In detailing its results, the fund offered commentary on a number of its positions. One of the positive contributors for the quarter was Koru Medical (NASDAQ: KRMD) — a medical device company that has a razor/razor blade model. The company recently changed its ticker and company name from Repro-Med (REPR).
The fund had the following to say regarding the company in its investment letter:
"KRMD was the biggest winner in the portfolio in Q3. It is a medical device company that has a razor/razorblade model that enables patients with primary immunodeficiency disease (“PIDD”) to self-administer plasma-derived treatments through subcutaneous infusion. There are roughly 270,000 people with PIDD in the U.S., but only ~70,000 (36%) are currently being treated. The primary reason for this large gap is that PIDD is difficult to diagnose, but awareness has been increasing. As a result, while the population with the disease is growing ~2% per year, the percentage of patients treated is growing closer to 10% per year. However, the story gets better for KRMD. Of the 70,000 patients currently being treated for PIDD, nearly 2/3 of those patients are being treated through intravenous therapy typically with one large dose per month in either a hospital or specialty clinic. This is suboptimal in several ways: it is inconvenient for the customer who has to go to the clinic and then receive a large dose through an IV, it is a high dose of a drug administered all at once (many patients feel sick afterwards and the effectiveness of the drug drops off significantly after a few weeks), and finally, it is very expensive for the healthcare industry since a dedicated facility and nurse are required. This is where KRMD’s solution enters the picture. KRMD’s subcutaneous infusion pump allows the patient to self-administer therapy at home, typically in smaller doses about once per week. The company currently has ~80% market share of the PIDD subcutaneous market--- a market that is growing double digits and offers stable, recurring revenue. I know the drivers of this market fairly well given my previous work on PaySign Inc (PAYS). KRMD is in a different part of the plasma supply chain than PAYS, but nonetheless benefits from double digit secular growth in patient count. I believe the company is undervalued based on their current PIDD and CIPD indications due to 20%+ sustainable revenue growth, 70% gross margins, and significant operating leverage. Moreover, there is a chance that the current management team and board, which is impressive for a micro-cap, can create value by extending the use of their pumps for other emerging subcutaneous drugs. If I am right, the stock could have multiples of upside from current levels."
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