On October 30, 2019 Apollo Endosurgery, Inc. ("Apollo") (Nasdaq: APEN), a global leader in less invasive medical devices for gastrointestinal and bariatric procedures, reported financial results for the third quarter ended September 30, 2019 (Press release, Lpath, OCT 30, 2019, View Source [SID1234550041]).

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Third Quarter 2019 Highlights
•ESS sales increased 28% (30% in constant currency) to $6.7 million, representing 64% of our Endoscopy sales for the third quarter
•Endoscopy sales increased 12% (14% in constant currency) to $10.4 million
•Received 510(k) clearance from the FDA for the OverStitch Polypropylene Suture-Anchor Assembly
Todd Newton, CEO of Apollo, commented, "Strong market momentum for OverStitch continued in the third quarter with 28% increase in sales. This marks our fourth consecutive quarter of double-digit year-over-year growth in OverStitch sales. We remain enthusiastic about the opportunities ahead to continue this growth, driven by expansion of our user base and ongoing clinical investments that will continue to demonstrate the notable clinical benefits of our Endoscopy products."
Third Quarter 2019 Results
Consolidated Endoscopy product sales increased 12% as reported and 14% in constant currency. For the third quarter, 64% of Endoscopy product sales related to ESS. In the U.S., Endoscopy sales increased 30% to $4.8 million.
Worldwide, ESS product sales increased 28% as reported and 30% in constant currency. U.S. ESS product sales increased 48% to $3.7 million in the third quarter of 2019. Outside the US ("OUS") ESS product sales increased 9% as reported and 12% in constant currency to $2.9 million.
Worldwide IGB sales decreased 9% as reported and 7% on a constant currency basis. U.S. IGB sales decreased $0.1 million, or 7%, to $1.1 million in the third quarter of 2019 while OUS IGB product sales decreased 9% as reported and 7% on a constant currency basis to $2.6 million.
The divestiture of our Surgical products in December of 2018 reduced total revenues in the third quarter of 2019 by $3.9 million compared to the third quarter of 2018. We divested the Surgical products in order to strengthen the organization’s focus on our Endoscopy products, which we believe have high growth potential.
Gross margin for the third quarter 2019 was 48%, compared to 55% for the third quarter 2018 as a result of a greater proportion of our overall product sales coming from our ESS products, which realize a lower gross margin than our other products.
Total operating expenses decreased $3.6 million to $12.3 million in the third quarter 2019, compared to the third quarter 2018. Research and development expense declined $1.5 million compared with the third quarter of 2018 as we neared completion in certain of our clinical studies. In addition, amortization expense is $1.3 million lower as a result of the reduction in our intangible assets after the recent divestiture of our Surgical products.
Net loss for the third quarter 2019 was $8.7 million compared to $9.8 million for the third quarter 2018.
Cash, cash equivalents and restricted cash were $36.0 million as of September 30, 2019. The Company raised proceeds of $20.0 million from the issuance of convertible debt in August 2019.
Conference Call
Apollo will host a conference call on October 30, 2019 at 3:30 p.m. Central Time / 4:30 p.m. Eastern Time to discuss operating results for the third quarter ended September 30, 2019.
To participate in the conference call dial (877) 823-8673 for domestic callers and (647) 689-4156 for international callers. The conference ID number is 6392218. A live webcast of the conference call will be made available on the "Events and Presentations" section of our Investor Relations website: www.ir.apolloendo.com.
A replay of the webcast will be made available on Apollo’s website, www.apolloendo.com following the event.

Non-GAAP Financial Measures
To supplement our financial results we are providing a non-GAAP financial measure, percentage revenue change in constant currency, which removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of revenues. Percentage revenue change in constant currency is calculated by translating current foreign currency sales at last year’s exchange rate. This supplemental measure of our performance is not required by, and is not determined in accordance with GAAP.
We believe the non-GAAP financial measure included herein is helpful in understanding our current financial performance. We use this supplemental non-GAAP financial measure internally to understand, manage and evaluate our business, and make operating decisions. We believe 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. However, our non-GAAP financial measure is not meant to be considered in isolation or as a substitute for the comparable GAAP metric.