method for the launch of this therapy. If successful, this indication could significantly increase our total patient population. In addition, we expect that the Freedom System will be utilized in several additional upcoming later-stage clinical trials focused on expanding indications in disease stage for the same drug. These indications represent substantial potential for KORU Medical beyond PNH. While we cannot be specific for competitive reasons, our current program development includes drugs focused on the current and new drug development opportunities, which in addition to hematology include nephrology, rheumatic and autoimmune diseases, pulmonology and secondary immunodeficiency. These programs have the potential to significantly expand our total addressable market. Moving on to Slide 7, demand for plasma has always exceeded supply. Since the beginning of the pandemic, however, the issue is taking on greater importance. In summary, collections have impacted or have been impacted in 2020 and allocations may be tight through 2021. With that said, we believe plasma manufacturers are committed to supporting recovery of collections barring any additional COVID-19 shocks. This commitment is manifested in several ways from the opening and reopening of collection centers in the U.S. to enhance marketing and incentive programs, to plasma related acquisitions, and investments that reinforce the commitment of these manufacturers to long-term growth. As a reminder, the U.S. is the largest market for plasma and offers attractive pricing. We, therefore, believe that any impact on plasma supply would be less evident in our core business. I'll now turn things over to Karen Fisher, our CFO for a review of the quarter. Karen?

Thanks, Don. Good morning, everyone. Beginning on Slide 8, total net sales decreased by 8.1% to $6.1 million for the 3 months ended September 30, 2020, compared with the same period last year. As Don noted, net sales decreased mostly due to $400,000 less U.S. clinical trial sales, higher allowances for gross rebates for certain customers, and payment discount and distribution fees, our largest distributor under new contract terms also contributed to lower net sales in the 3 months ended September 30, 2020. There were 2 unusually large orders in the third quarter of 2019. And $1 million order from our largest distributor placed early in exchange for a nominal discount in the third quarter of 2020. Excluding these orders net sales growth in our core business has tracked in line with industry trends for the 9 months period ended September 30, 2020, compared to the same period last year. Gross profit decline in 3 months ended September 30, 2020 to $3.9 million from $4.4 million in last year's third quarter, driven primarily by lower net sales partially offset by favorable production variances. Gross margin for the third quarter was 64.8% as compared to 66.2%. With the decline mostly attributable to higher allowances against sales that I just described, partially offset by the favorable production variances. We remain committed to the continual improvement of our gross margins. We're exploring a variety of initiatives to achieve this objective and expect to have more details to share by the end of 2020. Selling, general and administrative expenses rose to $3.1 million from $2.4 million in last year's third quarter, mostly due to higher salary related benefits and recruiting fees as well as higher consulting fees and insurance premiums. Offsetting these increases were lower trade show and travel expenses as a result of COVID-19 related travel restrictions. Litigation fees decreased by nearly $900,000 in the third quarter of 2020 reflecting the previously announced litigation settlement agreement with a competitor in May of 2020. Net income for Q3 2020 was $250,000, or $0.01 per diluted share as compared to net income of $652,000 or $0.02 cents per diluted share and last year's third quarter. Q3 2020 adjusted EBITDA was $900,000 compared to $2.2 million in Q3 of 2019. On Slide 9 moving to the balance sheet, we ended the quarter with $32.4 million of cash, with the increase from December 31, 2019, reflecting $26.5 million in net proceeds from the second quarter capital raise. Our cash flow statement reflects $1 million of cash provided by operations, which is net of a $3.2 million cash outflow for inventory to ensure timely order fulfillment, and to keep pace with sales growth. We ended the quarter with $43.9 million basic shares outstanding and diluted share count of $48 million. On Slide 10, you can see the reconciliation of net income to adjusted EBITDA, along with the metrics that comprise this calculation. I'll now turn things back to Don.

Thanks, Karen. So on Slide 11, as the global pandemic continues, we are mindful of a critical role that we play as a leading provider of products that allow patients to self-administer their subcutaneous therapies at home. Before turning the call over to questions, I want to emphasize 4 key points. First, our fundamentals are strong. We've established a leading market share position with the Freedom Integrated Infusion System mechanical, portable and easy to use technology that we believe is provided chronically ill patients with a way to assume control over their lives and the treatment of their disease, while delivering improved compliance, enhanced outcomes and tangible quality of life benefits. Second, our core business is addressing a growing and largely untapped global PIDD patient population of up to 6 million patients. We believe this represents a significant long-term growth opportunity for KORU Medical. Third, in addition to our core business, we are pursuing multiple pathways for growth, leveraging our existing pharma relationships, as well as the platform technology that is the Freedom System. Our success in this regard is reflected in the PNH opportunities, which could significantly increase our core business in this one indication, while offering additional growth opportunities associated with upcoming clinical trials for the same drug. This demonstrates that the Freedom System can be utilized in the delivery of subcutaneous therapies for diseases other than PIDD and CIDP, while introducing at home infusion therapy to a new cohort of patients. And finally, we remain well capitalized, which will allow us to weather global headwinds and fund our future growth initiatives, both organically and via acquisition. Thank you for your continuing interest in KORU Medical. And we can now open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] First question is from Alex Nowak, Craig-Hallum Capital Group. Please go ahead, sir.

All right, great, good morning, everyone. Don, I was hoping to kind of start off here and hoping you could expand on the allowances or sounds like rebate accrual that you took in a quarter. Just curious, why did the entire allowance come into this quarter were spread out over the last couple of quarters. And some of this is prior to you joining the company. But why wasn't allowances or these rebates back to distributors never an issue a year or 2 years ago?

So, very good question and I assume that's going to come up. So the main thing is we have contractual arrangements with our customers, both distributors and specialty pharmacies that incentivize growth. So, some of these are new and a lot of this has to do with time. But growth rebates are accrued for when we become more confident that these thresholds that we have in place will actually be met on an annualized basis. And we've had several key customers that are trying to meet these thresholds, and therefore, began accruing in Q3 2020. So, while it's a contributor to our Q3 results, it's not the main reason, but it's something that's fairly new into that they were recognized in Q3.

Okay, got understood. So we should be starting to account for those in our estimates going forward though, that is - would you say that's correct?

So I think the best way to look at this is - so stuff like this is exacerbated by lumpiness in the business. So when we have these growth incentives in place, and growth is trending to achieve those, then we accrue for them at the proper time, right? This is an annualized event based on contracts that we have in place. And this could change depending on the growth of our respective customers going forward.

Okay, got it.

So I wouldn't call that would be normal, but there's always a - this rebate and allowance effect from distributors to customers.

Sure, no, that's really helpful. Okay. And then, on the lower plasma collection that you mentioned, with CSL and Grifols and the like, and that impacting the drug supply, and then potentially just less patients getting diagnosed with COVID, and not going into the doctor to actually get the diagnosis done. Did that impact you at all in this quarter? And if not, how should we think about the impact in Q4 and beyond?

So Q3 impact is really driven by what we stated earlier with clinical trial activity as the main contributor. With that said, given this current environment, there are some headwinds and some challenges. I've said in the past that I think they'll be a net positive in terms of patients being diagnosed and plasma supply longer term. But right now, you see a lot of that in the news and you're hearing our drug manufacturers report out on some plasma challenges. But then you're also seeing their recovery efforts and greater investment into long-term infrastructure in collections. So I think in regard to answer your question, I don't see COVID as a major contributor to our Q3 results. But our eyes are wide open to some themes that may develop going forward. And knowing that patient starts are - new patient starts help accelerate the growth of our business, but declined patient starts doesn't decline our business, right? We have this stable core of patients that continue to be on these Ig products. And we've heard from our manufacturer - pharma manufacturers that their focus as well as our specialty pharmacies, are keeping patients on their therapies. So besides that, there's a lot of noise on what does allocation look like? When's the recovery? But I remain very optimistic with the efforts and still look at the long runway of patient opportunities that are undiagnosed.

Okay, got it. Then just last question for me, just turning over to the pipeline here on the hematology drug. Thanks for providing more info there. Would you expect the launch there by that pharmaceutical company to be more like a traditional pharmaceutical launch where supply isn't much of a problem? Someone unlike the Ig market, where it's more dependent on the plasma collections, and thus that this market is more dependent on patients getting a script. And to that point, 15,000 patients is the worldwide market, what are your or maybe what are the projections from this drug company as far as penetration? Could this be a 50% penetrated drug?

So to be determined on all of it, so this is a synthetic drug. So the classic supply challenges that we see with plasma may not apply here. But in terms of launch and all that, we don't know the exact day and timing this year, or for 2021. But that's what has been communicated. In terms of penetration, too early to say, but I will say that even small penetration is very impactful to us. So, for example, if we were to penetrate just 2,000 patients of this 15,000 global patient base, you have $3 million and - roughly $3 million of recurring revenues for KORU. So, little things make a big difference. And small - even small numbers of patient populations are very meaningful to us. The other thing I'll mention, Alex, is that - if we look at what's had a successful in the Ig business, is once these patients start on a new therapy using the Freedom System, the business is very sticky. And there's not a reason for these patients to change off of that. So this first-mover advantage, if you will, we think gives us some really strong benefits, that if we can capture them early that we can maintain them.

Okay, thank you, very helpful. Appreciate it.

Yeah, thanks for the questions, Alex.

We have a question from Matthew O'Brien, Piper Sandler. Please go ahead, sir.

All right. Thank you. Good morning, everybody. Thanks for taking my questions. I guess, just some more finer points on Alex's questions. To be clear, Don, excluding the clinical trial shortfall this quarter. And then, these allowances, it sounds like the core business in the quarter from a volume perspective still grew high teens. Is that right?

Yeah, so if you look at our business year to date, you still see growth of 19%. So if you take out the fluctuations of COVID-related regular ordering patterns - but the takeaway is if you look at what the industry is doing in general, we continue to grow with that.

Got it. But just to be clear on that though, it sounds like the patients that were using subcu Ig, heading into the quarter is still using the churn as a change there, but new patient ads still trending in the right direction, are you getting any kind of boost, because of the want or the desire to move away from in-center Ig? But, again, the new patients that you're adding are still trending in the right direction, and there's no material slowdown versus what you saw in Q1 or Q2?

Yeah, that's an accurate statement, Matt. So, to reiterate what I mentioned, any new patient start is growth to our business. And, so that's the first point. And if you look at some of the things, we anticipated that I've said in the past of - there's this continuing trend of movement of patients from site-of-care from an acute facility to at-home, right? I think those things are very apparent. And we have felt that the transition of patients that were currently on IV might accelerate to subcu based on the pandemic, because they just can't get into these clinics. So while we're seeing some evidence of it, we haven't seen a significant contribution in those new patients. The tailwinds are still there. And we think the tailwind pressure is actually picking up longer term. We're just not seeing the immediacy of it. And we're seeing select initiatives and examples of where that is being successful. But then when you enter in plasma allocation for Ig, it creates a little bit of a headwind.

Got it.

But as I look, in further quarters, I see that having a very net positive effect.

Okay, that's really helpful. On the clinical study side of things, that $400,000 you cited, can that come back fairly quickly? Or is this going to be something that's more spread over a multi quarter kind of timeframe? Or - and I guess, with some of these outbreaks too that we're seeing in the U.S. on the COVID side of things. I'm assuming clinical trials will be the first thing that will be delayed, how big of a headwind or a tailwind from these other ones starting back up should we think about? I guess, what I'm really trying to get to is just the lumpiness of the business? And how do we - how to investors get their heads around? How to predict what's going to happen with the business going forward?

Yeah, that's a fair question, Matt. So the direct to looking at the core business is very important here, because there's - with a relatively speaking a small business, little things make a very big difference. And $1 million order in a quarter could be a 10% to 20% swing. And clinical trials are very unpredictable. But we remain confident that those that were involved in why we've seen some delays, we're not seeing, additional disruption at this point. So - but to try to - we can normalize and predict our core business, I think, if you look historically, you can certainly do that. If you look at clinical trials, it's just a lumpiness of our business, that's magnified by just the size for total revenues. So it's difficult to predict as to when these are going to land and what the contribution is going to be. So I know that doesn't give you the answer that you're looking for, but it's the nature of our business. What we like about the clinical trials is that when we do recognize revenue its upside, right. We actually sell into these clinical trials. And if they're successful, and they commercialize, now we have a more predictable business where these new drugs become part of our core and that core becomes more predictable. But until we get to that phase, there's that level of uncertainty.

Got it. And last one for me, also on the pipeline, the hematology drug, can you talk about the other indications? I mean, getting 2015, would be $3 million of recurring revenue, that's really helpful. But can you talk about the other indications and where they're at as far as clinical studies, are they in Phase II? And then do you think 2021 is going to be a year where you're talking a lot more about all of these programs that you're working on with all these different providers, we're getting a lot more visibility on what's going on there next year? Thank you.

Yeah, so I know the appetites there to have more color on clinical trials. And I'd like to get your time where we start providing more color on that. I think this hematology announcement is just an example of something that's been worked on for a long period of time that appears to be coming to provision. But if you look at the trial activity in general, this is one of our key elements of our strategy is to continue to invest heavily with time and resources into this category. And the reason being is that the more clinical trials we can get, and we all know that there's different probabilities of success depending on phases. The more shots on goal we can get with clinical trials. We think the opportunity to accelerate our growth is absolutely enormous. So as we get to a point where we continue to invest in these clinical trials, then I'd like to be able to share more with you. But I can't comment as to when that would be at this point. But I do want to get the message across that this is a significant part of our strategic planning and we're investing quite significantly.

Makes total sense. Thanks so much.

Thanks, Matt.

The next question is from Kyle Rose, Canaccord Genuity. Please go ahead, sir.

Great, good morning. And thank you for taking the question. So I just wanted to ask a clarifying question, and kind of what Alex asked regarding the allowances? You also talked about $1 million order in the quarter was that came at a discount? Was that in relation to the allowances or maybe just help me understand the moving pieces on that specific order as it relates to the timing of that order? And how it could potentially pull forward or represent some Q4 numbers?

Sure. So we've done in the past is we've always highlighted unusual orders or anomalies. In this case, we had an opportunity for a large early order and took it for various reasons, including inventory management, COVID uncertainty, but really burden hand revenue. And that would imply that as the pipeline is more healthy with inventory that even though it's very unpredictable, given the current environment that we would expect some inventory to come back that we consider to be an overage, and this was an early order. So I would expect to see some impact going forward, it's just really difficult to say what the exact timing is, we've had large orders in the past, and trying to predict when they're coming back is very challenging. There's a lot of dynamics involved there. In terms of inventory that's in the pipeline. SO - but it was an early order, and the expectations are to come back.

Okay. And then on the partnerships with the drug manufacturers, I appreciate the additional color this quarter around the PNH opportunity. Maybe help us understand from a broader pipeline perspective, and I know, you're not going to give us compounds in market opportunities, more than you already have? But help us understand the relationships you have with the manufacturers. How are those agreements in those trials structured? I mean, are they where Freedom is specifically written into the clinical trial, and there - it will be part of the regulatory filing, and it puts up more of a bigger competitive, I guess, advantage from a long-term perspective. Just trying to understand the lifetime value of some of these potential opportunities, both from a trial perspective, but then also from a commercial perspective upon launch?

Yeah, so I think you've put into different categories, right. One is the trials focused on expanding indications with current drugs. And we are very collaborative by nature in providing a tried-and-true delivery system that's been in the market for a long time. So I think an important point here is, we have an off-the-shelf option, if you will, that if you're looking to start up a clinical trial, for a subcutaneous drug, you're probably going to look what's out there in the market and what's tried-and-true. And I think that's a distinct advantage for us in a unique offering that we have. With that said, this is not - we're not talking about being stepped into the regulatory path. And that we're talking about a combo product like where there's a direct tie and a requirement to get a drug with the certain delivery system, right, that that enters there's always a competitive element. But we feel like the first mover with a tried and true delivery option is key. The other part of that is as we look at these pipeline and a product, and see the trends and the direction that these pharma companies are going, it gives us a distinct advantage of having a front row seat for other product opportunities that might be more optimal for the longer term. So we continue to look very closely at what those look like.

Okay, that's very helpful. And then just, I guess, we're through the first month of the Q4, we're heading into November, I know, there's uncertainty, but maybe just help us understand visibility into the channel and just confidence with respect to ordering patterns, both from a distributor stocking in a clinical trial perspective. And I guess, do you feel comfortable that you'll be able to continue to deliver that, 19% or 20%, growth that you've had year-to-date through the Q4 and through the full year? Or how should we think about that with respect to timing here as well.

Yeah, so good question, Kyle. It's still too early to tell, we don't get quarterly guidance, obviously. But I don't want to hide from some headwinds that are persisting, and uncertainty with COVID. So we tried to call those out and address where we think there's some challenges, but I'll direct you back to our core business and I think what's easily referenced for what that business is growing at. I feel very confident about that. And I especially feel confident about that long-term with some net positive effect later on. So I think it's a safe assumption to assume that that businesses to continue to be very healthy. We're not having patient churn. And I like to think at a minimum, we're able to grow with the market rate.

Okay. Thank you very much for taking the question.

Appreciate it, Kyle.

We now have a question from Ram Selvaraju, H.C. Wainwright. Please go ahead, sir.

Hi, thanks very much for taking my questions. Just a couple of quick ones. Firstly, can you comment on the current market receptivity to Xembify and how uptake is proceeding, and if you expect any significant changes in that going forward, and if that is indeed conforming to your own expectations?

Yeah, so thanks for the question, Ram. So Xembify launch in several calls has been really slow for various reasons. We've seen momentum picked up there where they're now in many more specialty pharmacies, and we've seen before that they're on contract and that there is allocation out there. I will remind you that Xembify, I feel is such a big solution to the supply challenges, just Grifols commitment and in their infrastructure for collection of plasma. And the fact that they're the market share leader in IVIg coming out with a subcu product, we think it really validates this movement over to into subcu. With that said, we're fairly agnostic to the drug itself. And why we feel and I personally feel that the more supply that's out there, the greater the availability, I feel equals more prescriptions down the road, and potentially accelerating the movement of IV to subcu, or more patients getting on a subcu from the beginning, or encouraging new patient starts. So I think it's very healthy, that they're in the market. I also feel like their allocation they had in place for launch is really helping the industry weather the storm during COVID, where there is additional inventory out there. So I think that's a positive. But in terms of the immediacy of their upside, I would just say wrong, that we see momentum, we see some sporadic growth, but it hasn't been significant. And it hasn't been a needle mover for KORU. And it hasn't been the needle mover, because we are agnostic to these different subcu drugs.

Okay. And you mentioned a little bit of the supply with respect to plasma. I was wondering, and maybe you stated a little bit background to this before and apologies, I missed that. But have you seen any emergent trends with respect to plasma supply in the last quarter? And how do you expect this to potentially evolve? We still are dealing with ongoing impact of the pandemic.

Yeah, so I'm - personally I'm very bullish on plasma collection efforts and rebounding. You've seen what the pharma manufacturers are reporting with some of the challenges, but you're quickly seeing what they're doing to counterbalance that. So I think the general theme you hear is long-term commitments, short-term potential disruption and allocation, but long-term net gains and plasma that is collected. And whether you look at CSL Behring or Grifols or Takeda and see what they're reporting. It's safe to say that all of those are seeing long-term commitment to enhancing their collection efforts, which would increase the supply in general, not just for the U.S., but worldwide. So I see this as a short-term hiccup. That's making a lot of noise right now. But again, the commitment to keep current patients on therapies is very evident. And as plasma collection and IG manufacturers' increases, we think that helps accelerate our growth going forward.

Okay, and then just a question regarding how you expect gross margins to evolve going forward into this quarter and next year. I think, Karen, you talked a little bit about where gross margins are currently and a little bit about the trends that might be at play and driving improvement on that front. But maybe we could drill down a little further on that. And I don't know whether you would have the ability to provide any kind of long-term guidance regarding where you expect gross margins to evolve, and in what range you expect steady state to be, but that would be helpful as well.

Okay. So we were reported for the quarter 64.8% in gross margins. And we will plan to in the next quarter report, some more detail around initiatives that we have in place that will have a positive impact and increasing our margins. But at this point, we've been very focused on operational efficiencies and managing to make sure we have production in place to weather this - whether the irregularities and all things caused by COVID at this point. But I would ask that you be patient for the next quarter when we can share some more color on what those initiatives are, which we will plan on doing.

Okay, and then lastly, with respect to pipeline opportunities, I didn't hear specific commentary regarding the checkpoint inhibitor drug category, can you comment at all on whether you expect there to be some applicability of your technology platform to providing a potential subcutaneously administered solution for drugs in this category? And if so, whether there are specific drugs currently available on the market for which your solutions could potentially be paired?

So I haven't commented on the specific drugs outside of the ones that I've mentioned. But I will say that we have a very simple easy-to-use delivery system that's tried and trued for subcutaneous delivery of therapies. And if you look at, in my opinion, any drugs that is intended to be infused subcutaneously, that we are viewed as the market leader and first-mover into that space. That's been defined by Ig, so I think that's a very - I think that's a powerful accolade for us. But in terms of other specific drugs outside of the disease states that I've commented on, I haven't chosen to share any additional information beyond that.

Thank you.

Yeah. Thanks, Ram.

The next question is from Alex Silverman, AWM Investment. Please go ahead, sir.

Hey, good morning. Sorry, to be a little thick on this. Can you just very clearly tell us what core revenue was and what it grew in the quarter?

So what we've provided is kind of a breakdown of the general growth of the business of 19% year to date. So trying to strip out that lumpiness of the clinical trials, so trying to strip out the lumpiness of the clinical trials, it has that number of where we see the shortfall in the main contributor. So the core business, I would just say, is growing at market rates.

Which is what?

So if you look at what the Ig manufacturers are communicating for what Ig and subcu are growing historically as well as currently, as well as prescription rates, you can come to a number somewhere in the 8% to 15% range.

Don, I'm sorry to be so direct. But you pointed out over and over again, both in the press release and on this call that your core revenue growth is strong, yet you're not willing to break out what the core revenue growth was in the quarter. There's lots of moving parts here. I'm sure there are lots of new investors on this call and we're trying to understand the health of your business.

And I understand the question here. And what I'm trying to do is have you look and judge our business based on long-term tail-winds in this business. So if you look at what the business is doing in general over the course of a year versus over a quarter, the quarter…

But that's not how - Don, that's not how it works, right? We're here to judge you to determine if you are in fact progressing. And we can't tell that when there are strange swings. You've broken out a $400,000 hit from clinical trials. Help us with what, I guess, rebates and allowances are, or just back us into what core was. I'm not - I mean, this is a relatively simple answer or a question.

Yeah, so the - I understand. So, if you look at - if you're looking for a number of where we're growing, you can look at about a 50% year-over-year number.

Your core revenue grew 50% in Q3 versus Q3 a year ago.

No, I'm saying for Q3, if you look at normalized trends based on what that core business is driving, which is defined as the PIDD and CIDP business, that that's a number that you land on.

You're still not answering this directly. Your stock is down 20%. This nobody understands. You need to give greater clarity.

Yeah, so if you need some - if you need some specifics, if you look at the core business and I'll throw out these estimates, you're looking at the quarter at probably a $4.6 million dollar number versus a $5.2 million number.

$4.6 million core revenue versus - is that right, is that what you're saying, versus $5.2 million a year ago?

The opposite, $5.2 million versus $4.6 million.

Great. That's helpful. Thank you very much.

Yeah.

We have a question from [Marsh Swidden, TO Investing] [ph]. Please go ahead, sir.

Hey, Don. This Marsh. My answer were just - my questions were just answered here, Don. So I have no questions.

Okay, great.

Thanks.

There are no further questions at this time. I'd like to turn the conference back over to Don Pettigrew for closing remarks. Please go ahead, sir.

All right, thanks, Gerry. So, thanks to everybody. I want to close by thanking KORU Medical's production staff for their continuing commitment to our company and the thousands of patients who rely on our products. We have several virtual events planned for the fall and early 2021. And look forward to interacting with you. Thank you again and I hope you all have a wonderful day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.