Plenity Q2 product revenue increased 312%
year-over-year to $9.0 million
Gross profit in Q2 increased by $4.0 million
year-over-year, with gross margin improving to 47% from 8%
Gelesis (NYSE: GLS), the maker of Plenity for weight management,
today reported financial results for the second quarter of
2022.
“We are seeing both consumers and clinicians embracing Plenity,
with continued growth in both of our distribution channels. We are
excited by the fact that consumers are ordering quarterly kits at
the start of their treatment journey as well as by our refill
rates,” said Yishai Zohar, Founder and CEO of Gelesis. “There has
been incredible momentum in obesity care and finally, patients have
multiple effective approaches to managing their weight based upon
their BMI, insurance coverage, and their personal needs. Plenity
offers a unique solution: orally administered capsules for those
individuals with overweight and obesity across a wide BMI spectrum,
including those that are looking to lose 15-30 pounds. Plenity is
further differentiated by its strong safety profile – enabling
people to lose weight while enjoying the foods they love – at an
affordable price, making our business well positioned in this
rising tide of obesity care.”
“We’re encouraged by the continued growth in Plenity sales and
improving profit margin, while our marketing efforts are getting
more efficient by the day in generating awareness among consumers,”
Gelesis CFO Elliot Maltz said. “The previously disclosed $15.0
million pre-order for Plenity that Ro placed in June provided a
boost to our liquidity at the end of the quarter. The additional
$25.0 million of proceeds from the previously disclosed private
placement of promissory notes in July, as well as the committed
equity financing agreement with B. Riley we entered into in August
that provides us the option to issue up to $50.0 million of common
stock, further strengthens our financial position.”
Key Business Metrics
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021
2022
2021
In thousands
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
New members acquired
43,800
14,200
84,200
28,300
Units sold
129,890
33,120
244,460
81,881
Product revenue, net
$
8,973
$
2,178
$
16,487
$
5,279
Average selling price per unit,
net
$
69.08
$
65.76
$
67.44
$
64.47
Gross profit
$
4,187
$
173
$
6,788
$
458
Gross margin
47
%
8
%
41
%
9
%
Second Quarter 2022 Results
- Product revenue, net, was $9.0 million for the second quarter
2022 compared to $2.2 million for the second quarter 2021, a 312%
increase year-over-year.
- A total of 43,800 members joined during second quarter 2022
compared to 14,200 members joined during the second quarter 2021, a
208% increase year-over-year.
- Gross profit was $4.2 million for the second quarter 2022
compared to $0.2 million for the second quarter 2021, with gross
margin for the second quarter 2022 increasing to 47% from 8% in the
second quarter 2021, attributable to increased sales volume and
lower costs of goods sold.
- Net loss for the quarter was $(12.5) million and Adjusted
EBITDA was $(24.2) million for the second quarter 2022, compared to
net loss of $(24.8) million and adjusted EBITDA of $(16.6) million
for the second quarter 2021.
- A reconciliation of Adjusted EBITDA, a non-GAAP financial
measure, to net loss, its most comparable financial measure under
generally accepted accounting principles in the United States
(“U.S. GAAP”), is included in the tables accompanying this press
release. See “Non-GAAP Financial Measures” for additional important
information regarding Adjusted EBITDA.
Recent Business Highlights
- Following the successful debut of the national broad awareness
media campaign during the first quarter 2022, which resulted in a
new record high for prescription requests, in June, the Company’s
telehealth distribution partner, Ro, placed an additional pre-order
for $15.0 million. This is in addition to previous Plenity
pre-orders from Ro, bringing total fully pre-paid orders from Ro
for Plenity to $55.0 million.
- Gelesis presented new preclinical data at the American Diabetes
Association’s annual conference that suggests that the company’s
superabsorbent hydrogel causes changes to the microbiota leading to
weight loss and improvements in glucose tolerance and insulin
sensitivity.
- In July, Gelesis completed a private placement of $25.0 million
in promissory notes with existing top tier investors.
- In August, Gelesis entered into a committed equity financing
agreement with B. Riley Principal Capital II, LLC, providing
increased financial flexibility by allowing the company the option
to issue up to $50.0 million of common stock. Any issuance activity
under this facility will be undertaken opportunistically as market
conditions warrant and with the interests of shareholders at the
forefront.
Financial Outlook for Fiscal Year 2022
Gelesis is confident in the strong long-term potential of
Plenity, while our financial projections have always been
contingent on the timing and amount of raising additional
financing. Based on current market conditions, available liquidity,
and in anticipation of reduced levels of investment in selling and
marketing in the second half of 2022 relative to the first half,
Gelesis is updating its guidance for the full fiscal year 2022 as
follows:
- Product revenue, net, to be in the range of $27.0 million to
$30.0 million, compared to an estimate of $58.0 million
previously.
- Gross profit to be in the range of $11.0 million to $13.0
million, compared to a range of $25.0 million to $30.0 million
previously.
- Adjusted EBITDA to be in the range of $(75.0) million to
$(80.0) million, compared to a range of $(55.0) million to $(60.0)
million previously.
The guidance provided above constitutes forward-looking
statements which are subject to uncertainty. Actual results may
differ materially, and we cannot anticipate the effect of changes
in marketing investment on our results from operations. Refer to
the "Forward-Looking Statements" safe harbor section below for
information on the factors that could cause our actual results to
differ materially from these forward-looking statements.
Conference Call and Webcast Information
Gelesis management will host a conference call today at 8:30 am
ET to discuss the second quarter 2022 results, followed by a
question-and-answer period. The live call can be accessed via
webcast on the “Events & Presentations” section of the Gelesis
Investor Relations website at https://ir.gelesis.com/. The webcast
will also be archived and available for replay shortly after the
call has concluded. Those who are interested in participating in
the live call can dial 844-200-6205 from the U.S. and 929-526-1599
internationally and enter the access code 398940.
About Gelesis
Gelesis Holdings Inc. (NYSE: GLS) (“Gelesis”) is a
consumer-centered biotherapeutics company and the maker of
Plenity®, which is inspired by nature and FDA cleared to aid in
weight management. Our first-of-their-kind non-systemic
superabsorbent hydrogels are made entirely from naturally derived
building blocks. They are inspired by the composition and
mechanical properties of raw vegetables, taken by capsule, and act
locally in the digestive system, so people feel satisfied with
smaller portions. Our portfolio includes Plenity® and potential
therapies in development for patients with Type 2 Diabetes,
Non-alcoholic Fatty Liver Disease (NAFLD)/Non-alcoholic
Steatohepatitis (NASH), and Functional Constipation. For more
information, visit gelesis.com, or connect with us on Twitter
@GelesisInc. Plenity® is indicated to aid weight management in
adults with excess weight or obesity, a Body Mass Index (BMI) of
25–40 kg/m², when used in conjunction with diet and exercise.
Important Safety Information about Plenity
- Patients who are pregnant or are allergic to cellulose, citric
acid, sodium stearyl fumarate, gelatin, or titanium dioxide should
not take Plenity.
- To avoid impact on the absorption of medications:
- For all medications that should be taken with food, take them
after starting a meal.
- For all medications that should be taken without food (on an
empty stomach), continue taking on an empty stomach or as
recommended by your physician.
- The overall incidence of side effects with Plenity was no
different than placebo. The most common side effects were diarrhea,
distended abdomen, infrequent bowel movements, and flatulence.
- Contact a doctor right away if problems occur. If you have a
severe allergic reaction, severe stomach pain, or severe diarrhea,
stop using Plenity until you can speak to your doctor.
Rx Only. For the safe and proper use of Plenity or more
information, talk to a healthcare professional, read the Patient
Instructions for Use, or call 1-844-PLENITY.
Forward-Looking Statements
Certain statements, estimates, targets and projections in this
press release may constitute “forward-looking statements” within
the meaning of the federal securities laws. The words “anticipate,”
“believe,” continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “strive,” “would” and similar expressions may
identify forward-looking statements, but the absence of these words
does not mean that statement is not forward looking.
Forward-looking statements are predictions, projections and other
statements about future events that are based on current
expectations and assumptions and, as a result, are subject to risks
and uncertainties. Forward-looking statements include, but are not
limited to, statements regarding Gelesis’ or its management team’s
expectations, hopes, beliefs, intentions or strategies regarding
the future, including those relating to Gelesis’ expected operating
and financial performance and market opportunities. In addition,
any statements that refer to projections, forecasts, or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements.
Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking
statements, and Gelesis assumes no obligation and does not intend
to update or revise these forward-looking statements, whether as a
result of new information, future events, or otherwise. Gelesis
gives no assurance that any expectations set forth in this press
release will be achieved. Various risks and uncertainties (some of
which are beyond Gelesis’ control) or other factors could cause
actual future results, performance or events to differ materially
from those described herein. Some of the factors that may impact
future results and performance may include, without limitation: (i)
the ability of Gelesis to raise financing, if and when needed; (ii)
the ability of Gelesis to continue as a going concern; (iii)
Gelesis’ ability to achieve and maintain widespread market
acceptance of Plenity; (iv) the impact of current and future
applicable laws and regulations and Gelesis’ ability to comply with
such laws and regulations; (v) Gelesis’ ability to produce adequate
supply of Plenity, including Gelesis’ ability to continue to invest
in manufacturing capacity and to build additional manufacturing
sites; (vi) the development of the telehealth market and
regulations related to remote healthcare; (vii) global economic,
political and social conditions and uncertainties in the markets
that Gelesis serves, including risks and uncertainties caused by
the COVID-19 pandemic or other natural or man-made disasters;
(viii) Gelesis' ability to enter into strategic collaborations, to
acquire businesses or products or form strategic alliances and to
realize the benefits of such collaborations, acquisitions and
alliances; (ix) the level of demand, and willingness of potential
members to pay out-of-pocket for, Plenity; (x) the ability of
Gelesis to enforce its intellectual property rights and proprietary
technology ; (xi) the risk that a third-party’s activities,
including with respect to third parties that Gelesis has granted
out licenses to or granted limited exclusive or non-exclusive
commercial rights, may overlap or interfere with the
commercialization of Plenity; (xii) Gelesis’ ability to
successfully develop and expand its operations and manufacturing
and to effectively manage such growth; (xiii) Gelesis’ business
partners' ability to successfully launch and commercialize Plenity
in certain key markets; (xiv) risk relating to the loss of Gelesis’
suppliers or distributors, or their inability to provide adequate
supply of materials or distribution; (xv) the risk that Gelesis’
business partners may experience significant disruptions in their
operations; (xvi) Gelesis’ ability to retain its senior executive
officers and to attract and keep senior management and key
scientific and commercial personnel; (xvii) Gelesis’ ability to
identify and discover additional product candidates and to obtain
and maintain regulatory approval for such candidates; (xviii) risks
related to potential product liability exposure for Plenity or
other future product candidates; (xix) risks related to adverse
publicity in the weight management industry, changes in the
perception of Gelesis’ brands, and the impact of negative
information or inaccurate information about Gelesis on social
media; (xx) Gelesis’ ability to enhance its brand recognition,
increase distribution of Plenity and generate product sales and
reduce operating losses going forward; (xxi) the impact of risks
associated with economic, financial, political, environmental and
social matters and conditions on Gelesis’ supply chain, its
manufacturing operations and other aspects of its business; (xxii)
Gelesis’ ability to accurately forecast revenue and appropriately
monitor its associated expenses in the future; (xxiii) Gelesis’
ability to compete against other weight management and wellness
industry participants or other more effective or more favorably
perceived weight management methods, including pharmaceuticals,
devices and surgical procedures; (xxiv) foreign currency
fluctuations and inflation; (xxv) the risk that Gelesis fails to
maintain adequate operational and financial resources or to raise
additional capital or generate sufficient cash flows; (xxvi)
Gelesis’ ability to successfully protect against security breaches
and other disruptions to its information technology structure;
(xxvii) the ability of Gelesis to maintain its listing on the New
York Stock Exchange; (xxviii) failure to realize the anticipated
benefits of the business combination; and (xxix) other important
factors discussed in the “Risk Factors” section of Gelesis’ most
recent Annual Report on Form 10-K and in other filings that Gelesis
makes with the Securities and Exchange Commission. These filings
address other important risks and uncertainties that could cause
actual results and events to differ materially from those contained
in the forward-looking statements.
Disclaimer
Gelesis assumes no obligation and does not intend to update or
revise the results provided in this press release. The results
provided in this press release represent past performance and are
not necessarily predictive of future results.
Key Business Metrics
We monitor the following key metrics to help us evaluate our
business, identify trends affecting our business, formulate
business plans and make strategic decisions. We believe the
following metrics are useful in evaluating our business:
New members acquired
We define new members acquired as the number of consumers in the
United States who have begun their weight loss journey with Plenity
during the financial period presented. This is the total number of
recurring and non-recurring consumers who have begun their weight
loss journey during the financial period presented. We do not
differentiate from recurring and non-recurring consumers as of this
date as (i) we strongly believe every member’s weight-loss journey
is chronic and long-term in nature, and (ii) we have not initiated
our long-term strategy and mechanisms to retain and/or win-back
members. We will continue to evaluate the utility of this business
metric in future periods.
Units sold
Units sold is defined as the number of 28-day supply units of
Plenity sold through strategic partnerships with online pharmacies
and telehealth providers as well as the units sold to our strategic
partners outside the United States. Note that the terms “units” and
“monthly kits”, as mentioned in Gelesis’ various public disclosures
and filings, are synonymous when used to describe the sales volume
of Plenity.
Product revenue, net
We recognize product revenue in accordance with Accounting
Standards Codification Topic 606, Revenue from Contracts with
Customers, when we transfer promised goods or services to customers
in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
Our product revenue is derived from product sales of Plenity,
net of estimates of variable consideration for which reserves are
established for expected product returns, shipping charges to
end-users, pharmacy dispensing and platform fees, merchant and
processing fees, and promotional discounts offered to
end-users.
Average selling price per unit, net
Average selling price per unit, net is the gross price per unit
sold during the period net of estimates of per unit variable
consideration for which reserves are established for expected
product returns, shipping charges to end-users, pharmacy dispensing
and platform fees, merchant and processing fees, and promotional
discounts offered to end-users.
Gross profit and gross margin
Our gross profit represents product revenue, net, less our total
cost of goods sold, and our gross margin is our gross profit
expressed as a percentage of our product revenue, net. Our gross
profit and gross margin have been and will continue to be affected
by a number of factors, including the prices we charge for our
product, the costs we incur from our vendors for certain components
of our cost of goods sold, the mix of channel sales in a period,
and our ability to sell our inventory.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance
with GAAP, we believe that Adjusted EBITDA, a non-GAAP measure, is
useful in evaluating our operating performance. We define “Adjusted
EBITDA” as net (loss) income before depreciation and amortization
expenses, provision for (benefit from) income taxes, interest
expense, net, stock-based compensation and (gains) and losses
related to changes in fair value of our warrant liability, our
convertible promissory note liability, our tranche rights liability
and the One S.r.l. call option. We use Adjusted EBITDA to evaluate
our ongoing operations and for internal planning and forecasting
purposes because it facilitates internal comparisons of our
historical operating performance. We believe that this non-GAAP
financial measure, when taken together with the corresponding GAAP
financial measure, net loss, provides meaningful supplemental
information regarding our performance by excluding certain items
that may not be indicative of our business, results of operations,
or outlook. We consider Adjusted EBITDA to be an important measure
because it helps illustrate underlying trends in our business and
our historical operating performance on a more consistent basis. We
believe that Adjusted EBITDA is helpful to our investors as it is a
metric used by management in assessing the health of our business
and our operating performance.
However, non-GAAP financial information is presented for
supplemental informational purposes only, has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for financial information presented in accordance with
GAAP. In addition, other companies, including companies in our
industry, may calculate similarly titled non-GAAP financial
measures differently or may use other measures to evaluate their
performance, all of which could reduce the usefulness of Adjusted
EBITDA as a tool for comparison. A reconciliation is provided below
for Adjusted EBITDA to the most directly comparable financial
measure stated in accordance with GAAP. Investors are encouraged to
review the related GAAP financial measure and the reconciliation of
this non-GAAP financial measure to its most directly comparable
GAAP financial measure, and not to rely on any single financial
measure to evaluate our business.
SELECTED UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30,
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
25,341
$
28,397
Accounts receivable and grants
receivable
10,736
9,903
Inventories
18,821
13,503
Property and equipment, net
56,305
58,515
All other current and non-current
assets
27,766
35,983
Total assets
$
138,969
$
146,301
LIABILITIES, REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(DEFICIT)
Accounts payable
$
22,135
$
10,066
Accrued expenses and other current
liabilities
9,715
13,660
Deferred income, current portion
33,702
32,370
Notes and convertible notes payable,
current portion
3,177
29,078
Warrant liabilities
1,130
15,821
Earnout liability
6,190
—
Deferred income, non-current portion
9,040
8,914
Notes payable, non-current portion
30,015
35,131
All other current and non-current
liabilities
7,680
7,648
Total liabilities
122,784
152,688
Noncontrolling interest
11,087
11,855
Redeemable convertible preferred stock
—
311,594
Total stockholders’ equity (deficit)
5,098
(329,836
)
Total liabilities, noncontrolling
interest, redeemable convertible preferred stock and stockholders’
equity (deficit)
$
138,969
$
146,301
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021
2022
2021
Revenue:
Product revenue, net
$
8,973
$
2,178
$
16,487
$
5,279
Total revenue, net
8,973
2,178
16,487
5,279
Operating expenses:
Costs of goods sold
4,786
2,005
9,699
4,821
Selling, general and administrative
32,450
13,972
70,156
25,917
Research and development
5,523
5,592
12,933
9,968
Amortization of intangible assets
566
566
1,133
1,133
Total operating expenses
43,325
22,135
93,921
41,839
Loss from operations
(34,352
)
(19,957
)
(77,434
)
(36,560
)
Change in the fair value of earnout
liability
18,812
—
52,681
—
Change in the fair value of convertible
promissory notes
—
—
(156
)
—
Change in the fair value of warrants
2,600
(4,977
)
6,084
(7,051
)
Interest expense, net
(186
)
(227
)
(321
)
(588
)
Other income, net
613
422
930
891
Loss before income taxes
(12,513
)
(24,739
)
(18,216
)
(43,308
)
Provision for income taxes
—
—
—
17
Net loss
(12,513
)
(24,739
)
(18,216
)
(43,325
)
Accretion of Legacy Gelesis senior
preferred stock to redemption value
—
(82,365
)
(37,934
)
(116,126
)
Accretion of noncontrolling interest put
option to redemption value
(85
)
(96
)
(173
)
(190
)
Net loss attributable to common
stockholders
$
(12,598
)
$
(107,200
)
$
(56,323
)
$
(159,641
)
Net loss per share attributable to common
stockholders—basic and diluted
$
(0.17
)
$
(19.18
)
$
(0.83
)
$
(28.54
)
Weighted average common shares
outstanding—basic and diluted
72,423,043
5,589,728
67,609,838
5,592,911
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Six Months Ended June
30,
2022
2021
Cash flows from operating
activities:
Net loss
$
(18,216
)
$
(43,325
)
Adjustments to reconcile net loss to net
cash used in operating activities:
.
Amortization of intangible assets
1,133
1,133
Reduction in carrying amount of
right-of-use assets
265
150
Depreciation
1,440
358
Stock-based compensation
21,965
3,094
Unrealized loss (gain) on foreign currency
transactions
672
(28
)
Non-cash interest (income) expense
(3
)
36
Accretion on marketable securities
—
(1
)
Change in the fair value of earnout
liability
(52,681
)
—
Change in the fair value of warrants
(6,084
)
7,051
Change in the fair value of convertible
promissory notes
156
—
Change in fair value of One S.r.l. call
option
865
554
Changes in operating assets and
liabilities:
Account receivables
(1,473
)
640
Grants receivable
(1,078
)
(675
)
Prepaid expenses and other current
assets
5,048
(7,685
)
Inventories
(5,258
)
(156
)
Other assets
(536
)
(3,281
)
Accounts payable
11,486
(2,374
)
Accrued expenses and other current
liabilities
571
8,211
Operating lease liabilities
(263
)
(144
)
Deferred income
2,300
7,048
Other long-term liabilities
(81
)
(5,975
)
Net cash used in operating activities
(39,772
)
(35,369
)
Cash flows from investing
activities:
Purchases of property and equipment
(5,067
)
(10,057
)
Maturities of marketable securities
—
24,000
Net cash (used in) provided by investing
activities
(5,067
)
13,943
Cash flows from financing
activities:
Proceeds from Business Combination, net of
transaction costs
70,478
—
Principal repayment of notes payable
(1,119
)
(226
)
Repayment of convertible promissory notes
due to related party, held at fair value
(27,284
)
—
Proceeds from issuance of promissory
notes
—
4,540
Proceeds from the exercise of warrants
4
9
Proceeds from exercise of share-based
awards
110
10
Net cash provided by financing
activities
42,189
4,333
Effect of exchange rates on cash
(406
)
(680
)
Net decrease in cash
(3,056
)
(17,773
)
Cash and cash equivalents at beginning of
year
28,397
48,144
Cash and cash equivalents at end of
period
$
25,341
$
30,371
Noncash investing and financing
activities:
Purchases of property and equipment
included in accounts payable and accrued expense
$
1,027
$
1,217
Deferred financing costs included in
accounts payable and accrued expense
—
$
506
Recognition of earnout liability
$
58,871
—
Recognition of private placement warrant
liability
$
8,140
—
Supplemental cash flow
information:
Interest paid on notes payable
$
181
$
158
NET LOSS TO ADJUSTED EBITDA
RECONCILIATION
(In thousands,
Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2022
2021
2022
2021
In thousands
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Adjusted EBITDA
Net loss
$
(12,513
)
$
(24,739
)
$
(18,216
)
$
(43,325
)
Provision for income taxes
—
—
—
17
Depreciation and amortization
987
750
2,573
1,491
Stock based compensation expense
7,976
1,639
21,965
3,094
Change in fair value of earnout
liability
(18,812
)
—
(52,681
)
—
Change in fair value of warrants
(2,600
)
4,977
(6,084
)
7,051
Change in fair value of convertible
promissory notes
—
—
156
—
Change in fair value of One S.r.l. call
option
607
506
865
554
Interest expense, net
186
227
321
588
Adjusted EBITDA
$
(24,169
)
$
(16,640
)
$
(51,101
)
$
(30,530
)
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version on businesswire.com: https://www.businesswire.com/news/home/20220815005185/en/
Investors: ir@gelesis.com
Media: pr@gelesis.com
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