Alimera Sciences, Inc.
Q1 2013 Earnings Call Transcript

Published: 10 May 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Alimera Sciences, Inc. Q1 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Rick Eiswirth. You may begin, sir.

[Richard S. Eiswirth:]

Thank you. Good afternoon, everyone, and welcome to the Alimera Sciences conference call to update you on our commercialization of ILUVIEN in Europe and to review our first quarter financial results. A press release regarding these results was issued this afternoon and is available on our website. On the call with me today is Dan Myers, our President and Chief Executive Officer. Before we begin our prepared remarks, I would like to remind you that various statements that we make during this call about the company’s future results of operations and financial position, business strategy and plans and objectives for Alimera’s future operations are considered forward-looking statements within the meaning of the federal securities laws. Our forward-looking statements are based upon current expectations that involve risks, changes and circumstances, assumptions and uncertainties. These risks are described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of Alimera's annual report on Form 10-K for the fiscal year ended December 31, 2012, which is on file with the SEC and available on the SEC's and Alimera's websites. Additional factors may also be set forth in those sections of our quarterly report on Form 10-Q for the quarter ended March 31, 2013 to be filed with the SEC in the second quarter of 2013. We encourage all investors to read these reports and our other SEC filings. All of the information we provide on this conference call is provided only as of today, and we undertake no obligation to update any forward-looking statements we may make on this call for an account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast. Additionally, adjusted net loss and adjusted net loss per share, non-GAAP financial measures will be discussed on this conference call. A reconciliation of adjusted net loss to GAAP net loss, and net loss per share to adjusted net loss per share can be found on our press release, which is available on the SEC's and Alimera's websites. And with that, I would like to turn the call over to Dan Myers, our President and Chief Executive Officer. Dan?

[Charles Daniel Myers:]

Thanks, Rick. We begin this quarterly update call with several positive developments both in Europe and in the U.S. with regards to the commercialization and regulatory status of ILUVIEN. We recently launched ILUVIEN in the United Kingdom and Germany, and on May 7, Dr. Albert Augustin, President and Chairman of the Department of Ophthalmology at Klinikum Karlsruhe in Germany, treated the world's first 2 patients with ILUVIEN since its commercialization. Both patients have been suffering from chronic DME for over 5 years. This is a significant milestone for not only Alimera but also for the many patients in the U.K. and Germany currently suffering from the debilitating effects of chronic DME considered insufficiently responsive to other therapies and their physicians who have been patiently waiting for the shipments of ILUVIEN. During the first quarter of 2013, we expanded our marketing efforts and sales reach in preparation for the European launch. At the present time, our Quintiles Commerical staff in the U.K. and Germany numbers 14 persons, and our Alimera Sciences Limited European office has 6 employees. Our team has been calling all retinal physicians throughout the first quarter to educate them on the benefits of ILUVIEN, and we have attended numerous ophthalmic conferences and held symposiums where we received great feedback on our new European marketing materials, which highlight the many benefits of ILUVIEN's long-acting, sustained release treatment to help improve a patient's visual acuity. In France, our medical sales liaisons from Quintiles Commerical have been educating physicians on the ILUVIEN clinical data. Now I'd like to provide you with the market access update as well. As you are likely aware, in January, the United Kingdom's National Institute for Health and Clinical Excellence, or NICE as it is known, published final guidance indicating that ILUVIEN is not cost-effective for the treatment of chronic DME considered insufficiently responsive to available therapies. To address this issue, we recently submitted a simple Patient Access Scheme for ILUVIEN, also referred to as a PAS, to NICE for consideration under its rapid review facility. The PAS has been agreed to by the United Kingdom's Department of Health and we believe that PAS would allow treatment decisions with ILUVIEN to be based on patient need rather than cost. However, the NICE Appraisal Committee must assess the likely impact of the ILUVIEN PAS and determine whether an update to NICE's previously issued final guidance is warranted. The NICE Appraisal Committee is scheduled to meet May 15, 2013, to discuss the ILUVIEN PAS and we'll communicate its decision at a later date. In France, we have been working with our consultants to prepare our clinical and pricing dossiers for submission to the French health authorities. With this information, which we currently anticipate the health authorities will review in the second quarter, they will decide on the innovation level of ILUVIEN, which will be a factor in our price negotiations later this year. Market access is an evolving discipline, and we are confident in our belief that our senior level team possesses the market access expertise to manage this facet of our business. We also continue to receive positive feedback from European physicians who are eager to treat their own chronic DME patients with ILUVIEN. With our team's long history of introducing new products to the marketplace and a proven track record of revenue growth in the ophthalmic pharmaceutical industry, we are confident in our commercial strategy for Europe. We look forward to reporting back to you with our progress and successful patient experiences. Now turning to United States. We recently announced that our resubmission of the New Drug Application, or NDA, for ILUVIEN has been acknowledged as received by the FDA as a complete class 2 response to the FDA's November 11 letter and that a Prescription Drug User Fee Act, or PDUFA, date of October 17, 2013, has been established. In the resubmission, we responded to questions raised in the FDA's letter and provided additional analysis, as well as new information to support that ILUVIEN is safe and effective in the treatment of patients with chronic DME. The resubmission focused on a subgroup of patients with chronic DME from our pivotal Phase III trials collectively called the FAME Study, the same subgroup for which marketing approval for ILUVIEN has been granted in the 6 countries in the European Union. Additionally, data was submitted from the completed physician utilization study for the ILUVIEN applicator and from a special reading center assessment of photographs of the fundus, or the interior surface of the back of the eye, which were collected during this FAME Study. With that, I'll now turn the call back over to Rick to briefly discuss our first quarter financials. Rick?

[Richard S. Eiswirth:]

Thank you, Dan. Turning to our financial results for the first quarter. Net loss for the quarter ended March 31, 2013, was $14 million or $0.44 per common share, compared with the GAAP net loss of $4.4 million or $0.14 per common share for the quarter ended March 31, 2012. Net loss for the quarter ended March 31, 2013, was impacted by noncash warrant valuation adjustment of $5.6 million, resulting from the increase in the price of our common stock. Adjusted net loss, a non-GAAP measure that excludes the noncash warrant valuation adjustment for the quarter ended March 31, 2013, was $8.4 million or $0.27 per common share. Research and development expenses for the first quarter of 2013 increased to $2.0 million compared to $1.6 million for the first quarter of 2012. The increase was primarily attributable to the preparation of the resubmission of the NDA for ILUVIEN. General and administrative expenses in the first quarter of 2013 were $2.7 million compared to $1.4 million in the first quarter of 2012. The increase was primarily attributable to infrastructure build and financial and operational planning for our European operations. Sales and marketing expenses in the first quarter of 2013 increased, as expected, to $3.6 million, compared to $1.1 million for the first quarter of 2012. The increase was primarily attributable to the expansion of our sales and marketing team directly and in conjunction with Quintiles Commercial and market awareness development in preparation for the launch of ILUVIEN in Europe. As of March 31, 2013, we had cash, cash equivalents and investments of $39.3 million compared to $49.6 million as of December 31, 2012. In addition to our cash position, we announced yesterday that our U.K. subsidiary, Alimera Sciences Limited, entered into a $20 million Loan and Security Agreement with Silicon Valley Bank to provide a term loan in the principal amount of $5 million and up to an additional $15 million under working capital line of credit. The proceeds of the term loan will provide Alimera Sciences Limited with additional working capital for general corporate purposes. The line of credit will be utilized to finance accounts receivable in the United Kingdom, Germany and France, and replaces the $20 million line of credit facility previously provided by Silicon Valley Bank to finance accounts receivable in the United States. This debt facility strengthens our financial position for the commercialization of ILUVIEN in the United Kingdom, Germany and France and provides additional resources as we evaluate our expansion plans in Europe. The term loan provides for interest-only payments for 6 months, followed by 36 monthly payments of interest plus principal. Interest on outstanding borrowings under the term loan is payable at the rate of 7.5% per annum. Borrowings under the working capital line of credit will be advanced at 80% of eligible accounts receivable and interest is payable on the balance of eligible accounts financed at the rate of 2.75% above the bank's most recently announced prime rate. Now I'll turn the call back over to Dan for his closing comments

[Charles Daniel Myers:]

Thanks, Rick. We continue to believe that the demand for an effective and convenient treatment for chronic DME is great, and ILUVIEN will be a significant value to ophthalmologists and their patients. The International Diabetes Federation estimates that close to 17 million people of the 6 EU countries that we have received approval and another 3 million people in Italy are currently living with diabetes. We estimate that approximately 800,000 of those diabetics in these countries suffer from vision loss associated with DME. ILUVIEN is our proprietary sustained release intravitreal implant that delivers a submicrogram level of fluocinolone acetonide for up to 36 months for the treatment of chronic DME for patients considered insufficiently responsive to other therapies. The clinical trial data showed that in patients with chronic DME at month 30 after receiving the ILUVIEN implant, 38% of patients experienced an improvement from baseline in their best corrected visual acuity on the ETDRS eye chart of 15 letters or more. At the completion of the 36-month study, 34% had achieved that same result. This effect was highly statistically significant as compared to the control group, which received laser and other intravitreally administered therapies. As I mentioned earlier, we are thrilled to have injected starting in Europe and this is a milestone for Alimera for these patients and their physicians who have been long awaiting an effective treatment. We believe we are well positioned to continue revenue generation to the second and third quarters of this year and beyond. I will now turn it over to the operator for any potential questions.

[Operator:]

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

[Adam Darity:]

This is actually Adam in for Amit. So I guess, just to start with, I mean, maybe you can talk a little bit about the progress you've made on the market access side in Germany? And where you stand in negotiations with the different Krankenkassens. I think, you had mentioned before that 27 of those were 80% of the ophthalmology population. So can you talk a little bit about that? And how that leans into what your expectations are in Germany in second quarter?

[Charles Daniel Myers:]

Okay. Yes, I'll take the first and maybe let Rick speak a little more to -- from the guidance standpoint. As you know, we've not given specific guidance or we talked a little bit about that. You're exactly right, Adam, and for those that are also on the call, I will reiterate that there's 150-plus Krankenkassens or KKs as they're known in Germany. These are basically state-funded insurance funds, which would then be reimbursing the physician in clinics and hospitals for ILUVIEN in that particular country. And as is generally the rule, the 80% -- 80-20 rule does apply here that approximately 27 KKs account for about 80% of Alliance is covered. And so yes, we had targeted those accounts to go to right away. So we have Tobias Gantner, who we hired a couple months ago, has background in the German market for managed -- excuse me, for market access, specifically within ophthalmology and retina, so a wealth of experience. In relationship to some of these KKs, he has led the market access team in drafting the initial letters that will go to the KKs given the specifics of ILUVIEN and then beginning to set up these one-on-one appointments. And we're right at the early stage of that, that shall take place here very shortly. And so I still, Adam, believe that you will see the second, third quarter and perhaps, into the fourth quarter end of the year be a series of us kind of checking off, if you will, those Krankenkassens. And let me just reiterate one other point while I talk about it just for a second of your question. A patient, we do not have to have a contract with a KK for the patient to have access to ILUVIEN or perhaps even be reimbursed for ILUVIEN. But obviously, it's much more of a streamlined process, much like it would be here the U.S. with managed care. If ILUVIEN has been accepted on contract with the KKs, there's just no longer paperwork -- as much paperwork involved, but patients can get access to ILUVIEN and can be reimbursed on sort of a named patient basis doctors do have to fill out certain forms. And so early on, we still think we'll see some revenue in the second, third quarter, a bit more spotty than perhaps to be in the perfect world of having all these signed up. But I want to make sure I reiterate the point that getting access to patients having ILUVIEN and getting reimbursed is kind of a one-off one situation until we get those KK contracts done. And then obviously, once you're contracted with a KK, then it's like being, if you will, in the U.S. thinking of being on an approved formulary or so. And we expect to have a lot of that done before the end of the year.

[Richard S. Eiswirth:]

I will tell you, again, Adam, we -- so we -- let's say we launched in Germany early in the week, we know of 3 patients had been -- have already been funded in those KKs this week. So we certainly know there's precedent for it.

[Adam Darity:]

Okay. And then I think Rick was going to take the second part?

[Charles Daniel Myers:]

Yes, Rick -- I'll prove it to you only, Adam, because I know we want to be consistent to what we've said before and I know we're not giving the revenue guidance, but you may want to speak to just how do we see the uptake a bit.

[Richard S. Eiswirth:]

Well I think it is a little too early to give guidance at this time, but we will see update with the private market and some of these individual funding request that the physicians are putting forth right now. As Dan mentioned, we've already seen purchases in both those types of situations and we think they'll continue, but it's too early with only a couple of patients having been injected so far to give you guidance at this point of what the quarter's going to look like.

[Adam Darity:]

Okay. And then maybe if we can switch to U.S. for a second and I know you now have the PDUFA date, but has there been any communication with the FDA that you can relate to us at this point?

[Charles Daniel Myers:]

No, not other than the formal acceptance of the Complete Response Letter or of the classification of the Phase II and then, of course, the PDUFA date. I think we are looking at the next 30 days as when we have an opportunity to have a meeting with them and whether we would call that meeting or when that -- there's no date on that meeting, but the next phase is any interaction with questions or other clarifications of the CRL will come in the next few weeks. And there is an opportunity to meet after 30 days with FDA. We do not have a meeting date with them yet and it's just kind of real early right now to have many tone for the kind of questions or clarifications that they received.

[Operator:]

[Operator Instructions] And I'm not showing any further questions at this time.

[Charles Daniel Myers:]

Okay. Operator, thank you. And we look forward to updating you in our third quarter earnings call -- excuse me, our second quarter earnings call. And at this time, operator, I'll turn it over to you to close the call.

[Operator:]

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.