H.I.G. Capital News
Apollo Endosurgery, Inc. Reports First Quarter 2017 Results
AUSTIN - May 4, 2017 - Apollo Endosurgery, Inc. ("Apollo") (NASDAQ: APEN), a leader in less invasive medical devices for bariatric and gastrointestinal procedures, today announced financial results for the three months ended March 31, 2017.
First Quarter Highlights
- Total revenue of $14.6 million
- Endo-bariatric sales of $7.3 million
- Surgical sales of $7.1 million
Todd Newton, CEO of Apollo, said, “We were very satisfied with our first quarter sales. First, we continued to build momentum for our endo-bariatric products. In the first quarter of 2016, we were very actively engaged in the launch of ORBERA® in the U.S. and, last year’s endo-bariatric sales included $2.1 million of first-time starter kit sales to physicians as they completed training on the product. In the first quarter of 2017, U.S. starter kit sales were $0.3 million, reflecting our intentional transition to focus on ORBERA utilization in existing accounts. Total U.S. endo-bariatric sales in the first quarter of 2017 were $3.5 million, a decrease of 23% compared to $4.5 million in the first quarter of 2016, however, excluding these one-time U.S. ORBERA starter kit sales, adjusted U.S. endo-bariatric product sales were $3.2 million in the first quarter 2017, an increase of 31% compared to adjusted U.S. endo-bariatric product sales of $2.4 million in the first quarter 2016 reflecting both a solid ORBERA reorder rate and OverStitch™ sales growth. Second, the decline rate of our worldwide surgical business slowed in the first quarter. In the U.S., the rate of surgical sales decline in the first quarter was half that which we experienced in the year 2016 and surgical product sales outside the United States in the first quarter of 2017 increased 5% compared to the first quarter of last year.”
First Quarter 2017 Financial Results
Total revenue in the first quarter 2017 was $14.6 million, compared to $16.3 million in the first quarter 2016, a decrease of 10%.
Total endo-bariatric sales in the first quarter 2017 were $7.3 million, a decrease of 11% compared to $8.2 million in the first quarter 2016. The first quarter 2017 included $0.3 million of U.S. ORBERA starter kit sales compared to $2.1 million in starter kit sales in the first quarter 2016, which was a very active quarter for U.S. physician training for ORBERA following the product’s August 2015 FDA approval. Total U.S. endo-bariatric sales in the first quarter of 2017 were $3.5 million, a decrease of 23% compared to $4.5 million in the first quarter of 2016, however, excluding these one-time U.S. ORBERA starter kit sales, adjusted U.S. endo-bariatric product sales were $3.2 million in the first quarter 2017, an increase of 31% compared to adjusted U.S. endo-bariatric product sales of $2.4 million in the first quarter 2016, driven by growth in ORBERA reorders and increasing OverStitch sales.
Surgical sales in the first quarter 2017 were $7.1 million, compared to $8.0 million in the first quarter 2016, a decrease of 11%, reflecting an expected decline in gastric banding procedures. By geography, first quarter 2017 surgical sales declined by $1.0 million in the U.S. and increased by $0.2 million internationally.
Gross margin for the first quarter 2017 was 65%, compared to 70% for the first quarter 2016. The decline in gross margin was caused by changes in product sales mix between the quarters.
Total operating expenses were $16.3 million in the first quarter 2017, compared to $14.4 million in the first quarter 2016. The increase is primarily due to higher legal costs included in general and administrative expenses associated with initial filings and other public company activities that are not expected to repeat each quarter. Research and development expenses also increased due to activities to improve supply reliability of the OverStitch product.
Interest expense for the first quarter 2017 decreased $1.3 million due to the elimination of non-cash interest of $1.2 million associated with the convertible notes that converted to equity in December 2016.
Net loss for the first quarter 2017 was $8.2 million compared to $6.0 million for the first quarter 2016.
Cash, cash equivalents and restricted cash were $9.2 million as of March 31, 2017.
The decrease in cash, cash equivalents and restricted cash from $20.0 million as of December 31, 2016 includes a $7.0 million principal repayment on the Company’s senior secured credit facility (the “Credit Agreement”) made as part of an amendment to the terms of its Credit Agreement. As part of the new amendment, the minimum cash balance requirement of $8.0 million was also eliminated. In conjunction with the amendment, the lender waived all prepayment premiums and exit fees on the principal repayment and certain financial covenants of the senior secured credit facility were reduced.
The Company will host a conference call on May 4, 2017 at 7:30 a.m. Central Time / 8:30 a.m. Eastern Time to discuss the Company's operating results for the first quarter ended March 31, 2017.
To participate in the conference call dial (888) 578-6632 for domestic callers and (719) 325-2493 for international callers. The conference ID number is 2887552.
A telephonic replay of the call will be available until May 11, 2017. The replay dial-in numbers are (844) 512-2921 for domestic callers and (412) 317-6671 for international callers. The replay conference ID number is 2887552.
Non-GAAP Financial Measures
To supplement Apollo’s condensed consolidated financial statements presented on a U.S. GAAP basis, Apollo provides certain non-GAAP financial information to assist investors in assessing its operations in the way that its management evaluates those operations. Adjusted U.S. endo-bariatric product sales is a supplemental measure of Apollo’s performance that is not required by, and is not determined in accordance with, GAAP. Non-GAAP financial information is not a substitute for any financial measure determined in accordance with GAAP and should be read only in conjunction with Apollo’s condensed consolidated financial statements prepared in accordance with GAAP. Apollo’s management uses certain supplemental non-GAAP financial measures internally to understand, manage and evaluate Apollo’s business, and make operating decisions. Reconciliations for each non-GAAP financial measure to its most directly comparable GAAP financial measure is provided in the tables below. Management believes that making non-GAAP financial information available to investors, in addition to GAAP financial information, may facilitate more consistent comparisons between the company's performance over time with the performance of other companies in the medical device industry, which may use similar financial measures to supplement their GAAP financial information.
Adjusted U.S. endo-bariatric product sales is defined as GAAP product sales of ORBERA and Overstitch in the U.S. excluding one-time U.S. ORBERA starter kit sales.
About Apollo Endosurgery, Inc.
Apollo Endosurgery, Inc. is a medical device company focused on less invasive therapies for the treatment of obesity, a condition facing over 600 million people globally, as well as other gastrointestinal disorders. Apollo’s device based therapies are an alternative to invasive surgical procedures, thus lowering complication rates and reducing total healthcare costs. Apollo's products are offered in over 80 countries today.
Apollo’s common stock is traded on NASDAQ Global Market under the symbol "APEN". For more information regarding Apollo Endosurgery, go to: www.apolloendo.com.
Cautionary Note on Forward-Looking Statements
Certain statements in this press release are forward-looking statements that are subject to risks and uncertainties that could cause results to be materially different than expectations. Important factors that could cause actual results to differ materially include: the advancement of Apollo products; development of enhancements to Apollo’s existing products and technologies; market acceptance of Apollo’s products; and statements relating to the availability of cash for Apollo's future operations, Apollo’s ability to support the adoption of its endo-bariatric products and its ability to broaden its product portfolio as well as other factors detailed in Apollo’s Registration Statement on Form S-4 (file no. 333-214059) and Apollo’s periodic reports filed with the Securities and Exchange Commission, or SEC. Copies of reports filed with the SEC are posted on Apollo’s website and are available from Apollo without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, Apollo disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.