Alimera Sciences, Inc.
Q4 2020 Earnings Call Transcript

Published: 27 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Alimera Sciences fourth quarter and full year 2020 financial results and corporate update conference call. I would like to turn the call over to Scott Gordon of Core IR, the company's Investor Relations firm. Please go ahead.

[Scott Gordon:]

Thank you, Francesco. Good morning, and thank you all 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 last evening, particularly the cautionary statements in it. 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, its most directly comparable GAAP financial measure, please see the reconciliation table located in Alimera's earnings press release. The contents of this call contains time-sensitive information that is accurate only as of today, February 25, 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.

[Rick Eiswirth:]

Thank you, Scott, and good morning to everyone on the call. It goes without saying that 2020 was extremely challenging due to COVID-19. And given the tough environment, we are really pleased with the way that the company managed throughout the year. We delivered annual revenue of over $50 million in 2020, down just 6% compared to 2019 despite shelter in place mandates and health care provider lockdowns multiple times across several regions of the U.S. and our international territories. During the pandemic, we decided to retain our entire workforce, while significantly reducing our travel and expense spend and delaying or removing projects that would not be as effective, while our access to physicians was limited. This discipline enabled us to not only keep our workforce in place but we actually improved our cash position over the year and achieved positive adjusted EBITDA of $3.5 million in 2020. Despite reducing our expenses to achieve this goal, we continue to execute on key components of our strategy. We took steps to expand the availability of ILUVIEN for DME and the posterior uveitis indication in additional international markets. We also initiated the landmark New Day Study, which if successful, could help change the current paradigm and significantly increase use of ILUVIEN as baseline therapy for patients suffering from DME. By retaining our workforce and advancing these initiatives throughout last year, we believe that we are in a strong position to return to significant growth as COVID-19 becomes better managed. Turning to the fourth quarter. U.S. reported net revenue was $7.4 million, a decline of 22% versus the fourth quarter of 2019, and U.S. end-user demand also declined approximately the same compared to last year due to lower patient volumes in physician offices caused by COVID-19. However, it's important to note that these quarterly year-over-year comparisons reference our performance during the latest surge of COVID-19 compared to pre pandemic conditions in the fourth quarter of 2019, when our business was experiencing strong growth. We hope to get back to these levels soon once the pandemic begins to resolve. If we look sequentially at our U.S. segment, we see that the fourth quarter end-user demand was up 19% versus the third quarter of 2020, while generating 867 units. Our international segment also was impacted by renewed lockdowns late last year, with revenues down 18% in the fourth quarter of 2020 versus the year ago. Again, these figures should be taken in context given the comparison between pre-pandemic performance and the ongoing impact of the pandemic. Notably, our international segment performance in October and November was in line with our expectations, but tight lockdowns throughout Europe in December significantly affected the overall quarterly performance.

[Phil Jones:]

Thanks, Rick, and hello, everyone. During the fourth quarter of 2020, our consolidated net revenue was down approximately 20% to $13.8 million compared to $17.3 million in the fourth quarter of 2019. As Rick explained earlier, this comparison reflects pre-pandemic performance in 2019 versus the current COVID-19 environment. And making the comparison even tougher, our business was in full stride in the fourth quarter of 2019. Sequentially or compared to the third quarter of 2020, our consolidated net revenue was up 10% on higher sales in both our U.S. and international business segments. U.S. net revenue was approximately $7.4 million for the fourth quarter of 2020, a decline of approximately 22% from the $9.5 million reported in the fourth quarter of 2019. However, sequentially, U.S. net revenue was up 6% compared to the third quarter of 2020. U.S. end-user demand, which represents units purchased by physicians and pharmacies from our distributors was down 26% in the fourth quarter of 2020 to 867 units compared to 1,164 units in the fourth quarter of 2019. But again, on a sequential basis, end-user demand grew 19% versus the third quarter of 2020, an indication of recovery in U.S. treatments. 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 fourth quarter of 2020, Alimera U.S. distributors purchased approximately 6% more units than were sold to end users. Net revenue from our international segment decreased approximately 18% to $6.4 million for the fourth quarter of 2020. This compares to $7.8 million reported for the same period last year. The decrease was due to the impact of COVID-19 lockdowns. Total operating expenses were approximately $11.6 million in the fourth quarter of 2020, a reduction of 15% compared to $13.6 million reported in the fourth quarter of 2019. We reported adjusted EBITDA of $1.1 million in the fourth quarter of 2020 compared to $2.6 million in Q4 2019. Importantly, we achieved our quarterly goal of generating sufficient adjusted EBITDA to cover our quarterly interest payments despite the ongoing challenges of the pandemic. For the 3 months ended December 31, 2020, we reported a net loss of approximately $1 million compared to net income of approximately $500,000 for the 3 months ended December 31, 2019. Basic and diluted net loss per share for the 3 months ended December 31, 2020, was $0.18 on approximately 5.4 million weighted average shares outstanding. This compares to basic and diluted net income per share for the fourth quarter of 2019 of $0.08 on approximately 6.2 million total weighted average shares outstanding.

[Rick Eiswirth:]

Thank you, Phil. While 2020 was fraught with significant challenges. We were able to weather the COVID-19 storm and demonstrate the resilience of the company and the ILUVIEN franchise. As the pandemic becomes better controlled, we remain ready to put the business back on track for strong growth as physician offices increase capacity and patient flows return. Our cash position remains strong at $11.3 million compared to $9.4 million at the end of 2019. And we did this without having to raise additional equity financing during the year and face the incremental shareholder dilution that so many other companies have had to incur in this environment. For 2021, we are back to focusing on our 4 core goals, which are

[Operator:]

The first question is from Alex Nowak from Craig-Hallum Capital.

[Alex Nowak:]

Rick, I want to pick up right where you left off on the 2021 piece. I know you're not giving guidance, but obviously, easier comps now with the pandemic behind us in 2020 or the impact at least. But obviously, Q1 is still a little poor as the pandemic still goes on. But how are you thinking about growth here in 2021, given all the factors you mentioned?

[Rick Eiswirth:]

Yes. So, I mean, I think we're still being impacted by COVID as we speak right now. I would say patient volumes are down, and it's an interesting reason why we're seeing them down right now, Alex. It's -- what we're hearing is that patients are canceling or postponing visits because of where they sit in the queue for their vaccinations, right? They don't want to take a chance of coming down with COVID before they get vaccinated or in the middle of their 2 injections, 2 treatments so that they somehow miss the vaccination. So, we've heard a little bit about delays like that, and we're experiencing the typical seasonality. If you look at the first quarter, we are usually down in the high teens to 20% from Q4. I think that's probably a good estimate for Q1. Could be slightly higher, could be slightly lower depending on how patients return from the vaccine situation over the next few weeks. And I do believe that once we can get through this -- get through most of people in Phase I a, which are most of our patients vaccinated that hopefully we can – currently to grow throughout the rest of the year.

[Alex Nowak:]

Had did October and November look like in 2020? Is that going to be a useful proxy for you to think about how the beginning of the recovery looks?

[Rick Eiswirth:]

Yes. As I said, I mean, in the U.S., we did -- I think it was about 867 units. So that's obviously not where we want to be. We were doing much closer to, I think, we did between 1,100 and 1,200. So, it's not where we want to be. But at the same time, it was really good growth coming out of Q2, where we saw things suppressed. So, I certainly feel like we can get back to the volumes that we were doing in the fourth quarter of 2019 as things start to normalize. Honestly, though, I'm not sure if that's in April, May or June, when we start to get back there, it depends on how quickly we can get the rest of these patients vaccinated and take the pressure off of people skipping visits.

[Alex Nowak:]

You did make some changes to your chief medical officers or just maybe some -- can you walk us through the details there?

[Rick Eiswirth:]

Yes. Sure. Obviously, people join companies and people leave companies. I can't get into the details of our decision to part ways with Dr. Kaba. But I can tell you that we are very, very confident in our medical messaging and positioning now. We think the changes that we've made over the past couple of years, focusing on the need to treat that broader information, looking at the potential of the disease and that underlying information creating damage in the nerve fiber layers is pretty critical to differentiating the value of ILUVIEN. The great thing is the entire company is sort of unified around that story and that strategy. And so, we will continue on pushing that, and we will certainly search for a replacement for Dr. Kaba.

[Alex Nowak:]

And then on the obviously, U.K. and Germany are the major points right now. And then you're launching in the other geographies. So, you mentioned in the prepared remarks, but I just want to make sure we're all on the same page. For 2021, what are the new geographies that you expect to launch in and have reimbursement beyond U.K. and Germany?

[Rick Eiswirth:]

So the most critical ones are going to be the 3 bigger countries in Southern Europe. Obviously, Spain, France and Italy. Our 3 partners in those countries are all working through reimbursement right now, and the discussions are active, but they've been delayed because of COVID. So, it's hard for me to put a specific date on when we expect them to get reimbursement right now because things are not as open as we would like them to be in those 3 countries as well. But we do think that, that will happen in 2021, and we'll be able to launch in those 3 markets. Good chance we'll add countries like Portugal, potentially. And our new launch in The Netherlands where we recently sold some product is the pricing and reimbursement there is actually for both uveitis and DME. So, we're slowly rolling that out, but the key markets will be those 3 Southern European countries.

[Alex Nowak:]

And then the latest New Day time line, just given where enrollment is tracking right now with the original plan, when would you expect to finish enrollment and then ultimately read out that study?

[Rick Eiswirth:]

Yes. So certainly, we are going to try to ramp up everything we possibly can to try to drive enrollment as things continue to open up. But where our goal was originally to get everybody enrolled in 2021. I would say it's probably likely that it slips into the first quarter of 2022 before we can complete that, which would push the readout -- first readout of the study until late 2023.

[Operator:]

The next question is from Mr. Chen with H.C. Wainwright.

[Mr. Chen:]

First question is, could you please comment on the patient flows in the past 2 months in the U.S. versus Europe?

[Rick Eiswirth:]

Well, we are continuing to see patient flows a little bit suppressed for these diabetic patients, Yi, as I mentioned. And what we are hearing anecdotally from the doctors is we have patients that are canceling and postponing visits because of where they potentially are in the vaccination sort of scheduling process, I guess. Where they're pending the first vaccination, and they just don't want to risk getting COVID and then somehow be taken out of that queue or same thing where they may be scheduled for their second vaccination. And obviously, don't want to miss that as well. So, we know that, that is suppressing it. How much of the suppression we're seeing in January and February is, is that phenomenon versus the typical seasonality? It's hard to quantify that. In Europe, we see -- saw more aggressive lockdowns in Germany, specifically in December and January than we'd ever seen before because of some spikes. So that certainly has limited patient flow in Germany. We've had complete lockdowns in Portugal, right, because the -- and the U.K. because some of the hospitals were just flooded with patients. That seems to be letting up right now as we speak. So, we hope that, that continues to improve over March and obviously, April.

[Mr. Chen:]

Could you whether the level of operating expenses in the fourth quarter could be -- can serve as a reference level for 2021, particularly the G&A expenses.

[Phil Jones:]

I think the G&A expenses are probably a fairly good marker. Overall, Yi, we actually feel like the appropriate level of spending is where we were in Q4 of 2019, right, that that's where we want to be to continue to invest in trying to drive the top line. Obviously, we've made the decision to control some of those, and there's some self-controlling aspect just because we haven't been able to travel and have reps out on the road and do some of the trade shows and things like that. So, we slowly, as things open up, we'll probably work our way back up to that expense level, but the plan is to continue to manage that expense flow, I guess, in parallel with improvements in revenue so that we continue to generate positive EBITDA. We'd like to be in a position going forward that we're always generating positive EBITDA, sufficient to cover our quarterly interest expense. Is the goal.

[Mr. Chen:]

Last question, could the company consider any new pipeline candidates during 2021?

[Rick Eiswirth:]

Absolutely. We're always on the lookout for those. We'd like to find something that would be a novel mechanism action and certainly be something that could be a quality-of-life type improvement for the patients just like we believe ILUVIEN is in the unique way that it treats the disease. So, we're out there looking for stuff. And we hope to be able to find something out of the pipeline. But certainly, we think we've got a pretty strong and stable business here. And so, it needs to be the right product at the right time rather than a rush to maybe make an acquisition or something that could impair what we've built here.

[Operator:]

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

[James Molloy:]

Congrats on a pretty good year and very tough circumstances. You guys really held the line. As you're coming out of, I know the prior questions were asking about sort of the COVID impact. Is there -- and I know you're very clear about some of the delays due to people being concerned about missing their vaccines. But looking past that any anecdotal stories in the field on what folks are thinking or what doctors might be thinking of from a salesforce perspective on where they think things will start to get more normalized in '21, if at all?

[Rick Eiswirth:]

Yes. I mean I think it really ties to the vaccination curve, right? Jim, thanks for your question. It's really how quickly, I guess, what we're referring to as sort of 1A/1B, the patients that would be high risk, like diabetic patients, how quickly they get vaccinated and then are comfortable returning the offices. It's the one thing we have heard is that the majority of the doctors and the majority of the personnel in the clinics have been vaccinated, right, because they're on the front line and had a high priority. And so, the doctor's offices are open up a little bit more for us to get access. It's patient flow at the moment. So, we hope patient flow returns and we can get there. I would say just anecdotally, we continue to hear good stories about doctors seeing the value of ILUVIEN in this environment, right? The fact that I mentioned a couple of those papers, where patients that had missed visits or had their visits deferred or delayed, were coming back with worse vision than they ever had before or worse anatomy. And so, they see the value of keeping that long-term consistent therapy online. And we've actually been able to continue to add some new doctors and some new accounts during this period of time. So, we think that by maintaining all our personnel, keeping the relationships in place, we can really come out of this pretty strong. We're sort of just waiting to get out of the starters gate, so to speak.

[James Molloy:]

I know that sales is very much face-to-face sport and obviously, curtail an ability to do that with the pandemic. Any changes that you found that you don't really need some expenses going back? I mean, pretty good job. I mean, honestly, on keeping the sales where they are in the middle of the pandemic, are the things that you look back and say, well, maybe we don't need to spend on XYZ. We can really hold sales without some of these things.

[Rick Eiswirth:]

Jim, that's an interesting question. I mean I think the reality is Alimera, and you've followed this story for quite some time. I would argue that from a commercial standpoint, the launch of the product was somewhat underfunded over time, right? And we've always tried to get through by minimizing the budget. So certainly, as we make more money and generate more margin, I do want to reinvest it back in the business. That said, I will say that we are learning things, and we continue to learn things about maybe how we want to spend the money in this market to get the better share of voice. We've been spending more time with them -- some of the -- trying to work on our advocacy. And I think we may continue to try to drive advocacy and engage with the doctors in different formats and things like that. But engaging with those doctors, getting the face-to-face time, whether it's from a sales rep or an MSL or TLL role or even the executive team is going to be critical to continuing to drive those sales in the future. So, I don't see us continuing to contain the spending where it is once the environment opens up.

[James Molloy:]

And last question, I guess, on the sales force. Kudos in keeping the sales force together during this. Can you talk about any changes in the sales force, I know you had some changes last year? Anything along those lines happen this year? Or any plans to grow the sales force going forward?

[Rick Eiswirth:]

So nothing, I would say, no unusual turnover in the sales force. I mean, we've had the typical churn that you have, whether it's typically an underperforming territory, and we've had some turnover related to some things like that. But no mass exodus or anything of that nature like we experienced in 2019, which I believe you're referring to. So, we feel pretty good about it. Obviously, we -- our team and our employees are very important to us, and we try to do everything we can to keep them happy and keep them excited about being here at Alimera. Haven't seen anything unusual to date. And I think the way we've taken care of our team, hopefully, has created a lot of loyalty and excitement for the future of Alimera as we move forward.

[Operator:]

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

[Rick Eiswirth:]

Well, thank you, and I want to thank all of you for participating on today's call and for your interest in Alimera. We do look forward to sharing our progress on our next quarterly conference call when we report our first quarter results in late April or early May. Thank you, and have a great day.

[Operator:]

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