ReShape Lifesciences (RSLS) 15 May 232023 Q1 Earnings call transcript

Good afternoon, and thank you for joining the ReShape Lifesciences First Quarter 2023 Conference Call. I would like to turn the call over to Michael Miller from Rx Communications.

Good afternoon, and thank you for joining the ReShape Lifesciences first quarter 2023 earnings call. I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer; and Tom Stankovich, Chief Financial Officer. Paul will provide an overview and update on the company's activities, and Tom will review the financial results for the period. the after over call which, question-and-answer turn some Paul to then session. remarks, closing we'll will call to back for a He open the

SEC other factors. the to and unknown as the known reminder, XXXX. factors uncertainties and section Information company's Actual recent described those Act materially in and the and in risks website, within fully Securities including differ as most conference Private are risk annual company's a These statements uncertainties the identified website, Commission, risks, from call results additional forward-looking due meaning with as report As ReShape factors the the could this XX-K. of Lifesciences' and those on more of the filings Exchange filings Form contains Investor Securities and including Reform well discussed of Litigation

is additional symbol reminder, ReShape an As on stock the under NASDAQ, RSLS. trading listed

call Paul? now President will Hickey, turn the over to Paul I ReShape. CEO, and

like towards of quarter of Thank first to call. on sustainable first the Mike. and afternoon become you In to quarter we profitability. path XXXX scalable thank have our strategies this us I'd a execute XXXX, continued for you, growth a joining and earnings for to our organization all

quarter delve into for briefly I of growth I'd you our remind Before three our highlights, first to like pillars strategies growth. or

scalable a is and business our disciplined strategy approach metrics-driven of generation sustainable predictable model. this a growth operate with Our lead first is through our revamping to pillar to drive Key the revenue initiatives. first business to

is board insights leveraging continuum. weight and to And product our validate our solutions care evidence-based pipeline on the is scientific to pillar The to to portfolio continue our initiatives. key advisory continue second our strategic for last pillar loss across expand

we successes, our invest XXXX, first expenses including reduced growth say compared many marketing proud and particular, the us XX% adjustments, onetime to significantly in R&D. by allowing during the quarter had in of operating before we first quarter, as I'm to that to initiatives,

growth Additionally, drive to laser put reductions, in our us our to pillars combined on position executing these revenue, cost strong goals. with achieve our focus on a

and rate to obesity Before XXXX like or remains The dollar opportunity rise grow substantial to and more the upcoming Currently, largely initiatives, our or overweight us. $XXX a XXXX. figure enormous I the through billion considered global untapped. further by opportunity XX% from global by market mention market multibillion of before growth than representing population value expected global an people The detail to obese, that's highlights of X.X% is I'd weight management XXXX. XX% a billion, market of is estimated obesity loss annual compound expected X.X

in the alone worldwide bit, billion bariatrics same billion is portion by surgical to accounting reach the U.S. for a overall down $X.X XXXX, frame. projected time $X.X device the with Drilling market

in of the our suite XX% trying health U.S. weight loss address lose weight of year, to the solutions with weight differentiated metabolic well Additionally, positioned to every is continuum. adults we loss entire believe and

It's server adults can FDA, important drop a serious and pressure and tied lower to to individual's resulting in diabetes. issues the according help Moreover, costs. blood manage XX% that that to health risk is American tremendous an ROB approximately loss cancer remember weight of in weight, dramatic

marketing weight number obese market adoption obesity for recent who is the related of increased have The agonist GLP-X The and managed medically loss. loss. most efforts development in are consumer individuals seeking pharma media recent of significantly weight the big

critical adults normalized, acceptance has for While of as pleased not see past, topic care a a sensitive and in we been and is and greater the treatment obesity obesity a shift both has well in perception how are to been as children. awareness

other and and behavioral need known of the invasive, a surgical bariatric of adjustable we therapy the and approaches, is Lap-Band. effects for that than there nature pharmaceutical substantial inaccessibility, of ever, side the durability reversible more less believe irreversible the modification, limitations anatomy-altering Given and

a Our proven effective durable product loss. weight has and long-term safe, solution providing

order Now two and initiatives. we cost totaling previously our gross profitability, the sheet this to Lap-Band. remain awareness on in highlights our on path growth year raises in growth These $XX.X funds drivers turn discussion of reductions bolstered I let recent allow invest Based including our portfolio, the the us of product evidence-based back capital million me will to proceeds. by to expand with in balance mentioned, to the

for that leads Lap-Band highly patient yield through our our helped which higher-quality specific direct-to-consumer already are We and visibility with steadily markets align increasing in has lower-cost the targeted marketing advocates. campaign, surgeon

the know is driver Lap-Band we engagement. experience, our of patient surgeries Through primary

text touch As third every also that quarter. This ensure we highest will be process key points call, web automation with has to call combined e-mail with decision in to to improved the in a launch including patient-centric patient developing of experience, are on process launch retargeting I which improve automated of for initiative last mentioned the target we're possible the the chance patient's on surgery website and this surgeon. targeting to transferring strategically an marketing a our inquiry

these competencies center including lead in-house, building our and core automation to nurturing efforts. call marketing the are align We with

while of associated market. money Even to brand can marketing intent nimble we engagement Lap-Band implementation we ongoing on these website improving surgeries. new save ultimately, more the efforts the and better driving needs our and increasing when efforts, we're with considering conversions headcount more summary, the ensuring with the address technology, patient marketing responsive optimization to In to and believe

well the recently our internationally access an on base relationships Scientific full experts unparalleled meeting be metabolic At the to extensive and knowledge growth our invaluable and fields. disease as comprised recognized provides surgeons June, insights we obesity in our upcoming ASMBS SAB will as SAB of the in and and feedback meeting Global that Advisory provide Board ReShape's have us members initiatives. will formed first of as

access loss. expand in We for us member will patients safe for weight treatments each helping effective to expect that and integral durable be

approach we our as expand disciplined continue our to This execute and revenue pipeline. drive is product to critical

are To launched in and used that is bypass. products our of end, broad procedures sizes, gastric gastrectomy of range tubes as new a redesigned sleeve one calibration such which with newly laparoscopic the rate X

expect calibration add to revenues. We revenue is year. incremental this is for than future new the great in us product this to important other and procedures provides used to reiterate opportunity to customer It increase a reship Lap-Band therefore,

FDA to developed Similar Further, to optimize band experience. effectiveness. decrease of enhanced PMA which to the comfort, in the the improving the next-generation the to X.X, the or the opening physician a intend patient coming was feedback with postoperatively the individual's therapy to submit X.X adjustable weeks, improve we is thereby supplement Lap-Band our order increase to current Lap-Band, an Lap-Band in for

enhanced same food require time, valve patient band the technology band as pieces the that Lap-Band a relief in-office adjustments. is reservoir from X.X of feature to At an that may designed large alleviate of this serves a unique swallowing comfort

We and there FDA by adoption be expect by feedback existing we've and from broad if the with surgeons. believe physicians new we approved, that year-end discussions based will had on

historically. and I've us spoken X.X the have will As who product have the Lap-Band noted the new in used engage improved those past, surgeons allow believe many of reengage surgeons the with to I Lap-Band about

patients weight same awareness ensure quality in weight both use time, professionals life. Lap-Band program, can the to treatments, that and achieve including improvements personalized loss engage of HIPAA-compliant management health expand proprietary ReShapeCare we of and At goals, with to commodities obesity-related continue durable novel our care to the and

employers' reshape continue care and overall discussions large very costs. health employers we the order provide employee self-insured been to positive. health several Additionally, impact employees reduce thus engage to to reception care in our The from to positively have

ReshapeCare management in changes We the exciting lifestyle reminder, to just future. program healthy qualify individuals a updates forward on sharing for Lap-Band surgery. program who all persons, weight not supports As this for look

vegablock the liver our nerve dependent Well, opportunity device. that patients, respectively, -- diabetes, medications manage pancreas and DBSN on proprietary our one the be is Symposium very present or and most We type compelling glucose a on of Black selectively Neuromodulation, Keystone diabetic Stim may neuromodulation stimulation to able technology compelling to dependence evidence the blood to manner. recent at levels. had Diabetes Vegas products and The the insulin on DBSN dual diabetes pipeline reduce DBSN modulates individualized X to demonstrating this in preclinical

has reminder, to non-dilutive with grant further researchers we'll use, We believe support. strategic As if industry-leading enhance collaborate commercial corporate the will and the been offerings. funded continue with partners, NIH that additional medical for our device NIH grants, and approved leading DBSN a seeking device differentiated DBSN while

our Now ReShape I patents to listeners that my opening want strong assets Obalon of reshapes remind one the of device XXX Lap-Band system. intellectual property ReShape of is wrap including our products, DBSN portfolio surrounding our many before all I and balloon up remarks,

from allowance patent ReShape patent System. the diligently the position, worked most for IP have by Balloon to an We covering evidenced noticeable recently our office strengthen the Obalon additional U.S.

commercialization always, also and build action will around offensive efforts take to and mode is offensive we when appropriate. As continue it product our portfolio

would I of Stankovich the to a Tom? Tom financial to like recap call to our now provide over turn performance.

Thanks, all this for webcast joining afternoon. thank Paul. our And again, once you

in reminder, full our press a a financials As XX-Q. release discussion of our available is and

of reshape efficiencies. expense operating flow is with our of to bariatric point or expectation move remainder first sell closer in Before discuss revenue from recently on surgery onetime our XXXX consistent to combined of compared quarter targeted that positively centers and system ReShape our first details, $X the some quarter I operating on categories reported digital greater our focused geographies and focus reduction and the to XX% million our impact XXXX redesigned reductions, of These all campaign expenses are near XXXX achieving Lap-Band resulting out the revenue financial media in expected increased as for was that for before across breakeven. cash of launched want the and evidence adjustments, and to tubes calibration the I

XX, other financial first to XXXX. on the for ended March Moving key quarter metrics

same for months sales contraction X.X% XXXX, $X.X Our compared $XXX,XXX period which represents throughout reason for XX, Europe. revenue slight in is million totaled primary of the ended XXXX. a a the the decrease or to The March decline in three

we near XXXX a continue the on sizes calibration surgical bariatric revenue system that have centers Lap-Band media expectation tubes. remainder and through the that and three focus of digital Our targeted campaign launched will new to sell the increase of fully as

three period March compared revenue and and gross ended company the XX, XXXX. ended XXXX months looking continuously XXXX, the efficient to as XX.X% for months with our becoming The within reductions for cost of manufacturing March further due Gross to is percentage same XXXX, for profit a total XX.X% profit for $X.X XX, profit the in increase and in more million. three the Gross percentage processes. was

and XX, $X.X The to million advertising a $X.X compared the million for resulting reevaluated expenses or in due XX.X% million is approach targeted months and expenses same marketing as million decline digital we Sales XXXX, in to marketing decreased marketing $X.X of moved have costs. March primarily and the marketing XXXX. reduction for decrease a to ended three a period to of $X.X our campaign, and in

also to reductions sales were ReShapeCare compensation, and There the platform. offset in due by the development of increases personnel partially stock-based

were a to February cost $X.X administrative to we $X.X miscellaneous XXXX primarily million expenses the in due rent. XXXX, before million G&A three on decreased in along in onetime compared for as million professional reductions continue for and efforts. same activities a $X.X the There and March with XX, and ended services many in amortization see fundraising The efficiencies our decline payroll months costs to General related reduction work decreased of decrease is period XX.X% XXXX. $X.X or stock-based and to and by expenses expenses, for compensation also to million adjustments

Research in ended for expenses with XX, or a expenses $XXX,XXX the $XXX,XXX consulting by decreased primarily to development reduction March XXXX, payroll period in due months along XXXX. costs. three clinical related and XX.X% for $XXX,XXX The is the decrease compared and same to and to

cash $X.X debt with We and our and remain quarter ended free on cash equivalents balance the million sheet. of

control sufficient to As continue in increasing XXXX, and operations our hand XXXX. continue current and is cash fund we of and there we anticipate our expenses, reduction steadily revenues on we believe our into operating

to over I With turn the now back that, Paul. call will

Thank you, Tom.

and call committed continuously our and lead to for in-house components that important to up further global continue systems Board lead are effective generation is our finally, while fashion executing optimal marketing nurturing, we to with our obesity. reiterate critical will safe Scientific closely conversion, ensure historic world-class costs. we a on Advisory lead open in changing reducing success for Q&A, to we lead And Before the to it's that in and improving generation, for plan market work treatments normalize bringing

on invest revenue of changing not selection to across As services we of transformative on with enhancing patient-friendly, executing consists obesity the initiatives. We're Tom we reduced in growth categories, anatomy diseases treat entire programs of metabolic significantly laser can so a operating and to across lifestyle focused drive detailed, and our products, have care portfolio an expanded that expenses pillars all continuum. technologies growth

prepared remarks. our concludes This

open So for now your call we'd like questions. the to Operator?

Certainly. from first come question Pearlman Maxim. Jeremy [Operator will our Instructions] And of

Your line open. is

-- is my actually for the you Vendetti. for I'm This Hi. Thank line taking question. Anthony on

could if new new approach? the to earlier marketing that the can gauge we earlier goes doctor So has When marketing some you calls, that share to maybe how from there any this six-month when the of the can we you're see first know about was patient is, using benefits into until a surgery. you this said metrics weight of see on you of actually campaign may the the can we a see, when question success -- I and of

Thanks Great question, Jeremy. today. for joining

going updates quarter think hear forward. I you'll every

As you with in-house, for metrics to need have And that have the we ongoing and call on we'll an manage as then you improve share to center those others. example, to to program of basis. us and it allows appropriate, level whatever it bring, detail metrics the

our on the to Probably website or as if as marketing be at you part watch well track most before watch and consistent quarter and we able we'll spot, as and overall measurements the P&L. obviously or hit grow launched in we've watch a than importantly, improvements, third of after the revenue, sweet our those watch will. stay the our look marketing into the we sort to -- gets those. website our less again patient-centric And as we I it dollars share know as cost revenue of as increased we you here

the ultimately allows track competencies So us process enough inside to contact yeah, how the through transfer to nurturing marketing emphasize leads much the I from initial can't moving physician. the patient to that

in to transfer. actually seen marketing that And the down on get to study substantial we with physician. with enhancements did an It's it's have of practices be industry, in they the recent most our in increase our that warm the last -- an a percent that texting funnel a metric transfers transfer we've that increase to out you ultimately of top that had And pilot physician you'll lead needs we've hear warmly transferred where technology. the SMS the to want a you

have the decision. making a a they ready they want of to when or leads to the a make of some key words, to a to you attacks. in calling surgeon that message that make patient catch engage any us in we dentist button decision that response just -- with went you're them to allows that's an as to appointment. they used So lead or that them instead they're with other e-mail, a sending when or to That see same And the yes text get other technology the if like do chance whether sure bariatrics a click

Okay. the and opened patients, media, weight mentioned call attack they beginning lose and on obesity. in and I the new how call in help how loss help waiter could or the about then are Great. about of conversation drugs they the I popular the earlier the you many to know their it's guess, And

go the there on that the share surgery? off maybe the say, would patients you've and seen you the to any anything been would like drugs bariatric because of hesitation some hearing is popular let's from such is, Question maybe to this do before surgery, to spoken they -- surgeons from they who surgery? and option any holding you a takes Is have try, but have or want now patients are could

didn't said feel they And very in XX we're ask were no, question all volume, to, Anthony. watching feel top impacting this their or update procedure Again, I last but two out did okay? we reach they think weight drugs their I practice did a Yeah. similar weight the loss think the loss like drugs affecting accounts the closely. from one did them, We and and like were I our think,

drugs, are to information think they've overall I but weight the In I that at from an stand surgery. getting overall and have the that, said, contemplated our generation impact I is contemplating marketing people been the I to other on in efforts. that physicians And anecdotal off think slowdown. that there's part be certainly articles result are out which of loss number That of programs other weren't feeling of know going a the we're just getting wasn't the say going increase done. pool a look loss the to lead weight of position a health patients approaching that I care mean be by my of there's drugs, not they few professionals, a people sidelines would that words,

So discussions I a think the engaging in healthy component.

like Jeremy, our piece me, impact interesting seeing not. that an one our and on for lead centers are did The ours I some generation are not to is call related that mention are

sort leads to kind get texts that those marketing in leads patients efforts it be surgery. them a headwind we have of we're are e-mails, that We're calls. with believe engaging off to think retain But weight to drugs. because paying and considered customer loss live I ultimately able the of potentially service see and/or for surgeon way with a me to the

whatever to I weight may combination contemplating longer with be plan And on patients surgery. what of but have with their cost find prescription we're drugs, you surgery And the it's most have for the term, your on so as they may up new therapies prohibitive, is to been plateauing can might but weight loss therapy weight be surgeons the to or -- and going a end today, where back the combination goals they then with trying surgery you're plateauing get how you going drug, all think the are drugs. loss have, loss do you on surgeons as

All right.

egress And Okay. that last Understood. my question Great. about ReShapeCare. actually, the

signed how any the So reception? health on are private more you company a loss a are that -- But to sales you do how health And up I insurers. -- really speak Lap-Band, is the combined I have the do powerful patients do be cross-selling ReShapeCare that has it weight you what the you're the when opportunity, don't about reps been bring to know focused many also know with up be a on can tool? surgeon

transparent it health I by one about was kind end, director And Yeah. ReShapeCare think the and employers the of I've been interest their that that in past self-insured to the an in maker and say not offers caused whoever is. us decision of ReShapeCare surprised I'm larger surprise, call going with point employer in the leadership of and sort selling but terms with wellness have,

us allows we have once time that ReShapeCare, ReShapeCare it vary of And to size. be in positioned their in to during enrollment pitch frame some annual employers allows these

And a with up resources the for be comprehensive. employers are of to have where like come to so -- target really programs midrange don't is fairly seem us the they and kind good ours this

we're And efforts program. of and/or marketing loss doing part ReShapeCare the that who looking individuals something lead are in Lap-Band else mean nurturing just our for weight doesn't that not for and

ReShapeCare. they're of to find -- of there's own and There's will, coaches, have you their gap but Specific accounts dietitians to own not needing fill, -- sort and accounts. no ours several we if their

with partnering lead augment parapet there efforts postoperative have to support appropriately patients that that our if so we're to are the they either ReShapeCare nurturing sensitive need when we or their it's -- approach for that them. us sure on being we're their for of making So with and sort physicians

the whatnot actually all in lot industry of by stages. We're quantities number offered programs differentiated do for Noon the have things -- the virtual out and we're that's loss there patients, and it's of live in of loss terms or on I if ads other of in and a management weight that the whatever other not. And type fact a television by there's we honestly, also coaches not weight tools. you're strikes, So early think seeing commercial still

tuned the and build would guess, So of numbers stay I on it be would we to the the side just of continue the average individual the say Jane or Joe as employer I business. public base and the part both business

Understood.

Okay, great. I'll queue. information. all back Thank that you hop for in

no questions. Hickey further would Paul [Operator hand remarks. Instructions] I back call to the for like And I'm now to showing closing

be the excited work hope and towards commitment to how company therapeutics, diligently I a personalized we've Well, the are progress to future. have FDA-approved to about including rightsizing I made we to in our been you. scalable to minimal base We'll Thank the build remain Lap-Band. successful remain relaying to continue to. excited devices want we evidence-based sustainable, organization provide and

new and a an physician-led our solidify continued shareholders Thank health our members, continue existing forward to time we partners weight our truly solutions I your for Thank is ReShape. look employees, health our premier board as position vendors, customers, further support exciting stakeholders, It and our care you. as to metabolic shareholders. company. engaging of all of and loss

conference. and today's you ladies participating. gentlemen, this for concludes And Thank

now may disconnect. You