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Greetings, and welcome to the KORU Medical Systems First Quarter 2024 Financial Results Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Louisa of the Gilmartin Group. Please go ahead, Louisa.

Thank you, Rachel, and good afternoon, everyone. Earlier today, KORU Medical Systems released financial results for the first quarter ended March 31, 2024. A copy of the press release is available on the company's 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. 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 in our press release and accompanying investor presentation and in our filings with the SEC, each of which are posted on our website. You will find additional disclosure regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures in our press release. For the benefit of those listening to the replay, this call was held and recorded on Wednesday, May 1, 2024, at approximately 4:30 p.m. Eastern Time. Since then, the company may have made additional comments related to the topics discussed. Please reference the company's most recent press release. Joining us on the call today are Linda Tharby, President and CEO of KORU Medical Systems; and Tom Adams, KORU Medical's Chief Financial Officer. Linda, please go ahead.

Thank you, Louisa. Good afternoon, everyone, and thank you for joining us today. During our call today, we will use slides to support our commentary. I will begin with our first quarter 2024 results and key business updates, followed by Tom, who will review our financials and 2024 guidance. Following the prepared remarks, we will open the line for questions. I'm very pleased with our first quarter results, with progress against multiple key milestones of our Vision '26 growth strategy. We have started the year with an $8.2 million quarter and double-digit revenue, delivering the highest quarterly revenue in the company's history. The core business grew 14% overall, driven by double-digit growth in consumables and strong performance internationally. Underlying this was another solid quarter in the global immunoglobulin market. We also continued with great progress in our Novel Therapies business, which is the catalyst for getting new drugs approved on our FREEDOM infusion systems and for new patients in our core business. Year-to-date, we have signed 3 new collaborations, and I'm also very excited to announce the addition of a new oncology collaboration, which I will discuss in more detail later. From an operational perspective, we have hit several key milestones. I'm pleased to report our third consecutive quarter of gross margin above 60%, hitting 62.3%. We finished the quarter with a cash burn of $700,000, a significant decrease from a $5.2 million burn in the same period the prior year. This reduction is the outcome of disciplined operating expense management and continued efforts to decrease our working capital, further evidence of our meaningful headway towards cash flow breakeven and profitability. Finally, we are reaffirming our 2024 guidance metrics. Overall, I'm very pleased with our performance this quarter as we continue to execute on our Vision '26 growth agenda. Moving to the next slide. I'd like to detail the progress we are making in our strategy across our 3 growth pillars, increasing penetration in our domestic core, international expansion, and adding multiple large volume subcutaneous drugs to our label, our Novel Therapies business. Starting with domestic core, we saw a growth of 4% over the first quarter of 2023. I want to highlight that similar to last quarter, we saw a double-digit increase in our sales from our distributors to end user specialty pharmacies. This is indicative of strong patient demand in our core business. Our growth was largely attributable to competitive share gains and growth in new patient starts, driving double-digit growth and recurring consumable volumes. Our consumables growth following strong pump volumes in prior quarters, represents a recurring revenue stream and becomes increasingly valuable as we continue to expand our customer base and win new patient starts. Q1 was the fifth consecutive quarter of sequential market growth for immunoglobulin, indicating growing patient diagnosis. Prefilled syringes continue to drive penetration into the Ig market, remain the fastest-growing segment in subcutaneous immunoglobulin a key catalyst for potential increased levels of subcu penetration and growth in '24 and beyond. We also continue to make good progress towards the Q4 510(k) submission for our new consumables, designed for a more convenient and comfortable experience for our patients. Moving to international core. We saw explosive growth in the quarter with a 63% year-over-year increase in revenue. I want to begin the international results with great news. We were successful in the previously communicated appeal regarding ongoing certification of our products in Europe, our international notified body, BSI. As a result, we intend to proceed with the routine BSI assessment process. In the quarter, we saw strong Ig supply versus the prior year, continued geographic expansion, and increased penetration, and approved indications. We saw strength in our established ex U.S. geographic markets as we penetrate deeper into these markets and into targeted indications, specifically in CIDP, a neurological condition requiring large subcutaneous volumes and a typical twice per week dosing schedule, and SID, secondary immunodeficiency. During the quarter, we entered multiple new markets, including the Middle East and North Africa, increasing our global footprint and patient base, and onboarded multiple new distributors. Expansion in further geographies remains a key focus for our business for the remainder of the year, namely Japan, where we remain optimistic that we will receive clearance for the FreedomEdge and consumables by Q2 or Q3. Within novel therapies, we now have a total of 16 collaborations and have already hit our goal of 3 new deals signed within 2024, highlighted this quarter by the addition of the first drug therapy in oncology. The oncology collaboration is exciting for many reasons. First, the oncology therapy patient population is large with up to 500,000 patients as an addressable population for this drug therapy. Second, it will be our first entry into oncology infusion centers with administration via health care professionals. This is a large and growing market as several launch subcu oncology drugs require health care professional administration due to potential side effects post administration. Finally, this new collaboration is with the launch drug which removes the risk and time related to the drug's approval. We are currently in feasibility testing of the drug with a FREEDOM infusion system prior to an FDA 510(k) submission which we anticipate in the next 6 to 12 months. I'm also pleased to report ongoing progress within our pipeline. The endocrinology drug, which we first announced last year, has successfully passed validation and will enter Phase III trials with the FREEDOM infusion system, another pivotal step towards commercialization. We also progressed the development of our efforts with the previously announced collaboration with the launched rare disease biologics. This drug has successfully passed its feasibility testing, and we'll be moving into product development with a customized FREEDOM infusion system. We anticipate a 510(k) submission for the use of the drug with the FREEDOM system in the fourth quarter of this year. Overall, it was a successful quarter across all 3 strategic growth areas. Moving on to Slide 5. This slide depicts our novel therapies collaborations, representing opportunities for new drugs on our label and/or new innovations with launched on-label drugs. Although many of these drugs will take several years to attain regulatory approval, all 16 represent opportunities to bring new patients into our core and FREEDOM infusion system. A few key highlights. First, 16 total collaborations represent our largest number of collaborations to date, and with 19 new opportunities we're pursuing, this represents our broadest pipeline to date. Second, the addition of the oncology asset has expanded our global patient population by approximately 0.5 million patients, bringing our total addressable population to approximately 2.1 million patients. Third, the highlighted collaborations in to create the progress we are making with our pharmaceutical partners. And most importantly, the last column with potential core FDA clearance date indicate there are 7 opportunities within our Vision '26 time line for new to KORU drug label expansions, launch drugs in new geographies and/or drug product lifestyle for expansions with KORU. For example, this year, we expect the clearance for Takeda's CUVITRU drive Japan opening a new market for KORU. I'm very excited to see the novel therapies pipeline continue to get deeper and more diverse with opportunities with multiple pharmaceutical partners. I'd now like to turn the call over to Tom to review our financial performance.

Thank you, Linda, and thanks to everyone joining us this afternoon. We are pleased with our first quarter results as we saw a return of double-digit top line growth and a record setting quarter. Net revenues for the first quarter were $8.2 million, an 11% increase compared to the prior year period. Domestic core grew 4% with net revenues of $6 million, driven by double-digit consumable volume growth due to new patient starts and share gains. Our international core business grew 63% year-over-year with revenues of $1.8 million, driven by an improved Ig supply versus the prior year, increased sales, and improved indications, and the strong growth in our geographic expansion strategy. The 63% growth rate for international core consisted of approximately $260,000 and of revenue for expedited inventory orders relating to the BSI regulatory determination as Linda addressed earlier. Normalized growth, excluding these orders was approximately 40% in the OUS business. Novel Therapies revenue was $500,000, a 21% decline compared to Q1 2023, driven by a major collaboration milestone that occurred in the prior period. It's important to note that our novel therapies business consists primarily of nonrecurring revenues, which are variable in nature and are generally milestone-based. The compensation of our revenue mix has diversified with an expanded customer base, highlighted by 2 additional novel therapies agreements and advancements in pipeline progress for multiple drugs in the quarter. Our first quarter gross margin improved to 62.3%, a 620 basis point increase compared to the prior year. As indicated on the bar graph on the right side. The strong improvement was largely due to the consolidation of our U.S. manufacturing sites. This marks the third consecutive quarter that we have achieved margins greater than 60%, and we continue to work diligently to realize manufacturing improvements and efficiencies across our operations. Additionally, we have improved gross margins realized in our Novel Therapies business through the in-sourcing and service revenue costs at lower rates. Moving over to cash. As of March 31, we had an ending cash balance of $10.8 million, representing cash usage of $700,000 in the quarter, a substantial reduction from the $5.2 million spend incurred during the prior year period. This year, our cash spending will be lighter than previous years as we continue to achieve operating leverage. Our cash deployment in the first quarter came primarily from our cash basis net loss of $1 million, which was nearly 50% lower than prior year. Other drivers include investing and financing activities of $300,000 for new production line capital expenditures and financing for insurance premiums. This was offset by a significant improvement in working capital, driven by reductions in inventory levels resulting from operational efficiencies in manufacturing and higher accounts payable due to timing of receipts. We remain focused on our cash and cash flow targets. We substantially reduced spending since the beginning of 2023. We expect the first half 2024 cash usage pattern to remain consistent to the prior year with higher spend relative to the second half, but at a significantly lower burn rate. The spend will be driven by equipment for our new production lines. We remain confident that we will hit our goals of at least $8 million an ending cash balance as well as being cash flow positive in the fourth quarter of 2024 and for the full year of 2025. Moving on to guidance. We are reaffirming each aspect of our 2024 outlook, expecting the following for the remainder of the year. Revenues of $31.2 million to $32.2 million, representing a 10% to 13% growth driven by growth of a mid- to high single-digit SCIg market; 3 new novel therapy collaborations, and an approximately prefill syringe penetration of 20% to 25%. We anticipate a full year gross margin between 59% and 61% as we expand into lower ASP regions. We also will face and manage inflationary pressures within our supply chain and incur production line start-up costs later in the year. Lastly, as I mentioned before, we expect to finish with an ending cash balance of more than $8 million, which includes approximately $23.5 million to $24 million in operating expenses. This ending balance is exclusive of stock compensation and includes the expectation that we will reach cash flow breakeven in the fourth quarter of 2024, and cash flow positive for the full year of 2025. Our credit facility remains available to us for strategic growth opportunities, but is not included in our estimates for 2024 ending cash balance. I will now turn the call back over to Linda for closing remarks.

Thanks, Tom. I'm very pleased by our first quarter results and the momentum ensuing across all businesses. We remain committed to the milestones I highlighted in our last earnings call. We have achieved one quarter of double-digit net revenue growth with a commitment to this type of growth for the remainder of the year. We continue to see accelerating levels of growth in our core business, driven by share gains, new patient starts, international expansion and increasing prefill penetration. We've completed our goal of 3 new novel therapies collaborations and we'll continue to actively pursue new opportunities as we work to move our collaboration closer to commercialization. We are projecting the submission of two 510(k)s, one for a new product and the other for a new drug indication on the FREEDOM platform by the end of the year. And finally, it is our commitment to breakeven cash flows in Q4 of 2024, and cash flow positive for full year '25. Each of these milestones is a strong indicator of the progress we are making toward KORU's overarching Vision '26 goals. I'm strongly encouraged by our start to the year as we continue to evolve our company into a global leader in subcutaneous drug delivery in both the clinic and at-home setting. In closing, I'm incredibly proud of the team at KORU Medical, and the effort they put into their work each day as we strive to improve the patient experience and deliver increasing value to our customers, patients and shareholders. Operator, I will now turn the call over to you for Q&A.

Thank you. We'll now be conducting a question session. [Operator Instructions] Your first question comes from Frank Takkinen with Lake Street Capital Markets.

Great. Congrats on a solid first quarter. I was just hoping to start with the guidance reiteration. Obviously, a really strong start to Q1 understanding it's early in the year, but also understanding if you kind of annualize what happened in Q2 even after adjusting out some of the onetime stuff that happened internationally. It looks like the guide is very derisked and maybe a little bit conservative. So maybe just kind of walk through some of the different elements you considered when reiterating the guide versus bringing that up a little bit given the strong momentum year-to-date.

Sure. So thanks, Frank. We're excited by the first quarter. The way that we see the guidance overall is we're within our guidance range at 11% in that first quarter. So we anticipate the start of the year to be in the lower end of that guidance range with the back half of the year slightly at the top end of that guidance range, so coming in somewhere in that guidance range. So overall, obviously, what we're looking at for potential upside would be international expansion would be certainly at the top of that list. We certainly see in our first quarter that we had the onetime with BSI, which Tom was able to break that out. And we're also seeing -- we had a number of initial orders from new distributors. So we have to see how all that shakes out before we're comfortable relative to doing anything to guidance. Novel Therapies, excited by the progress. And again, more deals could mean upside there. However, we do have to finish the work in those areas. And then finally, on our U.S. core business really starting to see some nice uptick in share, but still not seeing our distributor inventories keep up with our end user sales results. So those are the positives and watch outs that we're looking at. But overall, a strong start to the year and pleased to be reaffirming guidance, and we'll update when we think it's prudent.

Got it. That's helpful. And then maybe just for my second one, any update on the 15-milliliter prefill. I don't think I heard an update in the prepared remarks, so maybe just explain to us how that's going, positive, negative, expectations versus reality versus expectations year-to-date? And looking at 2024.

Yes. So if you recall, we launched that product into the market, we did our initial load-in inventories in Q4. Q1, we've started to see conversion of patients to prefill therapy, but it is the first quarter of the products launch. So we anticipate those increased penetration levels as we move through the year. It continues to be off a small base, but the fastest-growing area of subcu therapy. And we also believe that over the longer term, what we're really watching out for is a tipping point to get more people on subcutaneous therapy.

Perfect.

I guess maybe, the only other update I would make is that CSL, which is the leader in prefills and the only company to date have prefills in the market for SCIg has announced their intention to discontinue their vials. So that, I think, will be another big impetus to prefills.

Your next question comes from Chase Knickerbocker with Craig-Hallum.

Linda and Tom, congrats on the strong progress from me as well. Maybe just first, if we kind of look at that commercial rare disease product and then now that commercial oncology asset, those sort of already approved products are obviously particularly exciting when we think about near-term impact. It seems like from engagement of the formal collaboration to approval for the use of -- on the use of your system, it's about a year as far as kind of what you're kind of saying for that rare disease product. Is that the right way for us to think about kind of that oncology asset as well? And then just kind of longer term, any sort of commercial drug product that is already approved and you just need to do your kind of regulatory steps?

Yes. Provided the FDA cooperates with the unknown part of the equation, but our internal process generally would take about 6 and sometimes 9 months, if there's customization required and then an FDA approval process somewhere between 3 and 6 months would be what we're looking at.

Got it. And I know you're not going to give names, certainly. But should we think of this oncology drug as being sort of a recently launched asset or one that's more mature and has some meaningful volume in the market already maybe in a different kind of dosage medium?

Yes. Most of the subcutaneous therapies in oncology have moved from IV to subcu. So most of them have launched within the last 3 to 5 years. So it is a fairly recent launch is what I would say.

But there's some volume that already where you won't be launching kind of the drug newly with, obviously, with your system. So there's some kind of volume to chase down already.

Correct.

Got it. And if we think about those open collabs kind of in the pipeline, so to speak, can you give us a sense if there's any more of these kind of quickly impactful collaborations around kind of already approved therapies? And kind of along those same lines, you had previously guided towards 3 for the year. And I know you've got a lot to chew on with your current like formal collaborations. And sorry if I missed this in your prepared remarks, but I mean, it seems like a lot in the pipeline there to not add a couple more kind of through the last 9 months of the year here. Kind of help us think about it.

Yes. So our business development team within Novel Therapies has their site set on Phase III and launch drugs. That is one of the key reasons why I am so excited about the oncology asset because there are multiple drugs that have launched that have the same sort of unmet needs that we're going to capitalize on with this drug. So I see a lot further potential there. We also are working on geographic expansion opportunities where some of the prior innovations we've done with some of our Ig partners, they are now looking to consolidate their base of consumables to ourselves on a global basis. So that's also exciting for us.

Got it. And maybe just one more on guidance to kind of piggyback up Frank there. If we look kind of at that commentary, is that kind of -- is it kind of fair to say that Q1 was kind of in line with your expectations and hence the reiteration of guide. But it just kind of seems if we're still seeing a very small impact from the kind of 15-milliliter launch that second half could look pretty good as that accelerates. And then on gross margins, Tom. Just kind of help us there from a standpoint of kind of the sequential decline that's kind of assumed in guidance? Is that around kind of that expected Japan launch?

You want to start Linda?

So just on the guidance, I'm not sure that I heard a question there, Chase. But what I would say is we obviously yes, you are correct that the year -- first quarter kind of came in about where we were expecting. So at this point, we see several shots on goal to outperform. But at this point, we're also watching several areas including overall growth in the domestic core market. And we're looking at, frankly, how our distributors fill what we see a strong end user demand. We also have to see what the recurring underlying international growth is once we get through what we saw is a lot of distributors -- new distributors coming into our network in the first quarter.

Yes. And then on the -- Chase, on the gross margin question, I'd say our gross margins start out the year very strong. We do have some product launches, as I mentioned, that are in the back plan for the back half of the year. So typically, when you have these product launches, you have some inefficiencies at the start-up phase of that. And then as production and volumes ramp up, you start to see those margins get back to the normal stages. And I'd say on top of that, margins have been stronger on the Novel Therapies side, just to offset that. We've been in-sourcing a lot of the work for our novel therapy services agreements. So that's been on the upside. And then another aspect on the gross margin is as we expand into these international markets, you do see a little bit of a mix change on the ASPs as you get into some of these new markets. So if you pull all those things together, along with some of the manufacturing improvements we're doing, we're pretty much holding to guidance right now on our margins.

Next question comes from William Wood from B. Riley Securities.

Really congratulations on a very nice quarter, and I appreciate you taking our questions. Just to get a quick update on the Japan, Canadian growth there or expansion. I know you touched on Japan earlier, but I was just curious, it seems like that might be sort of slipping. I know we're sort of expecting it or at least maybe I was sort of imminently now it's sort of 2Q, 3Q? I mean is there anything specifically that might be holding that up? Or that might be more required there? And then additionally, on the Canadian, I was just -- any update on the Canadian pilot study. I know there were some delays related to customs, but just to get an update on that and how we should think about that the potential launch of that program?

So Canada -- sorry, I'll start with Japan. Japan, we anticipate, as I said, an approval by the regulatory body there within the coming quarters. We received a final round of questions some months ago. They were all very easily answered questions. So we don't see any concerns. I think it's just the regulatory backup that we tend to see in ex U.S. markets. So no -- we had anticipated, though, what I would say is there is some slippage just in that regulatory time frame, but we had not put any big numbers for Japan into our forecast for the year. Regarding Canada, all is going well. The product is in the country, and we anticipate that the trial will begin soon, and it is a not a clinical trial, but it is a study that the nursing body will undergo with the product and then eventually patients. So we anticipate -- we'll continue to update you on that study as the quarters progress.

Awesome. And then one more, if I may. Just -- you said you successfully appealed the EU Notified Body earlier as well as today. But you still have to go through sort of the regulatory process there. Just curious if you could give a brief update of what that entails and what potential headwinds you still might be expecting to continue that international EU expansion?

Yes. So we undergo a regular review process with them, which we successfully passed an audit of our internal facilities. And then they review all of your technical files for all of your products. And so we have one product with an outstanding finding that we feel confident we can resolve in due course, and we're working with them in their normal process, which is generally 3 rounds of questions. We just completed our first round. So we anticipate closing that in the coming months and having a pathway to our MDR certification.

Got it. I appreciate the extra color there. And congratulations again on a very nice quarter. Thank you.

Your next question comes from Caitlin Cronin with Canaccord Genuity.

Congrats on a great quarter. Maybe just to dig into U.S. core a bit more. What is really driving the share gains there? And on the core SCIg market, any updated growth expectations this year?

Okay. I got the first part. When I answered the first part, you can give me the second part. So the U.S. core gains are really being driven by increased focus and penetration into our key accounts. First of all, for our key accounts that compose about 65% of our business. Just gone in and understood where we -- where our share position stood with each one of them and did focused and targeted programs for every one of those accounts. In addition, we have realigned all of our sales territories and have our reps focused on areas where we feel we have the greatest opportunity. I think your second question was on growth expectations in the overall SCIg market. We continue to see that globally in a mid- to high single-digit basis. So obviously, our core business performing at 14%. This quarter is greatly outperforming that underlying.

Got it. Okay. Awesome. And then just a quick one on the electronic pump trial that still set to close in the first half of this year.

No. We have seen that pump trial slip a little bit, and that's mostly due -- we're trying to get patients enrolled in multiple countries and every country has a different system for those clinical trials. So it's caused a little bit of delay. However, what I would say is it's not stopping our progress overall in international markets. So we're seeing as you see in first quarter, an underlying growth rate of well over 40%, which has been great.

Next question comes from Joseph Downing with Piper Sandler.

Congrats on the quarter. I guess just piggybacking off the U.S. market on the previous question and thinking about longer term, can you frame what kind of growth you need to see from the U.S. market in order for the company to hit the 2026 revenue targets?

So clearly, this year is a landmark year for us in the U.S. business in terms of we're looking to take that business into double-digit growth territory. So how do we intend to do that is obviously new products will be a tremendous driver of that. So I mentioned the new consumables and the new pump launch, which we anticipate certainly happening within the next 6 to 12 months. So both of those drivers, I think, will allow us to increase our share position, and we intend to get some ASP overall growth drive from there. In addition, expanded indications, particularly in CIDP and SID, which I mentioned in Europe continued to be a key focus area for us in the U.S. And as those new drugs launched that I mentioned in the Novel Therapies business, those automatically go into our core business. So our Novel Therapies business is just recording the revenue for the nonrecurring engineering revenues but several of those new products which I laid out on 1 slide, 7 new shots on goal to launch before 2026, will all be factored into our core business. So all of those in combination would be how we expect to see the overall business growing in that double-digit range that we anticipate with the biggest lever over time being new drugs added to the label.

Great. That's helpful, Linda. And then -- it looks like SCIg trends are obviously improving here. Can you just comment on your level of visibility -- confidence in all over the next few quarters here?

So we anticipate -- I mean, it's been fantastic just to see the sequential growth and overall steady levels of Ig supply. So the Ig drug companies have been projecting this saying they had built their vertical capabilities and we're not concerned about overall Ig supply, and now we're starting to see that in the market. We're also seeing increasing patient diagnosis. So I had mentioned a couple of quarters back that patient diagnosis had decreased overall due to a COVID lag effect where our patients require multiple infections in order to be diagnosed with the underlying condition that requires needing Ig. And because we had a period where everyone was sheltered for a while. We had that lack in patient diagnosis. So now everybody is out enjoying themselves. And as a result, and I hate to say it, but we see more sickness occurring. You probably saw yourself or multiple friends, get flus and infections this past season, and we're seeing the effect of that now in increasing diagnosis. So we see a continued healthy outlook for that Ig market. And as I said, the big unknown for us is will prefills lead to even greater growth in subcu because we see a huge flip from IV. That's yet to be seen, but that's what we're watching for.