Memorandum

GI Dynamics 3Q15 – November 11, 2015

GI Dynamics recently released its 3Q15 financial update in a quarterly report signed by Vice President of Finance and Company Secretary Mr. Robert Solomon. The company announced that revenues dropped 67% year-over-year (YOY) and 36% sequentially to $0.2 million. The report cited a decrease in sales of its obesity device EndoBarrier Therapy across all markets except the Middle East as the primary reason of this drop, resulting from “regulatory related questions arising out of the termination of the ENDO Trial.” Management also shared updates on this termination, stating that the company has completed all device removals from subjects “well ahead of the originally projected timeline” and that required post-explant patient follow-up is ongoing. The company highlighted that it is making good progress toward clinical investigator site closures, final data monitoring, and analysis and preparation for future scientific publication, which is estimated to occur sometime in 2016. Most notably, the update emphasized that based on ongoing review of the trial’s preliminary results, management remains “confident that the final data report will demonstrate a statistically significant benefit of EndoBarrier Therapy that exceeds the predefined trial efficacy endpoint as measured by a reduction of circulating HbA1c levels.” As a reminder, the German Diabetes Society released a statement this past October expressing similar sentiments, sharing interim analysis results of a significant A1c reduction of 1.3% at 12 months. In addition, the statement contextualized the US ENDO Trial’s increased abscess rates (rates with the device were not this high in any other setting) and raised various hypotheses on the mechanisms of this safety signal. With these questions in mind, we look forward to the full data of the trial to gain a more comprehensive understanding of the device’s risk-benefit profile, which we assume will guide much of GI Dynamics’ decision on EndoBarrier’s next steps.

-- by Melissa An, Sarah Odeh, and Kelly Close