Allurion Technologies, Inc.

Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the Ellurion second quarter earnings conference 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 conference over to Tara Brady. You may begin.

Good morning and thank you for joining us. Earlier today, Illurion Technologies Inc. issued a press release announcing financial results for the quarter ended June 30th, 2025 and provided a business update. You can access a copy of the announcement on the company's website at investors.illurion.com. With me on the call today is Shantanu Goar, Founder and Chief Executive Officer. Before we begin, I would like to inform you that comments mentioned on today's call contain forward-looking statements within the meeting of federal securities laws. 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 and Exchange Commission filings. including our annual report on Form 10-K, filed on March 27, 2025. Our SEC filings can be found through our company website at investors.allurion.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 under the events and presentation section on our investor relations page shortly after the conclusion of this call. And with that, I will turn it over to Shantanu.

Good morning, and as always, thank you for joining us today. Before discussing our second quarter results and updating you on the business, I'd like to begin today by sharing our vision for the future of obesity care. and how we believe the pivot we are making at Allurion sets the company up for long-term success. Due to their ease of use and wide accessibility, GLP-1s have leapfrogged other therapeutic approaches to treat obesity. But while they have become a popular first-line weight loss therapy, challenges with adherence and long-term efficacy persist. 30% of patients on GLP-1s discontinued their medication within the first month, and 50% to 75% discontinued during the first year. The adherence obstacle for GLP-1s is caused by three key factors, side effects, muscle mass loss, and high costs. And importantly, each of these issues is exacerbated when higher doses are needed to achieve clinically meaningful weight loss. We believe these fundamental issues make GLP-1s ripe for disruption and that our new strategic direction at Allurion systematically addresses these issues and lays the foundation for an exciting R&D and clinical pipeline that could shape the future of obesity care. Our new strategy doubles down on metabolically healthy weight loss, losing weight, keeping it off, and maintaining muscle mass, with a specific focus on combining the Illurion program with low-dose GLP-1 therapy. The benefits of combination therapy have become clear. Coupling the fast and immediate weight loss from the Illurion balloon and the Allurion program's focus on behavior change with a low dose of GLP-1 therapy improves all aspects of metabolically healthy weight loss and brings more patients into the funnel. Our new strategy has three key pillars. First, our commercial focus is shifting towards accounts and distributors who promote metabolically healthy weight loss as part of a comprehensive obesity management strategy that includes combination use of the Illurion program with low-dose GLP-1s. We believe this approach will bear fruit outside the United States and be the ideal strategy for a potential U.S. launch. To this end, we launched several initiatives in the second quarter. First, we began transitioning away from distribution partners who did not have access to accounts and clinicians equipped to deliver metabolically healthy weight loss and began either finding new distribution partners or converting those markets to direct operations. While this is disruptive in the short term, we believe it is the right strategy for the long-term success of the business. And second, we resized our sales force to focus on those accounts that can deliver comprehensive obesity care. These accounts grew by 20% compared to the first quarter of 2025. And while they are a subset of our existing account base, they deliver superb weight loss results coupled with increasing productivity. Second, our R&D pipeline has been retooled to pursue innovation that enables seamless combination therapy. In the second quarter, we signed a term sheet with a strategic partner to expand manufacturing capabilities and ex-US distribution and explore the joint development of a novel GLP-1 drug-eluting intragastric balloon. This partner has deep experience developing and manufacturing drug-eluting devices and a global footprint in bariatrics with deep conviction in the merits of metabolically healthy weight loss. Delivering GLP-1s through an intragastric balloon directly addresses the adherence challenges of GLP-1 use, which we believe will become even more apparent with once-daily pills while directly combining two independent mechanisms of action into a single therapy. Such an innovation could be the ideal therapy for the nearly 50% of patients who stop using GLP-1s before achieving any clinical benefit. In addition, we intend to continue to invest in next-generation designs for the Illurion balloon that reduce its capsule size, increase radio opacity, and introduce new valve technology that enables longer residence balloons, which we believe will enhance long-term weight maintenance. Third, our clinical pipeline will focus on the prospective validation of combination therapy leading to metabolically healthy weight loss. We are very pleased with the progress we have made with our prospective multicenter study in Europe designed to study the effects of combination therapy on weight loss, muscle mass, and GLP-1 adherence. The protocol has now been submitted to institutional review boards, or IRBs, and once approved, we expect to begin enrollment by the end of this year. As combination therapy becomes more of a standard of care, we also expect investigator-initiated studies to emerge that test various aspects of metabolically healthy weight loss. We believe that the protocol we are testing in this study, where patients will receive the Allurion balloon, start on 0.25 milligrams of semaglutide after three months, and scale up, if needed, to 1.0 milligrams of semaglutide over the subsequent nine months, directly addresses the issues related to high doses of GLP-1s and provides a compelling future clinical pathway for the U.S. market. With regards to the U.S. market, I am pleased to report that we submitted the fourth and final module of our PMA submission on schedule in the second quarter that included additional supportive analyses from the Audacity study that meet both of the pre-specified co-primary endpoints. Additional analyses submitted in the PMA application were conducted to account for the initial results seen in the control group. Using imputation methods that account for the variations observed in the control subjects The mean difference in weight loss between the treatment and control groups at 48 weeks was 4.34%, with a super superiority margin of 3.14%, exceeding the pre-specified 3% super superiority margin in the second co-primary endpoint, with a p-value of 0.0142. At 40 weeks, using these same imputation methods, the mean difference in weight loss between the treatment and control groups was 4.90%, with a super superiority margin of 3.75%, considerably exceeding the pre-specified margin in the second co-primary endpoint, with a p-value of 0.0006. We believe that these analyses are more suitable for the trends observed in both groups in the Audacity study and further strengthen our positive top-line data. With the PMA now submitted, we are looking forward to working with the FDA toward an approval. The results from Audacity, combined with recent publications from outside the United States that clearly demonstrate that long-term weight maintenance and muscle mass maintenance are possible with the Allurion program, with or without GLP-1 combination therapy, create a compelling setup for the US market where 40% of adults have obesity, 170 million may benefit from obesity therapy, And only 8 million people are currently taking injectable obesity therapy. The opportunity, quite simply, is massive. Shifting now to the second quarter, revenue was $3.4 million in line with the pre-announcement on August 5th, 2025, reflecting reduced sales and distributor markets undergoing partner transitions and partially offset by growth in direct markets driven in part by GLP-1 combination therapy. In the second quarter of 2025, clinics where the combination approach was piloted as part of a comprehensive obesity management program grew by 20% compared to the first quarter of 2025, underscoring the potential for the combination approach in the future. While we expect this pivot to continue to be disruptive in the short term, we believe it will lead to long-term growth and refinement of a strategy that we could utilize out of the gate in the U.S. market. Operating expenses in the second quarter decreased by 48% compared to the prior year, as the restructuring and reorganization we conducted previously continued to bear fruit. Operating loss improved by 26% compared to prior year, driven by the reduction in operating expenses. Given the near-term disruption we expect from the new strategic direction we are taking, we are reevaluating guidance for 2025. In addition, in July, we began implementing a plan designed to align the company's operating expenses with the new strategic direction. We anticipate recording charges of approximately $1.5 million in the third quarter of 2025 related to this plan. I will now turn the call over to Tara Brady, our Interim Chief Financial Officer. Tara?