Repro Med Systems Inc

NASDAQ:KRMD

Earnings Call Analysis

KORU Reports Growth and Positive Outlook

KORU Medical Systems displayed strength in the fourth quarter, with a disciplined growth strategy leading to a 2% annual revenue increase to $28.5 million and exceeded gross margin expectations. The core SCIg business saw robust U.S. performance from market share gains and double-digit international growth. The FDA approval of 50ml Hizentra prefilled syringes positions KORU to capitalize on this growing segment. Novel Therapies advanced, adding three collaborations in 2023 and starting 2024 strongly with two new ones. Gross margins stayed above 60%, and operational efficiencies led to a positive cash flow of $700,000 in Q4 and a year-end cash balance of $11.5 million, surpassing projections. For 2024, KORU forecasts net revenues of $31.2 to $32.2 million, implying 10-13% growth, and aims for a 59-61% gross margin, expecting to be cash flow positive in Q4 '24 and for the full year 2025.

Sustaining Core Business and Expanding Market Share

The company showcased robustness in its core subcutaneous immunoglobulin (SCIg) business, underlined by impressive growth in the U.S. market attributable to share gains and a recovering SCIg market which notched up another quarter of sequential growth. International markets played a vital role with double-digit growth year-over-year, supported by deeper market penetration and expansion into new geographies. This international success was buoyed by a strong immunoglobulin (Ig) supply, suggesting a well-managed supply chain and effective global strategy.

Innovation as a Growth Driver

The company announced a notable FDA clearance for the Hizentra prefilled syringes paired with the KORU FREEDOM System in November. This development positions the company favorably within the SCIg market where prefilled syringes are becoming increasingly popular. The company expects to benefit significantly from this market opportunity, indicating a forward-looking approach to product innovation.

Financial Health and Performance

The fiscal discipline of the company is evident as it boasted a gross margin above 60% for the second consecutive quarter and generated positive cash flow. They also finished the year with a stronger-than-expected cash balance of $11.5 million, reflecting effective expense management and inventory initiatives. Going forward, the company has guided net revenues for 2024 to range between $31.2 million and $32.2 million, signaling a robust 10% to 13% growth, and predicted a gross margin between 59% to 61% for the full year. Moreover, they plan to end the year with a minimum cash balance of $8 million, thereby reinforcing their anticipated financially healthy standing.

Strategic Focus and Revenue Growth

The year 2024 is declared as a crucial execution year, with the company aiming for sustained double-digit growth and profitability. Executing a focused growth strategy that leans on three main pillars—domestic SCIg market penetration, broadening the Novel Therapies pipeline, and geographical expansion—KORU remains committed to its Vision '26, aspiring to lead in the large volume subcutaneous drug delivery market. Achievements such as the sequential growth in patient volumes during Q4, strong end-user sales to pharmacies, and the anticipation of additional product approvals illustrate the company's robust market position and strategic direction.

Novel Therapies: Expanding the Collaborative Horizon

KORU is forging ahead with its Novel Therapies business, securing 15 collaborations to date, with 3 new alliances inked in 2023 and a pipeline of 19 potential opportunities. This initiative demonstrates the company's commitment to innovation and expansion, with two drug collaborations expected to proceed to Phase III trials in 2024, marking significant advances toward potential commercial launches.

International Market Dynamics

The fourth quarter revenue growth of 8% over the same quarter in the previous year and a full year growth of 10% reflect the company's resilient international performance. Enthusiasm remains high as KORU anticipates continued expansion into new regions in 2024, setting the stage for sustained growth in the international arena.

Consumer Preferences Shaping Product Offerings

The company is keenly aware of patient needs and preferences, as evidenced by the 20.5% growth of prefilled syringe patients in the fourth quarter. The move towards prefills is consistent with 78% of patients finding them a preferable alternative to vials. With FDA clearance for key dosages, KORU is strategically poised to meet the comprehensive demands of the Ig market, resonating with the consumer-driven approach to healthcare.

Commitment to Operational Excellence and Cost Management

The guidance provided by the company includes managing operating expenses between approximately $23.5 million to $24 million, excluding stock compensation expenses. Along with this prudent financial management, the company anticipates achieving cash flow breakeven by Q4 and turning cash flow positive for the full year of 2025. This represents a strategic commitment to achieving operational efficiency and underscores a long-term vision for growth and profitability.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the KORU Medical Systems Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Louisa Smith from the Gilmartin Group. Please go ahead.

[Louisa Smith]

Thank you, operator, and good afternoon, everyone. Earlier today, KORU Medical Systems released financial results for the fourth quarter and full year ended December 31, 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 press 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, March 13, 2024, at approximately 4:30 p.m. Eastern time. 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 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.

[Linda Tharby, executive]

Thank you, Louisa. 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 walking through results and key business updates for the fourth quarter and full year 2023. Tom will then review our financials and our 2024 guidance. Following the prepared remarks, we will open the line for questions.

I'm very pleased with KORU's performance in the fourth quarter. We continue to execute on our growth strategy, exceeded our gross margin expectations, and with discipline in our capital and expense management, we continued to see improvements in our quarterly cash burn. Our full year revenues ended at $28.5 million, with growth of 2%, affected by a onetime nonrecurring engineering services revenue in our Novel Therapies business.

Our overall revenue growth in our core SCIg business remains strong, with U.S. performance driven by share gains and with the overall SCIg market recovering in another quarter of sequential growth. In our international business, we delivered double-digit growth year-over-year, primarily driven by deeper penetration in current markets and successful entry into new geographies supported by strong Ig supply.

In November, we announced FDA clearance of the 50ml Hizentra prefilled syringes for the KORU FREEDOM System. Prefilled syringes are becoming an increasingly large part of the SCIg market, and KORU is strongly positioned to capitalize on this opportunity. We believe prefills will be a critical growth driver for KORU and expand our penetration in our core markets.

In Novel Therapies, we continue to build out the pipeline, having signed three additional collaborations in '23 and having started the year strong with two new in the beginning of 2024, both of which I will touch on later. From an operational perspective, I'll let Tom cover the financials with more granularity.

For gross margins, we finished above 60% for the second consecutive quarter and generated positive cash flow of $700,000 in the fourth quarter. Additionally, we exceeded our 2023 ending cash balance projections, closing the year with $11.5 million. Each of these metrics serves as a testament to the steps we've taken in our operating expense management and inventory reduction initiatives, and we expect to continue the progression in operating performance in 2024 and beyond.

Finally, we're initiating 2024 guidance for net revenues to range between $31.2 million and $32.2 million, representing 10% to 13% growth, and gross margin between 59% to 61% for the full year. Additionally, we plan to exit the year with an ending cash balance of at least $8 million and to be cash flow positive in the fourth quarter of '24 and for the full year 2025. Tom will discuss details related to the guidance and our associated assumptions later in the call.

Over the last few years, we've invested in positioning KORU for growth and profitability. And as we enter '24, we expect much of that investment is behind us. I'm seeing strong momentum in our core business, our best Novel Therapies pipeline to date and a focused operational discipline that is critical to our future success. 2024 will be an execution year for our team and we believe we are poised for a return to sustained double-digit growth and profitability. Vision '26 remains our key focus moving forward, and we are positioned for a meaningful inflection point in '24 and beyond.

Moving to Slide 4. You'll recognize the 3-pillar growth strategy that is the foundation of our Vision '26 initiative. Those 3 being domestic SCIg penetration and growth, the broadening of our Novel Therapies pipeline and geographic expansion. This strategy will continue to position KORU as a leader in the growing large volume subcutaneous drug delivery market. As it relates to our Domestic Core, our goal is to increase penetration into the SCIg market and further establish our leadership position.

With respect to the overall SCIg market, in the fourth quarter, we saw another quarter of sequential growth in patient volumes, and the market ended the year with mid- to high single-digit growth. We delivered approximately 6% year-over-year revenue growth, and our end-user sales to pharmacies were up double digits, reflective of share gains.

Our distributor inventories were lower at the end of Q4, and we expect to see this inventory replenished in future quarters. Increased demand for pumps drove a double-digit increase in volumes for both the fourth quarter and the full year, often a leading indicator to consumable sales. We continue to see caregivers and patients drive therapy to prefills due to their convenience versus traditional SCIg vial therapy.

We're encouraged by these trends and believe this will benefit the commercial launch of the 50ml Hizentra prefilled syringe, which began rollout in January. We also anticipate a new 510(k) submission for a product in the fourth quarter 2024 within core Ig. Overall, we are increasingly confident in the SCIg market growth driving new patient starts and believe we are positioned for continuing share gains in our U.S. business in 2024.

Turning to Novel Therapies. We have 15 collaborations signed to date, with 19 additional open opportunities across varying indications, signing 3 new collaborations in 2023. I'm encouraged by our progress in early '24. In recent weeks, we've announced two new collaborations, which I will discuss later. We also have 2 drug collaborations progressing to Phase III trials in 2024, a key milestone in the advancement to commercial launch.

Looking forward, during the fourth quarter of '24, we're anticipating the submission of a 510(k) application to support a new novel therapy indication for use with our FREEDOM Infusion System in ambulatory infusion centers. I'm very pleased by the headway we're making within NT, by the overall strength and diversity of our pipeline and the progress on commercialized drugs in early '25 and '26.

Turning to International Core. It continues to be a great opportunity for KORU. Revenue in the fourth quarter grew 8% over Q4 '22 and 10% for the full year. Strong sales growth was driven by growth in our established markets as Ig supply stabilized, new indication growth and CIDP and FID and entry into multiple new markets.

As was the case in Domestic Core, pump and consumable volumes were another strong indicator of demand with double-digit growth. Our excitement in international is at an all-time high as we anticipate continued expansion into new regions in 2024. We also expect the completion of an electronic pump trial in the first half of the year, generating further evidence for our FREEDOM Infusion system.

I'd like to shift our focus back to the Ig market on Slide 5, and more specifically, prefilled syringes, and why we're so bullish on the opportunities this presents for KORU moving forward. Prefills represent a major catalyst for growth within our Domestic and International Core markets as this delivery method is increasingly penetrating share amongst subcutaneous therapy patients and has the potential to increase overall subcu penetration.

Prefilled syringe patients grew 20.5% in the fourth quarter and increased overall penetration to 14% as the fastest-growing part of the overall Ig market. Overall, we see a number of factors that will continue to drive growth. First, patient preference, with 78% of patients preferring the use of prefill with the FREEDOM pump versus vial administration. Additionally, the 50ml dose clearance represents 2/3 of the prefilled market and, combined with the earlier 20ml launch, provides KORU with a broad portfolio to fulfill all patient needs.

We have been focused with our pharmaceutical partners in driving a clinical practice change to prefills, driving even greater uptake in usage due to the increased convenience. We expect increased penetration with CIDP patients who require much higher doses and twice weekly therapy. We are excited by our position and potential for prefills to drive growth and higher penetration reaching levels of 20% to 25% for full year penetration in '24 and 50% by the end of year '25.

Turning to Slide 6. We are very pleased to announce that we will be presenting new data at the 2024 National Home Infusion Association Conference later this month. This study focused on patient adherence to the FREEDOM System and collected data from over 11,000 patients with primary immune deficiencies who self-administered their SCIg therapy using the KORU FREEDOM pump. This retrospective study conducted over a 4.5-year period revealed an impressive adherence rate of 97% to the prescribed treatment protocol.

To provide context, adherence rates for other chronic conditions such as high blood pressure, cholesterol, arthritis and diabetes range somewhere from 62% to 87%. This comparison highlights the exceptional performance of the KORU FREEDOM pump system and promoting treatment consistency and improving patient satisfaction.

Overall, these findings underscore the effectiveness of the KORU FREEDOM pump system and facilitating strong adherence to SCIg therapy among PID patients, leading to improved treatment on pumps and patient satisfaction. We look forward to sharing these results at the upcoming NHIA Conference with our prospective new customers.

Turning to our Novel Therapies pipeline. We have the strongest pipeline we have reported to date. In 2023, we added 3 new collaborations to our pipeline, bringing our total collaborations to 15, and we are pursuing another 19 open opportunities. This NT pipeline translates to a total addressable market of approximately $2.7 billion, through the treatment of over 1.6 million people globally.

2024 is already off to a strong start, and I want to highlight the 2 recent collaborations we've announced. The first being the initiation of a feasibility study with KORU's system on an already commercialized rare disease therapy. And the second, a clinical supply agreement to support a pre-commercial unnamed SCIg drug entering its Phase III trials.

Novel Therapies is a key piece to KORU's growth strategy as it creates opportunities for future drug indications that can grow our KORU business significantly once commercialized. We also anticipate entry in Japan with increasing SCIg approvals. Our team is focused on late-stage drug opportunities with potential for commercialization over the next three years in both the home and ambulatory infusion settings.

The near-term targets are those collaborations we expect to go live with KORU, totaling 6 new potential entries by the end of '26, are highlighted in the lighter green on the far right of the slide. I'm encouraged by the incremental advancement in our funnel and truly believe that Novel Therapies will be transformational to increasing our leadership position as a global leader in large-volume drug delivery and driving our commercial potential in our core business.

In 2023, we've laid the foundation for a strong '24 and are on a path to continued double-digit growth with a clear line of sight to profitability in '25. I'm excited by our current momentum as we remain focused on the execution of our Vision '26 strategy and positioning KORU for continued growth and profitability. I will now turn it over to Tom to review our financials.

[Tom Adams, executive]

Thank you, Linda, and good afternoon, everyone. We closed the quarter with a total net revenue of $7.2 million, which was below the prior year by 2%. We were pleased with our quarterly performance in our Domestic and International Core business. .

For the quarter, we reported Domestic Core revenues of $5.6 million, reflecting 5% year-over-year growth. This growth was driven by share gains in new accounts, double-digit growth in infusion pump sales and an overall healthy SCIg market. In addition, and as Linda pointed out, the end-user sales, which are indicative of our demand, were very strong during the quarter, which we expect to be reflected in future replenishments of distributor inventory.

The International Core business increased 8% year-over-year with revenues of $1.3 million, driven by improved Ig supply across Europe, expansion into new geographies and double-digit growth in pump and consumable volumes. Our Novel Therapies business reported revenues of $200,000 or a 62% decrease driven by a large revenue milestone we completed for nonrecurring engineering services in 2022.

Moving to Slide 9. For the full year 2023, total net revenues were $28.5 million, increasing 2% over the prior year. Domestic Core sales totaled $22.4 million, which was a 6% year-over-year increase, driven by growth in pumps and consumables attributed to share gains in national and regional accounts. 2023 also marked a record year in infusion pump unit sales. With this growth, we expect our consumables revenue to follow as our pumps make it into the hands of nurses and patients.

International Core revenues were $4.6 million, representing a 10% increase compared to the prior year. Growth internationally was driven by increased sales in established markets as well as expansion into new geographies. Novel Therapies revenues were $1.5 million, reflecting a decrease of 41% in the year. The decline was a result of higher NRE recognized and increased clinical trial orders from the prior year. We carried revenue potential from a number of pipeline opportunities into 2024.

Moving on to gross margins on Slide 10. For the fourth quarter, we delivered GAAP gross margins of 60.3%, which was a 470 basis point improvement over the prior year. Our non-GAAP gross margin for the quarter was 63.1%. The non-GAAP gross margin allowed for a onetime inventory adjustment related to a product discontinuation that had no impact on revenues. Margin improvements in the quarter were driven by increases in manufacturing efficiencies relating to a site closure, outsourcing of consumable manufacturing and favorable changes in product mix.

For the full year 2023, GAAP gross margin was 58.6%, a 350 basis point improvement over the full year of 2022, which was driven primarily by our outsourcing efforts and improvements in manufacturing productivity and product mix. Non-GAAP gross margin for the year was 59.6%, which will add, again, for a onetime adjustment for a product discontinuation.

On Slide 11, at the end of the fourth quarter, we finished the year with a cash balance of $11.5 million, representative of a $700,000 cash gain for the quarter. Our Q4 cash improvement was driven by lower losses in the second half of 2023, driven by improved gross margin and disciplined operating expense control.

Additionally, there was an increase in CapEx in the quarter on tooling related to the development of our next-generation products. Offsetting these uses of cash, we achieved significant working capital improvement, led by the completion of our inventory reduction plan, collection of earned retention credits and typical year-end accruals.

During the fourth quarter, we also recorded a noncash valuation allowance against our deferred tax of $6 million. As we review our cash usage by quarter, we improved directionally throughout 2023. The first quarter had a higher level of spending as a result of onetime investments in CapEx and onboarding of new hires, which tapered off significantly throughout the year.

Moving into 2024, we expect quarterly cash usage to remain consistent to follow a similar cadence, but at a significantly lower burn rate. As Linda noted earlier, given our improved operating leverage and our planning -- reduced cash usage, we expect to be cash flow positive in the fourth quarter of 2024 and for the full year 2025.

Net loss for the fourth quarter of 2023 was $7.5 million or a negative $0.16 per diluted share compared to a net loss of $2 million or negative $0.04 per diluted share for the same period of 2022. Net loss for the full year 2023 was $13.7 million or negative $0.30 per diluted share compared to a net loss of $8.7 million or negative $0.19 per diluted share for the same period of '22.

Our net loss and EPS for both the quarter and the full year included a tax valuation allowance of $6 million. Adjusted EBITDA for the quarter was negative $1 million or negative $0.02 per diluted share versus negative $1.6 million or negative $0.04 from the prior year. And adjusted EBITDA for the full year was $6 million negative or negative $0.13 per diluted share versus negative $6.1 million or negative $0.14 in the prior year.

Moving on to Slide 13. We are setting our revenue guidance for the full year of 2024 between $31.2 million and $32.2 million, representing roughly a 10% to 13% growth. Key drivers behind these estimates include: one, core SCIg drug market growth in the mid- to high single digits; the second, adding 3 new collaborations to the novel therapies pipeline; and the third prefilled syringe penetration of approximately 20% to 25% of the overall SCIg market.

We expect gross margins to range between 59% to 61%, primarily as a result of geographic expansion into lower ASP markets, supply chain inflationary pressure and start-up costs for our new production line in the second half of the year. Finally, we expect our 2024 ending cash balance to be greater than $8 million, implying a significant cash burn decrease from prior years.

Assumptions to this guidance are driven by managing operating expenses of approximately $23.5 million to $24 million, exclusive of stock compensation expenses. We also are expecting cash flow to breakeven in Q4 and to be cash flow positive for the full year of 2025. Finally, all our cash guidance I just mentioned is exclusive of our new $10 million credit facility. Our new credit facility consists of a $5 million line of credit and a $5 million term loan with HSBC USA, with which we have established a new commercial banking relationships.

We are pleased to have this new reserve available to us for strategic growth capital opportunities. I will now turn the call back to Linda for closing comments.

[Linda Tharby, executive]

Thanks, Tom. In the last several years, we've invested in our R&D pipeline and new product innovation to drive increased market penetration, share gains and accelerated growth. As we discussed, we have already received FDA approval for the 50ml Hizentra on our FREEDOM60 platform, which will aid in expanding our customer base.

In the near term, we expect a 510(k) submission for our new infusion set which will provide a more comfortable and convenient experience and our next-generation infusion pump for Ig. In the longer term, we expect the pump platform for Novel Therapies that will be customizable to pharmaceutical partners' needs. We are very excited to bring each of these products to market as we look to assist both customers and pharmaceutical drug manufacturers in providing the best subcutaneous infusion experience to patients.

In closing, we have a few key milestones that I would like to highlight for 2024 within our financial and operational performance. We anticipate returning to double-digit net revenue growth versus full year '23. We look to accelerate our U.S. core share gains through increased penetration of 50ml prefilled syringes while also continuing our international expansion in current and new markets.

On the Novel Therapies front, we expect to enter 3 new collaborations in the year focusing on late-stage candidates that have higher probabilities of reaching commercialization prior to 2026. We are projecting the submission of 2 510(k)s, one for a new product and the other for a new drug indication on the FREEDOM platform. Finally, it is our commitment to breakeven cash flows in Q4 of '24 and cash flow positive for full year 2025. Each of these milestones are strong indicators of the progress we are making through our KORU's overarching Vision '26 goals.

Overall, I am pleased with our fourth quarter and '23 results, and I'm strongly encouraged by our strategic outlook across all of our businesses heading into '24. We continue to strive to evolve our company to a leader in drug delivery in both the clinic and at-home setting, to the convenience of our products, as demonstrated by our long-term plan and milestones for the year. In closing, I would like to thank the entire KORU team for their continued passion and dedication.

Operator, I will now turn the call over to you for Q&A.

[Operator]

[Operator Instructions] Our first question comes from Frank Takkinen with Lake Street Capital.

[Frank Takkinen, analyst]

I was hoping to start with one on guidance. I saw and heard the comments around some of your assumptions about SCIg market growth, Novel Therapies, prefilled syringe penetration. I was hoping you could kind of break it down by line item, maybe Domestic, International and Novel Therapies. How should we think about the growth profile [indiscernible] the guide for 2024? And then to add on to that, how should we think about the contribution from the Hizentra 50ml?

[Linda Tharby, executive]

Okay. I think I got it all. I'll start, and then turn it over to Tom. First, yes, our overall performance, $31.2 million to $32.2 million expectation for 2024. We do not guide by business, but let me give you a couple of the key points.

In our U.S. business, we would anticipate the market overall to grow somewhere in that 7.5% range, and we expect our performance to be a couple of points above that, driven by share gain, primarily prefilled syringe and increasing prefill penetration, particularly in the CIDP patient base. Our International performance, you can expect -- so that, in the U.S. business, is a nice acceleration from where we ended this year.

On our overall International business, we would expect the overall year in our International business to be up appreciably from where we ended this year, probably think about a growth trajectory somewhere in the 15% to 20% range. And then finally, for our Novel Therapies business, we would say, overall, you can expect that business somewhere between the $1.5 million and $2 million mark overall in the year.

[Frank Takkinen, analyst]

Okay. Perfect. That's helpful. And then maybe just as a follow-up to one of the earlier PRs from this week on the ambulatory infusion setting. Maybe talk about that specific opportunity and extend that into kind of how you think about the ambulatory infusion market as an overall opportunity going forward?

[Linda Tharby, executive]

Yes. So ambulatory infusion centers, just to set the stage there, are a market that exists between the hospital and the home setting, where drugs -- there have been 8 new drugs launched in the last 3 years, which require administration by a health care professional in that setting. As I noted in our Investor Day, that was a key area of progress for us because the drugs are already commercialized.

So I'm very excited that we were able to finalize this deal, announced it in the first quarter for a drug asset that is already commercialized in those settings. On top of that, that asset will use a customized KORU platform, and we anticipate that we will file a 510(k) for that in the U.S., followed by ex U.S. geographies.

We continue to see the infusion centers as being an opportunity for incremental growth. A new area that represents near-term commercial potential. And just overall very, very excited about the opportunity. We have several more that we are focused on in our pipeline and hopefully more to report in the coming quarters.

[Operator]

The next question comes from Alex Nowak with Craig-Hallum Capital.

[Alexander Nowak, analyst]

Maybe to follow up around the core business for KORU. We've spoken a lot about the 50-milliliter prefilled launch. But I'm curious, I've been seeing a lot of TV ads on CIDP recently. So are we seeing a bigger uptake in that part of the market than maybe we would have thought? What are your thoughts there?

[Linda Tharby, executive]

Yes. So currently, of our total user base, CIDP would account for about 10% of our total user base and is only today about 10% penetrated into SCIg therapy. So this is a major focus of all of the SCIg players to convert them from IV to SCIg therapy. With the advancement of prefills, because of the convenience, about 80% of patients prefer these and the very large doses that they require.

This is a significant opportunity to take that 10% penetration level and grow it to levels that are similar, for example, in PID, we would see about 50% penetration in that patient base. So overall, CIDP in the coming years is a significant area of growth. And speaking to our customers, they are reporting daily patients coming in asking and being converted with doc prescriptions to go from IV to subcu therapy. So very excited overall for the opportunity.

[Alexander Nowak, analyst]

So certainly, the 50-milliliter prefilled is going to be very helpful, whether it be PIDD or CIDP. So that makes total sense. What do you need for KORU to get ready to help Takeda with their launch in Japan?

[Linda Tharby, executive]

An approval by the regulatory bodies. We have been waiting for this one.

[Alexander Nowak, analyst]

It's going to be helpful.

[Linda Tharby, executive]

Yes. So as you know, we submitted that file some time. We continue to progress commercial discussions with all of the pharmaceutical partners for that entry. So we are excited, and it's just a regulatory approval is what we need.

[Alexander Nowak, analyst]

Okay. Got it. and then a clarification and then just one more question. Three new collaborations that was mentioned in the prepared remarks a couple of times. Do you mean 3 new collaborations in total for 2024? Or 3 more than what we've already been -- that's not even announced so far up until now?

[Linda Tharby, executive]

Yes. That is 3 in total, which would include the 2 we've already announced. And what I would say is, we have a lot of work to do on the 15 that are already in the pipeline. These generally start with feasibility, many of them involve innovation agreements. They then go into clinical trial approvals. So a lot of work to do in there. But 3 is the number. We obviously hope to exceed that number, but 3 is what we're counting on for our guidance right now. So obviously excited that we have 2 of those out of the way a couple of months in here.

[Alexander Nowak, analyst]

Yes. Makes total sense. And then just lastly, 2024, it should be a good year and should be building up into, I think, a very strong 2025. If you put together the core Ig business, Takeda Japan launch, the 50-milliliter prefilled, the rare disease launch, what is a realistic view on what the longer-term growth can start to look like for KORU? Is the growth that's provided in the 2024 number the longer-term growth? Or could we get above that?

[Linda Tharby, executive]

I would say thank you because you just named off all of the key areas that we're looking at, right? And I would say, in addition to that, continued strength in the Ig market, our share gains here in the U.S., the NT progression and successful commercial entries, all of which I laid out today, 6 shots on goal coming into '25 and '26.

And then incremental expansion internationally, that's become a real driver for us. So overall, we believe our numbers can be 2025-plus percent growth is what we're looking at for '25 and a little bit stronger. Sorry, the only thing I missed was new products, obviously. Those new products launching add to that share gain perspective.

[Operator]

The next question comes from Caitlin Cronin with Canaccord Genuity.

[Caitlin Cronin, analyst]

Just to start off with 2024 guidance, what does that really imply from a quarterly cadence perspective for both revenue and gross margin?

[Linda Tharby, executive]

Maybe I'll let Tom handle that question.

[Tom Adams, executive]

Sure. So we typically don't guide by quarter, Caitlin. But you can expect increasing revenues throughout the quarter. And I would say that, on the Novel Therapies side, as you know, that business is rather lumpy, and revenue is reflected as work is performed and the milestones were completed. But I would say on the core side, that's more of an increasing type of revenue that you can model out.

And then in terms of gross margin, yes, I mean, gross margin, there's 3 things that are impacting the year. And look, the first thing is we are launching new products, and we're ramping up our facilities in the second half of the year. And when you do that, you typically have some inefficiencies within manufacturing as you start up a new facility. Again, that's the second half of the year.

And then I would say, also, with that, we are growing internationally. And those ASPs are generally at a lower ASP than what you'd see in the U.S. market. So I would say, all in all, you can mile out of gross margin that would be pretty consistent with maybe a little bit of a drop in the Q3 time line and then a bounce back up in Q4.

[Linda Tharby, executive]

And Caitlin, maybe the only additional thing that I would add to what Tom had to say is you would expect that our quarterly revenues would follow prior year patterns. We typically tend to have a stronger Q1, generally driven by new insurance, so where people switch providers and we'll get new pumps and/or new consumables with that provider.

[Caitlin Cronin, analyst]

And then just on gross margin again, are the supply chain inflationary pressures that you noted in the press release, are these new or are these just pressures that have been going on for some time and if you [ knew ] them in the guidance?

[Tom Adams, executive]

I'd say a combination. As you know, inflation has not gone away. It's still out there. And so we still anticipate some pricing pressures from some of our vendors. And also, we just completed our budget and typically, a lot of our new contracts, they renew in the first quarter. So there are some pricing increases from those renewals that we're working with.

[Linda Tharby, executive]

Operator, further questions?

[Operator]

[Operator Instructions] Our next question comes from Jason Bednar with Piper Sandler.

[Jason Bednar, analyst]

I wanted to maybe follow up on some items that have been touched on, but just hopefully unpack a few things a bit more. Caitlin's question there around cadence, maybe if I string that together with a prior question around acceleration to '25. I mean it would seem like your comps first half versus second half, you should have an acceleration first half, second half in the growth rate this year so that we're not looking at such a large step-up in the growth rate heading into '25. So I guess, is that the right way to think about it on that side?

And then, Tom, on your gross margin points there, again, it was Caitlin's question, the supply chain costs ticking a little bit higher. Is this -- do we need to have like a little bit of a downshift in how you're thinking about gross margins in your '26 plan? Are those incremental to that '26 plan? Or are those contemplated within there? Just trying to understand if anything has changed.

[Tom Adams, executive]

Yes. So let me start with the gross margin since we were just on that topic. I would say that there are some onetime gross margin impacts. Again, as I mentioned, the starting up of a new production line, it definitely creates inefficiencies when you do that as you're trading off volumes from one site to the other. So that's one piece that I would imagine will resolve itself in future periods after this year.

And then just in terms of your question around the revenue growth, sure. We will see increasing, and we will see -- as we see the prefilled syringes uptick over the quarters, we will see upticks. We also will see -- we are expecting approval for the Japanese market, and there are some other drivers that are included in the back half of the year, which will help our revenue.

[Linda Tharby, executive]

And maybe the only other thing I would add to that is, given the revenues we carried in on Novel Therapies this year, you can expect a more even cadence in our Novel Therapies revenues throughout the year. They will not be as back-end loaded as what we anticipated last year because of what we carried into this year.

[Jason Bednar, analyst]

Okay. All right. Got it. I want to shift gears. I don't think it's been touched on yet. Apologies if I missed it, but you mentioned your PR today, an assessment report from your European notified body, what does this mean for your European business? Does it affect at all your ability to sell in that market or get products approved in that market? When do you expect to hear an update from BSI? Just anything additional there because, again, it could be important, just hard to tell if it is or not.

[Linda Tharby, executive]

Yes. No. Thank you for the question, Jason. So let me start by saying that we are currently certified for sale in the EU. So no issue there. Every year, you go through an annual recertification process. They were in -- BSI is our auditor. They were in, in February, to which we had zero nonconformances. So that's awesome in our manufacturing and quality systems.

We had one open technical file on one product, and they recommended we had submitted our response to that open file to BSI, and we had been informed by them that they would come back with questions or that the file was closed. That was in March of 2023. So we were quite surprised when we got this report last week saying that they were not recommending our recertification due to this one product and open technical file.

We have launched an appeal as of last evening. They came back and acknowledge that they have received that appeal, and we expect to resolve this in cooperation with them in the coming months. We expect little to no interruption in our sales in the European market. Our products continue to remain certified, marketed and sold in the EU.

[Jason Bednar, analyst]

And Linda, again, I don't want to throw out like the worst case, but just so we're prepared. I mean, what's that best case as we come back and there's like no impact whatsoever? Or it's de minimis? Or what's worse case here just so we can prepare accordingly.

[Linda Tharby, executive]

Yes. Great question. So best case is that there is no interruption at all. We are -- well we work through this situation. Any product that we have in the market, we can continue to sell. So that's best case. And worst case, what I would say, is a worst case would be that they say we are not -- they stand by their original and do not accept our appeal. Again, I feel that's highly unlikely given what we've sent them on their prior communication to us, which is that's why we're appealing.

But if they decide to uphold that, then I would say, it would take us several months to resolve, we feel we can resolve it on our end in several months. We feel it may take them some time to review the file. So if you take all of those things into impact, I would say, the worst-case scenario would be several months of not supply. I would cap that at probably 3 months in Europe of nonsupply products.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Linda for any closing remarks.

[Linda Tharby, executive]

In closing, I just want to say thank you to the KORU team and to all of our investors for the continued progress in 2023, and we look forward to a great year in 2024. Thank you all.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.