Q3 2023 KORU Medical Systems Inc Earnings Call

Participants

Linda Tharby; CEO and President, Director; KORU Medical Systems, Inc.

Ken Miller; CFO; KORU Medical Systems, Inc.

Hannah Jeffrey; Analyst; Gilmartin Group

Caitlin Cronin; Analyst; Canaccord Genuity

Joseph Downing; Analyst; Piper Sandler

Frank Takkinen; Analyst; Lake Street Capital Markets, LLC

Presentation

Operator

Good day and welcome to the KORU Medical Systems third-quarter 2023 earnings call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Hannah Jeffrey of the Gilmartin Group. Please go ahead.

Hannah Jeffrey

Thank you, Jason, and good afternoon, everyone. Earlier today, KORU Medical Systems released financial results for the third quarter ended September 30, 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 with 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, November 8, 2023, at approximately 4:30 PM.
Since then, the company may have made additional comments related to the topics discussed, and please reference the company's most recent press release and filings with the SEC. Joining us on today's call 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, Hannah. 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 reviewing key financial and business highlights for the third quarter. Tom will then review our financials and updated '23 guidance. Following our prepared remarks, we will open the call up for Q&A.
While a challenging quarter from a revenue perspective, I want to start today's call by emphasizing KORU's commitment to improving the quality of life for patients and caregivers with our freedom subcutaneous infusion system with a two-fold strategy. This strategy includes penetration into an installed base of over 30,000 chronic global subcutaneous immunoglobulin infusion patients and by building a continuum of new drugs on our pump.
During the third quarter, we saw revenue decline roughly 10% versus the prior year. The majority of the decline was due to our novel therapy's business, which was impacted by a large clinical trial order in the prior year and by timing of collaborations. This is a businesses that is composed of sales of product for clinical trials and nonrecurring engineering services that are dependent on milestone completion, all of which can be subject to timing changes.
The biggest value in this business is the signing of the collaborations which lead to commercial revenue when launched. In addition, our domestic core business was impacted by slower than anticipated SCIg market growth. Script volumes were down year on year and overall drug volume was down versus our expected growth.
While a difficult quarter from a revenue standpoint, we made progress in several key initiatives and continued momentum with our growth strategy. We have a solid US core business, which continues to outpace the underlying market and includes strong recurring revenue with over 27,000 patients. We remain the broadest label for subcutaneous drug indications and in the home and with our latest 50 mL prefill clearance remain the only cleared device for prefilled syringes, the fastest growing part of the market.
We continue to grow our novel therapies pipeline, winning a new novel therapies, innovation, collaboration and overall now have 15 close collaborations. On our pathway to break even, we posted an impressive 630-basis-point growth in our gross margin and executed a disciplined strategic operating expense plan.
We are committed to 2024 year end cash flow break even with a profitable core business and disciplined prioritization of investments related to innovation and our novel therapies business. We also continued to build capability, naming Ken Miller as our Chief Commercial Officer. Ken brings over 30 years of experience in leading high-performing teams and commercialization and marketing strategy, international expansion and driving sustainable growth and profitability.
And I am personally delighted to be working with him again. With 10 leading our global commercial operations and will allow me more time to dedicate to our innovation agenda and our novel therapies business, key drivers of our longer-term success. Although a difficult quarter, we continue to lay the groundwork with strong growth catalysts ahead, including new product introductions, novel therapies, collaborations and new geographies.
A lot of progress this quarter in advancing our three strategic growth drivers. As a reminder, these include growing our leadership position in domestic KORU SubQ Ig business, expanding this leadership position into expanding novel therapies business and geographic expansion. We have made advancements in each of these areas during the quarter.
A few key highlights. In our domestic core business on an underlying basis on the quarter and on a year-to-date basis, we continue to outperform the market, our pump growth, a leading indicator of consumables growth, it was up over 40%. And we are excited to have our prefilled syringe 510(k) approval and a record 119 days from submission.
And our NT business, we announced another close collaboration and we have the largest pipeline of new opportunities in our history. In our geographic expansion efforts, we are seeing wins in several markets and are excited by our recent submission to enter the Japanese market, one of the top five IG Markets with expected approval in late '24.
Let's now take a deeper dive into the US market. This quarter, we have done an analysis to evaluate the factors affecting the overall SCIg market. Well, we did not anticipate the market to be where it is today.
KORU's outperformance of the market continues. The overall SubQ Ig drug volume market is up 45% year today. This was lower than the recovery anticipated in the back half, and we now expect Q4 to be up 3% to 4%. Previously, we expected a faster rebound in PIDD diagnosis over 80% of SubQ use given a very strong flu season in '22 and into '23.
But it appears that rebound to pre-pandemic levels is taking longer than we anticipated. We are encouraged by the drive market being up sequentially in Q2 by over 2.5% and this combined with growing awareness and diagnosis in CIDP should set up for a good 2024. In the interim, we are generating above market growth of 6% year to date as a result of continued account wins and prefill adoption.
We are also excited by our pump performance, up 40% year-on-year and 24% from prior quarter. This is often the leading indicator to consumable sales. So we have multiple factors for future in the coming year. And now let's discuss refills. Key drug growth driver of our U.S. business is continued market share growth, driven by prefilled syringes.
The chart on the left shows our prefilled syringe 510(k) clearance for our 20 mL prefilled syringes led to an immediate uptick in the market as our pump facilitated presale market penetration going from about 3% to about 12% of the overall market. Last week, we received 50 mL 510(k) clearance for our Freedom60 infusion system for use with Hizentra 50 mL prefilled syringes.
We expect a full market launch to occur in early 2024. In our recent patient market studies, we found significant preference for use of our system with prefilled syringes due to the increased convenience of reduced drug preparation tasks and faster setup times. We estimate that over 70% of patients are on doses of greater than 50 mL, and this approval opens up the majority of the patient market.
Our freedom infusion systems remain the only pump with FDA clearance for use with prefilled syringes. We believe this will lead to increased share with expected growth of peripheral penetration from 12% to an expected 50% penetration by 2025. We also believe that due to the increased ease of ease of use, that it could drive overall further penetration of SubQ Ig therapy, which today sits at around 15% to 20%.
Moving to our NT business, we are focused on new biopharmaceutical collaborations for clearance of our freedom system for at-home use. This page illustrates our current close collaborations, both on our core Ig business at the top and a new therapy areas. In total, a $2.5 billion TAM over $2 million total patient population opportunity.
Although we know that not every one of these will make it to launch, each new signed collaboration provides the opportunity for commercial launch revenue. We continue to advance with our new collaborations this quarter, signing one additional collaboration with our net total remaining at 15 with a reduction of one Phase 2 neurology program that was terminated by the pharmaceutical company in the quarter.
We also have 18 additional open opportunities. We added three new this quarter, making this our largest opportunity list to date. These opportunities represent pharmaceutical companies where we are in active discussions related to a qualified drug for our system. All of these represent future opportunities for close collaboration.
More than two-thirds of our opportunities are for late-stage drugs that could be commercialized with KORU and by 2026 or earlier. They spend expand multiple dairy therapy areas with a significant concentration in oncology. Our new collaboration signed in the quarter as our first for our next-generation pump optimized for delivering all SCIg products, including prefilled syringes.
This collaboration includes obtaining 510(k) clearance of this next-generation pump with the pharmaceutical companies SCIg drugs. We think of novel therapies as the biggest mid to long-term opportunity for the company. We have started building this business just over two years ago. So very much still in its infancy. We have had many learnings since its inception as we continue to build our strategy and form relationship with the pharma companies, and we are excited by its trajectory.
Moving to international, we continue to expand our opportunities we ended the quarter with international growth of 12% year to date, driven by deeper penetration into secondary immunodeficiency and growth in new countries. We believe we have plenty more runway in our international business and are excited about key milestones.
One of our international growth drivers is new markets, and we have successfully completed launches in several smaller markets this year as we look ahead to '24, we anticipate a Japanese market launch for SCIg, one of the top five Ig markets in the world. We have previously discussed our ongoing electronic pump trial, which we now expect to be completed in the first half of 2024.
We have a great value proposition versus electronic pumps, and we are excited to generate clinical evidence to prove that. This week, the team is our largest international Ig show, I picked international primary immunodeficiency [conference]. KORU were present its third abstract this year, titled infusing subcutaneous immunoglobulins comparison of the constant flow system, our electronic pumps to the constant pressure system, the quorum mechanical system.
The abstract aims to provide valuable insights into the comparisons of two subcutaneous infusion systems, reviewing the considerations associated with both systems, highlighting the global benefits of a constant pressure system and contributing to the understanding of optimal infusion methods for improved patient outcomes. We're excited to showcase our efforts at this prestigious conference.
Another key area that is exciting for us is the use of freedom system and infusion clinics. The key value, driving the nursing time savings and alleviating significant dexterity challenges versus current manual push methods. Use of our broad product more broadly in infusion clinics is an area we will be actively pursuing for future growth.
International has become a vital key third growth strategy for the company. In addition to our three growth drivers, innovation is always at the forefront of our strategy as we believe progressing new label indications and new products that solve significant unmet patient needs is a key element that will drive forward to the next phase.
We've laid out our upcoming new products and commercial label milestones that we expect over the next few years. This quarter, we have completed two milestones, one for products with the launch of the new prefilled syringe pump and one for a commercial label indication with the approval of that prompt with the Hizentra 50 mL prefilled syringe.
Looking ahead, we plan to have a new consumer 510k submission in 2024. We remain extremely excited about our innovation pipeline with the opportunity to launch of a new core pump and consumable platform by the end of '25 and with prospects for multiple new drugs on the freedom system. I will now turn the call over to Tom to review our financials.

Ken Miller

Thank you, Linda, and good afternoon, everyone. In the third quarter, we reported total revenues of $7 million, a decline of 10% or $800,000 from prior year. The majority of this decline was due to our novel therapies business, which declined by 78% or $600,000 in the quarter. This decline was driven by a large clinical trial order of about 500,000 recorded in the prior year and by timing of NRE milestone completion.
Our domestic core reported revenues of $5.8 million, a 2% decrease versus prior year, driven by lower consumable volumes as the prior year included a backorder of 300,000 for consumables that were cleared during the period. Partially offsetting the decline was a 40% increase in pump units sold that are leading indicators of future patients driving consumables revenue.
Despite the year-over-year decline in the quarter, our domestic core has grown 6% year to date as we continue to outpace the underlying market growth, driven by new account wins and pre-sales. International core decline of 3% was caused by lower volume as a result of a country specific tender order in the period, partially offset by growth in new markets.
On a year to date basis, international core continues to perform well with 12% growth over prior year. Gross margins increased by over 600-basis-points in the quarter to 62% compared to 56% in the third quarter of 2022. The increase in gross margin was primarily driven by our exit from the Chester site in Q1 of this year, as well as increased efficiencies from our outsourced production initiatives.
With this performance, we achieved the high end of our second half gross margin guidance. As we look forward toward the end of the year, we expect to hold these levels of gross margins between 60% and 62% in Q4 and deliver a full year margin between 58% and 60%, driven by lower cost of outsourced products, lower labor, and overhead and improved efficiency from the consolidation of our U.S. manufacturing from two sites to one, along with contribution from price and volume mix.
During the quarter, we reported operation operating expenses of $6.1 million, and we expect second half operating expenses to come in at approximately $13 million versus our first half run rate of $14.3 million, driven by reductions of G&A and operational headcount as well as external consulting. We will continue to flex operating expenses levels with revenue projections while maintaining investments in our strategic initiatives, and we'll keep expenses under $28 million, in order to maintain planned net losses.
We significantly reduced our net losses in the second half, aided by improvements in gross margin and disciplined operating expense control. And there are and we are on a runway towards cash flow breakeven in Q4 2024. Our cash balance at the end of Q3 was $10.8 million and represented a $900,000 cash burn from the prior quarter.
Our biggest driver of cash burn was our net loss of $900,000, excluding non-cash items for stock compensation and depreciation. Adding to these cash flows were working capital changes of $300,000, driven by timing of higher AR and lower AP during the quarter of $900,000. This was offset by $600,000 for our planned reduction of inventory, making additional progress towards our $2 million end of year reduction target.
We also had $300,000 cash improvement driven by financing activities for our annual insurance renewal. We continue to control and plan our cash according to our revenue, gross margin, and expense guidance and our increasing our end-of-year guidance to having a cash balance greater than $10.5 million.
Cash burn for the year has been $5.7 million in the first half, and it is estimated to be less than $1.2 million in the second half. We are updating our guidance for full year 2023 to reflect novel therapies, timing of closing collaborations, clinical trials, and milestone achievements. In addition, we are adjusting our underlying US core drug market growth assumption to 3% to 4% in Q4 versus a prior expectation of 8% to 10% for Q4.
Our full year revenue is now expected to be between $28 million to $28.5 million. This implies a flat sequential growth rate in the fourth quarter at the midpoint to reflect the changes that I just mentioned in our novel therapies and core businesses. While our novel therapies pre-commercial revenue has been and will continue to be lumpy driven by timing.
We remain bullish in our novel therapies business with our current backlog of signed collaborations and our pipeline of opportunities adding short term and most importantly, long-term commercial revenue. In our assumptions, we are planning 3% to 4% Q4 growth rate in the underlying SCIg drug market, and we expect higher market growth in future quarters, as a rise in respiratory infections lead to increased diagnosis of PIDD which we will see the favorable impacts of '24.
Gross margin guidance remains between 58% to 60% for the full year and to exit the year between 60% to 62% with the completion of the manufacturing transition behind us and year to date gross margins on plan, we expect to continue to see our Q4 gross margins to remain at a mid-high end of our range as we continue to see lower cost of goods benefit from our outsource manufacturing initiatives and improvements in average selling prices.
We are raising our expected cash balance at year end 2023 to be greater than $10.5 million. We expect our operating expenses to be lower than $28 million, inclusive of stock compensation expense versus lower than $29.5 million reported in our prior guidance. This is inclusive of approximately $3.1 million in stock comp, which is offset by continued working capital improvements of $2 million of inventory reductions, which we are about 75% complete to date.
We continue to expect to reach cash flow breakeven by Q4 of 2024 based on our current strategic outlook. I will now turn the call back to Linda for closing comments.

Linda Tharby

Thanks, Tom. In closing, while we always want to see significant revenue growth, I'm encouraged by our third quarter progress across all of our businesses and on the innovation front. We continue to have exciting work ahead that will resolve the company strategically as a leader in drug delivery in the home and add continued value to patients, customers, and shareholders.
As we look ahead, we are excited about our upcoming milestones, including our 50 mL prefill launch, progressing our novel therapies, collaboration milestones and fillings, our innovation agenda and continued global expansion. I'm also excited to share that we will be hosting an analyst day on December 5 at our headquarters in Mahwah, New Jersey. We'll be sharing additional updates and progress to our plan.
And finally, in closing, I want to thank the entire KORU team for their exceptional efforts on the quarter. Operator, I will now turn it over to you for Q&A.

Question and Answer Session

Operator

Thank you. We will now begin the question and answer session. (Operator Instructions) Alex Nowak, Craig-Hallum.

Hey, good afternoon. This is [Connor] on for Alex. Thanks for taking my questions . So if you ask what is CSL saying about the 50 milliliter prefilled cartridge, I have the introduction and maybe speak to what this could do for IV to SubQ convergence in the market, whether it's in terms of market share? Just give some commentary on that, please?

Linda Tharby

And so first, what CSL has said publicly is that they plan on launching the product. Of course, they announced their approval back in April. The extended delay to launch the product into the market was due to the time that it takes them to fill that overall pre-fill with their drug and bring it to the marketplace. So they are planning on launching that product in early 2024, and they have also released some premarket studies that indicate the overall preference for presell.
Regarding overall IV to SubQ, I don't think they've been public about that. I think what we know is what factors are the biggest drivers to subcutaneous therapies are generally the overall convenience and ease of use for a patient in the home and given the considerable improvements in both of those areas, we project that about 50% of the market will be prefills over the course of the next three years on and that it will in turn drive increased penetration.

And that 50 percentage of the subcutaneous market?

Linda Tharby

Correct.

Okay, got it. And then maybe what are your views on a slump for this SubQ market. Is there any reason this isn't going to be a longer-term correction or issue?

Linda Tharby

Yes, I would say so. We've already seen we look at one primary source of data, which is the same data that the pharmaceutical Ig companies use and with that data source and looking through all of their public releases. Here's what we see. So first of all, I think two encouraging signs. Quarter on quarter we saw that overall drug market improved by about 2.3 percentage points versus the prior quarter.
And what really drives the diagnosis of immunodeficiencies and primary immune deficiency were about 85% of the market are increasing infection rate. So people get infections, they go to the hospital or they get more infections and you get recurring infections, which brings you there. So given the fact that we saw '22, '23 was the single biggest flu season we've seen and this flu season is off to another roaring start.
We expect that 2.3% increase we saw from quarter one to quarter two we expect that to continue. We don't have the quarter three data yet, but we expect that to continue. Another driver that we're excited about is CIDP usage. So that's a neurology indication and those patients tend to use about twice as much drug. They tend to use to do about twice as many injections and these patients are our prime candidates, both prefilled because they use so much drug, it's just a much simpler process.
We also see that being a buoyant factor for the overall market and that although we don't subscribe to the scrip data. I know it's out there publicly. We also saw the overall scrip data begin to flatten out in terms of we don't see, they continued on negative quarter on quarter. So I think those are all great indicators for what we feel where we're already beginning to see stabilization and certainly in the overall drive market improvements versus where we have been.

Got it. Just one last one here. So you mentioned some new pipeline opportunities for additional collaborations. Can you give any maybe color on how far along some of these opportunities are in terms of what they are?

Linda Tharby

Okay. So the 15 closed collaborations we did this quarter, you'll see that the signed collaborations, which means we have a signed deal, we are actively exchanging elements of value, whether that be the drug, whether that be dollars in order to get the product approved on our pump. In addition to that, we have 18 open opportunities that we have in our funnel.
The biggest focus that we've seen of late is that a number of new indications are being approved for subcutaneous use in the clinic and those usages for us and there was one such drug that was just approved a few months back a drug called UCB residue. And given the fact that we are the largest subcutaneous product being used in the home, nurses are very familiar that also work in those infusion clinics.
So we're seeing a lot of demand for what I would call launch market products in late Stage 3, which is what we're very excited about because obviously, a Phase 3 is much closer to market and some of these signed collaborations we have there today and many of them that we see are concentrated in the oncology clinic. Specifically, I spoke briefly in my script about Europe, where in Europe, we're seeing a lot of adoption of our platform in infusion clinics. So looking to learn from our experience in Europe and bring some of those into U.S.

Thank you.

Linda Tharby

You're a little bit of time in some time to get those on our labels and very excited.

Got you. That's great to hear that. Well, that's all I have, thank you.

Linda Tharby

Thank you.

Operator

Caitlin Cronan, Canaccord Genuity.

Caitlin Cronin

Hi. Thanks for taking the questions. Just a quick one on cash flow break even. I know you said that Q4 '24 is when you were planning for this. How do you really expect to drive this towards profitability?

Linda Tharby

Ken, you take that one.

Ken Miller

Yes, I'll take that one. Hello Caitilin, thanks for the question. As one of the mentions so that the number one thing is the excitement that we see with the increased diagnosis and what we're finally starting to why don't we start to see in the market and really what that means Caitlin, is getting back to a double digit growth, right?
So you have to believe that we get back to that double digit growth rate. You have to also believe that we continue to maintain our margin expansion that we've demonstrated here in the third quarter. And do you have to also believe that we continue with our operating expense discipline with increased leverage and an operating leverage on our OpEx and then finally with that is are choiceful decisions in our CapEx deployment? So if we can manage all those things, we can certainly get back to that cash flow break even by Q4 of '21.

Linda Tharby

And maybe the only other thing that I would say is that certainly our outlook does not look at '22, we had a 19% growth level. We're not looking at those levels to get to that cash flow breakeven level. But I'm very confident in those four areas that Tom just talked.

Caitlin Cronin

Got it, okay. And then just on novel therapies, I think your goal earlier in the year was for, I think, fixed in 2023, the two in the first half and another now, what's your confidence in really reaching this goal for the full year?

Linda Tharby

Yes. So we have said that our confidence level on now is four to five. Of course, there's always opportunities for us to exceed this. But we've gotten a lot smarter, Caitlin relative to how long lawyers take to markup a red line agreement. And so we're setting our expectations in that four to five level. Of course, we're excited by the new one that we just announced after market today.
What I would say about our novel therapies business may be different than where we were six months ago or even a year ago at this time is that we have a backlog now of revenues and of deals relative to the close collaborations we've already done that we're taking into 2024.
So that's also good news.

Caitlin Cronin

Awesome. Thanks for taking the questions.
Thanks Caitlin.

Operator

Joseph Downing, Piper Sandler.

Joseph Downing

I was on mute there, hello Tom and Linda. Appreciate you taking the question. I'm picking up off the first question there. So congrats on the 510(k) clearance. Can you just talk through how you're thinking about the uptake of the 50 mL once it's launched next year? I'm wondering, does it track with the prefill uptake trajectory we've seen or does it move faster or slower for some reason yet?

Linda Tharby

So we think it will move much faster. Today, if I were to look at the total PIDD the total patient population out there, about 30% of those are on doses of 20 mL and lighter and about 70% are on doses of 50 mL and greater. What that allows for is obviously with the 50 mL, it opens up that 70% of the market that we could not reach before.
In addition, what we had in the past is patients that were between, 20 and 50 mL or more than 50 mL. That nurses were just reluctant because they had to use both vials and prefilled to switch a patient. So patient might have to use a prefilled syringe and a vial in the past.
Now with this approval, they can satisfy a lot more of the market. So there are more able to switch patients. So we see where we saw the market basically get to about 12% penetration and then kind of stabilize there, we see the 50 mL really being able to go after 70% of that market. So a much faster uptick and what we saw was 20 mL.

Joseph Downing

Okay, thanks. And then I'm curious, any margin implications we should have in mind as our launch starts unfold?

Linda Tharby

Yes. Of course, with being the only pump out there for use with prefilled. We are certainly looking to take price wherever we can, but we're also conscious that the real game is consumables and so connecting a specific consumable to that pre-sold product is also what we're looking to do with this launch. So we should see some appreciation in our overall ASP as well related prefills.

Joseph Downing

Great. Thanks Linda, and then just one on the US market dynamics. So curious, what's changed in the last few months is like the such a shift in outlook here? And how does this influence the revenue growth assumptions embedded in your long-term plans?

Linda Tharby

So I would say, why did we come down? We really expected that with the drug market. We saw a little bit of an uptick between of Q1 and Q2. We expected that our continued uptick and we thought we'd see a couple of points of growth quarter on quarter on quarter and that just has not happened. It's been a little bit of a slower uptick than what we thought and again, I'll come back to our seeing what gets diagnosed is going is increased infections.
We're seeing, we saw a very strong flu season last year, pneumococcal infections or pre-pandemic levels. So although I hate to say it when people get sick, we see more diagnosis, which is fantastic. And I'm sorry, the second part of your question.

Joseph Downing

Yes, just about the revenue growth assumptions embedded in your longer-term plans for 2024 and as I guess, even through '26?

Linda Tharby

So as I said, our market growth assumptions are in that 3% to 4% range in the fourth quarter of this year. We would expect next year we're setting the overall market growth somewhere in that 5% to 6% growth range for the overall market, and we're not yet discussing our '24 guidance numbers, but obviously, let's hope for a strong Q4 and the overall underlying market.
We're beginning to, as I said earlier, from one of the earlier questions to see signs of that recovery relative to both scripts declined flattening out and also seeing some rise quarter on quarter in overall drive market growth.

Joseph Downing

Great. Thanks, Linda, appreciate it.

Operator

Frank Takkinen, Lake Street Capital.

Frank Takkinen

Great. Thanks for taking the questions. I wanted to start with one on the pump growth, you guys referenced 40% in the quarter. I assume this means that the consumables were of primary advocate of the number coming up a little bit shorter and obviously that dovetails well with where prescriptions came in and what not.
But I was hoping you could talk a little bit more about why you think those consumables may have come in a little lower. My understanding is maybe these patients were more chronic in nature and they would stay on SubQ. So did these patients potentially switch back to IV or was there something else that was occurring specifically related to consumables in the quarter?

Linda Tharby

Yes. So first, maybe let me start on. Hi, Frank, great to have you on the call. So our consumables revenues tend to lag our pump revenues by a couple of months. So we did see a bit of softer pump growth in Q2. And then last year, we had a significant one-time impact, which was we saw greater than a backorder that we basically cleared the backorder in our Q3 of last year and also refilled the channel with inventory. So we had a difficult compare to last year, specifically on our consumables because that's where our volume was.
Regarding any switch back to IV, we do not see it, 99% of patients when they go to SubQ therapy will stay on SubQ therapy given the benefits both in their time savings and in the associated side effects of IV versus SubQ. So we see very little switch back the IV market and any strength that we would have seen there is being driven by increased diagnosis of CIDP.
They are typically IV patients, only 15% of CIDP patients are on SubQ therapy and they are typically IV users mostly because of the volume of drugs. That's why we see the opportunity with prefills, given now patients that were say on 400 mLs would have been inaccessible with a prefill now it's actually a shorter infusion time and that can be done with prefill, the CIDP.
So that is a major market that we believe CSL will go after now as are the only company able to service those patients with the CIDP indication with prefills.

Frank Takkinen

Got it, that's helpful color, and then maybe one on the new collaboration you guys announced today, it seems like you're looking to develop a one-time settle in. I assume there's a cascade of positives that come with that specifically in the financials and economies of scale and things like that, but maybe just can do a catch all of the significance of that collaboration when we could see that progress?
What this could do to margin impact over a long period of time and any other strategic benefits I may be missing?

Linda Tharby

So first, let me just start with the value prop right that we obviously the pharma partner saw and increasingly, as we begin to show this in very confidential discussions with some of our pharmacy partners. The biggest dilemma right now, is as you call it simplicity rules so we can supply a pump that is able to satisfy the needs of all prefills and bio patients that had a big game changer for them.
And so obviously, with our partner that we're working with, they saw the advantage of that and I would also say that and three of the four major Ig companies have made the decision to go to prefilled and they've been public about that. So we see a lot of legroom in this area and without getting into any further specifics relative to the total infusion experience we intend to have for our patients.
I would say that we believe this product, both from a pump and a consumables program will be add significant convenience for patients save a lot of time, save a lot of really importantly, value added time for pharmacists and for caregivers that train on the product. So all the way around we think it will be a significant game changer for us.

Frank Takkinen

Okay, I will stop there. Thanks for taking.

Operator

There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Linda Tharby for any closing remarks.

Linda Tharby

Thank you all for joining us today, and I look forward to updating you at our upcoming Investor Day, and we look forward to seeing you here.

Operator

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.