ReShape Lifesciences Q4 2024 Earnings Report

ReShape Lifesciences EPS Results

• Actual EPS: -$47.25
• Consensus EPS: -$101.50
• Beat/Miss: Beat by +$54.25
• One Year Ago EPS: -$2,771.75

ReShape Lifesciences Revenue Results

• Actual Revenue: $1.81 million
• Expected Revenue: $3.17 million
• Beat/Miss: Missed by -$1.36 million
• YoY Revenue Growth: N/A

ReShape Lifesciences Announcement Details

• Quarter: Q4 2024
• Date: 4/4/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 10, 2025
• Conference Call Time: 4:30PM ET

ReShape Lifesciences (NASDAQ:RSLS) provides products and services that manages and treat obesity and metabolic diseases in the United States, Australia, Europe, and internationally. The company's product portfolio includes Lap-Band System, a minimally invasive long-term treatment of severe obesity and more invasive surgical stapling procedures, such as the gastric bypass or sleeve gastrectomy; Lap-Band 2.0 System, an adjustable postoperatively to increase or decrease the pressure to the band in order to optimize an individual's comfort and therapy effectiveness; and ReShape Calibration Tubes, that fits the lesser curvature of the stomach to reach the pylorus. It is also involved in developing ReShape Obalon Balloon System, consists of a swallowable capsule that tracks and displays the location of the balloon during placement; and ReShape Diabetes Bloc-Stim Neuromodulation (DBSN) device, a technology that is in development for the treatment of type 2 diabetes mellitus. The company was formerly known as EnteroMedics Inc. and changed its name to ReShape Lifesciences Inc. in 2017. ReShape Lifesciences Inc. was incorporated in 2002 and is headquartered in Irvine, California.

ReShape Lifesciences Q4 2024 Earnings Call Transcript

Key Takeaways

• 42% Reduction in Operating Expenses: ReShape cut operating expenses by nearly 42% in 2024 (excluding M&A costs) and bolstered its financial position with a $6 million public offering in February.
• Exclusive US Distribution Deal: Signed an agreement with Israel-based Motion Informatics to import and distribute the FDA-cleared StimUL III neuromuscular rehabilitation device, expanding its AI-driven rehabilitation portfolio.
• International Expansion of LAP-BAND 2.0 Flex: Launched the next-generation LAP-BAND 2.0 Flex in the US and secured a Canadian distribution agreement with Liaison Medical following Health Canada approval.
• Strengthened IP and NIH Funding: Received key US and international patents for its diabetes neuromodulation system and secured a $241,000 NIH grant—bringing total non-dilutive funding to $1.15 million—for next-gen electrode studies.
• Pending Merger and Asset Sale: Agreed to merge with Viome Therapeutics while concurrently selling assets to BIORAD, with board approval and revised shareholder liquidation preferences aimed at maximizing value.

Presentation

[Operator]

Good afternoon, and thank you for joining the Lifesciences Earnings Highlights and Strategic Update Conference Call. I would now like to turn the call over to Michael Miller from Rx Communications.

[Michael Miller, Managing Director at Rx Communications Group, LLC]

Good afternoon, and thank you for joining the ReShape Lifesciences Earnings Highlights and Strategic Update Call. I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer and Tom Stankovich, Chief Financial Officer. During the call, Paul will provide an overview and update on the company's activities, and Tom will provide highlights of the financial results for the year end 2024. As a reminder, this conference call as well as ReShape Lifesciences' SEC filings and Web website, including the Investor Information section of the website, contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those discussed due to known and unknown risks, uncertainties and other factors.

[Michael Miller, Managing Director at Rx Communications Group, LLC]

These and additional risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, including those factors identified as risk factors in the company's most recent annual report on Form 10 ks. As an additional reminder, ReShape's stock is listed on NASDAQ, trading under the symbol RSLS. I'll now turn the call over to Paul Hickey, President and CEO of ReShape Lifesciences. Paul?

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Thank you, Mike, and thanks to all of you for joining us this afternoon. As Mike noted, I will provide a strategic update on ReShape's activities and have Tom review the financial performance. Let's start with an overview of our activities over the past year. We remain committed to a disciplined approach, strategically levering resources to execute our 2024 cost reduction plan while executing our growth initiatives. As Tom will detail, we reduced operating expenses by almost 42%, excluding M and A related costs compared to the previous year.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

And to help strengthen our financial position, we successfully closed a $6,000,000 public offering in February, positioning us for continued growth. Most excitingly, on April 9, just yesterday, we signed an exclusive agreement with Israel based Motion Informatics to import and distribute their next generation neuromuscular rehabilitation devices. This marks a significant milestone for ReShape as we expand and diversify our product portfolio. In fact, this partnership presents a unique opportunity to bring cutting edge AI driven neurorehabilitation solutions to The US market in alliance with our growth pillars and commitment to expand our portfolio with differentiated products and therapies. This is not my first introduction into the complex rehabilitation market.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

And point of fact, prior to joining ReShape, I was President and CEO of Ultimate Medical Inc, where we worked extensively both with physical and occupational therapists to help those with complex rehabilitation needs. It is a fascinating market and offers tremendous opportunity for ReShape Medical and the differentiated technology that motion informatics offers. Now we recently introduced the motion informatics technology at the American Occupational Therapy Association's twenty twenty five Annual Conference and Expo held in Philadelphia. The feedback I received at this meeting, as well as other engagements with occupational therapists, have made us very excited to distribute the FDA cleared Stimul three system. Motion informatics, innovative devices align well with our commitment to improving the quality of life of patients our products and therapies serve.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Our relationship with Motion Informatics will leverage our competencies and complement our existing commercial activity, including the LAP BAND two point zero Flex designed to improve patients' quality of life while driving meaningful clinical and commercial results. Now let me tell you a bit more about the Stimul three system and motion informatics' other exciting products. The Stimul III is a breakthrough system that integrates functional electrical stimulation, or FES, neuromuscular electrical stimulation, MMES, and real time EMG biofeedback into responsive platform, redefining rehabilitation for patients recovering from stroke, injury, or surgery. In addition, with motion informatics development and future release of their flagship Spatial Stimul MD or SSMD, they are advancing precision neurorehabilitation by harnessing real time electrophysiological data, biofeedback driven neuromodulation and AR powered intervention protocols to optimize neuroplasticity and accelerate recovery for patients with complex neurological conditions. Now by integrating biomechanics, predictive analysis, and remote care, they are creating a scalable, intelligent rehabilitation ecosystem, and we are excited to partner with them and bring these important devices to The US market.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Clearly, we have reasons to be enthusiastic about this relationship with Motion Informatics as it will provide an opportunity to drive growth while we continue to execute with a disciplined approach. Our strategy remains consistent with our growth pillar to expand our product portfolio with either organically developed products or with products from strategic partnerships. Operationally, we will continue to identify cost reduction opportunities and invest in our key growth drivers, including the commercial launch of the next generation physician led LAP BAND two point zero Flex. Initial feedback from surgeons during our market release of the LAP BAND two point zero Flex in The US has been overwhelmingly positive. As a reminder, the new Flex technology features a relief valve that helps alleviate discomfort from swallowing large pieces of food.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

This innovation eliminates the need for in office band adjustments as the band temporarily relaxes before returning to its resting diameter. In February, we entered into a distribution agreement with Liaison Medical to distribute the Lepantopenil Flex in Canada. As one of the largest surgical device distributors in the country, Liaison Medical has strong, well established relationships with hospitals and surgeons. This partnership follows the receipt of Health Canada's approval in November 2024 and marks a significant step toward expanding access outside The United States to effective minimally invasive weight loss solutions for patients seeking alternatives to traditional bariatric surgery. Now, regarding our intellectual property estate, the March 2024 notice of allowance received from the US Patent and Trademark Office, along with the issuance of key international patents from the State of Israel Patent Office, underscores our leadership in pioneering innovative treatments for type two diabetes.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Specifically, these patents ensure long term protection for our diabetes Neuromodulation System, which utilizes our proprietary V block technology platform in vagus nerve stimulation to tackle one of the most urgent global health challenges, diabetes and its strong link to obesity. In November of twenty twenty four, we received a supplementary grant of approximately $241,000 from the NIH in collaboration with the University of Southern California Center for Autonomic Nerve Recording and Stimulation System. This non dilutive one year grant is supporting studies evaluating the safety and efficacy of next generation electrodes for ReShape's retiree diabetes neuromodulation system. These advanced electrodes have the potential to double the nerve contact area, enhancing the delivery of the neuromodulation signals while reducing the power consumption. Our fourth NIH grant, this award brings our total funding to 1,150,000.00 reinforcing the strength of our non dilutive funding strategy and highlighting the NIH strong and continued interest in our groundbreaking diabetes neuromodulation technology and its potential impact on the global diabetes market.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Most notably, in July, we coordinated both the merger agreement with Viome Therapeutics and the concurrent asset purchase agreement with BIRAB, and we successfully negotiated with our Series C shareholders substantially lower the liquidation preference. All things considered, we feel strongly these concurrent deals are intended to maximize stockholder value and earnings potential. The transactions have been progressing and both the ReShape and BIOM teams have been diligently working on all needed aspects of the transactions so that we can set the date for the shareholder meeting. Our board has unanimously recommended merging with BIOM and simultaneously selling assets to BI RAD as we believe this strategic decision will generate significant value and growth for our shareholders in the newly formed entity. I would now like to turn the call over to Tom Stankovich to provide highlights of our financial performance.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Tom?

[Tom Stankovich, Chief Financial Officer at ReShape Lifesciences]

Thanks, Paul. And once again, thank you all for joining our webcast this afternoon. As Paul mentioned earlier, during 2024, we implemented a disciplined approach to executing our cost reduction plan. With various cost reductions in all areas we've achieved a 42% reduction in overall operating costs for 2024 compared to the same period last year excluding transaction related costs for our pending merger and asset sale. A full discussion of our actual financials is available in our press release and 10 ks.

[Tom Stankovich, Chief Financial Officer at ReShape Lifesciences]

So I will just take a moment to review key financial metrics for the twelve months ended 12/31/2024. Revenue totaled $8,000,000 for the year ended 12/31/2024, which represents a contraction of 8% or $700,000 compared to the same period in 2023. The primary reason for this decrease is due to the introduction of GLP-one pharmaceuticals as well as a reduction in marketing spend at certain times in 2024. Gross profit for the year ended 12/31/2024 was $5,100,000 compared to $5,500,000 for the year ended 12/31/2023 a decrease of half a million dollars or 9%. Gross profit as a percentage of revenue for the year ended 12/31/2024 was 63.2% compared to 63.9% for the same period in 2023.

[Tom Stankovich, Chief Financial Officer at ReShape Lifesciences]

The slight reduction in gross profit margin is primarily due to the write off of certain inventories offset by the company's allocating resources to increase efficiencies and a slight increase in product pricing. Sales and marketing expenses for the year ended 12/31/2024 decreased by 4,600,000.0 or 60% to approximately $3,000,000 compared to 7,500,000.0 for the same period in 2023. The decrease is primarily due to a decrease of 2,200,000.0 in advertising and marketing expenses including consulting and professional marketing services as the company has continued to scale down its marketing efforts to a targeted digital marketing campaign. General and administrative expenses for the year ended 12/31/2024 decreased by approximately 3,400,000.0 or 33% to approximately 6,900,000.0 compared to 10,300,000.0 for the same period in 2023. This decrease was primarily driven by $1,800,000 reduction in general legal audit and other professional fees as the company reduced its reliance on consultants and professional services to conserve cash.

[Tom Stankovich, Chief Financial Officer at ReShape Lifesciences]

In addition payroll related expenses including stock based compensation decreased by 1,300,000 due to changes in personnel and workforce reductions during the year. Research and development expenses for the year ended 12/31/2024 decreased by half a million dollars or 22% to 1,800,000.0 compared to 2,300,000.0 for the same period in 2023. The decrease is primarily due to a decrease of 300,000 in consulting and clinical trials as the company halted clinical trials during 2023 and reduced the use of consultants while the LAP BAND was released in early twenty twenty four. Transaction costs for the year ended 12/31/2024 were slightly over $1,000,000. We have incurred transaction costs during 2024 related to our pending merger and asset sale and we felt it necessary to isolate these costs separately.

[Tom Stankovich, Chief Financial Officer at ReShape Lifesciences]

These expenses primarily consisted of 700,000 of legal fees and 200,000 of audit related fees incurred with our pending merger and asset sale. Cash and cash equivalents as of 12/31/2024 were 700,000. As Paul mentioned earlier we completed an upsized $6,000,000 public offering on 02/18/2025. The company had $800,000 in a convertible note payable to an institutional investor at 12/31/2024 which was repaid on 02/18/2025. With that, I will now turn the call back over to Paul.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Thanks, Tom. To remind shareholders, the details of the merger with Viome are outlined in the S-four registration statement, which includes the proxy statement. When the SEC declares the S-four effective, we will plan and hold a shareholder meeting to approve the transactions. The upcoming merger with Viome and the concurrent asset sale to BI RADS should be a cause for optimism, and it is part of the reason our board unanimously recommended the transactions. In closing, I'd like to extend my heartfelt gratitude to our employees, board members, customers, consultant advisers, suppliers, and both our existing and new shareholders for your steadfast support of ReShape and for believing in our future as Viome.

[Paul Hickey, CEO, President & Director at ReShape Lifesciences]

Thank you all.

[Operator]

This conference has now concluded. Thank you for attending today's call. You may now disconnect.

Participants

Executives

• Paul Hickey, CEO, President & Director
• Tom Stankovich, Chief Financial Officer

Analysts

• Michael Miller, Managing Director at Rx Communications Group, LLC