Reshape Lifesciences Inc (RSLS) Q1 2024 Earnings Call Transcript Highlights

• Reshape Lifesciences Inc (NASDAQ:RSLS) has implemented strategic cost reductions leading to a projected 55.4% decrease in operating expenses for 2024 compared to the previous year.

• The launch of Lap-Band 2.0 FLEX is progressing well with positive initial surgeon feedback, indicating potential growth in this product line.

• Reshape Lifesciences Inc (NASDAQ:RSLS) has enhanced its digital marketing strategies, utilizing AI and targeted campaigns to improve lead generation and patient engagement.

• The company has successfully reduced its core operating expenses by approximately $24 million or 75% between 2022 and 2024, demonstrating effective cost management.

• Reshape Lifesciences Inc (NASDAQ:RSLS) continues to explore strategic M&A opportunities to expand its portfolio and enhance shareholder value.

Q & A Highlights

Q: Can you provide an update on the financial performance for the first quarter of 2024? A: Thomas Stankovich, CFO, reported that revenue totaled $1.9 million, a 15% decrease from the previous year, primarily due to a decrease in sales volume influenced by GLP-1 drugs. Gross profit remained stable at $1.2 million, with a gross profit percentage increase to 60% from 54% due to reduced overhead costs. Operating expenses saw a significant reduction of 51% compared to Q1 2023.

Q: What strategic cost reductions have been implemented in response to market changes? A: Paul Hickey, CEO, detailed that the company has executed cost reductions leading to lower operating expenses of approximately $8 million in 2024, which is more than 50% reduction over 2023. These include cuts in consulting services, a reduction in force, and pausing the ReShape care program.

Q: How is the Lap-Band 2.0 FLEX performing since its launch? A: CEO Paul Hickey expressed satisfaction with the progress of the Lap-Band 2.0 FLEX, noting positive initial surgeon feedback and effective co-op marketing programs. He highlighted its potential to attract both new and existing patients due to its advanced features like the relief valve for improved patient comfort.

Q: What are the future plans for the Lap-Band 2.0 FLEX? A: The company plans a full US launch of the Lap-Band 2.0 FLEX in 2024, with expectations to drive increased sales. They are also working on obtaining regulatory approvals in Canada and the EU to expand their market reach.

Q: How is ReShape Lifesciences addressing the competition from GLP-1 receptor agonists? A: Paul Hickey discussed the limitations of GLP-1 receptor agonists, such as cost and durability, positioning the Lap-Band as a viable next step for patients experiencing limitations with GLP-1 treatments. He emphasized the safety and adjustability of the Lap-Band, making it an attractive option for a broader range of patients.

Q: What are the company's main strategic priorities moving forward? A: The company is focused on reducing operating expenses to invest in growth initiatives like the Lap-Band 2.0 FLEX. They are also enhancing marketing strategies and continuing to search for M&A opportunities to expand their portfolio and increase market share.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

https://finance.yahoo.com/news/reshape-lifesciences-inc-rsls-q1-070727001.html

Surmodics Agrees to be Acquired by GTCR for $43.00 Per Share in Cash

 Surmodics, Inc. (Nasdaq: SRDX), a provider of medical device and in vitro diagnostic technologies to the healthcare industry, today announced that it has entered into a definitive agreement to be acquired by GTCR, a leading private equity firm with a long track record of investment expertise across healthcare and healthcare technology

Under the terms of the agreement, affiliates of GTCR will acquire all outstanding shares of Surmodics. Surmodics shareholders will receive $43.00 per share in cash, for a total equity valuation of approximately $627 million. The per-share acquisition price represents a 41.1% premium to Surmodics’ 30-trading day volume-weighted average closing price through May 28, 2024. Surmodics’ Board of Directors has unanimously approved the transaction and resolved to recommend that stockholders vote in favor of the transaction.

https://www.businesswire.com/news/home/20240529992714/en

Biopharma IPOs From the First Half of 2024

 At the end of 2023, PwC predicted a “gradual uptick” in IPOs, with the market expected to favor those companies with “strong clinical data.” Roel van den Akker, pharmaceutical and life sciences deals leader at PwC, said that current market activity aligns with the firm’s predictions.

“I do think that we’ve seen somewhat of an uptick in public offerings going into January, February, March. It’s definitely picked up," van den Akker said. “We’ve seen some pretty critical ones in the first and second quarter of FY24, which we didn’t really see in FY23 and FY22.”

Lorenzo Paoletti, head of biotech investment banking at Truist Securities, agreed that the first half of 2024 is looking good compared with late 2023. Through May 10, his firm calculated that the biotech sector has seen $23 billion of issuance—including IPOs, secondary offerings, convertible debt, PIPEs and registered directs—compared with $15 billion in the second half of 2023.

A month-to-month look at the year so far reveals a downward trend, however, with $7 billion generated from IPOs in January, $9 billion in February, $4 billion in March and $2 billion in April.

As of May 29, 11 companies have launched IPOs this year. Five of those companies—Alto Neuroscience, ArriVent Biopharma, CG Oncology, Kyverna Therapeutics and Metagenomi—entered the market in January alone. The most recent, Rapport Therapeutics and Telix Pharma, each filed on May 17.

Van den Akker said it is hard to predict the future of the public market “given the geopolitical backdrop that we’re facing in the United States and abroad,” but this year so far has given the firm reasons to be optimistic about its continued strong performance.

Paoletti told BioSpace that we’re in a volatile time right now, largely due to the high interest rates. He added that he expects we’ll see a pause in IPOs as we get close to November’s presidential election, as investors will want to know the outcome before making bets on future returns. “As a banker, I would certainly recommend my clients to not launch an IPO close to elections,” he said, adding that some companies now waiting to go public may pull the trigger right after the election or in Q1 2025.

Here are this year’s IPOs so far:

1. CG Oncology

Date: Jan. 26-29
Value: $380 million

CG Oncology announced it was going public in January. The company initially anticipated $180 million in gross proceeds but later announced an upsized IPO. Its late-stage product cretostimogene grenadenorepvec infiltrates and kills cancer cells and is undergoing Phase III trials for non-muscle invasive bladder cancer.

2. Kyverna Therapeutics

Date: Feb. 8-11
Value: $366.9 million

Kyverna initially aimed for $182 million, pulled in $319 million on the first day of sales and closed at nearly $370 million. The company focuses on cell therapies for autoimmune diseases such as progressive multiple sclerosis. It published results of first use of its product KYV-101 at the end of March.

3. ArriVent Biopharma

Date: Jan. 26-29
Value: $175 million

ArriVent initially anticipated netting between $135.7 million and $156.7 million with its IPO, but ended up upsizing to $175 million. The company, which is developing drugs for non-small cell lung cancer, said the IPO will help fund development but it expects to need to raise “substantial additional capital” in the future.

4. Alto Neuroscience

Date: Feb. 2-6
Value: $147.9 million

Alto, a precision medicine company focused on psychiatric drug development, predicted closing with $128.6 million but ended with $147.9 million in gross proceeds. Alto recently saw positive results in a Phase I trial for ALTO-101, a PDE4 inhibitor for patients experiencing cognitive impairment with schizophrenia.

5. Contineum Therapeutics

Date: April 5-9
Value: $110 million

Contineum, originally called Pipeline, aimed to raise between $140.8 million and $158.4 million, but reduced the number of shares it expected to sell, dropping proceeds to about $110 million. Contineum, focused on treatments for neurologic, inflammatory and immune diseases, is developing two clinical-phase candidates: PIPE-307 for relapse-remitting multiple sclerosis and PIPE-791 for idiopathic pulmonary fibrosis.

6. Boundless Bio

Date: March 28-April 2
Value: $100 million

Boundless Bio went public in March, pulling in goal proceeds of $100 million. The company intends to use the funding for development of its extrachromosomal DNA programs for cancer, including products BBI-355 and BBI-825. It also plans to fund an  extrachromosomal DNA diagnostic test called ECHO.

7. Fractyl Health

Date: Feb. 2-6
Value: $100 million

Fractyl, a company developing treatments for type 2 diabetes and obesity, initially set its sights on $99 million in its IPO, before raising its goal to $110 million. Its gross proceeds were ultimately $100 million. Fractyl's main therapies are Revita, a device for inserting fluid into the small intestine to remodel the duodenal lining, and Rejuva PGTx, a pancreatic gene therapy.

8. Metagenomi

Date: Feb 9-13
Value: $93.75 million

Metagenomi went public in February, touting its metagenomics genome editing tools. It initially planned to raise $86.9 million, but the IPO closed with nearly $94 million despite share prices falling during its debut. The company has multiple preclinical and discovery-stage assets and had early support from companies such as Moderna, which exited its gene-editing deal with Metagenomi in May but remains a shareholder.

9. Telomir Pharmaceuticals

Date: Feb 9-13
Value: $7 million

Telomir went public in February, with gross proceeds meeting its $7 million prediction. The company is developing Telomir-1, a small molecule drug that aims to lengthen telomeres at the ends of chromosomes to prolong cell division and slow aging.

10. Rapport Therapeutics

Date: Announced May 17
Value: Undisclosed

Rapport is developing RAP-219, a tablet that targets a neuronal receptor–associated protein for the AMPA receptor to treat epilepsy and eventually psychiatric conditions. The company is also developing a long-acting injectable form of RAP-219 and treatments that target nicotinic acetylcholine receptors for pain, hearing disorders and psychiatric conditions.

11. Telix Pharma

Date: Announced May 17
Value: Undisclosed

The company’s prostate cancer PET scan agent Illuccix was approved by the FDA in 2021 and received an expanded label in 2023. It’s hoping to further expand Illuccix’s label and develop other late-stage products.

https://www.biospace.com/article/biopharma-ipos-from-the-first-half-of-2024/

Merck’s Potential $3B EyeBio Acquisition Puts Drugmaker Back in Ophthalmology

 Merck announced on Wednesday it is acquiring privately held biotech EyeBio in a potential $3 billion bid to diversify its pipeline and reestablish itself as a major player in the ophthalmology space.

Under the terms of the agreement, Merck will pay $1.3 billion upfront and put $1.7 billion on the line in developmental, regulatory and commercial milestones. The acquisition has been unanimously approved by the EyeBio Board of Directors. Merck will carry out the purchase through a subsidiary.

The companies expect to complete the transaction in the third quarter of 2024, pending clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

Dean Li, president of Merck Research Laboratories, said in a statement that the EyeBio purchase plays into its “science-led business development strategy to expand and diversify our pipeline.” The acquisition will also give Merck the biotech’s “promising pipeline of candidates targeting retinal diseases,” Li added.

The focus of Wednesday’s buyout is Restoret. Also known as EYE103, Restoret is an investigational and potentially first-in-class trispecific antibody being developed for diabetic macular edema (DME) and neovascular age-related macular degeneration (NVAMD).

The candidate works by activating the Wnt signaling pathway, which according to the biotech’s website is disrupted in DME and NVAMD, resulting in a weakened endothelial cell barrier and fluid leakage into the retina. Restoret’s mechanism of action allows it to restore the integrity of the eye endothelial cells and prevent vascular leakage.

Based on early data, Restoret is expected to enter a pivotal Phase IIb/III study in DME in the second half of 2024, according to the companies.

The EyeBio acquisition marks Merck’s return to the ophthalmology space after it exited the market in 2014, selling off its assets to Akorn Pharmaceuticals and Santen Pharmaceutical.

BMO Capital Markets in a Wednesday note to investors said that while the EyeBio deal was on the smaller side, the firm was “encouraged by the progress Merck continues to make diversifying its revenue base” ahead of the loss of exclusivity for blockbuster Keytruda.

The buyout also continues a dealmaking spree for the pharma, which in April 2024 bought the small biotech startup Abceutics for $208 million, gaining access to technology that could help improve the safety of antibody-drug conjugates.

In March 2024, Merck signed a $1 billion contract with Pearl Bio to develop engineered biologics. Based on research from Yale researchers, Pearl Bio’s tech uses synthetic amino acids—outside of the 20 naturally occurring ones—that in theory could yield proteins with enhanced therapeutic activity.

In January 2024, Merck also dropped $680 million to buy cancer-focused Harpoon Therapeutics and its pipeline of T-cell engagers designed for different types of cancers.

https://www.biospace.com/article/merck-s-potential-3b-eyebio-acquisition-puts-drugmaker-back-in-ophthalmology-market/

Chatbots are poor multilingual health care consultants: study

 Georgia Tech researchers say non-English speakers shouldn't rely on chatbots like ChatGPT to provide valuable health care advice.

A team of researchers from the College of Computing at Georgia Tech has developed a framework for assessing the capabilities of large language models (LLMs). Ph.D. students Mohit Chandra and Yiqiao (Ahren) Jin are the co-lead authors of the paper "Better to Ask in English: Cross-Lingual Evaluation of Large Language Models for Health care Queries." The paper is published on the arXiv preprint server.

Their paper's findings reveal a gap between LLMs and their ability to answer health-related questions. Chandra and Jin point out the limitations of LLMs for users and developers but also highlight their potential.

Their XLingEval framework cautions non-English speakers from using chatbots as alternatives to doctors for advice. However, models can improve by deepening the data pool with multilingual source material such as their proposed XLingHealth benchmark.

"For users, our research supports what ChatGPT's website already states: chatbots make a lot of mistakes, so we should not rely on them for critical decision-making or for information that requires high accuracy," Jin said.

"Since we observed this language disparity in their performance, LLM developers should focus on improving accuracy, correctness, consistency, and reliability in other languages," Jin said.

Using XLingEval, the researchers found chatbots are less accurate in Spanish, Chinese, and Hindi compared to English. By focusing on correctness, consistency, and verifiability, they discovered:

• Correctness decreased by 18% when the same questions were asked in Spanish, Chinese, and Hindi.
• Answers in non-English were 29% less consistent than their English counterparts.
• Non-English responses were 13% overall less verifiable.

XLingHealth contains question-answer pairs that chatbots can reference, which the group hopes will spark improvement within LLMs.

The HealthQA dataset uses specialized health care articles from the popular health care website Patient. It includes 1,134 health-related question-answer pairs as excerpts from original articles. LiveQA is a second dataset containing 246 question-answer pairs constructed from frequently asked questions (FAQs) platforms associated with the U.S. National Institutes of Health (NIH).

For drug-related questions, the group built a MedicationQA component. This dataset contains 690 questions extracted from anonymous consumer queries submitted to MedlinePlus. The answers are sourced from medical references, such as MedlinePlus and DailyMed.

In their tests, the researchers asked over 2,000 medical-related questions to ChatGPT-3.5 and MedAlpaca. MedAlpaca is a health care question-answer chatbot trained in medical literature. Yet, more than 67% of its responses to non-English questions were irrelevant or contradictory.

"We see far worse performance in the case of MedAlpaca than ChatGPT," Chandra said. "The majority of the data for MedAlpaca is in English, so it struggled to answer queries in non-English languages. GPT also struggled, but it performed much better than MedAlpaca because it had some sort of training data in other languages."

Ph.D. student Gaurav Verma and postdoctoral researcher Yibo Hu co-authored the paper.

Jin and Verma study under Srijan Kumar, an assistant professor in the School of Computational Science and Engineering, and Hu is a postdoc in Kumar's lab. Chandra is advised by Munmun De Choudhury, an associate professor in the School of Interactive Computing.

The team presented their paper at The Web Conference, occurring May 13-17 in Singapore. The annual conference focuses on the future direction of the internet. The group's presentation is a complementary match, considering the conference's location.

English and Chinese are the most common languages in Singapore. The group tested Spanish, Chinese, and Hindi because they are the world's most spoken languages after English. Personal curiosity and background played a part in inspiring the study.

"ChatGPT was very popular when it launched in 2022, especially for us computer science students who are always exploring new technology," said Jin. "Non-native English speakers, like Mohit and I, noticed early on that chatbots underperformed in our native languages."

More information: Yiqiao Jin et al, Better to Ask in English: Cross-Lingual Evaluation of Large Language Models for Healthcare Queries, arXiv (2023). DOI: 10.48550/arxiv.2310.13132

https://medicalxpress.com/news/2024-05-chatbots-poor-multilingual-health.html

Rating firms cautious ratifying some private credit loans

 Banks and insurers are making more requests to U.S. credit agencies for ratings on their risky loans to private equity funds that are secured against the value of their portfolio investments and cash flows that come from them.

So far, the response from the agencies including the top 3 - S&P, Moody's and Fitch - has been cautious because the valuation of the assets backing the loans are difficult to assess as they are owned by an opaque investor base.

A higher-for-longer interest rate environment over the last few years has limited opportunities for private equity fund managers to profitably exit investments in their portfolios.

They are instead starting to rely on loans to reinvest in existing portfolio companies, wait for a better time to exit these investments, make new acquisitions or pay dividends to their investors in the funds.

This activity has raised concerns about so-called leverage on leverage in private credit, a growing area of private fund finance.

Lenders are now approaching rating agencies to get credit ratings on their loans in a bid to lower the amount of capital needed on these loans and as an added due-diligence of the risk, senior rating officials said.

Agencies are balancing this fee-generating potential with a methodical approach.

Only two - S&P Global Ratings and KBRA - of the four agencies interviewed by Reuters rate net-asset value or NAV loans which are riskier because they are secured based on the theoretical valuation of an almost fully invested fund.

Valuations are much harder to assess in an environment where default rates in the invested portfolio companies are expected to rise as they struggle with higher interest expenses.

These loans have a shorter history in comparison to other types as their demand and wider use rose only in the last few years as exits through asset sales became harder in a higher-for-longer rate environment.

Their volumes are growing.

"We expect the approximately $150 billion in NAV facilities that some market participants have currently seen in the market to double within the next two years," S&P said in a recent report.

But only one of the top 3 rating agencies even has a methodology to rate them.

Moody’s Ratings does not have one for NAV loans, said its associate managing director, Rory Callagy.

"NAV loans are newer and there is less standardization of lending terms in this market," said Callagy.

"The collateral backing NAV loans are private investments whose values can be hard to assess because there is less transparency on the valuation of the assets," he added.

https://finance.yahoo.com/news/rating-firms-cautious-ratifying-private-101145008.html

Alibaba Health Shares Rise on Earnings Beat

 Alibaba Health Information Technology shares rose after the healthcare company posted better-than-expected earnings as improved efficiency trimmed costs for its warehousing, logistics and customer services.

Shares were 13% higher to 3.46 Hong Kong dollars (44 U.S. cents) early Tuesday, outperforming the Hang Seng Index's 0.6% rise and lifting this week's gain to 18%.

The company, backed by Chinese e-commerce giant Alibaba, said late Monday that its bottom line for the year ended March 31 rose 65% to 883.48 million yuan (US$122 million). That beat the estimates for CNY696.9 million from a Factset poll of analysts.

Revenue rose 1.0% to CNY27.03 billion, beating Factset estimates for CNY25.41 billion.

Fulfilment expenses--related to warehousing, logistics and others--fell 17% on year, while sales and marketing expenses were roughly steady.

The company said its "Internet + Healthcare" service model was further refined in the last fiscal year and benefited from Beijing's policy to support growth in the sector. Its Tmall Healthcare Platform served over 35,000 merchants as at March 31, 2024, a rise of 28% from the year before.

Revenue from its pharmaceutical direct sales business, which accounted for about 88% of its total revenue, rose 0.6% to CNY23.7 billion.

Its earnings beat Alibaba Health's guidance in late March for a 5% fall in revenue and a 30% rise in profit, Citi Research analysts highlighted in a note. Citi currently has a buy rating on its shares with a HK$8.00 target price.

https://www.morningstar.com/news/dow-jones/20240528163/alibaba-health-shares-rise-on-earnings-beat