Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allurion Technologies Inc (ALUR, Financial) reported a sequential revenue increase of 14% from the fourth quarter of 2023, totaling $9.4 million in the first quarter of 2024.
- Procedural volumes grew by 22% compared to the fourth quarter of 2023 and by 12% compared to the first quarter of 2023, indicating strong and growing demand for the Allurion program.
- Cash burn reduced by 62% compared to the fourth quarter of 2023, from $22 million to $8.4 million, due to a 43% reduction in operating expenses and more efficient marketing investments.
- Allurion Technologies Inc (ALUR) announced a significant financing deal with the closing of a $48 million convertible senior secured note, improving financial flexibility and extending cash runway.
- The company has expanded its Virtual Care Suite (VCS) in the United States, enhancing its digital offerings and potentially broadening its market reach.
Negative Points
- Year-over-year, revenue for the first quarter decreased by 33% due to macroeconomic headwinds and inventory adjustments in distributor markets.
- Despite high procedural volumes, ongoing de-stocking at distributor locations led to a lag in revenue recognition, which may impact short-term financial results.
- Gross margins were temporarily boosted to 73% due to lower production volumes, which may not sustain as production scales up.
- General and administrative expenses increased by $1.1 million, driven by costs associated with being a public company.
- The company is still navigating the challenges of inventory de-stocking, which is expected to conclude in the second quarter but has temporarily affected revenue growth.
Q & A Highlights
Q: Hi. Thank you for taking the question. I wanted to ask you a couple questions about catalysts through the year and starting with the reimbursement you received in the UK. Maybe talk about that as a catalyst in country and then how that recognition could help you to get more coverage or potentially market the product and other geographies as well?
A: Yeah, thanks for the question, Matt. As I mentioned on the call, the UK is a pretty significant opportunity from just an obesity perspective in general. 3,000 obesity-related hospital admissions per day, weight loss surgery costs that are through the roof, and a significant backlog for bariatric surgery in that market. The way the NHS works in the UK is that there are 215 trusts that really operate somewhat autonomously. And so we've broken the ground in the NHS by starting to work with the first handful of trusts that are reimbursing for the technology. And over the course of the next several quarters and indeed probably the next several years, we will be able to open up incrementally more and more trusts that really recognize the value proposition the Allurion program brings above and beyond bariatric surgery specifically for patients who need to lose weight prior to surgery. So I think what we've achieved in the UK is indicative of some of the pressures that payers are feeling, especially in the era of GLP-1s, and some of the trends that we are seeing in the UK could very well materialize in other parts of Europe and the Middle East and some of the other markets that we're operating in.
Q: Great. And just a general question. What are the catalysts should you looking for through the year? Do you see the potential for any other reimbursement wins, publications, anything like that outside of, obviously, the tracking of the pivotal study?
A: Yes. There's several catalysts that are here in the short-term. Matt, the first being obviously additional reimbursement wins in different markets. We, as I mentioned earlier, are exploring what the reimbursement landscape could look like in other parts of Europe and the Middle East. Those are markets that I think are feeling the pinch of GLP-1 costs and are looking for alternatives like the Allurion program. There's a large network of providers in a number of our different markets that are outside the center of our bullseye. Typically, we start commercialization with bariatric surgeons and providers that are deeply invested in obesity management and weight loss. But there are other types of providers in certain markets that are more generalists that are looking to expand into obesity management. And over the next couple of quarters in those markets, we expect to open up some of those larger groups of providers versus individual practitioners. And then, I mentioned on the call that we are now making available in the United States, the Virtual Care Suite. And I believe that that could be a significant opportunity for us to expand the B2B SaaS software business that we started inside Allurion in a significant market like the United States, but also start to build relationships with providers well before the Allurion balloon is approved. And that will hopefully increase awareness about our technology in the United States. But more importantly, start to educate US providers on the Allurion balloon and some of the benefits that it could provide.
Q: Yes. Thank you. So, in terms of the inventory de-stocking, is it still more of a problem or what's left to remediate? Is that still more of a problem with distributors?
A: Yeah, thanks for the question, Keay. It is mostly concentrated in distributor markets. What we observed in the first quarter was strong procedural volume growth in our direct markets and distributor markets. And in our direct markets, we saw a much closer correlation to sell-in and sell-out. In our distributor markets, procedural volume was strong, but obviously with ongoing de-stocking, sell-in lagged behind procedural volume. We expect that the majority of de-stocking should complete in the second quarter in those distributor markets, and that several of those distributors should begin to reorder in the second quarter.
Q: And if you could talk a little bit more about how you're able to understand what the procedural volume is. Obviously, if you have a new user, there are new app user that's probably easier to track. But with respect to the practitioners, is it always the case that there's a direct one-to-one correlation there between the app user using the balloon?
A: Yeah. Typically, it does vary by market key in terms of the correlation between new app users and actual balloon placements. But what we've been able to do over the past several quarters is actually validate our new app user data with actual inventory levels. So what we've been able to do market-by-market is assess what the app adoption rate is by market and use that to correlate new app users to actual inventory levels. And what that results in is a pretty powerful metric for us, really in real time, day-by-day, to actually track what procedural volumes are looking like in each market. And we expect that in the second half of the year in particular, that that metric should much more closely correlate to our revenue growth.
Q: Okay. And just a final question, if I can. What are the prospects for launching in new geographies this year?
A: This year, we are pretty much set in terms of the new geographies that we previously had launched in 2022 and 2023. Those include India, Brazil, Canada, Mexico, Australia. Those are massive market opportunities for us. And so we'll continue expanding in those markets. In terms of new markets on the horizon, the one that we're most focused on right now is the United States.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
