Apollo Endosurgery deals Lap-Band to ReShape Lifesciences for up to $17m

Apollo Endosurgery (NSDQ:APEN) said today that it dealt its Lap-Band gastric banding device to ReShape Lifesciences (NSDQ:RSLS) in return for up to $17 million and ReShape’s intra-gastric balloon, which Apollo plans to eventually discontinue.

Austin, Texas-based Apollo said the exchange closed yesterday with $10 million in cash and the balloon from ReShape. Further payments of $2 million are due Dec. 17, 2019, and Dec. 17, 2020, respectively, plus a final $3 million payout on the deal’s third anniversary. Apollo pledged to keep making the Lap-Band device for up to two years and distribute them outside the U.S. for another year, but said it will keep San Clemente, Calif.-based ReShape’s balloon for the short term before discontinuing it in favor of its own Orbera offering.

“Our surgical product line has served an important purpose for us, but it is no longer a strategic fit with our focus on our endobariatric products and therapies,” CEO Todd Newton said in prepared remarks. “The future for therapeutic endoscopy is very promising, especially due to flexible endoscopic suturing delivered by our OverStitch technology. By allowing physicians to suture with precision and assurance from a flexible endoscope, OverStitch enables many improved core gastrointestinal and bariatric therapy options for physicians and their patients. We also remain very bullish on the potential of the intra-gastric balloon market. We believe it is in the best interest of Apollo’s customers and shareholders that we direct our attention exclusively to the growth opportunities being afforded to us from these products.”

“The acquisition of the Lap-Band product line adds a clinically proven, FDA-approved, minimally invasive technology with broad insurance coverage and meaningful established revenue and margins to ReShape Lifesciences,” added ReShape chairman & CEO Dan Gladney. “We believe that shifting our product focus from the ReShape balloon to the Lap-Band will significantly enhance our financial profile, bringing to our business a product that generated almost $15 million in revenue in the last nine months, with high associated gross margins and very low investment needs, allowing us more financial flexibility to fund our exciting technologies in development. We believe the Lap-Band system, which can leverage our historically strong relationships with the bariatric surgeon, is a more optimal market opportunity that is better aligned with our core strengths as an organization.”

Apollo said it plans to use the $10 million cash payment to pay down its debt.

The news sent RSLS shares, which closed down -19.4% at 41.11¢ yesterday, up 14.3% to 47¢ today in pre-market trading. APEN shares closed own -11.4% yesterday at $3.57 apiece.

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