Q4 2023 KORU Medical Systems Inc Earnings Call
Participants
Louisa Smith; IR; Gilmartin Group
Linda Tharby; CEO and President, Director; KORU Medical Systems, Inc.
Tom Adams; CFO; KORU Medical Systems, Inc.
Frank Takkinen; Analyst; Lake Street Capital Markets, LLC
Alex Nowak; Analyst; Craig-Hallum Capital Group LLC
Caitlin Cronin; Analyst; Canaccord Genuity LLC
Jason Bednar; Analyst; Piper Sandler Companies
Presentation
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 31st, 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 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 of 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 13th, 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 filings and press releases 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
Thank you, Louisa, and 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 our 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 Core's performance in the fourth quarter. We continued 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 one-time nonrecurring engineering services revenue in our Novel Therapies business. Our overall revenue growth in our core SCIG. business remained strong with U.S. performance driven by share gains and with the overall SCG IG 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 50 Atmel central prefilled syringes for the core Freedom system. Prefilled syringes are becoming an increasingly large part of the SCIG. market and Coral is strongly positioned to capitalize on this opportunity. We believe propels will be a critical growth driver for Corio and expand our penetration in our core markets and 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. We 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 to progression in operating performance in 2024 and beyond.
Finally, we are 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 Qorvo 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 and 24 and beyond.
Moving to slide 4, you'll recognize the three pillar growth strategy that is the foundation of our Vision 26 initiative. Those three being domestic SCIG. penetration and growth. The broadening of our novel therapies pipeline and geographic expansion strategy will continue to position Qorvo 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. markets 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 volume 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 pre-filled devices or convenience versus traditional SCIG. BiDil therapy. We're encouraged by these trends and believe this will benefit the commercial launch of the 50 ML. has entered a prefilled syringe, which began rollout in January. We also anticipate a new five 10 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 new three 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 two drug collaborations progressing to Phase three trials in 2024, a key milestone in the advancement commercial launch. Looking forward during the fourth quarter of 24, we're anticipating a submission of a five tenant Applica 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 CIDPSID. and entry into multiple new markets as was the case in domestic core pump and consumable volumes with 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 systems.
I'd like to shift our focus back to the IG market on slide 5 and more specifically pre-filled syringes and why we're so bullish on the opportunities this presents for core and move forward. Presales represent a major catalyst for growth within our domestic and international core markets as this delivery method is increasingly penetrating share among 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 was 78% of patients preferring the use of PROPEL with the Freedom pump versus bile ADMINISTRATION. Additionally, the 50 ML. dose clearance represents two thirds of the prefilled market and combined with the earlier 20 ML. launch provides core with a broad portfolio to fulfill all patient needs. We've been focused with our pharmaceutical partners and driving clinical practice change to prefilled, 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 prebuilds to drive growth and higher penetration, reaching levels of [2020 to] 25% for portfolio penetration in '24 and 50% by the end of year '25.
Turning to slide 6, we are very pleased to announce that we will presenting new data at the 2024 National Home Infusion Association Conference later this month. This study focused on patient adherence to the Freedom systems and collected data from over 11,000 patients with primary immune deficiencies self-administered their SCIG. therapy using the core 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 poor performance of the core Freedom pump system and promoting treatment consistency and improving patient satisfaction. Overall, these findings underscore the effectiveness of the core Freedom pump system in facilitating strong adherence to SCIG. therapy among PID. patients leading to improved treatment outcomes and patient satisfaction. We look forward to sharing these results at the upcoming NHI. conference with our process prospectively customers.
Turning to our novel therapies pipeline. We have the strongest pipeline we have reported to date. In 2023, we added three 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 two recent club collaborations. We've announced the first being the initiation of a feasibility study with Chorus system on an already commercialized rare disease therapy and the second, a clinical supply agreement to support a pre-commercial unnamed SCIG. drug entering it Phase three trials. Novel therapies is a key piece to Qorvo's growth strategy as it creates opportunities for future drug indications that can grow our core 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 set in the near term targets or those collaborations we expect to go live with Q2 totaling six 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 leader position 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 we're 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 Qorvo for continued growth and profitability.
I will now turn it over to Tom to review our financials.
Tom Adams
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.
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 pumps 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 nursing 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 were up, 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 carry revenue potential from a number of pipeline opportunities into 2024.
Moving on to gross margins in 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 one-time inventory adjustment related to a product discontinuation that had no impact on revenue margin improvements in the quarter were driven by increases in manufacturing efficiencies related 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 allowed again for a one-time adjustment for our 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 from 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 asset.
Yes, 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 accrued 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 planned reduce 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 negative $0.16 per diluted share compared to a net loss $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 in 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 from 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 included one core SCIG. drug market growth in the mid to high single digits. The second, adding three new collaborations to novel therapies pipeline and 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 a new production line in the second half of the year.
Finally, we expect our 2024 and the cash balance to be greater than $8 million, implying a significant cash burn decrease from prior year's assumptions for 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 break even in Q4 and to be cash flow positive for the full year of 2024.
Finally, 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 at 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
Thanks, Tom. In the last several years. We've invested in R&D pipeline and new product innovation to drive increased market penetration, share gains and accelerated growth. As we discussed, we have received FDA approval for the 50m el-hi Xandra on our Freedom 60 platform, which will aid in expanding our customer base. In the near term, we expect a five 10 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 to pump platform for novel therapies that will be customizable to the 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 and providing the best subcutaneous infusion experience 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 US core share gains through increased penetration of 50m L. prefilled syringes. We'll also continuing our international expansion in current and new markets.
On the novel therapies front, we expect to enter three new collaborations in the year, focusing on late-stage candidates that have a higher probabilities of reaching commercialization prior to 2026, we are projecting the submission of two five 10 10-K's, one for new products and the other for a new drug indication on the Freedom platform.
Finally, it is our commitment to breakeven cash flows in Q4 24 and cash flow positive for full year 2025. Each of these milestones are strong indicators of the progress we are making toward Qorvo's overarching vision 26 goals. Overall, I am pleased with our fourth quarter and 22 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 through 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 Qorvo team for their continued passion and dedication.
Operator, I will now turn the call over to you for Q&A for a question and answer session.
Question and Answer Session
Operator
(Operator Instructions) Frank Takkinen, Lake Street Capital.
Frank Takkinen
Great. Thanks for taking the questions.
Congrats on all the progress and the strong start to the year. I was hoping to start with one on guidance. I saw I saw and heard the comments around some of your assumptions about SISCIG. market growth, novel therapies, pre-filled 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, the guide for 2024. And then to add on to that, how should we think about the contribution from the high center 50 ML.
Linda Tharby
Okay I think I got it all, but I'll start and then turn it over to Tom first on.
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, prefilled syringe and increasing prefilled penetration, particularly in the CIDP. patient base, our international performance, you can expect so that in the US business is a nice acceleration from where we ended this year and 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, off 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
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
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 eight new drugs launched in the last three years, which require administration by healthcare professionals in that setting. And 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. And on top of that, that asset will use a customized CORAL platform and we anticipate that we will file a five 10 K for that in the US, followed by ex U.S. geographies. We continue to see the infusion centers as being an opportunity for incremental growth of 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
Alex Nowak, Craig-Hallum Capital.
Alex Nowak
Okay, great. Good afternoon, everyone. Maybe to follow up around the core business for Karru. 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 where your what are your thoughts there?
Linda Tharby
Yes. So currently, the 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. therapies. So this is a major focus of all of the SCIG players to convert them from IV to SCIG therapy. With the advancements of prefilled, because of that 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.
Alex Nowak
Okay. Got it. So certainly the pre-fill, 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 crew to get ready to help the cadence their launch in Japan?
Linda Tharby
An approval by the regulatory bodies. We've been waiting for this one.
Yes. So as you know, we submitted that file some time and 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.
Alex Nowak
Okay. Got it. And then a clarification. And then just one more question on three new collaborations was mentioned in the prepared remarks, a couple of times, do you mean three new collaborations in total for 2024 or three more than what we've already been or that started with announced so far up until now?
Linda Tharby
Yes, that is three in total, which would include the two 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 on 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 three is a number we obviously hope to exceed that number. But the three is what we're counting on for our guidance. Right now. So obviously decided that we have two of those out of the way a couple of months in here.
Alex Nowak
Yeah, 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 launched 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 Kearl? Is the growth there providing the 2024 number, the longer term growth or can we get above that?
Linda Tharby
I would say thank you because you just named off all of the key areas that we're looking at right now. And I would say in addition to that, continued strength in the IG market, our share gains here in the U.SBNT. progression and successful commercial entries all of which I laid out today, six shots on goal, you know, 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 20%, 25%-plus . Growth is what we're looking at for 25 and beyond 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
Caitlin Cronin, Canaccord Genuity.
Caitlin Cronin
Thanks for taking the question. Just to start off with 2024 guidance, what does that really imply from a quarterly cadence prospective for both revenue and gross margin.
Linda Tharby
Maybe I'll let Tom handle that question.
Tom Adams
Sure. So we typically don't guide by quarter one, but you can expect increasing revenues. It's through throughout the quarter. And I would say that on a novel therapy side, as you know, that business is rather lumpy and revenue is reflective as work is performed and 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 three things that are that are that are impacting the year. And the first thing is we are launching new products and we are 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'm I would say also with that, we are growing. We are growing internationally and those ASPs are generally at a lower ASP than what you'd see in the US market so I would say all in all, you can you can you can you can model 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
Caitlin, maybe the only additional thing that I would add to what Tom had to say as 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 where people switch providers and wells. We'll get new pumps and or new consumables with that provider.
Caitlin Cronin
Got it. Okay. And then just on gross margin again or the supply chain inflationary pressures that you noted in the press release. Are these Now are these just the pressures that have been going on for some time and you look at them --
Tom Adams
I'd say, a combination of, as you know, inflation has not gone away, it's still out there. And so we still we still anticipate some pricing pressure 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 there are some some pricing increases up from those renewals that were we're working with.
Operator
(Operator Instructions) Jason Bednar, Piper Sandler.
Jason Bednar
Good afternoon for taking the questions here. I'm going to maybe follow up on some items that have been touched on, but just help us unpack a few things a bit more and Kevin's question there and cadence, you know, maybe a face putting that together with the 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 and the growth rate this year. So and to 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 and again, was Kevin's question on the supply chain costs thinking 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's changed.
Tom Adams
Yes. So let me start with the gross margin. Since we were just on that topic, I would say that there are some one-time gross margin impacts. Again, as I mentioned, the starting up of a new production line. It definitely creates inefficiencies when you do that measure, train our volumes from one site to the other. So that's that's one piece that I would imagine would 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 have seen the proof of the fruit the prefilled syringes uptick over the quarters, we will see upticks. We also will see we are expecting approval for them for the Japanese market. And there are some other drivers that are that are included in the back half of the year, which will help which will help our revenue.
Linda Tharby
And maybe the only other thing I would add to that is you could given the revenues we carried in on novel therapies this year, you can expect a more even cadence and 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
Okay. Got it. I wanted to shift gears. I don't think it's been touched on yet. Apologies if I missed it, but you mentioned your PR today and assessment report from your European notified body. What does this mean for your European business? And does it affect at all your ability to sell in that market or to 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
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 so no issue there on every year you go through an annual recertification process. They were in RBSI. as our auditor they were in February at which we had zero nonconformance. So that's awesome in our manufacturing and quality systems. And 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. And for 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 acknowledged 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 premium products have continued to remain certified marketed and sold in the US.
Jason Bednar
Okay. All right. That's helpful. I mean, one day, I guess I don't want to throw a worst case of just so we're prepared. I mean, what's that the best case as we come back and where you can, there's like no impact whatsoever are it's de minimus or what's what's worst case here, just the gas that we can prepare accordingly?
Linda Tharby
Yes. Great. Great question. So So best case is that there is no interruption at all. We are well, we well, we work through this situation. Any product that we have in the market, we can continue to sell. So so that that's best case and worst case, what I would say is worst case would be that they say we are not if they stand by their original ARM 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 and several months. We feel it may take them some time to review the file. So 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 three, three, three months and Europe I've known supply.
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
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 have a great year in 2024. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
