Wiki says:
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The XM25 Counter Defilade Target Engagement (CDTE) System,
also known as the Punisher and Individual Semiautomatic Air Burst System
is an air burst grenade launcher derived from the XM29 OICW.
It was fielded to soldiers serving in the War in Afghanistan
and was projected to enter full-rate procurement in 2013.
However, the Senate Armed Services Committee eliminated all funding
for the XM25 in its revision of the Pentagon’s budget in June 2013.
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http://en.wikipedia.org/wiki/XM25_CDTE
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The XM-25 had ammunition problems and it was withdrawn from combat service just as it was scheduled to go into production. I suspect that the ammunition problems were significant. This new model is a 35mm system, vice 25mm. It sounds to be like they completely redesigned the round and designed a manufacturing system to support it. The 25mm ammunition was practically all hand made and likely could not be reliably mass produced.