Alimera Sciences, Inc. (NASDAQ:ALIM) Q2 2022 Earnings Conference Call July 27, 2022 9:00 AM ET
Company Participants
Scott Gordon – CORE, Investor Relations
Rick Eiswirth – President & Chief Executive Officer
Phil Jones – Chief Financial Officer
Conference Call Participants
Alex Nowak – Craig-Hallum Capital
Yi Chen – H.C. Wainwright
Operator
Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Science Second 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 October 27, 2022.
I would now like to turn the call over to Scott Gordon of CORE IR, the company’s Investor Relations firm. Please go ahead sir.
Scott Gordon
Thank you Maria. 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, the Form 8-K filed with the SEC today and Alimera’s press release that accompanies this call particularly the cautionary statements in it.
Today’s conference call includes adjusted EBITDA, a non-GAAP financial measure. For the definition 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 July 27, 2022. 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.
Rick Eiswirth
Thanks Scott and good morning to everyone on the call. We are excited to share our second quarter results, having set new records for end user demand in both our US and international segments. End user demand represents units purchased by physicians and pharmacies from our distributors.
On a GAAP basis we are reporting $14.6 million in global consolidated net product sales for the second quarter of 2022, a 36% increase over the same period last year. With these results, the first six months of 2022 exhibited the strongest first half sales performance in Alimera’s history, which gets us back to prior business levels and we believe back to the growth that we were generating before the pandemic.
In the US segment, second quarter product revenue was $8.9 million, up 53% over the second quarter of 2021. This was driven by second quarter end user demand growth of 45% compared to the same period in 2021.
Further, end user demand was also up 16% sequentially over the first quarter of this year. These positive results were fueled by an improvement in face-to-face interactions with our customers both inside and outside of the clinic as access improved significantly from 2021 and from the first quarter of this year.
In addition with our recently published PALADIN study results, we have had an increase in podium time at several recent conferences, which we believe will continue to drive a paradigm shift to earlier utilization of ILUVIEN in the treatment of DME. For the last couple of years, we have been working to change the view of DME and the way it is treated, highlighting the importance of treating inflammation more broadly and the value of treating disease more consistently to reduce the waxing and waning of edema, protect the retina and provide better visual acuity results.
At the recent annual meeting of the American Society of Retina Specialists, two well-known key opinion leaders Dr. Christopher Riemann and Dr. Victor Gonzalez, presented abstracts from our recently published PALADIN study. Dr. Riemann’s presentation reported data on ILUVIEN’s ability to reduce retinal thickness variability a measure of the extent of fluctuation of retinal thickness over time. Importantly Dr. Riemann’s presentation emphasized the correlation between improved disease control with ILUVIEN and improved digital outcomes, a key component of our positioning.
Dr. Gonzalez’s presentation highlighted that eyes with baseline visual acuity of 20/40 or better achieve superior visual, anatomical and treatment burden outcomes with ILUVIEN, supporting our view that ILUVIEN should be used earlier in the treatment paradigm before significant visual loss.
We believe these abstracts and data strongly support the hypothesis of our NEW DAY study to demonstrate the benefits of the use of ILUVIEN as baseline therapy in newly diagnosed patients with DME. As a reminder, the NEW DAY study is the first head-to-head comparison of corticosteroid therapy and anti-VEGF therapy, the multibillion dollar standard of care in this type of patient.
Over 45,000 eyes have been treated with ILUVIEN, giving us significant real-world experience and understanding of how our drug works, which contributed to the NEW DAY study design.
This experience and the result of the PALADIN study and other post-marketing studies, give us great confidence that we can achieve a successful outcome from this trial and drive a significant shift in utilization of ILUVIEN. I’m pleased to report that the study is now close to two-thirds enrolled.
In the US, our direct-to-patient or DTP marketing campaign that we launched earlier in the year continues to deliver strong metrics. The campaign consists of streaming video and display ads on social and other digital media in 10 regional markets. For the first six months, we have exceeded our goals with close to 40 million impressions and over two million views of our video ads.
We believe that our DTP campaign is effectively messaging that ILUVIEN allows patients to see less injections, less doctor visits and fewer waiting rooms, and actually see more of the things they want to see.
We believe that this campaign and the data from the PALADIN study will help us continue the recent sales momentum in our US business by reminding patients and their physicians of ILUVIEN’s benefits, namely the ability to see better longer with fewer injections.
On international business, we are reporting $5.7 million in product revenues during the second quarter, which was up over 16% from the same period last year. As Phil will explain, the growth in our International segment was strong, but muted by the deterioration of the exchange rate, which reduced our reported international revenue by approximately 10%.
Importantly, end user demand in our International segment grew by over 21% compared to Q2 of 2021 and was up 9% sequentially over the first quarter of this year. This demonstrates recovery from the pandemic and the positive impact of renewed commercial support.
Additionally, we are excited about the opportunity to drive further growth in the international markets as availability of ILUVIEN for the treatment of non-infectious uveitis affecting the posterior segment of the eye increases. So far this year, we have announced the receipt of pricing and reimbursement approval for this indication in Spain, Italy and France.
Our Spanish partner, Brill Pharma, launched this indication in the second quarter. Partners in France and Italy are expected to launch the uveitis indication in these territories in September after the summer holidays.
We believe the uveitis indication in all of these markets will support growth over the remainder of 2022 and in 2023. Of particular note, we are excited about the launch in France as our French distributor Horus Pharma launched the DME indication in 2019 and quickly made France our second largest market measured by end user demand.
I’ll now turn the call over to Phil to review our financial results for the first quarter.
Phil Jones
Thanks, Rick, and hello, everyone. As I take you through the second quarter financials, it is important to remember that consolidated net revenue in Q2, 2021 included $11 million of license revenue generated from the out-licensing of rights up to ILUVIEN for the Western Pacific, reason I will give you, comparative figures both with and without this licensing revenue.
During the second quarter of 2022, our consolidated net revenue decreased 33% from approximately $21.7 million for Q2 2021 to $14.6 million for Q2 2022. More importantly, consolidated net product revenue increased 36% to approximately $14.6 million compared to $10.7 million for Q2 2021, showing continued momentum in our sales growth.
US net revenue was $8.9 million for the second quarter of 2022, an increase of 53% from the $5.8 million reported in the 2021 period. As Rick shared and I want to reemphasize, US end user demand increased 45% in the second quarter of 2022 to 1,063 units compared to 731 units in the second quarter of 2021.
As we have previously shared, our GAAP revenues in the US do not always correlate with end user demand due to the timing of purchases by our specialty distributors and this results in dissimilar growth rates.
In the second quarter of 2022, Alimera’s US distributors sold approximately 3% fewer units to end users than they purchased from Alimera. On Q2 2021, our distributors purchased approximately the same number of units they sold to end users.
Net revenue from our International segment in the second quarter of 2022, decreased 64% compared to Q2 2021. However, again focusing on product revenue, we saw a 16% increase in International segment to approximately $5.7 million for Q2 2022, compared to approximately $4.9 million for Q2 2021.
We achieved this increase despite the negative impact of the weaker euro and British pound sterling, which we estimate reduced our revenue by approximately 10% or $590,000. Importantly, end user demand improved in our International segment by approximately 21% from 1,006 units in Q2 2021 to 1,220 units in Q2 2022. This makes Q2 2022 the strongest second quarter for International segment end user demand in our history.
Turning to expenses. Total consolidated operating expenses were $14.4 million in the second quarter of 2022, an increase of 12% compared to the $12.9 million reported in the second quarter of 2021, when travel and engagement with physicians in several of our key markets were still limited.
Higher operating expenses resulted from an increase in promotional and medical program investment to accelerate growth, as we and our customers expect COVID-19 to become better managed globally in the second half of 2022.
As we discussed on the first quarter call, we have restructured some of our international operations and curtailed other investments to right-size our efforts and manage our cash usage. These adjustments are being implemented over the next few months. Once in place we expect the total annualized savings will be approximately $3 million.
We reported an adjusted EBITDA loss of just under $1 million in the second quarter of 2022 compared to positive adjusted EBITDA of $7.9 million in Q2, 2021. For the three months ended June 30, 2022, we reported a net loss of $3.1 million compared to net income of $7.6 million for the three months ended June 30, 2021.
Basic and diluted net loss per share for the second quarter of 2022 was $0.45 per share on approximately 7 million weighted average shares outstanding. This compares to basic and diluted net income per share for the second quarter of 2021 of $1.03 per share on approximately 7.4 million participating weighted average shares outstanding.
Adjusted EBITDA, net income and net income per share for Q2, 2021, included the positive impact of the $11 million in license revenue we recognized 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.
Excluding the impact of these licensing revenues, Q2, 2022, would have demonstrated improvement across these three metrics. On June 30, 2022, we had cash and cash equivalents of $7.9 million. Moving forward, our target each quarter and the remainder of 2022 will be to achieve positive adjusted EBITDA and to begin generating positive cash flow in 2023.
And with that, I’ll turn the call back over to Rick.
Rick Eiswirth
Thank you, Phil. In closing, we are very pleased with these second quarter results and our return to growth on a global basis in the first half of the year. As I shared, the first half of 2022 has been a record year for Alimera, for both GAAP product revenue and end user demand. This has been driven primarily by growth in the US market over the last 12 months, as our trailing 12-month end user demand is now up 24% through the end of June.
Although, our international markets have struggled with a slower emergence of the pandemic, they too have returned to growth over the last six months and now have the opportunity to expand the utilization of ILUVIEN with uveitis indication in the coming months.
With this sales momentum, the availability of the uveitis indication in additional markets, the compelling data from the PALADIN study and increasing interest in our NEW DAY study, we believe we are well positioned to complete 2022 in record fashion and continue growing in 2023 at levels we anticipated prior to the pandemic.
This concludes our prepared remarks. I’ll now turn the call over to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Alex Nowak with Craig-Hallum Capital. Please, go ahead.
Alex Nowak
Great. Good morning, everyone. I was hoping that we could start off with maybe describing the recovery that you’re seeing in procedure volumes throughout the quarter, just the cadence of sales throughout the period, how that trended into July. And just, how you’re thinking about growing sequentially off these very strong results in the Q3, Q4?
Rick Eiswirth
Yes. Good morning, Alex. So the sales have been fairly consistent over the last three or four months, but that’s nothing to be unexpected, because you do see a little bit of a slowdown as you hit late June and July and August, because of the summer holidays and then things always pick up in September.
And as you know, September is usually one of our strongest months of the year and then transitions into the fourth quarter and fourth quarter is usually always our strongest quarter of the year. So we feel pretty good that we will continue to still grow sequentially from second quarter to third and then, obviously, into the fourth quarter as well.
Alex Nowak
No, that’s good. And maybe we talked about this a little bit last quarter, but you’re making these new investments in the US business. We talked on the PALADIN study, the direct marketing, but also we’re seeing COVID beginning to wane. So just, as you go through your metrics internally, how are you kind of deciphering if the growth of sales is coming from COVID fading or directly from these new investments?
Rick Eiswirth
Alex, it’s really hard to come up with a specific reason for any one doctor. We do look at the programs and where we’re spending the money and the doctors that are involved in those programs to see if there’s growth in those markets and that’s how we evaluate the success of them. But I’m sure that it is a combination of all of those factors, right?
We actually — we know that the awareness of ILUVIEN was down during the pandemic. And that was because of a lack of face-to-face time.
And so we spent the money to make sure we were getting in front of the doctor. So, I’m sure it’s an emergence of COVID, more patients coming back in. We know that’s happening. But also we’ve been in front of the doctors a lot more to make sure they are remembering ILUVIEN and with the availability of its true DME.
Alex Nowak
Yeah, that’s perfect. And just to confirm, you haven’t made any operating expense cuts, for the European business yet. That’s going to be coming sounds like in Q3. And just how to think about, what that’s going to do to end user demand in Europe, if we should expect a little bit of a more muted volume in Q3 because of those cuts?
Rick Eiswirth
Yeah. I don’t — so we made some of those cuts right at the end of June. But because of some notice periods and severance payments or redundancy payments in the European markets, you won’t really start to see the impact of those until the fourth quarter. And then you’ll see more significant impact in 2023.
Most of those jobs are not customer-facing jobs. They’re more support jobs out of the hub. And we just decided to provide a little bit more leadership and direction out of the U.S. market for those activities, really to reduce our cost but also to continue to get more consistency in the messaging, because the messaging and the positioning in the U.S. market seems to be working in some of the programs we’re doing here working as well.
So, I don’t think it will have a negative impact on sales. Frankly, I think overtime it will actually have a positive impact, because we’ll get more consistent with the stronger message that we’ve been pushing in the U.S.
Alex Nowak
Okay, no, that’s great. Plus you get the uveitis launches in there as well.
Rick Eiswirth
That’s correct.
Alex Nowak
One thing that we haven’t talked about is the re-treatment — yeah one thing we haven’t talked on is the re-treatment population. Just how are you thinking about that now especially with COVID waning here?
Rick Eiswirth
Yeah. I think we’re definitely seeing more re-treatments. I still think it is somewhere in the probably 10% to 20% range at this point of patients being retreated, had some of our senior sales leadership in here from the U.S. yesterday.
And as they — as they go out and try to find these patients to be retreated or pushed for re-treatment a lot of times they’re finding that the patients are no longer around. They’ve passed away because of other co-morbidities, because of diabetes or something like that at the age.
I think that is a factor of the patients who were being treated three years ago, were still — far advanced in their disease state, more of the worst patients whereas we’re trying to get earlier in the treatment paradigm.
So we think that that amount of re-treatment will continue to improve as we treat patients earlier in the treatment paradigm. And we see the value of that stable control of the disease in healthier patients.
Alex Nowak
Understood. And then just last question. I noticed that on the balance sheet it looks like there’s now a $14 million note payable listed as a current liability. Just — is there a plan to pay that back in the next 12 months, or was there some sort of covenant that will shift there?
And then, actually maybe speak to the ability to increase the accounts receivable conversion. It looks like there’s a pretty nice balance there that could be used for cash.
Rick Eiswirth
Yeah. So, on the debt that is the amortization of the current Solar — debt facility with Solar Capital or SLR Capital that started amortizing in January of next year. As we stated on our first quarter call, we expected the results in Q2 to be pretty strong which we believe they are.
And the plan was to work on refinancing that debt facility in the second half of the year. We have a good relationship with Solar, so I think that’s very possible. And certainly I think we’re a stronger company than we were three years ago when that facility was put in place. So we believe we’ll have options based on, conversations we’ve had in the marketplace.
Phil Jones
And on the accounts receivable question Alex, just recall that in the US, which is where we’ve seen a large part of the growth our terms are net 120 days. Therefore, as that business grows naturally those accounts receivable numbers are going to get bigger over time. So — and since the US business over the first quarter accounted for about 65% of that — of the overall business of the company as a whole, that number is essentially getting bigger because of that — those terms that we have in place.
Alex Nowak
I see. Understood. Makes sense. Appreciate all the commentary. Thank you.
Rick Eiswirth
Thanks, Alex.
Operator
Our next question comes from Yi Chen with H.C. Wainwright. Please go ahead.
Yi Chen
Thank you for taking my question. My first question is — would you be able to comment on the patient flow in Spain, Italy and France for posterior uveitis? And how do you expect that these patient flow to contribute to the end user demand growth, compared to the current end user demand growth for DME in the European markets? Thanks.
Rick Eiswirth
Yes. So we estimate that in the European markets the 10 to — the size of the patient population for uveitis is probably 10% to 15% of the DME population. So theoretically, it would be a small ad accept. We do think you’ll get a faster acceleration out of the gate, because you don’t have the headwind of anti-VEGF therapy for that disease state. Similar to — we saw a pretty good uptake in the fourth quarter of 2019, and the first couple of months of 2020 in the UK and Germany when the uveitis indication was first launched. So — we do think there’ll be — there’s probably a bolus of patients out there. And then over time, it probably contributes 10% to 15% of the revenue.
Yi Chen
Got it. And do you expect to secure pricing and reimbursement for uveitis, in other European countries in the coming months?
Rick Eiswirth
Our partner in the Benelux territories, is working on reimbursement there and we are working on in the Nordic countries as well.
Yi Chen
And now that your quarterly — run rate is getting back to the pre-pandemic rates, would you be able to provide top line guidance at some point in the near term?
Rick Eiswirth
Near-term, we won’t do that. I’m going to stay consistent with what I’ve said in the past. And I expect for us to be able to grow in the mid- to high-teens. And there are certain years depending on, what launches we’re able to do with uveitis or timing of pricing reimbursement that you may see it exceed 20%.
Yi Chen
And lastly, could you comment on the trend of your R&D expenses going forward.
Phil Jones
Yes. The trend of the R&D expenses going forward Yi, a large part of the R&D expense currently is associated with the NEW DAY study. And through 2024, those numbers are going to stay fairly consistent with where they are now. However, after that we will reevaluate those dollars, and the spend and see where we may reinvest that or what we may repurpose that — those funds for.
Yi Chen
All right. Thank you.
Operator
We have no further questions. Now, I would like to turn the call over to Rick Eiswirth, for closing remarks. Please go ahead.
Rick Eiswirth
Thank you all for participating on today’s call and for your interest in Alimera, we look forward to sharing our ongoing progress when we report our third quarter results later this year. Thank you and have a wonderful day.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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