Q1 2024 Allurion Technologies Inc Earnings Call

Operator: Ladies and gentlemen, today's conference call is scheduled to begin shortly. Please continue to stand by. We thank you for your patience. Thank you for standing by, and welcome to the Alurion First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise.

Ladies and gentlemen, todays conference call is scheduled to begin shortly please continue to standby we thank you for your patience.

[music].

Lori: Thank you for standing by and welcome to the all Lori on first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' 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 telecom.

Operator: 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.

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 Carbonara Investor Relations. Please go ahead.

Mike Kavanaugh: Good morning. Thank you all for joining us today. Earlier today, Lourion 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.alurion.com. Joining me on the call today are Shantanu Ghor, Founder and Chief Executive Officer, and Chris Gebber, Chief Financial Officer. Shantanu will begin the call by discussing the quarter's business and operational highlights and our 2024 financial outlook.

Mike Carbonara: Good morning. Thank you all for joining us today earlier today Lori on technologies incorporated issued a press release announcing financial results for the quarter ended March 31, 2024, and revealing the Companys recent business highlights.

Mike Carbonara: You can access a copy of the announcement on the company's website at Www Dot investors Dr. Lorie on Dot com.

Mike Kavanaugh: 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 Actual results may differ materially from those expressed or implied as a result of certain risks or uncertainties.

Kris <unk>: With me on the call today are <unk>, founder and Chief Executive Officer, and Kris <unk> Chief Financial Officer.

Short term: Short term it will begin the call by discussing the quarter's business and operational highlights and our 2024 financial outlook.

Chris: Chris will then provide a review of our financial results and we will close the call with a question and answer session.

Mike Kavanaugh: These risks and uncertainties are described in detail in our Securities and Exchange Commission filings, including our most recent 10-K filed on March 26, 2024. Our SEC filings can be found on our company website at investors.alurion.com or the SEC's website. Investors are cautioned not to place a due reliance on such forward-looking statements, and DeLurion undertakes no obligation to publicly update or release any revisions to these forward-

Chris Johnson: 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 1095, including but not limited to our financial outlook for 2024.

Chris: The profitability in the future.

Chris: Market demand for our products in elective procedures, the impact of cost reduction initiatives on cash burn and runway.

Chris: Ability to compete with <unk> drugs or use the <unk> program in combination with <unk> one drugs.

Speaker Change: And expectations regarding our ongoing clinical trials and expectations regarding our ability to launch our products in new markets and growth in procedure volumes.

Speaker Change: Actual results may differ materially from those expressed or implied as a result of certain risks uncertainties.

Speaker Change: These risks and uncertainties are described in detail in our Securities Exchange Commission filings.

Speaker Change: Our most recent 10-K filed on March 26 2024.

Speaker Change: Our SEC filings can be found through our company website at investors Dot alert dot com or the SEC website.

L'oreal: Investors are cautioned not to place undue reliance on such forward looking statements and the l'oreal undertakes no obligation to publicly update or release any revisions to these forward looking statements.

Mike Kavanaugh: 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 of our Investor Relations page shortly after the conclusion of this call. Today's press release and supplementary financial data tables have been posted on our website. And with that, I will turn the call over to Shanta.

L'oreal: Please note that this conference call is being recorded and will be available for audio replay on our website at <unk> dot com under the events and presentations section in our Investor Relations page shortly after the conclusion of this call.

L'oreal: Today's press release, and supplementary financial data tables have been posted to our website.

L'oreal: And with that I will turn the call over to Sean.

Shantanu Ghor: 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 Alurion 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.

Sean: 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 <unk> 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.

Sean: Revenue in the first quarter totaled $9 4 million.

L'oreal: <unk> increase of 14% from the fourth quarter of 2023.

Shantanu Ghor: 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 Allurion 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 and procedural volume compared to revenue in the first quarter is reflective of ongoing destocking of inventory, especially in distributor markets.

Speaker Change: 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 represents.

Company Representative: What we believe to be a strong and growing opportunity for the <unk> program.

Company Representative: The year over year procedure 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.

Speaker Change: 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.

Shantanu Ghor: We expect that the majority of this de-stocking 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 have 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: With these market 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.

Shantanu Ghor: 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 was 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 a reallocation of marketing investments to higher ROI.

Speaker Change: I'm also extremely pleased with how we have improved our execution and increased efficiency across our operations.

Speaker Change: In the first quarter of 2020 for cash burn reduced by 62% compared to the fourth quarter of 2023 from $22 million to $8 4 million.

Speaker Change: This was largely driven by a 43% reduction in operating expenses and reallocation of marketing investments to higher ROI channels.

Shantanu Ghor: We expect to continue our efforts to further optimize our spend to drive even higher efficiency revenue in the subsequent quarter. 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.

Speaker Change: We expect to continue our efforts to further optimize our spend to drive even higher efficiency revenue in the subsequent quarters.

Speaker Change: We've also taken significant steps recently to simplify our capital structure and paved the way for future growth in.

Speaker Change: 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.

Speaker Change: This refinancing reduces annual interest expense provides increase near term cash flow and operational flexibility and extend our expected cash runway in advance of the audacity FDA trial readout.

Shantanu Ghor: 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.

Speaker Change: We believe the simplification of our capital structure combined with the operational efficiencies, we have backed it alerting positions. The company for success in 2024 and beyond with a series of catalysts ahead.

Speaker Change: 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.

Shantanu Ghor: As I mentioned in the last call, we believe that GLP-1 drugs will be a significant net positive for Lurion 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 one 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.

Chris: As I mentioned in the last call. We believe the <unk> one drugs will be a significant net positive for <unk> in the long term.

Chris: They have shown a significant light on the massive global obesity problem and.

Chris: 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.

Speaker Change: 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.

Shantanu Ghor: Currently, approximately one-third of patients on the Alurion program have previously tried anti-obesity medication. In the first quarter, we also began to observe that an increasing number of patients in the funnel showing interest in the Lurion 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 Lurion in 2024 and beyond. GLP-1s have driven increased visibility in the obesity space and the need for cost-effective and scalable therapy.

Chris: Currently approximately one third of patients on the <unk> program had previously tried anti obesity medications.

Speaker Change: In the first quarter. We also began to observe that an increasing number of patients in the funnel showing interest and Neal around program had previously tried <unk> one drugs, providing further validation that these drugs may have been a short term headwind in 2023.

Neal: But could become a long term tailwind for <unk> in 2024 and beyond.

GOP ones: GOP ones have driven an increased visibility on the obesity space and the need for cost effective and scalable therapies.

Shantanu Ghor: In January, we announced the first of Lurion 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.

Speaker Change: In January we announced the first delivery on patients treated with full reimbursement in partnership with the Uk's National Health service.

Speaker Change: Approximately one in every four adults in the U K has obesity and an additional 38% are overweight.

Speaker Change: There are 3000 obesity related hospital admissions per day in the U K.

Speaker Change: Weight loss surgery costs on average about 10000 British pounds.

Speaker Change: These surgeries have a penetration rate of roughly 1%, implying a 100 year backlog at current procedure rates.

Shantanu Ghor: 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, Alurion 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.

Speaker Change: Even if bariatric surgery volume scale up considerably in the short term to meet this need.

Speaker Change: There will still be a significant backlog.

Speaker Change: In contrast, <unk> is a scalable safe and effective solution that can immediately address this need in the U K at significantly lower cost.

NHS: 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.

Shantanu Ghor: In addition, combination therapy is becoming increasingly important in obesity management. In January, we announced the publication of a randomized double-blind controlled study demonstrating significant improvement in obesity-related comorbidities with the Alurion program used with or without oral GLP-1. Specifically, the trial demonstrated that the Alurion 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 were better when combined with an oral GLT1 drug. This study underscores two important points about the Olivion program. First, Alurion acts fast.

Speaker Change: In addition combination therapy is becoming increasingly important and obesity management.

NHS: In January we announced the publication of a randomized double blind controlled study demonstrating significant improvement in obesity related comorbidities with dealer and program used with or without an oral <unk>. One specifically the trial demonstrated that the ovarian program alone resulted in remission of type two diabetes.

Speaker Change: Retention and obstructive sleep apnea in just four months and over half of the patients enrolled and that these results improved when combined with an oral <unk> one drug.

Speaker Change: This study underscores two important points regarding deal OEM program.

Larry: First Larry on acts fast and as little as four months, there was a statistically significant improvement in <unk>.

Shantanu Ghor: 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, Alurion 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.

Speaker Change: And in over half of the cases of full resolution of these serious comorbidities.

Speaker Change: <unk> can be used effectively with <unk> ones 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.

unknown: Turning to our home market in the U S. We were thrilled to announce in April that our virtual care suite or Dcs now available to license in the United States for providers offering <unk> and other anti obesity medication therapy, bariatric surgery or weight loss devices.

Shantanu Ghor: 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 VCS is already having a profound impact on obesity treatment globally.

Speaker Change: Already in use by thousands of providers in over 50 countries. The vcs as an AI powered weight loss management suite that enables remote patient monitoring telehealth and care team collaboration all under one digital interface.

unknown: In 2023, <unk> added co gyrus, 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.

unknown: The data showed that the vcs is already having a profound impact on our obesity treatment globally, specifically clinics with the highest BCS usage achieve an additional 11% weight loss with 16% more patients reaching their goals and a 17% increase in net promoter score.

Shantanu Ghor: Specifically, clinics with the highest VCS usage achieved an additional 11% weight loss, with 16% more patients reaching their goals, and a 17% increase in net promoter score. We believe that health care providers will increasingly need a powerful tool like ECS to help monitor and manage the growing number of patients with obesity under their care. As part of the VCF launch in the U.S., we also debuted a new version of Allurion Insights, the web-based dashboard that providers and care teams use to navigate the VCF.

ECS: We believe that healthcare providers will increasingly need a powerful tool like ECS to help monitor and manage the growing number of patients with obesity under their care.

ECS: As part of the Vcs launch in the U S. We also debuted a new version of <unk> insights the web based dashboard that providers and care teams used to navigate the vcs hi.

Shantanu Ghor: Highlights of the new version of Allurion 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

Vcs: Highlights of the new version of our very own 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.

Speaker Change: 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.

Shantanu Ghor: Not only was there positive feedback on the role that BCS could play in their busy obesity practices, but it became clear that many of these same providers would be appropriate customers for the Elurion 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 Elurion balloon if FDA approves it. Long term, we are encouraged by the continued exposure the obesity market has received from the growing prominence of GLP-1 drugs and the rising interest and attention to the weight loss space.

Speaker Change: 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 <unk> balloon.

Speaker Change: 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 <unk> balloon.

Speaker Change: FDA approved.

Speaker Change: Long term we are encouraged by the continued exposure obesity market has received from the growing prominence the <unk> drugs and the rising interest and attention to the weight loss space.

Shantanu Ghor: Obesity is a massive worldwide epidemic, and we believe Allurion is well-positioned to be a leader in the space. Not just as a standalone therapy, but also as a complementary, Before handing the call over to Chris to discuss financials, I want to recognize the Alurion team as a whole. Our team continues to innovate, expand, and grow. I'm proud to lead a group of highly talented professionals working collectively to further our mission to treat a significant segment of the one billion people globally suffering from obesity. With that, I will now hand the call over to Chris. Chris?

Speaker Change: Obesity is a massive worldwide epidemic and we believe <unk> is well positioned to be a leader in this space not just as a standalone therapy, but also as a supplemental one.

Chris: Before handing the call over to Chris to discuss financials I want to recognize the <unk> team as a whole.

Chris: Our team continues to innovate expand and execute.

Chris: I am 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.

Chris: With that I will now hand, the call over to Chris Chris.

Chris Gebber: Thank you, Shantanu, and thank you all for joining the call today. First quarter revenue totaled $9.4 million, a decrease of 33% from the first quarter of 2023. The year-over-year decrease in revenue reflected macroeconomic headwinds in certain markets, leading to lower reorder rates during the period, as distributors and accounts in certain markets just maintained their inventory levels, and we reduced or paused sales of certain accounts to manage credit risk. However, while revenue decreased year-over-year, procedure volume, as estimated by new app users, grew by 12%, indicative of ongoing destocking of inventory.

Chris: Thank you Sean and thank you all for joining the call today first quarter revenue totaled $9 4 million a decrease of 33% from the first quarter of 2023.

Chris: The year over year decrease in revenue reflects the macroeconomic headwinds in certain markets, leading to lower reorder rates during the period.

Chris: Distributors and accounts in certain markets are just their inventory levels.

Speaker Change: We reduced our Pos sales of certain accounts to manage credit risk.

Speaker Change: While revenue decreased year over year procedure volume is estimated by new App users grew by 12%.

Nicholas: Nicholas of ongoing Destocking of inventory.

Chris Gebber: Revenue for the first quarter increased sequentially by 14%. As Shantan mentioned earlier, procedure volume grew 22% over the fourth quarter of 2023. The higher sequential growth and procedure volume compared to revenue in the quarter is reflective of ongoing destocking of inventory, mostly at distributor locations. We expect the majority of destocking to be completed in the second quarter. Gross margins in the quarter were 73%, compared to 39% for the same period a year ago, driven by temporarily lower production volumes, which resulted in less manufacturing labor and overhead costs being absorbed into inventory, we expect margins to increase with higher volume later in the year, sales and marketing expenses for the first quarter decreased approximately $5.7 million or 48 percent to $6.2 million compared to $11.9 million for the same period in 2023, driven largely by strategic reductions in spending to reduce cash burn and improve operational flexibility, research and development expenses decreased by $2.1 million to $5.7 million in the quarter, driven by reduced costs related to our FDA audacity trial.

Speaker Change: Revenue for the first quarter increased sequentially by 14%.

Nicholas Destocking: And you mentioned earlier procedure volume grew 22% over the fourth quarter of 2023.

Speaker Change: Higher sequential growth in procedure volume compared to revenue in the quarter.

Nicholas Destocking: Frankly, the ongoing destocking of inventory, mostly at distributor locations.

Speaker Change: We expect the majority of the Destocking to be completed in the second quarter.

Speaker Change: Gross margins in the quarter were 73% compared to 39% for the same period, a year ago, driven by temporary lower production volumes, which resulted in less manufacturing labor and overhead costs being absorbed into inventory.

Speaker Change: We expect margins to increase with higher volume later in the year.

Speaker Change: Sales and marketing expenses for the first quarter decreased approximately $5 7 million or 48% $6 2 million compared to $11 9 million. The same period in 2023, driven largely by strategic reductions in spending to reduce cash burn and improve operational flexibility.

Speaker Change: Research and development expenses decreased by $2 1 million to $5 7 million in the quarter.

Speaker Change: Driven by reduced costs related to our SBA audacity trial.

Speaker Change: General and administrative expenses of $6 4 million increased by $1 1 million driven by $2 million of costs related to being a public company and offset by $1 million less bad debt expense in the period.

Chris Gebber: General and administrative expenses of $6.4 million increased by $1.1 million, driven by $2 million of costs related to being a public company and offset by $1 million less bad debt expense in the period. Loss in operations for the first quarter was $11.4 million, a decrease of $2.5 million compared to $13.9 million in the same period in 2023. The decrease in loss from operations was driven by $6.8 million in lower operating expenses, partially offset by a lower gross margin.

Chris Gebber: Loss from operations for the first quarter was $11 4 million.

Speaker Change: A decrease of $2 5 million compared to $13 9 million in the same period in 2023.

Speaker Change: The decrease in loss from operations was driven by $6 8 million and lower operating expenses, partially offset by the lower gross margin.

Chris Gebber: As of March 31st, 2024, we had cash and cash equivalents of $29.7 million, a decrease of $8.4 million from December 31st, 2023. With that, I'd like to turn the call back to Shantanu for some final thoughts before we begin the questions and answers portion of the call.

Speaker Change: As of March 31, 2024, we had cash and cash equivalents of $29 7 million a decrease of $8 4 million from December 31 2023.

Sean <unk>: With that I'd like to turn the call back to Sean <unk> for some final thoughts before we begin the questions and answers portion of the call.

Sean: We are extremely pleased with our results from the first quarter and believe it is a strong way to get 2024 started we have delivered growth in procedural volume, while burning significantly less cash underscoring we believe the strong underlying demand for the <unk> program and the clear line of sight, you have toward a profitable sustainable future.

Speaker Change: Several exciting catalysts ahead of us, including the completion of the audacity FDA trial launch of the Vcs in the United States reimbursement opportunities in the UK and potentially other markets and a growing number of patient cycling off GLC ones and toward other therapies we.

Speaker Change: We believe the future has never been brighter for <unk> and its shareholders.

Shantanu Ghor: We are extremely pleased with our results from the first quarter and believe it is a strong way to get 2024 started. We have delivered growth in procedural volume while burning significantly less cash, underscoring, we believe, the strong underlying demand for the Lurion program and the clear line of sight we have toward a profitable, sustainable future. With several exciting catalysts ahead of us, including the completion of the Audacity FDA trial, launch of the VCS in the United States, reimbursement opportunities in the UK and potentially other markets, and a growing number of patients cycling off GLP-1s and toward other therapies, we believe the future has never been brighter for Lurion and its shareholders. With that, I'd like to turn it back to the operator to open it up for questions.

Operator: With that I'd like to turn it back to the operator to open it up for questions.

Shantanu Ghor: Yes.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of Matthew Taylor with Jefferies. Please ask your question.

Operator: Thank you.

Shantanu Ghor: We will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise their hand and joined the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask your question and our listening via loud speaker on your device.

Speaker Change: Please pickup your handset and ensure that your phone is not on mute when asking your question again press star one to join the queue.

Speaker Change: Your first question comes from the line of Matthew Taylor with Jefferies. Please ask your question.

Speaker Change: Yes.

Matthew Taylor: Hi, thank you for taking the question. I wanted to ask you a couple questions about Catalyst over the year, starting with the reimbursement you received in the UK and 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 in other geographies as well.

Operator: Hi, Thank you for taking my question.

Operator: I wanted to ask you a couple of questions about catalysts through the year and starting with <unk>.

Matthew Taylor: The reimbursement you received in the U K and maybe talk about that as the catalyst in country and then how that.

Matthew Taylor: Recognition could help you to get more coverage or potentially market the product in other geographies as well.

Shantanu Ghor: 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 that the NHS works in the UK is that there are 215 trusts that really operate somewhat autonomously. And so we've broken ground in the NHS by starting to work with the first handful of trusts that are reimbursed for the technology.

Matthew Taylor: Yes, thanks for the question Matt.

Matthew Taylor: As I mentioned on the call. The UK has a pretty significant opportunity from just an obesity perspective in general three.

Shantanu Ghor: <unk> thousand obesity related hospital admissions per day.

Shantanu Ghor: 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.

Shantanu Ghor: 215 trusts.

Shantanu Ghor: That really operate somewhat autonomously and so.

Shantanu Ghor: In the ground.

Shantanu Ghor: By starting to work with the first handful of trust.

Shantanu Ghor: Reimbursing for the technology and over the course of the.

Shantanu Ghor: And over the course of the next several quarters, and indeed probably the next several years, we will be able to gradually open up 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, in the Middle East, and some of the other markets that we operate in.

Speaker Change: The next several quarters and indeed, probably the next several years, we will be able to open up incrementally more and more trust.

Shantanu Ghor: That really recognize the value proposition of the ovarian program above.

unknown: Above and beyond Merry-andrew surgeries, specifically for patients who need to lose weight prior to surgery.

Shantanu Ghor: 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 <unk>.

Shantanu Ghor: And some of the trends that we're seeing in the U K could very well materialized in other parts of Europe, and the middle East and some of the other markets that we're operating in.

Shantanu Ghor: And just a general question. What other cattle should we be 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 studies?

Shantanu Ghor: Great and just a general question.

Speaker Change: What other catalysts should we be looking for through the year do you see the potential for any other reimbursement wins.

Shantanu Ghor: Publications or anything like that outside of obviously the.

Shantanu Ghor: Tracking of the pivotal study.

Shantanu Ghor: Yeah, there are several catalysts that are here in the short term, Matt, you know, 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 Alurion program. There is a large network of providers in a number of our different markets that are outside the center of our bullseye.

Shantanu Ghor: Yes, there is.

Shantanu Ghor: Several catalysts that are here in the short term on that the first being obviously additional reimbursement wins in different markets.

Shantanu Ghor: As I mentioned earlier are exploring.

Speaker Change: 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 DLP one costs and are looking for alternatives like jewelry on program.

Shantanu Ghor: A large network of providers and a number of our different markets.

Shantanu Ghor: That are outside the center of our Bull's eye. It typically we start commercialization with very hatrick surgeons.

Shantanu Ghor: 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 the virtual care suite available in the United States, and I believe that that could be a significant opportunity for us to expand the B2B SaaS software business that we started inside Alurion in a significant market like the United States, but also start to build relationships with providers well before the Alurion balloon is approved. And that will hopefully increase awareness about our technology in the United States, but more importantly, start to educate U.S. providers about the Alurion balloon and some of the benefits that it could provide.

Shantanu Ghor: Providers that are deeply.

Shantanu Ghor: Invested in obesity.

Speaker Change: Management in weight loss, but there are other types of providers.

Shantanu Ghor: 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 providers versus individual practitioners and then.

Speaker Change: Mentioned on the call that we are now avail.

Speaker Change: Available now making available in the United States, the virtual care suite.

Speaker Change: And I believe that that could be a significant opportunity for us to expand.

Speaker Change: The BW SaaS software business that we started inside of <unk>.

Speaker Change: A significant market like the United States, but also start to build relationships with providers well.

Speaker Change: Well before the <unk> balloon is approved and that will hopefully increase awareness about our technology in the United States, but more importantly start to educate providers on.

Shantanu Ghor: Larry on the balloon and some of the benefits that it can provide.

Shantanu Ghor: Yeah.

Operator: Great. Thanks a lot for the call.

Shantanu Ghor: Great. Thanks, a lot for the color.

Operator: Thank you.

Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from Kee Nakai with Chardon. Your line is open.

Operator: Again, if you would like to ask a question press star one on your telephone keypad.

Kee Nakai: Next question comes from key Mackay with Chardan. Your line is open.

Kee Nakai: Yes, thank you. So, in terms of the inventory de-stocking, is it still more of a problem of what's left to remediate? Is that still more of a problem with distributors? Yeah, thanks for the question, Keith.

Operator: Yes. Thank you.

Operator: So in terms of the.

Kee Nakai: Inventory destocking.

Kee Nakai: Is it still more of a problem.

Kee Nakai: What's left to.

Kee Nakai: <unk>.

Kee Nakai: Remediated is that still more of a problem with distributors.

Kee Nakai: Okay.

Shantanu Ghor: Yeah, thanks for the question, Kee. It is mostly concentrated in distributor markets. What we observed in the first quarter was strong procedural volume growth in both 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 destocking, sell-in lagged behind procedural volume. We expect that the majority of destocking should complete in the second quarter in those markets.

Kee Nakai: Yes, thanks for the question.

Kee Nakai: 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.

Shantanu Ghor: With ongoing Destocking.

Shantanu Ghor: Sell in lag behind procedural volume, we expect that the majority of Destocking should complete in the second quarter and those distributor markets and that several of those distributors should begin to reorder in the second quarter.

Shantanu Ghor: 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, they're a new app user, that's probably easier to track. With respect to the practitioners, is it always the case that there's a direct one-to-one correlation there between the app user and using the balloon?

Shantanu Ghor: And if you could.

Shantanu Ghor: Talk a little bit more about how youre able to.

Shantanu Ghor: Understand what the procedure volume is.

Interviewer: Obviously, if you have a new user there are new app user thats, probably easier to to track but.

Interviewer: With respect to the practitioners is it always the case.

Speaker Change: There is a direct one to one correlation there between the App user.

Shantanu Ghor: Using the balloon.

Shantanu Ghor: 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.

Shantanu Ghor: Yes typically.

Practitioner: It does vary by market key in terms of correlation between new App users and actual balloon placements, but what we've been able to do.

SaaS: 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 SaaS.

Speaker Change: 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 and.

Shantanu Ghor: 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 metric should much more closely correlate to our revenue.

Shantanu Ghor: <unk>.

Shantanu Ghor: That metric should much more closely correlated to our revenue growth.

Shantanu Ghor: Okay, and just a final question, if I can, what are the prospects for launching in new geographies this year? This year we are

Shantanu Ghor: Okay, and just a final question if I can.

Speaker Change: What are the prospects for launching in new.

Speaker Change: <unk> fees this year.

Shantanu Ghor: Yeah.

Shantanu Ghor: 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, and Australia. Those are massive market opportunities for us, and so we'll continue expanding in those markets. In terms of new markets, the one that we're most focused on right now is the United States.

Shantanu Ghor: This year, we are pretty much set in terms of the new geographies.

Shantanu Ghor: We previously had launched in 2022 and 2023 those include India, Brazil, Canada, Mexico, Australia, those are massive market opportunities for us. So we will continue expanding in those markets in terms of new markets on the horizon.

Shantanu Ghor: The one that we're most focused on right now in the United States.

Shantanu Ghor: Okay. Thank you.

Shantanu Ghor: Thank you.

Shantanu Ghor: There are no further questions at this time. I will now turn the conference back over to Shantanu Gor for the closing remarks.

Shantanu Ghor: There are no further questions at this time I will now turn the conference back over to Sean <unk> for the closing remarks.

Shantanu Ghor: I want to thank everyone for joining today and thank you for the questions. I specifically want to thank all the Alurions out there for their hard work in getting this year off to a very strong start. For any of you who have further follow-ups, please reach out to the ICR Westwick team for follow-up, and thank you all. Have a great day.

Shantanu Gor: Well I want to thank everyone for joining today and thank you for the questions I, specifically want to thank all the <unk> out there for their hard work on getting this year off to a very strong start for any of you who have further follow ups. Please reach out to the ICR Westwood team for follow up and thank you all have a great day, thanks for joining.

Operator: That concludes today's call. Thank you all for joining us. You may now disconnect.

Shantanu Ghor: That concludes today's call. Thank you all for joining you may now disconnect.

Operator: Yeah.

Operator: Okay.

Operator: Yeah.

Operator: Okay.

Operator: Hum.

Operator: Yeah.