KORU Medical Systems, Inc.

Greetings and welcome to KORU Medical Systems second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Greg Choracek of Gilmartin Group. Please go ahead, sir.

Thank you, Ryan, and good afternoon, everyone. Earlier today, KORU Medical Systems released financial results for the second quarter ended June 30, 2022. 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. We 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 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 matters with comparable GAAP measures in our press release and accompanying investor presentation and those filings. For the benefit of those listening to the replay, This call was held and recorded on Wednesday, August 3rd, 2022, at approximately 4.30 p.m. Eastern Time. Since then, the company may have made additional comments related to topics discussed. And please reference the company's most recent press release and filings with the SEC. Joining us on the call today is Linda Tharby, President and CEO of Cobru Medical Systems, and Tom Adams, Coru Medical's Interim Chief Financial Officer. Linda, please go ahead.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us today. To start, I want to emphasize the hard work and dedication of the entire Coru Medical team in delivering another strong quarter. Their efforts are instrumental in delivering on our mission to improve the quality of life for patients self-administering, and fusion therapy in the home. During today's call, we will use slides to support our commentary. I will begin with a business update of the second quarter. I will then turn the call over to Tom to discuss the quarterly financials before ending with updates to our 2022 guidance. After concluding our prepared remarks, Tom and I will then be happy to open the call up for Q&A. Before diving into our quarterly results, a few comments on our progress and vision as a leading drug delivery provider. The company holds a leading share position in the growing large volume sub-Q drug therapy market with over 25,000 patients on our freedom infusion system. Our current market for sub-Q home infusion primarily serves patients suffering from the chronic conditions of PIDD and CIDP. a market with substantial opportunity with less than 20% of patients on sub-Q therapy. Currently, we have 12 commercialized drugs indications on the core blue medical freedom infusion system, having doubled our number with six new label expansions in the past year. As the overall market for sub-Q drugs in development continues to expand, we continue to build our new drug pipeline with several new clinical trials and development agreements over the last 12 months that are increasing our total addressable market potential to over 1 billion. Now turning to our results for the quarter. We're very pleased with our results this quarter on several fronts. Q2 22 marked our third consecutive quarter of double digit growth. Leading this growth was our novel therapies business, which grew nicely for the second quarter in a row. This revenue growth is indicative of our prior closed deals and momentum with two new deals this quarter. Our core US business also performed ahead of a rebounding US sub-QIG market. We continue to solidify our foundation, completing the first phase of our move to our new corporate headquarters in Mahwah, New Jersey, enabling new R&D and operations capabilities and a great environment for our employees and customers to collaborate in. In addition, we further progressed our outsource manufacturing plan. This plan is intended to create a dual source of manufacturing and reduce cost of goods and is expected to be completed in Q1 of 23. And finally, we further solidified our executive team, hiring a new VP of operations promoting Chris Pasden to the SBP of Operations role, encompassing quality regulatory and operations, and eliminating the role of Chief Operating Officer. All of the above progress gives us confidence to raise our revenue guidance to a range of $27 to $27.5 million. Now, turning to our quarterly sales results. We reported net sales of 6.5 million for the second quarter of 2022. This represented an 18.4% increase year over year, marking the third consecutive quarter of double-digit growth for the company and with strong growth in all three parts of our business. Novel Therapies led our Q2 growth with continued momentum from prior deals and contributions from both engineering services revenues and clinical pipeline orders. Domestic core sales were up 8.7%, with growth outpacing a rebounding U.S. SCIG market due to label expansion and growth from pre-fills. Domestic core revenues in Q2 did not include $300,000 arising from supply chain issues that led to a backorder in our consumables business. We have prioritized an action plan to get back to the high service levels our customers and patients expect from KORU, and expect the backorder to clear in Q3. Our international business, where we continue to put increasing focus, was up 10.7% year-on-year, as we saw strength in multiple European markets due to expanded label indications and key tender wins. The second quarter represented another strong quarter of sales performance for the company. I now want to share progress made this quarter toward our strategic initiative that we rolled out in December of 2021. The first area relates to increasing core sub-Q penetration, which is under 20% of the broader IG market. This represents a $300 million U.S. total addressable market opportunity. There are three growth drivers associated with this strategy. which include winning new patient starts, capturing SCIG pre-pill growth, and geographic expansion. New subcutaneous patient starts, the leading pillar of increasing our core SCIG penetration, was up 6.9% in the quarter, with our U.S. business outperforming this with 8.7% growth in the quarter, and with freedom pumps as the leading indicator, up 21% year-to-date. A key driver of our new patient starts is our on-label indications. Label expansion is critical as it begins with the company working pre-launch to commercial with our pharmaceutical partners to provide an FDA-cleared platform with a freedom infusion system. This FDA clearance with the drug makes it easier for our specialty pharmacants to select Coru Medical as a partner of choice. In the past few quarters, we have reported five new indications. Each new clearance adds a new patient population to our pump and represents an opportunity to increase share. Overall, we see positive trends as our on-label indications start to generate growth, and we will continue to pursue new indications. Prefills continued to increase penetration post our Q4 label indication and now represent 10.3% of the overall market, growing over 400% this quarter. Prefills are a tremendous and growing area of opportunity for the company, and I will expand upon these in a moment. And in the past few quarters, we have put increasing focus on our international business, and we saw a 10.7% increase in the quarter driven by label expansions and tender wins. We've hired a new international sales leader with strong experience in managing international distributors. We look forward to continued progress in these markets. Now turning towards a deeper dive into the pre-filled fringe market. As we have communicated, the pre-filled fringe market for IG is an early stage, fast-growing market that represents a significant growth opportunity. Pre-filled syringes continue to capture market share as our pharmaceutical partners focus on their adoption and care providers and patients recognize the advantages they provide. Since our Q4 label indication, we have seen the market grow to 5% of the market in Q1 and doubled to 10% of the market in Q2. We remain uniquely positioned capture market share within prefilled syringes, as we have the only pump, specifically 510K cleared, for use with the market share leader, CSL's Hyzentra 20ml format. We anticipate that prefilled syringes will continue to capture market share, and we remain focused on increasing new patient adoption and conversion, working with our specialty pharmacy partners. Additionally, we are putting increased innovation efforts behind the prefilled format, and we plan to remain the partner of choice for commercialization. Moving to our novel therapies business, the primary driver here is our pipeline expansion, which includes continuously evaluating and monitoring new label indications, geographic expansion, IV to sub-Q opportunities, and new therapeutics. Our goal is to close new agreements across multiple drug categories and clinical phases from early feasibility to commercialization and extend our leadership position in high volume sub-Q drug delivery in the home. The second quarter showed another strong quarter of growth in our pipeline from both engineering service revenue on previously signed deals and from clinical product sales from an expanded pipeline. In the second quarter, we closed two new deals, one in immunology for a new indication that we expect to commercialize in 2023 and a second for a Phase II new indication in nephrology. In addition, we expanded the scope of a previously signed innovation agreement based on our successful execution of earlier milestones. We now have nine total closed agreements across six different drug categories and are pursuing over 10 additional new opportunities. The majority of our novel therapies work is for Phase III studies, with anticipated commercialization in 2023 to 2025. We continue to prioritize investment in novel therapies expansion as a key growth driver. I will now turn the call over to Tom for a discussion of our Q2 financials.