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spk03: Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Science second quarter 2022 financial results and corporate updates conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please sign our 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 the star then one on your telephone keypad. To withdraw your question, please press the 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 October 27th, 2022. I would now like to turn the call over to Scott Garden of Core IR, the company's investor's relation firm. Please go ahead, sir.
spk05: Thank you, Maria. Good morning, and thank you for participating in today's conference call. Joining me from Alameda's leadership team are Rick Eisworth, 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 Alamara'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 and Form 10-Q, the form 8K filed with the SEC today, and Alamara's press release that accompanies this call, particularly the cautionary statement in it. Today's conference call includes adjusted EBITDA, a non-GAAP financial measure. For the definition of this non-GAAP financial measure and a reconciliation to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in Alamara's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, July 27, 2022. Except as required by law, Alamara 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 Eisner. Rick, please go ahead.
spk02: Thanks, Scott, and good morning to everyone on the call. We are excited to share our second quarter results, having set new records for end user demand in both our U.S. and international segments. End user demand represents units purchased by physicians and pharmacies from our distributors. On a GAAP basis, we are reporting $14.6 million in global consolidated net product sales for the second quarter of 2022, a 36% increase over the same period last year. With these results, The first six months of 2022 exhibited the strongest first half sales performance in Alamira's history, which gets us back to prior business levels, and we believe back to the growth that we were generating before the pandemic. In the U.S. segment, second quarter product revenue was $8.9 million, up 53% over the second quarter of 2021. This was driven by second quarter end-user demand growth of 45%, compared to the same period in 2021. Further, end user demand was also up 16% sequentially over the first quarter of this year. These positive results were fueled by an improvement in face-to-face interactions with our customers, both inside and outside of the clinic, as access improved significantly from 2021 and from the first quarter of this year. In addition, with our recently published Paladin study results, we've had an increase in podium time at several recent conferences, which we believe will continue to drive a paradigm shift to earlier utilization of olivine in the treatment of DME. For the last couple of years, we've been working to change the view of DME and the way it is treated, highlighting the importance of treating inflammation more broadly and the value of treating disease more consistently to reduce the waxing and waning of edema, protect the retina, and provide better visual acuity results. At the recent annual meeting of the American Society of Retina Specialists, two well-known key opinion leaders, Dr. Christopher Rehman and Dr. Victor Gonzalez, presented abstracts from our recently published Paladin study. Dr. Rehman's presentation reported data on alluvian's ability to reduce retinal thickness variability, a measure of the extent of fluctuation of retinal thickness over time. Importantly, Dr. Riemann's presentation emphasized the correlation between improved disease control with Illuvian and improved visual outcomes, a key component of our positioning. Dr. Gonzalez's presentation highlighted that eyes with baseline visual acuity of 20-40 or better achieve superior visual, anatomical, and treatment burden outcomes with Illuvian, supporting our view that Illuvian should be used earlier in the treatment paradigm before significant visual loss. We believe these abstracts and data strongly support the hypothesis of our New Day study to demonstrate the benefits of the use of Illuvian as baseline therapy in newly diagnosed patients with DME. As a reminder, the New Day study is the first head-to-head comparison of corticosteroid therapy and anti-VEGF therapy, the multibillion-dollar standard of care in this type of patient. Over 45,000 eyes have been treated with Illuvian, giving a significant real-world experience and understanding of how our drug works, which contributed to the New Day study design. This experience and the results of the Paladin study and other post-marketing studies give us great confidence that we can achieve a successful outcome from this trial and drive a significant shift in utilization of Eluvian. I'm pleased to report that the study is now close to two-thirds enrolled. In the U.S., our direct-to-patient, or DTP, marketing campaign that we launched earlier in the year continues to deliver strong metrics. The campaign consists of streaming video and display ads on social and other digital media in 10 regional markets. For the first six months, we have exceeded our goals with close to 40 million impressions and over 2 million views of our video ads. We believe that our DTP campaign is effectively messaging that Alluvion allows patients to see less injections, less doctor visits, and fewer waiting rooms. and actually see more of the things they want to see. We believe that this campaign and the data from the Paladin study will help us continue the recent sales momentum in our U.S. business by reminding patients and their physicians of Aleveon's benefits, namely the ability to see better longer with fewer injections. Our international business, we're reporting $5.7 million in product revenues during the second quarter, which is up over 16% from the same period last year. As Phil will explain, the growth in our international segment was strong, but muted by the deterioration of the exchange rate, which reduced our reported international revenue by approximately 10%. Importantly, end-user demand in our international segment grew by over 21% compared to Q2 of 2021 and was up 9% sequentially over the first quarter of this year. This demonstrates recovery from the pandemic and the positive impact of renewed commercial support. Additionally, We are excited about the opportunity to drive further growth in the international markets as availability of Bolivian for the treatment of non-infectious uveitis affecting the posterior segment of the eye increases. So far this year, we have announced the receipt of pricing and reimbursement approval for this indication in Spain, Italy, and France. Our Spanish partner, Brill Pharma, launched this indication in the second quarter. Partners in France and Italy are expected to launch the uveitis indication in these territories in September after the summer holidays. We believe the UVID syndication in all of these markets will support growth over the remainder of 2022 and in 2023. Of particular note, we are excited about the launch in France, as our French distributor, Horace Pharma, launched the DME indication in 2019 and quickly made France our second largest market measured by end-user demand. I'll now turn the call over to Phil to review our financial results for the first quarter.
spk01: Thanks, Rick, and hello, everyone. As I take you through the second quarter financials, it is important to remember that consolidated net revenue in Q2 2021 included $11 million in license revenue generated from the out-licensing of rights to Illuvian for the Western Pacific. For that reason, I will give you comparative figures both with and without this licensing revenue. During the second quarter of 2022, our consolidated net revenue decreased 33%, from approximately $21.7 million for Q2 2021 to $14.6 million for Q2 2022. More importantly, consolidated net product revenue increased 36% to approximately $14.6 million compared to $10.7 million for Q2 2021, showing continued momentum in our sales growth. U.S. net revenue was $8.9 million for the second quarter of 2022, an increase of 53% from the $5.8 million reported in the 2021 period. As Rick shared, and I want to reemphasize, U.S. end-user demand increased 45% in the second quarter of 2022 to 1,063 units compared to 731 units in the second quarter of 2021. As we have previously shared, our GAAP revenues in the U.S. do not always correlate with end user demand due to the timing of purchases by our specialty distributors, and this results in dissimilar growth rates. In the second quarter of 2022, Alamira's U.S. distributors sold approximately 3% fewer units to end users than they purchased from Alamira. On Q2 2021, our distributors purchased approximately the same number of units they sold to end users. Net revenue from our international segment in the second quarter of 2022 decreased 64% compared to Q2 2021. However, again focusing on product revenue, we saw a 16% increase in international segment to approximately $5.7 million for Q2 2022 compared to approximately $4.9 million for Q2 2021. We achieved this increase despite the negative impact of the weaker euro and British pound sterling which we estimate reduced our revenue by approximately 10% or $590,000. Importantly, end-user demand improved in our international segment by approximately 21% from 1,006 units in Q2 2021 to 1,220 units in Q2 2022. This makes Q2 2022 the strongest second quarter for international segment end-user demand in our history. Turning to expenses, total consolidated operating expenses were $14.4 million in the second quarter of 2022, an increase of 12% compared to the $12.9 million reported in the second quarter of 2021, when travel and engagement with decisions in several of our key markets was still limited. Higher operating expenses resulted from an increase in promotional and medical program investment to accelerate growth. as we and our customers expect COVID-19 to become better managed globally in the second half of 2022. As we discussed on the first quarter call, we have restructured some of our international operations and curtailed other investments to right-size our efforts and manage our cash usage. These adjustments are being implemented over the next few months. Once in place, we expect the total annualized savings will be approximately $3 million. We reported an adjusted EBITDA loss of just under $1 million in the second quarter of 2022 compared to positive adjusted EBITDA of $7.9 million in Q2 2021. For the three months ended June 30th, 2022, we reported a net loss of $3.1 million compared to net income of $7.6 million for the three months ended June 30th, 2021. Basic and diluted net loss per share for the second quarter of 2022 was $0.45 per share on approximately 7 million weighted average shares outstanding. This compares the basic and diluted net income per share for the second quarter of 2021 of $1.03 per share on approximately 7.4 million participating weighted average shares outstanding. Adjusted EBITDA net income and net income per share for Q2 2021 included the positive impact of the $11 million in license revenue we recognized from the OccuMention transaction and the acceleration of $1 million in deferred product revenue associated with the termination of our Canadian distribution agreement with Knight Therapeutics. Excluding the impact of these licensing revenues, Q2 2022 would have demonstrated improvement across these three metrics. June 30, 2022, we had cash equivalents of $7.9 million. Moving forward, our target each quarter and the remainder of 2022 will be to achieve positive adjusted EBITDA and to begin generating positive cash flow in 2023. And with that, I'll turn the call back over to Rick.
spk02: Thank you, Phil. In closing, we are very pleased with these second quarter results. and our return to growth on a global basis in the first half of the year. As I shared, the first half of 2022 has been a record year for Almera for both GAAP product revenue and end user demand. This has been driven primarily by growth in the U.S. market over the last 12 months, as our trailing 12-month end user demand is now up 24% through the end of June. Although our international markets have struggled with a slower emergence of the pandemic, they too have returned to growth over the last six months. and now have the opportunity to expand the utilization of Aleveon with uveitis indication in the coming months. With this sales momentum, the availability of the uveitis indication in additional markets, the compelling data from the Paladin study, and increasing interest in our New Day study, we believe we are well positioned to complete 2022 in record fashion and continue growing in 2023 at levels we anticipated prior to the pandemic. This concludes our prepared remarks. I'll now turn the call over to the operator for questions.
spk03: Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press the star then the number one on your telephone. If your question has been answered and you wish to withdraw your request, you may do so by pressing star then the number two. If you're using a speakerphone, please pick up your handset before entering your request and speaking on the call. One moment, please, for the first question. Our first question comes from Alex Novak with Craig Hellion Capital. Please go ahead.
spk04: Great. Good morning, everyone. I was hoping that we could start off with maybe describing the recovery that you're seeing in procedure volumes throughout the quarter, just the cadence of sales throughout the period, how that trended into July, and just how you're thinking about growing sequentially off these very strong results in the Q3, Q4.
spk02: Yeah, good morning, Alex. So, you know, the sales have been, you know, fairly consistent over the last three or four months, but that's nothing to be unexpected because you do see a little bit of a slowdown as you hit, you know, late June and July and August because of the summer holidays and then things always pick up in September. And as you know, you know, September is usually, you know, one of our strongest months of the year and then transitions into the fourth quarter and fourth quarter is usually always our strongest quarter of the year. So, You know, we feel pretty good that we'll continue to still grow sequentially from second quarter to third and then obviously into the fourth quarter as well.
spk04: Now, that's good. And maybe we talked about this a little bit last quarter, but you're making these new investments in the U.S. business. We talked on the Paladin study, the direct marketing, but also we're seeing COVID beginning to wane. So just as you go through your metrics internally, how are you kind of deciphering if the growth of sales is coming from COVID fading or directly from these new investments?
spk02: You know, Alex, it's really hard to come up with a specific reason, you know, for any one doctor. You know, we do look at the programs and where we're spending the money and the doctors that are involved in those programs, you know, to see if there's growth in those markets. And that's how we evaluate the success of them. But I'm sure that it is a combination of, you know, all of those factors, right? You know, we actually, we know that the awareness of alluvium was down, you know, during the pandemic. And that was because of a lack of, you know, face-to-face time. And so we spent the money to, you know, make sure we were getting in front of the doctors. So I'm sure it's an emergence of COVID, more patients coming back in. We know that's happening, but also, you know, we've been in front of the doctors a lot more to make sure they are remembering olivine and, you know, with the availability of it to treat DME.
spk04: Yes, that's perfect. And just to confirm, you haven't made any operating expense cuts for the European business yet. That's going to be coming, sounds like in Q3 and just how to think about what that's going to do to end user demand in Europe. If we should expect a little bit of a, um, be more muted volume in Q3 because of those cuts?
spk02: Yeah, I don't, so we made some of those cuts right at the end of June, but because of some notice periods and severance payments or redundancy payments in the European markets, you know, you won't really start to see the impact of those until the fourth quarter. And then you'll see more significant impact in 2023. Most of those jobs are not customer facing jobs. They're more support jobs out of the hub. And we just decided to provide a little bit more leadership and direction out of the US market for those activities. really to reduce our costs, but also to continue to get more consistency in the messaging because the messaging and the positioning in the U.S. market, you know, seems to be working and some of the programs we're doing here are working as well. So I don't think it'll have a negative impact on sales. You know, frankly, I think over time it'll actually have a positive impact because we'll get more consistent, you know, with the stronger message that we've been, you know, pushing in the U.S.
spk04: Okay. No, that's great. Plus you got the UVI launches in there as well. One thing that we haven't talked about is the retreatment. Yeah. One thing we haven't talked about is the retreatment population. Just how are you thinking about that now, especially, especially with COVID waning here?
spk02: Yeah, I think we're definitely seeing more retreatments. I still think it is, you know, somewhere in the probably the 10 to 20% range at this point of patients being retreated. You know, I had some of our senior sales leadership in here from the U S yesterday. And, you know, as they, as they go out and try to, you know, find these patients to be retreated or push retreatment, a lot of times they're finding that the patients, you know, are no longer around. They've passed away because of other comorbidities because of diabetes or something like that at the age. I think that is a factor of, you know, the patients who were being treated three years ago, you know, were still, you know, be far advanced in their disease state, you know, more of the worse patients, whereas we're trying to get earlier in the treatment paradigm. So we think that that amount of retreatment will continue to improve as we treat patients earlier in the treatment paradigm. And, you know, we see the value of that stable control of the disease in healthier patients.
spk04: Understood. And then just last question. I noticed on the balance sheet looks like there's now a $14 million note payable listed as a current liability. Is there a plan to pay that back in the next 12 months? Or was there some sort of covenant that was stripped there? And then actually maybe speak to the ability to increase the accounts receivable conversion. Looks like there's a pretty nice balance there that could be used for cash.
spk02: Yeah, so on the debt, that is the amortization of the current solar debt facility with solar capital or SLR capital that starts amortizing in January of next year. As we stated on our first quarter call, we expected the results in Q2 to be pretty strong, which we believe they are. And the plan was to work on refinancing that debt facility in the second half of the year. We have a good relationship with solar. So I think that's very possible. And certainly, I think we're a stronger company than we were three years ago when that facility was put in place. So we believe we'll have options based on conversations we've had in the marketplace.
spk01: And on the accounts receivable question, Alex, just recall that In the U.S., which is where we've seen a large part of the growth, our terms are net 120 days. Therefore, as that business grows, naturally those accounts receivable numbers are going to get bigger over time. And since the U.S. business over the first quarter accounted for about 65% of the overall business of the company as a whole, that number is essentially getting bigger because of those terms that we have in place. I see. Understood. Makes sense.
spk04: Appreciate all the commentary. Thank you. Thanks, Alex.
spk03: Our next question comes from Yi Chen with HC Wainwright. Please go ahead.
spk06: Thank you for taking my questions. My first question is, would you be able to comment on the patient flow in Spain, Italy, and France for posterior uveitis? And how do you expect that these patient flow to contribute to the end user demand growth compared to the current end user demand growth for DMV in the European markets? Thanks.
spk02: Yeah, so we estimate in the European markets that the size of the patient population for uveitis is probably 10% to 15% of the DME population. So theoretically, it would be a small ad, except we do think you'll get a faster acceleration out of the gate because you don't have the headwind of anti-VEGF you know, therapy for that disease state. You know, similar that we saw pretty good uptake in the fourth quarter of 2019 and the first couple of months of 2020 in the UK and Germany when the uveitis indication was first launched. So we do think there'll be, there's probably a bolus of patients out there. And then over time it probably, you know, contributes 10 to 15% of the revenue.
spk06: Got it. Do you expect to secure pricing and reimbursement for uveitis in other European countries in the coming months?
spk02: Our partner in the Benelux territory is working on reimbursement there, and we are working on it in the Nordic countries as well.
spk06: Thank you. And now that your quarterly rent rate is getting back to the pre-pandemic rates, would you be able to provide top line guidance at some point in the near term?
spk02: Near term, we won't do that. You know, I'm going to stay consistent with what I've said in the past. You know, I expect us to be able to grow in the, you know, mid to high teens. And there are certain years, depending on, you know, what launches we're able to do with uveitis or timing or pricing reimbursement, that you may see it exceed 20%.
spk06: And lastly, could you comment on the trend of your R&D expenses going forward?
spk01: Yeah, the trend of the R&D expenses going forward, you know, a large part of the R&D expense currently is associated with the New Day Study. And through 2024, those numbers are going to stay fairly consistent with where they are now. However, you know, after that, we will reevaluate those dollars and the spend and see where we may reinvest that or what we may, you know, repurpose those funds for.
spk06: All right. Thank you.
spk03: We have no further questions. Now I would like to turn the call over to Rick Iceworth for closing remarks. Please go ahead.
spk02: Thank you all for participating on today's call and for your interest in Alamira. We look forward to sharing our ongoing progress when we report our third quarter results later this year. Thank you and have a wonderful day.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now
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