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spk07: Good day, and welcome to the Coru Medical System's third quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Hannah Jeffrey of the Gilmartin Group. Please go ahead.
spk00: Thank you, Jason, and good afternoon, everyone. Earlier today, Cobra Medical Systems released financial results for the third quarter ended September 30th, 2023. 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 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 with these measures 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, November 8, 2023, at approximately 4.30 p.m. Since then, the company may have made additional comments related to the topics discussed. And please reference the company's most recent press release and filings with the SEC. Joining us on today's call are Linda Tharby, President and CEO of Kohler Medical Systems, and Tom Adams, Kohler Medical's Chief Financial Officer.
spk01: Linda, please go ahead. Thank you, Hannah. Good afternoon, everyone, and thank you for joining us today. During today's call, we will use slides to support our commentary. I will begin by reviewing key financial and business highlights for the third quarter. Tom will then review our financials and updated 23 guidance. Following our prepared remarks, we will open the call up for Q&A. While a challenging quarter from a revenue perspective, I want to start today's call by emphasizing CORA's commitment to improving the quality of life for patients and caregivers with our Freedom Subcutaneous Infusion System with a two-fold strategy. This strategy includes penetration into an installed base of over 30,000 chronic global subcutaneous immunoglobulin infusion patients, and by building a continuum of new drugs on our pump. During the third quarter, we saw revenue decline roughly 10% versus the prior year. The majority of the decline was due to our novel therapies business, which was impacted by a large clinical trial order in the prior year, and by timing of collaboration. This is a business that is composed of sales of product for clinical trials and non-recurring engineering services that are dependent on milestone completion, all of which can be subject to timing changes. The biggest value in this business is the signing of the collaborations, which lead to commercial revenue when launched. In addition, our domestic core business was impacted by slower than anticipated SCIG market growth. Script volumes were down year on year, and overall drug volume was down versus our expected growth. While a difficult quarter from a revenue standpoint, we made progress in several key initiatives and continued momentum with our growth strategy. We have a solid U.S. core business, which continues to outpace the underlying market and includes strong recurring revenues with over 27,000 patients. We remain the broadest label for subcutaneous drug indications in the home, and with our latest 50 ml pre-soap clearance, remain the only clear device for prefilled syringes, the fastest growing part of the market. We continue to grow our novel therapies pipeline, winning a new novel therapies innovation collaboration, and overall now have 15 closed collaborations. On our pathway to breakeven, we posted an impressive 630 basis point growth in our gross margin, and executed a disciplined strategic operating expense plan. We are committed to 2024 year-end cash flow breakeven. a profitable core business and disciplined prioritization of investments related to innovation and our novel therapies business. We also continue to build capability, naming Ken Miller as our chief commercial officer. Ken brings over 30 years of experience in leading high-performing teams in commercialization and marketing strategy, international expansion, and driving sustainable growth and profitability. And I'm personally delighted to be working with him again. With Ken leading our global commercial operations, it will allow me more time to dedicate to our innovation agenda and our novel therapies business, key drivers of our longer-term success. Although a difficult quarter, we continue to lay the groundwork with strong growth catalysts ahead, including new product introductions, novel therapies collaborations, and new geographies. A lot of progress this quarter in advancing our three strategic growth drivers. As a reminder, these include growing our leadership position and domestic core sub-Q IG business, expanding this leadership position into the expanding novel therapies business, and geographic expansion. We have made advancements in each of these areas during the quarter. A few key highlights. In our domestic core business on an underlying basis on the quarter and on a year-to-date basis, we continue to outperform the market. Our pump growth, a leading indicator of consumer growth, was up over 40%, and we are excited to have our pre-filled syringe 510K approval and a record 119 days from submission. In our NT business, we announced another close collaboration, and we have the largest pipeline of new opportunities in our history. In our geographic expansion efforts, we are seeing wins in several markets and are excited by our recent submission to enter the Japanese market one of the top five IG markets with expected approval in late 24. Let's now take a deeper dive into the U.S. market. This quarter, we have done an analysis to evaluate the factors affecting the overall SCIG market. While we did not anticipate the market to be where it is today, CORA's outperformance of the market continues. The overall sub-Q IG drug volume market is up 4% to 5% year-to-date. This was lower than the recovery we anticipated in the back half, and we now expect Q4 to be up 3 to 4%. Previously, we expected a faster rebound in PID diagnosis, over 80% of sub-Q use, given a very strong flu season in 22 and into 23. But it appears that rebound to pre-pandemic levels is taking longer than we anticipated. We are encouraged by the drug market being up sequentially in Q2 by over 2.5%, and this combined with growing awareness and diagnosis in CIDP should set up for a good 2024. In the interim, we are generating above-market growth of 6% year-to-date as a result of continued account wins and pre-fill adoption. We are also excited by our pump performance, up 40% year-on-year and 24% from prior quarter. This is often the leading indicator to consumable sales who have multiple factors for future growth in the coming year. And now let's discuss pre-filled. A key growth driver of our U.S. business is continued market share growth driven by pre-filled syringes. The chart on the left shows how our pre-filled syringe 510 clearance for our 20 ml pre-filled syringes led to an immediate uptick in the market as our pump facilitated pre-fill market penetration going from about 3% to about 12% of the overall market. Last week, we received 50 ml 510K clearance for our Freedom 60 infusion system for use with Isentra 50 ml pre-filled syringes. We expect a full market launch to occur in early 2024. In our recent patient market studies, we found significant preference for use of our system with pre-filled syringes due to the increased convenience of reduced drug preparation tasks and faster setup times. We estimate that over 70% of patients are on doses of greater than 50 mL, and this approval opens up the majority of the patient market. Our freedom infusion systems remain the only pump with FDA clearance for use with prefilled syringes. We believe this will lead to increased share with expected growth of prefilled penetration from 12% to an expected 50% penetration by 2025. We also believe that due to the increased ease of use, that it could drive overall further penetration of sub-QIG therapy, which today sits at around 15 to 20%. Moving to our NT business, we are focused on new biopharmaceutical collaborations for clearance of our freedom system for at-home use. This page illustrates our current closed collaborations, both on our core RIG business at the top and in new therapy areas. In total, a $2.5 billion TAM or over 2 million total patient population opportunities. Although we know that not every one of these will make it to launch, each new signed collaboration provides the opportunity for commercial launch revenue. We continue to advance with our new collaborations, this quarter signing one additional collaboration with our net total remaining at 15. with a reduction of one phase two neurology program that was terminated by the pharmaceutical company in the quarter. We also have 18 additional open opportunities. We added three new this quarter, making this our largest opportunity list to date. These opportunities represent pharmaceutical companies where we are in active discussions related to a qualified drug for our system. All of these represent future opportunities for close collaboration. More than two-thirds of our opportunities are for late-stage drugs that could be commercialized with KORU by 2026 or earlier. They span multiple therapy areas with a significant concentration in oncology. Our new collaboration signed in the quarter is our first for our next-generation pump optimized for delivering all SCIG products, including pre-filled syringes. Collaboration includes obtaining five-tank clearance of this next-generation pump with the pharmaceutical company's SCIG drugs. We think of novel therapies as the biggest mid- to long-term opportunity for the company. We have started building this business just over two years ago, so very much still in its infancy. We have had many learnings since its inception as we continue to build our strategy and form relationships with pharma companies, and we are excited by its trajectory. Moving to international, we continue to expand our opportunities. We ended the quarter with international growth of 12% year to date, driven by deeper penetration into secondary immunodeficiency and growth in new countries. We believe we have plenty more runway in our international business and are excited about key milestones. One of our international growth drivers is new markets, and we have successfully completed launches in several smaller markets this year. As we look ahead to 24, we anticipate a Japanese market launch for SCIG, one of the top five IG markets in the world. We have previously discussed our ongoing electronic pump trial, which we now expect to be completed in the first half of 2024. We have a great value proposition versus electronic pumps, and we are excited to generate clinical evidence to prove that. This week, the team is at our largest international IG show, IPIC, International Primary Immunodeficiency Congress. Coral will present its third abstract this year titled Infusing Subcutaneous Immunoglobulins, Comparison of the Constant Flow System or Electronic Pumps to the Constant Pressure System, the Coral Mechanical System. The abstract aims to provide valuable insights into the comparisons of two subcutaneous infusion systems, reviewing the considerations associated with both systems, highlighting the global benefits of a constant pressure system and contributing to the understanding of optimal infusion methods for improved patient outcomes. We're excited to showcase our efforts at this prestigious conference. Another key area that is exciting for us is the use of freedom systems in infusion clinics. The key value driving the nursing time savings and alleviating significant dexterity challenges versus current manual push methods. Use of our products more broadly in infusion clinics is an area we will be actively pursuing for future growth. International has become a vital key third growth strategy for the company. In addition to our three growth drivers, innovation is always at the forefront of our strategy, as we believe progressing new label indications and new products that solve significant unmet patient needs is a key element that will drive Coru to the next phase. We've laid out our upcoming new products and commercial label milestones that we expect over the next few years. This quarter, we have completed two milestones, one for products with the launch of the new pre-filled syringe pump and one for commercial label indication with the approval of that pump with the Hyzentra 50 ml pre-filled syringe. Looking ahead, we plan to have a new consumable 510K submission in 2024. We remain extremely excited about our innovation pipeline with the opportunity to launch both a new coral pump and consumable platform by the end of 25 and with prospects for multiple new drugs on the freedom system. I will now turn the call over to Tom to review our financials.
spk08: Thank you, Linda, and good afternoon, everyone. In the third quarter, we reported total revenues of $7 million, a decline of 10% or $800,000 from prior year. The majority of this decline was due to our novel therapies business which declined by 70% or $600,000 in the quarter. This decline was driven by a large clinical trial order of about 500,000 recorded in the prior year and by timing of our NRE milestone completion. Our domestic core reported revenues of 5.8 million, a 2% decrease versus prior year driven by lower consumable volumes as the prior year included a back order of 300,000 for consumables that were cleared during the period. Partially offsetting the decline was a 40% increase in pump units sold that are leading indicators of future patients driving consumables revenue. Despite the year-over-year decline in the quarter, our domestic core has grown 6% year-to-date as we continue to outpace the underlying market growth driven by new account wins and pre-fills. International core decline 3% was caused by lower volume as a result of a country-specific tender order in the period, partially offset by growth in new markets. On a year-to-date basis, international core continues to perform well with 12% growth over prior year. Gross margins increased by over 600 basis points in the quarter to 62% compared to 56% in the third quarter of 2022. The increase in gross margin was primarily driven by our exit from the Chester site in Q1 of this year, as well as increased efficiencies from our outsourced production initiative. With this performance, we achieved the high end of our second half gross margin guidance. As we look forward toward the end of the year, we expect to hold these levels of gross margins between 60 and 62% in Q4 and deliver a full year margin between 58 and 60%, driven by lower cost of outsourced products, lower labor and overhead, and improved efficiency from the consolidation of our U.S. manufacturing from 2 sites to 1 along with contribution from price and volume mix. During the quarter we reported operation operating expenses of 6.1 million and we expect second half operating expenses to come in at approximately 13 million versus our first half run rate of 14.3 million driven by reductions of GNA and operational headcount as well as external consulting. We will continue to flex operating expenses levels with revenue projections while maintaining investments in our strategic initiatives and will keep expenses under $28 million in order to maintain planned net losses. We significantly reduced our net losses in the second half aided by improvements in gross margin and disciplined operating expense control. And we are on a runway towards cash flow breakeven in Q4 of 2024. Our cash balance at the end of Q3 was $10.8 million and represented a $900,000 cash burn from the prior quarter. Our biggest driver of cash burn was our net loss of $900,000, excluding non-cash items for stock compensation and depreciation. Adding to these cash flows were working capital changes of $300,000, driven by timing of higher AR and lower AP during the quarter of $900,000. This was offset by $600,000 for our planned reduction of inventory, making additional progress towards our $2 million end-of-year reduction target. We also had $300,000 cash improvement driven by financing activities for our annual insurance renewal. We continue to control and plan our cash according to our revenue, gross margin, and expense guidance and are increasing our end-of-year guidance to having a cash balance greater than $10.5 million. Cash burn for the year has been $5.7 million in the first half and is estimated to be less than $1.2 million in the second half. We are updating our guidance for full year 2020-23 to reflect novel therapies timing of closing collaborations, clinical trials, and milestone achievement. In addition, we are adjusting our underlying U.S. core drug market growth assumptions at 3% to 4% in Q4 versus a prior expectation of 8 to 10% or Q4. Our full year revenue is now expected to be between $28 million and $28.5 million. This implies a flat sequential growth rate in the fourth quarter at the midpoint to reflect the changes that I just mentioned in our novel therapies and core businesses. While our novel therapies pre-commercial revenue has been and will continue to be lumpy driven by timing, We remain bullish in our novel therapies business with our current backlog of fine collaboration and our pipeline of opportunities adding short-term and most importantly long-term commercial revenue. In our assumptions, we are planning 3% to 4% Q4 growth rate in the underlying SCIG drug market, and we expect higher market growth in future quarters as a rise in respiratory infections lead to increased diagnosis of PID which will see the favorable impacts of which we will see the favorable impacts of in 24. Gross margin guidance remains between 58 to 60% for the full year and to exit the year between 60% to 62%. With the completion of the manufacturing transition behind us and year to date gross margins on plan, we expect to continue to see our Q4 gross margins to remain at the mid high end of our range as we continue to see lower cost of goods benefit from our outsource manufacturing initiatives and improvements in average selling prices. We are raising our expected cash balance at year-end 2023 to be greater than 10.5 million. We expect our operating expenses to be lower than 28 million, inclusive of stock compensation expense versus lower than 29.5 million reported in our prior guidance. This is inclusive of approximately 3.1 million in stock compensation which is offset by continued working capital improvements of $2 million of inventory reduction, which we are about 75% complete to date. We continue to expect to reach cash flow breakeven by Q4 of 2024 based on our current strategic outlook. I will now turn the call back to Linda for closing comments.
spk01: Thanks, Tom. In closing, while we always want to see significant revenue growth, I'm encouraged by our third quarter progress across all of our businesses. and on the innovation side. We continue to have exciting work ahead that will evolve the company strategically as a leader in drug delivery in the home and add continued value to patients, customers, and shareholders. As we look ahead, we're excited about our upcoming milestones, including our 50 ml pre-fill launch, progressing our novel therapies collaboration milestones and signings, our innovation agenda, and continued global expansion. I'm also excited to share that we'll be hosting an analyst day on December 5th at our headquarters in Mahwah, New Jersey, where we'll be sharing additional updates and progress to our plan. And finally, in closing, I want to thank the entire CORA team for their exceptional efforts on the quarter. Operator, I will now turn it over to you for Q&A.
spk07: Thank you. We'll now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Alec Nowak from Craig Hallow. Please go ahead.
spk03: Hey, good afternoon. This is Connor on for Alec. Thanks for taking my questions. So can I ask, what is CSL saying about the 50 milliliter pre-filled cartridge? ahead of the introduction and maybe speak to what this could do for IV to sub-Q convergence in the market, whether it's in terms of market share. Just get some commentary on that, please.
spk01: So, first, what CSL has said publicly is that they plan on launching the product. Of course, they announced their approval back in April. The extended delay to launch the product into the market was due to the time that it takes them to fill. that overall pre-fill with their drug and bring it to the marketplace. So they are planning on launching that product in early 2024. And they have also released some pre-market studies that indicate the overall preference for pre-fills. Regarding overall IV to sub-Q, I don't think they've been public about that. I think what we know is what factors are the biggest drivers to subcutaneous therapy use are generally the overall convenience and ease of use for a patient in the home. And given the considerable improvements in both of those areas, we project that about 50% of the market will be pre-fills over the course of the next three years. and that it will in turn drive increased penetration.
spk03: And that 50% is of the subcutaneous market? Correct. Correct. Okay. Gotcha. And then maybe what are your views on the slump for this sub-Q market? Is there any reason this isn't going to be a longer-term correction or issue?
spk01: Yeah, I would say, so we've already seen, we look at one primary source of data, which is the same data that the pharmaceutical IG companies use. And with that data source and looking through all of their public releases, here's what we see. So first of all, I think two encouraging signs. Quarter on quarter, we saw that overall drug market improved by about 2.3 percentage points versus the prior quarter. the diagnosis of immunodeficiencies and primary immunodeficiencies, which are about 85% of the market, are increasing infection rates. So people get infections, they go to the hospital, they get more infections, and you get recurring infections, which brings you there. So given the fact that we saw, you know, 22, 23 was the big, the single biggest flu season we've seen, and this flu season is off to another roaring start, We expect that that 2.3% increase we saw from quarter one to quarter two, we expect that to continue. We don't have the quarter three data yet, but we expect that to continue. Another driver that we're excited about is CIDP usage. So that's a neurology indication, and those patients tend to use about twice as much drug. They tend to do about twice as many injections, and these patients are, prime candidates for pre-fills because they use so much drug. It's just a much simpler process. So we also see that being a buoyant factor for the overall market. And then although we don't subscribe to the script data, I know it's out there publicly, we also saw the overall script data begin to flatten out in terms of we don't see the continued negative quarter on quarter. So I think those are all great indicators for what we feel where we're already beginning to see stabilization and certainly in the overall drug market improvement versus where we have been.
spk03: Got it, got it. And then just one last one here. So you mentioned some new pipeline opportunities for additional collaborations. Can you give any maybe color on how far along some of these opportunities are in terms of what they're on? Yeah.
spk01: Okay. So the 15 side collaborations we did this quarter, you'll see that the signed collaborations, which means we have a signed deal, we are actively exchanging elements of value, whether that be the drug, whether that be dollars, in order to get the product approved on our pump. In addition to that, we have 18 open opportunities that we have in our funnel. The biggest focus that we've seen of late is that a number of new indications are being approved for subcutaneous use in the clinic. Those usages for us, and there was one such drug that was just approved a few months back, a drug called UCB Restigio. And given the fact that we are the largest subcutaneous product being used in the home, nurses are very familiar that also work in those infusion clinics. So we're seeing a lot of demand for what I would call launch market products and late stage three, which is what we're very excited about because obviously a phase three is much closer to market than some of the signed collaborations we have there today. And many of them that we see are concentrated in the oncology clinic specifically. I spoke briefly in my script about Europe, where in Europe we're seeing a lot of adoption of our platform in infusion clinics. So looking to learn from our experience in Europe and bring some of those into the U.S. It's a little bit of time. It takes some time to get those on our labels. It's very exciting.
spk03: Gotcha. That's great to hear. Well, that's all I have. Thank you.
spk01: Thank you.
spk07: The next question comes from Caitlin Cronin from Canaccord Genuity. Please go ahead.
spk02: Hey, thanks for taking the questions. Just a quick one on cash flow break even. I know you said Q4 24 is when you are planning for this. How do you really expect to drive this towards profitability?
spk08: I'll let you take that one. Hi, Caitlin. Thanks for the question. So as London mentioned, so the number one thing is the excitement that we see with you know, the increased diagnosis and what we're starting to finally start to see in the market. And really what that means, Caitlin, is getting back to a double-digit growth, right? So you have to believe that we get back to that double-digit growth rate. You have to also believe that we continue to maintain our margin expansion that we've demonstrated here in the third quarter. And you have to also believe that we continue with our operating expense discipline, with increased leverage and operating leverage. on our OpEx. And then finally with that is our, you know, choice fault decisions in our CapEx deployment. So if we can manage all those things, we could certainly get back to that cash flow breakeven by Q4 of 24.
spk01: And maybe the only other thing that I would say is that certainly our outlook does not look at, you know, 22. We had a 19% growth level. We're not looking at those levels to get to that cash flow breakeven level. But very confident in those four areas that Tom just talked through.
spk02: Got it. Okay. And then just on novel therapies, I think your goal earlier in the year was for, I think, six in 2023. So two in the first half and another now. What's your confidence in really reaching this goal for the full year?
spk01: Yeah, so we have said that our confidence level now is four to five. Of course, there's always opportunities to us for us to exceed the six. But we've gotten a lot smarter, Caitlin, relative to how long lawyers take to mark up a red line agreement. So we're setting our expectations in that four to five level. Of course, we're excited by the new one that we just announced after market today. And what I would say about our novel therapies business may be different than where we were six months ago or even a year ago at this time is that we have a backlog now of revenues and of deals relative to the close collaborations we've already done that we're taking into 2024. So that's also good news.
spk02: Awesome. Thanks for taking the questions.
spk05: Thanks, Caitlin.
spk07: The next question comes from Joseph Downing from Piper Sandler. Please go ahead.
spk06: Sorry, I was on mute there. Hey, Linda and Tom, how's it going? Appreciate you taking the question. Picking up off the first question there, so congrats on the 510 clearance. Can you just talk through how you're thinking about the uptake of the 50 ML once it's launched next year? I'm wondering, does it track with the pre-fill uptake trajectory we've seen, or does it move faster or slower for some reason?
spk01: Yeah, so we think it will move much faster. Today, if I were to look at the total PID or the total patient population out there, about 30% of those are on doses of 20 ml and lighter, and about 70% are on doses of 50 ml and greater. So what that allows for is obviously with the 50 ml, it opens up that 70% of the market that we could not reach before. In addition, what we had in the past is patients that were between let's say 20 and 50 ml or more than 50 ml that nurses were just reluctant because they had to use both vials and pre-fills to switch a patient. So a patient might have to use a pre-filled syringe and a vial in the past. Now with this approval, they can satisfy a lot more of the market. So they're more able to switch patients. So we see where we saw the market basically get to about 12% penetration and then kind of stabilize there. We see the 50 ml really being able to go after 70% of that market. So a much faster uptick than what we saw with 20 ml.
spk06: Okay, thanks. And then I'm curious, any margin implications we should have in mind as that launch starts to unfold?
spk01: Yeah, so the, of course, with being the only pump out there for use with pre-fills, we are certainly looking to take price wherever we can. But we're also conscious that the real game is consumable. And so connecting a specific consumable to that pre-filled product is also what we're looking to do with this launch. So we should see some appreciation. in our overall ASP as well related to pre-fills.
spk06: Great. Thanks, Linda. And then just one on the U.S. market dynamics. So curious what's changed in the last few months with such a shift in outlook here, and how does this influence the revenue growth assumptions embedded in your long-term plans?
spk01: Yeah, so I would say, why did we come down? We really expected that with the drug market, we saw a little bit of an uptick between Q1 and Q2. We expected that continued uptick, and we thought we'd see a couple of points of growth quarter on quarter on quarter. And that just has not happened. It's been a little bit of a slower uptick than what we thought. And again, I'll come back to We're seeing what gets diagnosis going is increased infections. We're seeing, we saw a very strong flu season last year. Pneumococcal infections are at pre-pandemic levels. So although I hate to say it, when people get sick, we see more diagnosis, which is fantastic. And I'm sorry, the second part of your question?
spk06: Yeah, just how that outlook, just about the revenue growth assumptions embedded in your longer-term plans for 2024, and I guess even through 26.
spk01: So, as I said, our revenue, or sorry, our market growth assumptions are in that 3% to 4% range in the fourth quarter of this year. We would expect next year we're setting the overall market growth somewhere in that 5% to 6% growth range for the overall markets. We're not yet discussing our 24 guidance numbers, but obviously let's hope for a strong Q4 in the overall underlying market. We're beginning to, as I said earlier from one of the earlier questions, to see signs of that recovery relative to both scripts, declines flattening out, and also seeing some rise quarter and quarter in overall drug market growth.
spk05: Great. Thanks, Linda. I appreciate it.
spk07: The next question comes from Frank Takanan from Lake Street Capital. Please go ahead.
spk04: Great. Thanks for taking the question. I wanted to start with one on the pump growth you guys referenced, 40% in the quarter. I assume this means that the consumables were a primary advocate of the number coming up a little bit shorter, and obviously that dovetails well with where prescriptions came in and whatnot. but I was hoping you could talk a little bit more about why you think those consumables may have came in a little lower. My understanding is maybe these patients were more chronic in nature and they would stay on sub-Q. So did these patients potentially switch back to IV or was there something else that was occurring specifically related to consumables in the quarter?
spk01: Yeah, so first maybe let me start. Hi Frank, great to have you on the call. So our consumables revenues tend to lag our pump revenues by a couple of months. So we did see a bit of softer pump growth in Q2. And then last year, we had a significant one-time impact, which was we saw greater than backorder that we basically cleared the backorder in our Q3 of last year and also refilled the channel with inventory. So we had a difficult compare to last year specifically on our consumables because that's where our volume was. Regarding any switchback to IV, we do not see, you know, 99% of patients when they go to sub-Q therapy will stay on sub-Q therapy given the benefits both in their time savings and the associated side effects of IV versus sub-Q. So, we see very little switchbacks. The IV market and any strength that we would have seen there is being driven by increased diagnosis of CIDP. They are typically IV patients. Only 15% of CIDP patients are on sub-Q therapy, and they are typically IV users, mostly because of the volume of drug. That's why we see the opportunity with pre-fills, given now patients that were, say, on 400 mLs, would have been inaccessible with a pre-fill. Now it's actually a shorter infusion time that can be done with pre-fills with CIDP. So that is a major market that we believe CSL will go after now as they're the only company able to service those patients with the CIDP indication with pre-fills.
spk04: Got it. That's helpful. And then maybe one on the new collaboration you guys announced today. It seems like you're looking to develop a one-size-fits-all, and I assume there's a cascade of positives that come with that, specifically in the financials and economies of scale and things like that. But maybe just do a catch-all of the significance of that collaboration, when we could see that progress, what this could do to margin impact over a long period of time. and any other strategic benefits I may be missing?
spk01: Yeah, so first, let me just start with the value prop, right? That we, obviously, the pharma partners saw, and increasingly as we begin to show this in very confidential discussions with some of our pharmacy partners, the biggest dilemma right now is, as you called it, simplicity rules, right? So if we can supply a pump that is able to satisfy the needs of all pre-fill and vial patients, that's a big game changer for them. So obviously with our partner that we're working with, they saw the advantage of that. And I would also say that, you know, three of the four major IG companies have made the decision to go to pre-fills and they've been public about that. So we see a lot of leg room in this area. And without getting into any further specifics relative to the total infusion experience we intend to have for our patients, I would say that we believe this product, both from a pump and a consumables program, will be at significant convenience for patients, save a lot of time, save a lot of, really importantly, value-added time for pharmacists and for caregivers that train on the product. So all the way around, we think it will be a significant game changer for us.
spk05: Okay, that's helpful. I'll stop there. Thanks for taking.
spk07: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Linda Tharby for any closing remarks.
spk01: Thank you all for joining us today. I look forward to updating you at our upcoming investor day, and we look forward to seeing you here.
spk07: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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