Allurion Technologies, Inc. (ALUR) Q2 2025 Earnings Call Transcript

Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the Allureon second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. 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 conference over to Tara Brady. You may begin.

Good morning, and thank you for joining us. Earlier today, Allureon Technologies, Inc. issued a press release announcing financial results for the quarter ended June 30, 2025, and provided a business update. You can access a copy of the announcement on the company's website at investors.allureon.com. With me on the call today is Shantanu Gore, founder and chief executive Officer. Before we begin, I would like to inform you that comments mentioned on today's call contain forward-looking statements within the meeting of Federal Securities Laws. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K filed on March 27, 2025. Our SEC filings can be found through our company website at investors.elurion.com or the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements, and Elurion undertakes no obligation to publicly update or release any revisions to the forward-looking statements. Please note that this conference call is being recorded and will be available for audio replay on our website under the events and presentation section on our investor relations page shortly after the conclusion of this call. And with that, I will turn it over to Shantanu.

Good morning, and as always, thank you for joining us today. Before discussing our second quarter results and updating you on the business, I'd like to begin today by sharing our vision for the future of obesity care, and how we believe the pivot we are making at Allurion sets the company up for long-term success. Due to their ease of use and wide accessibility, GLP-1s have leapfrogged other therapeutic approaches to treat obesity. But while they have become a popular first-line weight loss therapy, challenges with adherence and long-term efficacy persist. 30% of patients on GLP-1s discontinue their medication within the first month, and 50% to 75% discontinued during the first year. The adherence obstacle for GLP-1s is caused by three key factors, side effects, muscle mass loss, and high costs. And importantly, each of these issues is exacerbated when higher doses are needed to achieve clinically meaningful weight loss. We believe these fundamental issues make GLP-1s ripe for disruption and that our new strategic direction at Ellurion systematically addresses these issues and lays the foundation for an exciting R&D and clinical pipeline that could shape the future of obesity care. Our new strategy doubles down on metabolically healthy weight loss, losing weight, keeping it off, and maintaining muscle mass, with a specific focus on combining the Ellurion program with low-dose GLP-1 therapy. The benefits of combination therapy have become clear. Coupling the fast and immediate weight loss from the Illurion balloon and the Illurion program's focus on behavior change with a low dose of GLP-1 therapy improves all aspects of metabolically healthy weight loss and brings more patients into the funnel. Our new strategy has three key pillars. First, our commercial focus is shifting towards accounts and distributors who promote metabolically healthy weight loss as part of a comprehensive obesity management strategy that includes combination use of the Illurion program with low-dose GLP-1s. We believe this approach will bear fruit outside the United States and be the ideal strategy for a potential U.S. launch. to this end we launched several initiatives in the second quarter first we began transitioning away from distribution partners who did not have access to accounts and clinicians equipped to deliver metabolically healthy weight loss and began either finding new distribution partners or converting those markets to direct operations while this is disruptive in the short term we believe it is the right strategy for the long-term success of the business and second we resized our Salesforce to focus on those accounts that can deliver comprehensive obesity care. These accounts grew by 20% compared to the first quarter of 2025, and while they are a subset of our existing account base, they deliver superb weight loss results coupled with increasing productivity. Second, our R&D pipeline has been retooled to pursue innovation that enables seamless combination therapy. In the second quarter, we signed a term sheet with a strategic partner to expand manufacturing capabilities and XUS distribution and explore the joint development of a novel GLP-1 drug-eluting intragastric balloon. This partner has deep experience developing and manufacturing drug-eluting devices and a global footprint in bariatrics with deep conviction in the merits of metabolically healthy weight loss. Delivering GLP-1s through an intragastric balloon directly addresses the adherence challenges of GLP-1 use, which we believe will become even more apparent with once-daily pills, while directly combining two independent mechanisms of action into a single therapy. Such an innovation could be the ideal therapy for the nearly 50% of patients who stop using GLP-1s before achieving any clinical benefit. In addition, we intend to continue to invest in next-generation designs for the Illurion balloon that reduce its capsule size, increase radioopacity, and introduce new valve technology that enables longer residence balloons, which we believe will enhance long-term weight maintenance. Third, our clinical pipeline will focus on the prospective validation of combination therapy leading to metabolically healthy weight loss. We are very pleased with the progress we have made with our prospective multicenter study in Europe designed to study the effects of combination therapy on weight loss, muscle mass, and GLP-1 adherence. The protocol has now been submitted to institutional review boards, or IRBs, and once approved, we expect to begin enrollment by the end of this year. As combination therapy becomes more of a standard of care, we also expect investigator-initiated studies to emerge that test various aspects of metabolically healthy weight loss. We believe that the protocol we are testing in this study, where patients will receive the Ellurion balloon, start on 0.25 milligrams of semaglutide after three months, and scale up, if needed, to 1.0 milligrams of semaglutide over the subsequent nine months directly addresses the issues related to high doses of GLP-1s and provides a compelling future clinical pathway for the U.S. market. With regards to the U.S. market, I am pleased to report that we submitted the fourth and final module of our PMA submission on schedule in the second quarter that included additional supportive analyses from the Audacity study that meet both of the pre-specified co-primary endpoints. Additional analyses submitted in the PMA application were conducted to account for the initial results seen in the control group. Using imputation methods that account for the variations observed in the control subjects, the mean difference in weight loss between the treatment and control groups at 48 weeks was 4.34 percent with a super superiority margin of 3.14 percent exceeding the pre-specified 3 percent super superiority margin in the second co-primary endpoint with a p-value of 0.0142. At 40 weeks using these same imputation methods, the mean difference in weight loss between the treatment and control groups was 4.90 percent with a super superiority margin of 3.75 percent, considerably exceeding the pre-specified margin in the second co-primary endpoint with a p-value of 0.0006. We believe that these analyses are more suitable for trends observed in both groups in the audacity study and further strengthen our positive top line data with the pma now submitted we are looking forward to working with the fda toward an approval the results from audacity combined with recent publications from outside the united states that clearly demonstrate that long-term weight maintenance and muscle mass maintenance are possible with the elurion program with or without glp1 combination therapy create a compelling set up for the U.S. market, where 40% of adults have obesity, 170 million may benefit from obesity therapy, and only 8 million people are currently taking injectable obesity therapy. The opportunity, quite simply, is massive. Shifting now to the second quarter, revenue was $3.4 million, in line with the pre-announcement on August 5, 2025, reflecting reduced sales in distributor markets undergoing partner transitions and partially offset by growth in direct markets driven in part by GLP-1 combination therapy. In the second quarter of 2025, clinics where the combination approach was piloted as part of a comprehensive obesity management program grew by 20% compared to the first quarter of 2025, underscoring the potential for the combination approach in the future. While we expect this pivot to continue to be disruptive in the short term, we believe it will lead to long-term growth and refinement of a strategy that we could utilize out of the gate in the U.S. market. Operating expenses in the second quarter decreased by 48% compared to the prior year as the restructuring and reorganization we conducted previously continued to bear fruit. Operating loss improved by 26% compared to prior year, driven by the reduction in operating expenses. Given the near-term disruption we expect from the new strategic direction we are taking, we are reevaluating guidance for 2025. In addition, in July, we began implementing a plan designed to align the company's operating expenses with the new strategic direction. We anticipate recording charges of approximately $1.5 million in the third quarter of 2025 related to this plan. I will now turn the call over to Tara Brady, our interim chief financial officer. Tara?

Thank you, Shantanu. Our revenue for the second quarter of 2025 was $3.4 million compared to $11.8 million for the same period in 2024. The year-over-year decrease in revenue was primarily due to the distributor transitions we initiated in the second quarter of 2025, lower investments in sales and marketing, as well as the temporary suspension of sales in France. Gross profit for the second quarter was $2.5 million or 74% of revenue compared to 9.0 million dollars or 76 percent of revenue for the same period in 2024. The decrease in gross profit was driven by a decrease in sales. Sales and marketing expenses for the second quarter were 2.4 million dollars compared to 6.7 million dollars for the same period in 2024. The reduction in expense was primarily driven by increased operating efficiency in the restructuring initiatives implemented during the fourth quarter of 2024 which refocused spend on more efficient channels. Research and development expenses for the second quarter were $1.8 million compared to $4.3 million for the same period in 2024. The reduction was primarily driven by reduced costs related to the Audacity trial and restructuring initiatives implemented during the fourth quarter of 2024. General and administrative expenses for the second quarter were $5.2 million compared to $7.3 million for the same period in 2024. The reduction year-over-year was primarily driven by the restructuring initiatives implemented during the fourth quarter of 2024. Lost from operations for the second quarter was $7.0 million compared to $9.3 million for the same period in 2024. The reduction was driven by restructuring initiatives implemented during the fourth quarter of 2024, leading to a reduction in operating expenses. As of June 30, 2025, we had cash and cash equivalents of $12.7 million. I will now turn the call back over to Shantanu.

Thanks, Tara. We believe the Illurion program is the only solution for obesity management that has consistently demonstrated significant and immediate weight loss while maintaining or increasing muscle mass. In combination with low-dose GLP-1s, we believe the clinical benefit increases even more with higher levels of adherence to GLP-1s, and we are confident that by pivoting to this approach, we will capitalize on the success of GLP-1s and set Illurion up for long-term success. With a renewed focus on our R&D and clinical pipelines, high-performing accounts embracing combination therapy, and new strategic distribution partners, we are looking to position Allurion for long-term success in the highly dynamic obesity market with a potential U.S. launch on the horizon. We believe this pivot will establish a new standard of care in obesity where patients can achieve meaningful weight loss while preserving muscle mass and serve as a model for U.S. market entry. We are looking forward to updating all of you on future calls as we expect these new initiatives to continue unlocking shareholder value. With that, operator, please open up the call for questions.

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Josh Jennings with TD Cohen. You may go ahead.

Hi, good morning. Thanks for taking the questions and appreciate the detailed download. I wanted to just touch on one element of the pivot and to the combo therapy, the focus on the combo therapy and just with more cost sensitivity internationally, how should we be thinking about low-dose GLP-1s plus the Lurion gastric balloon impacting overall costs for obesity care in the short term and then maybe medium and long terms as well?

Thanks for the question. What we are seeing, LP1s are actually in the U.S.

And just a follow-up, just in terms of anticipation for cost effectiveness with the combo therapy, I'm sure that the team is optimistic in the medium and long term that the combo approach could deliver. But maybe just add your thoughts, if you don't mind.

On the long-term...

I'm just thinking about just any cost-effectiveness data that ultimately could be shown with lower-dose GLP-1s and the Eulerian blown and sustaining weight loss and potentially improving the health and illness and overall spend on a patient that maintains weight loss for a longer period of time and potentially and especially, you know, metabolically sound weight loss.

Yeah, absolutely. You know, with the data that we have seen so far on the health, it indicates that they...

Thanks for downloading that. Just as we're thinking about updating our models and it was too early to issue new guidance, but maybe just some help thinking through the retention of all distributors, if there's any kind of percentage of total you can share currently, and then how you expect new distributor ads to kind of get you back to the pre-pivot baseline as we're thinking about OUS revenue contributions in 2026 as well.

That's a good question, Josh. We're making a significant shift.

And then lastly, just thinking of congratulations on the FDA's acceptance of the PMA submission. It's been a 12-month review and potential approval timeline. I know there's not a stake in the ground there, but can you just help us think through what's baked in? I think the PMA typically have 180 days, but there's clock stops for questions and responses, et cetera. But maybe just help us think through the potential FDA approval timing from here. for taking all the questions.

Thank you, Josh. Yeah, in terms of the FDA, we were very submitting the module. We may be able to pull that in, but we'll know more once we receive.

Great. Thanks again.

Your next question comes from the line of Kay Nikkei with Shardin Capital. You may go ahead.

Maybe just some guidance on some of the operating expense, you know, stay away from sales and marketing, but in terms of, um, go forward expenses for R and D, let's start there. You just posted 1.8 is, is, is that a kind of a good go forward number, at least in the near term?

Yeah. Thanks for the question.

And then how about, um, G&A, again, is there much to do there, you know, relative to the 5.2 you just posted? I know you just talked about some additional restructuring. Does that number continue to go lower once you get past a one-time charge in Q3?

Yes.

All right. Thanks.

Again, if you would like to ask a question, press Start 1 on your telephone keypad. Your next question comes from the line of Michael Toomey with Jeffries. You may go ahead.

Hey, guys. Thanks for taking my question. I'm on for Matt Taylor. Most of my question has been answered, but could you just remind us of the cash runway that you have, especially with the U.S. launch in mind, and any updates on Coach Iris or Uptake there? Thanks.

Great.

Thank you very much.

Our next question comes from Key Nikkei with Shardin Capital.

Yeah, just thanks for the follow-up. Just want to talk about how the new strategy targeting the combination use is likely to impact your re-engagement with accounts in France. All right, thanks.

This time there are no further questions. I would like to turn the call over to Shantanu Gore for closing remarks.

Thank you very much, Lacey. As we close our call today, I'd just like to extend my gratitude.

That concludes today's conference call. You may disconnect.