Q3 2020 Repro Med Systems Inc Earnings Call

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Greetings and welcome to the <unk> Medical systems third quarter financial results conference call and webcast.

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<unk> Sullivan senior Vice President of the equity group. Please go ahead.

Thank you Gerry and good morning, everyone. Thank you for joining us for core medical systems third quarter 2020, <unk> financial results Conference call.

Our speakers today are Don pedigree, President and Chief Executive Officer, and Carrie Fisher, our Chief Financial Officer.

During this call we will discuss our business outlook and make certain forward looking statements. These comments are based on our predictions and expectations as of today.

Actual events or results could differ materially due to several risks and uncertainties, including those mentioned in the associated slide presentation.

Most recent filings with the FCC along with the associated press releases.

We assume no obligation to update any forward looking statements associated slide presentation will be posted to the Investor Relations section of our website Www Dot cool medical Dot com.

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 slide presentation accompanying this webcast and our filings with the FCC each of which are posted to our website <unk>.

Find additional disclosure regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our strategic plan goals incorporate the trends that we've seen today and what we believe to be appropriate assumptions. Our results are inherently unpredictable and maybe materially affected by many factors, including the introduction of competitive products availability of insurance reimbursement success of our research and development efforts acceptance of and demand for new and existing products.

Expanded market acceptance of the freedom system cost duration, and ultimate outcomes of litigation General economic and business conditions in the United States and abroad. The impact of COVID-19, and other factors described in our filings with the SEC.

Therefore, our actual results could differ materially from those goals.

The benefit of those of you listening to the replay this call was held and recorded on Wednesday November 4th 2020.

Fox only nine am eastern time.

Since then the company May have made additional comments related to the topics discussed.

Please reference the company's most press release, most recent press releases and filings with the SEC.

With that said I'd now like to turn the call over to Dawn pedigree, President and CEO of Qumu Medical systems. Don. Please go ahead.

Thank you Devon, good morning, everyone and thanks for joining us today I want to make sure you're aware of the Safe Harbor statement on slide two.

But let's move on to slide three.

So with that background I want to move on to the overview of the third quarter.

The strength and resiliency of our core business and the unwavering commitment ever dedicated employees are allowing us to navigate the challenges of coping night, Jane while working tirelessly to execute our long term growth strategy.

For Q3 2020, our total net sales decline from prior year period, due primarily to lower clinical trial activity.

Violence associated with U.S. sales also contributed to the decline in Q3 2020 total net sales.

Nine month year over year net sales and volume grew Karen will discuss the results in greater detail shortly.

The effects of the pandemic are complex and evolving for example in the first half of 2022.

Hope at Nike It produced a net positive effect on our results.

In Q2, 2020, we benefited from increased purchasing activity from specialty pharmacies likely in anticipation of higher demand for at home infusion therapy and concerned about supply chain disruption due to the pandemic.

We also generated meaningful net sales related to clinical trial activity, both ongoing and anticipated dry.

During our second quarter call, we commented that it'd be it'd be difficult to determine at what level does buying activity will continue for the balance of the year.

I want to stress that we remain very confident in our current market position and the long term outlook for our business and industry.

We continue to pursue opportunities created by multiple long term growth drivers and we remain supported by us by a strong balance sheet.

Let's move on to slide four.

As you can see net sales for the nine months ended September Thirtyth 2020 increased 19% and.

Instead of a $1 million early order after Karen will discuss shortly.

We understand that there is inherent quarter to quarter Lumpiness in our business model, owing to the unpredictable impact of clinical trials sales and O.U.S. expansion above and beyond our core business.

The dynamics of the current environment should not mass a long term net sales growth we have achieved.

Moving to slide five.

Our quarterly medical our core business, which excludes clinical trials for bikes products to patients who have been diagnosed with <unk> or P.I.D.D. and CE IDV, both chronic conditions and may expand to other indications as we execute our growth strategy.

The idea is a complex condition comprised of 400 plus separate diseases that affect the immune system.

Diagnosis can take years and involve multiple position does the patients who utilize or products or managing chronic health conditions and rely on the products and support we provide.

We are pleased that these relationships have resulted in a steady and substantial base of recurring revenue and that our business has experienced minimal patient sure.

Beyond that our growth drivers include clinical trials geographic expansion and new drug indications.

Clinical trial activity delivers two advantages to call room medical one is net sales associated with these trials and to the potential to expand our core business with product commercialization.

In a normalized business environment, the amount and timing of clinical trial contributions and geographic expansion have always been less predictable than those generated by our core business.

19 is magnified season Consistencies.

We're also keeping an eye on new patient service state and local Lockdowns related to COVID-19, maybe impeding the ability of P.I.D.D. patients, who rep, who present with compromised immune systems to receive a diagnosis and prescription to commence their therapy.

Our primary growth thesis, which is based on newly diagnosed patients and the ongoing shift from hospital and clinic based ideology treatments to home based subcutaneous AG trade treatments also remains intact.

While this transition will not be immediate we believe that the pandemic will overtime help accelerate this trend, especially for vulnerable populations.

Shifts should support increasing adoption of our products and we believe we remain very well positioned to capitalize on these opportunities.

Like six.

Our freedom system is currently involved in multiple clinical trials associated with the potential expansion of Vijay development of subcutaneous therapies for other disease States. Some of these trials have been disrupted due to COVID-19, but we're not aware of any that had been discontinued.

On our last call we discussed the use of the freedom system in a recently completed phase three trial for subject for a subcutaneous hematology drugs. We're now in a position to add a bit more color to this conversation the.

The trial use our freedom edge syringe driver, which accommodates smaller volumes and our freedoms 60 syringe driver.

The drug in question is aimed at treating P.N. age a rare chronic blood disorder characterized by disruption of red blood cells blood clots and impaired bone marrow function.

PNM Surfaxin estimated 15000 people worldwide and is primarily a disease of younger adults with a median age of diagnosis of 35 to 40.

We understand that this new drug is scheduled to launch in 2021, and the freedom system would be the delivery method for the launch of this therapy.

If successful this indication could significantly increase our total patient population.

In addition, we expect that the freedom system will be utilized several additional upcoming later stage clinical trials focused on expanding indications and disease states for the same drug these.

These indications represent substantial potential for Corey medical beyond being age.

While we cannot be specific for competitive reasons. Our current program development includes drugs focused on the current and new drug development opportunities, which in addition to hematology include nephrology metric in auto immune diseases, Pulmonology and secondary immunodeficiency.

These programs have the potential to significantly expand our total addressable market.

Moving on to slide seven.

Demand for plasma is always exceeded supply since the beginning of the pandemic. However, the issue is taking on great take on greater importance in summary collections have impacted or have been impacted in 2020 and allocations may be tight through 2021.

With that said, we believe plasma manufacturers are committed to supporting recovery of collections barring any additional cup at 19 shocks.

This commitment as manifested in several ways from the opening and reopening a collection centers in the U.S.

To enhance marketing and incentive programs to plasma related acquisitions and investments that reinforce the commitment of these manufacturers to long term growth.

As a reminder, the U.S. is the largest market for plasma and offers attractive pricing. We therefore believe that any impact on plasma supply would be less evident in our core business.

I'll now turn things over to Karen Fischer, our CFO for a review of the quarter Karen.

Thanks, Don and good morning, everyone begin.

Beginning on slide eight total net sales decreased by 8.1% to 6.1 million for the three months ended September Thirtyth 2020, compared with the same period last year.

As Don noted net sales decreased mostly due to 400000 less U.S. clinical trials sales hiring.

Higher allowances for gross rebates for certain customers and payment discounts and distribution fees, our largest distributor under new contract terms also contributed to lower net sales in the three months ended September Thirtyth 2020.

There were two unusually large orders in the third quarter of 2019 and a million dollar order from our largest distributor placed early in exchange for a nominal discount in the third quarter of 2020.

Excluding these orders net sales growth in our core business has tracked in line with the industry trends for the nine months period ended September Thirtyth 2020, compared to the same period last year.

Gross profit decline in three months ended September Thirtyth 2028 to 3.9 million from 4.4 million in the last year's third quarter, driven primarily by lower net sales, partially offset by favorable production variances.

Gross margin for the third quarter was 64.8% as compared to 66.2% with the decline mostly attributable to higher allowances against sales that I, just described partially offset by the favorable production variances.

We remain committed to the continual improvement over gross margins, we are exploring a variety of initiatives to achieve this objective and expect to have more details to share by the end of 2020.

Selling general and administrative expenses rose to 3.1 million from 2.4 million in last year's third quarter, mostly due to a higher salary related benefits and recruiting fees as well as higher consulting fees and insurance premiums.

Offsetting these increases were lower trade show and travel expenses as a result of COVID-19 related travel like restrictions.

[noise] litigation fees decreased by nearly 900000 in the third quarter of 2020, reflecting the previously announced litigation settlement agreement with a competitor in May of 2020.

Net income for Q3, 2020 was 250000 or one cents per diluted share as compared to net income of.

652000, or two cents per diluted share and last years third quarter.

Q3, 2020, adjusted EBITDA was 900000 compared to 2.2 million in Q3 up 2019.

On slide nine moving to the balance sheet, we ended the quarter with 32.4 million of cash with the increase from December 31st 2019, reflecting 26.5 million and net proceeds from the second quarter capital raise.

Our cash flow statement reflects 1 million of cash provided by operations, which is net of a 3.2 million.

Dollar cash outflow for inventory to ensure timely order fulfillment and to keep pace with sales growth.

We ended the quarter with 43.9 million basic shares outstanding and diluted share count.

48 million.

On Slide 10, you can see the reconciliation of net income to adjusted EBITDA, along with the metrics that comprise this calculation.

I'll now turn things back to Don.

Thanks, Karen.

So on slide 11, as the global pandemic continues we are mindful of the critical role that we play as a leading provider of products that allow patients to self administer their subcutaneous therapies at all.

Before turning the call over to questions I want to emphasize four key points first our fundamentals are strong.

We've established a leading market share position with the freedom integrated infusion system, a mechanical portable and easy to use technology that we believe is provided chronically ill patients with a way to assume control over their lives and the treatment of their disease, while delivering improved compliance enhanced outcomes intangible quality of life benefits.

Second our core business is that is addressing a growing and largely untapped global P.I.D.D. patient population of up to 6 million patients. We believe this represents a significant long term growth opportunity for core medical.

Third in addition to our core business, we're pursuing multiple pathways for growth leveraging our existing pharma relationships as well as the as the platform technology that is the freedom system. Our success in this regard as reflected in the P.N.H. opportunity, which could significantly increase our core business and that's one indication.

While offering additional growth opportunities associated with upcoming clinical trials for the same drive this.

This demonstrates that the freedom system can be utilized in the delivery of subcutaneous therapies for diseases other than P.I.D.D.C. I'd be well introducing at home infusion therapy to a new cohort of patients and finally, we remain well capitalized which will allow us to weather global headwinds and fund our future growth initiatives both.

Quickly via acquisition. Thank you for your continuing interest in quarter medical and we can now open the call for questions.

Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you may.

Press Star two if he'd like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we pull for questions.

First question is from Alex ILEC, Craig Hallum Capital Group. Please go ahead Sir.

Hey, Greg good morning, everyone.

And I was hoping to kind of start off your and hoping you could expand on the allowances or sounds like rebate accrual that you took in the quarter. Just curious why did the entire allowance come into this quarter versus spread out over the last couple of quarters and some of this is prior to you joined the company but.

Well I wasn't allowances or these rebates back to distributors never an issue a year or two years ago.

So a very good question and I assume that's going to come up. So the main thing is we have contractual arrangements with our customers both distributors and specialty pharmacies.

It incentivize growth.

So some of these are no and a lot of this has to do with type a growth rebates are accrued for when we become more confident that these thresholds that we have in place will actually be met on an annualized basis.

And we've had several key customers that's our training to meet these thresholds.

And therefore be Canada began accruing in Q3 2020, so why it's wildly a.

A contributor to our Q3 results it's not the main the main reason, but it's something that's a you know something that's fairly new into done we're recognizing a Q3.

Okay got it understood. So we should be starting to account.

Account for those and our estimates going forward, though that is would you say that's correct.

So I think the best way to look at this is so that's something like this is exacerbated by lumpiness in the business. So when we have these growth incentives in place and and growth is trending.

Trending that to achieve those then we accrue form at the at the proper time right.

Right. This is an annualize the bet based on contracts that we have in place.

And this could change depending on the growth of our respective customers going forward.

So I've got to call that's normal, but there's always a this rebate and allowance effect from distributors to to customers.

Sure No that's really helpful. Okay, and then on the lower plasma collection that you mentioned.

With with CSL in girls and the like and that impacting the drug supply and then potentially just less patients getting diagnosed with coal bed not going into the doctor actually get the diagnosis, Doug did that impact you at all in this quarter and if not how should we think about the impact in Q4 and beyond.

So Q3 impact is is really driven by what we stated earlier with with clinical trial activity as the main contributor.

With that said, giving this current environment as you know there are some headwind headwinds and some challenges.

I I've said in the past that I think there will be a net positive in terms of patients being diagnosed and plasma supply longer term.

But right now you see a lot of that in the news and you're hearing our drug manufacturers report out on you know some plasma challenges, but then you're also seeing their recovery efforts and greater investment into a long term infrastructure in collections. So.

So I think in regard to.

You know to answer your question I don't see co bit as as as a major contributor to our Q3 results, but were eyes. Our eyes are wide open to some some some some themes that may develop going forward.

And knowing that patient starts are a new patient starts help accelerate the growth of our business.

But declined patient starts doesn't doesn't decline our business right. We have the stable core of patients that continue to be on these I'd products.

And we've heard from our manufacturer pharma manufacturers that their focus as well as our specialty pharmacies are keeping patients on their therapies.

So besides that there is a lot of noise on what you know what its allocation look like and what is the recovery but.

But I I remain very optimistic with the efforts and still look at the the long runway of patient opportunities that are undiagnosed.

Okay got it and then just last question for me just just turning over to the pipeline here I mean hematology drug thanks for providing more info. There would you expect the launch there by that pharmaceutical companies to be more like a traditional pharmaceutical launch where supply is that much of a problem you know somewhat unlike the hygiene market where.

It's more dependent on the plasma collections and us that this market is more dependent on patients getting a script and to that point.

15000 patients worldwide market.

What are your or maybe what are the projections from this drug company as far as penetration could this be a 50% penetrated drug.

So to be determined on all of it. So this is a synthetic drugs. So the classic supply challenges that we've seen with plasma may not apply here.

But in terms of launch and all that we don't know the exact day and timing this year or for 2021, but that's what does been communicated.

In terms of penetration too early to say, but I will say that even small penetration is very impactful to us. So for example, you know.

If we were to penetrate you know just 2000 patients of this 50000 global patient days.

You have 3 million and you know rough roughly 3 million a recurring revenues for the quarter was of the.

So little things make a big difference and small.

Even small numbers of patient populations are very meaningful to us.

The other thing I'll mention it Alex is that if we look at what's had a successful on the AG business is once these patients start on a new therapy using the freedom system. The business is very sticky and there's not a reason for these these patients to change off of that so this first mover advantage. If you will we.

It gives us some some really strong benefits.

Data, we capture them early that we can maintain them.

Okay. Thank you very helpful. Appreciate it yeah. Thanks for the questions out.

We have a question from Matthew O'brien Piper Sandler. Please go ahead Sir.

Hi, Thank you good morning, everybody. Thanks for taking my questions I guess, just more finer points on Alex's question to be cleared on excluding the clinical trial shortfall. This quarter and then these allowances it sounds like the core business in the quarter from a volume perspective still grew high teens.

Is that right.

Yes. So if you if you look at our business year to date, you still see growth of 19%.

So if you take out the fluctuations of Ur cobot related irregular ordering patterns and but the take away is if you look at.

What the industry is doing in general we continue to grow with that.

Got it but just to just to be clear on that though you know.

It sounds like the patients ever using you know.

Q I G heading into the quarter still using the churn has it changed there, but new patient adds still trending the right direction are you getting any kind of boost because of the desire to move away from in center.

Yeah, but you know again, the new patients that you're adding are still still trending the right direction Theres no no material slowdown versus what you saw in Q1 or Q2.

Yes, that's an accurate statement, Matt. So you know just to reiterate what I've mentioned any new patient start growth to our business.

And you know it so that's the first point and.

If you look at some of the things we anticipated that I've said in the past of there's this continuing trend of movement of patients from site of care from an acute.

Facility to at home I think those things are very apparent ad.

And we just felt that the transition of patients that were currently on Ivy might accelerate to Subcu based on the pandemic because they just can't get into these these clinics. So why were seeing some evidence of it we haven't seen a significant contribution in those new patients. The you know the the tail.

Tailwinds are still still there and we think the the tailwind pressure is actually picking up longer term.

We're just not seeing the immediacy of it and we're seeing a select initiatives and examples of where that is been successful but.

But then when you enter and plasma allocation for I.G., it creates a little bit a little bit of a headwind but.

But as I got it.

In further quarters, I see that having a very net positive effect.

Okay. That's really helpful. On the clinical study side of things that $400000 you decided you.

Can that come back fairly quickly or is this going to be something that's more spread over a multi quarter, you know kind of timeframe or I guess, what somebody's outbreaks to that we're seeing in the U.S. and the cobot side of things.

I'm, assuming clinical trials to be the first thing that ill be delayed you know how big of a headwind or tailwind from these other ones starting back up should we think about I guess, what I'm really trying to get to is just the lumpiness of the business and how do we how to investors get their heads around how to how to predict what's going to happen with the with the business going forward.

Yeah, that's a fair question Matt the.

You know so that direct and looking at the core business is very important here because there's.

With with a relatively speaking a small business little things make a very big difference and a million dollar order in a quarter or could be a 10% to 20% swing.

And clinical trials are very unpredictable.

But we remain confident that those that were involved in a while we've seen some delays were.

We're not seeing.

Additional disruption at this point.

So but to try to nor we can normalize and predict.

Our core business I think if you look.

Historically, you can certainly do that if you look at clinical trial. It's just it's a lumpiness of our business that's backing to abide by just decide for total revenue.

So it's difficult to predict as to when when these are going to land and what the contribution is going to be so I know that doesn't give you the answer that you're looking for but it's the nature of our business.

What we like about the clinical trials is that when we do recognize revenue its upside right, we actually sell into these clinical trials.

And if they're successful and they commercialize you know now we have a more predictable business, where these these new drugs become part of our core in.

In that core becomes more predictable, but until we get to that base, there's that level of uncertainty.

Got it and last one for me also on the pipeline the hematology drug.

Can you talk about you know the other indications I mean, you know getting 2000 or the 15 it'd be 3 million of recurring revenue. That's really helpful. But can you talk about the other indications and where they are at as far as clinical studies are they in phase late in phase two and then do you think 21, it's going to be a year, where you're talking a lot more about all of these.

You know all these programs mature that you're working working on with all these different providers and we're getting a lot more visibility on what's going on there next year. Thank you.

Yeah, So I know the appetite there too to that.

More color on clinical trials and I'd like to get your time, where we start providing more color on that.

I think this hematology announcement is just an example of something that's been worked on for a long period of time that.

Appears to be coming to fruition.

But if you look at the trial activity in general.

This is one of our key elements of our strategy is to continue to invest heavily.

With time and resources into this category.

And the reason being is that the more clinical trials, we can get and we all know that theres different probabilities of success, depending on phases. The more shots on goal, we get with clinical trials, we think the Oh, we think the opportunity to accelerate our growth is absolutely enormous.

So as we get to a point, where we where we continue to invest in these clinical trials and I'd like to be able to share more more with you, but I can't comment as to when that would be at this point, but.

But I do want to get the message across that this is a significant part of our strategic planning.

And we're investing quite significantly.

Makes total sense. Thanks, so much.

Thanks, Matt.

The next.

This is from Kyle Rose Canaccord Genuity. Please go ahead Sir.

Great. Good morning, and thank you for taking the question I'm, sorry, I just wanted to ask.

That's a clarifying question on kind of what Alex regarding the allowances.

You also talked about 1 million dollar order in the quarter was that came in at a discount was that in relation to the allowances or maybe just help me understand the moving pieces on that specific order as it relates to the timing of that order and how it could potentially pull forward or represent some Q4 numbers.

Sure.

So what we've done in the past is we've always highlighted unusual orders or anomalies.

In this case, we had an opportunity for a large early order and took it for various reasons, including inventory management, cobot uncertainty, but but but really bird in hand revenue.

And that would imply that as the pipeline is more healthy with inventory that even though it's very unpredictable given the current environment. The debt that we would expect some inventory to come back that we consider to be an overage.

And this was an early order.

So.

Yes.

I would expect to see some impact going forward, it's just really difficult to say what the exact timing is.

We've had.

We've had large orders in the past and trying to predict when they're coming back.

It is very challenging there's a lot of dynamics involved there.

In terms of inventory that's in the pipeline so.

But it wasn't early order and the expectations are too let's come back.

Okay and.

And then.

On the partnerships with the drug manufacturers I appreciate the additional color this quarter around the P. NH opportunity.

Maybe help us understand from a from a broader pipeline perspective, and I know you're not going to give US you know compound and market opportunities is it more the already habit help us understand the relationships you have with the manufacturers.

How are those agreements in those trials structured I mean are are they were you know freedom is specifically written into the clinical trial and you know it will be part of the regulatory filing and it puts up you know more of a bigger competitive.

I guess, you know advantage from a long term perspective.

I'm just trying to understand the lifetime value of some of these potential opportunities both from a trial perspective, but then also on it from.

From a commercial perspective upon launch.

Yes, So I think you put in different categories right. One is the you know trials focused on expanding indications with with current drugs.

And we are very collaborative by nature, and providing a tried and true delivery system. That's been in the market for a long time.

So you know.

I think an important point here is we have a off the shelf auction. If you will that if you're looking to start up a clinical trial for subcutaneous drug you're probably going to look what's out there in the market and whats tried and true and I think that's a distinct advantage for us in a unique offering that we have.

With that said this is not we're not talking about being specked into the regulatory path.

And that we're talking about a combo product like that where there's a direct tie in a requirement to get a drug with a certain delivery system.

Right that that enters there there's always a competitive element but.

But we feel like the first mover with a tried and true delivery option is key.

The other part of that is as we look at these pipeline at a product and see the trends in the direction that these these pharma companies are going it gives us a distinct advantage of having a front row seat for other product opportunities that might be more optimal for the longer term.

So we continue to look very closely at what those look like.

Okay.

That's very helpful. And then I'm just I guess you.

You know were through the first month of the of the Q4, we're heading into November another's uncertainty, but maybe just help us understand you know visibility into the channel and just your confidence with respect to you know order.

Ordering patterns, both from a a distributor stocking in a in a clinical trial perspective, and I guess do you feel comfortable that you'll be able to continue to deliver that 19% or 20% growth that youve had year to date.

You know through the Q4 in through the full year or how should we think about that with respect to timing here as well.

Yes. So good question Kyle it's it's still too early to tell we don't give quarterly guidance, obviously, but I don't want to hide from some headwinds that are for existing.

And and and uncertainty with Cove. It so we try to call those out and address where we think there's there's some challenges, but I'll direct you back to our core business and I think whats easily reference for what that business is growing at a.

I feel very confident about that and I, especially feel confident about that long term with some net positive effect later on.

So I think it's a safe assumption to assume that that business is it continues to be very healthy.

We're not having patient churn.

And I like to think at a minimum we are able to grow with the market rate.

Okay. Thank you very much for taking the question.

We should have Kyle.

You know I have a question from Ron.

Ron So evolve as you H.C. Wainwright. Please go ahead Sir.

Hi, Thanks, very much for taking my questions. Just a couple of quick ones. Firstly can you comment on the current market receptivity to accept the Cri and how uptake is proceeding and if you expect any significant changes in that going forward and if that is indeed conforming to your own expectations.

Yeah. So thanks for the question Rob So it gives them a bye.

Launches and I've said on several calls its been really slow for.

For various reasons.

We've seen momentum picked up there where they are now in many more specialty pharmacies than we've seen before.

They are on contract and that there is allocation out there.

I will remind you that Zemba Fi I feel is such a big solution to the supply challenges.

You know just cripples commitment and their infrastructure for collection of of plasma.

And there. The fact that there are the market share leader in IB AG coming out with the Subcu product, we think it really validates. This this movement over to went to Subcu.

With that said, we're fairly agnostic to the drug itself.

And what why we feel and I personally feel that the more supply that's out there the greater the availability.

I feel equals a more prescriptions down the road and.

Potentially accelerating the movement of IP to Subcu.

Or more patients getting on to Subcu from the beginning or encouraging new patient starts. So I think that's very healthy that they're in the market I also feel like their allocation. They had in place for launch is really helping the industry weather. The storm you know during Tobin.

Where there is additional inventory out there so I think thats a positive but in terms of the b a b to C. At their upside I would just say Rob that we see momentum we see some some sporadic or a growth.

But it hasn't been significant and it hasn't been a needle mover for for coral.

And it hasn't been the needle mover because we are agnostic to these different subcu drugs.

Okay, and you mentioned a little bit how the supply which reflect the plasma I was wondering and maybe you you stated a little bit background to that before and apologies if I missed that but have you seen any emerging trends with respect to plasma supply.

In the last quarter and how do you expect this to potentially evolve and you know as you know we still are dealing with ongoing impact of the pandemic.

[noise], yeah, So I'm you know.

Personally I'm very bullish plan.

Plasma collection efforts and rebounding.

You know you you have seen with what the foreign manufacturers are reporting with some of the challenges.

But you are quickly seen what they're doing to counterbalance that so.

So I think the general theme you hear is long term commitments short term short term potential disruption in allocation, but.

But long term.

Net gains in plasma that is collected.

And whether you look at CSL, behring or grapples with Takeda and see what their reporting.

It's safe to say that all of those are seeing a long term commitment to enhancing their collection efforts, which would increase the supply in general not just for the U.S. that worldwide.

So I.

I see this as a short term hiccup, that's making a lot of noise right now, but again the commitment to keep current patients on the on therapies.

As bear is very evident.

And as plasma collection and IC manufacturers increases, we think that helps accelerate our growth going forward.

Okay, and then just a question regarding how you expect gross margins to evolve going forward into this quarter and next year.

I think you know Karen you talked a little bit about where gross margins are currently and a little bit about the trends that might be at play and drive improvement on that front, but maybe we could drill down a little further on that and I don't know whether you would have the ability to provide any kind of long term guidance regarding where your growth.

Margins were evolving and.

In what range, you expect steady state to be but that would be helpful as well.

Okay. So we we reported for the quarter, 64.8% gross margins.

And we will plan to in the next quarter report some more detail around initiatives that we have in place that will have a positive impact and increasing our margins.

But at this point that you know we've been very focused on operational efficiencies and managing to make sure. We have production in place to whether this.

Whether the irregularities and all things caused by toll but at this point.

But I would ask that you be patient for the next quarter. When we can share some more color on what those initiatives are which we will plan on doing.

Okay, and then lastly, with respect to pipeline opportunities you know I Didnt hear specific commentary regarding the Fracpoint inhibitor drug category can you comment at all on whether you expect there to be some applicability of your technology platform to providing a pickup.

Subcutaneously administered solution for drugs in this category and if so whether there are specific drugs currently available on the market for which youre solutions could potentially be paired.

So I'm sorry, I haven't commented on this specific drugs outside of the ones that I've mentioned, but but I will say that we have a very simple easy to use delivery system that is tried and true for subcutaneous delivery of therapies.

And and if you look good in my opinion any drug that is intended to be infused subcutaneously that we.

We are.

Viewed as the market leader and first mover into that space and that's been defined by high G.. So I think thats, a very I think that's a powerful accolade for us.

But in terms of other specific drugs or outside of the disease States that I've commented on them.

Uh huh.

Right I haven't chosen to share any additional information beyond that.

Thank you.

Yes, thanks, Rob.

The next question is from Alex Silverman aid W.M. investments. Please go ahead Sir.

Hey, good morning.

Oh, sorry, sorry to be a little stick on this can you just.

Just very clearly tell us.

What core revenue wise and what it grew in the quarter.

So we are.

What we've provided is a kind of a breakdown.

The general growth of the business 19%.

Year to date, so trying to strip out that lumpiness of the clinical trials.

Uh huh.

I was trying to strip out the lumpiness of the clinical trials has us out that number of.

Where we see the shortfall in the main contributor.

So the core business, but I would just say it's growing at market rates.

Which is what.

So if you look at what the IC manufacturers are communicating for what I G and Subcu are growing.

Historically as well as currently as well as prescription rates.

You can come to a number somewhere in the 8% to 15% range.

Donna I'm I'm, sorry to be can be so direct but you you pointed out over and over again, both in the press release and on this call that your core revenue growth is strong yet you're not willing to break out what the core revenue growth was in the quarter.

Yeah, there's lots of moving parts here I'm sure there's lots of new investors on this call I'm trying to understand how much of your business.

And I I understand the question here and what I'm trying to do is have.

Have you look and judge our business based on.

Long term.

Long term tailwinds in this business. So if you if you look at.

The business is doing in general over the course of a year versus over a quarter the quarter that or not but that's not how Don that's not how it works right. We're here to judge you.

To determine if you were in fact.

Hi, progressing and we can't tell that.

When there is you know.

You know strange swings you broken out a 400000 dollar hit from clinical trials.

Help us with what I guess rebates and allowances are we're just back into into what quarter was I.

I'm not I mean, this is a a relatively simple answer or question.

Yeah. So the.

You know I understand so if you look at you know if you.

If you're looking for a number of where we're growing you can look at about a 50% year over year number.

Your core your core.

Revenue grew 15% in Q3 versus Q3, a year ago.

Okay.

No I I am saying for Q3.

For Q3, if you look at normalized trends based on what that core businesses, driving which is defined as the P.I.D.D. and C.I.E. business, but that's the number that you land on.

Yeah, you're still not answering this directly your stocks down 20%, there's nobody understands the need to get greater clarity.

Yes, so if you need some you know if you need some specifics if you look at the core business and I'll throw out these estimates you're looking at the quarter it probably a four point.

$4.6 million number versus a $5.2 million.

4.6 million core revenue growth.

Right, so you're saying versus 5.2 million a year ago.

The opposite 5.2 versus 4.6.

Great. That's helpful. Thank you very much.

Yeah.

We have a question from us where it didnt feel investing please go ahead sir.

It does just as much my cancer were just Oh My question, we just answered they're done so I have no questions.

Okay great.

Thanks.

There are no further questions at this time I'd like to turn the conference back over to John Pettigrew for closing remarks. Please go ahead Sir.

All right. Thanks, Jerry so thanks to everybody I want to close by thanking Corey Medicals production staff.

For their continuing commitment to our company and the thousands of patients who rely on our products.

We have several virtual events planned for the fall in early 2021 and look forward to interacting with you. Thank you again and I Hope you all have a wonderful day.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

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