ReShape Lifesciences Inc. (Nasdaq:
RSLS), the premier physician-led weight loss and metabolic
health-solutions company, today reported financial results for the
year ended December 31, 2022 and provided a corporate strategic
update.
Fourth Quarter 2022 and Subsequent
Highlights
- In April, completed a $2.5 million
registered direct offering with a single institutional investor,
extending the company's cash runway into 2024, creating a
sustainable path to profitability.
- In April, received a Notice of
Allowance from the U.S. Patent and Trademark Office (USPTO) for
patent application 16/792,094, entitled, “Systems and Methods for
Determining Failure of Intragastric Devices,” related to the
company’s Obalon® Balloon System, expected to provide protection
into at least January 2031, without accounting for a potential
Patent Term Extension (PTE).
- In March, formed a Scientific
Advisory Board (SAB) comprised of internationally recognized
experts and surgeons in the obesity and metabolic disease fields.
The newly created SAB will provide management with strategic input
and external scientific review of the company’s development
activities and product pipeline.
- In February, raised $10.2 million
in an upsized underwritten public offering.
- In December, obtained shareholder
approval for, and effected, a 1-for-50 reverse stock split in order
to regain compliance with the Nasdaq minimum bid price
requirement.
- In November, completed a $750,000
registered direct offering with a single institutional
shareholder.
- In October, presented data at the
Obesity Society Annual Meeting, during ObesityWeek®, on ReShape’s
DBSN™ device as a potential treatment for Type 2 diabetes, in an
abstract entitled, Metabolic Effects of Dual Neuromodulation of
Vagus Nerve in a Type 2 Diabetic Model.
- In October, announced that the
American Society for Metabolic and Bariatric Surgery (ASMBS) and
the International Federation for the Surgery of Obesity and
Metabolic Disorders (IFSO) issued updated guidelines for Metabolic
and Bariatric Surgery, including the Lap-Band®, replacing the 30
year old guidelines issued by the National Institutes of Health
(NIH) in 1991.
- In October, announced publication
of data on the company’s proprietary DBSN™ system for the treatment
of Type 2 diabetes and metabolic disorders in the Neural Technology
Section of the peer reviewed journal, Frontiers in
NeuroScience.
- In October, announced that the
ASMBS issued a Consensus Statement on Lap-Band® use and aftercare
management, entitled, American Society of Metabolic and Bariatric
Surgery Consensus Statement on Laparoscopic Adjustable Gastric Band
Management.
“Since the latter half of 2022, we have
continued to execute on our growth pillars with a metrics driven
approach to business operations, while expanding our
evidenced-based product portfolio spanning the entire care
continuum to treat obesity and metabolic disease. Our upsized $10.2
million underwritten public offering, completed in February, along
with the recent $2.5 million registered direct offering in April,
gives us sufficient cash to achieve profitability within the next
18 months and provides an additional layer of capital to help drive
growth,” stated Paul F. Hickey, President and Chief Executive
Officer of ReShape Lifesciences®. “We intend to work closely with
our recently formed global SAB, whose members will be providing
their expertise and feedback on our growth initiatives and will be
integral in helping us develop safe and effective products and
programs for durable weight loss, improvements in obesity related
comorbidities and quality of life. Additionally, the compelling
evidence-based standards for metabolic and bariatric surgery issued
by the industry’s two key organizations, ASMBS and IFSO, if
supported by payers, can dramatically increase the number of
patients eligible for bariatric surgery. Our strong belief is that
our Lap-Band® System will prevail as the least invasive surgical
treatment option available to help address the global obesity
epidemic. Going forward, we remain committed to continuing our
collaborations with healthcare professionals to expand awareness
and use of personalized treatments, including both our proprietary
Lap-Band® and ReShapeCare™ programs, to ensure that patients can
achieve durable long-term weight loss goals.
“Operationally, we made a number of changes to
ensure more predictable and scalable future financial performance
including right-sizing the organization to reduce operating
expenditures and allow more investment in our growth drivers,
including sales and marketing. Shortly after I joined ReShape in
August, we implemented a highly targeted, direct-to-consumer
marketing campaign to help yield higher quality and lower cost
patient leads for the anatomy sparing Lap-Band® in specific markets
that align with surgeon advocates. We are continuing to upgrade our
lead generating and nurturing programs and will be moving critical
competencies in-house to ensure results are achieved quickly and
cost-effectively.”
Management noted that its focus on introducing
new products and services, the second of its growth pillars,
includes:
- The recent launch of the
re-designed ReShape Calibration Tubes, which support the majority
of all bariatric procedures. Initial surgeon feedback is positive,
and the company expects to achieve revenue from new customer
adoption of the Calibration Tubes during 2023.
- The expected submission, in the
second quarter, of a PMA Supplement to the U.S. Food and Drug
Administration (FDA) for approval of the Lap-Band® 2.0 System,
designed to reduce the required postoperative physician
office-based Lap-Band adjustments. Feedback from the FDA is
expected by year end 2023.
- Continuing to work with large,
self-insured employers to provide the HIPAA-compliant, novel,
weight management program, ReShapeCare™, to their employees in
order to positively impact overall employee health and thus reduce
employers’ health care costs.
- Continued the development of the
proprietary DBSN™ technology though non-dilutive NIH SBIR grant
support. The DBSN™ incorporates a vagus nerve block technology
platform with vagus nerve stimulation, which may be able to reduce
diabetes patients’ dependence on medications in a very
individualized manner. The device has the potential to address the
significant type 2 diabetes market.
Mr. Hickey concluded, “As evidenced by the
recent Notice of Allowance from the USPTO for an additional patent
covering the ReShape Obalon® Balloon system, we have a strong
defensive ‘moat’ of intellectual property surrounding all of our
products, including the Lap-Band®, Lap-Band® 2.0, DBSN™ technology,
and the ReShape Obalon® Balloon system. Looking ahead, we are at
the precipice of some exciting milestones and compelling new
product launches, and remain laser focused on executing on our
growth pillars, which have put us on a path to profitability.”
Year Ended December 31, 2022, Financial
and Operating Results
The information shown below will focus primarily
on our full year 2022 financial results. Additionally, we will also
highlight the great strides we made during the second half of 2022,
as we focused our business strategy and significantly reduced
costs, which will serve as both our launch pad for growth and path
to profitability.
During the second half of 2022, we pivoted our
marketing strategy which has significantly reduced our sales and
marketing expenses quarter over quarter. We also reduced our
G&A and R&D expenses in order to operate more efficiently
and reduce our cash burn. To give you more perspective, and before
any significant one-time adjustments, our overall operating
expenses in the first half of 2022 were $18.1 million compared to
$13.0 million for the second half of 2022 a reduction of $5.1
million, or 27.9%. This is a significant reduction in our cash
burn, which will pave the way for ReShape to become profitable,
sooner.
Revenue totaled $11.2 million
for the year ended December 31, 2022, which represents a
contraction of 17.4%, or $2.4 million compared to 2021. The decline
was primarily attributable to the re-emergence of COVID.
Nevertheless, we saw sequential growth in each quarter during 2022
in our U.S. business. Our U.S revenue for the first half of 2022
was $4.2 million vs $5.1 million for the second half of 2022, an
increase of $0.9 million, or 22.3%.
Gross Profit for the year ended
December 31, 2022, was $6.8 million, compared to $8.3 million for
the year ended December 31, 2021, a decrease of $1.5 million or
18.1%. Gross profit as a percentage of revenue for the year ended
December 31, 2022, was 60.5% compared to 61.4% for 2021. The
decrease in gross profit margin is primarily due to a decrease in
sales, as revenue decreased by 17.4%, with the largest decrease of
revenue in the U.S., which has a higher margin than international
sales. During the first half of 2022, our gross margins were 58.2%
compared to 62.6% for the second half of 2022 as our U.S revenues
began to increase.
Sales and Marketing Expenses
for the year ended December 31, 2022, rose by $5.2 million, or
58.5%, to $14.1 million, compared to $8.9 million for 2021. The
increase was primarily due to an increase in advertising and
marketing costs, as well as payroll related and travel expenses,
and expenses related to the development of the ReShapeCare™
platform, all totaling an increase of $6.1 million. This increase
was offset by a decline in stock-based compensation expense,
commissions and other related costs of $0.9 million. During the
first half of 2022, our sales and marketing expenses were $9.4
million compared to $4.8 million in the second half of 2022, a
decline of $4.6 million, or 48.9%.
General and Administrative
Expenses for the year ended December 31, 2022, decreased
by $7.1 million, or 28.5%, to $17.4 million, compared to $24.3
million for 2021. The decrease is primarily due to a decline in
stock-based compensation expense, and a reduction in consulting and
professional fees totaling $10.4 million. This decrease was
primarily offset by accrued litigation expenses and severance costs
totaling $3.3 million. During the first half of 2022 our general
and administrative expenses were $9.6 million compared to $7.7
million in the second half of 2022, a decrease of $1.9 million, or
19.4%.
Research and Development
Expenses for the year ended December 31, 2022, increased
by $0.2 million, or 7.3% to $2.5 million, compared to $2.3 million
for 2021. The increase is primarily due to an increase in
consulting and professional services related to the development of
ReShape’s Diabetes Bloc-Stim Neuromodulation™ device and payroll
related expenditures. Our R&D expenses for the first half of
2022 were $1.5 million compared to $1.0 million for the second half
of 2022, a decrease of $0.5 million, or 30.0%.
Cash and Cash Equivalents as of
December 31, 2022 were $3.9 million and the company remains debt
free on its balance sheet. Additionally, in February and April
2023, we completed two financings totaling $12.6 million. Based on
available cash resources, the company believes there is sufficient
cash on hand to fund current operations into 2024.
A full discussion of our financials is available
in our Annual Report on Form 10-K, 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. ReShapeCare™ is a
virtual weight-management program that supports lifestyle changes
for all weight loss patients led by board-certified health coaches
to help them keep the weight off over time. The recently launched
ReShape Marketplace™ is an online collection of quality wellness
products curated for all consumers to help them achieve their
health goals. 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 our expectation that we have sufficient cash to
achieve profitability within the next 18 months, that we expect to
achieve revenue from new customer adoption of the Calibration Tubes
during 2023, and the expected timing of the FDA submission and
review process for the Lap-Band 2.0. 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.
CONTACTSReShape Lifesciences Investor
Contact:Thomas StankovichChief Financial
Officer949-276-6042ir@ReShapeLifesci.com
Investor Relations Contact:Rx
Communications GroupMichael
Miller(917)-633-6086mmiller@rxir.com
RESHAPE LIFESCIENCES
INC.Consolidated Balance Sheets (dollars
in thousands; unaudited)
|
December 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
As Restated |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
3,855 |
|
|
$ |
22,765 |
|
Restricted cash |
|
100 |
|
|
|
50 |
|
Accounts and other receivables |
|
2,180 |
|
|
|
2,815 |
|
Inventory |
|
3,611 |
|
|
|
3,003 |
|
Prepaid expenses and other current assets |
|
165 |
|
|
|
1,305 |
|
Total current assets |
|
9,911 |
|
|
|
29,938 |
|
Property and equipment,
net |
|
698 |
|
|
|
1,454 |
|
Deferred tax asset, net |
|
56 |
|
|
|
— |
|
Operating lease right-of-use
assets |
|
171 |
|
|
|
266 |
|
Other intangible assets,
net |
|
260 |
|
|
|
20,827 |
|
Other assets |
|
46 |
|
|
|
46 |
|
Total assets |
$ |
11,142 |
|
|
$ |
52,531 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
1,926 |
|
|
$ |
3,468 |
|
Accrued and other liabilities |
|
5,040 |
|
|
|
3,368 |
|
Warranty liability, current |
|
344 |
|
|
|
415 |
|
Operating lease liabilities, current |
|
171 |
|
|
|
279 |
|
Total current liabilities |
|
7,481 |
|
|
|
7,530 |
|
Warranty liability,
noncurrent |
|
— |
|
|
|
300 |
|
Deferred income taxes,
net |
|
— |
|
|
|
367 |
|
Total liabilities |
|
7,481 |
|
|
|
8,197 |
|
Commitments and contingencies
(Note 13) |
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
Preferred stock, 10,000,000 shares authorized: |
|
|
|
|
|
Series C convertible preferred stock |
|
— |
|
|
|
— |
|
Common stock |
|
1 |
|
|
|
— |
|
Additional paid-in capital |
|
627,935 |
|
|
|
622,399 |
|
Accumulated deficit |
|
(624,187 |
) |
|
|
(577,973 |
) |
Accumulated other comprehensive loss |
|
(88 |
) |
|
|
(92 |
) |
Total stockholders’ equity |
|
3,661 |
|
|
|
44,334 |
|
Total liabilities and stockholders’ equity |
$ |
11,142 |
|
|
$ |
52,531 |
|
|
|
|
|
|
|
|
|
RESHAPE LIFESCIENCES INC.
Consolidated Statements of Operations (dollars in
thousands, except share and per share amounts; unaudited)
|
Year Ended December 31, |
|
2022 |
|
2021 |
|
|
|
|
As Restated |
Revenue |
$ |
11,240 |
|
|
$ |
13,600 |
|
Cost of revenue |
|
4,438 |
|
|
|
5,252 |
|
Gross profit |
|
6,802 |
|
|
|
8,348 |
|
Operating
expenses: |
|
|
|
|
|
Sales and marketing |
|
14,093 |
|
|
|
8,893 |
|
General and administrative |
|
17,250 |
|
|
|
24,319 |
|
Research and development |
|
2,537 |
|
|
|
2,369 |
|
Impairment of intangible assets and goodwill |
|
18,744 |
|
|
|
30,649 |
|
Loss on disposal of assets, net |
|
529 |
|
|
|
— |
|
Total operating expenses |
|
53,153 |
|
|
|
66,230 |
|
Operating loss |
|
(46,351 |
) |
|
|
(57,882 |
) |
Other expense
(income), net: |
|
|
|
|
|
Interest (income) expense, net |
|
113 |
|
|
|
832 |
|
Warrant expense |
|
— |
|
|
|
2,813 |
|
Loss on extinguishment of debt, net |
|
— |
|
|
|
2,061 |
|
Loss (Gain) on foreign currency exchange, net |
|
141 |
|
|
|
(168 |
) |
Other |
|
(11 |
) |
|
|
— |
|
Loss before income tax
provision |
|
(46,594 |
) |
|
|
(63,420 |
) |
Income tax benefit |
|
(380 |
) |
|
|
(274 |
) |
Net loss |
$ |
(46,214 |
) |
|
$ |
(63,146 |
) |
|
|
|
|
|
|
|
|
The following table contains a reconciliation of Adjusted EBITDA
to GAAP net loss attributable to common stockholders for the years
ended December 31, 2022 and 2021 (in thousands).
|
Year Ended December 31, |
|
2022 |
|
2021 |
|
|
|
|
As Restated |
GAAP net loss |
$ |
(46,214 |
) |
|
$ |
(63,146 |
) |
Adjustments: |
|
|
|
|
|
Interest (income) expense, net |
|
113 |
|
|
|
832 |
|
Income tax expense (benefit) |
|
(380 |
) |
|
|
(274 |
) |
Depreciation and amortization |
|
2,153 |
|
|
|
1,971 |
|
Stock-based compensation expense |
|
2,087 |
|
|
|
12,227 |
|
Impairment of intangible assets and goodwill |
|
18,744 |
|
|
|
30,649 |
|
Loss on disposal of assets, net |
|
529 |
|
|
|
— |
|
Loss on extinguishment of debt, net |
|
— |
|
|
|
2,061 |
|
Warrant expense |
|
— |
|
|
|
2,813 |
|
Professional fees incurred in connection with the Obalon
merger |
|
— |
|
|
|
2,277 |
|
Adjusted EBITDA |
$ |
(22,968 |
) |
|
$ |
(10,590 |
) |
|
|
|
|
|
|
|
|
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