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Alimera Sciences (NASDAQ:ALIM)

Q4 2012 Earnings Call

March 21, 2013 4:30 pm ET

Executives

Richard S. Eiswirth - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer, Vice President, Treasurer and Secretary

Charles Daniel Myers - Co-Founder, Chief Executive Officer, President and Director

Analysts

Adam Darity

Simos Simeonidis - Cowen and Company, LLC, Research Division

Operator

Good day, ladies and gentlemen, and thank you for your patience. You have joined the Alimera Sciences, Inc. Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Chief Financial Officer of Alimera Sciences, Mr. Rick Eiswirth. Sir, you may begin.

Richard S. Eiswirth

Thank you. Good afternoon, everyone, and welcome to the Alimera Sciences conference call to update you on our commercialization of ILUVIEN in Europe and to review 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 position, business strategy and plans and objectives for Alimera’s future operations are considered forward-looking statements within the meaning of the federal securities laws.

Our forward-looking statements are based upon current expectations that involve risks, changes and 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 sections of Alimera's annual report on Form 10-K for the fiscal year ended December 31, 2012, and quarterly reports on Form 10-Q for the quarters ended March 31, 2012, June 30, 2012, and September 30, 2012, 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 for an account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast.

And with that, I would like to turn the call over to Dan Myers, our President and Chief Executive Officer. Dan?

Charles Daniel Myers

Thanks, Rick. We begin this quarterly update call with positive developments in Europe regarding the commercialization of ILUVIEN. We have hired our European management team and are working with our contract sales organization and third-party logistics provider to be fully functioning from a commercialization position during the first quarter.

During the fourth quarter, we entered into a Master Services Agreement with Quintiles. And the training of our sales force in MS sales has been completed, and our teams are in place on the ground building demand for ILUVIEN. In addition, believe we've assembled a leading European management team with broad pharmaceutical experience and knowledge of the European ophthalmic market. We're very pleased with the initial results from this team and are confident of their ability to drive, not only European sales of ILUVIEN in our initial launch markets, but also in the development of our long-term strategy in Europe.

We have produced product to fulfill anticipated launch demand, and that product is in our European warehouse. Shipments of ILUVIEN will begin to the German market in the second quarter, a slight delay from our previous expectations due to required acceptance from the Medicines and Healthcare products Regulatory Agency, or the MHRA, on the intended commercial batch size of for ILUVIEN. In addition to Germany, we expect ILUVIEN shipments to begin in the U.K. during the second quarter of 2013, to meet the needs of the privately insured patients.

Feedback from physicians across Europe has been consistently positive. They continue to ask when ILUVIEN will be available. This month, we held a satellite symposium at the German Ophthalmology Congress or the AAD meeting in Düsseldorf, discussing new approaches to the management of chronic diabetic macular edema or DME. At this meeting, retina physicians discuss chronic DME and evolution of DME that may require a different treatment paradigm to existing available therapies. The interest generated among physicians for both Alimera and ILUVIEN was evident at the meeting as physicians easily identified patients who are suffering from chronic DME and are not currently being treated adequately.

As many of you know, market access is also a rapidly evolving process, and we believe we have adapted accordingly with strategic hires of senior-level market access experts who are addressing these hurdles with great energy. For example, we have developed strategies and meetings with the insurance funds in Germany that are critical to gaining access to patients.

On January 23, we announced that we've received final guidance -- published guidance from the United Kingdom's National Institute of Health and Clinical Excellence referred to as NICE, indicating that ILUVIEN is not presently a cost-effective treatment for chronic DME, considered insufficiently responsible to available therapies. We then submitted what we believe to be a compelling argument in the form of a simple patient access scheme, which has been agreed to by the United Kingdom's Department of Health and is now under consideration by NICE for inclusion in its rapid review facility. Under this facility, Appraisal Committee of NICE is expected to assess the impact of the ILUVIEN PAS on ILUVIEN's cost effectiveness and determine whether an update to the recently published final guidance is warranted.

As I previously mentioned, we do expect to begin recognizing revenue in the U.K. from private insurers potentially before a final decision has been made by NICE. We've received written acceptance by numerous private insurers that will provide approximately 80% coverage of the available patients in the U.K. with private insurance.

We received a Spanish improvement in January. We now have marketing authorization in the United Kingdom, Austria, Portugal, France, Germany and Spain for the treatment of chronic diabetic macular edema considered insufficiently responsible to available therapies. In Italy, regulatory and market access runs in parallel, leading to a longer and more complex process to receiving a label.

Now turning to our progress in the United States with the FDA, we are on track to resubmit our New Drug Application for ILUVIEN prior to the end of this month, using data from our 2 previously completed pivotal trials -- Phase III trials known as the FAME Study. This resubmission will focus on the safety aspect of ILUVIEN and the population of patients with chronic DME, the same group, which marketing approval of ILUVIEN has been granted in 6 European Union countries thus far. We will communicate to you the PDUFA date, once it is known from the FDA.

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

Richard S. Eiswirth

Thank you, Dan. Turning to our financial results for the fourth quarter. Net loss for the quarter ended December 31, 2012, was $5.3 million or $0.17 per common share. That compares with a net loss of $6.1 million or $0.19 per common share for the quarter ended December 31, 2011. Research and development expenses for the fourth quarter of 2012 were $2.3 million compared to $1.4 million for the fourth quarter of 2011. This increase was primarily attributable to the preparation of the resubmission of the NDA for ILUVIEN with the U.S. FDA expected in the first quarter of 2013.

General and administrative expenses in the fourth quarter of 2012 were $2.1 million compared to $1.4 million in the fourth quarter of 2011. The increase was primarily due to infrastructure build in Europe in preparation for the launch of ILUVIEN in 2013.

Marketing expense in the fourth quarter of 2012 were $3.8 million compared to $3.1 million for the fourth quarter of 2011, as the company prepared for the planned launch of ILUVIEN in Europe. As of December 31, 2012, Alimera had cash, cash equivalents and investments of $49.6 million compared to $33.6 million as of December 31, 2011.

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

Charles Daniel Myers

Thanks, Rick. As I stated earlier, we are very excited to have entered the commercialization phase for ILUVIEN. We have produced a warehouse product in Europe based on a strong interest we have seen for ILUVIEN.

From an infrastructure standpoint, we believe we are well-positioned in Germany and the U.K. for launch, and we expect our team to generate revenue in the second quarter, representing a critical milestone for Alimera. As we continue to work with NICE and the FDA, our #1 goal remains the same as it's always been, to make ILUVIEN available for the many patients worldwide suffering from the debilitating effects of chronic DME.

We look forward to updating you on all of our progress in the months ahead. And I will now turn it back over to the operator for potential questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Amit Bhalla of Citi.

Adam Darity

Dan and Rick, this is actually Adam in for Amit today. I just wanted to start with a question on the MHRA process. What's the communication been like with them? What are the expectations for actually getting the batch size accepted for that?

Charles Daniel Myers

Yes. So basically, this is a -- what's considered a Type 1b variance, which requires us notifying MHRA, and they have a period depending on the response of the expedited review of it between 30 and 60 days. And what it simply is, Adam, is we increased the size of the batches as we began to be more efficient in manufacturing. Obviously, when you do technology transfer back in the early days post clinical trial supplies, we had a validated process and, of course, was inspected by FDA and the original MHRA when we had the approval process back in 2012. So we began to find it with the batch -- with the current FA raw materials, we could actually manufacture more efficiently. We just gotten better at it, and we can increase the batch size, which, of course has a financial incentive, as well as just having more product available to produce and commercialize. So we increased the batch size. We had to get the MHRA sign off on the agreement that the larger batch size was validated as with the smaller batch size. We had expected to hear from the MHRA on Monday. Obviously, in a perfect world, they have no questions, and you're on your way. They did have a few, what we believe to be, questions that we can answer. And, we believe, in some cases, maybe just a bit of communication. We've requested a conference call with the individual MHRA, hopefully, any day now to answer the questions or clear up any miscommunications that we have. And so it's just clarify anything they may have on increasing the batch size.

Adam Darity

Okay. And then how -- what's the process after you clear up the miscommunication or the -- and provide new information? How long has it been until there's potentially approval or acceptance?

Charles Daniel Myers

Yes, so they can basically be -- the answers could be acceptable, they would then approve the variance. The reason is a little bit of a period of time where I can't give the exact date as when the MHRA, which if you remember, the U.K. served as our Reference Member State in our process, they -- when they asked us the questions, they also send that out to the other 6 Concerned Members States. And so you have technically a clock stop while the other states are notified that we've had these questions ask. When we answer the questions to the MHRA satisfaction, they then notify the CMS-es that they have had these issues or these questions or communications resolved, and then we have to have those 6 come back. They have a maximum of 30 days to respond to us, and so that's why when we give you sort of a slippage from first to second, I can't give an exact date. We don't think it'll be an extended period of time, but we can't predict when, for example, the other 6 countries would then kind of close the loop, if you will, and agree with what the MHRA has come to. Typically, the CMS states will sort of acquiesce to the RMS. It's just you got to get the RMS on board and then have the process take its course.

Adam Darity

Okay. And then maybe you can talk just about some of the market access challenges you're having in Germany and the U.K., and what your experts are doing to resolve that right now?

Charles Daniel Myers

Okay. Well, first of all, the U.K. of course, a lot of it's driven between the public and private sector. Probably, depends on who you believe. Between 10% and 15% of the market opportunity in the U.K. would be in the private sector, which we have access to right away. And to that point, as I've said earlier, we have negotiated now and gotten, call it, formulary acceptance. That's not technically correct but we have coverage, if you will, by the 3 largest insuring private sector companies in the U.K. So once we have the product available, the private sector, I think, lot of the heavy lifting, if you will, has been done, because we would have the great majority of patients who want ILUVIEN, the private sector covered, under these 3 large contracts that we've negotiated. On the public side, of course, that's driven more by NICE. And I think we've gone through that a bit in my earlier comments. We're waiting to hear back from NICE on our patient access scheme. And so there's some early work that our market access folks are doing with the hospitals and the public trust and preparing them in anticipation of a positive outcome with the patient access scheme but, obviously, a lot of that work is being done in more of a contingency basis versus the private sector. It's pretty much more of a conclusion, and that's where we see our early revenue coming. In Germany, it's really not a real -- any key issues are hurdles. It's just a lot of work. There's -- I think at last count, or somebody told about 150 what's called KKs or Krankenkasse. We refer to them as the sick funds, they're basically the insurance covering groups within Germany. The large numbers, not too important to you or me, because we really have identified with our market access team in Germany, 27 key KKs, if you will, that, we think, drive the great majority of ophthalmic coverage within Germany. So it's not quite as daunting as it may sound that you've got 150-or-so accounts to call on. You really got a key 27 or so. And then, of course, you break down as everyone typically does the 80-20 rule with even -- within that subset. We have hired Tobias Gantner, who is our Head of European Market Access, very senior-level individual who's been involved in the ophthalmic space for quite some time. And, I think, really, has a good understanding of the ins and outs of negotiating with the KKs. They are in the process, along with Karsten van Blum [ph], our country head in Germany, working on appointments. We're already having calls set up to meet with the KKs and begin negotiating individual contracts with those agencies. So in Germany, it's more just getting there and getting in front of the people.

Operator

[Operator Instructions] Our next question comes from Simos Simeonidis of Cowen & Company.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Can you walk us through this delay in Germany? Was this something that was unexpected? I know you had talked about a launch in February initially, then the language seems to Q1 and now it's Q2. First of all, do you think it's going to be in April or later in the quarter? And again, was there something that was unforeseen or something you -- that could have been planned for?

Charles Daniel Myers

Yes, Simos. It's really very much around the singular issue that I described in the narrative and in answering Adam's call -- question. We had product, physically, in our logistics warehouse in Europe, probably about the middle of -- early to middle of January, which would have allowed us to begin sales in mid to late February. So everything was in place for Germany and remains in place. Granted it would have been a little bit of a race between product availability and getting, as I mentioned in my last comment, all of the KKs lined up with formularies. But that's just part of any launch you do. And you're never going to have that perfect or have it all of those done before your launch, because that just kind of comes with the territory. We submitted the variance anticipating that we would get some response from MHRA by mid-February. That's what led us to that original comment. MHRA advises that the variance was a 1b type variance, which we weren't totally in agreement with, but, obviously, accepted, which allowed them an extra 30 days to get a response to us. So we -- that then, of course, put us to this past Monday as I told you, which was the delay from the middle to the date that we were anticipating. We would still make the first quarter. So if you'd ask me last Friday, I would probably begin having our first revenue in the next -- this week or next week. As I stated earlier, then we got the questions from the MHRA around the variance increase, which causes us to have to answer those questions. Again, I don't think they're show-stopper questions, but they do require us to answer them. And that is where we find ourselves. So it's really around more this sort of, I don't want to trivialize and say paperwork issue but it is sort of a few last boxes we think we have to check with MHRA.

Simos Simeonidis - Cowen and Company, LLC, Research Division

In terms of the U.K. launch, is it something that we should expect to happen in April? And then for France, is it a 3Q event? Is that how we should be thinking about this next 2 countries?

Charles Daniel Myers

Yes. So the way you'll probably see things roll out now is we'll see sort of a simultaneous launch in both the U.K. and Germany. Now, as I said earlier, just to be clear, the launch in the U.K. will be in the private sector, initially, whereas, of course, it will be a full launch to the full population in Germany. But because of this sort of slip with the MHRA, I think we now found ourselves in a place in the U.K. that we're ready to ship product also in the second quarter. Now whether it's late April, early May, it's a little tough to call, as I said with Adam, because we're not really totally clear on when the clock starts with a CMS-es. So I think once we have our meeting with MHRA, which I hope would be any day now, and answer their questions, then, of course, the CMS-es have 30 days to respond. They could respond sooner than that, but they have a period of 30 days. So you can kind of do the timelines. If we're able to clarify and get this situation resolved with MHRA, then it would lead us to be in a place late in April. If it slips a little bit and those it could move into sometime in May.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Okay. And for France?

Charles Daniel Myers

I'm sorry. Yes, and your other question about France. With some of the ongoing work we do in France and pricing and some of the market access work, we think we'll be launching in France sometime in the fourth quarter.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Guess I was being pushed out to 4Q.

Charles Daniel Myers

We originally thought somewhere in September. We now think it will slip a little bit into the fourth quarter.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Okay. And then, do you have any thoughts on when you might be able to go on in Spain?

Charles Daniel Myers

Currently, we are looking at that, and we talked to some folks in Spain about what potential strategies we want to look at in Spain. Clearly, economic situation makes it one that we're sort of taking it one day at a time right now. We have not committed to a time where we would launch in Spain. I could tell you, it will be at best in first half of 2014.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Okay. Great. I mean, would you be able to discuss pricing in the first countries you're going to launch, or not at this point?

Charles Daniel Myers

Well, we have a public price in the U.K. of GBP 5,500. And I appreciate you bringing that up, because I was remiss in mentioning that, while, obviously, the patient access scheme addresses the cost effectiveness for the public sector through the NICE process. If there is an upside to the private sector and the launch in the private sector earlier, is that it would be a pricing to the insurance funds at the full public price of the GBP 5,500. So that will be where the initial pricing will be in the U.K. Clearly, if we go into a patient access scheme with NICE, that would be adjusted somewhat as we mentioned earlier. We have not publicly issued a price in Germany, but that will be coming out in the first week of April. I didn't speak to this, but you basically answer your price into the system call called IFA. It's a acronym, I-F-A, which is the German system. We have committed that price into that system. It's going and working through the system, and it has a publication date of April 1, which we should say that you would see the public price. I can tell you that the public price in Germany will be in line with the public price in the U.K.

Simos Simeonidis - Cowen and Company, LLC, Research Division

Sorry, so you said I can tell you or I cannot tell you?

Charles Daniel Myers

I can, and I will tell you that the public price in Germany will be in line with the public price in the U.K. although we -- the specific price will be announced the first week of April.

Operator

At this time, I'd like to turn the call back over to Dan Myers for any closing remarks.

Charles Daniel Myers

Thanks for listening to today's call. We look forward to updating you on our progress in the coming months. And operator, I'll turn it back over to you to conclude the call.

Operator

Thank you, sir, and thank you, ladies and gentlemen, for your participation. That does conclude your Alimera Sciences fourth quarter 2012 earnings conference. You may disconnect your lines at this time. Have a great day.

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