Obalon Therapeutics, Inc.
Q1 2017 Earnings Call Transcript

Published: 10 May 2017

[Operator:]

Good day ladies and gentlemen and welcome to the Obalon Therapeutics’ First Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instruction will be given at that time. [Operator Instructions]. As a reminder this conference call is being recorded. I would now like to turn the conference over to Bill Plovanic, Chief Financial Officer. Sir, you may begin.

[Bill Plovanic:]

Thank you. Good morning and welcome to Obalon Therapeutics’ first quarter 2017 financial results call. I am Bill Plovanic, Chief Financial Officer for Obalon Therapeutics. With me on today’s call is Andy Rasdal, Chief Executive Officer for Obalon. This morning the company issued a press release detailing financial results for the three months ended March 31, 2017. This can be accessed through the Investor Relations section of the Obalon website and obalon.com. You can also access the webcast of this call from there. Before we get started, I’d like to remind everyone that any statements made on today’s conference call that expresses a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company’s future performance maybe considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Obalon management as of today and involves risks and uncertainties including those noted in this morning’s press release and Obalon’s filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Obalon specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A telephone replay of the call will be available shortly after completion of this call for seven days. You’ll find the dial-in information in today’s press release. The archived webcast will be available for one year of the company’s website obalon.com. For the benefit of those who may be listening to replay or archived webcast, this call was held and recorded on May 10, 2017, since then Obalon may have made announcements related to the topics discussed, so please reference the company’s most recent press releases and SEC filings. And with that I’ll turn the call over to Obalon’s CEO, Andy Rasdal.

[Andy Rasdal:]

Thank you, Bill. Good morning everyone. Thank you for joining us today. On this call we will provide some background on our products and technology as well as discuss highlights from our first three months of U.S. commercial experience. Finally, Bill will review our first quarter financial results after which we will answer questions. The Obalon balloon system is a swallowable intragastric balloon system indicated for temporary use to facilitate weight loss in adults with obesity with a BMI of 30 to 40 or people, who approximately 30 to 100 pounds overweight who have failed to lose weight through diet and exercise. Our PMA was approved by the FDA on September 8, 2016 and we began commercialization in the United States in January of 2017. Although, we are only a few months into our U.S. launch, we are encouraged by initial position of patient interest, as well as the execution by our team. Although, we believe it's still too early to draw any firm conclusions or provide predicted metrics, I’d like to provide an update on the first few months of our U.S. commercial launch. In the fourth quarter of 2016, we hired our direct field force, identified our initial target accounts, and begun laying the foundation for Q1 launch including working closely with those accounts to begin filling the top of the patient funnel through targeted marketing programs. In late December, we launched our new website and initial digital presence. We believe these efforts provide to run and start into first quarter of the year, which positioned us to be more efficient in opening in the first quarter than we may find it subsequent quarters. January, as we had our first U.S. commercial shipments and placements, we launched into all three of our targeted physician channels, bariatric surgeons, gastroenterologists and plastic surgeons. Although we are encouraged by the level of position interest in commitment and providing Obalon to patients, there can be a wide range of variability in the time between when an account signs a sales agreement than when they have all of the capabilities in place to begin actively treating patients. In the first quarter, approximately two-thirds of the accounts who were shipped products treated patients during the quarter. As we have mentioned before, this is an example of why to find a doctor directory on our website may not accurately reflect the number of accounts actually treating patients. We are also pleased with our capability to reliably manufacture products into variety of new customers in the timely manner. We are again more pleased with our product and clinical performance. As we previously mentioned, we have created an online clinical and product performance database or registry with a very high rate of participation. We have no reports of series or unexpected adverse events patient injuries or product failure that warrant field action. We are intensely focused on providing high quality defect free products and we continue to test samples from production at relatively high rates. We continued our launch strategy to target fewer accounts within a limited geographic footprint and the focus on driving sustainable patient blow and product utilization in those accounts. We had accounts reordered during the quarter and the earlier we begin actively treating patients the more likely they were to reorder. During the first quarter, we initiated very targeted [indiscernible] programs intended to drive patient flow towards accounts. We also launched our initial social media campaigns, we are pleased with the level of response and interest at the top of the patient funnel during the quarter. We had over 160,000 unique visitors to our website and more than 30,000 searches on our find a doctor locator. On social media, we have over 65,000 engagements, more than 500,000 video views and greater than 3 million ad views. We continue to garner strong needy interest with 41 earn placements and over 400 million medium impressions. This activity reinforces our believe that people are very interested in the Obalon treatment for weight loss. However, as we have said previously, this out flow of patient's interest is not immediately translating to treatment. There are number of leaks and likes in the patient's interest to treatment funnel and we’re continually working closer with our accounts to optimize the funnel and more efficiently convert patient interest to treatment. Internationally, we are awaiting regulatory notifications approval for the new dispenser to support commercialization of our six month balloon in the Middle East. At this time, we are still fully focused on the successful U.S. launch and are assessing the best timing to launch the six month product into international markets beginning with the Middle East. Lastly, we also remain committed to bringing forward a robust pipeline of new products we believe will stimulate market growth of product adoption. We have received EMEA's approval of our new vegetable base HPMC capsule technology that we believe will quell some cultural and religious concerns, maybe easier for patients to slow and should favorably impact gross margins when launched. We have made further progress on our other key projects, our new touch dispenser, our navigation tracking system intends to eliminate the need for x-ray during balloon emplacement and our longer duration 12 month balloon. In conclusion, although still a very early in our U.S. launch we are encouraged with interest from both providers and patients. We are pleased with initial clinical product performance and commercial use. Finally, I am impressed with the team's execution and ability to stay focused on the key activities and milestones we believe we’ll build the sustainable and growing business. I would now like to hand the call over to Bill Plovanic, Obalon’s CFO, so that he may review our first quarter financial results.

[Bill Plovanic:]

Thanks Andy. Good morning everyone. Today I’d like to share details on our financial results posted for the first quarter ended March 31, 2017. As Andy previously stated, we began U.S. commercialization in January 2017 and we’re fully focused on a successful U.S. launch. We did not recognize any U.S. revenues in the first quarter of 2017. As we were awaiting regulatory approval of a new dispenser in certain international markets, which will support commercialization of our six months balloon. First quarter revenue was reported at 1.5 million which was up from 1.1 million from the first quarter of 2016. First quarter revenue results reflect our decision to prioritize commercialization efforts for our recently approved six-month treatment product in the United States. Specifically, all revenue in the first quarter 2017 was from sales of our Obalon balloon system in the United States. Comparatively, all revenue in the year ago quarter were from sales of our prior generation Obalon balloon system to our Middle East distributor. As a reminder, we discontinued sales of that earlier generation three months Obalon balloon at yearend 2016. We expect to transition to our current generation six-month product with the new inflation dispenser in international markets, beginning with the Middle East, when we have the necessarily regulatory approvals and the confidence that we can successfully support of U.S. and international markets. Cost of goods sold increased to $823,000 from $622,000 in the first quarter 2016. Gross profit for the first quarter 2017 was $649,000, that’s up from $447,000 in the year ago period. Gross margin increased 44% from 42% over the same period as higher ASPs where somewhat offset by an increase in payroll and other overhead costs associated with the expansion of our manufacturing organization. R&D expense for the first quarter totaled $2.4 million down from $2.5 million in the first quarter 2016. The slight decrease was attributable to a $700,000 decrease in clinical trial expenses due to the conclusion of our SMART trial that supported our U.S. PMA submission and approval, which was somewhat offset by an increase in employee headcount related expenses to support development of our next generation product. SG&A expense for the first quarter totaled 5.9 million, up significantly from 1.4 million in the first quarter 2016. The increase includes expenses associated with U.S. commercialization, the most notable being the expansion of our U.S. commercial team, including sales management, the field sales team, marketing personnel and their initial activities. Specifically, our U.S. field force including customer service was approximately 25 people in the first quarter 2017 and that compared to only one in the same period a year ago. Furthermore, we incurred the expense of full marketing team in place with activity supporting U.S. commercialization in the first quarter ’17, again as compared to only 1 person and minimal activities in the first quarter of 2016. Finally, we have the added expenses associated with be a public company. Operating loss for the first quarter was $7.7 million, compared to $3.4 million for the same period a year ago. Higher revenue and gross profit was more than offset by the increased investment in U.S. commercial operations with R&D expenses relatively flat on nominal basis. GAAP net loss for the quarter was $7.7 million or $0.47 a share per weighted average common shares outstanding as compared to 3.6 million or $6.22 per share for the same period a year ago. As of March 31, we have $66.7 million in cash equivalent in short-term investments and $10 million in long-term debt. We ended the quarter with $16.6 million weighted average common shares outstanding. Our top priority of use of cash is to support our U.S. commercialization networks as well as continued research and development projects. With that, my comments on Obalon's first quarter are complete. We continue to make important commercial progress and I believe we are putting the building blocks in place to support long-term growth. We will be participating in the UBS Healthcare Conference May 22 and May 23 in New York City. Operator, we are pleased now to open the lines for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Matt Miksic with UBS. Your line is open.

[Matt Miksic:]

So, first given the U.S. business came in quite a bit stronger than our estimates, I’d love to hear your thoughts on what if anything compared to the conversations we had and maybe two or three months ago went better than you expected in the U.S. launch. And maybe what if anything we should take away from your experience of whether would temper how we think about the line into Q2 and later in the year?

[Andy Rasdal:]

Yeah. Thanks, Matt. Well, I think again as we said on the call we’re certainly pleased with the execution we put together, our plan and you execute to that plan, I think the team did a good job on that this quarter. We did mention that certainly with getting up and running in November and December and having that ability to sort of the prime the pumps so to speak, we certainly hit the first quarter running at a pace that maybe different in subsequent quarters. Other than that, I don’t think of any specific guidance to what the next couple of quarters will look like. We're still very, very early in launch.

[Matt Miksic:]

Sure.

[Bill Plovanic:]

And then the only thing I’d like to add Matt is, in Andy's comment he mentioned as we get the accounts up there is a lag between what you see kind of out there on the find a doc and kind of them getting up and running. So, as we think we don’t provide guidance, but these kinds of things moving forward, we’re bringing the accounts on and we’re getting them going. But maybe not to the level you may be thinking.

[Matt Miksic:]

Sure. So, there is maybe a range of productivity that you're seeing as you get these get up and running, if I'm hearing your comments correctly. I know there is other folks on the call, who also want to jump in with follow-ups on that and I’d ask a question on sort of timeline and your thoughts on approvals on the U.S. even though that's clearly not the focus of your front of your efforts at the moment. Help us maybe understand when those approvals come and when that business might come back a line?

[Andy Rasdal:]

It's almost impossible to predict regulatory timelines in an accurate fashion. Certainly, in the -- first international mark we intend to go back to the Middle East, we’re waiting for the regulatory approval necessary to dispenses so that we can launch the six-month product into that. In combination, I think even if we obtain that in the near future, we’ll take one last look to be sure that we can adequately support both the U.S. and launching the product, which will still be a new product for that market in a manner that would lead to success.

[Matt Miksic:]

Right, no that’s fair. I think caution is certainly the way that everyone would refer that you precede. Last question, Andy you touched on the sort of pipeline of additional R&D efforts that you have on the hopper here and I know, you don’t like to be specific necessarily about when and what will come. But maybe, as navigation, just to focus on that for a moment and the importance to your account development. If you can give a sense of, what sort of uptake have you seen from the plastic side and maybe how is that compared to what you were expecting at this stage and how important is navigation to the further development of that channel?

[Andy Rasdal:]

Yes. Sure. Well, look, I think we’ve only saw that being the ability to eliminate the need for radiography to confirm placement of the balloon isn’t just important in aesthetic channel, it’s important in each and every channel. Certainly, if somebody doesn’t have easy access or currently owned radio drive equipment, it takes them longer to make those logistics. It’s not very large financial hurdle, but there are a number of things that have to be hurdled, eliminating that means people will just be able to get up and start it quicker with less investment. Overall with that means is, look it doesn’t have anything that's necessarily to measure balloon improve safety and efficacy as those were the things we always felt which drives more adoption and creates bigger markets, and that is to make it much easier, more convenient to use and drives costs out both for the provider and for the patients, all of which I think were good. So it’s nice, any time you’re involved in an intensive double blinded randomize sham controlled pivotal trial, regardless it becomes all consuming for an organization. I am pleased, in the sense we completed that trial, got our PMA submitted and approved the R&D team has been able to go back to work so to speak and become increasingly productive across all of the projects, not just navigation.

[Matt Miksic:]

That’s great.

[Bill Plovanic:]

And Matt, I would like to just highlight from an R&D perspective. We did receive PMA as approval for our HPMC or veggie cap. And we did mention that we will be commercializing that in 2017 as well.

[Matt Miksic:]

Excellent. Thanks. Thank you again for taking the question.

[Operator:]

Thank you. Our next question comes from Kyle Rose with Canaccord Genuity. Your line is open.

[Kyle Rose:]

So I’m just going to -- wanted to ask another color on the channel performance in the U.S. I understand, you’re going to, you’ve been limited with some of what you disclosed. But just in the first several months of commercialization. I mean have you seen any difference as far as a one channel performance stronger than the other that you based on geography, specialty, the pricing that position chooses. Is that to the actual customer? So anything that we might be able to understand what’s driving some productivity did high-end versus some potential to the lower end?

[Andy Rasdal:]

Sure. I think probably what we highlighted on our Q4 call. The first and foremost, we did launch into on all three channels bariatric surgeons, gastroenterology and the plastic surgeons couple of weeks ago we attended ASAPs, the plastic surgery scientific meeting and convention, and it was a fascinating experience and certainly pleased with the amount of interest from there. We just seeing that of BBW, I think the overall awareness of balloons compared to last year which is the first half of that was very significant in notice to us. That being said, I think like we said over the last year that for sure bariatric surgery is the channel which has the proverbial low hanging fruit and has patients in the queue, especially, if they have balloon practices already with one of the other two previously approved balloons. So, as you might expect they were the more productive ones and actually patient placements and those things going forward. But we continue to concentrate on growing the GI aminostatic business. But in a manner which we ensure our initial accounts in there are successful and creating sustainable business models with patient flow.

[Kyle Rose:]

Great. I appreciate the incremental color there. Thank you. And then, Bill, just a question on the commercial side and operating spend. Looking at your website, it looks like you got some job postings for some sales higher at some point in the future and what looks to be five territories. Just how are you thinking about the scale the commercial business and then just the impact that has on your SG&A over the rest of 2017 year?

[Andy Rasdal:]

Yeah. Kyle I'll take that one. I'm not going to comment on tactical strategic things about what the field force, just for the caution that sometime just like we find a doctor site, postings or things that get put in social media may not exactly and accurately reflect what's operationally happening there.

[Kyle Rose:]

Okay. And then one last question and I'll hop back in queue. You talked about making sure that the capacity in your corporate band with this there before you launch in additional markets internationally. Could you just remind us where you are at from a capacity and manufacturing standpoint? And then the over the course of time, at what rate you can expand that to potentially accommodate international geographies moving forward?

[Andy Rasdal:]

Yeah. Sure. As I said in the prepared we’re very pleased with our ability to turn a customer order into shipments and to provide that without interruption through the first quarter certainly perhaps the most importantly to provide product which was defect free, is the most important. So, I think it’s the combination of not just capacity of which we feel we have pretty flexible capacity here for any reasonable increase in demand, but building product and supplying it is more than that. You also have to be able to ensure that the quality as you scale that is very high in the clinical service in the field ensures safe and effective use. To us, there is nothing more important than establishing and building new category to have absolutely defect free product performance as expected and to ensure people's clinical experience that everything from the safety standpoint is extremely strong. As we move through our people see the expected weighted loss. So, the sort of caution in expanding to additional markets isn't just related to capacity, is to ensure that we understand and have the people and the training in place to ensure that people's experience initially are very positive and continue that way.

[Kyle Rose:]

Thank you very much. It's very helpful.

[Operator:]

Thank you. Our next question comes from Rick Wise with Stifel. You line is open.

[Rick Wise:]

Andy let me start off with a question about guidance. Obviously, you're not giving specific guidance in the [indiscernible] or on the call. And I think everybody understands we're listening, we know it's early days and the reason why you might be reluctant or cautious or careful by guiding. Having said that, there are estimates out there and so I feeling have to ask. Can you help us just think about 2017 sales outlook in some kind of way? Consensus is just 9 million. Does that seem like a reasonable -- with a wide range, is that a reasonable midpoint of some reasonable range or said differently, with the first quarter as a baseline, is there any reason to not assume each quarter? However much could or should move sequentially higher? I assume there is no seasonality, anything you can do this help us think about that would be helpful.

[Bill Plovanic:]

Rick, I’ll take that question. So in Andy’s prepared remarks, we discussed the fact that the sales force was up running in November and really priming the pump. So we really did have a running start, a solid running start as we went into the first quarter. So with that, we probably opened up more accounts that we would in a typical quarter. And so as you think about that going through the year, you have to take that into account.

[Rick Wise:]

So it would likely be that maybe a slightly step down a second and then from their build as the team gets faster new accounts. Is that the right way to think about?

[Bill Plovanic:]

Rick, well I’m not going to provide any guidance, I just wanted to give you color on what actually happen in the first quarter. But we’re not going to provide guidance for any of the subsequent quarters for the year.

[Rick Wise:]

Okay. Talk about gross margin. Long-term obviously, I think you offset publicly that over next few years, you could approach 80% margin. We start off where you started off, again do we assume you make steady progress throughout the year, as volumes grow, as you get more efficient. Is that the right place to think about this issue?

[Bill Plovanic:]

So as you think about scaling up for commercialization in the U.S. You typically bring on overhead that will be absorbed into the product costs, before the volume really picks up. So we have said and continue to say, we would expect if volumes ramp up than there is more units to absorb that overhead, which would in turn drive a higher gross margin. But that’s all volume dependent.

[Andy Rasdal:]

I think the only thing I would add to that Rick. I don’t think, we have guided towards 80% gross margin. I think what we have specifically said is that novel PMA type products have the ability to achieve historically 78% to 80% gross margins and certainly, we’d like to follow into that category overtime. We've said that a great deal of this product is burden with overhead. So this is great operating leverage and as volumes increase, assuming we’re able to maintain the same level of product quality and yields, we would expect that to improve. I also said in my prepared remarks that today we continue to [technical difficulty] sample a fairly high percentage or finish goods to ensure that we have the highest quality product getting into the field overtime as we accumulate data that indicates that continues to happen, we certainly will reduce the disruptive sampling and testing that as well.

[Rick Wise:]

Andy, you have been very clear in saying you want to be very thoughtful about opening these early accounts with customers, doctors who are very committed to the technology to the procedure. Can you give us any flavor for some of your early experience, I mean, I think you and Bill said that two-thirds accounts shift treated patients, I appreciate some of that logistics, but can you give us any incremental concrete color about the number of procedures, some of the early accounts were doing per month or what you'd hope that a successful account would be, and as part of that, how long does it take an average account, how long do you think it's going to take from open to get to whatever that sort of reasonable idle inspirational procedure rate per month might be?

[Andrew Rasdal:]

Yeah. Sure. Well, I think with only really three months, I don’t know we’ve in no what an average count looks like yet. Those metrics would be difficult and we have as we said a wide range of timelines between how quickly some accounts if they already have balloons and they have a develop practice, it's not the next day, but its very quickly. Someone saying in aesthetic channel who wants to get into the business, but doesn’t have radiography, dietary counseling, endoscopy capabilities to remove product, obviously, it takes a lot longer. I think everybody that again it’s a pretty discrete group, everybody that we targeted as we've said the commitment and the interest is very, very high. So it's not as these people make purchase and then sort of lose interest. I think all of them committed, I think that’s too, we certainly as a company and our people in the field have learned a lot in the first three months about how to get an account up and running more expeditiously. So, the focus is of course, we will still want to in a measured manner as you noted, open accounts, we have no desire to sell a little bit to a whole bunch of people and keeping moving on, we want to stay focused on the group of accounts, we want to get them up and running faster, and then we want to help them develop the sales and marketing practices within their own groups to be able to organically drive patient volume and have that on an increasing basis. But, after literally three months, it's impossible for us to put metrics around it other than to say we want to improve our efficiency in doing so.

[Rick Wise:]

One last quickly, you're staying very true to strategy focused on the product quality, successful outcomes performance, et cetera. Part of that, you’ve indicated is data. What are the next key datasets or the timing. What should be focused on for the rest -- let's say over the next six months to 12 months. Thank you.

[Andrew Rasdal:]

Yeah. Thanks, Rick. Yeah, I think the next major of the scientific meeting for us is ASMBS, it was interested at ASAPs the plastic surgery meeting. We didn’t have any formal scientific and date presented, but Dr. Stephens actually presented us in their hot topics, which talks about new and novel things coming to the field to the plastic surgery which was the nice surprise. And then there is a they have section, Dave is more focused on the business aspects of their medical practices and we are also included in practice changers to talk about, he did a nice job about lining, why this would be attractive to the aesthetic channel and that as productivity. Although, we had no formal submissions to DDW in terms of data sets, we have at least four presentations, where physicians undenounced to us brought us up and presented, the Obalon balloon in a way that we thought was very positive. The next major meeting will be obesity week ASMBS. In the fall, too early to tell the abstract deadline is just about now and so we don’t know, if and what any thing will be formally accepted for presentation. But I would imagine need to presented that meeting this call as well.

[Operator:]

Thank you. Our next question comes from Ryan Zimmerman with BTIG. Your line is open.

[Ryan Zimmerman:]

So just housekeeping questions for me. The U.S. distributor, just want to make sure I understand it. Given the undetermined regulatory timeline outside the U.S. [indiscernible] assure you're working through existing inventories from 2016 at all and should we think that there could be any pent-up demand at some points, if there is an inventory gap outside the U.S.?

[Andy Rasdal:]

That’s a fair question. But not something, which we have a liberal visibility to with what distributors to accurately comment on that.

[Ryan Zimmerman:]

Okay. Fair enough. Within DDW and cost from the clinical presentations and I’m just curious Andy if you can characterize the nature of your conversation with physicians at that conference. Is it more clinical in nature, is it more logistical in nature in kind of setting up their practices? Any color that I think it would be very helpful. Thank you.

[Andy Rasdal:]

Yes. Sure. I mean you went to the conference and you know there is a wide and diverse group that specialty, I think we estimate, what we said there is 15,000 gastroenterologists in the U.S. and those are divided into different areas of interest and specialties, large practices and small practices. And so it’s always interesting meeting. And the answer is, we talk to people for the full range. We talked -- and really the conversation depended upon where they were on where they were on what I'll call the awareness curve, for folks who sort of came to the meeting with knowledge, but picked up on this balloon vibe, this balloon interest that was kind of permeating meeting, I think the meeting. I think they quickly ran to the three there who were balloons and basically were asking fundamental questions about how does it work, how is it different, what's the safety and efficacy from a clinical trial output. But those folks who are a little bit higher up on the curve began to pretty well focus on what’s required for me to get my practice setup, clinical logistics, patient flow, what are you going to do for meeting and those folks who were beyond that, there are more discussions about how can you help us be in the cash pay business, what’s patient flow going to look like, what are the economics. And so I think is that you would expected, the awareness curve sort of drives the level of conversation and we had a variety of offering.

[Ryan Zimmerman:]

Great. And then just lastly for me and I’ll up back in the queue. Just want to make sure I understand, the U.S. commercial sales force right now. I mean, should we think about the dynamic and I know you alluded to this a little bit. But the dynamic of servicing accounts versus opening account. I mean, it’s certainly a balance of their time and just incrementally any color that you can provide there I think would be helpful as we think about the ramp and accounts going forward?

[Andy Rasdal:]

Well again, I mean, I think we are going to centrally meter very carefully, the number of accounts, which channels are opened, so that we get the right accounts and then we’re able to support on them. So, it's a combination as you recall, we have a bifurcated field force, I think we’re the only ones who do that, to where we have truly a sales rep who is responsible for certainly giving the account interested sold getting them to sign a sales agreement which is traditional, but then also helping them to plan for the clinical logistics if they don’t already have that to get their practice up and going. We have a dedicated product specialist who is really responsible for making sure that from a clinical standpoint they understand how the product works, the training and all of their initial placements are successful, that they’re selecting the right kind of patients, that the weight loss mechanisms are in place and to be able to meet not only the physicians staff, but the registry dietitian to ensure that expectations are met in terms of the clinical safety and efficacy of the product. And then as it happens the EIM is responsible for doing the in-office training and the development of the staff and the programs that will allow them to be able to advertise effectively two patients and organically from their own databases or outreach be able to drive patients into the practice with an interest in balloon related and Obalon related weight loss and be able to transform that to treatment. As we said, the top line numbers of interest of everything we quoted are extremely high and we’re pleased with that, but there are a number of sort of lags and leaks in the funnel. And so the EIM spends a fair amount of time helping to sort of the plug those leaks and accelerate those lags rather than just going on and dropping off and trying to sell another goal is to five other accounts. So, they're really is a heavy investment once an account comes up, to making them successful, from both a business and a clinical standpoint.

[Ryan Zimmerman:]

Fair enough. And congrats on the strong start in the U.S. space.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Kyle Rose with Canaccord Genuity. Your line is open.

[Kyle Rose:]

Great. Thanks for taking the follow-up. I just had a one quick question, Dove tailing off some of Rick's questions. Just wanted to see, when you talk about the productivity of some of the two-thirds of accounts that have treated patients, I understand there is an initial ordering pattern to get the account up and going. But in the early days for your more productive accounts that you’ve seen, I mean how are people reordering. Are they reordering on a month-by-months basis or they thinking about it on a quarterly basis to stock in for the perspective patient pipeline? Just how do we think about ordering patterns from those specific physician users that might be more established maybe bariatric accounts?

[Andy Rasdal:]

Sure. Again, look after three months, I don’t know that there is any establish pattern. We are not pushing or stopping or asking or anyway do we reward our field force for pushing things into accounts that are not going to be used. In general, as we said somebody who started and got up and running in January and treated patients was more likely to reorder than someone who have started later in the quarter, which would seem to indicate that there reordering on an as-needed basis, that's certainly what we’re encourage, but in terms of any metric with three months and just getting those initial accounts, I couldn’t predict that other than we’re not just trying to push product into people aren’t using. We would like to be -- we would like to see it on an as-needed basis and make the as needed pieces high and productive as we can.

[Kyle Rose:]

Great. And then just one question, I know it’s still earlier for the, one the product class, but also bariatrics overall and the weight loss space overall, but in your conversations with physicians. Have you notice any commentaries just about your seasonality and procedural patents, as far as obviously the holidays are time when people, you talked about not wanting to do these types of procedures? But is there any difference in the summer months versus a winter months, just from a broad procedural perspective in the weight loss in obesity space?

[Bill Plovanic:]

Yes. Kyle, I think for us, we’re too early in commercialization to even know if seasonality exists. We haven’t heard about it, but with one quarter under or belt, I don’t think we have the experience to know whether there will be seasonality or not.

[Kyle Rose:]

Okay. That’s fair. I appreciate it. Thanks for taking the questions.

[Operator:]

Thank you. This concludes today’s question-and-answer session. I would like to turn the conference back over to management for closing remarks.

[Bill Plovanic:]

Great. Thank you for your continued interest and support. This now concludes today’s conference call.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program and you may now disconnect. Everyone have a great day.