Allurion Technologies, Inc.

Thank you for standing by and welcome to the Alurian first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mike Kavanaugh, Investor Relations. Please go ahead.

Good morning. Thank you all for joining us today. Earlier today, Lurion Technologies Incorporated issued a press release announcing financial results for the quarter ended March 31, 2024, and reviewing the company's recent business highlights. You can access a copy of the announcement on the company's website at www.investors.lurion.com. With me on the call today are Shantanu Gaur, Founder and Chief Executive Officer, and Chris Geber, Chief Financial Officer. Shantanu will begin the call by discussing the quarter's business and operational highlights and our 2024 financial outlook. Chris will then provide a review of our financial results, and we will close the call with a question and answer session. Before we begin, I would like to inform you that comments mentioned on today's call may be deemed to contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to the financial outlook for 2024 and the path to profitability in the future, the market and demand for our products and elective procedures, the impact of cost reduction initiatives on cash burn and runway, the ability to compete with GLP-1 drugs or use the Allurion program in combination with GLP-1 drugs, timing and expectations regarding our ongoing clinical trials, and expectations regarding our ability to launch our products in new markets and growth in procedure volumes. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our Securities Exchange Commission filings, including our most recent 10-K filed on March 26, 2024. Our SEC filings can be found through our company website at investors.allureon.com or the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements, and Allurion undertakes no obligation to publicly update or release any revisions to these forward-looking statements. Please note that this conference call is being recorded and will be available for audio replay on our website at allurion.com under the Events and Presentations section in our Investor Relations page shortly after the conclusion of this call. Today's press release and supplementary financial data tables have been posted to our website. And with that, I will turn a call over to Shantanu.

Thank you, Mike, and thanks to everyone for joining today's call. As I report on our first quarter 2024 results, I'm very pleased with the performance of the Illurion team as we accelerated out of the fourth quarter, which, as you recall, was impacted by headwinds that we view as being largely short-term in nature. Revenue in the first quarter totaled $9.4 million, a sequential increase of 14% from the fourth quarter of 2023. More importantly, procedural volumes, as estimated by new app users, the metric we believe is currently the best indicator of demand for our product, reached a record high for the company in the first quarter, growing by 22% compared to the fourth quarter of 2023 and 12% compared to the first quarter of 2023, representing what we believe to be a strong and growing opportunity for the Illurion program. The year-over-year procedural volume growth exceeded our plan for the first quarter of 2024, and we expect continued acceleration of procedural volume throughout the remainder of 2024 as we increase productivity of existing accounts and open new accounts. The higher sequential growth in procedural volume compared to revenue in the first quarter is reflective of ongoing destocking of inventory, especially in distributor markets. We expect that the majority of this destocking will conclude in the second quarter, that most distributors will begin to reorder in the second quarter, and that procedural volume and revenue growth will be more closely correlated in the second half of 2024. While it is still early in the second quarter, we are observing positive trends in procedural volume thus far, especially in markets that had previously been impacted by short-term headwinds. With these markets stabilizing, we are reiterating our 2024 guidance for procedural volume, revenue, gross margin, and cash burn, with the majority of revenue growth occurring in the second half of the year. I'm also extremely pleased with how we have improved our execution and increased efficiency across our operations. In the first quarter of 2024, cash burn reduced by 62% compared to the fourth quarter of 2023, from $22 million to $8.4 million. This was largely driven by a 43% reduction in operating expenses and reallocation of marketing investments to higher ROI channels. We expect to continue our efforts to further optimize our spend to drive even higher efficiency revenue in the subsequent quarters. We have also taken significant steps recently to simplify our capital structure and pave the way for future growth. In April, we announced the closing of a $48 million convertible senior secured note financing with RTW Investments that allowed for the prepayment of an existing senior secured term loan. This refinancing reduces annual interest expense, provides increased near-term cash flow and operational flexibility, and extends our expected cash runway in advance of the Audacity FDA trial readout. We believe the simplification of our capital structure, combined with the operational efficiencies we have unlocked at Allurion, positions the company for success in 2024 and beyond, with a series of catalysts ahead. Chris will provide more color on our first quarter financial performance later in the call, but I would like to first highlight some of our more impactful recent business successes. As I mentioned in the last call, we believe the GLP-1 drugs will be a significant net positive for Allurion in the long term. First, they have shown significant light on the massive global obesity problem. And second, these drugs are not and will not be the ideal therapy for all of the approximately 1 billion people worldwide suffering from obesity. We know adherence to these drugs is low, with multiple studies and surveys validating that only one quarter to one third of patients will remain on these drugs beyond one year, and that these drugs must be continued indefinitely. Currently, approximately one-third of patients on the Illurion program had previously tried anti-obesity medications. In the first quarter, we also began to observe that an increasing number of patients in the funnel showing interest in the Illurion program had previously tried GLP-1 drugs, providing further validation that these drugs may have been a short-term headwind in 2023, but could become a long-term tailwind for Illurion in 2024 and beyond. GLP-1s have driven an increased visibility on the obesity space and the need for cost-effective and scalable therapies. In January, we announced the first delirium patients treated with full reimbursement in partnership with the UK's National Health Service. Approximately one in every four adults in the UK has obesity, and an additional 38% are overweight. There are 3,000 obesity-related hospital admissions per day in the UK. And weight loss surgery costs, on average, about 10,000 British pounds. These surgeries have a penetration rate of roughly 1%, implying a 100-year backlog at current procedure rates. Even if bariatric surgery volumes scale up considerably in the short term to meet this need, there will still be a significant backlog. In contrast, Allurion is a scalable, safe, and effective solution that can immediately address this need in the UK at significantly lower cost. And I look forward to the opportunity to expand with the NHS in years to come and replicate this model in other markets with significant backlogs. In addition, combination therapy is becoming increasingly important in obesity management. In January, we announced the publication of a randomized double-blind control study demonstrating significant improvement in obesity-related comorbidities with the Allurion program used with or without an oral GLP-1. Specifically, the trial demonstrated that the Allurion program alone resulted in remission of type 2 diabetes, hypertension, and obstructive sleep apnea in just four months in over half of the patients enrolled. and that these results improved when combined with an oral GLP-1 drug. This study underscores two important points regarding the Allurion program. First, Allurion acts fast. In as little as four months, there was a statistically significant improvement in, and in over half of the cases, a full resolution of these serious comorbidities. Second, Allurion can be used effectively with GLP-1s as a combination therapy. which is encouraging as we may be able to improve outcomes even further and expand our therapy to a broader segment of the population. Turning to our home market in the U.S., we were thrilled to announce in April that our Virtual Care Suite, or VCS, is now available to license in the United States for providers offering GLP-1 and other anti-obesity medication therapy, bariatric surgery, or weight loss devices. Already in use by thousands of providers in over 50 countries, The VCS is an AI-powered weight loss management suite that enables remote patient monitoring, telehealth, and care team collaboration all under one digital interface. In 2023, Allurion added Coach Iris, a personalized AI-powered weight loss coach, to the VCS, enabling a more customized behavior change program to accompany a wide range of obesity treatments. The data show that the VCS is already having a profound impact on our obesity treatment globally. Specifically, clinics with the highest VCS usage achieve an additional 11% weight loss, with 16% more patients reaching their goals and a 17% increase in net promoter score. We believe that healthcare providers will increasingly need a powerful tool like VCS to help monitor and manage the growing number of patients with obesity under their care. As part of the VCS launch in the U.S., we also debuted a new version of Illurion Insights, the web-based dashboard that providers and care teams use to navigate the VCS. Highlights of the new version of Illurion Insights include a responsive mobile app-like design, allowing providers and care teams to efficiently sync with their patients, a more efficient navigation and seamless interface, and multitasking capabilities for busy providers. Just last month, we asked a group of experts at the Obesity Medicine Association Conference in Denver for their impressions of the VCS, and we believe their feedback bodes well for our launch in the United States. Not only was there positive feedback on the role that VCS could play in their busy obesity practices, but it became clear that many of these same providers would be appropriate customers for the Illurion balloon. With the launch of the VCS in the United States, we are looking forward to building strong partnerships with U.S. providers, including those who may become future customers for the Illurion balloon if FDA approved. Long term, we are encouraged by the continued exposure the obesity market has received from the growing prominence of the GLP-1 drugs and the rising interest and attention to the weight loss space. Obesity is a massive worldwide epidemic, and we believe Illurion is well positioned to be a leader in this space. not just as a standalone therapy, but also as a supplemental one. Before handing the call over to Chris to discuss financials, I want to recognize the Allureon team as a whole. Our team continues to innovate, expand, and execute. I'm proud to lead a group of highly talented professionals working collectively to further our mission to treat a significant segment of the 1 billion people globally suffering from obesity. With that, I will now hand the call over to Chris.