Alimera Sciences Inc (ALIM) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Alimera fourth-quarter 2011 earnings conference call. At this time all participants are in a listen-only mode. Later we will have a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Rick Eiswirth, CFO. Sir, you may begin.

Thank you. Good afternoon, everyone, and welcome to the Alimera Sciences conference call to discuss our recent positive outcomes of the decentralized procedure for the ILUVIEN in Europe and our review of our fourth-quarter financial results. A press release regarding these results was issued this afternoon and is available on our website.

On the call with me today is Dan Myers, our President and Chief Executive Officer.

Before we begin our prepared remarks, I would like to remind you that various statements that we make during this call about the Company's future results of operations and financial positions, business strategy and plans and objectives for Alimera's future operations are considered forward-looking statements within the meaning of the federal securities laws. Words such as anticipate, believe, estimate, expect, intend, may, plan, contemplate, predict, project, target, likely, potential, continue, will, would, should, could, or the negative of those terms and similar expressions are intended to identify forward-looking statements. Although not all forward-looking statements contain these identifying words.

Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations section of Alimera's annual report on Form 10-K for the fiscal year ended December 31, 2010, and quarterly reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011, all of which are on file with the SEC and available on the SEC's and Alimera's websites. We encourage all investors to read these reports and our other SEC filings.

All the information we provide on this conference call is provided only as of today, and we undertake no obligation to update any forward-looking statements we may make on this call or on account of new information, future events or otherwise.

Please be advised that today's call is being recorded and webcast. And, with that, I'd like to turn the call over to Dan Myers, our President and Chief Executive Officer. Dan?

Thanks, Rick. We are happy to begin this quarterly update call on the heels of the positive outcome to the European Decentralized Procedure, or DCP, indicating that ILUVIEN has approval for the treatment of vision impairment associated with the chronic diabetic macular edema, or DME, considered insufficiently responsive to current available therapies in the seven European countries in which we filed. We believe that ILUVIEN will be the first sustained release pharmaceutical in the European Union to treat DME.

During our approval process, we submitted our marketing authorization application in seven countries through the DCP with the United Kingdom's Medicines and Healthcare products Regulatory Agency, or MHRA, serving as the Reference Member State. Following the MHRA evaluation, the Reference Member State and all concerned member states, specifically Austria, France, Germany, Italy, Portugal and Spain, reached consensus that ILUVIEN is approvable. The regulatory process will now enter the national phase of the DCP in which each of these countries grants its national marketing authorization.

During this process, labeling on each country's local language is finalized. We expect to receive marketing authorization in each country by the end of the first quarter. I would like to reiterate that this is not only a positive achievement for Alimera, but an exciting development for the many patients in Europe suffering from this debilitating disease. The International Diabetes Federation estimates that in these seven countries 19.1 million people are currently living with diabetes.

By comparison, the Centers for Disease Control and Prevention estimate that Americans with diabetes now numbers 25.8 million. Alimera estimates that 1.1 million people suffer from DME within these seven EU countries.

We believe that ILUVIEN will be commercially available in Europe by the end of the year, and we are currently exploring all options options, including both working with a partner and handling the marketing distribution on our own. We anticipated approval from the seven EU countries, and we are now looking to expand the availability of ILUVIEN. We are evaluating the mutual recognition procedure for pursuing the approval of ILUVIEN in additional EU countries as the 20 remaining countries represent an additional 11 million people with diabetes, and we are initiating discussions to make ILUVIEN available in other non-EU markets such as the Middle East and Asia. We anticipate providing an up-to-date on these items during our first-quarter conference call.

In a separate event, we are planning to meet with the FDA late in the second quarter to discuss the complete response letter we received from them in the fourth quarter of 2011 and our possible next steps as we continue to pursue the approval of ILUVIEN in the United States.

We previously had scheduled a meeting for April to meet with the FDA. However, in light of the recent response from the seven EU countries and their positive view of the benefit to risk in the chronic patients, we've chosen to postpone the meeting with the FDA to further develop our approach.

Now with that, I'll turn the call back over to Rick to briefly discuss our fourth-quarter financials.

Thank you, Dan. Turning to our financial results for the fourth quarter, net loss for the quarter ended December 31, 2011 was $6.1 million or $0.19 per common share. That compares with a net loss of $6.3 million or $0.20 per common share for the quarter ended December 31, 2010. Research and development expenses for the fourth quarter of 2011 decreased to $1.4 million compared to $2.1 million for the fourth quarter of 2010. This reduction was primarily due to the technical development of the engineering processes necessary to produce ILUVIEN in 2010.

General and administrative expenses in the fourth quarter of 2011 were $1.4 million compared to $1.3 million in the fourth quarter of 2010. Marketing expenses in the fourth quarter of 2011 were $3.1 million compared to $2.7 million for the fourth quarter of 2010. This increase was primarily due to increased spending in 2011 in anticipation of the previously expected launch of ILUVIEN in the United States during the first quarter of 2012. As of December 31, 2011, we had cash, cash equivalents and investments totaling $33.6 million compared to $54.8 million as of December 31, 2010.

Now I'll turn the call back over to Dan for closing comments.

Thanks, Rick. As stated, we believe that ILUVIEN is the best treatment options for many patients suffering from the debilitating efforts -- effects of DME, and we applaud the EU for acknowledging the long-term positive impact that ILUVIEN can bring to these patients. We have an excellent team in place preparing for the launch of ILUVIEN, and we look forward to updating you on our progress in the coming months.

With that, I'll turn it back over to the operator for any potential questions.

(Operator Instructions). Amit Bhalla, Citi.

Hi, Dan. Hi, Rick. Good afternoon, everyone. A question just in terms of the decision to go direct in Europe or to partner. I assume you guys have had some economic models in P&Ls for the go direct Europe scenario. Over the past year or so, you must have looked at that at some point. So is the main gating factor on making a decision really the pace of discussions or negotiations with a potential partner? Is that how we should think about it right now?

I think the real key to stepping back and looking at this, we had made some assumptions regarding P&Ls on a sort of go it alone. But really the real driver that dictated the strategy back in the fourth quarter of 2011 when we last spoke and even going back since a year or two back, the plan to always commercialize in the US on our own had really made the go it alone strategy sort of as much a bandwidth issue as an economic issue. And so we had felt like trying to launch ILUVIEN in the US in fourth quarter or first quarter -- or fourth quarter of '11 and first quarter of '12, and subsequently having another major launch in these countries three to six months later, just really wasn't even feasible from an execution standpoint. So while we have made some topline assumptions, the partnering strategy really made more sense strategically and really wasn't as driven much by the financial considerations.

Now having had the delay we've had obviously from the CRL we received in November of 2011, we just decided to step back and take a look at it. We still are entertaining the partnering discussions that we mentioned to you guys the last time we spoke back in November. Obviously with approval, we've received some additional inbound interest in partnering and continue to pursue that.

The reason for making these comments is we just want to take a real hard look at the financial considerations and the shareholder value that could be driven by keeping the economics, again considering the long-term financing need potential and things of that nature. So this isn't a tremendous deviation from strategy where we were before, but it does afford us the opportunity to sort of step back and look at this from a financial perspective.

Now, having said that, I think the biggest thing that is really the gating issue for us right now -- and I will let Rick speak to this for just a moment because he and Dave have been charged with this in Europe -- is really more understanding the reimbursement and market access differences that you face in those seven EU countries that you would not face obviously in the market in the US.

When you step back and look at the basic sales and marketing efforts, the number of reps, some of the structure issues, you don't find a big difference in some of the ways you look at the US from a commercial standpoint as you do the EU. The real difference lies in sort of the run rates as to access, reimbursement timelines, when you can be in market and the variabilities by the various countries. And that's the piece that we just wanted to take a good look at before we do decide if we are going to go partner. And, to that, I'll let Rick speak just for a moment on how those reimbursement pieces look because they've done quite a bit of work, and we've been working with consultants now for the better part of the year and looking at pricing in Europe.

I think what Dan is referring to, as we look at potentially going it alone, the real questions we have to evaluate there are, what is the execution risk and what is the capital that we need? Clearly, if you look at a model on a standalone basis, you can generate more by keeping operations to yourselves from a bottom-line impact. The question is, how much dilution do you take to get there in risk? And the pricing and reimbursement is something that we've been working on quite a bit, and we still are trying to get our hands around the various countries. But on average it could take anywhere from nine to 15 months in the various countries to get that reimbursement. Until we have our arms around that, we can't make a complete decision on the economics.

So is there any kind of rough timeline when you think you would have a decision? Because I know you're saying you're not going to launch until late in the year, so that does give you plenty of time. But in your minds, do you want to have a decision by the summer or just roughly what you're thinking there?

I think we will be prepared to talk about that and give some guidance at our next quarterly update. I think we feel like the second quarter with this kind of the regulatory focus we had and now have this under our belt, I think we feel like we'll be able to come to a conclusion on that in the second quarter.

And then just my other question here is just on where ILUVIEN fits in in the treatment algorithm and paradigm in Europe versus how it would have fit in in the US. So could you help us understand that, and that's all I have?

Actually when we do the market research and some of the advisory committee work we've done now in Europe -- and just to give you guys a sense of that -- we have probably spoken to better than 400 doctors in the US either through advisory committees, one-on-ones even, online surveys, etc.

Now we've done that with about 100 doctors in the EU. So we don't have quite the sample size in the EU that we have in the US. However, we are getting to a pretty good number of doctors where we feel like we can start making some legitimate comparisons.

And you don't find a real strong difference in the treatment paradigms between the two continents. You do have, of course, the fact that Lucentis has been approved for DME in the EU. And so there anti-VEGF therapy has now been embraced to a greater degree via Lucentis because obviously you don't have the reimbursement issue as opposed to you have that big Avastin and Lucentis tug-of-war going on in the US because all the anti-VEGF therapy is actually off-label.

The use of laser is roughly the same. You still see for the most part that state -- the primary course of therapy is initially laser, and then, as I said, in the EU they are more quickly moving to Lucentis because it is approved and at this point not necessarily reimbursed in all countries. But for the most part, I think ILUVIEN fits in the EU to a great extent where we described it to you guys in the US. That if you've got a newly diagnosed diabetic presenting with DME, it's unlikely that you're going to probably take a three-year implant like ILUVIEN. The data would suggest that you would probably start with a laser and maybe move to anti-VEGF therapy.

But we have found that there is a large number of patients we believe who either don't respond sufficiently to those therapies or are just not willing to tolerate the multiple injections and office visits that come with getting the kind of visual results that you get in some of their clinical trials. So I think you'll see ILUVIEN really fitting in as a great opportunity for doctors using those patients who have either not responded or just don't want to tolerate the regimen.

Great. Thank you.

Michael Faerm, Credit Suisse.

Two questions. I guess the first one is, if you could just clarify something you were saying before about how reimbursement could take nine to 15 months to be sorted out and you need that to make a decision on economics? Should I understand that to mean that you need to have reimbursement sorted out as a prerequisite to making a partnering versus going it alone decision and prior to actually launching the product?

No. Now that we have an actual label that we know what it's going to be in Europe, we can actually finalize health economic models, health economics and outcome models, which include both the budget impact model and the cost effectiveness model in Europe that you submit to the regulatory authorities to determine pricing. And although we won't know pricing for nine to 15 months in the various countries, I would say about an average of 12 months across all the countries.

We will have a better feel within the next month or two about where we think the pricing can come out in Europe and because we have to work that new label back through the pricing models to get there. Then once we have that, we can build out our economic models to build a better forecast and make a more informed decision on what makes sense for the Company.

And my second question actually concerns pricing in Europe. I know it's still far from decided yet, but just directionally, what are your expectations there relative to the ranges you had talked about before in the US? I think you were saying sort of 5,000 to 10,000 in the US. What's your expectation directionally from that in Europe?

Based on our preliminary models that we have run over there, we think the pricing from a list price standpoint will be consistent with what we had been projecting in the US.

Okay. From a list price, what about from a sort of -- (multiple speakers)

You will have some discounting at the hospital levels. It's too hard to predict what those discounts will be at this point in time.

Okay. Thank you.

Bret Holley, Oppenheimer.

This is [Eric Chang] for Bret Holley. Thanks for taking our questions. Regarding a potential ILUVIEN partnership, can you talk about your preferences regarding deal structure like how you weigh a co-promote versus a royalty?

Right now I think it's pretty straightforward. Most of the discussions we've had would be constructed with an upfront payment, with some sort of milestone on sales over the course of the early years, and then a long-term royalty.

And do you think the timing of a partnership could, I guess, hold up pricing and reimbursement discussions or launch timelines?

I don't think so. We have been moving along for the past 18 months or so operating from a pricing and reimbursement standpoint as if we are going to launch the product on our own, even though we were looking at partners because we wanted to be in a position that we could hand off the package to a partner in the best way. So I don't think that will impact it at all.

Great. Thank you.

(Operator Instructions). Simos Simeonidis, Cowen & Co.

Thanks for taking the question. Can you walk us through timelines in terms of what happens in the next nine months between now and when you're hoping to launch?

Well, obviously the timelines take a bit of a different tact depending on whether you're doing it on your own versus partnering as far as activity from the Alimera perspective. But, in general, I think what you would kind of take this from maybe three different tracks, if you will.

From a logistics production, having product distributing on the EU countries, we are now in production or beginning shortly production in April, I should say, of our batches that we will need to validate. Those will start moving into completion in mid-summer, and we would expect to have our initial batches of commercially available product to our in-destination [Brecon], Wales sometime -- first batch should start arriving in late July into August. So product would be available around October for commercial sales.

So from a timeline standpoint, we think we are in really good shape, logistics and product availability standpoint.

From a commercial structure standpoint, whether it's us building that structure or partner, we think we need to have that in place by the fourth quarter because some of the markets -- while Rick was correct in, you know, you may need nine to 15 months, there are a few markets that might move a little quicker than that. Germany traditionally allows for an earlier entry, and we've said all along we anticipate we could be seeing potentially sales in Germany before the end of the year. So you would want to have your commercial structure as far as sales and marketing in place.

The reimbursement piece is probably the one that has the wider variability to it in that, as Rick said, you could see anywhere from nine to 12 months in those other countries ex-Germany, which is a little bit unique to the seven. Also, of course, as we are ongoing through all of this is KOL development that I think our team here has done an excellent job early on in developing key opinion leaders in all of these seven countries and will continue to do that on an ongoing basis.

So thinking in terms of timelines, production availability, early fourth-quarter commercial and structure in place, mid fourth quarter, and then, of course, trying to get the reimbursement market access sometime in the first quarter to first half of next year.

Great. That's very helpful. Then can you talk about the rest of Europe? What's the process for the rest of the countries, assuming you get approval in the next few weeks? What are the logistical steps that go through, and how long will that take to get more countries on board?

As I said earlier, we are very much interested in moving quickly on it. There's 11 million diabetic patients still in the EU, and we will now move into the mutual recognition process that can take anywhere from three months to six months. Again, I'm going to turn it over to Rick as he and David have been responsible for sort of expanding out the marketplace in Europe, and Rick, I'll let you comment on that.

I think that's the key thing. Once we have these marketing authorizations in hand, we are eligible for the mutual recognition procedure that Dan mentioned and the advantage we sit in today as we have a package obviously that was just approved.

So to go forward with that while it remains consistent, we wouldn't have any changes. It would be the most efficient thing for us to do over the next I would say one to two months, we will evaluate the market opportunity in each one of those countries individually because we could file for one country or we can file for all 20, and we will have to make a decision on that. And once we make those filings, the formal review process takes 90 days, but I would allow, as Dan said, three to six months just to get through any additional questions that may come from those regulatory authorities.

That's also very helpful. Then moving to the US regulatory front, the meeting that you rescheduled, do you have a new meeting in place or have you requested one?

We do not have a new meeting date in place. The FDA has 60 days from the time we request a meeting. We have just notified them that we would like to postpone the meeting, and we have not put in a formal request. We will be doing that very shortly. But, again, knowing that from the time you put in your request the clock starts on the 60 days, we feel like it might be a little premature to put that meeting request in here in March, but we will be putting that in shortly. In a perfect world, I think a late second-quarter meeting is probably where you will see us meeting with the FDA.

That's good. The argument behind -- it's hard to convince the FDA for kind of reversing what they have requested you to do two more trials is that, look, we've been approved in Europe. Is that the core of your argument?

Certainly that's a plank in the platform, if you will, but I think at this point in time I couldn't really go much further than how we tend to structure that and the plan to go forward. I think we will have to just report back on that next quarter.

Final question, can you remind us the European patent life for ILUVIEN?

It's around 2020.

Okay. And are you eligible for any additional time post-that point expansion?

Not that we are aware of, no.

Thank you for taking the questions.

Amit Bhalla, Citi.

Thanks for the follow-up. I don't know if Dave Holland is there, but you mentioned, Dan, that there are sufficient patients who don't respond to the therapies that you outlined in Europe. Any way you can put some numbers around that and what you're characterizing as kind of the addressable patient population that fits with the label that you have in Europe?

Actually I don't have Dave available, but, again, Dave and Rick have sort of jointly spearheaded this European effort. I know that Rick has attended these ad comm calls as well and these conferences, so I'll let Rick try to speak to it. Although we are going to come up a little short right now quantifying it probably to the specificity. But I think that we have some general direction, and I'll let Rick speak to that.

A couple things go into that. I mean I think, first of all, as you know, generally every patient becomes a chronic patient because they will have had most people don't get DME and then have it go away.

The way we have presented it from a modeling standpoint in some of our early discussions in Europe is, if you look at the resolve and restore data for Lucentis, they had about 30% efficacy there. So 70% of those patients are theoretically not being sufficiently treated with Lucentis, and that's with an average of seven injections in the first year and four in the second year.

So there is an argument there that it is 70%. A lot of that will come into play -- a lot of what will come into play will be the physician's judgment, and the physician will have to evaluate how many injections can I realistically give this patient and what kind of efficacy am I getting there. We think it is certainly more than half of the patients that are out there that would ultimately be a candidate for us.

Okay. Thanks a lot.

I show no further questions in the queue and would like to turn the conference back to Mr. Dan Myers for closing remarks.

Thank you for listening to today's call. We look forward to seeing you in the near future and as we attend upcoming investor events. So, operator, this will conclude our call.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect at this time.