On July 23, 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 second quarter ended June 30, 2019 (Press release, Lpath, JUL 23, 2019, View Source [SID1234537669]).
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Second Quarter 2019 Highlights
•OverStitch, or ESS, sales increased 40% to $7.7 million, representing 63% of our Endo-bariatric sales for the quarter
•Endo-bariatric sales increased 13% to $12.2 million in the second quarter of 2019 from $10.8 million in the second quarter of last year
•In constant currency, Endo-bariatric sales increased 16% for the second quarter
Todd Newton, CEO of Apollo, commented, "The second quarter was a terrific OverStitch quarter. Sales were strong with 40% growth in the quarter. In addition, the interest expressed for OverStitch at Digestive Disease Week, the main gastroenterologist event of the year, was exciting with more than 30 abstracts from physicians related to OverStitch use in a variety of endolumenal surgeries and four DDW-sponsored training events that included endoscopic suturing in addition to our own company-provided training sessions in our mobile learning center."
Second Quarter 2019 Results
Consolidated Endo-bariatric product sales increased 13% as reported and 16% in constant currency. Of our Endo-bariatric product sales in the second quarter of 2019, 63% related to ESS. In the U.S., Endo-bariatric sales increased 21% to $5.2 million and outside the U.S. ("OUS") Endo-bariatric sales increased 8% as reported and 13% on a constant currency basis to $7.0 million.
Worldwide, ESS product sales increased 40% as reported and 43% in constant currency. U.S. ESS product sales increased 42% to $3.8 million in the second quarter of 2019. OUS ESS product sales increased 38% as reported and 44% in constant currency to $3.9 million.
Worldwide IGB sales decreased 15% as reported and 12% on a constant currency basis. U.S. IGB sales decreased $0.2 million, or 13%, to $1.5 million in the second quarter of 2019 while OUS IGB product sales decreased 15% as reported and 12% on a constant currency basis to $3.1 million.
The divestiture of our Surgical products in December of 2018 affects the comparability of our total revenues in the second quarter of 2019 versus 2018. Total revenues in the second quarter of 2019 include $1.3 million of Surgical product sales from certain OUS markets where we continue to temporarily distribute these products and $0.6 million of transition and manufacturing services provided to ReShape while total revenues in the second quarter of 2018 included $4.7 million of Surgical product sales.
Gross margin for the second quarter 2019 was 50%, compared to 58% for the second 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. Gross margin for our Endo-bariatric products was 50% for the second quarters of both 2019 and 2018.
Total operating expenses decreased $2.3 million to $14.4 million in the second quarter 2019, compared to the second quarter 2018. 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. In addition, sales and marketing expense is $0.7 million lower than the second quarter of 2018.
Net loss for the second quarter 2019 was $8.8 million compared to $9.5 million for the second quarter 2018.
Cash, cash equivalents and restricted cash were $23.9 million as of June 30, 2019.
Conference Call
Apollo will host a conference call on July 23, 2019 at 3:30 p.m. Central Time / 4:30 p.m. Eastern Time to discuss operating results for the second quarter ended June 30, 2019.
To participate in the conference call dial (866) 393-4306 for domestic callers and (734) 385-2616 for international callers. The conference ID number is 3369396. 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.