Ladies and gentlemen, greetings, and welcome to the KORU Medical Systems Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Louisa Smith, from Investor Relations. Please go ahead.

Thank you, Ryan, and good afternoon, everyone. Joining me on the call today are Linda Tharby, President and CEO of KORU Medical Systems and Tom Adams, Chief Financial Officer. Earlier today, KORU Medical Systems released financial results for the third quarter ended September 30, 2024. A copy of the press release is available on the company's website. I encourage listeners to have our press release in front of you, which includes our financial results as well as commentary on the quarter. Additionally, we will use slides to support commentary in today's call, which are also available on the Investor Relations section of our website. During this call, we will make certain forward-looking statements regarding our business plans and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to many risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. During the call, management will also discuss certain non-GAAP financial measures. You will find additional disclosures, including reconciliations of these non-GAAP measures with comparable GAAP measures in our press release, the accompanying investor presentation, and SEC filings. For the benefit of those listening to the replay, this call was held and recorded on Wednesday, November 13, 2024, at approximately 4:30 p.m. EST. Since then, the company may have made additional comments related to the topics discussed. I'd now like to turn the call over to Linda Tharby, President and CEO. Linda, please go ahead.

Thank you, Luisa. Good afternoon, everyone, and thank you for joining us today. I'll begin with commentary on our third quarter results and related business updates, followed by Tom, who will review our financials and 2024 guidance before we open the line up for your questions. We are very pleased with our third quarter results, delivering strong top line growth and increased operating leverage as we continue to progress on our near- and long-term goals. Our third quarter revenues totaled $8.2 million, representing growth of 17% over the prior year period and marking third consecutive quarter of double-digit revenue growth. We had very good performance across all of our businesses, with our overall core business growing by double-digits as we once again outpaced SCIg market growth and entered new geographic regions. Novel Therapies had a strong quarter with an increased number of new collaborations and clinical trial orders compared to the prior year. We also delivered strong operational results with gross profit growing 19% year-over-year, and gross margin improving 140 basis points to 63.4%. Our ending cash balance of $8.8 million was ahead of expectations and represents a 60% reduction in year-to-date cash usage, as compared to the same period of 2023. Throughout the year, we have consistently delivered double-digit growth with a disciplined use of cash, which we anticipate to continue through the fourth quarter. As a result, we are pleased to be raising our revenue and gross margin guidance for the second time this year. In addition to increasing our year-end cash balance target, Tom will review the details and assumptions surrounding our increased guidance in his commentary. Moving to the next slide. We continue to make progress in each pillar of our underlying growth strategy to protect and grow our domestic core SCIG business to expand internationally…

Thanks, Linda. We delivered strong performance with the third consecutive quarter of double-digit top line revenue growth. Net revenues for the third quarter were $8.2 million, a 17% increase over the prior year period. Our domestic core revenues were $6.4 million, representing growth of 12% year-over-year and 10% year-to-date, and we continue to outpace the underlying IG market. This growth was driven by new patient starts and continued account penetration. Our international core business grew 5% year-over-year and 38% year-to-date with $1.1 million in quarterly revenue, driven by consumable growth in new and existing markets and strong performance in new geographies. As Linda mentioned, we believe customers have worked through the excess inventory purchased as a result of the earlier BSI notice that has since been resolved and will return to normal order patterns in Q4. Normalizing for this excess inventory, international core growth would have been approximately 24% in the quarter. Novel Therapies revenue totaled $600,000 and represented 276% growth year-over-year or a 46% growth year-to-date. This was driven by progress on NRE, non-recurring engineering services work for six collaborations compared to two in the prior year as well as strong product sales in support of customer clinical trials. Moving on, we have consistently delivered gross margins above 60% through the year. And in the third quarter, we reported gross margins of 63.4%, representing a 140 basis point improvement over the prior year. This increase was driven by improved NRE margins resulting from bringing engineering and development activities in-house as well as an increase in ASPs from contractual price increases. The growth in gross margin was partially offset by changes in product sales mix. On the cash, as of September 30, we had a cash balance of $8.8 million, representing cash usage of $1.7 million in the quarter. This…

Thanks Tom. The third quarter was another great quarter of execution towards both our short and long-term goals. We once again grew double-digits and delivered strong performance in each of our businesses. We continue to be a market leader within our domestic core as we win new accounts, SCIG further penetrates the market, and we add to our recurring patient base. We are seeing accelerated growth in international core as we expand our presence in new geographies and our novel therapies pipeline is robust, the diverse pipeline collaborations, and opportunities to add revenues in the near-term. All-in-all, I'm excited with our momentum as we expect to finish the year strong, setting us up for a solid 2025. I'd like to close by thanking the entire KORU team for their hard work as we continue on our journey towards creating the best drug delivery solutions for our customers and patients. Operator, you may now open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Frank Takkinen from Lake Street Capital Markets. Please go ahead.

Great. Thanks for taking the questions and congrats on all the progress in the quarter. Linda, I was hoping we could start with a little bit more color on the next-generation pump being pushed out a little bit. Can you just give us a little bit of an insight into what happened exactly with that? And then once that is submitted. Can you give us kind of an overview of how you expect that when that to be cleared and then the launch plans thereafter.

Sure. So first, the delay was actually on our consumables. We still and have expected our new pump to be launched in early 2025. So the decision to -- as we looked at the overall new product development, as you know, it can be very challenging. And as we're starting to roll out the overall production -- of that, we just took a pause and said it's going to take us a few extra months to get there as well as compiling all the data we need to for our 510(k) submission. We are confident that we will get this across the finish line in 2025 and by the midyear of 2025. And as I said on the call, I think, we had not anticipated a broad launch in 2025. We anticipated that launch to happen near the end of 2025. So we don't see any material impact on our revenues. I think the advantage, again, we remain very confident in the studies that we've done and the research we've done with patients and health care providers and the benefits that, that product will deliver both in terms of convenience and comfort for our patients and I think the one shining star of delaying that launch will allow us to do what we hope will be a combined launch of the consumable with the pump at the same time which we think will drive significant advantages for our commercial team and also for our customers.

Okay. That's helpful. And then maybe shifting over to kind of the last piece you were talking about just the commercial team. Can you remind us where we stand with sales reps, territories? And then give us a taste for kind of hiring aspirations as you look forward?

Sure. So I just want to remind everyone, one of the greatest things about our business model is that a lot of our demand in the form of scripts for subcutaneous therapy are driven by pharmaceutical companies. So the reps there do the work with the docs to generate the script. That script then goes to specialty pharmacies, and we have a network of, here in the US we have in total -- we've expanded our overall commercial sales force, adding recently another new person here internally, but we have about 5 people in total in the US covering our key account basis. About five of our customers purchase upwards of 60% of our volume so we have fantastic relationships with them, which we focus on. Outside the US, we work with a very talented group of distributors, 26 in total, our Chief Commercial Officer just led a very engaging distribution meeting last week in international. And per his comments are pretty fired up about the progress we're making and the work we do there. So we work very closely with the distributor network outside the US.

Okay. That's helpful. And then maybe just for my last one, and I'm sure there's going to be some reluctance to speak to it with any great detail. But as we look towards the end of 2024, maybe give us some initial thoughts on 2025 were the key items that are going to be driving growth. And I think right now, the Street has something like 15% growth, which any reaction to that based on what your core business is doing and some of the new initiatives that are coming down the pipeline?

Yeah. So yeah, clearly, you pegged it right. I'm not going to comment on 2025. We are in the midst of putting all of that together. In terms of specific numbers, we will be commenting on that in early 2025. What I would say is let's think about all the things that drive the company and the progress we're making. You see our US core business, which is the biggest part of our business, basically doubling their growth from where they were a year ago. A healthy IG market is helping, but the share gains that we're driving on a day-to-day basis are impressive to see. And so that feels great when the biggest part of your business is now growing double digits. So kudos to that team. Second is obviously international. We continue to expand into new markets, opening up another new market this past quarter in Austria. Of course, we have the Japan launch, which we'll see most of the work happening there in 2025, along with some of the additional markets that we entered this year, including Turkey, et cetera. So just lots of momentum happening in our international business. And then finally, Novel Therapies, I mentioned in the call, in my prepared comments that we're starting to see a lot more consistency in those revenues. We've got now a number of new collaborations, a number of products entering clinical trials and an overall increased number. So we believe that our overall Novel Therapies business should show some nice growth as well. So you basically have all three parts of that portfolio performing at peak, some of them getting their best quarters of revenues that we've seen, and so that's a great way to end the year, and I'll repeat mix is still good as we think about 2025.

Got it. That's great. Thanks and congrats again.

Thank you.

Thank you. The next question comes from the line of Chase Knickerbocker from Craig-Hallum Capital Group. Please go ahead.

Good afternoon. Thanks for taking the questions. Linda, just maybe to start on, I'll ask both my questions upfront. Just so I kind of understand the 510(k) filings for those two drugs we expect next year. Are those going to be concurrent with the next-gen device? Is there some cadence we should think of as when those filings for those two drugs come after that device -- those device filings is that something where they have to get approved first, can they be filed concurrently, et cetera? And then I'd love to get just a little bit more on general market commentary on the SCIG market in the quarter, and then how you see it in Q4 as supply healthy, kind of, those dynamics? What are you seeing in the market so far? Thanks.

Right. All right, Chase. That was a lot. Thanks, first, on the congratulations on the quarter. So let me start with the two launches, and I'll piece them both parts. So the first launch next year that we're anticipating is an Infusion Clinic entry with a rare disease biologics. That, we had, coupled with our consumables launch, and so we anticipate those two coming fairly close hand-in-hand in terms of the filing for both would be submitted in parallel at the same time, and we expect that to occur by the mid of 2025. The oncology biologic, we are currently assessing plan, but we anticipate launch of that product by the end of 2025, and that is not dependent on any of our current product line, new product assumptions, that one can be delivered with and we anticipate delivering it with our current legacy product platform that we have. The second part of the question was on the general market, the overall SCIg market, we feel great both here in the U.S. and internationally. I think if you look at the two biggest players in the market, Takeda and CSL and you look at their reported results. They are reporting strong double-digit growth, which is great to see. We are tracking ahead overall. The market here in the U.S. is growing high single digits. We're performing ahead of that market, which we feel great about. And we see all strong underlying generators for demand in that marketplace. So, increasing movements to subcu therapy, overall strong supply in the marketplace. Overall increases in the number of patients being diagnosed every single quarter, which are all strong underlying drivers. And that's a recurring patient base. They are chronic. Once they come into our pump and into our system, they are on the product for life. So, overall, we feel very good about where we sit with that market. I think I got them all.

Thank you. The next question comes from the line of Anderson Shack from B. Riley Securities. Please go ahead.

Hi. This is Anderson on for Kyle. Congrats for the great quarter and thank you for taking our questions. So first, do you have any updates on the prefilled syringe adoption? Your core business growth outpaced the overall SCIg market again, is this the main driver here?

So first, prefilled syringe adoption continues to be, as we anticipated about 30% of the overall market now converted to a prefilled presentation. Overall, that is for us a vial to prefilled syringe, it's basically trading a customer from a vial to a prefilled syringe. I think the longer-term opportunity for us and for the total market is can prefills drive increased number of patients on subcu therapy. So can it continue to drive that overall subcu market growth up? I would say that the overall reasons for our increased market share, for our growth in the U.S. market are more about market share. So yes, some of it may have to do with the fact that we have great clinical training experts and reps that are able to support the conversion to prefills, but also just all of the day-to-day efforts we're doing with our key accounts. So hopefully, that answers the question on prefills.

Great. Thank you. And then how is commercialization in Japan progress? Do you have any updates on your distributor and pharmaceutical company programs there?

What I would say is the team is doing a great job working with the pharmaceutical partners in that market. So both the two leading IG manufacturers, we are working close collaboration with. We are still working out the final details of our distribution in that market, and we anticipate sales early in 2025. That is a top 10 IG market, so should be very positive for us.

Great. Thank you for taking our questions and congrats again. I'll jump back in the queue.

Thanks, Anderson.

Thank you. [Operator Instructions] The next question comes from the line of Caitlin Croning from Canaccord Genuity. Please go ahead.

Hi. Thanks for taking my questions and congrats on a great quarter. Just starting with the macro issues, Tom, I think you pointed to them with the hurricanes and the port strike. Is that something you guys are seeing an impact on or expecting potentially to see an impact on

Hi, Caitlin. No impact on that. What we actually did during the quarter was our inventory amounts we purposely grew them just in anticipation of those weather events as well as the dock strike. So we had a – we showed some growth in inventory on our balance sheet, which we expect to come back down here in the fourth quarter.

Got it. That makes sense. And then just any updates on the SCHOTT partnership and any early R&D synergies there?

Yes. So first, I would say that the teams are meeting regularly. I know that the team just met with them this past quarter at their headquarters in Europe. The -- again, I'll just highlight that the two advantages that we felt would come out of the partnership we're starting to see materialize. The first one is potential synergy and ensuring that the use of their – the prefilled syringe with our pump is optimized for the best patient experience. And the second is collaboration and our pipeline opportunities. So I know that we have progressed well on both of those fronts. So I'll remain excited about the potential for that partnership to position our devices as combined device is the best in the marketplace, and secondly, to drive further collaborations in our novel therapies pipeline.

Great. Thanks for taking my questions.

Thanks, Caitlin.

Thank you. As there are no further questions, I would now hand the conference over to Linda Tharby for her closing comments.

Just want to thank the KORU team again for a great third quarter, and thanks to all for listening in today.

Thank you.

Thanks, operator.

Thank you. The conference of KORU Medical System has now concluded. Thank you for your participation. You may now disconnect your lines.