ReShape Lifesciences, Inc.

Good afternoon and thank you for joining the Reshape Life Sciences First Quarter 2024 Conference Call. I would like to turn the call over to Michael Miller from RX Communications.

Good afternoon and thank you for joining the First Quarter 2024 Reshape Life Sciences Earnings Call. I'm pleased to be joined today by Paul Hickey, President and Chief Executive Officer, and Tom Stankovic, Chief Financial Officer. Paul will provide an overview and update on the company's activities and Tom will review the financial results for the period. We will then turn the call back over to Paul for some closing remarks, after which we will open up the call to 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 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, Mike, and thanks to all of you for joining us this afternoon for our earnings call for the first quarter of 2024. During the first quarter and subsequently, we have remained focused on delivering shareholder value and have reshaped on a path to profitability and long-term sustainability. Key to our success include our efforts to stabilize revenues as well as our disciplined approach to continually leveraging resources and focus on reducing costs as we outlined in March. To that end, we continue to fine-tune our lead generation activities and invest in our growth drivers, including the commercial launch of our physician-led redesign, LapBand 2.0 Flex. At the same time, we continue our high priority search for strategic and synergistic M&A opportunities. As we have mentioned before, we have engaged the Maxim group on an exclusive basis to assist in this process. As one can imagine, we've had a high level of activity and will continue this effort to find the right partner to join us in our mission at Reshape to improve the quality of life for individuals fighting obesity worldwide. With the stigma around obesity and medical intervention being normalized, by the surge of GLP-1 receptor agonist usage, we are steadfast in our confidence that the numbers of people seeking medical professionals, especially bariatric surgeons, will continue to increase. The GLP-1's short-term impact on the market last year made it necessary for us to undertake additional strategic cost reductions, including a further reduction in staff, leading to a projected 55.4% decrease in operating expenses for 2024 as compared to last year. Tom and I will provide further details during this call, but this reorganization and decrease in expenses will allow us to focus on and optimize the commercialization of our LapBand 2.0 Flex created to improve the patient experience while continuing to market our current LapBand. I'm happy to report that the limited launch of the LapBand 2.0 Flex continues to progress well and the initial surgeon feedback has been positive. Added to this, our revamped patient-friendly website is receiving meaningful traffic, while our co-op marketing program involving cost sharing with key lap band centers has proved effective and scalable. Before I recap our first quarter and subsequent highlights, I'd like to remind listeners about the important events occurring within the obesity market today. As most of you already understand, the global obesity market is growing at an alarming rate and carries with it significant medical repercussions and associated economic costs. Obesity remains a complex, lifelong disease that requires personalized treatment to ensure long-term weight loss goals are achieved. I'm sure you're also aware of the growing popularity of GLP-1 receptor agonists that have brought significant benefits to those suffering from type 2 diabetes and that help those who have obesity. We believe that GLP-1 adoption is expanding the medical weight loss market by vastly reducing the stigma that often occurs around obesity and medical intervention, including bariatric surgery. However, it's becoming very clear that weight loss due to GLP-1 drug usage has limitations, especially related to cost, accessibility, and the fact that weight loss plateaus by 12 to 18 months. Additionally, the real-world long-term tolerability is low, In one large analysis, only 27% of patients prescribed GLP-1 receptor agonists were adherent after one year. We continue to believe, based on this and other evidence, that the market opportunity for the lap band will increase over time, especially with the newly launched next-generation lap band 2.0 flex. From a continuum of care perspective, individuals with obesity on GLP-1 therapy are likely potential candidates for lap band bariatric surgery as the next viable anatomy-preserving weight loss treatment. In other words, once GLP-1 patients get a taste of weight loss, yet have issues with the drug's accessibility, durability, or tolerance, they will contemplate bariatric surgery, especially a minimally invasive procedure like the lap band. Furthermore, as the safest and only adjustable and reversible bariatric surgery, The lap band is ideal for simple specific types of patients like women in childbearing years who are not able to utilize GLP-1 drugs. Now let me take a few minutes to update you on our progress related to our primary growth pillars. As I mentioned earlier in the call, I want to provide more specifics on the progress made toward our first pillar to deliver shareholder value and ultimately profitability, specifically As we considered the impact of GLP-1 receptor agonist prescriptions for weight loss treatment, which has put pressure on the bariatric industry, it was imperative to conduct a thorough evaluation of our operations and swiftly implement substantial cost-cutting measures. At the same time, we were channeling investments into the most promising part of our strategy to drive growth and maintain adherence to critical P&L metrics within our organizations. Tom will detail the expense savings we have identified, realized, and are planning for. In summary, we have identified and implemented additional cost reductions expected to result in lower operating expenses of approximately $8 million in 2024, a more than 50% reduction over 2023, excluding one-time costs. We are optimizing our marketing spending while making additional reductions in consulting services, totaling approximately $2.4 million. We have also executed a reduction in force equating to approximately $1.2 million. We've decided to temporarily pause our reshaped care program and achieve estimated savings of $0.8 million while we work to augment the reshaped care platform and secure a self-insured employer to provide reshaped care to employees. We have also planned for $0.9 million of reductions for incentive compensation and other payer-related amounts. all a part of streamlining our team significantly, but without affecting revenue. Taken together, these reductions will allow us to focus and invest in our growth drivers, while at the same time extend our cash runway. These changes are bold, necessary, and indicative of our commitment to our first pillar, which I established in late 2022. In point of fact, with these 2024 reductions, the company's core operating expenses reduced between 2022 and 2024 an estimated $24 million, or 75%. In addition to the necessary cost reduction initiatives related to our first growth pillar, we are continuing to make progress with our cost-effective digital lead generation and patient engagement campaign through our partnership with Hive Medical. This platform allows us to access advanced lead optimization software that enhances patient engagement and increases patient volume. The software utilizes AI SMS platform technology along with our direct-to-consumer marketing campaign to help individuals easily book appointments with medical professionals. This has led to an increase in the quality of patient needs and cost reduction in targeted markets. Let's now discuss our progress executing our second growth pillar to expand our portfolio and distribution. In February, the first surgeries using Reshape's enhanced lap band 2.0 flex were successfully performed. Since then, additional surgeries have taken place, and the initial limited launch has gained momentum. This launch represents a significant advancement in improving the overall experience for lap band patients. While we're now only approved to market in the US, we are working to obtain regulatory approvals in both Canada and the EU. The new Flex technology serves as a relief valve, alleviating discomfort caused by swallowing large pieces of food and designed to eliminate the need for in-office band emergent adjustments as the band temporarily relaxes before returning to its original diameter. Now, earlier this year, we had the opportunity to train surgical fellows on the LapBand, and we also introduced them to the LapBand 2.0 Flex. This was an exciting event because the future of LapBand relies on its continued adoption by surgeons and surgical fellows who are the next generation of bariatric surgeons. Based on feedback from current surgeons, including those who have already used the LapBand 2.0 Flex, we believe that the new Flex technology will enable us to engage more surgeons, and attract new and existing lap band patients. In June, in San Diego, at this year's annual American Society for Metabolic and Bariatric Surgery meeting, or the ASMS meeting, we are excited to showcase the FLEX technology to the largest gathering of surgeons and integrated health professionals. All combined, we feel there is momentum building and increasing demand for lap band 2-panel FLEX surgery. making it a true catalyst for growth in LapBan franchise and the company as a whole. Now, it's also important to note that in March, we significantly strengthened Reshape's intellectual property portfolio surrounding the IntegraStick balloon system, having received a notice of allowance from the US Patent Office and Trademark Office, and last week had the patent issued. We will continue to build a defensive moat around our product portfolio, innovation and commercialization efforts, and take offensive action to defend our position utilizing non-dilutive funding. Before I turn the call over to Tom, I want to reiterate that we remain confident that with our LapBand 2.0 Flex and Legacy LapBand, we are uniquely positioned with the safest and most durable organ sparing and reversible weight loss option for those patients that have historically had an aversion to medically managed weight loss and surgery. Given the growing body of evidence pointing to the fact that weight loss due to GLP-1 receptor agonist usage has limitations related to comorbidities and accessibility, we believe that the market opportunity for the lap band 2.0 flex and lap band will increase over time. From a continuum of care perspective, these patients are likely potential candidates for bariatric surgery as the next viable weight loss treatment. I'd like to now turn the call over to Tom Stankiewicz to provide a recap of our financial performance. Tom?