Obalon Announces Restructuring to Streamline Operations & Cash Use

Date : 04/03/2019 @ 1:30PM
Source : GlobeNewswire Inc.
Stock : Obalon Therapeutics, Inc. (OBLN)
Quote : 0.76  0.03 (4.11%) @ 3:23PM

Obalon Announces Restructuring to Streamline Operations & Cash Use

OBALON THERAPEUTICS INC (NASDAQ:OBLN)
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Obalon Therapeutics, Inc. (NASDAQ:OBLN), a vertically integrated medical technology company with the first and only FDA-approved swallowable, gas-filled intragastric balloon system for the treatment of obesity, today announced an organizational restructuring intended to refocus activities, streamline operations and make more efficient use of cash. 

The Company expects the restructuring to reduce operating expenses in the second quarter of 2019 by approximately 35%, after one-time charges of approximately $1.0 million, when compared to the first quarter of 2019.  The changes reduce overall headcount by approximately 50%, including the elimination of Obalon’s direct field sales force and a reduction of headquarters staff.  As a result, the Company expects to transition to a new selling model intended to efficiently use the existing resources to develop the market and drive revenue.  The Company plans to provide more details related to its revised commercial structure and strategy, in addition to expectations around key metrics and updated financial guidance, on its first quarter 2019 earnings call in May.

In February 2019, Obalon launched its Navigation System, the Company’s proprietary FDA-approved imaging solution designed to eliminate the need to use x-ray imaging during balloon placement.  “After two months of selling Navigation with a highly targeted approach, we are pleased that Navigation appears to be increasing access to potential new customers who are interested in incorporating the Obalon Balloon System into their practices,” said Obalon CEO Kelly Huang, Ph.D.  “We saw less immediate rejections now that the cost and logistics with incorporating x-ray into their practices are removed, and we sold more Starter Kits in the first quarter of 2019 than the fourth quarter of 2018.  However, we are still finding the purchase decision is complex for some accounts and takes time.  Based on our first two months of commercial experience with Navigation, we believe a new approach may be required to develop the market for the Obalon Balloon System.”   

Dr. Huang continued, “The swallowable, gas-filled Obalon Balloon System continues to perform very well clinically, and we have seen accounts that commit to making Obalon a priority in their practice achieve strong results. For example, our most productive bariatric practice, which was also the first practice to order Navigation, treated over 80 patients in the first quarter of 2019.   We also have the experience of a retail-focused chain being able to generate similar patient volumes.  As a result, our new selling model will focus on more centralized customer support and marketing programs intended to drive higher levels of engagement, and may include pilot programs that can be more efficiently scaled if successful, including: the establishment of our own Obalon Balloon Retail Center; a new program rewarding top-performing accounts for increasing focus on and investment in Obalon; and initiatives for use by other medical weight loss specialties.”

Obalon expects to end the first quarter of 2019 with approximately $24.7 million in cash and cash equivalents and total indebtedness of $20 million under its loan and security agreement.  The terms of the loan and security agreement require the Company to maintain a cash balance in its accounts with the lender in an amount equal to or greater than the outstanding indebtedness.  Given the Company’s current market capitalization and cash position, Obalon has decided to streamline its organization and operations to more efficiently deploy cash as it continues to develop the market for this novel product and therapy.

Forward-Looking StatementsTo the extent that statements contained in this press release are not descriptions of historical facts regarding Obalon Therapeutics, they are forward-looking statements reflecting the current beliefs and expectations of management made pursuant to the safe harbor of the Private Securities Reform Act of 1995, including statements regarding the impact of the organizational restructuring and transition to a new commercial approach. Such forward-looking statements involve substantial risks and uncertainties that could cause Obalon Therapeutics' future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the uncertainties inherent in the product research, development and regulatory process and risks, risks of operating with a reduced workforce and uncertainties surrounding the effectiveness and efficiency of the new commercial approach. Obalon Therapeutics undertakes no obligation to update or revise any forward-looking statements. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to Obalon Therapeutics' business in general, please refer to Obalon Therapeutics’ annual report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2019, and its current and future periodic reports filed with the Securities and Exchange Commission.

About Obalon Therapeutics, Inc.  Obalon Therapeutics, Inc. (NASDAQ:OBLN) is a San Diego-based company focused on developing and commercializing novel technologies for weight loss. For more information, please visit www.obalon.com.

For Obalon Therapeutics, Inc.

Investor Contact:  William Plovanic  Chief Financial Officer  Obalon Therapeutics, Inc.  Office: +1 760 607 5103  wplovanic@obalon.com

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