ReShape Lifesciences, Inc.

Good morning, and thank you for joining the Reshape Life Sciences second quarter 2022 conference call. I would now like to turn the call over to Paula Schwartz from RX Communications. Please go ahead.

Good morning, and thank you for joining the Reshape Life Sciences third quarter 2022 earnings call. I'm pleased to be joined by Paul Hickey, President and Chief Executive Officer of Reshape Life Sciences, and Tom Stankovich, Chief Financial Officer. Paul will provide an overview and update on the company's activities, and Tom will review the financial results for the quarter. He will then turn the call back over to Paul for some closing remarks, after which we will open up the call to a question and answer session. As a reminder, this conference call, as well as Reshape Life Sciences' SEC filings and 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. 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-K. As an additional reminder, reshaped stock is listed on the NASDAQ, trading under the symbol RSLS. I will now turn the call over to Paul Hickey, President and CEO of Reshape Life Sciences. Paul?

Thank you, Paula. I'd like to thank all of you for joining us this morning for our third quarter 2022 earnings call. For those of you who took part in our second quarter earnings call, you may recall that that was my first day of employment with Reshape. Well, today marks my 98th day with the company, and I'm excited to reconnect with you. and share a more meaningful update on the current state of the business and exciting initiatives ongoing at Reshape. During the past three months, I've been working hard with my team to understand how the business has progressed since I left the predecessor company, Intermedics, five years ago. Since our last call, I've gained valuable insights into the company's potential to address the large market opportunity helping to alleviate the obesity epidemic. And I'm thrilled about the enormous prospects that lay ahead of us. As I mentioned last quarter, this is a significant reason that I chose to rejoin the company. I'm excited to say that there are great things going on here that support our mission to help improve the quality of life for those individuals who are fighting obesity and related comorbidities, which can often be a lifelong battle. This morning, I'd like to highlight some of the changes we've made in the last 98 days, what is working for us and what our plan is going forward. Specifically, I'd like to walk through the three strategies, or what I refer to as our growth pillars, that we're now executing. The first pillar is to operate our business with a disciplined, metrics-driven mindset to ensure we have predictable growth and profitability. The second is to continue to develop and launch new products and therapies to augment our best-in-class portfolio. And the last is to continue to drive and gain search and advocacy for our product portfolio. by ensuring that it is backed by compelling evidence showing effectiveness when addressing the continual care needed to fight obesity. Before I fully address these three growth pillars, let me touch on the obesity market that we are working hard to address. The global multi-billion dollar obesity market opportunity before us is enormous and remains largely untapped. How large is the market? Currently 2.5 billion people, more than 30% of the global population is considered overweight or obese. A figure that's expected to grow 50% by 2030. The global weight loss and obesity management market is expected to rise an estimated value of $300 billion, with a substantial compound annual growth rate of 6.7% from 2019 through to 2026. Drilling down a bit, the overall bariatric surgical device market alone is projected to reach $2.8 billion worldwide by 2025. with the U.S. portion accounting for 1.8 billion in the same timeframe. Additionally, with 50% of adults in the U.S. trying to lose weight every year, we believe our suite of weight loss and metabolic health solutions is positioned to address the entire weight loss continuum. But how do we get after it? The metabolic and bariatric surgery market is complex. There's no single panacea for weight loss, and we must have a sound strategy to address the market needs and ensure our success. Well, as I mentioned a moment ago, our first growth pillar is to optimize our operations and have a disciplined, measured approach to our business. From day one, it was clear to me that the business model for Reshape needed to change dramatically in order to become more disciplined, sustainable, and scalable as an organization. We have made changes. We are now on a path to profitability, which we will achieve by continuing to partner with our physician advocates and leveraging our portfolio of proven products that manage and treat obesity and metabolic disease. To advance our sales efforts, in August, we appointed seasoned executive Nick Ansari, who I've had the pleasure of working with for several years. His leadership, in conjunction with the implementation of the Salesforce platform, is enabling us to track sales metrics and key performance indicators to predict and drive sales growth. We now track customer engagement, leads, warm transfers of qualified patients to practices with a much higher level of confidence. By tracking these metrics, we can adapt our marketing campaign to be more effective and efficient. Case in point, we have pivoted our media campaign to regional, multi-platform digital strategy aligned with our search and advocates. This digital marketing approach has had an immediate impact and as a result, has reduced our cost per lead by over 50%. We have also taken other significant measures to right-size the organization and reduce operating expenses so we can preserve cash and invest in our future growth drivers to a greater degree including sales and marketing to drive revenue both internationally and domestically our second strategy our pillar for growth is to develop and commercialize new products and therapies it seems simple but it takes experience to be good at it and I'm confident leading this team that we're going to be very successful I'm pleased to report Having completed the limited release of our disposable reshape calibration tubes, we have made additional improvements to the products and are planning a full rollout in the coming months. We expect this line extension of calibration tubes to be rapidly adopted by surgeons, given their ability to help better visualize the anatomy, making it easier to identify potential defects during a broad range of bariatric procedures, such as laparoscopic sleeve gastrectomy and gastric bypass. To be clear, this product is used in procedures other than the LAMPAN and therefore provides great opportunity to increase future revenues. The second product we are commercializing is ReshapeCare, our virtual weight management platform. When discussing ReshapeCare and how we will impact the entire weight loss continuum, it's imperative that we touch on the virtual healthcare delivery space, a market that is expected to reach $95 billion by 2026. We will win in this area by leveraging our telehealth counseling platform. Reshape Care supports and coaches patients throughout their weight loss journey, regardless of the treatment pathway. We were recently pleased with the reception we have received as we spoke to large self-insured employers about Reshape Care and how this important program can help impact overall employee health and reduce employers' healthcare costs. Based on this positive feedback, we are expanding this program to support both our potential partners' employees and our lap band patient leads to improve their health and achieve weight loss. Reshape Care and its extension, Reshape Marketplace, that includes Reshape Optimize, our advanced line of premium supplements, allows Reshape to distinguish itself with an incredibly valuable e-commerce platform with healthcare provider-recommended, competitively placed weight loss and wellness products that address nutrition, exercise, sleep, and stress. Both platforms are a key element to our patient engagement and retention strategy. On the horizon is the launch of the next generation physician-led redesign of lap band, the Lap Band 2. This project was started with the goal to reduce patient discomfort and minimize postoperative adjustments by minimizing the potential for obstructions while maintaining satiety. As you may recall from previous updates, these are commonly noted drawbacks of the lap band. The Lap Band 2 incorporates an enhanced band reservoir technology that serves as a relief valve designed to alleviate discomfort from swallowing too much food. We're excited about this next-gen device. Surgeons I've spoken with about this new design believe the LapBand 2 will allow us to engage new surgeons and reengage those who have used the LapBand in the past. I'm excited to report that in the first part of 2023, we're expected to submit for clearance with the FDA. Stay tuned for future updates. As excitingly, we have also advanced the development of our diabetes block stem neuromodulation, or DBSM device, which has the potential to address the significant global type 2 diabetes market. Type 2 diabetes remains challenging to effectively treat for over 30 million Americans who suffer from the disease, especially considered an estimated 50% of type 2 diabetics do not take medications as prescribed. Data on the device was recently published in the peer-reviewed journal Frontiers in Neuroscience and was presented in an abstract during Obesity Week. Our innovative DBSN system may hold significant promise as it's designed to address type 2 diabetes by electrically blocking the vagus nerve signals to the liver, which has been shown to decrease insulin resistance, while concurrently stimulating the vagus nerve feeding into the pancreas, which has been shown to release insulin. The vagus nerve is involved in nearly every physiological action in the human body. It serves as a superhighway, carrying information between the brain and the internal organs. The vagus nerve has unlocked incredible treatments for numerous diseases, such as depression and prescription-filled epilepsy. The compelling data generated on our DBSN thus far was funded by an NIH Small Business Innovation Research Grant, or SBIR grant, and we have received subsequent SBIR grant funding to focus on the development of this technology to treat hypoglycemia. This strong SBIR support further validates our belief that addressing type 2 diabetes in this manner has tremendous potential advantages over current treatment options. We believe that this device may have the ability to address the clear unmet need for a new non-pharmacological and patient-specific treatment providing improved efficacy and durability for type 2 diabetes. We're very excited about this technology and its future role in fighting obesity with personalized therapy, and we'll continue to collaborate with leading researchers and seek continued non-dilutive NIH grant support. The third and last growth pillar for ReShape is to gain surgeon advocacy by ensuring our products and therapies are supported by strong clinical evidence. In other words, we need to provide an evidence-based care continuum. I'm pleased to say that the last few months have been tremendous for Lapland. Specifically, the recent evidence-based guidelines for metabolic and bariatric surgery issued by the American Society for Metabolic and Bariatric Surgery, or ASMBS, and the International Federation for the Surgery of Obesity and Metabolic Disorders, or IFSO, bode well for reshape. The updates were long overdue, replacing the 30-year-old guidelines issued by the NIH in 1991. The guidelines now recommend metabolic and bariatric surgery for individuals with a BMI of 35 or more, regardless of the presence, absence, or severity of obesity-related conditions, and that it be considered for adults with a BMI of 30 to 34.9 and metabolic disease and inappropriate selected children and adolescents. The guidelines further state that even without metabolic disease, weight loss surgery should be considered as an option for people whose BMI is greater than 30 and who have not achieved substantial or durable weight loss or improvement in obesity-related conditions using non-surgical methods. These new guidelines align well with LAPBAN, which is approved by the FDA for adult patients with a BMI over 30, with at least one obesity-related comorbidity, as well as any patient with a BMI of over 40. Importantly, the lap band, backed by 25 years of clinical evidence, is the only FDA-approved laparoscopic weight loss device on the market. As a result, if supported by payers, these new guidelines can dramatically increase the number of patients eligible for bariatric surgery, and it is our strong belief that, among approved procedures, the personalized lap band will prevail as the least invasive surgical treatment option. In addition to the new guidelines issued in conjunction with IFSO, in October, the ASMBS issued a consensus statement on lap band use in aftercare management, validating that the anatomy-sparing lap band is a safe and effective weight loss solution. We were pleased to see that many of the determinations reached in the statement aligned perfectly with Reshape's own evidence-based best practices recommendations. Additionally, the experts who issued the consensus statement also concluded that proper aftercare related to behavioral health and nutrition is critical to the success of the weight loss procedure. I will say it again. The consensus statement also concluded that proper aftercare related to behavioral health and nutrition is critical for the success of the weight loss procedure. That is important because we believe that our nationwide reshape care program aligns with this key component of lap band aftercare. through which we offer effective and convenient virtual health coaching for all weight loss patients, including pre- and post-surgical bariatric patients. Our philosophy to partner with organizations such as the ASMVS to identify and train surgeons is a core piece of our strategy and is critical to ensuring that the surgeons and healthcare professionals on the front lines are fully educated on the benefits of our comprehensive WAPM program so that, together, we can provide the long-term care required for patients to achieve safe, durable weight loss results. Taken together, the updated guidelines and the consensus statement provide a crucial component to driving future adoption and top-line revenue for Reshape. Now, before I turn the call over to Tom to recap our financial performance, I want to highlight some additional metrics that are not captured in our 10-Q. As you can all appreciate, we have moved quickly to effect change, and I'm confident that our path will lead to predictable and scalable growth. Operationally, we have made tough but necessary adjustments to right-size the organization and to shorten our path to profitability. When discussing our third quarter revenue, Tom will highlight the decline in our international sales, due primarily to the lack of resources and focus. This international business is an important part of our mission, and we will have resources now focused on reversing this trend. For our U.S. sales, it has been previously discussed how complex the weight loss journey is for individuals, and it may take up to six months or even over a year to commit to bariatric surgery. It has also been previously reported how COVID's Omicron variant impacted our sales and lead generation program early in 2022. This setback was real, but temporary. Our commercialization team, comprised of both sales and marketing, are now aligned to support our surgeon partners and drive growth. There are some early indicators for success, including the number of surgeons we have engaged, trained, and are now beginning to offer the lap band. In 2022, we have 31% more surgeons offering lap band. In October alone, we had more than twice the number of surgeons use the lap band than in October of 21. This is clearly evidenced by October's 50% revenue growth compared to last year. As I've stated, we are optimistic about the metrics we have established and will continue to optimize our business model to drive top-line revenue and profitability. I'd now like to turn the call over to Tom Stankovich to provide a recap of financial performance. Tom?