Analysis:
Part 1: Performance Analysis
KORU Medical Systems, Inc. specializes in the development, production, and marketing of proprietary portable and innovative medical devices primarily for the subcutaneous drug delivery market, governed by the FDA quality and regulatory system and international standards for quality management.
During the fiscal year ended December 31, 2022, the company recorded net revenues of $27.9 million, representing an 18.8% increase compared to the same period in the previous year. The growth was attributed primarily to sales growth realized in all three business sources; i.e., domestic core, international core, and novel therapies. The Company's domestic core growth was caused by increased volume attributed to SCIg market growth and new label indications that include pre-fill syringes, and increases in average selling prices. On the other hand, the novel therapies business's growth was attributed to revenues received from non-recurring engineering services and clinical trial product sales for various pharmaceutical customers. In comparison, sales growth for international core business was driven by volume growth in several EU markets compared to the preceding year.
Furthermore, the company's gross profit for the year ended December 31, 2022, was $15.4 million, which represents an 11.6% increase compared to the same period last year. Gross profit margin decreased to 55.1% from 58.6% in the prior year period. The decline in gross profit margin percentage was primarily caused by higher manufacturing costs associated with labor and materials, production rework, and scrap related to the company's manufacturing transition. Product mix had a negative impact on the domestic core business, while NRE service revenue mix contributed to a lower gross profit margin. Partially offsetting these declines was an increase in average selling prices.
Operating expenses for the year ended December 31, 2022, were $26.2 million compared to $20.8 million for the same period last year. The increase was primarily due to research and development, and selling, general, and administrative expenses for new hires to support commercialization, quality, business development, and regulatory capabilities.
Part 2: Forward Looking Analysis
KORU Medical Systems, Inc. is optimistic about its future prospects. Amid the COVID-19 pandemic, the company's products, which are used in-home infusion procedures, have become highly relevant, and many people have been forced to shelter in place as physicians and clinics convert to virtual visits. During the transition to a third-party manufacturing operation for the company's needle and tubing sets, the management believes that the Command Medical Products will further improve the manufacturing capacity and efficiency of these products.
Additionally, the company has completed the first phase of moving to its new corporate headquarters and manufacturing facility in Mahwah, NJ, with the expectation of completing the move of manufacturing before the end of the first quarter of 2023. The move is expected to increase the company's production capacity to keep up with the growing demand for its products.
The management believes that the revenue growth achieved in 2022 will continue, with the domestic core sales growth being driven by increased volumes and an increased average selling price. However, the growth in international core and novel therapies will continue at a relatively slower pace since it is dependent on the company's ability to secure regulatory approvals and to successfully commercialize its products in foreign markets.
In conclusion, KORU Medical Systems, Inc. remains optimistic about its future prospects. The company has achieved significant growth in its core businesses and is poised to continue its growth trajectory due to the increased demand for its products. Additionally, the company's ongoing production capacity improvements and new headquarters and manufacturing facility are anticipated to have a positive impact on its future performance. Although regulatory approvals and successful commercialization in foreign markets are factors that could hinder the company's growth, the management is confident in its ability to navigate these challenges.