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spk01: Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences' fourth quarter and full year 2021 Financial Results and Corporate Update conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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 May 24th, 2022. I would now like to turn the call over to Scott Gordon of CoreIR, the company's investor relations firm. Please go ahead, sir.
spk06: Thank you, Keri. Good morning, and thank you for participating in today's conference call. Joining me from Alameda's leadership team are Rick Eisberg, President and Chief Executive Officer, and Phil Jones, Chief Financial Officer. During this call management, we'll be making forward-looking statements, including statements that address Alameda'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 Alamara's most recently filed periodic reports on Form 10-K, Form 10-Q, and Form 8-K filed by the SEC today, and Alamara's press release that accompanies this call, particularly cautionary statements in it. Today's conference call contains adjusted EBITDA, a non-GAAP financial measure, that Alamara 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 reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in Alamara's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, February 24th, Except as required by law, Alan Mara 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 Isworth. Rick, please go ahead.
spk02: Thank you, Scott, and good morning to everyone on the call. I'm very pleased to report that we continued our revenue growth in the second half of the year, a sign of our recovery from the pandemic. We are now positioned to return to more consistent growth in 2022 as access to positions continues to improve. We reported net revenue of $59 million in 2021, up 16% compared to the full year of 2020, driven by a strong finish to the year on our U.S. business and the OccuMention license fee that we received in the second quarter for rights to our Luvian formulation in the Western Pacific. We delivered adjusted EBITDA of $3.6 million in 2021, which compares to adjusted EBITDA of $3.5 million in 2020. Importantly, we took the initiative mid-year to increase our investments in connecting with physicians and driving growth in 2022. We believe we've seen early returns on these investments in the U.S. as end-user demand was up in the second half of 2021, with the fourth quarter being our best quarter since the onset of the pandemic. We bent the curve over the year, with U.S. end-user demand for 2021 finishing up 7% over 2020, despite being down almost 14% at the end of the first quarter of 2021. In the fourth quarter, we generated 982 units in end-user demand for a living in the U.S., up 13% year-over-year, despite the surge of the Omicron variant. And on a sequential basis, our unit volume was up 17% compared to the third quarter of 2021, indicating acceleration of our growth rate. We also had a strong fourth quarter in the U.S. from a GAAP perspective, reporting U.S. sales of $8.4 million, 14% growth compared to the fourth quarter of 2020, and 20% growth sequentially from the third quarter of 2021. Our strong performance was driven by increased face-to-face interactions, both inside and outside of the clinic, and our advocacy efforts. We're excited to have launched our U.S. Direct-to-Patients, or DTP, marketing campaign in mid-January. This campaign is designed to reach potential Alluvian patients in areas where we have high prescribing practices. We believe there is a significant opportunity to appeal to patients who desire to see better, longer, with fewer injections, and we believe the pandemic has highlighted the need for Alluvian for both patients and physicians. You may recall that we ran a successful pilot DTP campaign and selected markets in 2019. Our 2022 campaign consists of streaming video and display ads on social and other digital media, as well as a non-branded educational site. The campaign spans 10 regional markets in the U.S. that have a large prevalence of diabetes, and targets are based on behavioral and demographic qualifications. Early in the campaign, we're already trending above our weekly impression goals with our DTP tactics, and our website traffic to alluvium.com has increased more than two and a half times since the DTP launch began. We believe that this campaign will help us maintain the sales momentum in our U.S. business by reminding patients and physicians of Alluvium's benefits, namely the ability to see better, longer, with fewer injections. Turning to our international business, We note that it was challenged throughout the year due to the severe access restrictions in Europe caused by the COVID-19 variants. Fortunately, we are seeing these restrictions removed in our markets during February and March. International sales for full year 2021 were up 24% year-over-year to $32.3 million, including the $11 million upfront license fee that we received from OccuMention for a living in the Western Pacific. Excluding the OccuMention license fee, our full year 2021 international Lubion sales declined 18% from $26 million in 2020 to $21.3 million in 2021. As we previously shared, this was primarily a result of our international distributor partners building inventory in late 2020, only to see limited demand in the first half of 2021 due to the variants and restrictions. However, we did see some positive trends in our international segment in the fourth quarter, despite stay-at-home mandates and other continuing restrictions. We were pleased to see sequential revenue growth of 8% in the fourth quarter over the recently completed third quarter. And importantly, the end-user demand across our entire international segment, including both direct and indirect markets, was the highest since before the impact of COVID-19 in the first quarter of 2020. Despite the challenges of the pandemic, we continue to execute on our expansion of the global markets in which olivine is available for the treatment of both DME and noninfectious posterior uveitis. At the end of 2021, olivine was approved and available for the treatment of DME and a noninfectious posterior uveitis in 16 European countries, compared to only nine at the end of 2020. In late 2019 and over the course of 2021, We added the Nordic countries, the Benelux countries, and the Czech Republic from an availability standpoint. However, neither we nor our partners provided significant commercial support in 2021 due to the restrictions of the pandemic. We're excited for the opportunity to grow our DME business in these markets as restrictions elapse and access improves. Further, we are anticipating the opportunity for growth from the posterior UVI syndication. You may recall that earlier this month, we announced pricing approval for this indication in Spain. Our partner, Brill Pharma, is now launching into this market where treatment options are limited. Prior to this, Alevian had only been marketed for posterior uveitis in Germany and the UK. We're working on obtaining reimbursement for the additional markets and expect to launch in a few of these in 2022. Access to care appears to be improving in Europe as evidenced by lockdowns being lifted. We believe this improved access, Increased commercial activities in our new markets, reimbursement for posterior units in new markets, and normalized inventory levels with our distributor partners will lead to growth in 2022 in our international segment. And with that, I'll now turn the call over to Phil, who will review our financial results for the quarter and the full year.
spk04: Thanks, Rick, and hello, everyone. During the fourth quarter of 2021, Arkansas' net revenue was up approximately 1% to $14 million last year. compared to $13.8 million in the fourth quarter of 2020. Our consolidated net revenue was up 15% sequentially compared to the third quarter of 2021, driven by higher sales in our U.S. business segment. U.S. net revenue was approximately $8.4 million for the fourth quarter of 2021, an increase of only 14% from the $7.4 million reported in the 2020 period. U.S. net revenue was up 20% sequentially compared to the third quarter of 2021. U.S. end-user demand, which represents units purchased by our physicians and pharmacies from our distributors, increased 13% in the fourth quarter of 2021 to 982 units, compared to 867 units in the fourth quarter of 2020. However, end-user demand grew 17% sequentially versus the third quarter of 2021, 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 2021, Alamira's U.S. distributors purchased approximately 6% more units than were sold to end-users. Net revenue from our international segment decreased approximately 13% to $5.6 million for the fourth quarter of 2021. This compares to $6.4 million reported for the same period last year. The decrease in our international net revenue was due to the impact of COVID-19 variants, which limited our ability to come face-to-face with our customers and kept patients from going to hospitals for their DME and posterior uveitis treatment in both our direct and distributor markets. Total consolidated operating expenses were approximately $14.7 million in the fourth quarter of 2021, an increase of 26.7% compared to $11.6 million reported in the fourth quarter of 2020. The higher operating expenses were due to our decision to increase investment in promotional and medical expenses to accelerate growth as COVID-19 becomes better managed. We reported an adjusted EBITDA loss of $1.9 million in the fourth quarter of 2021 compared to positive adjusted EBITDA of $1.1 million in Q4 2020. This was due to the increases in promotional and medical spend mentioned earlier. For the three months ended December 31, 2021, we reported a net loss of approximately $4.1 million compared to a net loss of approximately $1 million for the three months ended December 31, 2020. Basic and diluted net loss per share for the fourth quarter of 2021 was 59 cents on approximately 6.9 million weighted average shares outstanding. This compares the basic and diluted net loss per share for the fourth quarter of 2020 of 18 cents on approximately 5.4 million weighted average shares outstanding. Turning to our results for the full year, consolidated net revenues for 2021 were $59 million, an increase of approximately 16% from the $50.8 million that we reported in 2020, Our revenue in 2021 included $11 million that we received from our license agreement with OccuMention for the marketing rights to Alluvion's formulation technology in China and the Western Pacific. Total operating expenses in 2021 were $52.2 million, an increase of 17.6% compared to the $44.4 million reported in 2020. The year-over-year increase in total operating expenses was primarily due to our decision to increase investment in our commercial and medical activities in the second half of 2021 to drive sales recovery and growth post-pandemic. For the full year of 2021, we reported adjusted EBITDA of $3.6 million compared to $3.5 million in 2020. For the year into December 31, 2021, we reported net loss of $4.4 million compared to a net loss of $5.3 million for the year ended December 31st, 2020. Basic and diluted net loss per share for 2021 was 66 cents on approximately 6.6 million weighted average shares outstanding. This compares to basic and diluted net loss per share for 2020 of $1.04 on approximately 5.1 million weighted average shares outstanding. On December 31st, 2021, we had cash and cash equivalents of approximately $16.5 million compared to $11.2 million in cash and cash equivalents that we reported on December 31st, 2020. And with that, I'll turn it back over to Rick.
spk02: Thank you, Phil. Before we open up for questions, I'm excited to share a little bit of new data on Alluvium. Yesterday, we announced the publication of favorable three-year results from our Paladin study in the medical journal Ophthalmology. We believe these results, once again, confirm the safety and efficacy of olivine in the treatment of DME. Paladin was a phase four, three-year prospective observational study that was conducted in the U.S. across 41 clinical sites. The study was designed and developed to confirm the benefit of using a prior course of corticosteroid, as indicated in the U.S. label, to mitigate the risk of IOP-lowering surgery. Importantly, 2.97% of eyes required IOP-lowering surgery, but only half of these were due to steroid-induced ocular hypertension following the administration of olivine in accordance with the U.S. label. This compares favorably to the 4.8% seen in the Pivotal Fame study. The study, however, also looked at several other outcomes. Eyes that completed 36 months of the treatment of olivine achieved statistically significant outcomes in two key parameters. Functionally, patients experienced a mean 3.6-letter increase in visual acuity three years post-treatment, a statistically significant improvement. But importantly, this was after these same study eyes had experienced a mean 6.7-letter loss of visual acuity in the three years prior to the treatment of the alluvium while receiving other therapies. Anatomically, patients reached a statistically significant decrease in central retinal subfield thickness, a measure of edema, at all time points measured in the study when compared to baseline. And alluvium again demonstrated a significant decrease in the required number of treatments. In the three-year period prior to alluvium, study eyes received a median of 3.4 treatments per year. And during the three-year follow-up period with the alluvium implant in place, the median treatment frequency declined to just one treatment per year. This represents a 70.5% reduction in treatment burden for patients, demonstrating that Alluvian already provides the durability that many companies are searching for. And further, a post-hoc analysis of the 36-month paladin data suggests that the use of Alluvian earlier in the treatment algorithm for DME could lead to more desirable visual acuity outcomes. Study eyes that had received six or fewer treatments for DME before Alluvian administration demonstrated an improvement of 5.7 letters in visual acuity. This was significantly better than the more heavily treated patients who received seven or more treatments before receiving olivine, as those patients only gained 1.8 letters in visual acuity. This is exactly what we expect to see in the New Day study, reduced treatment frequency and a benefit from earlier olivine intervention. As a reminder, our landmark New Day study is our ongoing head-to-head clinical trial designed to demonstrate the advantages of alluvium as baseline therapy over repeated anti-VEGF injections in the treatment of naive and near-naive patients suffering from DME. We believe there is strong evidence that alluvium's long-term durability and anti-inflammatory properties significantly reduce the need for frequent and recurring injections and improve patient outcomes compared to the leading anti-VEGF therapies. And with that, I will now turn the call over to the operator for questions. Thank you.
spk01: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question will come from Alex Nowak of Craig Hallam Capital Group. Please go ahead.
spk03: Great. Good morning, everyone. Rick, let's start on the last piece there about the New Day study. Just curious how enrollment is progressing there. And then just on the New Day, from what you're hearing in the retinal community, is there a buzz essentially forming around the New Day, kind of combining it with the Paladin study, that there might create this renewed interest in alluvium maybe already before the study's even begun to read out?
spk02: Yeah, great. Alex, thanks for your questions, and good morning. So New Day study enrollment is progressing. We're probably between 35% and 40% enrolled as we speak in that study. We definitely saw an uptick over the fall in enrollment as things started to open up a little bit. It did slow down a little bit later. over the holiday season, but we have seen it start to pick up a little bit again once we got past the holidays and got past the Omicron variant. So, you know, we're still trying to get the study enrolled this year and doing everything we can to push it up. To your comment on, you know, noise around the study, I've actually reached out to quite a few of the investigators myself this week to see where they are enrollment and ask them to, you know, keep pushing it. And I've actually got, you know, pretty enthusiastic responses enthusiastic responses back about, you know, interest in seeing what these results are. And, you know, several of these doctors also participated in the Paladin study and have seen those results, and I think that's fueled a little bit of excitement as well.
spk03: No, that's great. And then maybe comment on some of the growth here that you expect for 2022. I know 60 million run rate was kind of the base that we wanted to get back to. Is the run rate or, excuse me, the sales that we saw here in Q4, is that a good run rate to start off from? Was there any kind of puts and takes there as we head throughout the year?
spk02: Yeah, so I think we're in a real good place that it's building from there. As I said, you know, the U.S., you know, we're generally doing pretty well. We do typically experience a little bit of seasonality early in the first quarter, as you know. and we're still dealing with some restrictions coming off in Europe. Some of the restrictions last in Ireland and the UK, for example, at the end of January, I believe the restrictions are coming off as we speak. In France, you know, March 20th is a pretty significant day in Germany. So we're still dealing with a few of those restrictions, but we feel pretty good about the way we ended the year and that, you know, we can expect to, you know, continue the growth in the U.S. and return to growth in Europe. So I think we're in a good spot to deliver. You know, I don't know that we'll deliver numbers where we did in the fourth quarter. of 2019, you know, until we get toward the end of this year and can grow throughout the year without those restrictions. But we certainly expect to get back there at some point this year.
spk03: Okay. That's great. And then beyond the direct-to-patient program, just maybe some more details on this U.S. sales growth plan, just new marketing, new sales programs. What else can be done to change kind of the marketing tactics here as you're thinking about growth for 2021? Yeah.
spk02: Well, we did add some MSLs and some medical science liaisons, thought leader liaisons, you know, over the course of 2021 to increase the engagement in different ways at the clinic. You know, as I've always said, alluvium is a high medical sale as well because we are trying to get the doctors to think about changing the way they treat these patients, use it earlier in the paradigm, and that we think that, you know, there's a lot of, characteristics of the disease that make you need something more than an anti-BGF. So increasing the medical education component, you know, around the drug as well, holding a lot of advisory boards and those types of things. I think that's probably the most significant thing we've done is find ways to engage the doctors in these educational programs or advisory board situations to discuss the, you know, science and medicine behind the drug.
spk03: All right, helpful. And then last question, it's a little bit of a two-parter, but just on the cost side, just The sales and marketing spent here was up in Q4. Is that a good run rate or is that going to be a starting run rate for the rest of the year for 2022? And then we don't have a balance sheet yet. So what was the net cash usage in the quarter? Where does cash stand at the end of the year? And then thinking about managing the growth and then cash burn going forward.
spk04: Yeah, Alex, just if you look at the cash burn for the fourth quarter, we burned about $4.6 million for the fourth quarter. And a lot of that was due to the investment that we mentioned throughout the call. You know, we would suggest that the fourth quarter expense run rate is probably a pretty good run rate to use to model out for the 2022 timeframe. Again, looking at somewhere north of what we did this year slightly. And, again, just as we get back into the mode of travel and everything, just understand that there will be more of those normal items that return as well, such as travel within Europe and some of the other places that have been stymied to some degree by the pandemic. If I missed anything there, let me know, and I'll come back to it and answer the question.
spk03: Nope, I think that's good. Appreciate the update. Thank you.
spk01: The next question will be from Jim Malloy of Alliance Global Partners.
spk07: Hi, good morning, guys. Thanks for taking my question. I was wondering if you could talk a little bit about your reps currently, how many reps you guys have currently, what the turnover was, if any. I know in the past you sometimes experience turnovers can happen in these businesses. But how are you guys standing up through the first part of this year with the reps? Yes.
spk02: You know, Jim, so far our retention has been pretty good. You know, I think, you know, last year we probably turned over 10% to 15% of the territories, which I think is a pretty normal, you know, normal situation. You know, and frankly, sometimes that's driven by the rep having another better opportunity, and sometimes that's driven by us trying to find the right rep for the territory. So it's been pretty good so far. You know, no significant changes in the first part of this year to those trends.
spk07: How many reps are there currently?
spk02: We've got 30 territories out there, you know, right now, and I believe we've got one vacancy at this point. Oh, great. Thank you.
spk07: And then I see excellent sales in the fourth quarter, and alluvium obviously remains a very high touchpoint sale item as you hit upon with the MSLs. How much of the sales and marketing – How much of that goes sort of to these advisory boards or to having these KOLs, I presume, you know, doing these advisory boards? And is there a way to sort of decouple? I mean, looking at sales and marketing for 21 is about 50% of sales, and that's harder the last couple of years with the COVID. Go back to 2018, right around this number as well, you had about 50% of sales decoupled. Is there a way to sort of decouple to get the alluvium sales sort of on an upward trajectory, X the heavy, you know, person-to-person spend you need to do, you've had to do through COVID and a little bit before? Sure.
spk02: A couple of questions there, Jim. On the amount of the spend, frankly, where the advisory boards are and the type of the advisory boards depends on where they are. If there are more medical, scientific, educational advisory boards, they're going to sit in a lot of our medical affairs effort there. Frankly, that is where most of the medical affairs you know, spend goes at this point in time. We also do, you know, commercial advisory boards where we, you know, sit with the doctors and evaluate some of our commercial messaging, right, to see how that resonates as well. And, you know, that's another, you know, touch point with the doctors. So, you know, it's hard to, you know, quantify and break out each piece. And frankly, that's probably a lot of granularity, you know, we don't want to get into. I will tell you that if you tried to look at where our growth rates were, I'd probably refer back to our growth rates as far as your decoupling question. back to our growth in, you know, in 17 to 18, 18 to 19, right? I think over the course of 19, you know, we reported quite a few quarters where the comparative growth was in that 15% range, you know, organically. You know, we think we can get back to that. And the hope is that things like DTP, you know, and the new data study results, you know, can ultimately drive that number higher once we get out of, you know, sort of the restrictions of the pandemic completely. Okay.
spk07: The final question, the fact they're shooting at each other in Europe, does that impact EU sales at all?
spk02: I'd say it's probably a little bit too early to tell. I think I guess the one place I would start to worry about is, you know, the cost of fuel and things like that, if that impacts people's ability to, you know, move around the countries and, you know, visit doctors in person or patients to get in the offices or things like that. But it's probably a little bit too early to tell at this point.
spk07: Thank you for taking the questions.
spk02: Yep.
spk01: The next question will be from Yi Chen of HC Wainwright. Please go ahead.
spk05: Thank you for taking my questions. Could you comment on whether you have any patient feedback for your direct-to-patient market campaign and whether you plan to have a direct-to-patient market campaign in Europe as well?
spk02: I'm sorry. I didn't hear the end of that question. Sorry. In Europe? Yeah. Yeah, so yeah, I can answer the first – well, first of all, good morning, and thanks for the question. I can answer the first question – the second half of that question first. In Europe, you know, we're not able – we're not allowed to, under the regulations, to market directly to the patients, right? So there is no direct-to-patient campaign in Europe at this time. In the U.S., it's very early. We started this in mid-January. So we don't have direct patient feedback yet, but what I can tell you is that we do have increased traffic on our alluvium.com site, you know, coming from those patients, right? So, you know, we saw more than a 250% increase in traffic on alluvium.com, you know, since we started that, and I think we started around January 19th or so. So it's interesting. It's very early. It is important, though, to actually drive that traffic there because that's where we ultimately have the find-a-doctor site where a patient can go find a doctor that is already treating patients with alluvium that would be amenable to that usage and try to funnel through there to a to an appointment at some point. The other thing I can tell you is we also believe we're ahead of our internal goals on impressions for our advertisements as well. So the advertisements and videos and things like that are definitely being looked at and seen, frankly, by more people than we expected to this early on in the rollout, both to our branded and our non-branded sites.
spk05: And which European countries will have the Illuvium launch for Uviadis this year?
spk02: Well, so as we have released, we expect the launch is ongoing in Spain right now. And our French and Italian partners are working on reimbursement there right now. We hope to get reimbursement by the middle of the year in both of those countries. It has been delayed by a lot of stops and starts as they've continued to open and close in various offices and everything due to the pandemic. Portugal, we expect to get reimbursement in the first half of the year. We have reimbursement in the Netherlands at this point, and we expect our French partner that is commercializing the product in the Benelux territories to put a little bit more effort behind that now that things are opening up there as well. We expect to see uveitis pushed pretty hard in quite a few countries before the end of the year.
spk05: Could you comment on the In the U.S., at the inventory level, at the distributor's level, and whether you see the inventory level could remain stable going forward?
spk02: The inventory level of the distributors in the U.S. was pretty stable throughout the year. I think there was less than a 1% or 2% difference in the amount of product that was ordered by the distributors versus what we sold through from an end-user demand standpoint. So that was pretty steady. You know, you always get this little bit of a phenomenon the first couple months of the year where because the end user man drops off a little bit because of the seasonality, they slow down some of the buying and then they sort of pick up again, you know, in March and April as the volume returns. So, you know, we'll have to see what that looks like over the quarter, but it was pretty steady over the course of 2021 as a whole.
spk05: Okay. Thank you.
spk02: Yep. Thank you, Ian.
spk01: And this concludes our question and answer session. I would now like to turn the conference back over to Rick Eisworth for any closing remarks.
spk02: Thank you all for joining us today and participating on the call, and we appreciate your continued interest in Almera. We are looking forward to sharing our ongoing progress when we report our first quarter results later on in May. Thank you very much, and have a wonderful day.
spk01: Thank you. The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.
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