Appendix 4C Quarterly Report Quarter Ended 31 March 2016

LEXINGTON, Massachusetts, United States and SYDNEY, Australia – 29 April 2016 – GI Dynamics, Inc. (ASX: GID) (the Company), a medical device company developing innovative treatments for type 2 diabetes and obesity, releases its Appendix 4C Quarterly Report today for the quarter that ended 31 March 2016 (the Quarter).The Appendix 4C, which has been prepared in U.S. dollars under U.S. GAAP, is attached; the results disclosed in the Appendix 4C are unaudited.

Highlights

Key highlights for the period included:

  1. Clinically significant results:
    • The Company’s ENDO Trial top-line results confirmed statistically and clinically significant glycemic improvement and weight loss in obese patients with type 2 diabetes.
    • Interim data from the independent, investigator-initiated REVISE Diabesity Study (United Kingdom) was presented at Diabetes UK and the Endocrine Society’s ENDO 2016 meetings. This is the first study in which the combination of a GLP-1 receptor agonist (liraglutide) and EndoBarrier Therapy have been used to successfully treat type 2 diabetes and obesity. Results of the combination therapy were significantly better than either EndoBarrier alone or liraglutide alone.
  2. Revenue was $0.2 million. Closing cash, cash equivalents and restricted cash balance on 31 March 2016, was $15.8 million.
  3. Appointment of Mr. Scott Schorer, a highly experienced medical device executive, as president and chief executive officer, to lead the Company turnaround.
  4. Cost savings are being implemented to extend cash runway.

Scott Schorer, president and CEO, commented, “On behalf of the board and management, I acknowledge that this has been a difficult and disappointing first quarter of 2016 and 2015 for GI Dynamics. However, in spite of having to stop the ENDO Trial in the United States, we have yielded encouraging efficacy results that are statistically and clinically significant. We are in the process of completing the summary of the ENDO Trial and our Clinical Evaluation Report, including a meta-analysis of our seven clinical trials.

“During my first month with the Company, I’ve met with clinicians around the world and have conducted an internal review of our systems, expenses and personnel. We will enact additional cuts to our expenses and resize company systems to better fit our current priorities. We are analyzing the issues that led to stopping the ENDO Trial and have initiated more effective dialogue with regulatory bodies in Europe, Australia and the United States.

“I firmly believe that EndoBarrier Therapy is a safe and effective treatment. We have compelling qualitative and quantitative clinical data and additional investigator-initiated data to support EndoBarrier Therapy as a treatment for patients with type 2 diabetes and obesity. Our first priority is to advance our clinical efficacy and regulatory approvals to serve our target patient population while supporting our current customers and ongoing investigator-initiated trials in addition to reducing burn to extend our cash runway.

“We are committed to a focused set of objectives that will enable us to reboot the Company. GI Dynamics will have a culture of greater accountability and transparency. I intend to make myself available to shareholders so we can rebuild investor confidence. I will not shy away from making the decisions that need to be made to serve patients and clinicians, maximize shareholder value and ensure compliance.”

Company Update

While stopping the Company’s ENDO Trial impacted commercial activities, a number of clinicians continued to recommend and use EndoBarrier Therapy for their patients during the Quarter. The Company has conducted multiple meetings with clinicians who have reiterated their strong support for EndoBarrier Therapy.

During the Quarter, 14 active EndoBarrier Therapy clinicians from around the world, representing endocrinology, gastroenterology and bariatric surgery specialties reviewed the interim ENDO Trial results and discussed clinicians’ practical experiences in treating patients with EndoBarrier Therapy. The meeting explored a modified clinical algorithm for treating EndoBarrier Therapy patients specifically designed to reduce the incidence of hepatic abscess and improve overall safety without compromising efficacy. To date, 39 cases of hepatic abscess have occurred in the ~3,600 commercial shipments worldwide and the Company’s clinical trials, with seven of these occurring in patients who participated in the ENDO Trial. This represents a cumulative hepatic abscess rate of <1.1%. The Company is conducting additional analyses of the issues that led to cases of hepatic abscess.

The Company is reaching out to the FDA to discuss the ENDO Trial data, lessons learned from the study and the parameters for future U.S. clinical trials.

Research and Development

The Company continues to advance future product enhancements including a simpler implant procedure.

Clinical Update

In May, three posters pertaining to EndoBarrier Therapy are scheduled for presentation at the American Gastroenterological Association’s Digestive Disease Week meeting (May 21–24, San Diego, Calif.). They include:

  • Results from a prospective, controlled, multi-center study conducted in the Czech Republic on the effectiveness of EndoBarrier Therapy and patient traits predicting suboptimal results
  • An assessment of changes in fat absorption and meal-related symptoms before and after EndoBarrier implantation in obese, type 2 diabetes patients and their correlation to achieved weight loss
  • Another aspect of the REVISE Diabesity Study showing EndoBarrier Therapy’s role in improving non-alcoholic fatty liver disease in obese patients with type 2 diabetes

Final results from the Company’s ENDO Trial are among the four presentations scheduled during the upcoming American Diabetes Association 76th Congress (June 10–24, New Orleans, La.), which include the following:

  • A moderated discussion on the benefits of bariatric surgery and bypass liners and a review of human trials
  • A poster demonstrating a reduction in cardiovascular risk profile with EndoBarrier Therapy
  • Results of a study showing EndoBarrier Therapy reduces non-alcoholic fatty liver disease in obese, type 2 diabetes patients

Key Financial Information

The Company plans to file its Quarterly Report on Form 10-Q (Form 10-Q) with the U.S. Securities and Exchange Commission and the Australian Securities Exchange on or before the due date of 16 May 2016. The Form 10-Q will provide financial statements for the Quarter along with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Quarter.

The Company’s revenue for the Quarter was $0.2 million, consistent with that of 4Q 2015, but down from $0.6 million for the same period last year. While the cost of revenue for the Quarter was $0.4 million, down from $0.9 million in the same period last year, gross loss was adversely impacted by the decrease in the volume of units manufactured.

The Company’s operating costs were reduced during the Quarter to $3.3 million, compared to $9.6 million for the same period last year. This reduction was due to lower expenses in a number of areas, including reduced costs related to the stopping of the ENDO Trial, reduced personnel-related expenses, reduced professional and consulting expenses and reduced marketing expenditures.

As a result, the Company recorded a net loss of $3.4 million for the Quarter compared to a net loss of $10.3 million for the same period last year. As of 31 March 2016, the Company had cash, cash equivalents and restricted cash of $15.8 million, a decrease of $3.8 million since 31 December 2015.

Investor Conference Call & Webcast

GI Dynamics, Inc. (ASX: GID) will hold a conference call at 6:30 p.m. U.S. EDT on Wednesday, 11 May 2016 (8:30 a.m. AEST on Thursday, 12 May 2016) to discuss the Company’s financial results for the Quarter and the business outlook. Scott Schorer, president and CEO, will host the call.

Accessing the Conference Call via Webcast:

A live webcast of the call will be available on the GI Dynamics website at investor.gidynamics.com. The webcast can be directly accessed at: http://edge.media-server.com/m/p/9avzu34m/lan/en

Accessing the Conference Call via Telephone:

For those preferring to listen by telephone, please dial in five minutes prior to the start of the call and provide the passcode 97266410.

Regional dial-in numbers are as follows:

  • United States callers please dial toll-free   1 877 797 0688
  • Australia callers please dial toll-free           1 800 005 989
  • International callers please dial                 1 615 247 0187

The webcast will be archived for 30 days following the call on the GI Dynamics website at www.investor.gidynamics.com.

Robert Solomon

Vice President of Finance & Company Secretary