On November 1, 2021 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, 2021 and recent corporate highlights (Press release, Apollo Endosurgery, NOV 1, 2021, View Source [SID1234594010]).
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Third Quarter 2021 Selected Financial Results
Total revenue of $16.4 million, an increase of 28% compared to the third quarter of 2020
Endoscopic Suturing System (ESS) revenue increased 34% and Intragastric Balloon (IGB) revenue increased 21% compared to the third quarter of 2020
Gross margin of 56%
Pro forma cash of $98.3 million, including net proceeds from October 2021 follow-on offering
Recent Corporate Highlights
Announced that investigators of the Multi-Center ESG Randomized Interventional (MERIT) study reported data from the MERIT-Trial, which met its primary endpoints for safety and efficacy, with patients undergoing the Endoscopic Sleeve Gastroplasty (ESG) procedure achieving excess body weight loss of 49.2% at 12 months, improvements in weight-related comorbidities, and a serious adverse event rate of 2%;
Submitted a De Novo classification request to the U.S. Food and Drug Administration seeking 510(k) classification and clearance for the Apollo ESGTM and Apollo REVISETM devices;
Grew year-to-date revenue from Apollo’s top 10 direct accounts by 100% compared to 2020;
Continued X-Tack penetration in key accounts, with over 70% of third quarter 2021 revenue from repeat orders;
Closed a follow-on equity offering that generated net proceeds of approximately $69.9 million to support continued growth-related investments and expand the institutional shareholder base; and
Announced the publication of a multi-center study of Apollo’s X-Tack System, demonstrating high success rates, ease of use, and economic value in the treatment of GI defects.
"In the third quarter, we continued to build momentum and energize our business in the U.S. and overseas, delivering strong financial performance for both revenue and gross margin," said Chas McKhann, Apollo’s president and CEO. "Our recently completed follow-on financing enables us to thoughtfully invest in advancing large-scale opportunities to expand our addressable markets. For example, our recent De Novo 510(k) classification request for Apollo ESG and Apollo REVISE is based on well documented therapeutic solutions in categories where patients are increasingly seeking effective but less invasive alternatives. We are building a foundation for long-term value creation here at Apollo."
Third Quarter Results
Total revenues of $16.4 million for the third quarter of 2021 increased $3.5 million, or 28%, compared to $12.8 million in revenue during the third quarter of 2020. Compared to the third quarter of 2020, U.S. product sales increased 30% and OUS increased 24%.
Compared to the third quarter of 2020, total ESS product sales increased $2.6 million or 34% and total IGB product sales increased $1.0 million or 21% due to the improvement in demand for our products, the launch of X-tack product in the U.S. earlier this year, and an increase in product sales in our distributor markets compared to the prior year quarter when those markets were still destabilized from the initial impact of the COVID-19 pandemic.
Gross margin increased to 56% for the third quarter of 2021 from 55% in the third quarter of 2020 due to higher product sales and unabsorbed overhead costs from reduced production volumes in the prior year quarter as a result of the COVID-19 pandemic.
Total operating expenses increased $5.2 million compared to the third quarter of 2020. The increase was due to the normalization of temporary cost controls that were implemented in response to the pandemic in the prior year and higher non-cash stock-based compensation expense of $1.5 million in the third quarter of 2021.
Net loss for the third quarter of 2021 was $6.7 million compared to $2.6 million for the third quarter of 2020.
Non-GAAP adjusted EBITDA, which excludes interest, taxes, depreciation, amortization, unrealized foreign exchange and stock-based compensation, in the third quarter 2021 was a loss of $2.5 million, compared to a loss of $0.3 million in the third quarter 2020.
Cash, cash equivalents and restricted cash were $28.5 million as of September 30, 2021, representing a net cash burn of $2.8 million for the third quarter.
In October, the Company completed a follow-on equity offering of 9,660,000 shares for gross proceeds of $75 million.
2021 Financial Outlook
Apollo expects full year 2021 revenue between $63-$64 million. The Company continues to monitor the potential and uncertain impact of the ongoing COVID-19 pandemic. Should hospitals or outpatient centers where the company’s procedures are performed experience continued or additional surges in cases and need to defer elective procedures to preserve capacity for COVID-19 patients, the company’s ability to achieve these financial projections could be adversely affected.
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 "Apollo Endosurgery Third Quarter 2021 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.