Alimera Sciences, Inc (NASDAQ:ALIM) Q4 2021 Earnings Conference Call February 24, 2022 9:00 AM ET

Company Participants

Scott Gordon – CORE IR
Richard Eiswirth – President, CEO & Director
Philip Jones – CFO

Conference Call Participants

Alexander Nowak – Craig-Hallum
Yi Chen – H.C. Wainwright & Co.
James Molloy – Alliance Global Partners

Operator

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences Fourth Quarter and Full-year 2021 Financial Results and Corporate Update Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through May 24th, 2022. I would now like to turn the call over to Scott Gordon of core ir, the company's Investor Relations firm. Please go ahead, sir.

Scott Gordon

Thanks. Good morning. And thank you for participating in today's conference call. Joining me from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer, and Philip Jones, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address Alimera's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks please refer to the risk factors, described in Alimera's most recently filed periodic reports on Form 10-K, Form 10-Q, and Form 8-K filed with the SEC today and Alimera's press release that accompanies this call, particularly cautionary statements in it.

Today's conference call contains adjusted EBITDA, a non-GAAP financial measure, that Alimera believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in Alimera's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, February 24, 2022. Except as required by law, Alimera disclaims any obligation to publicly update or revise any information to reflect events and circumstances that occur after this call. It is now my pleasure to turn the call over to Richard Eiswirth, Rick, please go ahead.

Richard Eiswirth

Thank you Scott, and good morning to everyone on the call. I'm very pleased to report that we continued our revenue growth in the second half of the year, a sign of our recovery from the pandemic. We're now positioned to return to more consistent growth in 2022, as access to physicians continues to improve. We reported net revenue of $59 million in 2021, up 16% compared to the full year of 2020, driven by a strong finish to the year on our U.S. business and the Ocumension license fee that we received in the second quarter for [Indiscernible] I LUVIEN formulation in the Western Pacific. We delivered adjusted EBITDA of $3.6 million in 2021, which compares to adjusted EBITDA of $3.5 million in 2020. Importantly, we took the initiative mid-year to increase our investments in connecting with physicians and driving growth in 2022.

We believe we've seen early returns on these investments in the U.S. as end-user demand was up in the second half of 2021. With the fourth quarter being our best quarter since the onset of the pandemic. We bent the curve over the year with U.S. end-user demand for 2021 finishing up 7% over 2020, despite being down almost 14% at the end of the first quarter of 2021. In the fourth quarter, we generated 982 units in end-user demand for ILUVIEN in the U.S. up 13% year-over-year, despite the surge of the Omicron variant. And on a sequential basis, our unit volume was up 17% compared to the third quarter of 2021, indicating acceleration of our growth rate. We also had a strong fourth quarter in the U.S. from a GAAP perspective, reporting U.S. sales of $8.4 million, 14% percent growth compared to the fourth quarter of 2020, and 20% growth sequentially from the third quarter of 2021.

Our strong performance was driven by increased face-to-face interactions, both inside and outside of the clinic, and our advocacy efforts. We are excited to have launched our U.S. direct-to-patient, or DTP, marketing campaign in mid-January. This campaign is designed to reach potential ILUVIEN patients in areas where we have high prescribing practices. We believe there is a significant opportunity to appeal to our patients who desire to see better, longer, with fewer injections. And we believe the pandemic has highlighted the need for ILUVIEN for both patients and physicians. You may recall that we ran a successful pilot DTP campaign and selected markets in 2019. Our 2022 campaign consists of streaming video and display ads on social and other digital media, as well as a non-branded educational site.

The campaign spans ten regional markets in the U.S. that have a large prevalence of diabetes, and targets are based on behavioral and demographic qualifications. Early in the campaign, we're already trending above our weekly impression goals with our DPP tactics. And our website traffic to Iluvien.com has increased more than 2.5 times since the DTP launch began. We believe that this campaign will help us maintain the sales momentum in our US business by reminding patients and physicians of ILUVIEN benefits. Namely the ability to see better, longer, with fewer injections.

Turning to our international business, we note that it was challenged throughout the year, due to the severe access restrictions in Europe caused by the COVID-19 variants. Fortunately, we are seeing these restrictions removed in our markets during February and March. International sales for full-year 2021 were up 24% year-over-year to $32.3 million, including the $11 million upfront license fee that we received from Ocumension for ILUVIEN in the Western Pacific.

Excluding the Ocumension license fee, our full-year 2021 international ILUVIEN sales declined 18% from $26 million in 2020 to $21.3 million in 2021. As we previously shared, this was primarily a result of our international distributor partners building inventory in late 2020, only to see limited demand in the first half of 2021, due to the variants and restrictions.

However, we did see some positive trends in our international segment in the fourth quarter, despite stay at home mandates and other continuing restrictions. We were pleased to see sequential revenue growth of 8% in the fourth quarter over the recently completed third quarter. And importantly, the end-user demand across our entire international segment, including both direct and indirect markets was the highest since before the impact of COVID-19 in the first quarter of 2020. Despite the challenges of the pandemic, we continue to execute on our expansion on the global markets in which ILUVIEN is available for the treatment of both DME and non-infectious posterior uveitis. At the end of 2021, ILUVIEN was approved and available for the treatment of DME and noninfectious posterior uveitis in 16 European countries compared to only nine at the end of 2020. In late 2019 and over the course of 2021, we added the Nordic countries, the Benelux countries, and the Czech Republic from an availability standpoint. However, neither we nor our partners provided significant commercial support in 2021 due to the restrictions of the pandemic.

We're excited for the opportunity to grow our DME business in these markets as restrictions elapse and access improves. Further, we are anticipating the opportunity for growth from the posterior uveitis indication. You may recall that earlier this month we announced pricing approval for this indication in Spain. Our partner, Brill Pharma, is now launching into this market where treatment options are limited.

Prior to this, ILUVIEN had only been marketed for posterior uveitis in Germany and the UK. We're working on obtaining reimbursement for the additional markets and expect to launch in a few of these in 2022. Access to care appears to be improving in Europe, as evidenced by lockdowns being lifted. We believe this 1. improved access, 2. increased commercial activities in our new markets, 3. reimbursement for posterior uveitis in the markets, and 4. normalized inventory levels with our distributor partners, will lead to growth in 2022, and in our international segment. And with that, I'll now turn the call over to Phil, who will review our financial results for the quarter and the full-year.

Philip Jones

Thanks, Rick and hello everyone. During the fourth quarter of 2021, our consolidated net revenue was up approximately 1% to $14 million compared to $13.8 million in the fourth quarter of 2020. Our consolidated net revenue was up 15% sequentially compared to the third quarter of 2021, driven by higher sales in our U.S. business segment. U.S. net revenue was approximately $8.4 million for the fourth quarter of 2021, an increase of 14% from the $7.4 million reported in the 2020 period. U.S. net revenue was up 20% sequentially compared to the third quarter of 2021. U.S. end-user demand, which represents units purchased by our physicians and pharmacies from our distributors, increased 13% in the fourth quarter of 2021 to 982 units compared to 867 units in the fourth quarter of 2020. However, end-user demand grew 17% sequentially versus the third quarter of 2021, an indication of recovery in U.S. treatments.

As we have previously shared, our GAAP revenues in the U.S. do not always correlate with end-user demand due to the timing of purchases by our specialty distributors. In the fourth quarter of 2021, Alimera's U.S. distributors purchased approximately 6% more units than were sold to end-users. Net revenue from our international segment decreased approximately 13% to $5.6 million for the fourth quarter of 2021. This compares to $6.4 million reported for the same period last year. The decrease in our international net revenue was due to the impact of COVID-19 variant, which limited our ability to come face-to-face with our customers and kept patients from going to hospitals for their DME and posterior uveitis treatment in both our direct and distributor markets. Total consolidated operating expenses were approximate $14.7 million in the fourth quarter of 2021, an increase of 26.7% compared to $11.6 million reported in the fourth quarter of 2020.

The higher operating expenses were due to our decision to increase investment in promotional and medical expenses to accelerate growth as ILUVIEN -- as COVID-19 becomes better managed. We reported an adjusted EBITDA loss of $1.9 million in the fourth quarter of 2021, compared to positive adjusted EBITDA of $1.1 million in Q4 2020. This was due to the increases in promotional and medical spend mentioned earlier. For the three months ended December 31, 2021, we reported a net loss of approximately $4.1 million, compared to a net loss of approximately $1 million for the three months ended December 31st, 2020. Basic and diluted net loss per share for the fourth quarter of 2021 was $0.59 on approximately 6.9 million weighted average shares outstanding.

This compares to basic and diluted net loss per share for the fourth quarter of 2020 of $0.18 on approximately 5.4 million weighted average shares outstanding. Turning to our results for the full year, consolidated net revenues for 2021 were $59 million, an increase of approximately 16% from the $50.8 million that we reported in 2020. Our revenue in 2021 included $11 million that we received from our license agreement with Ocumension for the marketing rights to ILUVIEN 's formulation and technology in China and the Western Pacific. Total operating expenses in 2021 were $52.2 million, an increase of 17.6% compared to the $44.4 million reported in 2020. The year-over-year increase in total operating expenses was primarily due to our decision to increase investment in our commercial and medical activities in the second half of 2021 to drive sales recovery and growth post-pandemic.

For the full-year 2021, we reported adjusted EBITDA of $3.6 million compared to $3.5 million in 2020. For the year ended December 31st, 2021 we reported net loss of $4.4 million compared to a net loss of $5.3 million for the year ended December 31st, 2020. Basic and diluted net loss per share for 2021 was $0.66 on approximately $6.6 million weighted average shares outstanding. This compares to basic and diluted net loss per share for 2020, of $1.04 on approximately 5.1 million weighted average shares outstanding. On December 31 2021, we had cash and cash equivalents of approximately $16.5 million compared to $11.2 million in cash and cash equivalents that we reported on December 31, 2020. And with that, I'll turn it back over to Rick.

Richard Eiswirth

Thank you, Phil, before we open up for questions, I'm excited to share a little bit of new data on ILUVIEN. Yesterday, we announced the publication of favorable three-year results from our PALADIN study in the medical journal Ophthalmology. We believe these results once again, confirm the safety and efficacy of ILUVIEN in the treatment of DME. PALADIN was a Phase four, three-year perspective observational study, that was conducted in the U.S. across 41 clinical sites. The study was designed and developed to confirm the benefit of using a prior course of corticosteroid as indicated in the U.S. label, to mitigate the risk of IOP lowering surgeries. Importantly, 2.97% of eyes required IOP lowering surgery, but only half of these were due to steroid induced ocular hypertension following the administration of ILUVIEN in accordance with the U.S. label. This compares favorably to the 4.8% seen in the pivotal fame study.

The study, however, also looked at several other outcomes. Eyes that completed 36 months of the treatment of ILUVIEN achieved statistically significant outcomes in two key parameters. Functionally, patients experienced a mean 3.6 letter increase in visual acuity three years post-treatment, a statistically significant improvement. But importantly, this was after these same study eyes had experienced a mean 6.7 letter loss of visual acuity in the three years prior to the treatment of ILUVIEN while receiving other therapies.

Anatomically, patients reached a statistically significant decrease in central retinal sub-filled thickness, a measure of edema at all time points, measured in the study when compared to baseline. And ILUVIEN again demonstrated a significant decrease and the required number of treatments. In the three-year period prior to ILUVIEN, study eyes received a medium of 3.4% treatments per year. And during the three-year follow up period with the ILUVIEN implant in place. The medium treatment frequency declined to just one treatment per year. This represents a 70.5% reduction in treatment burden for patients. Demonstrating that ILUVIEN already provides the durability that many companies are searching for. And further, a post-talk analysis of the 36-month PALADIN data suggests that the use of ILUVIEN earlier in the treatment algorithm for DME could lead to more desirable visual acuity outcomes. Study eyes that received six or fewer treatments for DME before ILUVIEN administration demonstrated an improvement of 5.7 letters in visual acuity.

This was significantly better than the more heavily treated patients who received seven or more treatments before receiving ILUVIEN, as those patients only gained 1.8 letters in visual acuity. This is exactly what we expect to see in the NEW DAY Study. Reduced treatment frequency and a benefit from earlier ILUVIEN intervention. As a reminder, our landmark NEW DAY Study is our ongoing head-to-head clinical trial, designed to demonstrate the advantages of ILUVIEN as baseline therapy over repeated anti-VEGF injections in the treatment of naive and near-naive patients suffering from DME. We believe there is strong evidence that ILUVIEN 's long-term durability and anti-inflammatory properties significantly reduced the need for frequent and recurring injections and improve patient outcomes compared to the leading anti-VEGF therapies. And with that, I will now turn the call over to the Operator for questions. Thank you.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause momentarily, to assemble our roster. The first question will come from Alex Nowak of Craig - Hallum Capital Group. Please go ahead.

Alexander Nowak

Great, good morning, everyone. Rick, let's start on the last piece there about the NEW DAY Study. Just curious how enrollment is progressing there. And then on the new day from what you're hearing in the retinal community, is there a bus essentially forming around the NEW DAY, kind of combining with the PALADIN study that there might create this renewed interest and ILUVIEN, maybe already before the studies even begun to read out?

Richard Eiswirth

Yeah, great. Alex, thanks for your questions and good morning. So New Day Study enrollment is progressing; we're probably between 35% and 40% enrolled as we speak in that study. We definitely saw an uptick over the fall in enrollment as things started to open up a little bit. It did slow down a little bit over the holiday season, but we have seen it start to pick up a little bit again once we got past the holidays and got past the [Indiscernible]. We're still trying to get the study enrolled this year and doing everything we can to push it up. To your comment on noise around the study, I've actually reached out to quite a few of the investigators myself this week to see where they are enrollment and asked them to keep pushing it and I've actually got pretty enthusiastic responses back about interest in seeing what these results are, and several of these doctors also participated in the PALADIN study and have seen those results and I think that's fueled a little bit of excitement as well.

Alexander Nowak

Now, that's great. And then maybe comment on some of the growth here that you expect for 2022. I know 60 million run rate was kind of the base that we wanted to get back to. Is the run rate, excuse me, the sales that we saw here in Q4, is that a good run rate to start off from or is there any kind of puts and takes there as we head throughout the year.

Richard Eiswirth

Yes. I think we're in a real good place that it's building from there. As I said, the U.S., we're generally doing pretty well. We do typically experience a little bit of seasonality early in the first quarter, as you know, and we're still dealing with some restrictions coming off in Europe, some of the restrictions lapsed in Ireland and the U.K. for example the end of January, I believe the restrictions are coming off as we speak in France. March 20th is a pretty significant day in Germany. So we're still dealing with a few of those restrictions, but we feel pretty good about the way we ended the year and that we can expect to continue the growth in the U.S. and return to growth in Europe. So I think we're in a good spot to deliver, you know, I don't I don't know that we'll deliver numbers where we did in the fourth quarter of 2019 until we get towards the end of this year and can grow through that the year without those restrictions, but we certainly expect to get back there at some point this year.

Alexander Nowak

Okay. That's great. And then beyond the direct-to-patient program, just maybe some more details on this U.S. sales growth plan, just new marketing, new sales programs, what else can be done to change kind of marketing tactics here as you're thinking about growth for 2021?

Richard Eiswirth

Well, we did add some MSLs and some medical science liaisons -- thought-leader liaisons over the course of 2021 to increase the engagement in different ways throughout the clinic. As I've always said, ILUVIEN is a high medical sale as well because we are trying to get the doctors to think about changing the way they treat these patients, use it earlier in the paradigm, and that we think that there's a lot of characteristics of the disease that make you need something more than anti-VEGF. So increasing the medical education component around the drug as well, holding a lot of advisory boards and those types of things. I think it's probably the most significant thing we've done is find ways to engage the doctors in these educational programs or advisory board situations to discuss the science and medicine behind the drug.

Alexander Nowak

Alright, on the last question, it's a little bit of a two - parter, but just on the cost side. The sales and marketing spend here was up in Q4. Is that a good run rate or is that going to be a starting run rate for the rest of the year for 2022? And then we don't have a balance sheet yet, so what was the net cash usage in the quarter? Where does cash stand at the end of the year? And then thinking about managing the growth and then cash burn going forward.

Richard Eiswirth

Yeah, Alex, if you look at the cash burn for the fourth quarter, we burned about $4.6 million for the fourth quarter. And a lot of that was due to the investment that we mentioned throughout the call. Yeah, we would suggest that the fourth quarter expense run rate is probably a pretty good run rate to use to model out for the 2022 time frame. Again, looking at somewhere north of what we did this year slightly, and again, just as we get back into the mode of travel and everything, just understand that there will be more of those normal items that the return is well, such as travel within Europe and some of the other places that have been stymied to some degree by the pandemic. And if I've missed anything there, let me know and I'll come back to it and answer the question.

Alexander Nowak

No, but I think that's good. I appreciate the update. Thank you.

Operator

The next question will be from James Molloy of Alliance Global Partners.

James Molloy

Hi, good morning guys thanks for taking my questions. I was wondering if you'd talk a little bit about your reps currently --how many reps you guys have currently with the turnover was, if any. I know in the past year, sometimes experienced turnovers can happen in these businesses. But how are you guys standing up through the first part of this year, with the reps.

Richard Eiswirth

Jim so far, our retention has been pretty good. I think last year we probably turned over 10% to 15% of the territories, which I think is a pretty normal situation. And frankly, sometimes that's driven by the rep, having another better opportunity, and sometimes that's driven by us trying to find the right rep for the territory. So it's been pretty good so far. No significant changes in the first part of this year to those trends.

James Molloy

How many reps are there currently?

Richard Eiswirth

We've got 30 territories out there right now and I believe that we've got one vacancy at this point.

James Molloy

Okay. Thank you. And then we see very excellent sales in the fourth quarter and ILUVIEN obviously remains a very high touch point sale items you hit upon with the MSLS. How much of the sales and marketing -- how much of that goes to these advisory boards or to having these [Indiscernible], I presume doing these advisory boards? And, is there weighted sort of [Indiscernible]? Looking at sales and marketing for '21, it's about 50% of sales [Indiscernible] in the last couple of years with the COVID, go back to 2018, last, we're right around this number as well, you had about 50% of sales. Is there a way to sort of decouple to get the ILUVIEN sales on an upward trajectory. Ex the heavy person to person spend that you need to do to -- you've had to do through COVID and a little bit before

Richard Eiswirth

So a couple of questions there, Jim, that you asked. The amount of the spend -- frankly, where the advisory boards are and the type of the advisory boards depends on where they are. So if they're more medical, scientific, educational advisory boards, they are going to sit in a lot of our medical affairs effort there and frankly, that is where most of the medical affairs spend goes at this point in time. We also do commercial advisory boards where we sit with the doctors and evaluate some of our commercial messaging to see how that resonates as well and that's another touch point with the doctor, so it's hard to quantify and break out each piece, and frankly, that's probably a lot of granularity we don't want to get into. I will tell you that if you if you tried to look at where our growth rates were, I'd probably refer back to our growth rates as far as your decoupling question, back to our growth in '17 - '18, '18 to '19, right? And I think over the course of '19, we reported quite a few quarters where the comparative growth was in that 15% range. Organically, we think we can get back to that and the hope is that things like DTP and the NEW DAY Study results can ultimately drive that number higher once we get out of sort of the restrictions of the pandemic completely.

James Molloy

Final question, the fact they are shooting at each other in Europe, does that impact EU sales at all?

Richard Eiswirth

I'd say it's probably a little bit too -- it's probably a little bit too early to tell. I think -- I guess the one place I would start to worry about is the cost of fuel and things like that as that impacts people's ability to move around the countries and visit doctors in person or patients to get in the offices or things like that. But it's probably a little bit too early to tell at this point.

James Molloy

Thank you for taking the questions.

Richard Eiswirth

You're welcome.

Operator

The next question will be from Yi Chen of HC Wainwright. Please go ahead.

Yi Chen

Thank you for taking my questions. Could you comment on whether you have any patient feedback from -- for your direct-to-patient market campaign and whether you plan to have direct-to-patient market campaign in Europe as well?

Richard Eiswirth

I'm sorry, I didn't hear the end of that question.

Yi Chen

Whether you --

Richard Eiswirth

In Europe?

Yi Chen

Yes.

Richard Eiswirth

Yes. So yeah, I can answer the first -- well, first of all, good morning and thanks for the question. I can answer the first question -- the second half of that question first. In Europe, we're not able -- we're not allowed to, under the regulations, to market directly to the patients. So there is no Direct-to-Patient campaign in Europe at this time. In the U.S., it's very early. We started this in mid-January, so we don't have direct patient feedback yet, but what I can tell you is that we do have increased traffic on our Iluvien.com site coming from those patients. So we saw more than a 250% increase in traffic on Iluvien.com since we started that. And I think we started around January 19th or so. So it's very early. It is important though to actually drive that traffic there because that's where we ultimately have the find-a-doctor site, where a patient can go find a doctor that is already treating patients with ILUVIEN that would be a minimal to that usage and try to funnel through there to an appointment at some point. The other thing I can tell you is we also believe we are ahead of our internal goals on impressions for our advertisements as well. The advertisements and videos and things like that are definitely being looked at and seen frankly by more people than we expected to this early on in the roll out. Both to our branded and our non-branded site.

Yi Chen

Okay. What European countries will have the ILUVIEN launch for you've had as distributor?

Richard Eiswirth

[Indiscernible] we've released -- we expect the launch is ongoing in Spain right now. And our French and Italian partners are working on reimbursement there right now. We hope to get reimbursement by the middle of the year in both of those countries, it has been delayed by a lot of stops and starts as they've continued to open and close various offices and everything due to the pandemic. Portugal, we expect to get reimbursement in the first half of the year. We have reimbursement in the Netherlands at this point and we expect our French partner that is commercializing the product in the Benelux Territories to put a little bit more effort behind that, and now that things are opening up there as well. So, we expect to see uveitis pushed pretty hard in quite a few countries before the end of the year.

Yi Chen

All right. And could you comment on the -- in the U.S., the inventory level at the distributors level and whether you see the initial level could remain stable going forward?

Richard Eiswirth

The inventory level that distributes in the U.S. was pretty stable throughout the year. I think there was less than a 1% or 2% difference in the amount of product that was ordered by the distributors versus what we sold through from end-user demand standpoint. So that was pretty steady. You always get this little bit of a phenomenon the first couple of months of the year where because the end-user man drops off a little bit because of the seasonality, they slow down some of the buying and then they start to pick up again in March and April as the volume returns. We'll have to see what that looks like over the quarter but it was pretty steady over the course of 2021 as a whole.

Yi Chen

Okay. Thank you.

Richard Eiswirth

Yes. Thank you, Yi.

Operator

And this concludes our question-and-answer session. I would now like to turn the conference back over to Rick Eiswirth for any closing remarks.

Richard Eiswirth

Thank you all for joining us today and participating on the call. And we appreciate your continued interest in Alimera. We are looking forward to sharing our ongoing progress when we report our first quarter results later on in May. Thank you very much and have a wonderful day.

Operator

Thank you, the conference is now concluded, thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.