ReShape Lifesciences Inc. (Nasdaq:
RSLS), the premier physician-led weight loss and metabolic
health-solutions company, today reported financial results for the
first quarter ended March 31, 2024 and provided a corporate
strategic update.
First Quarter 2024 and Subsequent
Highlights
- March 2024: Significantly strengthened the company’s
intellectual property portfolio related to an intragastric balloon
system. Specifically, received a Notice of Allowance from the U.S.
Patent and Trademark Office (USPTO) for patent application
18/370,819. The patent, number 11974934, was issued on May 7, 2024
and provides protection into at least January 2031, without
accounting for a potential Patent Term Extension (PTE).
- March 2024: Due to the continued impact on the company’s
revenue caused by the rise in glucagon-like peptide 1 (GLP-1)
receptor agonist prescriptions for weight loss, ReShape provided an
update on its 2024 cost reduction plan, including a further
Reduction in Force (RIF). Full implementation of the plan is
expected to result in further lowering operating expenses of
approximately $8.0 million in 2024, or more than a 50% reduction
compared to 2023, excluding one-time costs.
- February 2024: Announced that the first surgeries utilizing the
company’s next generation, enhanced Lap-Band® 2.0 FLEX, were
successfully performed by Adam Smith, D.O., Bariatric Surgery
Specialist and Chief Executive Officer of Ultimate Bariatrics in
Dallas, Fort Worth, TX, and Christine Ren-Fielding, M.D., Professor
of Surgery at NYU Grossman School of Medicine, Director of NYU
Langone Health’s Weight Management Program and Chief of the
Division of Bariatric Surgery.
- January 2024: Conducted bariatric fellows training for their
Lap-Band® System, highlighting the Lap-Band® 2.0 FLEX.
“During the first quarter and subsequent period,
we have remained focused on delivering shareholder value and are on
a path to profitability, executing the 2024 cost reductions we
outlined in March. To that end, we continue to fine-tune our lead
generation activities and invest in our growth drivers, including
the commercial launch of the Lap-Band® 2.0 FLEX,” stated Paul F.
Hickey, President and Chief Executive Officer of ReShape
Lifesciences®. “With the adoption of GLP-1s, the stigma around
obesity treatment is being replaced with medical intervention and
we are steadfast in our confidence that the number of people
seeking medical professionals, especially bariatric surgeons, will
continue to increase. The first surgeries utilizing ReShape’s next
generation, enhanced Lap-Band® 2.0 FLEX, designed to improve the
patient experience, were successfully performed in February and
additional surgeries have already taken place. Based on surgeon
feedback, including those who have used the Lap-Band® 2.0 FLEX, we
believe the market opportunity for the Lap-Band® franchise will
increase, over time.
“In March, we significantly strengthened
ReShape’s intellectual property portfolio surrounding the
intragastric balloon system, having received a Notice of Allowance
from the USPTO, and last week, had the patent issued. We will
continue to build a defensive ‘moat’ around our product portfolio,
innovation and commercialization efforts and, when necessary, we
will take offensive action to defend our position utilizing
non-dilutive funding. That said, as we continue through 2024, we
are making significant progress implementing our 2024 cost
reduction plan, which has included a further reduction in staff,
expected to lower operating expenses by roughly 50%, compared to
last year. These cuts are necessary to allow us to focus on our
growth initiatives, by optimizing the commercialization of the
Lap-Band® franchise. It is important to note that we are continuing
our high priority search for synergistic M&A opportunities and,
as previously reported, have engaged Maxim Group LLC, on an
exclusive basis, to assist in this process. Finding the right
partner will be key to the long-term success of ReShape
Lifesciences. We look forward to providing further updates as the
search continues.”
First Quarter Ended March 31, 2024,
Financial and Operating Results
Revenue totaled $1.9 million
for the three months ended March 31, 2024, which represents a
contraction of 15.0%, or $0.3 million compared to the same period
in 2023. The primary reason is due to a decrease in sales volume
primarily due to GLP-1 pharmaceuticals.
Gross Profit for both three
months ended March 31, 2023 and 2024, was $1.2 million. Gross
profit as a percentage of total revenue for the three months ended
March 31, 2024, was 59.9% compared to 53.5% for the same period in
2023. The increase in gross profit percentage is due to the
reduction in overhead related costs, primarily payroll, as the
Company had a reduction of employees late in 2023.
Sales and Marketing Expenses
for the three months ended March 31, 2024, decreased by $1.2
million, or 53.3%, to $1.0 million, compared to $2.2 million for
the same period in 2023. The decrease is primarily due to a
decrease of $0.7 million in advertising and marketing expenses,
including consulting and professional marketing services, as the
Company has reevaluated its marketing approach and has moved to a
targeted digital marketing campaign, resulting in a reduction of
costs. The Company also had a reduction in payroll expenditure,
including commissions, stock compensation expense and travel of
$0.5 million, due to changes in sales personnel and lower
sales.
General and Administrative
Expenses for the three months ended March 31, 2024,
decreased by $2.3 million, or 55.6%, to approximately $1.9 million,
compared to $4.2 million for the same period in 2023. The decrease
is primarily due to a reduction in professional services, such as
audit and legal fees of $1.3 million primarily due to the fiscal
year 2022 restatement that occurred during the first quarter of
2023, public stock offering costs, and a reduction in
payroll-related expenses, including a reduction in stock-based
compensation expense of $0.5 million, due to changes within
personnel. The Company also had a decrease in rent and insurance of
$0.1 million as it moved its headquarters during the second quarter
of 2023 to a smaller facility to reduce costs.
Research and Development
Expenses Research and development expenses were
approximately $0.5 million for the three months ended March 31,
2024, remaining consistent with the same period in 2023, with a
slight decrease primarily in stock based compensation.
Cash and Cash Equivalents As of
March 31, 2024, the Company had net working capital of
approximately $4.4 million, primarily due to cash and cash
equivalents of $2.5 million, and $1.6 million of accounts
receivable.
A full discussion of the company’s financials is available in
our Annual Report on Form 10-Q, filed with the Securities and
Exchange Commission.
Conference Call Information
Management will host a conference call to
discuss ReShape’s financial and
operational results today at 4:30 pm ET. To participate
in the conference call please register with the following
Registration Link, and dial-in details will be provided.
Participants using this feature are requested to dial into the
conference call fifteen minutes ahead of time to avoid delays.
An archived replay will also be available on the
“Events and Presentations” section of ReShape’s website at:
https://ir.reshapelifesciences.com/events-and-presentations.
About ReShape Lifesciences®
ReShape Lifesciences® is America’s premier weight loss and
metabolic health-solutions company, offering an integrated
portfolio of proven products and services that manage and treat
obesity and metabolic disease. The FDA-approved Lap-Band® System
provides minimally invasive, long-term treatment of obesity and is
an alternative to more invasive surgical stapling procedures such
as the gastric bypass or sleeve gastrectomy. The investigational
Diabetes Bloc-Stim Neuromodulation™ (DBSN™) system utilizes a
proprietary vagus nerve block and stimulation technology platform
for the treatment of type 2 diabetes and metabolic disorders. The
Obalon® balloon technology is a non-surgical, swallowable,
gas-filled intra-gastric balloon that is designed to provide
long-lasting weight loss. For more information, please visit
www.reshapelifesciences.com.
Forward-Looking Safe Harbor
Statement This press release may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Actual results could differ materially from
those discussed due to known and unknown risks, uncertainties, and
other factors. These forward-looking statements generally can be
identified by the use of words such as "expect," "plan,"
"anticipate," "could," "may," "intend," "will," "continue,"
"future," other words of similar meaning and the use of future
dates. Forward-looking statements in this press release include
statements about the company’s projected decrease in operating
expenses for 2024, its belief that it is on a path to
profitability, and its expectation that the market opportunity for
Lap-Band will increase. These and additional risks and
uncertainties are described more fully in the company's filings
with the Securities and Exchange Commission, including those
factors identified as "risk factors" in our most recent Annual
Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q.
We are providing this information as of the date of this press
release and do not undertake any obligation to update any
forward-looking statements contained in this document as a result
of new information, future events or otherwise, except as required
by law.
Non-GAAP DisclosuresIn addition
to the financial information prepared in conformity with GAAP, we
provide certain historical non-GAAP financial information.
Management believes that these non-GAAP financial measures assist
investors in making comparisons of period-to-period operating
results.
Management believes that the presentation of
this non-GAAP financial information provides investors with greater
transparency and facilitates comparison of operating results across
a broad spectrum of companies with varying capital structures,
compensation strategies, and amortization methods, which provides a
more complete understanding of our financial performance,
competitive position, and prospects for the future. However, the
non-GAAP financial measures presented in this release have certain
limitations in that they do not reflect all of the costs associated
with the operations of our business as determined in accordance
with GAAP. Therefore, investors should consider non-GAAP financial
measures in addition to, and not as a substitute for, or as
superior to, measures of financial performance prepared in
accordance with GAAP. Further, the non-GAAP financial measures
presented by the company may be different from similarly named
non-GAAP financial measures used by other companies.
Adjusted EBITDAManagement uses
Adjusted EBITDA in its evaluation of the company’s core results of
operations and trends between fiscal periods and believes that
these measures are important components of its internal performance
measurement process. Adjusted EBITDA is defined as net loss before
interest, taxes, depreciation and amortization, stock-based
compensation, and other one-time costs. Management uses Adjusted
EBITDA in its evaluation of the company’s core results of
operations and trends between fiscal periods and believes that
these measures are important components of its internal performance
measurement process. Therefore, investors should consider non-GAAP
financial measures in addition to, and not as a substitute for, or
as superior to, measures of financial performance prepared in
accordance with GAAP. Further, the non-GAAP financial measures
presented by the company may be different from similarly named
non-GAAP financial measures used by other companies.
CONTACTS:
ReShape Lifesciences
Contact: Paul
F. HickeyPresident and Chief Executive
Officer949-276-7223ir@ReShapeLifesci.com
Investor Relations Contact:Rx
Communications GroupMichael
Miller(917)-633-6086mmiller@rxir.com
RESHAPE LIFESCIENCES
INC.Consolidated Balance Sheets (dollars
in thousands; unaudited)
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2024 |
|
2023 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,379 |
|
|
$ |
4,459 |
|
Restricted cash |
|
|
100 |
|
|
|
100 |
|
Accounts and other receivables |
|
|
1,566 |
|
|
|
1,659 |
|
Inventory |
|
|
3,467 |
|
|
|
3,741 |
|
Prepaid expenses and other current assets |
|
|
383 |
|
|
|
337 |
|
Total current assets |
|
|
7,895 |
|
|
|
10,296 |
|
Property and equipment,
net |
|
|
54 |
|
|
|
60 |
|
Operating lease right-of-use
assets |
|
|
226 |
|
|
|
250 |
|
Deferred tax asset, net |
|
|
27 |
|
|
|
28 |
|
Other intangible assets,
net |
|
|
— |
|
|
|
— |
|
Other assets |
|
|
29 |
|
|
|
29 |
|
Total assets |
|
$ |
8,231 |
|
|
$ |
10,663 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
1,314 |
|
|
$ |
1,689 |
|
Accrued and other liabilities |
|
|
1,930 |
|
|
|
1,814 |
|
Warranty liability, current |
|
|
163 |
|
|
|
163 |
|
Operating lease liabilities, current |
|
|
112 |
|
|
|
111 |
|
Total current liabilities |
|
|
3,519 |
|
|
|
3,777 |
|
Operating lease liabilities,
noncurrent |
|
|
127 |
|
|
|
151 |
|
Common stock warrant
liability |
|
|
51 |
|
|
|
72 |
|
Total liabilities |
|
|
3,697 |
|
|
|
4,000 |
|
Commitments and contingencies
(Note 14) |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
Series C convertible preferred stock |
|
|
— |
|
|
|
— |
|
Common stock |
|
|
23 |
|
|
|
23 |
|
Additional paid-in capital |
|
|
642,374 |
|
|
|
642,302 |
|
Accumulated deficit |
|
|
(637,727 |
) |
|
|
(635,574 |
) |
Accumulated other comprehensive loss |
|
|
(96 |
) |
|
|
(88 |
) |
Total stockholders’ equity |
|
|
4,534 |
|
|
|
6,663 |
|
Total liabilities and stockholders’ equity |
|
$ |
8,231 |
|
|
$ |
10,663 |
|
|
|
|
|
|
|
|
|
|
RESHAPE LIFESCIENCES INC.
Consolidated Statements of Operations (dollars in
thousands; unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
$ |
1,944 |
|
|
$ |
2,287 |
|
Cost of revenue |
|
|
779 |
|
|
|
1,063 |
|
Gross profit |
|
|
1,165 |
|
|
|
1,224 |
|
Operating
expenses: |
|
|
|
|
|
|
Sales and marketing |
|
|
1,019 |
|
|
|
2,182 |
|
General and administrative |
|
|
1,872 |
|
|
|
4,220 |
|
Research and development |
|
|
484 |
|
|
|
453 |
|
Total operating expenses |
|
|
3,375 |
|
|
|
6,855 |
|
Operating loss |
|
|
(2,210 |
) |
|
|
(5,631 |
) |
Other expense
(income), net: |
|
|
|
|
|
|
Interest (income) expense, net |
|
|
(9 |
) |
|
|
5 |
|
Gain on changes in fair value of liability warrants |
|
|
(21 |
) |
|
|
(2,965 |
) |
(Gain) loss on foreign currency exchange, net |
|
|
24 |
|
|
|
(21 |
) |
Other |
|
|
(25 |
) |
|
|
(2 |
) |
Loss before income tax
provision |
|
|
(2,179 |
) |
|
|
(2,648 |
) |
Income tax expense
(benefit) |
|
|
14 |
|
|
|
14 |
|
Net loss |
|
$ |
(2,193 |
) |
|
$ |
(2,662 |
) |
|
|
|
|
|
|
|
The following table contains a reconciliation of GAAP net loss
to non-GAAP net loss Adjusted EBITDA attributable to common
stockholders for the months ended March 31, 2024 and 2023 (in
thousands):
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2024 |
|
2023 |
GAAP net loss |
$ |
(2,193 |
) |
|
$ |
(2,662 |
) |
Adjustments: |
|
|
|
|
|
Interest (income) expense, net |
|
(9 |
) |
|
|
5 |
|
Income tax expense (benefit) |
|
14 |
|
|
|
14 |
|
Depreciation and amortization |
|
6 |
|
|
|
48 |
|
Stock-based compensation expense |
|
72 |
|
|
|
222 |
|
Gain on changes in fair value of liability warrants |
|
(21 |
) |
|
|
(2,965 |
) |
Adjusted EBITDA |
$ |
(2,131 |
) |
|
$ |
(5,338 |
) |
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