Executive Summary / Key Takeaways

• Pivoting to Profitability with Robust Growth: KORU Medical Systems achieved a historic milestone with over $10 million in Q2 2025 revenue, marking 21% year-over-year growth, and is on track for positive cash flow from operations for the full year 2025, driven by strong top-line performance and disciplined capital allocation.
• Technological Edge in a Shifting Market: The company's Freedom system, cleared for all SCIg drugs, offers a significant advantage in the accelerating shift from IV to subcutaneous delivery, particularly with its direct compatibility with prefilled syringes, a feature that outmaneuvers many electronic pump competitors.
• Diversified Growth Pillars: KORU's strategy is yielding results across its domestic core (outpacing SCIg market growth), international expansion (34.8% H1 2025 growth driven by prefill conversions and new geographies), and a rapidly expanding Pharma Services and Clinical Trials (PST) pipeline of new drug indications.
• Innovation Pipeline Fuels Future: With a next-generation pump submission expected by Q1 2026 and multiple new drug clearances anticipated by 2026 (including Empaveli, a rare disease biologic, deferoxamine, and vancomycin), KORU is poised to significantly expand its addressable market beyond traditional Ig therapies.
• Competitive Strengths and Risks: KORU's patient-centric design and specialized focus provide a strong niche, but its smaller scale compared to diversified giants like Becton, Dickinson and Company (BDX) and ICU Medical (ICUI) presents vulnerabilities, while tariff impacts and temporary distributor inventory adjustments require ongoing management.

The Subcutaneous Revolution: KORU's Strategic Foundation

KORU Medical Systems, Inc. (NASDAQ:KRMD), founded in 1980, has evolved into a specialized leader in the large-volume subcutaneous drug delivery market. Its core mission revolves around providing innovative, patient-centric solutions, primarily through its Freedom infusion systems. The company's journey, marked by the 2017 clearance of its Freedom system for its first drug and a strategic rebranding in 2022, positions it at the forefront of a significant healthcare paradigm shift. This shift sees treatments moving away from traditional hospital-based intravenous (IV) infusions towards more convenient, at-home, or clinic-based subcutaneous (SC) therapies.

This macro trend underpins KORU's overarching strategy, which is built on three pillars: defending and growing its core domestic business, aggressively expanding internationally, and broadening its platform to enable the delivery of additional drug therapies. The market opportunity is substantial: an estimated $450 million for Ig therapy drug delivery devices alone, with only 20% currently penetrated by subcutaneous formulations. Beyond Ig, over 50 drugs in development require specialized large-volume delivery solutions, aligning perfectly with KORU's core competencies.

Technological Edge: The Freedom System and Next-Gen Innovation

KORU's competitive moat is significantly reinforced by its differentiated technology, particularly the Freedom infusion system, which includes syringe drivers, HIgH-Flo subcutaneous safety needle sets, and precision flow rate tubing. This system's core advantage lies in its mechanical design, offering portability, reliability, and ease of use that is highly valued in ambulatory settings.

A critical differentiator is the Freedom system's direct compatibility with prefilled syringes. This capability is a game-changer, especially in markets like Europe where electronic pumps (e-pumps) are standard but often require patients to transfer medication from a prefilled syringe into a different syringe for administration. KORU's system eliminates this cumbersome step, reducing preparation steps by over 40% and demonstrating a patient preference exceeding 75% for prefilled options. This directly translates into enhanced patient mobility, improved convenience, and a more streamlined infusion experience, which are tangible benefits that drive customer loyalty and recurring revenue.

The company's R&D pipeline is actively extending this technological lead. The Phase I flow controller, launched ahead of schedule in Q2 2025, offers improved cost of goods sold and increased production capacity, enabling expansion into new geographies. A Phase II flow controller, slated for submission by the first half of 2026, promises enhanced performance, expanded label indications, and broader market access.

Perhaps the most significant technological leap is the next-generation pump, with a 510(k) submission targeted between Q4 2025 and Q1 2026. This pump is designed to accommodate all available prefilled syringe sizes (from 5ml to 50ml), be compatible with both vials and syringes, and offer improved mobility, usability, and a seamless removal and loading system for patients requiring multiple syringes. This innovation is expected to unlock new market share, particularly in international markets rapidly converting to prefilled syringe administration. While the 510(k) submission for new consumable sets has been re-scheduled to H2 2026 to incorporate further market feedback, this prioritization of pump development is a strategic decision aimed at accelerating international growth, with no anticipated negative impact on 2025 or 2026 revenues. These technological advancements are crucial for KORU's competitive moat, enabling higher average selling prices, potentially lower manufacturing costs through efficiencies, and a stronger market position for long-term growth.

Financial Performance: Momentum Towards Profitability

KORU Medical Systems delivered a strong financial performance in the first half of 2025, demonstrating clear momentum towards profitability. In the second quarter of 2025, net revenues reached $10.19 million, a robust 20.9% increase year-over-year. This performance contributed to a first-half 2025 revenue of $19.83 million, up 19.3% from the prior year.

Gross profit for Q2 2025 was $6.48 million, yielding a gross margin of 63.5%. While this was a slight decrease from 65.0% in the prior year, it was primarily attributed to a prior-year favorable inventory valuation adjustment and current-year tariff-related charges (approximately 90 basis points impact), partially offset by volume efficiencies and stronger margins from the Pharma Services and Clinical Trials (PST) business. For the first half of 2025, the gross margin stood at 63.1%. Operating expenses saw a modest increase of 1.7% in Q2 2025 and 2.5% in H1 2025, reflecting disciplined cost management even with increased R&D for new product development and recruiting for key roles like the Chief Commercial Officer. The net loss significantly narrowed to $0.2 million in Q2 2025 from $0.99 million in the prior year, and adjusted EBITDA for H1 2025 turned slightly positive, a 101% improvement from a negative $1.3 million in H1 2024.

Liquidity remains solid, with cash and cash equivalents of $8.05 million as of June 30, 2025. The company's cash usage trajectory has shown significant improvement, decreasing from $5.9 million in 2023 to $1.9 million in 2024. KORU achieved positive cash flow in Q2 2025, with cash usage of $600,000, and anticipates neutral to positive cash usage in H2 2025, putting it on track to achieve positive cash flow from operations for the full year 2025, ending with at least $8.1 million in cash. This financial turnaround is a direct result of higher revenues, improved gross margins, and disciplined operating expense management, with major infrastructure investments largely completed.

Competitive Landscape and Strategic Positioning

KORU Medical Systems operates in a competitive landscape dominated by larger, more diversified medical device companies such as ICU Medical, Becton, Dickinson and Company, Fresenius Kabi (FMS), and Baxter International (BAX). While these competitors offer broad portfolios of infusion systems, KORU carves out a distinct niche with its specialized focus on portable, patient-centric subcutaneous infusion solutions.

KORU's core strength lies in its mechanical Freedom system, which offers qualitative advantages in simplicity, reliability, and ease of use for at-home care, setting it apart from the often more complex, electronically integrated devices of its rivals. This is particularly evident in the European market, where electronic pumps are prevalent but struggle with direct prefilled syringe compatibility. KORU's system, by contrast, seamlessly accommodates prefilled syringes, offering a significant competitive edge. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, KORU's domestic core business consistently outpaces the overall SCIg market growth, suggesting effective market share capture. Internationally, KORU holds approximately 10% of the $60 million OUS SCIg market, with a strategic goal to expand to 30-40% share, leveraging its prefill advantage and new product launches.

However, KORU's smaller scale compared to giants like Becton, Dickinson and Company and ICU Medical presents vulnerabilities. These larger players benefit from extensive distribution networks, broader technological integration (e.g., smart infusion devices, digital health solutions), and greater financial resources for R&D. This can lead to higher operational costs for KORU and potential challenges in competing on price in broader institutional settings. KORU mitigates this by focusing on strong patient education and direct sales channels, fostering deep customer loyalty in its targeted segments. The company's strategic partnerships with pharmaceutical companies and its robust distributor network, particularly internationally, are crucial for navigating this competitive environment.

Outlook and Growth Catalysts

KORU Medical Systems has raised its 2025 revenue guidance to a range of $39.5 million to $40.5 million, representing 18% to 20% growth, up from its prior range. This increased confidence is primarily driven by significant opportunities in international markets, particularly from prefilled syringe conversions. The company expects international growth to accelerate in the back half of 2025, with most of the guidance raise attributed to this segment. While a temporary inventory reduction by a large U.S. distributor is anticipated to cause a slight dip in Q3 domestic revenue, a rebound is expected in Q4, with the domestic core business continuing to outperform the broader SCIg market.

The gross margin guidance remains reiterated at 61% to 63% for the full year 2025. Management acknowledges potential pressures from a stronger mix of international sales (which typically have lower average selling prices), ongoing supply chain inflationary pressures, and tariff impacts (estimated at less than 100 basis points annually). These are expected to be offset by planned pricing adjustments and manufacturing efficiencies from operational excellence programs.

Key growth catalysts include:

• International Expansion: Full pump and consumable registrations in Japan, a top 10 Ig market, are expected to drive sales in H2 2025 and have a larger impact in 2026. Further prefill conversions in Europe are anticipated, building on initial successes.
• New Drug Pipeline (PST): KORU has 10 active opportunities, with 5 new drugs expected to be commercialized by the end of 2026. This includes the FDA-approved expanded indication for Empaveli (estimated 20,000 KORU infusions annually), a rare disease biologic (40,000 annual infusions, 510(k) submitted ahead of schedule), and independent pursuits for deferoxamine and vancomycin (estimated $0.5 million incremental revenue in 2026). An oncology pilot program is also underway in the U.S., exploring a potentially massive market opportunity.
• Next-Gen Products: The upcoming next-generation pump and Phase II flow controller are expected to unlock new market share and geographic expansion opportunities, particularly in prefill-dominant markets.

Risks and Challenges

Despite the positive outlook, KORU faces several risks. Tariff-related charges, while currently estimated at less than 100 basis points impact on gross margin annually, could escalate or persist, requiring continuous mitigation through manufacturing efficiencies. The temporary inventory reduction by a large U.S. distributor in Q3 2025 highlights potential short-term revenue volatility due to customer-specific dynamics. Ongoing supply chain inflationary pressures could also impact profitability. Furthermore, while KORU's niche focus is a strength, its smaller scale compared to larger competitors means it must constantly innovate and execute flawlessly to maintain its competitive edge against rivals with broader product portfolios and deeper financial pockets. The delay in the new consumable sets 510(k) submission, while not impacting near-term revenue, underscores the inherent challenges in product development timelines.

Conclusion

KORU Medical Systems is demonstrating a compelling transformation, moving from a period of significant investment to one of robust growth and impending profitability. The company's strategic focus on the large-volume subcutaneous drug delivery market, underpinned by its differentiated Freedom system and a strong pipeline of next-generation products and new drug indications, positions it favorably within a rapidly expanding industry. The impressive financial performance in the first half of 2025, coupled with a raised revenue outlook and a clear path to positive operational cash flow, reflects effective execution of its three-pillar growth strategy.

While competitive pressures from larger players and macroeconomic factors like tariffs present ongoing challenges, KORU's technological advantages, particularly its prefilled syringe compatibility and patient-centric design, provide a strong foundation. The company's ability to consistently gain market share in its core Ig business and accelerate international expansion, alongside the diversification offered by its Pharma Services and Clinical Trials pipeline, suggests a sustainable growth trajectory. Investors should closely monitor the commercialization of new drugs, the launch of next-generation devices, and the continued penetration of international markets as key indicators of KORU's long-term success and its ability to solidify its leadership in specialized subcutaneous infusion solutions.