Alimera Sciences, Inc (NASDAQ:ALIM) Q1 2022 Earnings Conference Call May 9, 2022 9:00 AM ET
Scott Gordon - CORE IR
Richard Eiswirth - President and Chief Executive Officer
Phil Jones - Chief Financial Officer
Conference Call Participants
Alexander Nowak - Craig-Hallum Capital Group
James Molloy - Alliance Global Partners
Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences First Quarter 2022 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 August the 5th, 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.
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 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 risk factors, described in Alimera's most recently filed periodic reports on Form 10-K and 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 includes adjusted EBITDA, a non-GAAP financial measure. For a reconciliation of this non-GAAP financial measure and a reconciliation 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, May 9, 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.
With that, it is now my pleasure to turn the call over to Rich Eiswirth. Rick, please go ahead.
Thank you, Scott and good morning to everyone on the call. I'm very pleased to report that we continue to see ongoing recovery from the pandemic across most of our markets.
In the first quarter of this year, consolidated revenue was $11.9 million, up 6% compared to Q1 of 2021. However, looking at revenue on a consolidated basis does not provide a complete picture of the progress we are seeing due to the stage of recovery in certain markets.
Let's focus on the U.S. market, our largest market first. End user demand in the U.S. has continued to steadily improve since we returned to growth in the second quarter of last year. And since that time, our trailing 12 months end user demand at the end of the first quarter is up 18% over the previous trailing 12 months. Specifically, in the first quarter end user demand grew 25% to 918 units compared to 737 units in the first quarter of 2021. And this fueled a 23% improvement in reported GAAP U.S. revenue, with domestic sales of $6.9 million versus $5.6 million in the same period last year.
We believe this trend is a result of improved patient flows in on the clinics, our ability to have more face-to-face interactions with customers inside the clinic, and our investments in engaging with retina specialists in alternate settings outside of the clinic to drive advocacy. Further, we believe the data from our PALADIN study strengthens our message on both the safety and efficacy ILUVIEN, including the case for earlier utilization and is being well received by physicians.
A paper summarizing the data was accepted by Ophthalmology, the journal of the American Academy of Ophthalmology. And some of the data was recently presented at ARVO where the annual meeting of Association for Research in Vision and Ophthalmology in Denver. More data has been accepted for presentation in several upcoming meetings as well, indicating great interest in study data by the ophthalmic community. And importantly, we see the positive trends in the U.S. continuing early in the second quarter, as end user demand for ILUVIEN is now up over 30% year-to-date through the end of April versus the same period in 2021.
You're probably aware that Roche-Genentech has recently launched Faricimab, an alternate form of anti-VEGF, counting possible durability of one to four months. Obviously, durable access getting remains an objective in the retina space and is something that ILUVIEN provides. We believe that the possibility of one injection every three years or significantly reduced injection frequency is being more sought out by retina stress specialists today than ever before, and is always, is very attracted to patients.
As we announced on our last earnings call, we restarted a direct-to-patient, or DTP, campaign in mid-January in the U.S. to support our growth. As a reminder, we're conducting this campaign in 10 regional markets, where there is a large prevalence of diabetes, or we have high prescribing practices, or both. The DTP campaign is designed to target potential ILUVIEN patients in those markets based on behavioral and demographic qualifications. The campaign consists of streaming video and display ads on social and other digital media, as well as a non-branded educational site labeled DME and ME.
After three months of the campaign, we are encouraged by the response we have seen, including achieving over 50% of our annual impression goal by the end of the first quarter and increasing our ILUVIEN.com site traffic by over 200% over the quarter prior to the launch of this campaign. One of the tools we make available for potential patients on our website is called Find A Doctor, a tool that helps patients locate a physician who is fully trained and utilizes ILUVIEN. This campaign has led to a significant increase in the interactions with that section of our website, indicating patients have a desire to discuss ILUVIEN for DME with a retina specialist.
We were reminded during the pandemic that ILUVIEN is very promotionally sensitive. The more we can get the brand in front of physicians, the better chance we have of building utilization and loyalty. Therefore, we have increased our communications of doctors to include email campaigns in addition to our ongoing digital media campaign. We've been very pleased that the open rates and click rates, these campaigns are significantly above typical healthcare rates for this type of content. Indicating again, the information is relevant to our customers.
Ultimately we believe the DTP campaign and our increased data communication with our customers will help us maintain the recent sales momentum in our U.S. business by reminding patients and physicians of the benefits of ILUVIEN, namely the ability to see better, longer with fewer injections.
Now, let's tune turn to our International business. Although our International segment sales for Q1, 2022 were down 11% year-over-year to $5 million, we are starting to see some signs of progress of recovery. The outbreaks of the Omicron variant across Europe during the fourth quarter of 2021 and the first quarter of 2022 resulted in both limited access to physicians by our team and high levels of clinic staff absence due to the requirements to isolate. Limited staffing had a significant effect on clinic capacity, which resulted in limited patient visits and opportunities for ILUVIEN utilization.
However, at various times, during the first quarter, we saw government restrictions due to COVID-19 and its variance relaxed in the United Kingdom, Ireland, Portugal, and other countries, which has allowed us to begin to increase our face-to-face visits with physicians. As these restrictions have lapsed, we are already seeing better access to customers and improving patient flows.
As Q1 ended and Q2 began, we are seeing improving demand trends. Importantly, in our international distributor markets, both end user demand and gap demand or stocking orders are improving. End user demand in our distributor markets was up 9% in the first quarter of 2022 versus the first quarter of 2021. And this trend also continued in April, with year-to-date end user demand improving by 12% over the prior year. This is fueling increased stocking order volume from all of our distributor partners.
As at the end of April, we have already received orders for deliveries in 2022 for approximately 2,300 units with a value of more than $6 million to us. This compares to total international distributor shipments of approximately 1,600 units and $5 million in revenue for Alimera in all of 2021.
Coming out of the pandemic, we expect to realize more of the opportunity to grow ILUVIEN's non-infectious posterior uveitis indication. Our partner, Brill Pharma, is now launching this indication after receiving pricing approval in Spain in the first quarter. This new indication is helping create momentum coming out of COVID-19 restrictions as Spain is achieving positive overall sales results, with end user demand up over 31% year-over-year in the first quarter. We are now anticipating the formalization of reimbursement for the uveitis indication in France, Italy, and Portugal in the next few months, with launches for the indication to follow.
The first quarter of this year demonstrated the positive of distributors renewing commercial support in our distributor markets. And we're excited for the opportunity to continue growing our International segment as the environment approves. Although they're lagging our overall recovery, we are seeing some positive trends in our direct markets as well.
Demand in Portugal was up 35% in Q1 over the prior year. The U.K. returned to growth today -- growth year-to-date at the end of April in a year-over-year comparison. And monthly face-to-face visits in Germany in March were the highest they've been since 2020.
To sum up, in Europe, access to care has improved in our distributor markets and a significant turnaround in unit growth in the first quarter is evident in these countries. Distributor inventories have normalized, and we expect more consistent ordering patterns going forward, which should better align demand growth in these markets with our reported sales.
And in our direct markets, we believe that improved access, increased patient flows, and increased commercial activities in new and existing markets will lead to the same recovery trends we've seen in the U.S. in our distributed markets. That said, we do realize that incremental investments made in our European markets have not yet resulted in the growth trends we are seeing in the U.S., and we are controlling our spending in those markets to better align with current revenue levels.
And finally, we continue enroll patients in our landmark NEW DAY study. Recall, the goal of this study is to demonstrate the utilization of ILUVIEN as baseline therapy for all patients diagnosed with DME. I'm pleased to report that this head-to-head trial against the current standard-of-care is now over 50% enrolled. I personally am engaged with several of the sites and continue to see more buy-in to our concept of ILUVIEN based on therapy.
I'll now turn the call over to Phil to review our financial results for the first quarter.
Thanks Rick and hello everyone. During the first quarter of 2022, our consolidated net revenue increased 6% to $11.9 million compared to $11.2 million in the first quarter of 2021. U.S. net revenue was $6.9 million for the first quarter of 2022, an increase of 23% from the $5.6 million reported in the 2021 period.
As Rick shared, U.S. end user demand, which represents units purchased by physicians and pharmacies from our distributors, increased 25% in the first quarter of 2022 to 918 units compared to 737 units in the first quarter of 2021. And we -- as we have previously discussed our GAAP revenues in the U.S. do not always correlate with end user demand due the timing of purchases by our specialty distributors.
In the first quarter of 2022 Alimera's U.S. distributors sold approximately 8% more units to end users than they purchased from Alimera, reducing inventory during typically seasonal slowdown of January and February. As we have historically seen, we expect distributed orders to catch up with the end user demand over the year.
Net revenue from our International segment in the first quarter of 2022 decreased to $5 million compared to $5.6 million that we reported in the first quarter of 2021. The 11% decline in International net revenue was due primarily to the impact of COVID-19 and its variants on our two key direct markets of Germany and the U.K., which led to high levels of clinic staff sickness and reduced patient visits to clinics and for their DME and non-infectious posterior uveitis treatment. The recent COVID-19 resurgence also limited our ability to interact face-to-face with our customers.
As Rick noticed, and I want to emphasize, International distributor orders were up 55% to $1.7 million driven by end user demand returning in those markets. Through the end of April, we have already received orders for deliveries totally more than $6 million for 2022, 20% more than total distributor shipments in 2021.
Total consolidated operating expenses were $14.4 million in the first quarter of 2022, an increase of 19% compared to $12.1 million reported in the first quarter of 2021. The higher operating expenses were driven by an increase in promotional and medical program investment intended to accelerate growth, as we and our customers expect COVID-19 to become better managed globally in the second half 2022. However, we are continuing some of our spending in international markets to address the slower than expected revenue growth in Europe coming out of the pandemic in order to manage or mitigate the cash burn as we have done in the past.
We reported an adjusted EBITDA loss of $3.1 million in the first quarter of 2022 compared to adjusted EBITDA loss of $1.3 million in Q1, 2021. For the three months ended March 31st, 2022, we reported a net loss of $6 million compared to a net loss of $3.6 million for the three months ended March 31st, 2021. The loss in Q1, 2022 was impacted negatively by approximately $552,000 or 9% of the net loss associated with the change in the fair value of our warrant asset as the value of Ocumension Therapeutics stock price has declined. This asset did not exist as of Q1, 2021, therefore there's no comparative change for that period.
Basic and diluted net loss per share for the first quarter of 2022 was $0.85 on 7 million weighted average shares outstanding. This compares to basic and diluted net loss per share for the first quarter of 2021 of $0.63 on 5.8 million weighted average shares outstanding. On March 31st, 2022, we had cash and cash equivalents of $9.9 million compared to $8.3 million in cash and cash equivalents that we reported on March 31st, 2021.
As we've indicated during the quarterly calls in the second half of 2022, we have invested in target spending programs, both in the U.S. and International markets to drive reengagement with physicians and regain the share voice that have been lost during the COVID lockdowns. While we believe many of these investments have proven to be successful, we also realized that continuing to spend at those levels in certain markets was not sustainable without offsetting top line performance.
To that end, we have reviewed our spending programs in those markets and have eliminated those items that are not generating targeted results. Moving forward, our target each quarter will be to achieve adjusted EBITDA outbreak even or better, which should help mitigate future operating cash burn in successive quarters.
And with that, I'll turn it back to Rick.
Thank you, Phil. We are very pleased with our performance in the U.S., with 25% year-over-year unit growth, as well as the unit volume inflection that we saw in our international distributor territories. We expect the strong performance in these markets to continue throughout the year and sales in our direct markets units will also begin to recover this quarter and contribute to our overall growth toward the middle of the year.
We expect that our anticipated launches for non-infectious posterior uveitis in Portugal and France in addition to the recent launch of this indication in Spain will add to the growth that we plan for our existing territories. I'm pleased with the progress we're making on the NEW DAY study, where the reopening of access to care and our focus on increasing enrollment have been paying off, so that we can complete this important trial as soon as possible.
In summary, we believe 2022 has the potential to be a significant growth here for Alimera as COVID-19 becomes more manageable in all territories.
That concludes our prepared marks. I'll now turn the call over to the operator for questions.
Thank you. [Operator Instructions]
And the first question is from Alex Nowak with Craig-Hallum Capital Group. Please go ahead.
Great. Good morning everyone. With the PALADIN data, I would say pretty good enrollment on the NEW DAY study so far, all the previous data you have here, plus with the pandemic reducing procedure volume, do you think the value of a three-year implant is beginning to resonate more with physicians and potentially they're changing their habits a little bit more quickly now has become out the pandemic? And maybe speak to the reception so far, you're seeing at the ARVO conference compared to something like in 2019 when last in-person.
Yeah. A lot there to address, Alex. I think that certainly the shift in what is needed to treat diabetic macular edema is occurring, right, and it has been occurring. I think one of the most important things there is the recognition that DME is more of an inflammatory disease and not just a vascular disease, right? So that the anti-VEGF by themselves are not necessarily sufficient to treat it and you've got to incorporate steroids and anti-inflammatories in the disease earlier. An example of that would be, Faricimab, right? So, Roche and Genentech are promoting an anti-inflammatory component of that drug. But it is only one small mechanism in the anti-inflammatory cascade, right? But we think there's a shift in the need and a lot more discussion about that going on out there.
Obviously, durability is remain -- continues to be critical in the space. You've looked at companies like, Kodiak and Bayer, Roche-Genentech trying to deliver anti-VEGF therapy in a much more durable way. Nobody has a great answer on that yet. We'll see how Faricimab is adopted, but we think the need for something like LUVIEN that provides that very consistent and durable therapy gets better control the disease is more and more well received and was certainly highlighted during the pandemic.
These modified anti-VEGF is what I'm calling them, the ones from Genentech, for example, is that more of a competitive threat to the existing VEGF so that they're expanding the patent life on those, or are you seeing those trickle down to second phase, third stage DME drugs?
I think it's more of a shuffling of the deck tiers for the anti-VEGF therapy myself, right? I think people continue to try to figure out what the next best anti-VEGF they have, and certainly gives them more patent extension life over what they have with Lucentis. But more and more doctors, that I talk to, aren't seeing the need to shift between multiple anti-VEGF before they incorporate a steroid into the DME paradigm.
Okay. No, that's good to hear. This one is a bit harder one to answer, but it is important for determining that capital allocation. The growth you experienced in the U.S. now coming out of the pandemic, how much do you think is that associated with the just pure COVID recovery and procedures now happening, again patients coming back and how much is that coming from the new Salesforce, the marketing investments that you've made?
I mean, it's hard -- as you said, it's hard to quantify how much is just a natural recovery. But I will tell you that I think we have done a very good job of finding new ways to engage with physicians outside of the clinic, right? And I think that's made a big difference in the push to do it that way.
There's nothing that I'll ever subsidize, frankly, for the effectiveness of our sales team, right, in the day-to-day and comment out there in the clinics as well. So, I think, it's a combination of both. I will say that some of the modeling we put back -- that we put together back in late spring, summer of last year, we're within two or three percentage points of the trajectory we had projected for our U.S. operations of those investments. So, we think we're on track with what we intended to do and that they're working so far.
That's good. And then, just final two questions here. Maybe expand on the investments you were making outside the U.S. and ultimately, why you're curtailing those? Just why don't you think the market responded there? And then, so far what you've seen into April here, do you think getting 2022 back to that pre-COVID run rate is still achievable?
So, with respect to Europe, I think we -- to some extent, we got out over our skis. I mean, some of it was unforeseeable, right? We saw a lot of stops and starts with the different variants in Europe and specifically in bigger markets like Germany and the U.K. and we just got ahead of it. And we think until we see more stability for several months at a time, it doesn't make sense to make the more aggressive investments to get in front of doctors and find those clinical settings, right, because even if we're getting in front of doctors then they don't have the patient flow. And so, we've got to make sure that we see more consistent patient flow for a good two quarters before it makes sense to really push the European markets hard.
And then just on the pre-COVID run rate?
I'm sorry. I feel very good about that. I think, I do expect us to have a very strong second quarter. As we alluded to in our prepared comments, we've had a very, very strong start in April. We're seeing that continue in early May. And our goal is to be back to the pre-COVID run rate by middle to end of the third quarter this year.
That’s great. Appreciate the update. Thank you.
Okay. Thank you, Alex.
The next question is from Yi Chen with H.C. Wainwright. Please go ahead.
Hey, guys. This is Chep [ph] on behalf of the Yi. Just a couple of quick questions. I know recently, EyePoint has decided to pause development of YUTIQ 50 for posterior segment uveitis based on the FDA's new requirement for drug device combination. Do you anticipate any broader implications in this space based on the FDA's new requirement? I believe, it's seeking more additional data for such combinations. And then in the same context, this treatment was being developed as a twice a year option. So, do you also have any plans? Or do you see the need to develop a six-month version of ILUVIEN for DME or uveitis? Thank you.
So, with respect to the changing regulations to the FDA, we're continuing to monitor what's going on there right now. We don't anticipate it to have any impact on the commercialization or utilization of ILUVIEN. It may lead to some additional filing requirements for us in the future, but we're not aware of anything yet. And as I said, we continue to monitor that situation.
As far as the short-term ILUVIEN, we have looked at that ourselves and considered the possibility of that. Frankly, we think the idea of a non-erodible drug for six months in the eye may create some additional safety issues that you may have to be concerned about that and maybe more erodible options for shorter duration make more sense in the long-term. We're really pleased with the delivery we have and the data that we have on the three-year version. We think it's safe and efficacious, and we don't really see need to shorten it.
Excellent. Thank you so much. And congrats on the progress.
The next question is from Jim Molloy with Alliance Global Partners. Please go ahead.
Hey, good morning. Thank you for taking my questions. Phil had mentioned that [technical difficulty] some items that weren't performing. Can you address that a little more directly? What were those items and sort of how did they sort of not perform to expectations?
So, the challenge is really just trying to -- we were spending money the same way trying to get in front of doctors in different formats. The advisory boards, maybe some additional personnel get out there and find new ways to see them, even some standalone meetings. And we've postponed some of those things until we feel like -- as I said, that the patient flow justifies making those investments with the doctors, right? It's similar to, frankly, what we saw a year or two ago when COVID first started as we cut back on all the travel spending from all of our reps in the U.S. and really engage with the doctors more remotely because even if we were out there trying to get in the clinics, they did not have the patient flows there. So, it's really trying to give it a chance to catch up there.
We've looked at some investigator-sponsored studies, a little bit of Phase 4 work in Europe as well to drive demand over there similar to what we saw with NEW DAY, but it just doesn't make sense to make investments in those things now.
Got it. And I think on the fourth quarter call, this last month, I guess, you mentioned being able to get back to sort of 15% year-over-year growth range. Is that still seem good? Looks like you guys are pretty much on track to where you thought you'd be back on the fourth quarter call here through the first quarter?
Yeah. We still feel good about that. One of the issues we've seen with the pandemic is a little bit of issue in some of the supply chain, nothing that's impacting the product available for sale, but a little bit of delays in shipping and some things like that. And there are a few distributor orders that didn't get shipped at the end of the first quarter. We would have liked gotten in the first quarter. I think as you look at the year as a whole, based on the demand numbers, we quoted up 25% to 30% in the U.S., up 12% in the distributor markets, and we returned to growth in the U.K. at the end of April that we feel pretty good about achieving that level for the full year.
Maybe last question. I know that historically -- I guess a couple of years ago, there was a -- first quarter was tough on reps. How was retention during the quarter? And how is the sort of profitability by rep looking? Is it in line with where you guys expect it to be?
We feel very good about the size of the sales team in the U.S. and the forms there. They're doing a fantastic job, very close to hitting targets month after month for the last several quarters. In Europe, we are very happy with the sales team, but the patient flow is not there right now. So, we continue to look at geographically, we set up those territories to make the best use of that patient flow. But we're happy with our team, have not had a lot of turnover in the sales team. I think generally, people are pretty happy working here at Alimera.
Outstanding. You sound very happy as well. Thank you Rick for taking the questions.
Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Rick Eiswirth for any closing remarks.
Great. Thank you, and thank you all for participating on today's call. We're looking forward to reporting our second quarter results and other results to the rest of the year as we hope to expect this recovery to continue. Thank you very much.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.