KORU Medical Systems, Inc.

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.

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.

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.