Obalon Therapeutics, Inc. (Nasdaq: OBLN), a weight loss solutions
company with the first and only FDA-approved swallowable,
gas-filled intragastric balloon system for the treatment of
obesity, today announced its financial results for the first
quarter ended March 31, 2020 and provided a business update.
Financial results for the first quarter of
2020
Revenue for the first quarter of 2020 was $0.8 million, compared
to $1.8 million for the first quarter of 2019. Net loss for the
first quarter of 2020 was $5.3 million, compared to $8.3 million
for the first quarter of 2019. Net loss per share for the first
quarter of 2020 was $0.68, compared to $3.59 for the first quarter
of 2019.
Cost of revenue was $0.5 million for the first quarter of 2020,
down from $1.2 million for the first quarter of 2019. Gross profit
for the first quarter of 2020 was $0.2 million, down from $0.5
million for the first quarter of 2019.
Research and development expense for the first quarter of 2020
totaled $1.3 million, down from $2.4 million for the first quarter
of 2019. Selling, general and administrative expense decreased to
$3.9 million for the first quarter of 2020, compared to $6.2
million for the first quarter of 2019.
Operating loss for the first quarter of 2020 was $4.9 million,
down from a loss of $8.1 million for the first quarter of 2020.
In the first quarter ended March 31, 2020, the Company did not
record any asset impairment charges, but it would expect to record
certain long-lived asset and inventory impairment charges in the
second quarter ended June 30, 2020 related to its decision to move
away from the retail treatment center model. The Company estimates
the second quarter impairment charge to be in a range between $0.8
million and $1.4 million.
As of March 31, 2020, the Company had cash and cash equivalents
of $8.9 million and no debt. The Company believes its cash
and cash equivalents as of March 31, 2020 are sufficient to fund
its operations only through the end of 2020. If the Company
is not able to raise additional capital to meet its needs, it will
not be able to support any ongoing operations and may not be able
to settle all of its liabilities. The Company has actively reviewed
financial and strategic alternatives, including debt and equity
financing, whole or partial sale of the company and a reverse
merger in order to meet its capital needs and financial
obligations, and to date it has been unable to identify a viable
alternative for capital raising.
Business update
On June 16, 2020, the Company and certain of its executive
officers reached a settlement with the plaintiffs in its ongoing
securities class action litigation, and they intend to submit a
final settlement agreement for court approval. The settlement
provides that the defendants continue to deny the allegations and
claims asserted by the plaintiffs, and are entering into the
settlement solely to eliminate the burden and expense of further
litigation. The Company expects that any amounts due as part
of the settlement will be covered by the Company’s insurance
policies.
In March 2020, the Company announced that the overall
uncertainty, the restriction on elective procedures and the
specific directives issued by the Governor of California as a
result of COVID-19 had a significant impact on its business.
As a result, the Company halted sales to new patients in its
company-branded retail treatment centers, terminated expansion
plans for additional retail centers and subsequently closed the two
retail treatment centers it had opened. The Company also
halted manufacturing operations and has not filled orders to U.S.
customers or its former international distributor since that
time.
Given those impacts and the significant concern about an
economic recovery that would allow consumers to feel confident
enough to spend on a cash-pay procedure like the Obalon Balloon
System, the Company does not currently plan to re-open its retail
treatment centers, re-initiate its retail treatment center
expansion plans, or plan to ship orders to U.S. customers or its
former international distributor. As a result, the Company would
not expect to report any meaningful revenue for the foreseeable
future.
The Company continues to believe the Obalon Balloon System can
provide significant benefits to patients and value to the
healthcare system. However, treatment with the Obalon Balloon
System is not currently covered by any kind of private or public
health insurance. The Company believes this has contributed
to slow commercial adoption of the product and the procedure, as
physicians are not reimbursed for treating patients with the Obalon
therapy and patients must pay solely out of pocket for the Obalon
Balloon System and the procedure. With that in mind, the
Company is initiating efforts to explore obtaining third-party
payor reimbursement and coverage for the Obalon Balloon
System. The Company believes that reimbursement and coverage
for the Obalon Balloon System could significantly expand its market
opportunity. There are more than 70 million adults in the
United States who are obese and over 11 million adults in the
United States who have Type 2 diabetes and are obese.
Moreover, the COVID-19 pandemic has further highlighted the
personal health and economics costs of the obesity epidemic in the
United States. Recently published data suggest that next to
age, the underlying health conditions of obesity and
obesity-related health conditions (hypertension and diabetes) are
the greatest predictors of COVID-19 hospitalizations and death.
The Company believes the Obalon Balloon System could help
reduce third-party payors’ costs and improve patient care, and the
Company intends to explore how additional data may be collected to
demonstrate the economic and clinical evidence necessary to secure
reimbursement. However, obtaining reimbursement is never
certain and can take many years to achieve, and if achieved, may
not be determinative of the Company’s success. If the
Company’s initial efforts with payors begin to bear success, it
would expect to need to raise additional capital to support those
efforts.
To enable it to pursue this reimbursement strategy, the Company
is taking further steps to significantly reduce expenses in an
effort to extend its cash runway. The Company has
significantly reduced the organization to only essential personnel
and expects that, after a transition, only two full-time employees
will remain: Andy Rasdal, the current Executive Chairman of
the Board, who effective as of the close of business on the date of
this quarterly report will reassume the role of CEO, and Nooshin
Hussainy, who will remain Chief Financial Officer. During
this time the Company also plans to continue to seek strategic
alternatives that may be in the best interests of its stockholders,
while it explores establishing third party coverage and
reimbursement for the Obalon Balloon System. If the Company
is unsuccessful in either of these two endeavors over the next
several months, there is a high likelihood it may need to sell all
or portions of its business, liquidate all or some of its assets or
seek bankruptcy protection, any of which could result in a
significant decrease in value for all stakeholders. If the
Company determines to proceed with a plan to establish
reimbursement coverage for its products, it will need additional
capital to fund operations beyond the end of 2020 and there is no
assurance that such capital will be available on acceptable terms
or at all.
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 http://www.obalon.com.
Cautionary Statement Regarding Forward Looking
Statements
This press release contains forward-looking statements that are
not purely historical regarding Obalon’s or its management’s
intentions, beliefs, expectations and strategies for the future,
including those related to new products and their potential
benefits. All forward-looking statements and reasons why results
might differ included in this press release are made as of the date
of this release, based on information currently available to
Obalon, deal with future events, are subject to various risks and
uncertainties, and actual results could differ materially from
those anticipated in those forward looking statements. The risks
and uncertainties that may cause actual results to differ
materially from Obalon’s current expectations are more fully
described in Obalon’s annual report on Form 10-K for the period
ended December 31, 2019, periodic report on Form 10-Q for the
period ended March 31, 2020 and its other reports, each as filed
with the Securities and Exchange Commission. Except as required by
law, Obalon assumes no obligation to update any such
forward-looking statement after the date of this report or to
conform these forward-looking statements to actual results.
OBALON THERAPEUTICS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except
shares and per share data)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
|
(Unaudited) |
Revenue |
$ |
780 |
|
|
$ |
1,775 |
|
Cost of
revenue |
541 |
|
|
1,232 |
|
Gross
profit |
239 |
|
|
543 |
|
Operating
expenses: |
|
|
|
Research and development |
1,257 |
|
|
2,439 |
|
Selling, general and administrative |
3,893 |
|
|
6,204 |
|
Total operating expenses |
5,150 |
|
|
8,643 |
|
Loss from
operations |
(4,911 |
) |
|
(8,100 |
) |
Interest
income (expense), net |
35 |
|
|
(190 |
) |
Other
expense, net |
(385 |
) |
|
— |
|
Net loss and
comprehensive loss |
$ |
(5,261 |
) |
|
$ |
(8,290 |
) |
Net loss per
share, basic and diluted |
$ |
(0.68 |
) |
|
$ |
(3.59 |
) |
Weighted-average common shares outstanding, basic and diluted |
7,725,205 |
|
|
2,311,329 |
|
|
|
|
|
|
|
|
|
OBALON THERAPEUTICS,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands, except shares and par value data)
|
March 31, 2020 |
|
December 31,2019 |
Assets |
(Unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
8,915 |
|
|
$ |
14,055 |
|
Accounts receivable, net |
461 |
|
|
285 |
|
Inventory |
1,408 |
|
|
1,936 |
|
Other current assets |
4,786 |
|
|
1,959 |
|
Total current assets |
15,570 |
|
|
18,235 |
|
Property and
equipment, net |
2,159 |
|
|
1,081 |
|
Lease
right-of-use assets |
1,500 |
|
|
1,077 |
|
Total assets |
$ |
19,229 |
|
|
$ |
20,393 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
1,070 |
|
|
$ |
648 |
|
Accrued compensation |
359 |
|
|
820 |
|
Deferred revenue |
462 |
|
|
424 |
|
Other current liabilities |
4,607 |
|
|
1,524 |
|
Current portion of lease liabilities |
690 |
|
|
561 |
|
Total current liabilities |
7,188 |
|
|
3,977 |
|
Lease liabilities long-term |
969 |
|
|
567 |
|
Total liabilities |
8,157 |
|
|
4,544 |
|
Commitments and contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock, $0.001 par value; 100,000,000 shares authorized as of
March 31, 2020 and December 31, 2019; 7,731,633 and 7,724,100
shares issued and outstanding as of March 31, 2020 and December 31,
2019, respectively |
8 |
|
|
8 |
|
Additional paid-in capital |
188,755 |
|
|
188,271 |
|
Accumulated deficit |
(177,691 |
) |
|
(172,430 |
) |
Total stockholders’ equity |
11,072 |
|
|
15,849 |
|
Total liabilities and stockholders’ equity |
$ |
19,229 |
|
|
$ |
20,393 |
|
|
|
|
|
OBALON THERAPEUTICS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(in thousands)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
|
(Unaudited) |
Operating activities: |
|
|
|
Net
loss |
$ |
(5,261 |
) |
|
$ |
(8,290 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation |
103 |
|
|
150 |
|
Stock-based compensation |
470 |
|
|
1,105 |
|
Amortization of right-of-use asset |
122 |
|
|
92 |
|
Accretion of investment discount, net |
— |
|
|
(2 |
) |
Amortization of debt discount |
— |
|
|
22 |
|
Change in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
(176 |
) |
|
(959 |
) |
Inventory |
(326 |
) |
|
102 |
|
Other current assets |
(2,828 |
) |
|
923 |
|
Accounts payable |
422 |
|
|
(137 |
) |
Accrued compensation |
(446 |
) |
|
(2,819 |
) |
Deferred revenue |
38 |
|
|
18 |
|
Lease liabilities, net |
(14 |
) |
|
(42 |
) |
Other current liabilities |
3,082 |
|
|
195 |
|
Net cash used in operating activities |
(4,814 |
) |
|
(9,642 |
) |
Investing activities: |
|
|
|
Maturities
of short-term investments |
— |
|
|
2,550 |
|
Purchases of
property and equipment |
(326 |
) |
|
(19 |
) |
Net cash (used in) provided by investing activities |
(326 |
) |
|
2,531 |
|
Financing activities: |
|
|
|
Proceeds
from long-term loan |
— |
|
|
10,000 |
|
Proceeds
from issuance of common stock, net of issuance costs |
— |
|
|
607 |
|
Proceeds
from sale of common stock upon exercise of stock options |
— |
|
|
1 |
|
Net cash provided by financing activities |
— |
|
|
10,608 |
|
Net (decrease) increase in cash and cash equivalents |
(5,140 |
) |
|
3,497 |
|
Cash and
cash equivalents at beginning of period |
14,055 |
|
|
21,187 |
|
Cash and
cash equivalents at end of period |
$ |
8,915 |
|
|
$ |
24,684 |
|
Supplemental cash flow information: |
|
|
|
Interest
paid |
$ |
— |
|
|
$ |
205 |
|
Unpaid
issuance costs |
$ |
— |
|
|
$ |
26 |
|
Property and
equipment in accounts payable |
$ |
— |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
For Obalon Therapeutics, Inc.
Investor Contact: Bill Plovanic President and Chief
Executive Officer Obalon Therapeutics, Inc. Office: +1
760 607 5103 wplovanic@obalon.com
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