On Thursday, Canaccord Genuity adjusted its price target on shares of Koru Medical (TASE:PMCN) Systems Inc. (NASDAQ: KRMD), increasing it to $4.00 from the previous $3.00, while reaffirming a Buy rating on the stock. The adjustment follows Koru Medical Systems' report of a robust financial quarter, surpassing expectations for both revenue and earnings.
Koru Medical Systems has demonstrated consistent double-digit growth for the third consecutive quarter, with significant advancements in its domestic core business and nearly a 300% increase in its Novel Therapies business. This growth is attributed to clinical trial orders and progress on non-recurring engineering (NRE) milestones. The company also reported strong gross margins and a cash use of $1.7 million during the quarter.
In light of these results, Koru Medical Systems has updated its full-year 2024 guidance, raising its projections for top line, gross margin, and ending cash balance, while maintaining its forecast for cash flow breakeven in the fourth quarter of 2024. Despite the positive financial performance, the company announced a delay in its 510(K) submission for next-generation consumables, pushing the expected submission from the fourth quarter of 2024 to mid-2025.
The delay in the 510(K) submission is not anticipated to materially impact the company's revenue projections for 2025, as broader market launch plans were not scheduled for that year. Moreover, Koru Medical Systems expects to file a 510(K) for a rare disease biologic in tandem with the consumables submission, with both anticipated in 2025. The company assures that these updated submission timelines should not significantly affect revenue expectations.
Canaccord Genuity's analyst highlighted Koru Medical Systems' potential for sustained momentum, citing the company's performance in the core subcutaneous immunoglobulin (SCIg) market and its ability to expand through new patient starts and increased account penetration.
With multiple 510(K) submissions expected in 2025 and potential for international market expansion, the firm sees a strong future for Koru Medical Systems in both its core markets and Novel Therapies pipeline. Despite potential competitive pressures, the firm remains confident in the company's trajectory.
In other recent news, KORU Medical Systems announced a significant increase in its second-quarter revenues, reporting a 22% rise to $8.4 million year-over-year, primarily driven by its core business and advancements in its Novel Therapies division.
The company also revealed a new Long-Term Incentive Program (LTIP) designed to enhance executive retention and performance. The LTIP, part of the company's 2024 Omnibus Equity Incentive Plan, offers annual equity-based awards to key executives and selected employees.
The LTIP awards consist of restricted stock units, performance stock units, and nonqualified stock options, with the number of shares allocated based on the company's stock price on the Nasdaq Capital Market on the day before the grant date. Notably, the performance stock units vest based on the company’s revenue performance for the fiscal year ending December 31, 2026.
In addition, KORU Medical Systems has received regulatory clearance in Japan for its FreedomEdge infusion system and has promoted Chris Pazdan to Chief Operating Officer. Furthermore, the company is aiming for six new drug clearances by 2026 and reported a 65% gross margin for the quarter.
The company ended the quarter with a cash balance of $10.5 million and projects a year-end balance over $8 million. Despite anticipating higher cash usage due to capital investments and R&D, and a potential slowdown in revenue growth due to seasonal factors, the company remains optimistic about its growth prospects.
InvestingPro Insights
Koru Medical Systems' recent performance and Canaccord Genuity's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $146.74 million, reflecting investor confidence in its growth potential. Notably, KRMD has shown impressive price momentum, with a 38.53% total return over the past three months and a 39.13% return over the past year, aligning with the analyst's positive stance.
InvestingPro Tips highlight that two analysts have revised their earnings upwards for the upcoming period, suggesting growing optimism about KRMD's financial prospects. This aligns with the company's updated guidance and Canaccord Genuity's increased price target. Moreover, KRMD is trading near its 52-week high, with the current price at 98.46% of the 52-week high, indicating strong market sentiment.
While the company is not currently profitable, with a negative P/E ratio of -12.48, it's important to note that KRMD operates with a moderate level of debt and its liquid assets exceed short-term obligations. This financial stability supports the company's ability to invest in growth initiatives and navigate the path to profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for KRMD, providing a deeper understanding of the company's financial health and market position.
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