LEXINGTON, Massachusetts, United States and SYDNEY, Australia – 30 January 2015 – GI Dynamics, Inc. (ASX: GID) (GI Dynamics or the Company), a medical device company developing innovative treatments for type 2 diabetes and obesity, is pleased to provide its financial results for the quarter ended 31 December 2014 (Quarter), as well as a discussion of the full-year 2014 performance. The Appendix 4C, which has been prepared in U.S. dollars under U.S. GAAP, is attached and the results disclosed in the Appendix 4C are unaudited.

“We addressed several challenges in the fourth quarter with both our corporate restructuring and obtaining authorization to resume shipments of EndoBarrier®,” said Michael Dale, president and chief executive officer of GI Dynamics. “With these issues behind us, we are focusing on finalizing our strategic business plan, which we expect to complete by the end of the first quarter of 2015. With this in mind, we expect to host an investor call following our first quarter 2015 results report to review this plan and provide an update on our progress.”

Mr. Dale continued, “Completing our leadership team hires, effectively and efficiently managing our ENDO Trial, completing the 1:10 reverse stock split previously approved by our shareholders and dual listing on the ASX and NASDAQ Capital Market are priorities for the Company in 2015.”

ENDO Trial

As of 31 December 2014, 25 of a possible 25 clinical sites across the U.S. have initiated patient recruitment and a total of 299 patients have been enrolled in the ENDO Trial out of a total of 500 patients required.  During the Quarter 62 patients were enrolled.

Financial Review 

The Company’s key financial results for the Quarter and year ended 31 December 2014 include the following:

  • Revenue decreased to US$0.5 million for the Quarter compared to US$1.1 million for the same period last year, a decrease of US$0.6 million. For the year ended 31 December 2014 revenue increased to US$2.8 million compared to US$2.3 million for the previous year, an increase of US$0.5 million. The decrease in the Company’s revenue in the Quarter compared to the same period last year was a result of a decrease in sales in all markets other than South America due to the shipment hold that began in early October 2014 and ended on 1 December 2014. The increase in the Company’s revenue for the full year compared to the previous year was a result of an increase in sales in Europe, South America and Australia, with the Middle East effectively flat from 2013 to 2014.
  • Cost of revenue for the Quarter was US$2.2 million compared to US$1.0 million for the same period last year, an increase of US$1.2 million. For the year ended 31 December 2014 cost of revenue was US$4.1 million compared to US$2.5 million for the previous year. The negative gross margin in the Quarter and 2014 was a result of a non-recurring charge of US$1.6 million recorded in the Quarter for sleeve inventory in excess of our currently anticipated commercial requirements.  These sleeves were purchased in 2013 prior to the termination of the Company’s supply agreement with W.L. Gore & Associates, Inc.  Excluding the non-recurring charge, the negative gross margin in the Quarter compared to the small positive gross margin in the same period last year was a result of the shipment hold and its impact on manufacturing activity and the increase in gross margin for 2014 primarily reflects increased sales volume and increased utilization of manufacturing capacity compared to 2013.
  • Operating expenses increased to US$12.0 million for the Quarter compared to US$9.1 million for the same period last year, an increase of US$2.9 million. Operating expenses increased to US$46.9 million for 2014 compared to US$34.6 million for 2013, an increase of US$12.3 million.
    • Research and development expenses were US$7.0 million for the Quarter compared to US$4.1 million for the same period last year, an increase of US$2.9 million. Research and development expenses were US$26.7 million for 2014 compared to US$14.7 million for 2013, an increase of US$12.0 million. The increase in research and development expenses for the Quarter and year ended 31 December 2014 was primarily a result of increased expenses to support the ENDO Trial.
    • Sales and marketing expenses were US$2.0 million for the Quarter compared to US$3.1 million for the same period last year, a decrease of US$1.1 million. Sales and marketing expenses were US$10.0 million for 2014 compared to US$11.0 million for 2013, a decrease of US$1.0 million. The decrease in sales and marketing expenses for both the Quarter and for 2014 compared to the same periods last year was the result of lower spending on marketing related activities to support the Company’s commercialization effort as well as lower compensation related expenses primarily related to the departure of the Company’s former chief commercial officer.
    • General and administrative expenses were US$3.0 million for the Quarter compared to US$1.9 million for the same period last year, an increase of US$1.1 million. General and administrative expenses were US$10.2 million for 2014 compared to US$8.9 million for 2013, an increase of US$1.3 million. The increase in general and administrative expenses for both the Quarter and for 2014 compared to the same periods last year was primarily associated with the departure of the Company’s former chief executive officer and former chief financial officer and the hiring of the Company’s new chief executive officer. The increase for 2014 described above was partially offset by a decrease in legal fees for the year associated with the successful settlement of the Company’s lawsuit with W.L. Gore & Associates, Inc. and a reduction in consulting fees.
    • Other income (expense) for the Quarter was a US$0.3 million loss compared to a loss of US$0.1 million for the same period last year, a decrease of US$0.2 million. Other income (expense) for 2014 was a gain of US$0.1 million compared to a loss of US$0.6 million for 2013, an increase of US$0.7 million. The decrease in the Quarter compared to the same period last year was primarily associated with a larger foreign exchange loss due to the depreciation of the Australian dollar versus the U.S. dollar during the Quarter. The increase in other income for 2014 compared to 2013 was primarily associated with a smaller foreign exchange loss due to the volatility of the Australian dollar versus the U.S. dollar and a gain on the remeasurement of the warrant liability.
    • As a result, the Company recorded a net loss of US$14.1 million for the Quarter compared to US$9.1 million for the same period last year, an increase of US$5.0 million, and a net loss of US$48.2 million for 2014 compared to US$35.6 million for 2013, an increase of US$12.6 million.
    • The Company had cash and cash equivalents of US$51.2 million at 31 December 2014 compared to US$58.6 million at 31 December 2013, a decrease of US$7.4 million.  The Company raised US$31.4 million from the issuance of shares and the exercise of stock options and used US$38.8 million to fund its operations in 2014. 

Robert Solomon

Vice President of Finance & Assistant Company Secretary