KORU Medical Systems, Inc. (KRMD): A Bull Case Theory

Yahoo

27-02-2025

We came across a bullish thesis on KORU Medical Systems, Inc. (KRMD) on Substack by Shareholdersunite. In this article, we will summarize the bulls' thesis on KRMD. KORU Medical Systems, Inc. (KRMD)'s share was trading at $3.58 as of Feb 26th. KRMD's trailing P/E was 398.47 according to Yahoo Finance.
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KORU Medical (KRMD) is a leader in subcutaneous drug delivery solutions, providing patient-friendly infusion systems that are transforming the market. After a period of overvaluation, a recent correction has created an attractive entry point, as KORU benefits from strong industry tailwinds, including the shift from intravenous to subcutaneous immunoglobulin (SCIg), greater adoption of prefilled syringes, international expansion, and its growing role in novel therapy development. The company's FREEDOM System, consisting of portable, maintenance-free infusion devices and consumables, has established itself as a preferred solution for treating conditions like primary immunodeficiency diseases (PIDD), Chronic Inflammatory Demyelinating Polyneuropathy (CIDP), and Paroxysmal Nocturnal Hemoglobinuria (PNH), providing superior patient comfort while reducing healthcare costs.
KORU's recurring revenue model, driven by its high-margin consumables business, ensures consistent growth. Its multi-channel sales and distribution approach, which includes direct supply agreements with pharmaceutical companies, specialty pharmacies, and home infusion providers, reinforces its market penetration. Additionally, strict quality controls in U.S. and Nicaraguan manufacturing facilities guarantee compliance with regulatory standards. The company is also investing in R&D to develop a next-generation infusion system, further strengthening its market position.
The domestic core business remains the backbone of KORU's growth, with revenue increasing 14% in Q2 2024 and 12% in Q3, outpacing the broader SCIg market. This momentum is driven by growing patient adoption, expanded SCIg drug labels such as XEMBIFY, and a rising CIDP market. Prefilled syringe adoption is another significant tailwind, enhancing convenience and compatibility with KORU's devices. Internationally, the company has seen strong growth, with adjusted revenue increases of 20% in Q2 and 24% in Q3, bringing year-to-date international growth to 38%. With operations now spanning 25 countries and 26 global distributors, KORU is well-positioned to capitalize on expanding SCIg adoption in new markets like Japan and Austria.
Novel Therapies is an emerging high-growth segment, with revenues surging 276% in Q3 2024 following a 50% increase in Q2. This segment, which includes feasibility studies, clinical trials, and engineering services for pharmaceutical companies developing subcutaneous biologics, represents a significant long-term growth opportunity. As more therapies transition to subcutaneous delivery, KORU's FREEDOM System stands to benefit, reinforcing its leadership in this expanding market.
Financially, KORU has delivered strong performance, with total revenue increasing 17% to $8.2M in Q3 2024, led by 12% growth in domestic core sales and 5% in international sales, which normalized to 25% after accounting for Q2 BSI stocking orders. The Novel Therapies segment contributed $600K, driven by robust product sales supporting clinical trials and non-recurring engineering (NRE) services for six pharmaceutical collaborations. Preliminary Q4 results indicate revenue growth of 23% to $8.9M, bringing FY24 growth to 18% at $33.7M.
Profitability is improving, with gross profit up 19% and margins expanding 140 basis points to 63.4%, aided by higher NRE margins and price increases. Cash flow is turning positive, with preliminary Q4 figures showing a $9.6M cash balance, reflecting $0.8M positive cash flow for the quarter and a 67% reduction in FY24 cash burn. With zero debt and access to a $10M credit facility, KORU is financially stable. FY24 guidance has been raised to $32.75M-$33.25M, though preliminary results suggest an even stronger $33.9M. Gross margins are projected at 62%-63%, while operating expenses are expected to land at $24.5M-$25M, excluding stock compensation. KORU anticipates achieving cash flow breakeven in Q4 and sustained positive cash flow in 2025.
At $3.6 per share, KORU's market cap stands at $170M, with an enterprise value of $160.5M. It is projected that FY25 revenue of $38.4M, equating to a 4.17x EV/S multiple. While a $0.07 EPS loss is expected, the company's improving fundamentals, margin expansion, and accelerating growth in novel therapies suggest further upside. Despite difficult comps in FY25, momentum is expected to strengthen in FY26, reinforcing the long-term investment case. Investors may find the current $3.5-$3.7 range an attractive entry point, as KORU's disciplined financial management and multiple growth drivers position it for sustained success.
KORU Medical Systems, Inc. (KRMD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held KRMD at the end of the third quarter which was 6 in the previous quarter. While we acknowledge the risk and potential of KRMD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KRMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.