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Apollo to the Moon?

Apollo Endosurgery Inc. (APEN) is a medical technology company that helps with weight loss and obesity related issues. They offer three products, OverStitch, Orbera and X-Tack, all of which improve patient outcomes and quality of life. The OverStitch endoscopic suturing procedure encloses a portion of the stomach and reduces patient appetites. Similarly, Orbera is a gastric balloon that reduces the capacity of the stomach to reduce the effects of fatty liver disease, NASH, and Cirrhosis. X-Tack is an endoscopic helix tacking system, alternative to stapling, that is used to close holes created during a colonoscopy. We believe X-Tack is addressing a $500 million market. In total, the three procedures all have FDA approval, are the leaders in their respective categories, and have significant market opportunities worth over $6 billion. This past quarter OverStitch received FDA approval for Endoscopic Sleeve Gastroplasty which we believe will take significant share of the $300+ million Laparoscopic Sleeve Gastrectomy market as the procedure is less invasive and the recovery times are much shorter.

Yesterday, the New York Post published an article describing APEN’s OverStitch ESG procedure along with multiple success stories with patients losing 25-60 pounds in just a few months. The patients named in the article preferred OverStitch as opposed to surgery because the less invasive nature and lower complication rate. Some people also noted that weight loss drugs didn’t work, and weight was regained as soon as they stopped taking them. The before and after pictures of these patients show how dramatic the impact of the procedure was on these individuals.

One NYU doctor noted that some bariatric surgeons didn’t like ESG because it cut into their surgical business. ESG currently costs about $11,000 out-of-pocket because most insurance companies don’t cover it. The average cost of gastric bypass surgery is $23,000 and typically appeals to people who are morbidly obese (at least 100 pounds overweight). Most people who get this procedure done have it covered by their health insurance plan. We anticipate APEN getting similar reimbursement coverage over time making ESG a product that can continue to take share from bariatric surgery over the long run.

Apollo to the Moon?
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© 2022 by Grow Funds LLC. Registered Investment Advisor. GROW Funds LLC is a California registered investment advisory firm. Registration does not imply any level of skill or training. Neither the information within this article nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities. Investors should have long-term financial objectives. Past performance is no guarantee of future returns. GROW Funds LLC currently owns APEN shares in its portfolios.



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