Obalon Announces Second Quarter 2020 Financial Results

SAN DIEGO, July 30, 2020 (GLOBE NEWSWIRE) -- Obalon Therapeutics, Inc. (NASDAQ:OBLN), a vertically integrated medical technology company with the first and only FDA-approved swallowable, gas-filled intragastric balloon system for the treatment of obesity, today announced its financial results for the second quarter ended June 30, 2020.

Financial results for the second quarter of 2020

Revenue for the second quarter of 2020 was $0.7 million, compared to $0.4 million for the second quarter of 2019, primarily due to reversals of revenue reserves as a result of suspending business operations at the company-branded retail treatment centers. Net loss for the second quarter of 2020 was $4.2 million, compared to $6.8 million for the second quarter of 2019. Net loss per share for the second quarter of 2020 was $0.54, compared to $2.52 for the second quarter of 2019.

Cost of revenue was $0.4 million for the second quarter of 2020, down from $0.7 million for the second quarter of 2019. Gross profit for the second quarter of 2020 was $0.3 million, compared to a gross deficit of $0.3 million for the second quarter of 2019.

Research and Development expense for the second quarter of 2020 totaled $0.8 million, down from $1.8 million for the second quarter of 2019. Selling, General and Administrative expense decreased to $2.4 million for the second quarter of 2020, compared to $4.3 million for the second quarter of 2019.

The Company recognized $1.3 million impairment expense and other charges related to its inventory and long-lived assets during the second quarter of 2020, as a result in the Company's shift in business strategy away from the retail treatment centers to reimbursement.

Operating loss for the second quarter of 2020 was $4.2 million, down from a loss of $6.4 million for the second quarter of 2019.

As of June 30, 2020, the Company had cash and cash equivalents of $6.8 million and $0.4 million of debt related to its Payroll Protection Program loan. The Company intends to continue exploring the potential for third-party reimbursement for the Obalon Balloon System, as well as exploring and evaluating financial alternatives to help meet its capital needs and strategic alternatives that might enhance stockholder value.  There is no assurance that any financial or strategic alternative will be identified.  If the Company is not able to raise additional capital to meet its needs or to identify a strategic alternative in the best interest of stockholders, it will have to discontinue all operations and may be required to declare bankruptcy or dissolve.

About Obalon Therapeutics, Inc. 
Obalon Therapeutics, Inc. (NASDAQ:OBLN) is a San Diego-based company focused on developing and commercializing novel technologies for weight loss.

Cautionary Statement Regarding Forward Looking Statements

This press release contains forward-looking statements that are not purely historical regarding Obalon’s or its management’s intentions, beliefs, expectations and strategies for the future, including those related to new products and their potential benefits. All forward-looking statements and reasons why results might differ included in this press release are made as of the date of this release, based on information currently available to Obalon, deal with future events, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in those forward looking statements. The risks and uncertainties that may cause actual results to differ materially from Obalon’s current expectations are more fully described in Obalon’s annual report on Form 10-K for the period ended December 31, 2019, periodic reports on Form 10-Q for the period ended June 30, 2020 and March 31, 2020 and its other reports, each as filed with the Securities and Exchange Commission. Except as required by law, Obalon assumes no obligation to update any such forward-looking statement after the date of this report or to conform these forward-looking statements to actual results.

(in thousands, except shares and per share data)
 Three Months Ended June 30,  Six Months Ended June 30,
  2020 2019
Revenue$703  $386  $1,483  $2,161 
Cost of revenue423  679  964  1,911 
Gross profit (deficit)280  (293) 519  250 
Operating expenses:       
Research and development765  1,788  2,022  4,227 
Selling, general and administrative2,362  4,332  6,255  10,536 
Asset impairment and other charges1,310    1,310   
Total operating expenses4,437  6,120  9,587  14,763 
Loss from operations(4,157) (6,413) (9,068) (14,513)
Interest (expense) income, net(5) (295) 30  (485)
Other expense, net(26) (59) (411) (59)
Net loss and comprehensive loss$(4,188) $(6,767) $(9,449) $(15,057)
Net loss per share, basic and diluted$(0.54) $(2.52) $(1.22) $(6.02)
Weighted-average common shares outstanding, basic and diluted7,728,624  2,687,829  7,726,915  2,500,619 

(in thousands, except shares and par value data) 
 June 30, 2020 December 31, 2019
Current assets:   
Cash and cash equivalents$6,804  $14,055 
Accounts receivable, net  285 
Inventory  1,936 
Other current assets3,971  1,959 
Total current assets10,775  18,235 
Property and equipment, net1,055  1,081 
Lease right-of-use assets748  1,077 
Other long-term assets1,295   
Total assets$13,873  $20,393 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable$1,054  $648 
Accrued compensation240  820 
Deferred revenue123  424 
Other current liabilities3,603  1,524 
Current portion of lease liabilities579  561 
Total current liabilities5,599  3,977 
Lease liabilities long-term666  567 
Long-term debt430   
Total long-term liabilities1,096  567 
Total liabilities6,695  4,544 
Commitments and contingencies   
Stockholders’ equity:   
Common stock, $0.001 par value; 100,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 7,731,633 and 7,724,100 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively8  8 
Additional paid-in capital189,049  188,271 
Accumulated deficit(181,879) (172,430)
Total stockholders’ equity7,178  15,849 
Total liabilities and stockholders’ equity$13,873  $20,393 

(in thousands)
 Six Months Ended June 30,
  2020   2019 
Operating activities:       
Net loss$(9,449) $(15,057)
Adjustments to reconcile net loss to net cash used in operating activities:   
Depreciation187  256 
Stock-based compensation762  1,641 
Loss on disposal of fixed assets  95 
Amortization of right-of-use assets239  186 
Accretion of investment discount, net  (2)
Amortization of debt discount  70 
Impairment of long-lived assets and other charges1,257   
Impairment of inventory53   
Change in operating assets and liabilities:   
Accounts receivable, net285  423 
Inventory(524) (157)
Other current assets(1,845) 1,760 
Accounts payable405  (191)
Accrued compensation(564) (2,712)
Deferred revenue(302) (32)
Lease liabilities, net(147) (136)
Other current and long term liabilities2,079  (142)
     Net cash used in operating activities(7,564) (13,998)
Investing activities:   
Maturities of short-term investments  2,550 
Purchase of property and equipment(117) (20)
     Net cash (used in) provided by investing activities(117) 2,530 
Financing activities:   
Proceeds from long-term loan430  10,000 
Payment on long-term loan  (15,000)
Proceeds from issuance of common stock, net of issuance costs  8,793 
Proceeds from sale of common stock upon exercise of stock options  1 
     Net cash provided by financing activities430  3,794 
     Net decrease in cash and cash equivalents(7,251) (7,674)
Cash and cash equivalents at beginning of period14,055  21,187 
Cash and cash equivalents at end of period$6,804  $13,513 
Supplemental cash flow information:   
Interest paid$  $563 
Unpaid issuance costs$  $377