Q4 2021 Gelesis Holdings Inc Earnings Call
You will likely result in similar expressions. These forward looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward looking statements.
Factors that could cause or contribute to such differences include but are not limited to those discussed in our amended 8-K and Form 10-K for the year ended December 31, 2021, and those discussed in other documents, we file with the Securities and Exchange Commission.
All subsequent written and oral forward looking statements attributable to jealousness or persons acting on <unk> behalf are expressly qualified in their entirety by.
The cautionary statements, including in this conference call.
We undertake no obligation to revise or publicly release the results of any revision to these forward looking statements except as required by law. Given these risks and uncertainties listeners are cautioned not to place undue reliance on such forward looking statements also the following discussion may contain non-GAAP financial measures for a discussion and reconciliations.
<unk> of these non-GAAP financial measures. Please see our earnings release for the fourth quarter 2021.
I would like to remind everyone that this call will have a webcast replay available via the link provided in today's press release as well as on the company's website and Jealousness Dot com.
Now I would like to turn the call over to the CEO of jealousy Shine Zohar you Shai.
Thank you and good afternoon, everyone.
We are happy you can join us today, and I am glad to be here.
<unk> and CEO of Genesis.
For those listeners who are new to our story.
I will make some introductory remarks, and then turn the call over to aerials months our CFO .
To walk you through our 2021 financial results.
We are transforming weight loss with our proprietary SBA cleared waste management solution.
Clarity.
We have the potential to help millions of people.
More than seven out of 10 Americans struggled with excess weight may.
<unk>, a new universal issue.
Thus surprisingly few scientifically proven tools available for people on their weight loss journey.
The data shows.
Diet and lifestyle modifications don't work for the majority of people in the long term.
Historically, many of the medical product the tweet overweight and obesity.
We've had poor safety to efficacy profile.
And we'll either pulled from the market for safety reasons or have had limited utilization.
Currently approved drugs and surgery do not address the needs of people who are overweight at the lower end of the BMI continuum.
In many cases do not even qualified for prescribing medical treatments.
While the majority of the population that has excess weight user.
Using expensive drugs chronically with safety or Tolerability issues.
A risky surgery.
Not viable options.
So the majority of the population is left without any help.
There are 150 million Americans with excess weight or BCP, yet only 2% of this population received prescription medical treatment.
And the <unk> label encompasses the entire population of overweight.
Starting from body mass index or BMI of 25 to obesity up to BMI of 40.
With <unk>, we have a completely new solution that is inspired by nature and proven by science.
Thanks to its unparalleled safety and efficacy profile, we are uniquely positioned to bring an option to people struggling with excess weight delivered in a completely new way with ecommerce convenience.
With pricing that is both affordable and transparent.
<unk> is designed to help people too satisfied with smaller portions.
So they can eat less and lose weight, while enjoying the food they love <unk>.
Let's go to the science behind how it works.
Clarity is made for naturally derived building blocks, which through a proprietary process.
<unk> Super absorbent hydrogen.
It works by releasing thousands of small particles that absorb water in the stomach.
Become smaller gel pieces, and creating a similar composition and texture.
<unk> very large amounts of full vegetables with meals.
Those <unk> pieces pass through your Gi tract naturally.
Out being absorbed.
Imaging.
Feeling about one quarter of your stomach with thousands of small gel pieces that have similar properties like vegetables mix with every lunch and dinner.
Those thousands of general pieces increase the volume and streamers.
The meals in the stomach and small intestine without any additional calories, which helps can same quarter.
Relative maintains its shape and structure throughout the digestive process at later breaks down in the large intestine.
There the water as we absorbed back into the body and the backbone of the hydrogel is eliminated through your body's natural digestive process.
Trinity can help youll see solar both doing meals and between them, helping you eat and snack less.
Many plenty members report that they begin to lose weight within the first few weeks.
We are proud to collaborate with some of the top experts in the obesity field on research around identity for example.
Our pivotal clinical study clarity has proven effectiveness.
Six out of 10 patients were responders.
Find by achieving a clinically meaningful weight loss of at least 5% of their by the way in.
In fact <unk>.
These responders had an average weight loss of about 10% or about 22 pounds.
The last three five inches of their waste in just six months. So the weightless was both clinically important and cosmetics significant.
Another positive result was the 26% of the participants were what we call Super responders and they lost on average 14% of the white Ora and average of 30 pounds.
What's really sets <unk> apart for other weight management therapies is its safety and Tolerability profile.
Remarkably in this study we found the planet is side effect profile was similar to placebo.
This favorable safety profile is related to the biomimetic approach the jealousy stook in its development, which is basically emulating the composition, which is cellular structures holding water and the mechanical properties, which is a seamless and picture of raw vegetables.
<unk> works with the body's natural digestive processes.
Importantly, it is not absorbed by the body.
These compelling results were presented at several important scientific conferences, including the obesity Society National meeting and were published in highly cited article in the leading obesity Medical Journal, which also won an Editor's Choice Award.
Now I would like to move on to the commercialization of the product.
This safety to efficacy profile I, just mentioned has allowed us very broad with describing use. Unlike other week those prescriptions clarity can be used down to BMI of 25, which is considered just being a few pounds overweight.
In fact about 150 million Americans could qualify for treatment with clarity.
We also have broad access for people looking to seek treatment our potential members can connect with healthcare provider for free towards telehealth assessment that takes about 15 minutes whenever it is convenient for them or they can see the on booked out through traditional channels, regardless of using telehealth.
Months.
Plenty of fee will arrive at the member's door in two days for $98 for a 28 day trip supply or $1 75 per dose.
We completed the first phase of building our commercial scale manufacturing facility at the end of 2021, and we have ramped up supply to meet the strong commercial demand.
First and foremost we are most excited about the enormous reception of our members. We saw a three fold increase in web traffic.
And a three five fold increase in the number of few of new planet members per day in the first three weeks of our National Media campaign launch that kicked off on January 31st of this year.
This compares to previous months when supply was limited while we built over the manufacturing facility.
This equates to approximately 4700, new loyalty members per week within the first three weeks of the campaign.
This is in addition to the existing members will continue the planet prescriptions about 70% of blended team members had never tried prescription weight management product before.
Indicating that <unk> is bringing new members into the category of prescription weight management products.
Within two weeks of the campaign launch <unk> has reached organic search volume on par with well established weight management brands. According to the data from global trends.
Through both our telehealth and our tradition of health care provider channels.
As quickly reached record highs.
Jealousy telehealth partner role.
Responded to growing patient demand and placed a total of $40 million in preorders for <unk> last year.
Since launch of the campaign clarity has become one of the most sought after offerings on our platform and it's bringing more new members than any other product.
We are thrilled by the feedback we're receiving from thousands of new members. We have recently began their weight loss journey with clarity.
In addition.
Health care provider or ICP prescription of Trinity is up 100% since the media campaign began and 40% of ACP prescriptions were requested by the patient which is a 60% increase from the beta launch benchmark.
Now I would like to turn the call over to our CFO <unk> to talk through our financial discussion.
Thank you Shai as background gelled it completed a business combination with cast our special purpose acquisition Corp. On January 13th 2020 to debut in the following day at the publicly traded company on the New York Stock exchange under the ticker symbol <unk>.
I will now walk through our financial results and accomplishments in fiscal year 2021, and then I'll move on to our projections for 2022.
But any first became commercially available through our beta launch in 2020, and our member growth. In 2021 was significant was 79100 total members through the end of the year compared to 18800 members through the end of 2020.
This strong growth was despite limited marketing investments and limited product availability as a supply to our beta launch from a pilot manufacturing site, while developing a commercial scale manufacturing facility.
The first line is our new commercial manufacturing facility was validated and began producing inventory in the fourth quarter of 2021.
We sold approximately 171000 units in 2021 compared to approximately 41000 units in 2020, which drove our product revenue net to $11 $2 million in 2021, which is the 313% annual increase.
Gross profit in 2021 was $1.2 million compared to 0.3 million in 2020, driven by the increased sales volume or.
Our net loss for fiscal year, 2021 was $93 3 million, while our adjusted EBITDA was negative $73 8 million.
Moving on to the balance sheet at December 31, 2021, we had $28 $4 million in cash and $9 $9 million in receivables with $13 4 million of inventory in our pipeline to supply the broad commercial launch of <unk> in 2022.
The business combination with <unk> that closed in January 2022 resulted in gross proceeds of $105 million.
Moving onto our outlook for 2022, we're expecting net product revenues of $58 million, which reflects an approximate 400% annual increase we are projecting gross profit to be in the range of $25 million to $30 million and adjusted EBITDA in the range of negative $55 million to negative $60 million.
Now I will turn it back to <unk> to provide closing remarks.
We have developed the science and support to help make a difference in the lives of up to 160 million Americans will struggle with their weight, many of whom and never had a prescription option before.
We are proud to have taken clarity from inception to now be in a position to make it broadly available.
Already we have seen incredible demand for <unk> and we are confident on the path to achieve 400% growth in revenue by the end of 2022.
We look forward to executing on our plans and delivering value for our shareholders.
In closing I would like to thank our team for their hard work and dedication.
With that operator, please open up the call for questions.
Thank you, Sir and addition to the Cheyenne Elliott and joining us for the Q&A portion will be David path, Chief operating officer, and Chief commercial officer of jealousy.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like that question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question, we will pause briefly for questions registered.
Our first question goes to Ellie Merle with UBS.
Your line is open you can go ahead.
Hey, guys. Thanks, so much for taking the question maybe just in terms of your projections for this year could you give us a little bit more color in terms of your assumptions. Both in terms of the number of new members start as well as sort of your assumptions in terms of manufacturing costs and any improvements in terms of.
The gross margin over the course of the year.
You built up your manufacturing plans.
And then second question just in terms of net new member growth that you've seen so far in 2022.
Comment maybe in terms of the initial response, you've seen some of the broader advertising that you've been doing I did see.
One of your first ads on Instagram Unprompted recently.
And I'm curious some of the.
Kind of any attribution in terms of new member starts that you're seeing this year versus last year and sort of some of the responses I know you alluded to that in the prepared remarks or haven't increased web traffic, but anything more that you can.
Provide color on in response to the recent uptick in advertising would be helpful. Thanks.
Thank you for the question, so I'll ask Elliot to start with more of the.
Financial side, and maybe then David.
On the other parts of your question.
Yes, Thank you Ian side and good afternoon Ali. So we are not currently providing guidance on our forecast for new members to be acquired this year. All we can provide insight on is the results. We've seen thus far give us confidence in our projected 58 million of net product revenue for 2022, and then re.
Guarding our cost of goods and projected gross margin when we completed the scale up of our manufacturing facility. Our commercial site at the end of last year, we transitioned from a manual batch process to a streamlined semi continuous manufacturing process, which has significantly higher yields and output and a much lower cost of goods. This was done.
In tandem with implementing a reconfigured packaging configuration for the full commercial launch Thats also carries a lower cost of goods and therefore, we anticipate our cost of goods or I should say, our gross margin for the year to be approximately 50% of our net product revenue.
David cancer or a bit more questions about the commercial approach.
<unk>.
In terms of trend what we've seen from a commercial perspective in terms of the marketing mix, we've been really using a combination of television digital social I'm glad to see the.
To add as well as out of home.
A bit early from an attribution perspective, as we look at our marketing mix model, but we really been encouraged by really each piece of the mix.
We're obviously in the process of analyzing what that looks like as we assess kind of going forward, what's the right level of spend and importantly to your question, where we put that.
In terms of the different channels, but I can say that the the response, we've seen in the social channels as well as search have been very strong.
Got it thanks, so much for the color.
Youre welcome.
Thank you Ali.
Our next question goes to Chris <unk> with Jefferies. Chris. Your line is open you can go ahead.
Okay.
Great. Thanks for taking my questions and congratulation on the first public quarter.
From the initial member uptick <unk> seen and now maybe through one or maybe two supply cycle. Since the campaign launch what are you seeing on reorder metrics. Maybe you can help us think about purchasing patterns I know you mentioned previously.
60% of members are buying multiple cats, but for the other 40% how are you thinking about or maybe what kind of visibility do you have into future reorders.
Yes, so I'm sure David will be the best to answer these questions sure happy to so it's a bit early to say, but it looks encouraging as you mentioned.
What we saw initially based upon the campaign starting in January 31.
Recently.
<unk> seen that 60% of members have reorder kits, which is consistent with what we saw in clinical trials, where six out of 10 people.
Responders and launched that on average 10% of their body weight.
Well, where we're.
We're seeing as well as at 40% specifically mentioned, what we're hearing so we do have a very active voice of customer program and we're constantly asking our members about their experience and will be found is that the folks who decided to stop taking plenty for whatever reason 70% of them.
Be willing or interested in potentially trying plenty again, that's important for a couple of reasons. One is obviously as we think about win backs and then natural cycle of people who tried it you had a good experience where mix experienced coming back obviously as we think about the commercial efforts and bring back but also supporting our members on their journey. So we continue.
To get the back of whats working for members and what's not and we continuing to augment that member experience to improve the overall retention. So we're encouraged what we're seeing is a bit early to make a call on it.
But potentially going forward, we'll be happy to share that.
That's great. Thank you for the color and then clearly.
Increases in consumer interest, but I'm wondering if you sense that maybe the elevated levels of consumer interest is having an effect on.
Providers.
On aided propensity to suggest plenty of their patients any commentary or any degree of interplay. There would be helpful. And then just as a reminder of how should we think about any sort of margin differential.
From the different sales channels.
Yeah, No I think it's a great question as we think about that obviously the health care professional whether it be through telehealth through traditional channel plays a major role in coaching as well as prescribing planning.
And what we've seen is even before our campaign started at the end of January we saw a significant level of interest as you know we have a sales force out there who are speaking to we do a great job of educating physicians and health care providers in general with regard to <unk> and we've seen a nice uptick there.
We saw a shift as <unk> mentioned in his opening comments, where there was a greater shift where the consumer was asking for plenty versus the physician prescribing it but we're still seeing a nice increase regardless, whether it comes from the physician recommending it to the patient with a patient asking the position. So I think that will continue to play a role.
Leveraging the telehealth channel and making it easy for for our potential future members to get access when it's convenient for them.
Or if they choose to go to their own physician and get plenty that way. So we really see both as complementary and an opportunity at the end of the day to help our members to be successful.
And then was there any profitability differential based on the sales channel.
Yes Elliot.
Here and there is a difference between our telehealth business as well as the in person physician business channel or.
Our margins are slightly higher on the in person physician network and that's because effectively there is a platform cost to be telehealth offering and thats not present with the in person physician network, we're effectively only claim or paying pharmacy dispensing fees. So our margins are stronger on that front.
And we anticipate in the future there'll be a mix of business from both channels.
Very helpful. Thank you Tim.
Thank you Chris.
Our next question goes to Ted <unk> with Piper Sandler.
Your line is open you can go ahead.
Great. Thank you very much I wanted to get a sense from the supply side, so with the facility so much.
Quantity can you ultimately make either in terms of pace tremors scripts or however, you are thinking about it how should we be thinking about.
Capacity from the facility. Thank you.
Thank you for the question. So we just completed our first line last year.
Soon going to complete the second.
Commercial manufacturing line.
Within a few months.
Without getting to the exact numbers of capacity.
We are confident that now we have the capacity.
To make the manufacturing non issue in other words to have the capacity we need.
So for the next year.
Without <unk>.
Limiting factor.
Great. Thank you very much.
Thank you Ted.
As a reminder, it is star one on your telephone keypad to ask a question.
Our next question goes to George Farmer with pure Tech helped towards your line is open you can go ahead.
Yeah.
Hi, guys. Thanks for taking my question.
Wondering if you could kind of speak broadly is what do you think peak sales for <unk> could actually be.
Certainly in light of all the other competitors out there and then maybe you could speak about.
International growth as well.
Sure. So maybe I'll start first with the peak sales. So what we believe given the broad label and the fact that our label covers 150 million Americans.
We believe that <unk> has blockbuster potential.
Dax.
And regarding the second part.
David.
The as far as the international plants, yes, so as as you may know, we have the CE Mark approval.
In Europe .
And we also had a great partnership with <unk>.
CMS in China. So we're quite encouraged about the opportunity and we are evaluating both global.
As well as regional and local partnerships going forward. So we see a significant opportunity not just for plenty to help people struggling with excess weight here in the U S, but really around the world.
Great. Thanks.
Yes.
Yeah.
Thank you George.
At this time. This concludes our question and answer session I would like to now turn the call back over to Mr. Zohar for closing remarks.
Yes.
Thank you very much everyone will be happy to be with you here and hope to have you. All next time when we have this meeting at the end of the next quarter.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
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