On August 2, 2022 Apollo Endosurgery, Inc. ("Apollo") (Nasdaq: APEN), a global leader in less invasive medical devices for gastrointestinal and bariatric procedures, reported financial results for the second quarter ended June 30, 2022 and recent corporate highlights (Press release, Apollo Endosurgery, AUG 2, 2022, View Source [SID1234617256]).
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Second Quarter 2022 Selected Financial Results
Second Quarter and Recent Corporate Highlights
•Grew second quarter 2022 U.S. revenue by 18% and OUS revenue by 15% (23% in constant currency) over the same period in 2021;
•Grew second quarter 2022 Endoscopic Suturing System (ESS) revenue 23% (27% in constant currency) over the same period in 2021;
•Grew second quarter 2022 Intragastric Balloon (IGB) revenue 6% (9% in constant currency) over the same period in 2021;
•Increased second quarter 2022 revenue from the Company’s top 10 direct accounts by 53% over the same period in 2021;
•Received FDA De Novo marketing authorization in July 2022 for Apollo ESGTM and Apollo REVISETM, new endoscopic systems for the treatment of patients with obesity
•Announced publication of the MERIT Study on July 28, 2022 in The LANCET; and
•Appointed Sharon O’Keefe to the Board of Directors, deepening Apollo’s Board-level expertise in hospital systems and health care delivery.
"This was a solid quarter for Apollo, with record revenue driven by growth across all products, both domestic and international," said Chas McKhann, Apollo’s president and CEO. "Importantly, we also secured De Novo marketing authorization from the FDA for endoscopic sleeve gastroplasty (ESG) and endoscopic bariatric revision (REVISE). This authorization positions Apollo to play a leading role in the market for next generation weight loss solutions. We remain focused on driving our business as a whole, in addition to preparing to take advantage of our new weight loss indication in the U.S. market, which we believe will be an important growth driver."
Selected GAAP and Non-GAAP Financial Results for Second Quarter 2022 Compared to Second Quarter 2021
Total worldwide revenues of $19.3 million for the second quarter of 2022 reflected an increase of 16% compared to $16.6 million in revenue during the second quarter of 2021. Revenue results in the second quarter include $0.6 million of foreign currency impact. On a constant currency basis, total revenue in the second quarter of 2022 increased 20% compared with the prior year second quarter. Compared to the second quarter of 2021, U.S. product sales increased 18% and OUS increased 15% (or 23% on a constant currency basis).
Compared to the second quarter of 2021, total ESS product sales increased $2.4 million, or 23%, due to the continued strong demand for OverStitch and X-Tack products. Total IGB product sales increased $0.3 million compared to the prior year quarter.
Gross margin increased to 57% for the second quarter of 2022, from 55% in the second quarter of 2021, due to higher product sales resulting in overhead efficiencies and improved variable gross margin on ESS products, net of 200 basis points of foreign exchange headwinds.
Total operating expenses increased $3.2 million compared to the second quarter of 2021. The increase primarily was due to the expansion of the U.S. salesforce in the latter half of 2021, and an increase in marketing spend to drive increased revenue as the Company scales the business and focuses on driving increased utilization of its products.
Net loss for the second quarter of 2022 was $10.4 million compared to $3.0 million for the second quarter of 2021 due to changes in unrealized foreign exchange of $3.3 million between periods and the $2.9 million gain on forgiveness of PPP loan in the prior year.
Non-GAAP adjusted EBITDA, which excludes interest, taxes, depreciation, amortization, unrealized foreign exchange and stock-based compensation, and gain on forgiveness of PPP loan, in the second quarter 2022 was a loss of $4.3 million, compared to a loss of $1.9 million in the second quarter 2021.
The Company had $140.7 million in cash and committed cash at June 30, 2022, including cash, cash equivalents and restricted cash of $75.7 million.
"We continue to manage cash investment prudently, with a focus on near-term growth initiatives," said Jeff Black, Chief Financial Officer. "We saw a $2.1 million sequential improvement in cash flow over the first quarter of 2022. We exited the second quarter with a multi-year runway and clear line of sight to a cash flow break-even business."
2022 Outlook
The Company is reiterating fiscal year 2022 revenue guidance to be in the range of $73 million to $75 million, inclusive of up to $3 million in foreign currency headwinds. The Company continues to monitor the potential and uncertain impact of adverse economic conditions in the U.S. and OUS. Continued or sustained COVID-19 pandemic, inflationary or recessionary pressures could impact the Company’s ability to achieve these financial projections.
Conference Call
Apollo will host a live webcast audio call with slides today at 3:30 p.m. CT / 4:30 p.m. ET. Investors are invited to join the live call via webcast from the Investors section of the Company’s corporate website at www.apolloendo.com. An audio-only option is available is available by dialing +1-973-528-0011 and referencing access code 481278 or the "Apollo Endosurgery Second Quarter 2022 Earnings Call." Investors who opt for audio-only will need to download the related slides at www.apolloendo.com.
A replay of the webcast will be made available on Apollo’s website, www.apolloendo.com, shortly after completion of the call.