Alimera Sciences Inc (ALIM) 2021 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Alimera Sciences Second Quarter 2021 Financial Results and Corporate Update Conference Call. (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 this call will be available approximately 1 hour after the end of the call through November 12, 2021.

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.

Thank you, Tom. Good morning, and thank you for participating in today's conference call. Joining me today from Alimera's leadership team are Rick Eiswirth, President and Chief Executive Officer; and Phil 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 cautionary statements in Alimera's press release today.

Today's conference call includes 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 -- net income or loss, the 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, August 13, 2021. Except as required by law, Alimera disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

It is now my pleasure to turn the call over to Rick Eiswirth. Rick, please go ahead.

Thanks, Scott, and good morning to everyone on the call. First, I want to thank all of you for your patience with respect to the timing of our earnings release. As most of you know, we completed a significant transaction with Ocumension Therapeutics, in which we received a $10 million upfront license payment, a $10 million equity investment and a warrant for Ocumension stock earlier in April of this year. The accounting for this transaction was rather complex and resulted in some delays in closing our books for the quarter.

As we released this morning, we are reporting $21.7 million in consolidated net revenue during the quarter, including the license revenue from the Ocumension transaction. Phil will provide more detail regarding our reported results in a few minutes.

Although the COVID-19 pandemic continues to have an adverse effect on our business due to reduced patient volumes and limited access to physicians depending on the market, we are seeing positive growth trends in most of our markets. In the second quarter, we saw end-user demand increased significantly across the United States, growing by 17% in comparison to Q2 2020. Despite our growth, it is clear that patient volumes in U.S. retina practices still have not recovered compared to pre-pandemic levels. In July, we conducted a survey among 50 practices across the United States and learned that on average, only about 60% of practices are seeing their DME patient volume back at pre-COVID levels. We believe this is likely the result of several factors, including DME patients needing to catch up on visits with multiple physicians due to the complications of diabetes, short staffing in some offices and new office protocols to safeguard patients and personnel that can slow down throughput.

Importantly, we are seeing signs of increased access across our U.S. -- across the U.S. as our reps were able to increase their in-person calls by 14% in the second quarter over the previous quarter. Our U.S. reps have also been seeking up new accounts with success, while our existing user volume is down. We have added new accounts who have started prescribing ILUVIEN in the second quarter at the highest level we have seen since 2019, before the pandemic began. These are encouraging signs for the rest of the year in addition to the end user demand growth of 17%.

In our International segment, we recorded 16% net growth in end-user demand, driven by 6 of the 7 European markets in which ILUVIEN was available during the second quarter of last year. For clarity, markets in which ILUVIEN has recently been made available were not included in this end user calculation for a more accurate comparison. The exception was Germany, where we did experience a decline in utilization due to clinics being closed to our sales force. The arrival of the third wave of COVID in May and a relatively low rate of vaccination in the country during the quarter. Despite the challenges associated with the substantial spike of COVID cases in Germany and (inaudible) in the prior year, we were encouraged to see the significant end-user demand increase across Europe as a whole, which resulted in a record second quarter for end-user demand.

Importantly, with this demand, we are seeing our distributor partners in France, Spain and Italy, reducing their inventories and placing orders with scheduled distributor shipments for each of the next 3 quarters. Because of these positive trends, we believe that it is now time for us to start investing more aggressively behind ILUVIEN to drive our performance back to the more consistent growth we were seeing before the pandemic. We believe the financing obtained from the Ocumension transaction allows us to make these strategic investments.

As we've previously disclosed, we made the decision to maintain our employee base and their relationships with physicians at the outside of the pandemic and as a result, reduced a significant amount of our promotional expenditures. Our conservative promotional spend during the pandemic has weakened our share of voice. Given that ILUVIEN is promotionally sensitive, meaning that we need to keep the brand top of mind for our physicians, we need to move ahead with investments in marketing and medical initiatives. We believe that the COVID pandemic and the associated challenges of treating patients on a frequent and recurring basis with the short duration anti-VEGF and other intravitreal steroid injections has highlighted the value of ILUVIEN, giving us the opportunity to communicate this value in numerous channels.

We believe that advocacy development and peer-to-peer communications will be important to our future success. In the second quarter, we hired Dr. David Dyer, as our Chief Retina Specialist to bring the voice of the retina specialist in-house and help drive this initiative. We are expanding our medical science liaison and thought leader liaison teams globally to increase the frequency and level of communication with our future advocates. Dr. Dyer and our medical team will be engaging in advisory boards over the remainder of this year and next year to review and discuss the PALADIN study with an eye to develop papers and publications that highlight the benefits of ILUVIEN in that prospective clinical trial.

This group will also discuss the NEW DAY study, helping to shape some of the analysis and messaging that could come from this important study. The NEW DAY study continues to screen and enroll patients, and we are seeing momentum build over the last few months as we implemented some changes to the study and access to patients has improved. As of today, we have 51 patients randomized in the study and an additional 11 in the steroid screening phase.

In our European markets, where hospitals have strained capacity, we believe we have a significant opportunity to demonstrate ILUVIEN's value to the health care system to increase clinic efficiency, reduce high cost and alleviate the tremendous treatment burden of the short-acting treatments. We believe these messages will also translate in certain U.S. channels, such as the VA hospitals.

As physicians across the world have become more digitally savvy, further motivated by the collective COVID experience, we, too, are becoming more digitally focused, redeveloping a new educational hub to create a one source extensive clinical database to include webinars and other educational events that will provide easy access to the data and targeted delivery of pertinent information. We're also increasing advertising on physician-specific digital channels. And importantly, we will be restarting our direct-to-patient or DTP campaign in the U.S. as we move into 2022. As you may recall, we ran a 6-month pilot test of a DTP campaign in a few select key markets in 2019. During that campaign, we saw elevated patient engagement and an increase in physician utilization in those markets. We learned a lot at that time about which channels were effective and which were not.

Our core message of maintaining vision longer with fewer injections resonated well with patients in that time period. We believe the relevance of that message is only further heightened by patients experience over the past 18 months of the pandemic. Many patients were unable to see their retina specialists during the pandemic, resulting in a potential lapse of treatment due to the short duration of other intravitreal injections. When they did return many presented with worst vision than they previously experienced.

Because ILUVIEN delivers a consistent microdose every day continuously for up to 3 years, the promise of maintaining vision with fewer injections is very appealing and an excellent message to communicate to patients with our DTP spend. We will be preparing for the launch of this campaign over the next few months before launching in 2022.

Our geographic expansion continues to be a critical part of our strategy. At the end of 2020, ILUVIEN was commercialized in 7 European countries. In the first 6 months of this year, units have been sold in 5 new markets despite little promotional support because of the pandemic. As markets continue to open up, we anticipate an increase in commercial support and revenue growth in both the countries where we sell directly and in the countries where we sell through our distributor partners.

Further, we expect to leverage our uveitis indication in all of these markets. We believe that ILUVIEN for noninfectious posterior uveitis could and should be the gold standard of treatment given our indication for the prevention of recurrence of disease and limited ocular alternatives in this market.

Remember, the anti-VEGF therapies are not an option to treat uveitis. And to date, ILUVIEN has only been launched for uveitis in Germany and the U.K. in late 2019, right before the start of the pandemic. We hope to launch the uveitis indication across the remaining markets over the next 12 to 18 months as we receive pricing and reimbursement in each country. Just this week, we also announced a partnership with the Tanner Pharma Group to initiate a named patient program for ILUVIEN. Tanner is now the exclusive provider of ILUVIEN globally for diabetic macular edema, and in Europe and the Middle East for the treatment of noninfectious posterior uveitis in specific countries where the product is not commercially available for patients with DME and uveitis.

I'll now turn the call over to Phil for more detail on our financial results for the quarter. Phil?

Thanks, Rick, and hello, everyone. For the second quarter of 2021, we reported consolidated net revenue of $21.7 million, up approximately 117% compared to the $10 million that we reported in the second quarter of 2020. Consolidated net revenue for the second quarter included $10.7 million in product revenue and $11 million in license revenue during the quarter generated from the Ocumension transaction that Rick mentioned earlier.

U.S. net revenue, which was all product revenue, was approximately $5.8 million for the second quarter of 2021, up 71% from $3.4 million reported in Q2 2020. The U.S. end-user demand, which represents units purchased by physicians and pharmacies from our distributors, rose 17% in the second quarter of 2021 to 731 units compared to 625 units in the second quarter of 2020.

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 second quarter of 2021, our distributors purchased approximately the same number of units they sold to end users, while in Q2 2020, our U.S. distributors purchased 36% fewer units than they sold in order to reduce inventory during the pandemic.

Net revenue from our international segment increased by approximately 141% to $15.9 million for the second quarter of 2021 compared to $6.6 million reported for the same period last year. International net revenue includes the $11 million in license revenue associated with the Ocumension transaction.

International product revenue was down 26% to approximately $4.9 million compared to $6.6 million for Q2 2020. The decrease in product revenue was driven by 2 factors: one, a lack of orders from our distributor partners who continue to sell off inventory acquired in 2020; and two, a significant decrease in end-user demand in Germany in Q2 2021 compared to Q2 2020. This was due to restricted health care facility access in response to a substantial rise in reported COVID cases over the quarter compared to the prior year. The decrease in product revenue was partially offset by the acceleration of $1 million in deferred revenue associated with the termination of our Canadian distribution agreement with Knight Therapeutics.

As Rick mentioned, end-user demand across Europe was at a new high for the second quarter. Across our 7 European markets, where we were selling in Q2 2020, the United Kingdom, Germany, Portugal, France, Italy, Spain and Ireland, net end-user demand grew from 824 units in the second quarter of 2020 to 955 units in the second quarter of 2021, a net increase of 16% despite the challenges in Germany.

Total operating expenses were approximately $12.9 million in the second quarter of 2021, an increase of approximately 30% compared to $9.9 million reported in the second quarter of 2020. With access to customers increasing, we are spending again on certain initiatives to drive the sales recovery and future growth in the second half of 2021 and into 2022.

We reported positive adjusted EBITDA of $7.9 million in the second quarter of 2021 compared to an adjusted EBITDA loss of $300,000 in Q2 2020. Adjusted EBITDA for Q2 2021 includes the impact of $11 million in license revenue from the Ocumension transaction and the acceleration of $1 million in deferred product revenue associated with the termination of our Canadian distribution agreement with Knight Therapeutics.

For the second quarter of 2021, we reported net income of approximately $7.6 million compared to a net loss of approximately $2.5 million for the second quarter of 2020. Basic and diluted net income per share for the second quarter was $1.03 on approximately 7.6 million weighted average shares outstanding. This compares to basic and diluted net loss per share for the second quarter of 2020 of $0.51 on approximately 5 million weighted average shares outstanding.

On June 30, 2021, we had cash and cash equivalents of approximately $24.8 million compared to the $8.3 million in cash and cash equivalents that we reported on March 31, 2021. Given our recently strengthened balance sheet, we believe that we are in a strong financial position to fund the growth of our business going forward.

I'll turn the call back over to Rick for his closing remarks.

Thank you, Phil. We remain very focused on getting back to prepandemic sales levels and growth rates by investing in our commercial infrastructure and corporate activities. The license we granted Ocumension in Q2 for the rights to develop and commercialize ILUVIEN for Greater China territory and other Western Pacific countries, along with Ocumension's equity investment in us have significantly improved our balance sheet, as Phil said. The Ocumension license agreement also offers the potential for us to receive up to $89 million in future sales-based milestones plus a markup on commercial product that we furnished to Ocumension under the license agreement. As a result, we do believe we have the capital resources to execute on our core business in the U.S. and Europe, and we plan to get back to the strong position that we were in prior to the pandemic.

With that, I'll turn the call over to the operator to begin the question-and-answer session.

(Operator Instructions) And the first question comes from Alex Nowak with Craig-Hallum Capital.

Rick, just hoping you could expand on the month-to-month cadence of results throughout Q2 for both U.S. and OUS end user demand. How are things tracking towards the end of the quarter? And just how is Delta playing in the thing starting here in Q3?

Yes. So great question, Alex, and thanks for joining us today. I would -- I have to tell you, it's still inconsistent. We see a lot of inconsistency month-to-month, depending on the country. We'll have a strong month in the U.K. and a weak month in the U.S. and then it will flip the next month. And a lot of that is tied to the variability in these spikes with the Delta variant and things like that. So there's not -- there is just, unfortunately, a lot of inconsistency right now as things continue to open and close. There are certain jurisdictions where we had access for a while, and that access has been limited again for a period of time. And it just seems to continue to stop and start.

Overall, I'm really pleased that our utilization appears to be at a slightly greater share than maybe the availability of patients coming back to the offices, and we are adding new accounts. So that message that we talked about, about the COVID pandemic highlighting the value of ILUVIEN, I believe, is working. And I think as we get more and more consistency with patient volumes, we'll see that consistency come back. But just like you read the news every day, look, things continue to change and evolve.

Yes. Understood. And how much inventory do you think is sitting outside the U.S. right now? Do you think that's mostly drawn down and end user demand is good -- excuse me, orders shipped is going to track closer to end-user demand here in the second half?

It should. Yes, we should get much closer back to end user demand. There are orders that we have on hand, as we said, for deliveries in the next 3 quarters. So there's some in the third quarter, some in fourth quarter, some in the first quarter of next year. I would say we're probably not quite back to a perfect match just yet, but I would expect us to be there by the fourth quarter.

Okay. No, that's great. And can you expand on the Tanner Group deal, just how to think about that? Is that going to be a material piece? Or is that relatively light just given the lack of reimbursement in some of those markets?

Yes. So I want to -- I'm hesitant to quote a number on that. I mean, I would tell you that what we see is we do get a lot of interest at trade shows and things like that from countries where ILUVIEN is not yet approved and available. So we hear a lot of interest from South America. We do hear a lot of interest from Asian markets where the product is not available yet, right, even though Ocumension is trying to get it there. And so we do think there is demand out there we can supply. The Tanner Group has said that they believe eventually, it could be $1 million to $2 million a year, but how quickly that ramps up, we'll have to see.

Okay. Understood. And then given the cash infusion, you mentioned a number of different investments that the team wants to make across sales and marketing. But I was just hoping you can kind of rank all of those. Where -- with the additional cash, where do you plan on using that most wisely from the sales and marketing side, from a clinical regulatory side, from expanding uveitis? And then just any comment on the pipeline there, too.

Yes. So it's I would say really 2 things, maybe 3. The 2 things that would be top of mind on that are going to be the advocacy in the face-to-face engagement with the doctors, right? So I want more of my team to be face-to-face with more doctors and quality environments as often as we can to develop that advocacy and get that peer-to-peer discussion going. So for example, we are increasing the size of our thought leader liaison team in the U.S. We're adding MSLs, both in the U.S. and in Europe, and we're adding a position that is similar to a thought leader liaison in Europe as well, although because the compliance rules are slightly different. It's not a TLL.

But the focus is that professional relationship, getting those in-depth conversations with the doctors. So -- and a lot of advisory boards did that format. Another example is I'm trying to get out there myself and talk to these doctor practices quite a bit with myself and Dr. Dyer and more of our senior leadership team. I had a dinner here in New York with 6 or 7 doctors last night. I have 4 or 5 of those types of dinners playing with different practices around the country over the next 3 weeks.

The second thing would be the market access side of things. We think we've got a great argument specifically in Europe, for the hospital systems there where they're overcrowded, and they do have capacity issues associated with COVID to show them that ILUVIEN can make their practice more efficient. And both from a -- just from an operational standpoint, but also from a cost standpoint with ILUVIEN, and we think there's a great argument there around uveitis. So that's going to be a big part of the story as we roll out for uveitis.

And then the third thing would be that DTP effort in 2022. We'll be building toward that over the rest of this year. But we really think -- and I think many people agree with this. There's a huge opportunity to demonstrate to patients or potential patients out there the value of ILUVIEN then drive that through to the doctors' practices.

No, that's great. And just anything on the pipeline as far as new retinal assets?

Not right now, not right now. We are out there looking aggressively. I will say that as things have started to open up and we see some meetings on the horizon, we do expect to be able to engage a little bit more dialogue, but nothing right there on the front burner at the moment.

The next question comes from James Molloy with Alliance Global Partners.

I had a quick follow-up on the NEW DAY trial. Did you quote 51 patients currently in the NEW DAY trial at this point?

Yes, that's right. So we've got about 51 patients in the study right now. There's 11 that are in the screening phase. We have seen that ramp up over June and July as some of that patient volume and access has come back. It's a little bit slower than we'd like, Jim, unfortunately, because some of the people that have not been shown up in the office are those new patients where things were shut down, our access was restricted. But we're starting to see an improvement in that, and hopefully that will continue to build through the rest of the year.

Yes obviously, the pandemic's hitting that, I mean, much slower than you anticipated. With the 11 in, it's hard to know with the Delta variant of course, but we do anticipate -- that's 50 in a year, granted in teeth of COVID, you expect like 100 in a year over the next year or so?

I certainly hope so. I mean I certainly -- that enrollment will increase exponentially over the next 12 months. I'm not giving up on it being enrolled this time a year from now. The challenge we've had, as I said, is the specific type of patient that we're trying to recruit is that naive patient or very -- a patient that has anemia that's been treated very, very lightly, so far in the study. And a lot of times, companies will try to change that enrollment criteria to accelerate it. We're just not going to do that because we think it's so important to focus on these early patients. So we're going to be patient with it. We're doing the things we can to speed it up, and we are seeing some positive signs over the last 8 to 10 weeks in that enrollment.

And then can you talk a little bit about the U.S. sales. How many reps you guys have currently? And is there a change to -- obviously, face-to-face very important, you're showing excellent leadership doing it yourself with the Delta variant hitting everyone. How is that working at Alimera? Are you able to get the face-to-face that you need? Or are people starting to get there?

Absolutely. So we've got about -- you asked about the number of reps. We've got 29 reps right now. There is one territory that we had some turnover and we just decided to leave it open in the COVID situation down in South Florida. I would say our reps access is getting better. As I mentioned, there was about a 14% increase in face-to-face calls or in-person calls by reps in the second quarter over the first quarter. So we're definitely seeing some improvement there.

We are seeing more practices open up for lunch and learns, right, is where we get to go in and have a launch of the entire practice and get greater access and more quality time than 5 to 10 minutes in an injection lane. So we're definitely seeing improvements there. I hope that will continue to improve. As I said to Alex, there is a lot of variability, though, and it's not consistent across the U.S. because of spikes in the Delta variant. I think we've seen things open up in Georgia. We got some access over the last month or so with [George Retina], who's one of our biggest customers here. And frankly, that had been pretty tight for most of the time. And over the last couple of weeks, you've seen a spike in the Delta variant here in Georgia. So we'll have to see how these things play out. I think it's going to be a little bit of stop and start for a couple more months.

And last couple of questions. Could you speak a little bit to the sales versus sales and marketing spend, looking -- the sales and marketing up 11% quarter-over-quarter versus the sales down 5%. Is there a lag on the sales and marketing or decoupling between when the spend goes up or it comes back in sales? Or can you talk a little bit about the linkage between the spend out there and the revenues coming in the top?

Phil, do you want to provide some comment on that first?

Yes. First, Jim, I'll talk a little bit about the spending. If you're aware, if we look at the spending in the sales and marketing area, we've had severe lockdowns for about the last 16 to 18 months. And what we're seeing now is that our reps are able to get out into the field and be able to travel a little bit more. And as that occurs, we do see an increase in travel, related to travel and the engagement related to those interactions that we see between our field force and the doctors. So we will see that increase. And I think that's just somewhat of an advanced effect of what hopefully is good results to come based on that interaction.

And then any -- last question. Any thoughts on guidance for '21 here halfway through?

Jim, I don't think so. We're not really comfortable doing that right now. I mean we think there's a lot of positive signs that are pointing to positive trends from activity that we went through in the call, but probably especially with the spike in the Delta variant right now, just not comfortable providing guidance for the rest of the year.

(Operator Instructions) The next question comes from Yi Chen with H.C. Wainwright.

In the second half of this year, do you think the U.S. revenue growth skew exceed the international revenue growth?

Yi, that's a great question. I would say probably not because we do have those additional countries that have started selling product in the first half of the year, and we do expect to see some of those distributor [orders to] come back. So I think that as you see Europe sort of come back to get to a normalized level, the growth will be greater in Europe for a little bit of period of time.

Got it. And with respect to the enrollment for the NEW DAY trial, do you think it would be reasonable to expect that the enrollment should be completed in the 2023 or 2024 time frame?

We're certainly going to be pushing and working on strategies to get it enrolled in 2022.

And for second half of this year, how should we look at the operating expenses?

So I think we will be building back over the course of the year to the levels that you saw in the fourth quarter of 2019, and potentially increasing a little bit [above that] in 2022.

This concludes our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Great. Thank you all for participating on today's call and for your interest in Alimera Sciences. We do look forward to sharing our progress on our next quarterly conference call when we report our third quarter results. Thank you, and have a wonderful day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.