Alimera Sciences, Inc.
Q4 2018 Earnings Call Transcript

Published: 19 Feb 2019

[Operator:]

Greetings, and welcome to the Alimera Sciences Fourth Quarter and Full Year 2018 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jacob Goldberger of CG Capital. Thank you, sir. You may begin.

[Jacob Goldberger:]

Thank you all for joining us today for the Alimera Sciences fourth quarter and year-end 2018 financial results conference call. With me on the call today are Rick Eiswirth, President and Chief Executive Officer; and Phil Jones, Chief Financial Officer. Yesterday, the company issued a press release announcing fourth quarter and full-year 2018 results. You can find that press release at www.alimerasciences.com under the Investor Relations section. Today's call is being webcast and a recording will be posted to the company's website. Following remarks by management, we will open the call up to your questions. During this call, management will make some forward-looking statements regarding future events and the company's future expected performance. These statements are not guarantees of future performance, are based on current expectations and involve inherent risks and uncertainties that could cause actual results to differ materially. For more information, please see the risk factors discussed in Alimera's recent filings with the SEC. Alimera's presentation 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 an isolation or a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure, see the reconciliation table located in Alimera's earnings release from yesterday. For the benefit of those of you who may be listening to the replay of this call, it was held and recorded on Tuesday, February 19, at approximately 9

[Rick Eiswirth:]

Thank you, Jacob. Good morning, everyone and thank you for joining us today. As this is my first call as CEO and Phil's first call as CFO, we are looking forward to sharing with you the excellent results we recorded in Q4 2018 and for the full-year 2018. After I discuss Alimera's new leadership team and we go through the numbers, I will share some thoughts on my near-term vision for Alimera and the strategy to get there. As we announced in November 2018, I was promoted to the position of President and Chief Executive Officer effective January 2. I can assure you that I am well versed with our business, having joined Alimera as CFO in 2005, and been the President for the past three years. I've also had the pleasure in 2019 of speaking directly with the stockholders who own over 70% of our stock to share my vision with them and I look forward to speaking with many more investors both current and future. Phil Jones, who will provide the financial portion of today's presentation was promoted to the position of Chief Financial Officer. Phil joined Alimera nearly four years ago and was previously our VP of Finance. Before he joined us at Alimera, he held various senior financial positions at Theragenics, Superior Essex and Arjo Wiggins Medical, as well as beginning his career with a large CPA firm. Dave Holland assumed the title of Chief Marketing Officer and Senior VP of Corporate Communications. Dave was a co-founder of Alimera and has held various sales and marketing roles here ever since. Before founding Alimera, Dave was the Vice President of Marketing at Novartis and held various sales and marketing positions at CIBA VISION and Procter & Gamble. Philip Ashman, previously our Senior VP and Managing Director of Europe has been appointed Chief Operating Officer and Senior Vice President of Commercial Operations in Europe. Before he joined Alimera in 2013, Philip held management roles at Bayer, AstraZeneca, Sanofi and Schering-Plough. I believe this management team is well positioned to lead Alimera Sciences through its next trajectory of growth. Turning to the financials now, 2018 was a record year for us in many ways. We saw a substantial growth in both our U.S. and International segments behind our flagship ILUVIEN brand, which continues to gain traction in the markets where we compete. We are reporting record revenues of $15.1 million for the fourth quarter of 2018, a 66% increase over the fourth quarter of last year, and for the full-year, we are reporting an increase of 31% to a new annual high of $47 million. Our revenue growth rates in both our U.S. and International segments accelerated significantly over 2017. As you know, we closely monitor end-user demand or sales from our U.S. specialty distributors to physicians and pharmacies as a measure of our progress in the U.S. End-user demand was up approximately 16% for 2018 to 3,802 units versus 3,288 units in 2017. This represents acceleration in the option ILUVIEN as 2017 end-user demand was up only 12% over 2016. As you can see in this chart, we have also grown U.S. demand in every quarter over the prior year period since launch and exceeded a 1,000 units in a quarter for the first time during the fourth quarter of 2018, recording 1,119 units to end users. Our International segment business increased 138% in the fourth quarter and 49% in 2018. While we experienced solid organic growth, we do believe that Ozurdex being removed from the market late in the year allowed us to obtain new patients and customers. Though the supply of Ozurdex is returning, we believe that doctors injected a bolus of patients that require treating. This has enabled us to get more clinicians comfortable with ILUVIEN and we expect to retain some of this increased usage once Ozurdex is back in supply. We do not expect the international segment to continue to grow at this pace in the fourth quarter, but we still anticipate revenue acceleration into the first quarter of 2019 as our distributor partners begin to grow as well. Turning to those distributor partners now. We have made progress in new markets in 2018 and expect to leverage those opportunities in 2019. Looking at Spain, as a reminder, our partner Brill reached agreement on reimbursement for ILUVIEN with the Spanish authorities in 2018. They are currently working with hospitals to include ILUVIEN on formularies in advance of a plan launched this quarter. Our French partner, Horus, is currently engaged with the regulatory authorities and anticipates receiving a reimbursed price for ILUVIEN in the near future. Assuming this goal is met, Horus will launch earlier this year. We remain very optimistic about the opportunity for ILUVIEN in these Southern European markets as Spain and France are known for their use of intraocular steroids. In December, we announced that our distribution partner, MEAgate had received approval in pricing in the United Arab of Emirates. In January, we received approval in Lebanon, and we expect to have agreed upon pricing on Lebanon in 2019. Now, for a more detailed review of our financials, I would like to hand the call over to Phil Jones, our CFO.

[Phil Jones:]

Thank you, Rick. Good morning, everyone. During the fourth quarter of 2018, our consolidated net revenue grew 66% to $15.1 million, compared to $9.1 million in the fourth quarter of 2017. For the year, consolidated net revenue grew to 31% to $47 million, compared to $35.9 million during 2017. U.S. net revenue grew 37% to approximately $8.9 million for the three months ended December 31, 2018, compared to U.S. net revenue of approximately $6.5 million for the three months ended December 31, 2017. For the 12 months ended December 31, 2018, U.S. net revenue increased 24% to $32.3 million, compared to $26.1 million in 2017. Both period increases in the U.S. were driven primarily by increased end user demand as Rick previously mentioned. U.S. end user demand was up 16% for the year and 13% for the quarter. As we have previously shared, our GAAP revenues in the U.S. do not always perfectly correlate with end user demand due to timing of purchases by our specialty distributors. For those of you viewing the webcast, this chart shows the historical comparison between our quarterly GAAP sales and our end user demand experienced each quarter for the last three years. You can see that the correlation improved significantly in 2018, however, there were still some differences. During the fourth quarter of 2018, our distributors purchased approximately 7% more units than they sold to end users, increasing their stock on hand during the quarter. For the full-year of 2018, our distributors only purchased approximately 3% more units than they sold to end users, increasing their stock on hand during the most recent year. This continues to reflect the improvement and consistency between GAAP revenues and end user demand versus last year. Net revenues from Alimera's International segment increased 138% to approximately $6.2 million for the three months ended December 31, 2018, compared to approximately $2.6 million for the three months ended December 31, 2017. As Rick discussed, we attribute a significant amount of this to the shortage of Ozurdex in the UK and Germany during the period. For the year, International net revenue totaled $14.6 million, up 49% compared to $9.8 million in 2017. Research, development and medical affairs expenses during the fourth quarter were down 6% to $2.9 million, compared to $3.1 million during the prior year period. Total 2018 research, development and medical affairs expenses were $11.3 million, compared to $12.8 million during 2017. The company incurred a one-time $2.9 million non-cash charge during 2017 for the additional rights to uveitis acquired from EyePoint Pharmaceuticals. This decrease was offset by increased costs associated with ongoing clinical studies. General and administrative expenses for the three months ended December 31, 2018 were approximately $4 million, compared to approximately $3.4 million for the three months ended December 31, 2017. The increase was primarily attributable to approximately $600,000 in severance for our previous Chief Executive Officer. For the year, general and administrative expenses were possibly $14.5 million, compared to $13 million during 2017. Sales and marketing expenses during the fourth quarter of 2018 were approximately $6.1 million, down 8%, compared to $6.6 million reported for the three months ended December 31, 2017. For the 12-month period, sales and marketing expenses totaled approximately $23.5 million during 2018, compared to $23.2 million during 2017. Total operating expenses were approximately $13.7 million for the three months ended December 31, 2018, compared to approximately $13.8 million for the three months ended December 31, 2017. Total operating expenses for the year ended December 31, 2018 were approximately $52 million, compared to approximately $48.9 million during the prior year period. We were pleased to announce that during the fourth quarter of 2018, we reported positive adjusted EBITDA of $2.4 million, compared to an adjusted EBITDA loss of $3.8 million during the fourth quarter of 2017. This was a significant goal for the company and we are proud to have surpassed adjusted EBITDA breakeven during the quarter. For the year, the adjusted EBITDA loss was approximately $2 million, compared to an adjusted EBITDA loss of $8.8 million during 2017, a decrease of 77%. Net loss for the three months ended December 31, 2018, was approximately $1.2 million, compared to a net loss of approximately $7.2 million for the three months ended December 31, 2017. For the year ended December 31, 2018, net loss totaled approximately $16.4 million, compared to a net loss of approximately $22 million during the year ended December 31, 2017. GAAP basic and diluted net loss per common share for the three months ended December 31, 2018 was $0.02 on approximately 70.1 million weighted average common shares outstanding, compared to basic and diluted net loss per share of $0.10 on approximately 69.1 million weighted average common shares outstanding during the three months ended December 31, 2017. GAAP and diluted net income per share for the year ended December 31, 2018, was $0.25 on approximately 70 million and 70.7 million basic and diluted weighted average common shares outstanding respectively, compared to net loss per share of approximately $0.33 on 70 million weighted average common shares outstanding during the same period in 2017. During the third quarter of 2018, we recorded a one-time gain on the extinguishment of the Series B convertible preferred stock resulting from the exchange in September 2018 for new series C convertible preferred stock, which contributed $0.48 per share. This gain in preferred stock of approximately $38.3 million resulted in reported net income to shareholders of $21.9 million or $0.25 per basic and diluted share for the year ended December 31, 2018. And finally, it is important to note that we generated cash from operations in the fourth quarter of 2018. As of December 31, 2018, we had cash and cash equivalents of approximately $13 million and a slight increase in cash from $12.6 million at September 30, 2018. I would now like to turn the call back over to Rick.

[Rick Eiswirth:]

Thank you, Phil. So, I have to say, it was nice not to have to read all the numbers this time. I appreciate that. As I mentioned before, I wanted to have a chance to share with you some of my thoughts on the catalyst that we believe will help with the continued growth of ILUVIEN in 2019, as well as some thoughts around my vision for potentially adding more revenue generators for us. Essentially, we see four key growth drivers in 2019. The first is continued organic growth from our existing practitioner base, where we believe we can treat more of their patients and from new physicians who are willing to add ILUVIEN to their treatment regimen. We believe we can generate this growth as we continue to improve on the positioning of ILUVIEN over the last 18 months, to help doctors better understand the unique opportunity that ILUVIEN provides them to treat their patients. The ILUVIEN is the only non-acute therapy currently available to treat DME, which is typically both a chronic and persistent disease. The competitive products last anywhere from one to three months, and we believe they have inherent disadvantages in treating a persistent disease. Acute therapies, unless dosing regimens are appropriately customized for each patient and maintained consistently over time, allow for the recurrence of the DME in DME patients. ILUVIEN was designed to deliver this consistent dose of drug delivery every day for up to three years. It is through continuous micro-dosing that we can address the disease daily and control the recurrence of the swelling. The repeat swelling that leads to vision loss. Because of this, we can also significantly reduce the number of injections that patient needs to endure. Our messaging has been and will continue to emphasize these one-of-a-kind benefits of ILUVIEN. We do believe this messaging is effective. As I mentioned earlier, we saw an acceleration of growth in the U.S. in 2018 over 2017. The second catalyst in 2019 should be the opportunity for our first material cycle of re-treatments. As you know, ILUVIEN provides therapy for up to 36 months, which means that we do not benefit from recurring monthly scripts or even quarterly scripts as the competing acute therapies do. In 2016, we had not only a significant number of U.S. patients injected with ILUVIEN as the DME therapy, but the quality of patient choice was better as physicians became more comfortable with reimbursement following the receipt of a J-code in January 2016. We have looked at our top 20 account volumes for 2016. Those accounts treated approximately 1,000 patients in that year. If we can even achieve a 30% re-treatment rate, you could see an additional 7% to 8% growth boost to our new patient volume. A third potential driver, is that we filed for approval for Non-Infectious Posterior Uveitis in the same 17 countries in Europe as we did for DME and expect approval in the first half of this year. Non-Infectious Posterior Uveitis represents about 15% to 20% of the size of the DME market. It is currently treated by systemic steroids, which have significant side effects by immunosuppressants and by acute or short-acting intravitreal steroids. These patients have episodes that can last months, be very unpredictable and frequently recur. The ability to provide consistent treatment over a long period of time is very appealing to these patients. If approved, we believe we will see additional revenue from ILUVIEN for Uveitis in Europe in the second half of the year. The final element to potentially drive revenue is our goal to continue expanding access to ILUVIEN to new markets while working with our distributor partners to ensure they have the support they need to successfully commercialize ILUVIEN. During 2018, we successfully opened new markets in Ireland and in the United Arab Emirates. Leveraging our recent regulatory and reimbursement progress, we expect to expand the reach of ILUVIEN in 2019 in Spain, France, and Lebanon, and potentially other markets in the Middle East. Beyond ILUVIEN, we see additional opportunities. We are somewhat unusual in having a commercial infrastructure for growing retina products in both the U.S. and Europe. This is a leverageable asset. We intend to look for retina products with reasonable evaluations that would be accretive and fit our current commercial model. We will be prudent in seeking these opportunities. At Alimera, we bring a re-energized management team to a product that we believe provides a better way to treat DME and potentially posterior Non-Infectious Uveitis. It is the only non-acute therapy available to treat retina disease and can help patients see better, longer and more consistently with fewer injections. I'm confident that the shared vision our new management team has for Alimera will lead to growth and of course returns for our shareholders and that we have the abilities necessary to execute on that vision. We work side-by-side for years and we are ready to turn to the next chapter of this organization. Now, I'd like to begin our Q&A session.

[Operator:]

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Andrew D'Silva with B. Riley. Please proceed with your question.

[Andrew D'Silva:]

Hi, good morning. Thanks for taking my questions. A couple of quick bookkeeping ones first. If you could please, just let me know, cash flow from operations and CapEx was for the year. And then, just for modeling purposes, what was the exact GAAP units of ILUVIEN sold domestically during the fourth quarter. And then, and while you're pulling that, can you just let me know if you're seeing a continued benefit in Europe right now through the Ozurdex recall? And do you think that you're in a position to buck that traditional first quarter dip in a similar manner to what you did in the first quarter of 2018?

[Phil Jones:]

Hi Andy, thanks for your questions. Looking at the given information you wanted, I'd now turn it over to Rick for your – the first part and the second part of your question. We sold 1,092 units for GAAP revenue in Q4. And for the year, our cash burn was about $11.6 million from an operational standpoint and included $175,000 from CapEx. Overall, that includes about $4.7 million in interest. So, almost half of that burn is related to interest payments.

[Andrew D'Silva:]

Thank you very much.

[Rick Eiswirth:]

Sure, with respect to Ozurdex, obviously, we had a positive impact on this in the quarter. We think the overall impact was probably about $2.5 million in revenue in Germany and the UK. But if you factor then in the results, we were still well ahead of consensus estimates, both for the quarter and the year. We clearly treated a bolus of those patients, but the sales have continued to be strong both in the UK and Germany, where we saw most of that effect so far in the first quarter. We think that obviously it's a positive development for Alimera that we were able to treat that bolus of patients, but more importantly, hopefully got more physicians comfortable using the product and accustomed to the side effect profile and we'll provide some lasting impact to us. As far as how much an impact to the seasonality, it's probably a little bit too early to tell that. We certainly will have seasonality in the U.S. business, because of the way insurance renewals work and things like that, as well as getting on hospital formularies and some of the other countries. So, there is still going to be a seasonality impact, but we do hope to retain some of the Ozurdex business going forward.

[Andrew D'Silva:]

Okay, great, great. And I noticed you also increased the actual inventory on your balance sheet, it's now at an all-time high this quarter. Can you discuss what's that tied to? Is it related to having to meet new distributor demand for stocking purposes? Or is it tied to domestic growth or anything that you can provide there would be useful.

[Rick Eiswirth:]

Sure, Andy. It's actually a combination of two things

[Andrew D'Silva:]

Okay that makes sense. And you highlighted the retreatment as 2016 patient start coming into – to their second time treatment for 2019. Are you seeing any anecdotal evidence of that at this point from the top 20% of physicians that you highlighted? Are they discussing what the retreatment is looking like, and that they are actually going through that process?

[Rick Eiswirth:]

Yes. I would say, I mean your choice of words there is right. So, it's all anecdotal at this point, because from a HIPAA standpoint, we can't see what's happening with each individual patient. However, I have spent some time with one physician who treated about 75 patients in 2016, and he said his intention was to retreat all those patients. Our VP of Sales was in the office with another physician couple of weeks ago, and they were running a report out of their EMR systems to identify patients that have been treated three years ago to look at them for scheduling re-treatment. So, we know it’s occurring out there, but how specific it is and how much of an impact that's having on revenue already it's hard to identify.

[Andrew D'Silva:]

Okay. Fair enough. And last question from me, just related to Canada. In my opinion, it seemed like a very surprise approval. Assuming from my standpoint, should be at least a year before you get through the payer related processing, but maybe you could let me know, how we should think about Canada from a modeling standpoint?

[Rick Eiswirth:]

Yes. I mean the reality is Canada, the reimbursement process is pretty lengthy there anywhere from 18 to 24 months. So, you're probably talking about well into late 2020 or early 2021 before you would see any material revenue come out from Canada. And frankly at that point, typically, Canada is about 8% of the size of the opportunity in the U.S., with them in a new launch and us being quite a few years in and the revenue base right now, I wouldn't expect it to have a material impact on our revenue even at that point in time.

[Andrew D'Silva:]

Okay. Perfect. Got it. Thank you very much. Good luck going forward and great quarter.

[Rick Eiswirth:]

Thank you.

[Operator:]

Thank you. The next question is from the line of Francois Brisebois with Laidlaw. Please proceed with your question.

[Francois Brisebois:]

Hi, thanks for taking the questions. Just a couple here. So, how much would you say – you're still talking about education, how much do you guys still need education or they have to speed especially in the smaller centers on the difference between DME and Uveitis here ex-U.S., just in terms of the treatment paradigm?

[Rick Eiswirth:]

I certainly don't think we need to do much to educate the doctors on the differences between DME and Uveitis. I do think that the doctors maybe more quick to adopt ILUVIEN in Uveitis in Europe, because there's no headwind from the anti-VEGF. So, we're not in the habit of injecting anti-VEGF so frequently with those patients. I mean steroids are much more of a natural choice.

[Francois Brisebois:]

And would you feel comfortable saying that steroids would be first line with ILUVIEN or is this more of a, let's try a generic one to make sure a kind of worse because IOP doesn't seem to be a problem or is this just more of a first-line therapy?

[Rick Eiswirth:]

I mean, it's a great question. It certainly depends on what the label is, and we'll have to see what we ultimately get, if we get something from the European health authorities. I would say that probably because ILUVIEN is a three-year steroid, you are still going to have physicians inject some sort of shorter-term steroid to make sure that the patient indeed does have recurrent disease. But the reality is, most of these Uveitis patients do have recurrent disease. So, they should be candidates for ILUVIEN.

[Francois Brisebois:]

Okay, great. And then on the ex-U.S. Ozurdex, I know you just touched on it. But could you give a little more color on the impact going forward? Is that $2.5 million all done in the fourth quarter, and we shouldn't see any more of this from Ozurdex being taken off the market? Or just to frame that to make sure that's kind of not taking forward here?

[Rick Eiswirth:]

Yes. So, the impact was about 2.5 million in the fourth quarter. What it is going forward, as I said to Andy, it's a little bit challenging to estimate. We know that Allergan has been prioritizing the U.S. market. So, we haven't seen an impact of the Ozurdex recall really in the U.S. market and they're saying that they're going to have product back in full stock towards the end of the first quarter, sometime in the second quarter. It appears that they are rationing stock in the European countries, and so it may be that ILUVIEN is being injected where Ozurdex is not available. But we also believe that we've improved some of the stickiness with some of those doctors, because they've got experience. Now they're familiar with ILUVIEN and they may be using it. So, what exactly the impact will be on the first quarter, as I said, it's a little bit too early to tell.

[Francois Brisebois:]

Okay. That's interesting. And then lastly, you touched on this in terms of M&A. Just can you mention, obviously you guys have this ex-U.S. specialty on the commercial front for back of the eye. Can you just remind us again of the criteria you're looking at when you do look at potential acquisition targets?

[Rick Eiswirth:]

Yes, I think it's simply something that would allow us to leverage our commercial team. We have a commercial presence, sales, reimbursement, medical support, et cetera out there in the retina space. As you know, it's a fairly contained space and I think looking at a product that would leverage that team is the priority for the next, I would say 6 months to 18 months. It could be pharmaceuticals, obviously that would be the most logical choice. I think there's some opportunities potentially out there in diagnostics or genetic testing or even on the device side, which would make sense, because most of the retina specialists are doing surgery as well.

[Francois Brisebois:]

Okay. Great. And thank you very much and congrats on the quarter.

[Rick Eiswirth:]

Thank you.

[Operator:]

Thank you. The next question is from the line of Jim Molloy with Alliance Global Partners. Please proceed with your question.

[Jim Molloy:]

Hi guys. Thanks. Question on the – through $2.5 million bump in the fourth quarter and you take that out of $3.7 million in the quarter, that's a pretty good number, pretty good jump from where you guys had been. Is that sort of a range the run rate going forward we should be looking at in 2019 and then you make some assumptions of how much of that 2.5 million might be sort of sticky post the Ozurdex getting back in the market?

[Rick Eiswirth:]

Yes. I mean, we certainly feel good about the number. I mean there was growth both in the U.S. and the international markets when the distributors come on board. As we've stated before, the fourth quarter is typically a seasonally high month, and the first quarter is typically a seasonally low month. So, I think it's certainly a great baseline to work off, but we start to consider the seasonality moving forward.

[Jim Molloy:]

Okay. And you're still anticipating the Uveitis coming in here first half and adding the dimension of your 20%, size of the DME, $1.3 million, $1.4 million to the EU sales that is something we should dissipate and start flowing through second half of 2019?

[Rick Eiswirth:]

Yes, be – at 15% or so impact in the second half of the year. Correct.

[Jim Molloy:]

Excellent. And then could you talk about the size of the incremental sales from any potential acquisitions you might bring into add to the bag and as you're looking out there, are there multiple opportunities that that are looking pretty good? Is pricing really becoming an issue kind of something you can sort of afford or anything on the timing of these potential acquisitions?

[Rick Eiswirth:]

Yes. Jim, I think it's probably too early to comment on anything specific. I mean, I think, we have a goal to try to leverage that commercial team and we're going to be out there aggressively looking for things. I think the reason to focus there is, regardless of the size of any potential product we could add to the bag, it should be very, very accretive, since we are at adjusted EBITDA breakeven in the fourth quarter and we hope we can maintain that going forward.

[Jim Molloy:]

Final question. Any thoughts on guidance for 2019?

[Rick Eiswirth:]

We typically have not provided specific guidance. I think I would say the same thing as we've said in the past that we would guide everybody if we are going to do to something in the high-teens to 20%. And we certainly hope we can outperform that based on some of the catalyst I explained to you earlier.

[Jim Molloy:]

Great, Thanks for taking the questions.

[Operator:]

[Operator Instructions] Our next question is from the line of Yi Chen with H.C. Wainwright. Please proceed with your question.

[Yi Chen:]

Thank you for taking my question. My first question is, can you comment on the effectiveness of your marketing strategy in the U.S. in the second half of 2018 and whether there will be any change in the strategy in 2019?

[Rick Eiswirth:]

We certainly believe that it has been effective as I said earlier in my comments. We think, focusing on the uniqueness of ILUVIEN and then it treats the disease consistently every day, provides more stability in the eye, reduces the recurrence of the disease. Those are the things that are most important, rather than making a comparison with respect to efficacy, and because of the progress we've been saying, we can – we expect to continue to do the same thing. There certainly will be additional datasets, we hope to develop by looking at chart reviews with physicians and things like that to continue to support that story, but I think it is the same story, but continuing to get more bullish on it.

[Yi Chen:]

Got it. Second question is, there was an improvement in gross margin in the second half of 2018 compared to first half. Do you expect the gross margin – any gross margin improvement further in 2019?

[Phil Jones:]

We probably do not see an improvement in gross margin for 2019. It should be fairly consistent. However, as we bring on more of our distributor partners and there is an increase in revenue from those partners, we probably will see a slight decrease overall in the gross margins due to that royalty that we get from those partners.

[Yi Chen:]

Got it. Thank you.

[Operator:]

Thank you. It appears there are no further questions at this time. So, I'd like to pass the floor back over to management for any additional concluding comments.

[Rick Eiswirth:]

Great. Thank you. Thank you all for listening and engaging with us today. We are excited about the future and thank all of our employees for their hard work and vision for success. I look forward to updating you on our progress throughout the year.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation. You may now disconnect your lines.